prem14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant To Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed By a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only |
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Definitive Proxy Statement
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(as permitted by Rule 14a-6(e)(2)) |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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LEAR CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the Appropriate Box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Common Stock, par value $0.01 per share (the Common Stock), of Lear Corporation |
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Aggregate number of securities to which transaction applies: |
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76,642,783 shares of Common Stock; 720,575 options to purchase Common Stock;
restricted stock units with respect to 1,856,831 shares of Common Stock; stock
appreciation rights with respect to 2,209,952 shares of Common Stock; deferred unit
accounts with respect to 104,432 shares of Common Stock; and performance shares
with respect to 169,909 shares of Common Stock. |
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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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The maximum aggregate value was determined based upon the sum
of (A) 76,642,783
shares of Common Stock multiplied by $36.00 per share; (B) options to purchase
720,575 shares of Common Stock with exercise prices less than $36.00 multiplied by
$3.94 (which is the difference between $36.00 and the weighted average exercise
price of $32.06 per share); (C) restricted stock units with
respect to 1,856,831
shares of Common Stock multiplied by $36.00 per share; (D) stock appreciation
rights with respect to 2,209,952 shares of Common Stock multiplied by $9.16 (which
is the difference between $36.00 and the weighted average exercise price of $26.84
per share); (E) deferred unit accounts with respect to 104,432 shares of Common
Stock multiplied by $36.00 per share; and (F) performance shares with respect to
169,909 shares of Common Stock multiplied by $36.00 per share. In accordance with
Section 14(g) of the Securities Exchange Act of 1934, as amended, the filing fee
was determined by multiplying 0.0000307 by the sum calculated in the preceding
sentence. |
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Proposed maximum aggregate value of transaction: |
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$2,858,944,606 |
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Total fee paid: |
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$87,770 |
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Fee paid previously with preliminary materials. |
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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. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Filing Party: |
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Date Filed: |
THE INFORMATION IN THIS PRELIMINARY
PROXY STATEMENT
IS NOT COMPLETE AND IS SUBJECT TO
CHANGE
21557 Telegraph Road
Southfield, Michigan 48033
, 2007
Dear Fellow Stockholder:
On behalf of the Board of Directors, you are cordially invited
to attend the 2007 Annual Meeting of Stockholders to be held
on , ,
2007, at a.m. (Eastern Time)
at .
At the annual meeting, you will be asked to consider and vote
upon a proposal to adopt the Agreement and Plan of Merger, dated
as of February 9, 2007, by and among Lear Corporation, AREP
Car Holdings Corp. and AREP Car Acquisition Corp., pursuant to
which AREP Car Acquisition Corp. will merge with and into Lear.
AREP Car Holdings Corp. and AREP Car Acquisition Corp. are
affiliates of American Real Estate Partners, L.P. and
Mr. Carl C. Icahn. If the merger agreement is adopted and
the merger is completed, you will be entitled to receive $36.00
in cash, without interest and less any applicable withholding
tax, for each share of Lear common stock owned by you (unless
you have exercised your appraisal rights with respect to the
merger), as more fully described in the enclosed proxy statement.
Lears board of directors, after careful consideration of a
variety of factors including the unanimous recommendation of a
special committee of disinterested and independent directors,
has determined that the merger agreement and the transactions
contemplated thereby are advisable and fair to, and in the best
interests of, Lear and its stockholders, and approved the merger
agreement, the merger and the other transactions contemplated
thereby. Accordingly, our board of directors recommends that
you vote FOR the adoption of the merger
agreement.
The attached proxy statement provides you with detailed
information about the annual meeting, the merger agreement and
the merger. A copy of the merger agreement is attached as
Appendix A to the proxy statement. We encourage you to read
the entire proxy statement and the merger agreement carefully.
You may also obtain more information about Lear from documents
we have filed with the Securities and Exchange Commission.
In addition, you are being asked at the annual meeting to elect
directors, approve amendments to our Amended and Restated
Certificate of Incorporation, ratify the appointment of
Ernst & Young LLP as our independent registered public
accounting firm, consider two stockholder proposals (if
presented at the meeting) and transact any other business
properly brought before the meeting.
Whether or not you plan to attend the annual meeting, please
complete, date, sign and return, as promptly as possible, the
enclosed proxy card in the accompanying reply envelope.
Thank you in advance for your cooperation and continued support.
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Sincerely, |
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![-s- Robert E. Rossiter](https://cdn.kscope.io/43118120ab0c7e39b7a417a23dab53ef-k12958pmk1295814.gif) |
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Robert E. Rossiter |
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Chairman and Chief Executive Officer |
Neither the Securities and Exchange Commission nor any state
securities regulatory agency has approved or disapproved the
merger, passed upon the merits or fairness of the merger or
passed upon the adequacy or accuracy of the disclosure in this
document. Any representation to the contrary is a criminal
offense.
This proxy statement is
dated ,
2007, and is first being mailed to stockholders on or
about ,
2007.
LEAR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
, ,
2007
a.m., Eastern Time
To the Stockholders of Lear Corporation:
The 2007 Annual Meeting of Stockholders will be held
on ,
2007, at a.m. (Eastern Time)
at .
The purpose of the meeting is to:
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vote upon a proposal to adopt the Agreement and Plan of Merger,
dated as of February 9, 2007, by and among Lear
Corporation, AREP Car Holdings Corp. and AREP Car Acquisition
Corp., and the merger contemplated thereby; |
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vote upon a proposal to adjourn or postpone the annual meeting,
if necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the annual meeting to
adopt the merger agreement; |
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elect three directors; |
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approve amendments to our Amended and Restated Certificate of
Incorporation to provide for the annual election of directors; |
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ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2007; |
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consider two stockholder proposals, if presented at the
meeting; and |
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conduct any other business properly before the meeting or any
adjournments or postponements thereof. |
Voting is limited to stockholders of record at the close of
business
on ,
2007. A list of stockholders entitled to vote at the
meeting, and any postponements or adjournments of the meeting,
will be available for examination between the hours of
9:00 a.m. and 5:00 p.m. at our headquarters at 21557
Telegraph Road, Southfield, Michigan 48033 during the ten days
prior to the meeting and also at the meeting.
After careful consideration, our board of directors has
determined that the merger agreement and the transactions
contemplated by the merger agreement, including the merger, are
advisable and fair to, and in the best interests of, Lear and
Lears stockholders. Our board of directors has approved
and adopted the merger agreement and the transactions
contemplated by the merger agreement, including the merger.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR ADOPTION OF THE MERGER AGREEMENT.
Your vote is important. Properly executed proxy cards with no
instructions indicated on the proxy card will be voted
FOR the adoption of the merger agreement. Whether or
not you plan to attend the annual meeting, please complete, sign
and date the accompanying proxy card and return it in the
enclosed prepaid envelope. If you attend the annual meeting, you
may revoke your proxy and vote in person if you wish, even if
you have previously returned your proxy card. Your failure to
vote in person at the annual meeting or to submit a properly
executed proxy card will effectively have the same effect as a
vote AGAINST the adoption of the merger agreement.
Your prompt cooperation is greatly appreciated.
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By Order of the Board of Directors, |
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![-s- Daniel A. Ninivaggi](https://cdn.kscope.io/43118120ab0c7e39b7a417a23dab53ef-k12958pmninivagd.gif) |
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Daniel A. Ninivaggi |
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Executive Vice President, Secretary and |
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General Counsel |
,
2007
TABLE OF CONTENTS
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Important Information Regarding Mr. Icahn,
Mr. Intrieri, Parent, Merger Sub and AREP
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Financial Forecasts
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Prior Purchases and Sales of Lear Common Stock and Common Stock
Equivalents
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APPENDIX J PROXY CARD
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ii
SUMMARY TERM SHEET
The following summary highlights selected information in this
proxy statement with respect to the merger agreement and the
merger and may not contain all the information that may be
important to you. Accordingly, we encourage you to read
carefully this entire proxy statement, its appendices and the
documents referred to or incorporated by reference in this proxy
statement. Each item in this summary includes a page reference
directing you to a more complete description of that topic. See
Where You Can Find More Information beginning on
page 148. References to Lear, the
Company, we, our or us
in this proxy statement refer to Lear Corporation and its
subsidiaries unless otherwise indicated or the context otherwise
requires.
The Parties to the Merger (Page 16)
Lear Corporation was incorporated in Delaware in 1987 and is one
of the worlds largest automotive interior systems
suppliers based on net sales. Our net sales have grown from
$14.4 billion for the year ended December 31, 2002, to
$17.8 billion for the year ended December 31, 2006. We
supply every major automotive manufacturer in the world,
including General Motors, Ford, DaimlerChrysler, BMW, Fiat, PSA,
Volkswagen, Hyundai, Renault-Nissan, Mazda, Toyota, Porsche and
Honda. We supply automotive manufacturers with complete
automotive seat and electrical distribution systems and select
electronic products.
Historically, we have also supplied automotive interior
components and systems, including instrument panels and cockpit
systems, headliners and overhead systems, door panels and
flooring and acoustic systems. In October 2006, we completed the
contribution of substantially all of our European interior
business to International Automotive Components Group, LLC,
(IAC Europe), a joint venture with WL
Ross & Co. LLC (WL Ross) and Franklin
Mutual Advisers, LLC (Franklin), in exchange for a
one-third equity interest in IAC Europe. In addition, on
November 30, 2006, we entered into an Asset Purchase
Agreement with International Automotive Components Group North
America, Inc. and International Automotive Components Group
North America, LLC (together, IAC North America), WL
Ross and Franklin under which we agreed to transfer
substantially all of the assets of our North American interior
business segment (as well as our interests in two China joint
ventures) and $25 million of cash to IAC North America.
Under the terms of the agreement, we will receive a 25% equity
interest in the IAC North America joint venture and warrants to
purchase an additional 7% equity interest. We expect this
transaction to close in the first quarter of 2007, although the
closing is subject to various conditions, including the receipt
of required third-party consents and other closing conditions
customary for transactions of this type.
AREP Car Holdings Corp., a Delaware corporation
(Parent), is an indirect subsidiary of American Real
Estate Partners, L.P. (AREP), an affiliate of
Mr. Carl C. Icahn. Parent was formed exclusively for the
purpose of effecting the merger. AREP is a master limited
partnership, formed in Delaware in 1987, and a diversified
holding company owning subsidiaries engaged in three primary
business segments: Gaming, Real Estate and Home Fashion. Icahn
Partners LP, Icahn Partners Master Fund LP, Koala Holding
Limited Partnership and High River Limited Partnership, which
are also affiliates of Mr. Carl C. Icahn, beneficially own
in the aggregate approximately 16% of our outstanding common
stock.
AREP Car Acquisition Corp., a Delaware corporation (Merger
Sub), is a direct wholly-owned subsidiary of Parent.
Merger Sub was formed exclusively for the purpose of effecting
the merger.
The Merger (Page 18)
The Agreement and Plan of Merger, dated as of February 9,
2007 (the merger agreement), provides that Merger
Sub will merge with and into Lear (the merger). Lear
will be the surviving corporation (the
1
Surviving Corporation), in the merger and will
continue to do business as Lear Corporation
following the merger. In the merger, each outstanding share of
Lear common stock will be converted into the right to receive
$36.00 in cash, without interest and less any applicable
withholding tax. We refer to this amount in this proxy statement
as the merger consideration. However, shares held in treasury,
owned by Parent or Merger Sub or held by stockholders who have
properly demanded statutory appraisal rights, if any, will not
be converted.
Effects of the Merger (Page 41)
If the merger is completed, you will be entitled to receive
$36.00 in cash, without interest and less any applicable
withholding taxes, for each share of our common stock owned by
you, unless you have exercised your statutory appraisal rights
with respect to the merger. As a result of the merger, Lear will
cease to be an independent, publicly-traded company. You will
not own any shares of the Surviving Corporation.
Treatment of Options and Other Awards (Page 56)
At the effective time of the merger, except as otherwise agreed
by a holder and Parent, all outstanding restricted stock units
under our equity incentive plans (whether vested or unvested)
will be cancelled and converted into the right to receive a cash
payment equal to the number of restricted stock units multiplied
by $36.00. All outstanding stock appreciation rights and options
to acquire our common stock (whether vested or unvested) will be
cancelled and converted into the right to receive a cash payment
equal to the number of outstanding shares of our common stock
underlying the stock appreciation rights or options multiplied
by the amount (if any) by which $36.00 exceeds the applicable
exercise price. All deferred amounts held in unit accounts
denominated in shares of our common stock under our Outside
Directors Compensation Plan will be converted into the right to
receive a cash payment of $36.00 multiplied by the number of
shares deemed held in such deferred unit account, payable or
distributable in accordance with the terms of the agreement,
plan or arrangement relating to such deferred unit account. All
outstanding performance shares (whether vested or unvested) will
be cancelled and converted into the right to receive a cash
payment equal to the target number of units or shares of common
stock previously subject to performance shares multiplied by
$36.00, with respect to that percentage of such performance
shares that vest upon a change in control as provided in our
Long-Term Stock Incentive Plan. All payments of the merger
consideration will be without interest and less any applicable
withholding taxes.
Recommendation of the Special Committee and Our Board of
Directors (Page 26)
Special Committee. The special committee is a committee
of three independent and disinterested members of our board of
directors that was formed for the purpose of evaluating any
proposal that may be made relating to the acquisition of Lear.
The special committee unanimously determined that the merger is
advisable and fair to, and in the best interests of, Lear and
its stockholders and unanimously recommended that the board of
directors (i) approve the merger agreement and the
transactions contemplated thereby, including the merger, and
(ii) recommend that the stockholders of Lear vote in favor
of adoption of the merger agreement. For a discussion of the
factors considered by the special committee in reaching its
conclusions, see Special Factors Reasons for
the Merger; Recommendation of the Special Committee and Our
Board of Directors beginning on page 26.
Board of Directors. The board of directors (other than
Vincent Intrieri, who did not participate in board deliberations
concerning the merger), acting upon the unanimous recommendation
of the special committee, (i) determined that the merger
agreement and the transactions contemplated thereby, including
the merger, are advisable and fair to, and in the best interests
of, Lear and its stockholders, (ii) approved the merger
agreement and the transactions contemplated thereby and
(iii) resolved to recommend that the stockholders adopt the
merger agreement and the transactions contemplated thereby and
directed that such matter be submitted for consideration of our
stockholders at the annual meeting. The board of directors
recommends that our stockholders vote FOR the
adoption of the merger agreement and FOR the
adjournment or postponement of the annual meeting, if necessary,
to solicit additional proxies in favor of the adoption of the
merger agreement.
2
Interests of Lears Directors and Executive Officers in
the Merger (Page 44)
In considering the recommendation of the board of directors, you
should be aware that our directors and executive officers may
have interests in the merger that are different from, or in
addition to, your interests as a stockholder, and that may
present actual or potential conflicts of interest. Such
interests include (i) the accelerated vesting of certain
equity awards and the accelerated vesting and payment of certain
deferred compensation and non-qualified retirement arrangements
for certain directors and officers, (ii) certain enhanced
constructive termination rights for executives with employment
agreements following a change in control and (iii) rights
to continued indemnification and insurance coverage after the
merger for acts or omissions occurring prior to the merger. In
addition, at Parents request in connection with the merger
agreement, we entered into employment agreement amendments with
each of Douglas G. DelGrosso, Robert E. Rossiter and James H.
Vandenberghe. The effectiveness of each amendment is conditioned
upon the consummation of the merger with Parent and Merger Sub.
Pursuant to the amendments, following the closing of the merger,
Mr. DelGrosso would serve as Chief Executive Officer of
Lear, Mr. Rossiter would serve initially as Executive
Chairman of the Board of Directors and Mr. Vandenberghe
would serve as Vice Chairman and Chief Financial Officer of
Lear. In addition, one of our directors, Mr. Intrieri, is a
director of American Property Investors, Inc. (API),
the general partner of AREP.
Opinion of J.P. Morgan Securities Inc. (Page 30)
J.P. Morgan Securities Inc. (JPMorgan)
delivered its opinion to our special committee, with a copy to
the board of directors, that, as of February 8, 2007, and
based upon and subject to the assumptions, qualifications and
limitations set forth in its opinion, the consideration of
$36.00 per share in cash to be received by the holders of shares
of our common stock (other than affiliates of specified entities
controlled by Mr. Icahn) pursuant to the merger agreement
was fair from a financial point of view to such holders of
shares of our common stock.
The full text of the JPMorgan opinion, dated February 8,
2007, which sets forth, among other things, the assumptions
made, procedures followed, matters considered, and
qualifications and limitations of the review undertaken by
JPMorgan in rendering its opinion is attached as Appendix B
to this document and is incorporated into this document by
reference. In connection with the rendering of JPMorgans
opinion to the special committee, JPMorgan provided its opinion
for the information and assistance of the special committee
(and, at the instruction of the special committee, to
Lears board of directors) in connection with and for the
purposes of their evaluation of the merger. The JPMorgan opinion
is not a recommendation to any stockholder of Lear as to how
that stockholder should vote with respect to the merger or any
other matter and should not be relied upon by any stockholder as
such.
Financing (Page 42)
Parent and Merger Sub estimate that the total amount of funds
necessary to consummate the merger and related transactions will
be approximately $4.0 billion, of which $2.7 billion
will be funded by two new senior secured credit facilities. On
February 8, 2007, Parent entered into a commitment letter
with Bank of America, N.A. (Bank of America) and
Banc of America Securities LLC (BAS), pursuant to
which such parties committed to provide to Parent the debt
financing necessary to complete the transactions contemplated by
the merger agreement. As described in the commitment letter,
Bank of America will act as the sole and exclusive
administrative agent and BAS will act as sole lead arranger and
sole bookrunner for credit facilities in an aggregate amount of
$3.6 billion, consisting of a $1.0 billion senior
secured revolving credit facility and a $2.6 billion senior
secured term loan B facility. The credit facilities, along
with an equity investment by AREP, are intended to refinance and
replace Lears existing credit facilities and to fund the
transactions contemplated by the merger agreement. Funding of
the debt financing is subject to the satisfaction of the
conditions set forth in the commitment letters. See
Special Factors Financing of the Merger
beginning on page 42.
3
Regulatory Approvals (Page 52)
Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the HSR Act), and the rules
promulgated thereunder by the Federal Trade Commission
(FTC), the merger may not be completed until
notification and report forms have been filed with the FTC and
the Antitrust Division of the Department of Justice
(DOJ), and the applicable waiting period has expired
or been terminated. Lear and Mr. Icahn filed notification
and report forms under the HSR Act with the FTC and the
Antitrust Division of the DOJ, and the waiting period commenced
on February 16, 2007. The merger is also subject to review
by the governmental authorities of various other jurisdictions
under the antitrust laws of those jurisdictions.
Material U.S. Federal Income Tax Consequences
(Page 51)
The exchange of shares of our common stock for cash pursuant to
the merger agreement generally will be a taxable transaction for
U.S. federal income tax purposes. Stockholders who exchange
their shares of our common stock in the merger will generally
recognize a gain or loss in an amount equal to the difference,
if any, between the cash received in the merger and their
adjusted tax basis in their shares of our common stock. You
should consult your tax advisor for a complete analysis of the
effect of the merger on your federal, state and local and/or
foreign taxes.
Conditions to the Merger (Page 63)
Conditions to Each Partys Obligations. Each
partys obligation to complete the merger is subject to the
satisfaction or waiver, at or prior to the effective time of the
merger, of the following conditions:
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the merger agreement must have been adopted by the affirmative
vote of the holders of a majority of the outstanding shares of
our common stock; |
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there is no order, injunction or decree preventing the
consummation of the merger; and |
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any applicable waiting period (and any extension thereof) under
the HSR Act will have expired or been terminated and, subject to
materiality thresholds, approvals and authorizations from other
applicable antitrust authorities will have been granted. |
Conditions to Parents and Merger Subs
Obligations. The obligation of Parent and Merger Sub to
complete the merger is subject to the satisfaction or waiver, at
or prior to the effective time of the merger, of the following
additional conditions:
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our representations and warranties must be true and correct,
subject to certain materiality thresholds; |
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we must have performed in all material respects all obligations
required to be performed by us under the merger agreement at or
prior to the closing date; |
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we must deliver to Parent and Merger Sub at closing a
certificate with respect to the satisfaction of the foregoing
conditions relating to representations, warranties and
obligations; |
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since the date of the merger agreement, there must not have been
any event, change, effect, development, condition or occurrence
that has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect (as
defined in the merger agreement) or any specified force majeure
event that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; |
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we must perform certain obligations and satisfy certain
requirements with respect to Parents debt financing
arrangements; and |
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we must provide to Parent a certification that our shares of
common stock are not United States real property interests. |
4
Conditions to Lears Obligations. Our obligation to
complete the merger is subject to the satisfaction or waiver of
the following further conditions:
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the representations and warranties made by Parent and Merger Sub
must be true and correct, subject to certain materiality
thresholds; |
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Parent and Merger Sub must have performed in all material
respects all obligations required to be performed by them under
the merger agreement at or prior to the closing date; |
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Parent must deliver to us at closing a certificate with respect
to the satisfaction of the foregoing conditions relating to
representations, warranties and obligations; and |
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Parent must deliver to us at closing a solvency opinion. |
Solicitation of Other Offers (Page 64)
Until 11:59 p.m., Eastern Standard Time, on March 26,
2007 (which we sometimes refer to as the end of the go
shop period), we are permitted to initiate, solicit and
encourage acquisition proposals (including by way of providing
access to non-public information pursuant to one or more
acceptable confidentiality agreements), and participate in
discussions or negotiations with respect to acquisition
proposals or otherwise cooperate with or assist or participate
in, or facilitate any such discussions or negotiations.
After 11:59 p.m., Eastern Standard Time, on March 26,
2007, we have agreed not to:
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initiate, solicit or knowingly encourage the submission of any
inquiries, proposals or offers or any other efforts or attempts
that constitute or may reasonably be expected to lead to any
acquisition proposals or engage in any discussions or
negotiations with respect thereto or otherwise cooperate with or
assist or participate in, or knowingly facilitate any such
inquiries, proposals, offers, discussions or negotiations; |
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approve or recommend, or publicly propose to approve or
recommend, any acquisition proposal; |
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enter into any merger agreement, letter of intent, agreement in
principle, share purchase agreement, asset purchase agreement or
share exchange agreement, option agreement or other similar
agreement relating to an acquisition proposal; |
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enter into any agreement requiring us to abandon, terminate or
fail to consummate the transactions contemplated by the merger
agreement or breach our obligations under the merger
agreement; or |
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resolve, propose or agree to do any of the foregoing. |
Notwithstanding these restrictions:
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we are permitted to continue discussions and provide non-public
information to any party that has made an acquisition proposal
prior to March 26, 2007 or with whom we are having ongoing
discussions or negotiations as of March 26, 2007 regarding
a possible acquisition proposal (we must otherwise immediately
cease or cause to be terminated discussions except as permitted
below and cause any confidential information provided or made
available to be returned or destroyed); and |
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at any time after the date of the merger agreement and prior to
the approval of the merger agreement by our stockholders, we are
permitted to furnish information with respect to Lear and our
subsidiaries to any person making an acquisition proposal and
participate in discussions or negotiations with the person
making the acquisition proposal, subject to certain limitations. |
In addition, we may terminate the merger agreement and enter
into a definitive agreement with respect to a superior proposal
under certain circumstances. See The Merger
Agreement Recommendation Withdrawal/ Termination in
Connection with a Superior Proposal.
5
Termination of the Merger Agreement (Page 68)
The merger agreement may be terminated at any time prior to the
consummation of the merger, whether before or after stockholder
approval has been obtained:
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by mutual written consent of Lear and Parent; |
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by either Lear or Parent if: |
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there is any final and non-appealable action that restrains,
enjoins or otherwise prohibits any of the transactions
contemplated by the merger agreement or a governmental entity
declines to grant an approval necessary to satisfy the
conditions to closing; |
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the merger is not completed on or before the Outside Date (as
defined under The Merger Agreement Termination
of the Merger Agreement), as may be extended by Parent in
certain circumstances; or |
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our stockholders do not adopt the merger agreement at the annual
meeting or any adjournment or postponement thereof. |
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Parent or Merger Sub has breached any of its representations,
warranties, covenants or agreements under the merger agreement
in a manner that would result in the failure of certain
conditions to closing to be satisfied, and where that breach is
not cured or is incapable of being cured within the Outside Date
and 30 days following written notice to the party
committing such breach; |
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the termination is effected prior to receipt of the requisite
stockholder approval in order to enter into an agreement with
respect to a superior proposal; or |
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if all of the conditions to each partys obligation to
effect the merger have been satisfied, and Parent has failed to
consummate the merger no later than ten calendar days after the
last day of the Marketing Period. |
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we have breached any of our representations, warranties,
covenants or agreements under the merger agreement in a manner
that, either individually or in the aggregate, would result in
the failure of certain conditions to closing to be satisfied,
and where that breach is not cured or is incapable of being
cured within the Outside Date and 30 days following written
notice to us; |
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a change of the recommendation of our board of directors has
occurred; |
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we or our board of directors (or any committee thereof)
approves, adopts or recommends any acquisition proposal or
approves or recommends, or enters into or allows us or any of
our subsidiaries to enter into, a letter of intent or agreement
for an acquisition proposal; |
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we fail under certain circumstances to issue a press release
reaffirming the recommendation of our board of directors that
our stockholders adopt the merger agreement; |
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we have intentionally or materially breached any of our
obligations under the solicitation provision or the stockholder
approval provisions of the merger agreement; we have failed to
include in this proxy statement our board recommendation; or we
or our board of directors (or any committee thereof) authorizes
or publicly proposes any of the foregoing actions of this and
the preceding three bullet points; |
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there has been a Material Adverse Effect that cannot be cured by
the Outside Date; or |
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any specified force majeure event has occurred, subject to
materiality thresholds. |
6
Termination Fees (Page 70)
If we terminate the merger agreement or the merger agreement is
terminated by Parent or Merger Sub under certain circumstances,
we must pay a termination fee to Parent. In connection with such
termination, we are required to pay a fee of $85.2 million
to Parent plus up to $15 million of Parents
out-of-pocket expenses
(including fees and expenses of financing sources, counsel,
accountants, investment bankers, experts and consultants)
relating to the merger agreement. If such termination is to
accept a superior proposal during the go shop
period, we are required to pay a fee of $73.5 million to
Parent plus up to $6 million of Parents
out-of-pocket expenses.
Under certain circumstances, Parent must pay us a termination
fee of $250 million.
Voting Agreement (Page 53)
In connection with the execution of the merger agreement, we
entered into a voting agreement with Icahn Partners LP, Icahn
Partners Master Fund LP, Koala Holding Limited Partnership
and High River Limited Partnership, which are affiliates of AREP
and Mr. Icahn. In the aggregate, such holders beneficially
own approximately 16% of our outstanding common stock. Pursuant
to the voting agreement, such holders agreed to vote in favor of
the adoption of the merger agreement and, subject to certain
exceptions, not to dispose of any shares of our common stock
prior to consummation of the merger. Such holders have also
agreed to vote in favor of a superior proposal under certain
circumstances.
Limited Guaranty (Page 44)
In connection with the merger agreement, AREP provided to us a
limited guaranty under which AREP has guaranteed the performance
by Parent and Merger Sub of their payment of the termination fee
under the merger agreement. The limited guaranty is our sole
recourse against the guarantor.
Appraisal Rights (Page 76)
Under Delaware law, holders of our common stock who do not vote
in favor of adopting the merger agreement will have the right to
seek appraisal of the fair value of their shares of our common
stock as determined by the Delaware Court of Chancery if the
merger is completed, but only if they comply with all
requirements of Section 262 of the General Corporation Law
of the State of Delaware (the DGCL), the text of
which can be found in Appendix F of this proxy statement,
which are summarized in this proxy statement. This appraisal
amount could be more than, the same as or less than the merger
consideration. Any holder of our common stock intending to
exercise such holders appraisal rights, among other
things, must submit a written demand for an appraisal to us
prior to the vote on the adoption of the merger agreement, must
not vote or otherwise submit a proxy in favor of adoption of the
merger agreement and must continuously hold its stock from the
date of the written demand through the effective time of the
merger. Your failure to follow exactly the procedures specified
under Delaware law will result in the loss of your appraisal
rights.
Market Price of Common Stock (Page 107)
The closing sale price of our common stock on the NYSE on
February 2, 2007, the last trading day prior to our
announcement that AREP made an offer to acquire all our issued
and outstanding shares of common stock for $36.00 per share
in cash, was $34.67. The $36.00 per share to be paid for
each share of our common stock in the merger represents a
premium of approximately 3.8% to the closing price on
February 2, 2007. The $36.00 per share merger
consideration represents a premium of 55.1% based on the
52-week volume weighted
average price of our common stock as of February 2, 2007,
and a premium of 46.4% based on the closing price of our common
stock on October 16, 2006, the date on which Lear announced
the private placement of $200 million of our common stock
to affiliates of Mr. Icahn.
7
ANSWERS TO QUESTIONS YOU MAY HAVE
The following questions and answers are intended to address
briefly some commonly asked questions regarding the annual
meeting, the merger and the merger agreement, and the other
proposals on which you are being asked to vote. These questions
and answers may not address all questions that may be important
to you as a Lear stockholder. Please refer to the Summary
Term Sheet and the more detailed information contained
elsewhere in this proxy statement, the appendices to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement, which you should read
carefully. See Where You Can Find More Information
beginning on page 148.
Questions and Answers About the Annual Meeting
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When and where is the annual meeting? |
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The annual meeting of stockholders of Lear will be held
on ,
2007, at a.m. (Eastern Time)
at . |
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What do I need to do now? |
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Even if you plan to attend the annual meeting, after carefully
reading and considering the information contained in this proxy
statement, if you hold your shares in your own name as the
stockholder of record, please complete, sign, date and return
the enclosed proxy card in order to have your shares voted at
the annual meeting. You can also attend the annual meeting and
vote. If you hold your shares in street name, follow
the procedures provided by your broker, bank or other nominee. |
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How do I vote? |
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You may vote by: |
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signing and dating each proxy card you receive and
returning it in the enclosed prepaid envelope; |
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using the telephone number printed on your proxy
card; or |
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if you hold your shares in street name,
follow the procedures provided by your broker, bank or other
nominee. |
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If you return your signed proxy card, but do not mark the boxes
showing how you wish to vote, your shares will be voted
FOR the proposal to adopt the merger agreement,
FOR the adjournment proposal, FOR the
election of the director nominees named in this proxy statement,
FOR the proposal to amend our Amended and Restated
Certificate of Incorporation, FOR the ratification
of the appointment of Ernst & Young LLP as our public
accounting firm for 2007 and AGAINST each of the two
stockholder proposals. |
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How can I change or revoke my vote? |
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You have the right to change or revoke your proxy at any time
before the vote taken at the annual meeting by: |
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delivering to Daniel A. Ninivaggi, our Executive
Vice President, Secretary and General Counsel, a signed, written
revocation letter dated later than the date of your proxy; |
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submitting a proxy to Lear with a later date; or |
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attending the meeting and voting either in person or
by ballot. |
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If my shares are held in street name by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me? |
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A. |
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If you hold your shares in street name through a
broker or other nominee, your broker or nominee may not be
permitted to exercise voting discretion with respect to some of
the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions with respect to a
non-discretionary matter, your shares will not be voted on such
matter. However, shares represented by such broker
non-votes will be counted in determining whether there is
a quorum. |
8
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What do I do if I receive more than one proxy or set of
voting instructions? |
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If you also hold shares directly as a record holder in
street name, or otherwise through a nominee, you may
receive more than one proxy and/or set of voting instructions
relating to the annual meeting. These should each be voted
and/or returned separately as described elsewhere in this proxy
statement in order to ensure that all of your shares are voted. |
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What happens if I sell my shares before the annual
meeting? |
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If you transfer your shares of common stock after the record
date but before the annual meeting, you will retain your right
to vote at the annual meeting. However, you will have
transferred the right to receive $36.00 per share in cash
to be received by our stockholders in the merger, as described
under Questions and Answers About the Merger
and the Merger Agreement. In order to receive the
$36.00 per share, you must hold your shares through
completion of the merger. |
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Will a proxy solicitor be used? |
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Yes. We expect to engage MacKenzie Partners, Inc. to assist in
the solicitation of proxies for the annual meeting for a fee of
approximately
$ ,
a nominal fee per stockholder contact, reimbursement of
reasonable
out-of-pocket expenses
and indemnification against certain losses, costs and expenses. |
Questions and Answers About the Merger and the Merger
Agreement
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What is the proposed merger transaction? |
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A. |
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The proposed merger transaction is the acquisition of Lear by
AREP Car Holdings Corp. (Parent), an affiliate of
American Real Estate Partners, L.P. (AREP). Once the
merger agreement has been adopted by the stockholders and other
closing conditions under the merger agreement have been
satisfied or waived, AREP Car Acquisition Corp. (Merger
Sub), a wholly-owned subsidiary of Parent, will merge with
and into Lear. Lear will be the Surviving Corporation and become
a wholly-owned subsidiary of Parent after the merger. |
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What will I receive in the merger? |
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A. |
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Upon completion of the merger, you will be entitled to receive
$36.00 in cash, without interest and less any applicable
withholding tax, for each share of our common stock that you
own, unless you have exercised your appraisal rights with
respect to the merger. For example, if you own 100 shares
of our common stock, you will receive $3,600.00 in cash in
exchange for your shares of our common stock, less any
applicable withholding tax. You will not own any shares in the
Surviving Corporation. |
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What vote is required for Lears stockholders to adopt
the merger agreement? |
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An affirmative vote of a majority of the outstanding shares of
our common stock is required to adopt the merger agreement. |
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What vote of our stockholders is required to approve the
proposal to adjourn or postpone the annual meeting, if
necessary, to solicit additional proxies in favor of the
adoption of the merger agreement? |
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A. |
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The proposal to adjourn or postpone the annual meeting, if
necessary, to solicit additional proxies in favor of the
adoption of the merger agreement requires the affirmative vote
of a majority of the outstanding shares of our common stock
present in person or represented by proxy at the annual meeting
and entitled to vote on the matter. |
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How does Lears board of directors recommend that I vote
on the proposals relating to the merger agreement? |
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The board of directors, after careful consideration of a variety
of factors including the unanimous recommendation of the special
committee, recommends that you vote FOR the proposal
to adopt the merger agreement and FOR the proposal
to adjourn the annual meeting, if necessary, to solicit
additional proxies if there are insufficient votes at the time
of the annual meeting to adopt the merger agreement. You |
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should read Special Factors Reasons for the
Merger; Recommendation of the Special Committee and our Board of
Directors for a discussion of the factors that the special
committee and the board of directors considered in deciding to
recommend the adoption of the merger agreement. |
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What effects will the proposed merger have on Lear? |
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As a result of the proposed merger, Lear will cease to be a
publicly-traded company and will be wholly-owned by Parent. You
will no longer have any interest in our future earnings or
growth. Following consummation of the merger, the registration
of our common stock and our reporting obligations with respect
to our common stock under the Securities Exchange Act of 1934,
as amended (the Exchange Act), will be terminated
upon application to the Securities and Exchange Commission (the
SEC). In addition, upon completion of the proposed
merger, shares of our common stock will no longer be listed on
any stock exchange or quotation system, including the New York
Stock Exchange (NYSE). |
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Am I entitled to exercise appraisal rights instead of
receiving the merger consideration for my shares? |
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Yes. As a holder of our common stock, you are entitled to
appraisal rights under Delaware law in connection with the
merger if you comply with all the requirements of Delaware law.
See Appraisal Rights beginning on page 76. |
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When is the merger expected to be completed? |
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We are working toward completing the merger as quickly as
possible, and we anticipate that it will be completed at the end
of the second quarter of 2007. However, the exact timing of the
completion of the merger cannot be predicted. In order to
complete the merger, we must obtain stockholder approval and the
other closing conditions under the merger agreement must be
satisfied or waived. In addition, Parent is not obligated to
complete the merger until the expiration of a 15-business day
Marketing Period that it may use to complete its
financing for the merger. See The Merger
Agreement Effective Time and The Merger
Agreement Conditions to the Merger beginning
on pages 55 and 63, respectively. |
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What happens if the merger is not consummated? |
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If the merger agreement is not adopted by stockholders or if the
merger is not completed for any other reason, stockholders will
not receive any payment for their shares in connection with the
merger. Instead, Lear will remain an independent public company
and our common stock will continue to be listed and traded on
the NYSE. Under specified circumstances, Lear may be required to
pay Parent a termination fee and reimburse Parent for its
out-of-pocket expenses
as described under the caption The Merger
Agreement Termination Fees and Expenses. |
Questions and Answers About the Other Proposals
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What are the proposals at the annual meeting in addition to
the adoption of the merger agreement? |
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A. |
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In addition to the proposal to adopt the merger agreement and
the merger, you are being asked to vote on the election of three
directors, the adoption of amendments to our Amended and
Restated Certificate of Incorporation to provide for the annual
election of each director on our board, the ratification of the
appointment of Ernst & Young LLP as our independent
registered public accounting firm for 2007 and, if presented at
the meeting, the two stockholder proposals described in this
proxy statement. |
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What effect will the adoption of the merger agreement have on
the other proposals? |
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If the merger agreement and the merger are adopted by the
affirmative vote of a majority of the outstanding shares of our
common stock, then you will still have the right to vote on the
other proposals |
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at the annual meeting. If the merger is consummated, however,
Lear will cease to be a publicly-traded company and you will no
longer be a stockholder of Lear. |
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What will happen to the other proposals if the merger
agreement is not adopted by stockholders? |
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If the merger agreement is not adopted by our stockholders or if
the merger is not completed for any other reason, Lear will
remain an independent public company and you may be affected by
the adoption, or failure to adopt, the other proposals described
above if you remain a stockholder of Lear. |
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What vote is required for Lears stockholders to adopt
the other proposals? |
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Our directors are elected by a plurality of the votes cast by
the holders of our common stock. Plurality means
that the three individuals who receive the highest number of the
votes will be elected as directors. Any shares not voted
(whether by abstention, broker non-vote or otherwise) have no
impact on the election of directors except to the extent that
the failure to vote for an individual results in another
individual receiving a higher number of votes. Approval of the
amendments to our Amended and Restated Certificate of
Incorporation will require the affirmative vote of holders of a
majority of the outstanding shares of our common stock. For each
other item, the affirmative vote of the holders of a majority of
the shares represented in person or by proxy and entitled to
vote on the item will be required for approval. |
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How does Lears board of directors recommend that I vote
on the other proposals? |
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The board of directors recommends that you vote FOR
the election of the director nominees named in this proxy
statement, FOR the proposal to amend our Amended and
Restated Certificate of Incorporation, FOR the
ratification of the appointment of Ernst & Young LLP as
our public accounting firm for 2007 and AGAINST each
of the two stockholder proposals. |
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Who can help answer my other questions? |
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A. |
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If you have additional questions about the merger, need
assistance in submitting your proxy or voting your shares of our
common stock, or need additional copies of the proxy statement
or the enclosed proxy card, you may direct such question or
request to Lear Corporation, 21557 Telegraph Road,
P.O. Box 5008, Southfield, Michigan 48086-5008,
Attention: Investor Relations, or through Lears website at
www.lear.com. You may also contact MacKenzie Partners, Inc., who
we expect to be our proxy solicitor, toll-free
at . |
11
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a
safe harbor for forward-looking statements made by us or on our
behalf. The words will, may,
designed to, outlook,
believes, should,
anticipates, plans, expects,
intends, estimates and similar
expressions identify these forward-looking statements. All
statements contained or incorporated in this proxy statement
which address operating performance, events or developments that
we expect or anticipate may occur in the future, including
statements related to business opportunities, awarded sales
contracts, sales backlog and on-going commercial arrangements or
statements expressing views about future operating results, are
forward-looking statements. Important factors, risks and
uncertainties that may cause actual results to differ from those
expressed in our forward-looking statements include, but are not
limited to:
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general economic conditions in the markets in which we operate,
including changes in interest rates or currency exchange rates; |
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the financial condition of our customers or suppliers; |
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fluctuations in the production of vehicles for which we are a
supplier; |
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disruptions in the relationships with our suppliers; |
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labor disputes involving us or our significant customers or
suppliers or that otherwise affect us; |
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our ability to achieve cost reductions that offset or exceed
customer-mandated selling price reductions; |
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the outcome of customer productivity negotiations; |
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the impact and timing of program launch costs; |
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the costs and timing of facility closures, business realignment
or similar actions; |
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increases in our warranty or product liability costs; |
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risks associated with conducting business in foreign countries; |
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competitive conditions impacting our key customers and suppliers; |
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raw material costs and availability; |
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our ability to mitigate the significant impact of increases in
raw material, energy and commodity costs; |
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the outcome of legal or regulatory proceedings to which we are
or may become a party; |
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unanticipated changes in cash flow, including our ability to
align our vendor payment terms with those of our customers; |
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the finalization of our restructuring strategy; and |
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other risks described from time to time in our SEC filings. |
Finally, the closing of the merger described in this proxy
statement is subject to various conditions, including the
receipt of the affirmative vote of the holders of a majority of
the outstanding shares of our common stock, antitrust approvals
and other customary closing conditions. Our agreement to
transfer substantially all of our North American interior
business to a joint venture with WL Ross and Franklin is also
subject to various conditions, including the receipt of
third-party consents, as well as other closing conditions
customary for transactions of this type. No assurances can be
given that these proposed transactions will be consummated on
the terms contemplated or at all.
The forward-looking statements in this proxy statement are made
as of the date hereof, and we do not assume any obligation to
update, amend or clarify them to reflect events, new information
or circumstances occurring after the date hereof.
12
LEAR CORPORATION
21557 Telegraph Road
Southfield, Michigan 48033
SUMMARY OF THE ANNUAL MEETING
Annual Meeting
The 2007 Annual Meeting of Stockholders will be held
at ,
on ,
2007,
at a.m.
(Eastern Time).
Record Date
The date fixed to determine stockholders entitled to notice of
and to vote at the meeting is the close of business
on ,
2007.
Mailing Date
We anticipate first mailing this proxy statement, the attached
Notice of Annual Meeting and the enclosed proxy card on or
about ,
2007.
Agenda
The agenda for the meeting is to:
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1. |
vote upon a proposal to adopt the Agreement and Plan of Merger,
dated as of February 9, 2007, by and among Lear
Corporation, AREP Car Holdings Corp. and AREP Car Acquisition
Corp., and the merger contemplated thereby; |
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2. |
vote upon a proposal to adjourn or postpone the annual meeting,
if necessary, to permit further solicitation of proxies if there
are not sufficient votes at the time of the annual meeting to
adopt the merger agreement; |
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3. |
elect three directors; |
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4. |
approve amendments to our Amended and Restated Certificate of
Incorporation to provide for the annual election of directors; |
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5. |
ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for 2007; |
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6. |
consider two stockholder proposals, if presented at the
meeting; and |
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7. |
conduct any other business properly before the meeting or any
adjournments or postponements thereof. |
Proxy Solicitation
We expect to engage MacKenzie Partners, Inc. to assist in the
solicitation of proxies for the annual meeting for a fee of
approximately
$ ,
a nominal fee per stockholder contact, reimbursement of
reasonable
out-of-pocket expenses
and indemnification against certain losses, costs and expenses.
We have requested that banks, brokers and other custodian
nominees and fiduciaries supply, at our expense, proxy material
to the beneficial owners of our common stock.
Voting of Proxies
Your proxy will be voted in accordance with your instructions,
provided that you date, execute and return a proxy card. If you
execute and return your proxy card but provide no specific
instructions in the proxy card, your shares will be voted FOR
the adoption of the merger agreement, FOR the proposal to
adjourn or postpone the annual meeting, if necessary, to permit
further solicitation of proxies if there are not
13
sufficient votes at the time of the annual meeting to adopt the
merger agreement, FOR our Boards nominees named on the
proxy card, FOR the approval of amendments to our Amended and
Restated Certificate of Incorporation, FOR the ratification of
the appointment of our independent registered public accounting
firm, and AGAINST the approval of the stockholder proposals, if
presented.
We do not intend to bring any matters before the meeting except
those indicated in the Notice of Annual Meeting and we do not
know of any matter which anyone else intends to present for
action at the meeting. If any other matters properly come before
the meeting, however, the persons named in the enclosed proxy
will be authorized to vote or otherwise act in accordance with
their judgment.
Revoking Proxies
You may revoke your proxy at any time before it is voted at the
meeting by:
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delivering to Daniel A. Ninivaggi, our Executive Vice President,
Secretary and General Counsel, a signed, written revocation
letter dated later than the date of your proxy; |
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submitting a proxy to Lear with a later date; or |
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attending the meeting and voting either in person or by ballot. |
Outstanding Shares
On the record date, there were
approximately shares
of our common stock, par value $0.01 per share,
outstanding. Our common stock is the only class of our voting
securities outstanding.
Quorum
A quorum is established when a majority of shares entitled to
vote is present at the meeting, either in person or by proxy.
Abstentions and broker non-votes (as described below under
Required Vote) are counted for purposes
of determining whether a quorum is present.
Voting
Each share of common stock that you hold as of the record date
entitles you to one vote, without cumulation, on each matter to
be voted upon at the meeting.
Required Vote
The adoption of the merger agreement requires the affirmative
vote of a majority of the outstanding shares of our common
stock. Approval of the proposal to adjourn or postpone the
annual meeting, if necessary for the purpose of soliciting
additional proxies, requires the affirmative vote of a majority
of the shares of our common stock present in person or
represented by proxy at the annual meeting and entitled to vote
on the matter. Accordingly, with respect to the adoption of the
merger agreement, your failure to affirmatively vote in favor of
the adoption of the merger agreement will have the same effect
as a vote against the adoption of the merger agreement.
Our directors are elected by a plurality of the votes cast by
the holders of our common stock. Plurality means
that the three individuals who receive the highest number of the
votes will be elected as directors. Any shares not voted
(whether by abstention, broker non-vote or otherwise) have no
impact on the election of directors except to the extent that
the failure to vote for an individual results in another
individual receiving a higher number of votes.
Approval of the amendments to our Amended and Restated
Certificate of Incorporation to provide for the annual election
of directors will require the affirmative vote of holders of a
majority of the outstanding shares of our common stock.
For each other item, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and
entitled to vote on the item will be required for approval.
14
A properly executed proxy marked ABSTAIN with respect to any
matter other than the election of directors will not be voted,
although it will be counted for purposes of determining whether
there is a quorum. Accordingly, an abstention will have the
effect of a negative vote on such items.
If you hold your shares in street name through a
broker or other nominee, your broker or nominee may not be
permitted to exercise voting discretion with respect to some of
the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions with respect to a
non-discretionary matter, your shares will not be voted on such
matter and will not be counted as shares entitled to vote on
such matter. However, shares represented by such broker
non-votes will be counted in determining whether there is
a quorum.
Annual Report
Lear Corporations 2006 Annual Report is being mailed to
you with this proxy statement.
15
APPROVAL OF THE MERGER AGREEMENT AND THE MERGER
(PROPOSAL NO. 1)
THE PARTIES TO THE MERGER
Lear
Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48033
Lear Corporation was incorporated in Delaware in 1987 and is one
of the worlds largest automotive interior systems
suppliers based on net sales. Our net sales have grown from
$14.4 billion for the year ended December 31, 2002, to
$17.8 billion for the year ended December 31, 2006. We
supply every major automotive manufacturer in the world,
including General Motors, Ford, DaimlerChrysler, BMW, Fiat, PSA,
Volkswagen, Hyundai, Renault-Nissan, Mazda, Toyota, Porsche and
Honda. We supply automotive manufacturers with complete
automotive seat and electrical distribution systems and select
electronic products.
Historically, we have also supplied automotive interior
components and systems, including instrument panels and cockpit
systems, headliners and overhead systems, door panels and
flooring and acoustic systems. In October 2006, we completed the
contribution of substantially all of our European interior
business to IAC Europe, a joint venture with WL Ross and
Franklin, in exchange for a one-third equity interest in IAC
Europe. In addition, on November 30, 2006, we entered into
an Asset Purchase Agreement with IAC North America, WL Ross and
Franklin under which we agreed to transfer substantially all of
the assets of our North American interior business segment (as
well as our interests in two China joint ventures) and
$25 million of cash to IAC North America. Under the terms
of the agreement, we will receive a 25% equity interest in the
IAC North America joint venture and warrants to purchase an
additional 7% equity interest. We expect this transaction to
close in the first quarter of 2007, although the closing is
subject to various conditions, including the receipt of required
third-party consents and other closing conditions customary for
transactions of this type.
For more information about Lear, please visit our website at
www.lear.com. Our website address is provided as an inactive
textual reference only. The information provided on our website
is not part of this proxy statement, and therefore is not
incorporated by reference. See also Where You Can Find
More Information beginning on page 148. Our common
stock is publicly traded on the NYSE under the symbol
LEA.
Parent
AREP Car Holdings Corp.
c/o American Real Estate Holdings Limited Partnership
767 Fifth Avenue, 47th Floor
New York, New York 10153
AREP Car Holdings Corp., a Delaware corporation, is an indirect
subsidiary of American Real Estate Partners, L.P.
(AREP), an affiliate of Mr. Carl C. Icahn.
Parent was formed exclusively for the purpose of effecting the
merger. AREP is a master limited partnership, formed in Delaware
in 1987, and a diversified holding company owning subsidiaries
engaged in three primary business segments: Gaming, Real Estate
and Home Fashion. Icahn Partners LP, Icahn Partners Master
Fund LP, Koala Holding Limited Partnership and High River
Limited Partnership, which are also affiliates of Mr. Carl
C. Icahn, beneficially own in the aggregate approximately 16% of
our outstanding common stock. AREPs Depositary Units and
Preferred Units are publicly traded on the NYSE under the
symbols ACP and ACP-P, respectively.
16
Merger Sub
AREP Car Acquisition Corp.
c/o American Real Estate Holdings Limited Partnership
767 Fifth Avenue, 47th Floor
New York, New York 10153
AREP Car Acquisition Corp., a Delaware corporation, is a direct
wholly-owned subsidiary of Parent. Merger Sub was formed
exclusively for the purpose of effecting the merger.
17
SPECIAL FACTORS
Background of the Merger
Affiliates of Mr. Carl C. Icahn have been stockholders of
Lear since March 2006. On November 8, 2006, we completed
the sale of 8,695,653 shares of our common stock in a private
placement to affiliates of and funds managed by Mr. Icahn.
In connection with the offering, Lear agreed to a limited waiver
of Section 203 of the DGCL with respect to the Icahn
affiliates for so long as their interest in our stock does not
exceed 24% of our outstanding common stock. The terms of the
purchase agreement entered into between Lear and the Icahn
affiliates in connection with the stock sale also permitted the
Icahn affiliates to designate one person to serve on our board
of directors. On November 9, 2006, our board of directors
elected Vincent J. Intrieri, the designee of the Icahn
affiliates, to our board of directors.
On January 16, 2007, Robert E. Rossiter, our Chairman and
Chief Executive Officer, and Daniel A. Ninivaggi, our Executive
Vice President, Secretary and General Counsel, met in New York
with Messrs. Icahn and Intrieri. Mr. Rossiter
described the current automotive industry environment, including
production levels, the impact of oil prices on demand for
certain of the Companys key platforms and the uncertainty
over Lears North American customers upcoming labor
negotiations. Mr. Rossiter also described the
Companys investment plans in Asia and other growth markets
and the importance of Lears restructuring initiatives,
particularly in North America and Western Europe.
Mr. Rossiter indicated that management remained confident
in Lears business plan but the industry environment,
particularly in North America, remained very challenging. Each
of the topics raised by Mr. Rossiter were discussed further
during this meeting. Mr. Icahn then expressed support for
managements business strategy but indicated that in a very
challenging industry environment, management should be even more
aggressive in restructuring the Companys core business,
lowering its cost structure and investing in growth areas.
During the meeting, Mr. Rossiter also remarked about
volatile industry and market conditions and their negative
effect on the Companys business, including how short-term
stock price fluctuations affect perceptions about the
Companys long-term prospects. Mr. Icahn suggested
that the Company might be able to take a longer-term focus, more
aggressively pursue restructuring initiatives and be better
positioned to withstand volatile industry conditions as a
private company with a strong financial sponsor. The parties
discussed the benefits that a strong financial sponsor would
provide to Lears business. Mr. Rossiter agreed that
such a transaction might be beneficial to Lear, provided that a
transaction could be structured to maximize shareholder value.
Mr. Icahn further stated that he would be interested in
obtaining access to confidential information to consider the
feasibility of his pursuing an acquisition of the Company.
Mr. Icahn also stated that the strength and liquidity of
the capital markets offered a particularly attractive
opportunity for Lear to explore such a transaction.
Mr. Rossiter indicated that Lears management and
board had been engaged in a long-range strategic planning
process for several months and, if Mr. Icahn requested, he
would convey to the board Mr. Icahns interest in
exploring an acquisition of the Company. Mr. Icahn
requested that Mr. Rossiter do so but emphasized that he
was not making a proposal regarding a transaction, and would
need further due diligence information regarding Lears
business and prospects in order to determine whether a
transaction was feasible. Mr. Icahn also expressed his
confidence in Lears management team and the Companys
business strategy and indicated he would only proceed in
exploring a transaction if he obtained the support of the Lear
board. The parties then discussed, in general terms, a proposed
due diligence and transaction process and agreed to reconvene in
the next few days for a more detailed discussion.
On January 17, 18 and 19, 2007, Messrs. Ninivaggi,
Icahn and Intrieri had several telephone calls to discuss the
parties expectations regarding due diligence and a
transaction process if Mr. Icahn were to decide to further
explore a potential transaction. During these calls,
Mr. Ninivaggi indicated that the decision to engage in any
due diligence process or more specific discussions regarding a
transaction would be subject to the prior approval of our board
of directors.
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On January 22, 2007, Messrs. Ninivaggi, Icahn and
Intrieri, among others, participated in a conference call to
further discuss the proposed due diligence process and
timetable. Mr. Icahn noted that if he were to decide to
pursue a transaction, he would likely do so through an
affiliated entity, American Real Estate
Partners, L.P. (AREP), or a subsidiary thereof.
AREP, a Delaware master limited partnership, is a diversified
holding company engaged in a variety of businesses, including
gaming, real estate and home fashion. AREPs general
partner is American Property Investors, Inc., which is
wholly-owned, through an intermediate subsidiary, by
Mr. Icahn. Mr. Icahn also noted that AREP would likely
engage advisors to assist in a financial and business due
diligence review of Lear. Mr. Ninivaggi informed
Mr. Icahn that he would discuss with our board of directors
Mr. Icahns request for confidential information and
potential interest in a transaction.
On January 23, 2007, representatives of our management team
and Winston & Strawn LLP (Winston &
Strawn), our outside legal counsel, participated in a
conference call with representatives of Mr. Icahn and AREP
(the Icahn Group) during which they further
discussed the general scope and timing of the proposed due
diligence. Later that day, Mr. Rossiter called independent
directors Larry W. McCurdy and James A. Stern to inform them of
the discussions to date.
On January 24, 2007, Mr. Ninivaggi spoke with
Messrs. Rossiter, McCurdy and Stern regarding the ongoing
discussions with the Icahn Group. Mr. Ninivaggi also
contacted directors David P. Spalding, Henry D.G. Wallace and
Richard F. Wallman, and informed them of the discussions to
date. That same day, Mr. Rossiter spoke with
Mr. McCurdy about potential next steps.
Messrs. Rossiter and McCurdy determined that it was
appropriate to convene a special meeting of our board of
directors to discuss the recent events.
On January 25, 2007, our board of directors convened a
special meeting. Mr. Ninivaggi and a representative of
Winston & Strawn also participated in this meeting. Due
to his affiliation with the Icahn Group, Mr. Intrieri
excused himself from the meeting prior to any discussions
regarding the potential transaction occurring. Mr. Rossiter
was unable to attend the meeting because of an overseas business
trip. At the meeting, Mr. McCurdy, our lead independent
director, requested that Mr. Ninivaggi provide the
directors with an update on the discussions that had taken place
between management and the Icahn Group. Mr. Ninivaggi
provided such an update and described to the board of directors
the proposed process for exploring a potential transaction. The
initial stage would consist of the sharing of certain non-public
information with the Icahn Group and due diligence meetings
between management and representatives of the Icahn Group to
discuss Lears business strategy and financial prospects.
Following this initial due diligence period, the Icahn Group
would indicate whether it believed a transaction was feasible
and whether it wanted to further explore a potential
transaction. If so, the Icahn Group would thereafter conclude
its evaluation, finalize its financing commitments and deliver a
definitive proposal regarding a transaction.
Our board of directors then discussed at length whether to
provide the Icahn Group with access to the non-public
information it had requested. The board discussed the Icahn
Groups potential motivations, risks and potential harm to
the Company of a protracted or uncertain sale process and the
importance of not diverting managements resources from
operating the business. The board also discussed the strategic
analysis that had been reviewed at prior board meetings,
including the Companys long-range plan presented at a
board meeting in July 2006.
After further discussion, Mr. McCurdy recommended, and our
board of directors approved, the formation of a special
committee comprised of independent directors McCurdy, Stern and
Wallace, with Mr. McCurdy serving as chairman. The board
delegated to the special committee the authority to review,
evaluate and negotiate any proposal that the Icahn Group may
make with respect to a potential transaction, and also to
consider any alternatives thereto. The board retained the final
authority to make any decision to approve or enter into any
transaction. The board also authorized the special committee to
retain financial and legal advisors. Over the course of the next
two weeks, the special committee met six times, and our board of
directors met five times.
Our board of directors concluded its deliberations by
authorizing management to proceed with the initial phase of due
diligence the Icahn Group had requested, subject to negotiation
of an acceptable confidentiality agreement. Our board advised
James H. Vandenberghe, our Vice Chairman and Chief Financial
Officer, and
19
Mr. Ninivaggi that management was to limit any discussion
with the Icahn Group at this time to the requested due diligence
information and transaction process. Our board further directed
management to advise senior representatives of JPMorgan of the
discussions with the Icahn Group and to be prepared to advise
the special committee (and, at the instruction of the special
committee, to inform the board of that advice) should the Icahn
Group proceed with a transaction proposal. Our board had
originally engaged JPMorgan in April 2006 to, among other
things, advise the board regarding Lears strategic
alternatives and evaluate Lears long-range financial plan.
On January 26, 2007, we entered into a confidentiality
agreement with AREP. The confidentiality agreement obligated
AREP and its advisors to maintain the confidentiality of the
information to be provided to them by us and the parties
discussions of a potential transaction. On January 26,
2007, we began to provide due diligence materials to AREP and
its advisors. We provided most of the business and financial due
diligence material over the next couple of days, and the legal
and other due diligence materials during the following week. We
also made the business and financial due diligence available to
JPMorgan.
On January 28 and 29, 2007, representatives of Lear and
AREP, along with their respective legal advisors, met in New
York for due diligence meetings. The parties discussed in detail
Lears long-range plan and financial forecast. The parties
also discussed the status of strategic initiatives, including
the previously announced divestiture of Lears North
American interiors business segment.
On January 29, 2007, Mr. Ninivaggi provided
Messrs. McCurdy and Stern with an update on the due
diligence meetings with the Icahn Group. Mr. McCurdy
decided that the special committee should hold an initial
meeting the following day to discuss the recent events and
formally engage legal and financial advisors to the special
committee. He also asked Mr. Ninivaggi to have JPMorgan
update its financial analysis based on the Companys
long-range plan.
Later that day, Messrs. Ninivaggi, Icahn and Intrieri met
in New York to discuss the due diligence process and
Mr. Icahns proposed next steps. Based on AREPs
initial due diligence review, Mr. Icahn confirmed his
desire to proceed in evaluating the feasibility of a
transaction. Mr. Icahn indicated that AREP would require
several additional days to conclude its business and legal due
diligence, following which AREP would be in a position to
determine whether a transaction was feasible and, if so, make a
proposal. That evening, Douglas G. DelGrosso, our President and
Chief Operating Officer, and Messrs. Icahn and Intrieri had
a dinner meeting in New York at which they discussed, in general
terms, the state of the automotive industry and the prospects
for Lears business. At the meeting, Mr. Icahn
expressed his interest in retaining Lears senior
management team, including Mr. DelGrosso, should a
transaction occur. The parties did not discuss, or make any
proposals regarding, the terms of any employment relationship or
a proposed transaction.
On January 30, 2007, the special committee held a meeting
to discuss the ongoing due diligence process and the discussions
with the Icahn Group. At the request of the special committee,
Mr. Ninivaggi and representatives of Winston &
Strawn participated in the meeting. Mr. Ninivaggi informed
the special committee that the Icahn Group had not made any
proposal regarding a transaction with Lear but that
Mr. Icahn had stated that, based on the due diligence
conducted to date, the Icahn Group wished to proceed further
with due diligence for purposes of evaluating a potential
transaction. Mr. Ninivaggi also noted that Mr. Icahn had
expressed an interest in retaining senior management following a
potential transaction, but that no specific discussions had
taken place regarding the terms of employment or
managements participation in a transaction. The special
committee decided to formally engage a financial advisor and
legal counsel at this time. Based on JPMorgans previous
engagement by our board of directors and familiarity with the
Company, the special committee resolved to engage JPMorgan as
its financial advisor in connection with the evaluation of any
potential offer for Lear from the Icahn Group or any other
person. The special committee also resolved to engage
Winston & Strawn and Richards, Layton &
Finger, P.A. (Richards Layton) as its legal
advisors. In addition, the special committee authorized
Mr. McCurdy to contact Mr. David P. Spalding, chairman
of the Compensation Committee of our board of directors, to have
the Compensation Committee review the implications of a
potential change in control transaction involving the Company on
employee compensation and benefits matters.
20
On January 31, 2007, additional business and financial due
diligence continued, including a visit to Lears
headquarters facility by a representative of the Icahn Group. On
that same day, Lear began to provide business and financial due
diligence materials to Bank of America, N.A., which AREP
identified as the debt financing source for a possible
transaction with Lear.
On February 1, 2007, the special committee met to review
managements financial projections. Also present at the
meeting were Messrs. DelGrosso, Vandenberghe, Ninivaggi and
Matthew J. Simoncini, our Senior Vice President, Finance and
Chief Accounting Officer, as well as representatives of
JPMorgan, Winston & Strawn and Richards Layton. At the
meeting, Messrs. Vandenberghe and DelGrosso made a
presentation regarding Lears recent operating results,
existing financial condition, and strategic plans, goals and
prospects, including the financial forecasts prepared by
management. In this regard, Mr. Vandenberghe also discussed
updated third-party production forecasts, which showed a decline
in the long-term North American production outlook, particularly
among the domestic automakers. The members of the special
committee discussed the presentation and inquired of management
regarding the preparation of the forecast and the most
significant risks and opportunities to Lears long-term
prospects. JPMorgan also presented to the special committee a
preliminary financial analysis of Lear based on the
Companys updated long-range plan.
On February 2, 2007, Messrs. Rossiter, Ninivaggi,
Icahn and Intrieri participated in several conference calls to
discuss the status of AREPs evaluation process. During one
such call, Mr. Icahn expressed an oral indication of
interest in AREP acquiring Lear at a price of $35.00 per
share of common stock. Mr. Icahn indicated that AREP had
substantially completed its due diligence and that it was
prepared to move quickly to negotiate and sign a definitive
merger agreement over the next few days. Mr. Icahn also
noted that AREP was prepared to enter into a merger agreement
with a go shop provision that would permit Lear to
solicit alternative proposals for a period of 45 days after
signing a merger agreement, subject to a
break-up fee associated
with accepting an alternative proposal equal to 3% of the equity
value of the transaction, plus reimbursement of up to
$20 million of expenses. In addition, Mr. Icahn
indicated that AREP was prepared to deliver a debt financing
commitment letter from Bank of America, N.A. at the time of
signing a merger agreement. Mr. Rossiter responded that he
could not support a transaction on these terms but that he would
advise the special committee of the offer.
Later in the evening, the special committee held a telephonic
meeting to consider the proposal from AREP.
Messrs. Rossiter, Vandenberghe, DelGrosso and Ninivaggi and
representatives of JPMorgan, Winston & Strawn and
Richards Layton also participated in the meeting.
Representatives of Winston & Strawn and Richards Layton
discussed the fiduciary duties of the directors in connection
with their evaluation of the proposal from AREP and any other
alternatives available to Lear. The special committee discussed
the proposed terms of the AREP offer and Lears long-range
plan. The special committee concluded that the proposed
transaction terms were unacceptable and that it was not willing
to recommend a transaction on these terms. The special committee
also expressed concern regarding the size of the proposed
break-up fee and the
length of the go shop period.
Following the meeting of the special committee,
Messrs. Rossiter, Vandenberghe and DelGrosso and a
representative of Winston & Strawn called
Messrs. Icahn and Intrieri and informed them of the
decision of the special committee. On this call, Mr. Icahn
indicated that AREP was willing to increase its offer to
$35.25 per share. Mr. Rossiter responded that, based
on the special committees position expressed earlier that
evening, he did not believe the special committee would look
favorably on an offer of $35.25 per share. Later in the
call, Mr. Icahn indicated that AREPs final and
highest offer for Lear was $36.00 per share. Mr. Icahn
stated that AREP was not willing to consider a price higher than
$36.00 per share, given its perception of industry risk and
the uncertainty surrounding Lears long-range business
plan. Mr. Rossiter indicated that he would convey
Mr. Icahns latest offer to the board of directors and
suggested that he and Mr. Icahn continue discussions the
next morning.
On the morning of February 3, 2007, Mr. Rossiter
contacted Mr. Icahn to seek further improvement in the
terms of the AREP proposal, including the price and the
break-up fee.
Mr. Rossiter indicated that in his opinion further
improvement would be required before the special committee would
recommend to the board that it accept the AREP proposal.
Mr. Icahn responded that $36.00 per share was his best
and final offer on
21
the price but that he might consider some adjustment to the
break-up fee.
Mr. Rossiter indicated that he would discuss AREPs
position with the board of directors at a meeting scheduled for
later in the afternoon and that following that meeting, if
appropriate, Mr. Ninivaggi and a representative of
Winston & Strawn should speak with representatives of
AREP regarding the
break-up fee and other
substantive and procedural aspects of the go shop
process, including AREPs ability to match competing offers
and the length of the go shop period.
On February 3, 2007, our board of directors (excluding
Mr. Intrieri) held a telephonic meeting to discuss the
proposal from AREP. Representatives of JPMorgan,
Winston & Strawn and Richards Layton also participated
in the meeting. Mr. Rossiter informed the board of the
increase in AREPs proposed purchase price.
Mr. Rossiter stated that Mr. Icahn had characterized
the offer as final and that he would be unwilling to consider a
higher price.
Messrs. Rossiter, Vandenberghe, DelGrosso and Ninivaggi
then reviewed with the board and answered questions regarding
Lears long-range business plan and prospects. In this
regard, the members of management discussed in detail the risks
and opportunities relevant to the execution of the
Companys long-range plan, including the sensitivity of the
plan to industry production levels, commodity prices, the
success of the Companys restructuring initiatives and
other factors. Mr. Vandenberghe noted that since the
formulation of the Companys long-range plan in mid-2006,
the industry production outlook, particularly for the domestic
North American automakers, had worsened. He further indicated
that while management believed the long-term prospects of the
Company were favorable, the adverse industry environment and
external event risk, including risks associated with the
upcoming labor negotiations involving the Companys major
North American customers, made the AREP proposal worthy of
serious consideration. Representatives of JPMorgan then
presented their financial analysis of AREPs offer, based
on Lears long-range plan. The directors and other
participants in the meeting thereafter engaged in extensive
discussion of the Companys long-range plan, including key
assumptions and risks, as well as JPMorgans financial
analysis of AREPs offer.
Management and representatives of JPMorgan then exited the
meeting. The board of directors, with representatives of
Winston & Strawn and Richards Layton present, discussed
the AREP proposal at length, focusing on the price, the go
shop process and the terms of the
break-up fee. The board
discussed the various options available to it, including
proceeding on the terms outlined in AREPs proposal,
terminating discussions with AREP or continuing to negotiate
with AREP. The board also considered the possibility of
soliciting other potential buyers through a formal sale process,
but noted the potential disruption to Lears business and
customer relationships, the risks and consequences of an
unsuccessful sale process and the prospect that AREP might
withdraw its proposal. In addition, the board considered the
likelihood of management successfully executing the long-range
plan, including the risks and uncertainty associated with
achieving that plan.
The board concluded that given the potential harm and disruption
to Lears business, it was not in the best interests of
Lear to engage in an extensive and uncertain sale process of the
Company. The board also concluded that it was not willing to
agree to the current terms of the AREP proposal, but that it was
willing to authorize management to engage in further discussion
with AREP regarding a transaction. The board authorized
Mr. Ninivaggi to have further discussions with AREP and its
advisors to seek to improve certain contractual terms of a
transaction. In particular, the board requested management to
seek a longer go shop period and a lower
break-up fee if an
alternative proposal were accepted during the go
shop period.
Following the meeting, Mr. Ninivaggi had several telephone
calls with Messrs. Icahn and Intrieri to discuss the
proposed terms of a transaction. Mr. Ninivaggi advised
Messrs. Icahn and Intrieri that the board of directors was
willing to continue to explore a potential transaction, but that
the board would require further improvement in the terms of the
break-up fee and other
contractual terms. During these calls, Mr. Icahn reaffirmed
that AREP was not willing to further increase the proposed offer
price but would consider a somewhat lower
break-up fee during the
go shop period. Mr. Icahn also indicated that
AREP was requesting that Messrs. Rossiter, DelGrosso,
Vandenberghe and Ninivaggi remain with the Company following the
transaction and execute new employment agreements as a condition
to closing.
22
Also on February 3, 2007, the Compensation Committee of the
board held a telephonic meeting, with representatives of
Winston & Strawn, Richards Layton and Towers Perrins,
the Compensation Committees independent consulting firm,
participating. The Compensation Committee reviewed with its
advisors the potential implications of a change in control
transaction involving Lear and whether any modifications to the
change in control provisions of existing employee benefit plans
or arrangements were appropriate. The Compensation Committee,
with no advisors present, had a subsequent telephonic meeting on
February 4, 2007 to further discuss this matter. At the
February 4, 2007 meeting, the Compensation Committee
concluded to recommend that no modifications be made.
During the evening of February 3, 2007, AREP delivered to
Lear an initial draft of a proposed merger agreement. The draft
merger agreement reflected the proposed transaction terms as
expressed by Mr. Icahn. The draft merger agreement also
provided that Lear would be required to pay a somewhat reduced
break-up fee if an
alternative proposal were accepted during the go
shop period, AREP would be required to pay a reverse
break-up fee to Lear
equal to 3% of the equity value of the transaction as
Lears recourse against AREP for its breach of the merger
agreement, and AREP would have the ability to match competing
bids. In addition, the merger agreement included as a condition
to closing that certain executive officers of Lear enter into
amendments of their existing employment agreements.
On February 4, 2007, Lear delivered to AREP its comments to
the draft merger agreement. Also on February 4, 2007, our
board of directors (excluding Mr. Intrieri), with
representatives of Winston & Strawn and Richards Layton
participating, held a telephonic meeting. Mr. Ninivaggi
advised the board that there had been some limited progress on
the proposed terms. In particular, Mr. Ninivaggi noted that
AREP had agreed to reduce the
break-up fee during the
go shop period to 2.8% of the equity value of the
transaction (inclusive of expenses) from the initially proposed
3% plus up to $20 million of expenses. The proposed price
of $36.00 per share and the go shop time period
of 45 days, however, remained unchanged. Other material
provisions Mr. Ninivaggi noted included the reverse
break-up fee AREP was
requesting, the terms of the proposed guarantee being delivered
by AREP, procedures for the go shop period and
certain closing conditions. Representatives of
Winston & Strawn and Richards Layton then discussed the
fiduciary duties of the directors in connection with their
evaluation of the proposal from AREP and any other alternatives
available to Lear.
At the meeting, Mr. Ninivaggi also informed the board of
AREPs request that Lear amend the employment agreements
between Lear and Messrs. Rossiter, Vandenberghe, DelGrosso
and Ninivaggi and that these amendments were important elements
of the proposed transaction for AREP. Mr. Ninivaggi stated
that he informed Mr. Icahn that he would not discuss at
this time, or at any time prior to the closing of a transaction,
his personal employment status with Lear given his role as
counsel to Lear. Mr. Ninivaggi noted that, based on a
previous discussion with Mr. Spalding, management would
retain separate legal counsel to negotiate their amended
employment agreements.
The special committee convened a telephonic meeting shortly
after the meeting of our board of directors, with
representatives of JPMorgan and Winston & Strawn
participating. A representative of Winston & Strawn
participated in the meeting and reviewed in detail the proposed
terms of the merger agreement delivered by AREP. The special
committee discussed concerns regarding the proposed terms of the
merger agreement and determined that, at that time, it was not
willing to recommend the transaction to the board of directors
on the proposed terms. The special committee requested that
management and the special committees advisors continue to
negotiate improved transaction terms. The special committee also
concluded that while management could discuss with AREP the
proposed terms of amended employment agreements, such amendments
could not be a condition to closing, a representative of
Winston & Strawn should participate in the discussions
and the board of directors would need to approve any proposed
amendments.
Also on February 4, 2007, Mr. Ninivaggi, at the
direction of the special committee, directed JPMorgan to solicit
expressions of interest from third parties that were most likely
to be interested in a potential transaction. Over the next four
days, JPMorgan approached certain third parties about a
potential transaction. Although certain of the parties contacted
expressed a general interest in exploring a possible
transaction, none of the parties presented a preliminary or
definitive proposal with respect to a transaction. JPMorgan
reported the
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results of its inquiries at subsequent meetings of the board and
the special committee on February 7 and 8, 2006.
Early in the morning on February 5, 2007, our board of
directors (excluding Mr. Intrieri) held a telephonic
meeting. Mr. Ninivaggi and a representative of
Winston & Strawn participated in the meeting and
provided the board with an update on the negotiations with AREP.
Mr. Ninivaggi informed the board that he had continued to
push for a further reduction in the
break-up fee during the
go shop period, but that AREP had refused to change
its position on that issue. In addition, AREP had continued to
object to the special committees request for additional
remedies (beyond a reverse
break-up fee) in the
event of a breach of the merger agreement by AREP. Aside from
these issues, Mr. Ninivaggi indicated that the parties were
making progress on the other terms of the proposed merger
agreement. Mr. McCurdy then informed the board that the
special committee had not yet reached a decision regarding its
recommendation and would continue its deliberations.
Mr. Vandenberghe reviewed with the board a draft of a press
release Lear intended to issue that morning and an amended
Schedule 13D certain affiliates of Mr. Icahn intended
to file with the SEC that morning regarding the AREP proposal.
The board authorized Winston & Strawn, JPMorgan and
management to continue negotiations with AREP and to seek
further improvements in the terms and conditions of the proposed
merger agreement.
On the morning of February 5, 2007, certain affiliates of
Mr. Icahn filed an amended Schedule 13D with the SEC
in which they disclosed that AREP had made a proposal to acquire
Lear for $36.00 per share and that the parties were still
negotiating the terms of a possible transaction. That morning,
Lear also issued a press release in which it announced the
receipt of an offer from AREP and that negotiations were
continuing.
On February 5 and 6, 2007, representatives of AREP, DLA
Piper US LLP (DLA Piper), AREPs outside legal
counsel, Lear and Winston & Strawn met in New York at
the offices of Winston & Strawn to negotiate the terms
of the merger agreement and related transaction documents.
On February 7, 2007, the special committee decided to
formally retain Evercore Partners (Evercore) as an
additional financial advisor to assist the special committee in
the evaluation of AREPs proposal. Lear had previously
retained Evercore and its principal involved in the engagement
to assist Lear in evaluating strategic alternatives.
On February 7, 2007, the special committee held a meeting
in Birmingham, Michigan. Mr. Ninivaggi and representatives
of JPMorgan, Evercore and Winston & Strawn participated
in person in a portion of the meeting and a representative of
Richards Layton participated in a portion of the meeting by
teleconference. Mr. Ninivaggi and a representative of
Winston & Strawn reviewed the key terms and conditions
of the proposed merger agreement, including certain open issues.
The special committee then reviewed again with management
Lears current long-range plan for the Company. A
representative of Evercore then made a presentation to the
special committee on the automotive industry environment, after
which the special committee reviewed again with JPMorgan the
financial analysis of AREPs offer prepared by JPMorgan.
The members of the special committee then discussed with
Lears senior management and representatives of JPMorgan
the special committees concerns regarding the proposed
transaction with AREP and possible alternatives. In particular,
the special committee focused in detail on managements
long-range plan and the risks and opportunities relevant to the
execution of such plan. The special committee also discussed,
and sought JPMorgans views regarding, whether alternative
buyers for Lear were likely to emerge. Representatives of
JPMorgan then delivered an oral opinion (subsequently confirmed
in writing) to the effect that, as of that date and based upon
and subject to the assumptions, qualifications and limitations
set forth in the opinion, the merger consideration of
$36.00 per share to be received by Lears stockholders
(other than affiliates of specified entities controlled by
Mr. Icahn) was fair, from a financial point of view, to
such stockholders. The special committee concluded that it was
not yet ready to make a recommendation to the board of directors
and needed to further consider the matters discussed at the
meeting.
Following the meeting of the special committee, our board of
directors (excluding Mr. Intrieri) held a meeting in
Birmingham, Michigan. Mr. Ninivaggi and a representative of
Winston & Strawn reviewed the key terms and conditions
of the proposed merger agreement. Mr. McCurdy then informed
the board that the special committee had not yet reached a
decision regarding the AREP proposal. The board considered the
24
proposed terms of the merger agreement and its alternative
courses of action to entering into an agreement with AREP. As
instructed by the special committee, representatives of JPMorgan
reviewed with the full board JPMorgans financial analysis
presented to the special committee, and representatives of
Evercore made a presentation on the near and longer-term
automotive industry environment and possible implications for
Tier I suppliers. Mr. Spalding, as chairman of the
Compensation Committee of the board, reported to the board that
the Compensation Committee had reviewed the potential
implications of a change in control transaction involving Lear
and whether any modifications to the change in control
provisions of the Companys existing employee benefit plans
or arrangements were appropriate. Mr. Spalding informed the
board that the Compensation Committee had concluded not to
recommend any changes. Following its deliberations, the board
concluded that it would not take any action with respect to the
AREP offer until it had received a recommendation from the
special committee.
Later that evening, Mr. Ninivaggi spoke with Mr. Icahn
to discuss the remaining open issues on the merger agreement,
including the circumstances under which a
break-up fee would be
payable. The parties did not reach agreement on the open issues.
On the morning of February 8, 2007, the special committee
held a meeting at Lears corporate headquarters in
Southfield, Michigan with no advisors or members of management
present. Following initial discussion among the members of the
special committee, the special committee requested management to
join the meeting and answer questions regarding the long-range
plan and alternatives to entering into an agreement with AREP.
After management exited the meeting, the special committee
engaged in further discussion of the AREP proposal. Following
its deliberations, the special committee unanimously determined
that the merger agreement and merger were fair to and advisable
to and in the best interests of Lear and its stockholders and
unanimously recommended that our board of directors approve the
merger agreement and recommend its adoption to Lears
stockholders.
Following the special committee meeting, our board of directors
(excluding Mr. Intrieri) held a meeting in Southfield,
Michigan. At the meeting, representatives of Winston &
Strawn and Richards Layton reviewed the fiduciary duties of the
directors in considering whether to approve the transaction with
AREP. Mr. Ninivaggi and representatives of
Winston & Strawn then reviewed the terms of the
proposed merger agreement and related documents, including
employment agreement amendments, with the directors. The special
committee then reported to the full board of directors its
recommendation in favor of the transaction and the reasons for
its recommendation. As instructed by the special committee,
representatives of JPMorgan then conveyed to the board the oral
opinion previously delivered to the special committee.
Messrs. Rossiter and Vandenberghe, being the management
members of the board, then excused themselves from the meeting.
The remaining directors discussed the transaction and
unanimously approved the merger agreement and the merger,
subject to the satisfactory resolution of certain open issues,
including additional protection measures AREP was requesting
during the go shop process. Messrs. Rossiter
and Vandenberghe returned to the meeting and a vote of all of
the directors present at the meeting occurred. After
considering, among other things, the factors described below
under Reasons for the Merger; Recommendation of the
Special Committee and Our Board of Directors, the
financial analyses and fairness opinion of JPMorgan, the
presentation of Evercore and the recommendation of the special
committee, all of our directors (excluding Mr. Intrieri)
unanimously resolved to adopt resolutions approving the merger
agreement and the transactions contemplated thereby and
recommend that our stockholders adopt the merger agreement. The
board also authorized the special committee to solicit
alternative proposals during the go shop period
provided for under the merger agreement.
Following an adjournment of the board meeting,
Messrs. McCurdy and Ninivaggi along with a representative
of Winston & Strawn contacted Messrs. Icahn and
Intrieri to discuss the remaining open issues, including the
circumstances under which payment of a
break-up fee would be
payable. Mr. McCurdy then reported to the board (excluding
Mr. Intrieri) that the open issues were satisfactorily
resolved with Messrs. Icahn and Intrieri on the terms
previously approved by the board. Representatives of Lear,
Winston & Strawn, AREP and DLA Piper then finalized the
definitive documentation for the transaction during the
remainder of the day. Late in the evening on February 8,
2007, AREP delivered to Lear the signed debt financing
commitment letter from Bank of America, N.A. and Banc of America
Securities LLC. The parties
25
executed the merger agreement and related agreements on the
morning of February 9, 2007, and the transaction was
announced to the public in a press release later that day.
Reasons for the Merger; Recommendation of the Special
Committee and Our Board of Directors
Since early 2005, the automotive industry environment,
particularly in North America, has become even more challenging.
Higher energy prices, shifts in consumer purchasing patterns,
particularly with respect to SUVs and light trucks, increased
foreign competition and other effects of globalization,
increases in the prices of key commodities and raw materials and
distress among a large number of automobile manufacturers and
suppliers have been some of the principal factors contributing
to this challenging environment. The Companys operating
and financial performance since 2005 has been materially
adversely affected by these industry conditions.
In 2005, our board initiated a strategic planning process
focused on exploring ways to enhance shareholder value. The
process involved three primary components: (1) the
development of a detailed strategic plan designed to restore the
Company to historical levels of financial performance;
(2) a review of the Companys long-term capital
structure to ensure stability and sufficient liquidity and
capital resources to implement the strategic plan; and
(3) overseeing the execution of the Companys plan to
divest its interiors systems division. In addressing these
components, the board asked management to review initiatives to
improve the Companys product portfolio, customer
diversification and cost structure, as well as to explore
non-traditional growth and business combination opportunities.
As part of the strategic planning process, the board also
established strategic planning as a permanent part of its
regular meeting agenda. At its meetings in November 2005 and
February and May 2006, management presented its internal
corporate strategy and the board invited industry experts to
make presentations on the state of the automotive industry and
implications to the Company. In the Fall of 2005, we engaged
Citigroup Global Markets Inc. and UBS Securities LLC to advise
the Company on the divestiture of our interiors systems
division. In April 2006, the board engaged JPMorgan to provide
advisory services in connection with the strategic planning
process.
During this time period, management also undertook the creation
of a long-term financial plan that involved senior management
establishing strategic priorities, setting overall objectives
for the Companys operations and then having each of the
Companys business units establish operating plans to
achieve these objectives. The process was an extension of the
Companys annual budgeting and planning process and
occurred over several months through the first half of 2006. It
was highly iterative and designed to reconcile the objectives
established by the board and senior management with the
realities of a challenging and evolving industry environment. In
July 2006, management presented its long-range financial plan to
the board. The financial plan, and the strategic plan on which
it was based, relied extensively on aggressively restructuring
the Companys operations to ensure cost competitiveness,
including migrating production to lower-cost locations and
better aligning the Companys capacity with the industry
environment. The plan also included a refined product-line
strategy that contemplated increased vertical integration.
Finally, the plan provided for more aggressive investment in
emerging markets, particularly in Asia, and further customer and
revenue diversification.
Our board of directors and management also took several actions
to preemptively address the refinancing of the Companys
near and longer-term debt maturities. In April 2006, we entered
into a $2.7 billion amended and restated credit agreement,
which provided a revolving credit facility of $1.7 billion
and a term loan facility of $1.0 billion. We used a portion
of the proceeds of the new credit facility to refinance
$525 million of upcoming debt maturities. Thereafter,
management also began evaluating alternatives to refinance
$900 million of debt maturing in 2008 and 2009, which
refinancing was completed in November 2006 through an offering
of senior notes. This offering extended those debt maturities
through 2016. In October 2006, after considering various
alternatives, our board of directors also approved the private
placement of $200 million of common stock to affiliates of
and funds managed by Mr. Icahn. This offering facilitated
the subsequent issuance of senior notes and the divestiture of
the Companys interiors systems division.
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During the course of 2006, management and the board of directors
also remained keenly focused on the divestiture of the
Companys interiors systems division. This business, which
represented approximately $3.2 billion in net sales, had
been suffering significant operating losses, primarily as a
result of higher raw material prices and industry over-capacity.
As a result of a shift in customer sourcing strategies away from
total interior awards to individual component and system
sourcing, this business was also no longer of significant
strategic value to the Company. In August 2006, we entered into
an agreement to contribute substantially all of our European
interiors business to IAC Europe, a joint venture with WL Ross
and Franklin. We subsequently completed the contribution of our
European interiors business to IAC Europe in October 2006. In
November 2006, we entered into an agreement to transfer
substantially all of our North American interiors business to
IAC North America, another joint venture with WL Ross and
Franklin. We expect the closing of the IAC North America
transaction to occur in the first quarter of 2007, although no
assurances can be given in this regard.
The refinement of our strategic business plan, the development
and implementation of a long-term capital structure strategy and
the execution of our interiors systems division divestiture
strategy were all actions overseen by our board of directors,
with the advice of outside advisors, and undertaken by the
Company in furtherance of our strategic planning process.
Following these initiatives, our board and management continued
to focus on additional strategic actions that could further
enhance shareholder value.
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Special Committee and Board of Directors |
The special committee, consisting solely of independent and
disinterested directors, and acting with the advice and
assistance of its independent financial and legal advisors,
evaluated and negotiated the merger proposal, including the
terms and conditions of the merger agreement. The special
committee unanimously determined that the merger agreement and
the merger are fair to, advisable to and in the best interests
of Lear and our stockholders and unanimously recommended that
our board of directors adopt, authorize and declare advisable
the merger agreement and recommend to Lears stockholders
that they vote in favor of adoption of the merger agreement.
Following the receipt of the recommendation of the special
committee, the board of directors (excluding Mr. Intrieri)
unanimously approved the merger agreement and the transactions
contemplated thereby and recommend that our stockholders adopt
the merger agreement.
In the course of reaching their determination, the special
committee and the board of directors considered the following
factors and potential benefits of the merger, each of which they
believed supported their decision:
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their belief that the merger was more favorable to stockholders
than the alternative of remaining a stand-alone independent
company, because of the uncertain returns to stockholders if
Lear remained independent (taking into account, in particular,
managements projections of the future financial
performance of Lear, the risks involved in achieving projected
financial results, the existing state of the automotive industry
and the financial distress of several of our major customers and
the industry supply base); |
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the fact that the automotive operations of Lears three
largest customers have recently experienced significant
operating losses, and these automakers are continuing to
restructure their North American operations, which may have an
adverse impact on our operating results and the price of our
common stock; |
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their belief that the merger was more favorable to Lears
stockholders than the potential value that might result from
other alternatives available to us, including continuing to
operate in the ordinary course of business and the alternatives
of pursuing other strategic initiatives; |
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the results of Lears extensive strategic planning process,
including an examination of the industry risks that may impact
Lears ability to achieve its strategic plan, as well as
the level of investment required by Lear to implement the plan; |
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their belief that the cash consideration of $36.00 per
share was likely the most favorable financial terms that could
be obtained from the Icahn Group, and that further negotiation
could have caused the Icahn Group to abandon the transaction; |
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the fact that the terms of the merger agreement would provide
Lear a 45-day
post-signing go shop period during which we would
have the right to solicit additional interest in a transaction
involving Lear and, after such
45-day period, Lear
would have the ability to continue discussions with persons who
had made an acquisition proposal during the
go shop period or with whom we were engaged in
discussions concerning an acquisition proposal, and to respond
to unsolicited proposals during the period prior to the
stockholders vote, subject to certain conditions as more
fully described below under The Merger
Agreement Solicitation of Other Offers; |
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the fact that the merger agreement provides that the holders of
a majority of Lears outstanding shares determine whether
to approve the merger, and that this decision will allow
Lears stockholders to make their own informed judgment as
to whether the proposed transaction is in the best interests of
the stockholders; |
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their belief that while improvements in Lears operating
performance could yield improved operating results, the
achievement of such improvements is uncertain and subject to
significant execution risk; |
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the current and historical market prices of our common stock,
including the market price of our common stock relative to those
of other industry participants and general market indices; the
high volatility of our common stock, the fact that the merger
consideration per share represented a premium of 55.1% based on
the 52-week volume
weighted average price of our common stock as of
February 2, 2007, and a premium of 46.4% based on the
closing price of our common stock on October 16, 2006 (the
date on which Lear announced the private placement of
$200 million of our common stock to affiliates of
Mr. Icahn); |
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the financial analyses presented by JPMorgan that are described
in Opinion of Financial Advisor and the
opinion of JPMorgan delivered on February 8, 2007, that, as
of such date and based upon and subject to the limitations,
qualifications and assumptions set forth in the opinion, the
merger consideration of $36.00 per share to be received by the
holders of our common stock (other than affiliates of specified
entities controlled by Mr. Icahn) in the merger was fair,
from a financial point of view, to such holders, as more fully
described below under Opinion of Financial
Advisor; |
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the current strength and liquidity of the private equity and
debt financing markets and the risk that such conditions could
be less favorable in the future; |
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the ability of our board of directors, under certain
circumstances, to change its recommendation that our
stockholders vote in favor of the adoption of the merger
agreement; |
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their belief that as a public company with substantial leverage,
Lears ability to finance its restructuring and investment
initiatives could be limited; |
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the financial and other terms and conditions of the merger
agreement as reviewed by the special committee, including the
fact that the merger would not be subject to a financing
condition and the transaction did not have any significant
antitrust risk, as well as the fact that the terms and
conditions of the merger agreement were the product of
arms-length negotiations between the parties; |
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the fact that the merger consideration is all cash, so that the
transaction allows our stockholders to immediately realize at
the closing a fair value in cash for their investment and
provides such stockholders certainty of value for their shares; |
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the lack of other interested acquirers notwithstanding the fact
that the market price of our common stock had traded
substantially below the merger price for much of the
12-month period prior
to the announcement of AREPs proposal; |
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their concern over the potential impact on our business and
stock price of an unsuccessful public auction of the Company and
their belief that if Lear were to engage in some form of
auction, it would |
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be in the best interests of the stockholders to have a committed
buyer in place prior to commencing such process; |
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the fact that, subject to compliance with the terms and
conditions of the merger agreement, if a third party has
proposed an alternative transaction that is a superior
proposal, our board of directors is permitted, prior to
the adoption of the merger agreement by our stockholders, to
change its recommendation, approve or recommend the superior
proposal or, upon the payment to Parent of a reasonable break-up
fee, terminate the merger agreement in order to enter into a
definitive agreement with respect to the superior
proposal as more fully described below under The
Merger Agreement Recommendation Withdrawal/
Termination in Connection with a Superior Proposal; |
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the fact that AREP has provided a guarantee in Lears favor
with respect to the performance by Parent and Merger Sub of
certain of their payment obligations under the merger agreement; |
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the fact that affiliates of Parent which beneficially own
approximately 16% of our outstanding common stock were willing
to enter into a voting agreement in connection with the merger,
pursuant to which such holders agreed to vote in favor of the
adoption of the merger agreement and, under certain
circumstances, in favor of a superior proposal; |
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the fact that our senior management team was in favor of the
merger and the merger agreement and the fact that members of our
management have not committed to be exclusive to Parent and are
therefore available to enter into discussions and arrangements
with a subsequent bidder, if any, for Lear; |
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the availability of statutory appraisal rights to holders of our
common stock who comply with the required procedures under
Delaware law, which allows such holders to seek appraisal of the
fair value of their shares as determined by the Delaware Court
of Chancery; |
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the fact that we would not have to establish the existence and
amount of our damages in the event of a failure of the merger to
be consummated under certain circumstances in light of the
$250 million reverse
break-up fee payable by
Parent if Parent were to breach its obligations under the merger
agreement and fail to complete the merger; |
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the fact that our board of directors established a special
committee of independent directors, consisting solely of
directors who are not officers, employees or controlling
stockholders of Lear and who are not affiliated in any way with
Parent or Merger Sub, to review, evaluate and negotiate
proposals made by the Icahn Group with respect to a potential
transaction and to consider any alternatives thereto; and |
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the fact that the special committee had authority to decide
whether or not to proceed with a transaction or any alternative
thereto, subject to our board of directors approval of the
merger agreement. |
The special committee and the board of directors also considered
a variety of risks and other potentially negative factors
concerning the merger agreement and the merger, including the
following:
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the fact that the $36.00 price per share will represent the
maximum price per share receivable by our stockholders unless
the merger agreement is terminated in accordance with its terms,
and that our stockholders will not participate in any future
earnings or growth of Lear and therefore will not benefit from
any appreciation in our value, including any appreciation in
value that could be realized as a result of improvements to our
operations; |
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the fact that certain of our directors and executive officers
may ultimately have interests in the transaction that may be
different from, or in addition to, their interests as
stockholders of Lear, including the employment agreement
amendments that Parent requested certain of our executive
officers sign as part of the merger negotiations; |
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the restrictions on the conduct of our business prior to the
completion of the merger, requiring Lear to conduct business
only in the ordinary course, subject to specific limitations,
which could delay or prevent us from undertaking business
opportunities that may arise pending completion of the merger
and the length of time between signing and closing when these
restrictions are in place; |
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the fact that if Parent were to breach its obligations under the
merger agreement and fail to complete the merger, our remedy may
be limited to $250 million, or less under certain
circumstances; |
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the requirement that we pay a termination fee of up to
$85.2 million and Parents and Merger Subs
reasonable out-of-pocket expenses up to $15 million, if our
board of directors terminates the merger agreement under certain
circumstances; and |
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the fact that the receipt of the $36.00 per share cash
consideration in the merger will generally be taxable to our
stockholders. |
The foregoing summarizes the material factors considered by the
special committee and the board of directors in their
consideration of the merger. After considering these factors,
the special committee and the board of directors concluded that
the positive factors relating to the merger agreement and the
merger outweighed the potential negative factors. In view of the
wide variety of factors considered by the special committee and
the board of directors, and the complexity of these matters, the
special committee and the board of directors did not find it
practicable to quantify or otherwise assign relative weights to
the foregoing factors. In addition, individual members of the
special committee and the board of directors may have assigned
different weights to various factors. The special committee and
the board of directors approved and recommended the merger
agreement and the merger based upon the totality of the
information presented to and considered by them.
Opinion of Financial Advisor to the Special Committee
At the meeting of the special committee of our board of
directors held on February 7, 2007, JPMorgan rendered its
oral opinion to the special committee that, as of that date and
based upon and subject to the assumptions, qualifications and
limitations set forth in its opinion, the consideration of
$36.00 per share in cash (the Consideration) to
be paid to the holders of Lears common stock (other than
affiliates of specified entities controlled by Mr. Icahn)
in the merger is fair, from a financial point of view, to such
holders. JPMorgans oral opinion was subsequently confirmed
in writing and provided to the special committee and, at the
instruction of the special committee, to Lears board of
directors. JPMorgan has consented to the inclusion of its
opinion as Appendix B to this document.
The full text of the written opinion of JPMorgan, dated
February 8, 2007, which sets forth, among other things, the
assumptions made, procedures followed, matters considered, and
qualifications and limitations of the review undertaken by
JPMorgan in rendering its opinion is attached as Appendix B
to this document and is incorporated into this document by
reference. In connection with the rendering of JPMorgans
opinion to the special committee, JPMorgan presented a related
financial presentation to the special committee and, at the
direction of the special committee, to Lears board of
directors on February 7, 2007. Copies of JPMorgans
February 7, 2007 presentation are available for inspection
and copying at Lears principal executive office during
regular business hours by any Lear stockholder or its
representative who has been so designated in writing, and will
be provided to any Lear stockholder upon written request at the
expense of the requesting party. The February 7, 2007
presentation is filed as an exhibit to the
Schedule 13E-3
filed by Lear with the SEC, copies of which may be obtained from
the SEC. For instructions on how to obtain materials from the
SEC, see Where You Can Find More Information
beginning on page 148. The summary of the JPMorgan opinion
set forth in this document is qualified in its entirety by
reference to the full text of the JPMorgan opinion. We urge you
to read the JPMorgan opinion carefully and in its entirety.
JPMorgan provided its opinion for the information and assistance
of the special committee (and, at the instruction of the special
committee, to Lears board of directors) in connection with
and for the purposes of their evaluation of the merger.
JPMorgans written opinion addresses only the fairness,
from a financial point of view, as of the date of such opinion,
of the Consideration to be paid to holders of Lears common
stock (other than affiliates of specified entities controlled by
Mr. Icahn) in the merger, and does not address any other
aspect of the merger nor any other matter. The JPMorgan opinion
is not a recommendation to any stockholder of Lear as to how
that stockholder should vote with respect to the merger or any
other matter and should not be relied upon by any stockholder as
such.
30
In connection with rendering its opinion, JPMorgan, among other
things:
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reviewed a draft dated February 7, 2007 of the merger
agreement; |
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reviewed certain publicly available business and financial
information concerning Lear and the industries in which it
operates; |
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compared the proposed financial terms of the merger with the
publicly available financial terms of certain transactions
involving companies JPMorgan deemed relevant and the
consideration received for such companies; |
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compared the financial and operating performance of Lear with
publicly available information concerning certain other
companies JPMorgan deemed relevant and reviewed the current and
historical market prices of Lears common stock and certain
publicly traded securities of such other companies; |
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reviewed certain internal financial analyses and forecasts
prepared by the management of Lear relating to its
business; and |
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performed such other financial studies and analyses and
considered such other information as JPMorgan deemed appropriate
for the purposes of its opinion. |
In addition, JPMorgan held discussions with certain members of
the management, special committee and board of directors of Lear
with respect to certain aspects of the merger, the past and
current business operations of Lear, the financial condition and
future prospects and operations of Lear, and certain other
matters JPMorgan believed necessary or appropriate to its
inquiry.
In giving its opinion, JPMorgan relied upon and assumed, without
assuming responsibility or liability for independent
verification, the accuracy and completeness of all information
that was publicly available or was furnished to or discussed
with it by Lear or otherwise reviewed by or for JPMorgan.
JPMorgan did not conduct nor was it provided with any valuation
or appraisal of any assets or liabilities, nor did JPMorgan
evaluate the solvency of Lear or Parent under any state or
federal laws relating to bankruptcy, insolvency or similar
matters. JPMorgans financial analyses, which formed the
basis of JPMorgans opinion, were performed in reliance
upon, among other things, the Long Range Plan with Current
Industry Outlook provided to JPMorgan by management of
Lear at the direction of the special committee. In relying on
financial analyses and forecasts provided to it, JPMorgan
assumed that they were reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments
by management as to the expected future results of operations
and financial condition of Lear to which such analyses or
forecasts relate. JPMorgan did not express any view as to such
analyses or forecasts or the assumptions on which they were
based. JPMorgan also assumed that the merger and the other
transactions contemplated by the merger agreement will be
consummated as described in the merger agreement, and that the
definitive merger agreement will not differ in any material
respects from the draft of the merger agreement furnished to
JPMorgan. JPMorgan also assumed that the representations and
warranties made by Lear and Parent in the merger agreement and
the related agreements are and will be true and correct in all
respects material to its analysis. JPMorgan is not a legal,
regulatory or tax expert and relied on the assessments made by
advisors to Lear with respect to such issues. JPMorgan further
assumed that all material governmental, regulatory or other
consents and approvals necessary for the consummation of the
merger will be obtained without any adverse effect on Lear.
The JPMorgan opinion is necessarily based on economic, market
and other conditions as in effect on, and the information made
available to JPMorgan as of, the date of its opinion. It should
be understood that subsequent developments may affect the
JPMorgan opinion and that JPMorgan does not have any obligation
to update, revise, or reaffirm its opinion. The JPMorgan opinion
is limited to the fairness, from a financial point of view, of
the Consideration to be paid to the holders of Lears
common stock (other than affiliates of specified entities
controlled by Mr. Icahn) in the proposed merger and
JPMorgan expressed no opinion as to the fairness of the merger
to, or any consideration received in connection with the merger
by, the holders of any
31
other class of securities, creditors or other constituencies of
Lear or to the underlying decision by Lear to engage in the
merger.
Prior to the execution of the merger agreement, JPMorgan was
not authorized to and did not solicit expressions of interest
from other potential acquirors of Lear, except that during the
four-day period between the public announcement by affiliates of
Parent of its proposal to enter into the merger and the
execution of the merger agreement, JPMorgan, at the direction of
the special committee, approached a limited number of parties
with respect to their potential interest in a transaction.
JPMorgan assumed in its opinion that the terms of the merger are
the most beneficial terms from Lears perspective that
could under the circumstances be negotiated among the parties to
such transaction, and JPMorgan expressed no opinion as to
whether any alternative transaction might produce consideration
for Lears stockholders in excess of that contemplated in
the merger.
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Summary of JPMorgans Analyses. |
In connection with its opinion, JPMorgan performed the following
financial analysis:
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comparable company trading multiples analysis, |
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precedent transaction multiples analysis, and |
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discounted cash flow analysis. |
JPMorgan determined the implied value of Lears common
stock based on the Long Range Plan with Current Industry
Outlook, which was provided to JPMorgan by Lears
management at the direction of the special committee. In
addition, Lears management provided JPMorgan with certain
additional forecasts previously prepared by Lears
management and referred to as the Long Range Plan with
July 06 Industry Outlook, or the July 06
Outlook. For comparative purposes only, JPMorgan also
determined the implied value of Lears common stock based
on the July 06 Outlook. However, since JPMorgan was
advised by the special committee that the July 06 Outlook
no longer reflected managements or the special
committees current estimate of the Companys future
financial performance, in rendering its opinion, JPMorgan relied
on the Long Range Plan with Current Industry Outlook and did not
rely on the July 06 Outlook.
The foregoing forecasts furnished to JPMorgan by Lear at the
direction of the special committee were prepared by the
management of Lear. Lear does not publicly disclose internal
management projections of the type provided to JPMorgan in
connection with JPMorgans analysis of the merger, and
those projections were not prepared with a view toward public
disclosure. Those projections were based on numerous variables
and assumptions that are inherently uncertain and may be beyond
the control of Lears management, including, without
limitation, factors related to general economic and competitive
conditions and prevailing interest rates. Accordingly, actual
results could vary significantly from those set forth in those
projections.
The following is a summary of the material financial analyses
performed by JPMorgan in connection with rendering its opinion
to the special committee (and, at the direction of the special
committee, providing its opinion to Lears board of
directors). Some of the summaries of the financial analyses
include information presented in tabular format. To fully
understand the financial analyses, the tables should be read
together with the text of each summary. Considering the data set
forth in the tables without considering the narrative
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of the financial analyses.
Comparison of trading multiples. Using public filings
with the SEC and other publicly available information, selected
published equity research estimates and Lears management
forecasts, JPMorgan compared financial information, financial
ratios and valuation multiples for Lear to corresponding
measures for certain publicly traded companies selected by
JPMorgan. Although none of selected companies is directly
32
comparable to Lear in all respects, JPMorgan selected the
following companies based on JPMorgans view of the
comparability of their operating and financial characteristics:
North American automotive suppliers:
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American Axle & Manufacturing Holdings Inc.* |
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ArvinMeritor, Inc.* |
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BorgWarner Inc.* |
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Commercial Vehicle Group, Inc. |
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Donaldson Company, Inc. |
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Eaton Corporation |
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Gentex Corporation |
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Johnson Controls Inc.* |
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Magna International Inc.* |
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Modine Manufacturing Company |
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Stoneridge, Inc. |
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Tenneco Inc.* |
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TRW Automotive Holdings Corp.* |
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Visteon Corporation* |
Global automotive suppliers:
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Autoliv, Inc. |
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Brembo SpA |
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Continental AG |
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Denso Corporation |
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ElringKlinger AG |
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Faurecia SA |
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GKN PLC |
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Grammer AG |
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SOGEFI SpA |
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Tomkins plc |
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Trelleborg AB |
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Valeo SA |
JPMorgan calculated the firm values of the selected companies as
multiples of estimated sales, EBITDA and EBIT for the 2007 and
2008 calendar years for the selected companies. JPMorgan
calculated the firm value of each company by adding the market
value of its common equity as of February 2, 2007 to the
sum of its long-term and short-term debt and the book value of
its preferred stock and minority interest, and subtracting cash
and cash equivalents, of each company as of the most recent
relevant filing date for each such
33
company. Estimated sales, EBITDA and EBIT for each company were
based on estimates published by Wall Street equity research
firms. The following table presents the summary results of this
analysis:
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Price Per | |
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Price Per | |
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Firm | |
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Firm | |
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Firm | |
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Firm | |
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Firm | |
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Firm | |
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Share/2007 | |
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Share/2008 | |
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Value/2007 | |
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Value/2008 | |
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Value/2007 | |
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Value/2008 | |
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Value/2007 | |
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Value/2008 | |
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Earnings | |
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Earnings | |
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Sales | |
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Sales | |
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EBITDA | |
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EBITDA | |
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EBIT | |
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EBIT | |
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Per Share | |
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Per Share | |
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North American Automotive Suppliers:
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Median
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0.60 |
x |
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0.56 |
x |
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6.6 |
x |
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5.7 |
x |
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11.4 |
x |
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9.3 |
x |
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15.1 |
x |
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11.0x |
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Median of Select
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Peers(1)
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0.43 |
x |
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0.41 |
x |
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5.2 |
x |
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5.0 |
x |
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10.5 |
x |
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8.4 |
x |
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14.8 |
x |
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10.7x |
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Global Suppliers:
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Median
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0.93 |
x |
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0.93 |
x |
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6.5 |
x |
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6.4 |
x |
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10.8 |
x |
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9.7 |
x |
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14.2 |
x |
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12.9x |
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(1) |
The companies considered in this computation are marked with an
asterisk (*) in the list of North American automotive
suppliers above. |
Based on the Long Range Plan with Current Industry Outlook,
various characteristics of the selected companies as compared
with Lear, other factors (such as industry performance and
general business, economic, market and financial conditions),
and JPMorgans experience and judgment (and not based
solely on the results of mathematical analyses set forth in the
table above), JPMorgan applied a range of multiples of 2007
EBITDA of 4.75x to 5.75x to determine an implied range of equity
values per share of Lear. Based on the analysis, JPMorgan
derived an implied per share range of values for Lear of between
$23.60 and $34.14.
Transaction comparables. Using publicly available
information, JPMorgan examined the following selected automotive
supplier transactions.
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Date Announced |
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Acquirer |
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Target |
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October 2006
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Robert Bosch GmbH |
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Pacifica Group Ltd. |
October 2006
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Hitachi, Ltd. |
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Clarion Co., Ltd. |
September 2006
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Asahi Tec Corporation |
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Metaldyne Corporation |
June 2006
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Platinum Equity LLC |
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Textron Fastening Systems business of Textron Inc. |
May 2006
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Red Diamond Capital Partners, L.P. |
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Automotive division of Avon Rubber plc |
April 2006
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Continental AG |
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Automotive electronics business of Motorola, Inc. |
January 2006
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Bain Capital, LLC |
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Sensors and controls business of Texas Instruments Incorporated |
December 2005
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Cooper-Standard Automotive Inc. |
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Automotive brake and fuel tubing business of ITT Industries, Inc. |
September 2005
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The Carlyle Group |
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AxleTech Industries, Inc. |
March 2005
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Johnson Controls, Inc. |
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Battery business of Delphi Corporation |
January 2005
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Valeo SA |
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Engine electronics division of Johnson Controls, Inc. |
November 2004
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BorgWarner Germany GmbH |
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BERU AG |
34
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Date Announced |
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Acquirer |
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Target |
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October 2004
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Magna International |
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Tesma International Inc. |
October 2004
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Magna International |
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Decoma International Inc. |
September 2004
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The Cypress Group |
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Cooper-Standard Automotive Inc. |
July 2004
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The Cypress Group |
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Dana AG |
July 2004
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Thomas H Lee Partners |
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Progressive Moulded Products Ltd. |
July 2004
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Montagu Private Equity |
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Stabilus GmbH |
June 2004
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Kohlberg & Company LLC |
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Stanadyne Corporation |
May 2004
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GS Capital Partners |
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Autocam Corporation |
March 2004
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Continental AG |
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Phoenix AG |
September 2003
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Vestar Capital Partners |
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FL Selenia SpA |
May 2003
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Hg Capital |
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W.E.T. Automotive Systems AG |
May 2003
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Tomkins plc |
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Stackpole Limited |
May 2003
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The Carlyle Group |
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Automotive parts business of UIS, Inc. |
May 2003
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Rheinmetall AG |
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Kolbenschmidt Pierburg AG |
March 2003
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Castle Harlan, Inc. |
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Advanced Accessory Systems, LLC |
November 2002
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The Blackstone Group |
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Automotive business of TRW Inc. |
November 2002
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The Carlyle Group |
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Edscha AG |
August 2002
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CVC Capital |
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Kwik-Fit Holdings Limited |
August 2002
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Johnson Controls, Inc. |
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Automotive battery business of Varta AG |
August 2002
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Questor Management Co. LLC |
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Teksid Aluminum SpA |
July 2002
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Magna International Inc. |
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Donnelly Corporation |
July 2002
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Doughty Hanson & Co. |
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A.T.U. Group |
May 2002
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Hitachi, Ltd. |
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Unisia JECS Corporation |
January 2002
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CSFB |
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Oxford Automotive, Inc. |
Based on public filings with the SEC, other publicly available
information and selected published equity research estimates,
JPMorgan calculated the implied firm values of the target
companies in the selected transactions as multiples of each
targets estimated trailing twelve-month sales, estimated
trailing twelve-month EBIT, and estimated trailing twelve-month
EBITDA. The following table summarizes the results of this
analysis:
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Firm Value/ | |
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Firm Value/ | |
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Firm Value/ | |
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Sales | |
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EBIT | |
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EBITDA | |
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Median
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0.63x |
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10.8x |
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6.1x |
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Based on this analysis, various characteristics of the selected
companies and the selected transactions, other factors (such as
industry performance and general business, economic, market and
financial conditions), and JPMorgans experience and
judgment (and not based solely on the results of mathematical
analyses set forth in the table above), JPMorgan selected a
range of multiples of estimated 2006 EBITDA of 5.5x to 6.5x for
Lear, which implied a per share range of equity values for Lear
of between $28.30 and $38.25.
Discounted Cash Flow Analysis. JPMorgan conducted a
discounted cash flow analysis for the purpose of determining a
range of equity values per share for Lears common stock.
JPMorgan calculated the
35
unlevered free cash flows that Lear is expected to generate
during fiscal years 2007 through 2016. Unlevered free cash flow
projections for fiscal years 2006 to 2010 were based on the Long
Range Plan with Current Industry Outlook, and unlevered free
cash flow projections for fiscal years 2011 to 2016 were
extrapolated by JPMorgan based on assumptions provided by
management. In calculating Lears terminal value, JPMorgan
applied a perpetual growth rate ranging from 0.5% to 1.5% of the
unlevered free cash flow of Lear for periods subsequent to 2016.
Projected cash flows were then discounted to present value using
discount rates ranging from 10.0% to 11.0%. The foregoing
discounted cash flow analysis indicated a range of equity values
of between $25.30 and $34.45 per share of Lears
common stock on a stand-alone basis.
Other Information. JPMorgan also referenced a
52-week high and low
range of Lears common stock and the high and low range of
Wall Street research analysts price targets as of
February 2, 2007. Specifically, the reference range for the
52-week high and low
was $15.60 to $35.56 per share and the analyst target
prices ranged from $16.00 to $37.00 per share. JPMorgan
noted that historical stock trading and analyst price targets
are not valuation methodologies but were presented merely for
informational purposes.
JPMorgan also reviewed the premium and discount of the
Consideration to the historical prices of Lears common
stock. JPMorgans analysis indicated that the Consideration
represented:
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a premium of 3.8% based on the closing price of Lears
common stock of $34.67 on February 2, 2007 (the trading day
prior to the announcement of an offer to purchase Lear by
affiliates of Parent); |
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a discount of 10.2% based on the closing price of Lears
common stock on February 8, 2007 (the trading day prior to
announcement of the merger) of $40.07; |
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a premium of 7.0% based on the closing price of Lears
common stock of $33.66 one week prior to February 2, 2007; |
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a premium of 21.9% based on the closing price of Lears
common stock of $29.53 one month before February 2, 2007; |
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a premium of 46.4% based on the closing price of Lears
common stock of $24.59 on October 16, 2006 (the date on
which Lear announced the execution of an agreement relating to
the private placement of $200 million of common stock to
affiliates of Parent); |
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a premium of 1.2% based on the
52-week high of
Lears common stock of $35.56 as of February 2, 2007; |
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a premium of 55.1% based on the
52-week volume weighted
average price of Lears common stock of $23.21 as of
February 2, 2007; and |
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a premium of 130.8% based on the
52-week low of
Lears common stock of $15.60 as of February 2, 2007. |
In addition, JPMorgan conducted a discounted cash flow analysis
using unlevered free cash flow projections based on the July
06 Outlook and otherwise using the assumptions, range of
growth rates and range of discount rates referred to above under
the caption Discounted Cash Flow Analysis. Because
JPMorgan was advised by the special committee that the July
06 Outlook no longer reflected the current industry
production outlook of independent industry analysts, this
discounted cash flow analysis, which indicated a range of equity
values of between $35.90 and $46.50 per share of
Lears common stock on a stand-alone basis, was presented
for informational purposes only and was not relied upon by
JPMorgan in rendering its opinion.
Finally, JPMorgan also conducted an analysis on the same basis
as described above under the caption Transaction
Comparables, except that the firm value of Lear was
increased for purposes of the analysis by $256 million of
factored receivables outstanding as of December 31, 2006,
based on information provided to JPMorgan by management of Lear.
Because comparable information regarding factored receivables
was not available for the companies reviewed other than Lear,
the analysis, which indicated a range of equity values for Lear
of between $24.95 and $34.90 per share, was provided for
informational purposes only and was not relied upon by JPMorgan
in rendering its opinion.
36
The foregoing paragraphs summarize certain material financial
analysis performed by JPMorgan but do not purport to be a
complete description of the analyses or data underlying its
opinion, which was presented to the special committee by
JPMorgan. The preparation of a fairness opinion is a complex
process which involves various determinations as to the most
appropriate and relevant methods of financial and comparative
analysis and the application of those methods to the particular
circumstances. Therefore, the opinion is not susceptible to
partial analysis or a summary description. The foregoing summary
and its analyses must be considered as a whole, and selecting
portions of the forgoing summary and these analyses, without
considering all of the analyses as a whole, could create an
incomplete view of the process or assumptions underlying the
analyses and JPMorgans opinion. In arriving at its
opinion, JPMorgan considered all of the financial analyses it
performed and did not attribute any particular weight to any
individual analysis or factor it considered or reach any
specific conclusion with respect to any such analysis. Rather,
JPMorgan made its determination as to the fairness to the
stockholders of Lear, from a financial point of view, on the
basis of its experience and professional judgment after
considering the results of all of the analyses summarized above.
Analyses based upon forecasts of future results are inherently
uncertain, as they are subject to numerous factors or events
beyond the control of the parties and their advisors, including
JPMorgan. Accordingly, forecasts and analyses used by JPMorgan
are not necessarily indicative of actual values or actual future
results, which may be significantly higher or lower than
suggested by those analyses. Moreover, JPMorgans analyses
are not and do not purport to be appraisals or otherwise
reflective of the prices at which businesses actually could be
bought or sold.
The special committee selected JPMorgan to render its opinion
because of its reputation as an internationally recognized
investment banking and advisory firm with substantial experience
in transactions similar to the proposed merger and because
JPMorgan is familiar with Lear and its business.
JPMorgan will receive a fee from Lear for its services as the
financial advisor to the special committee in the proposed
merger, $2.0 million of which was payable upon the
announcement of the merger, and the balance of which is payable
upon the consummation of the merger or an alternate transaction
involving Lear, if any. The fee to which JPMorgan is entitled
will be $12.5 million in the aggregate, in the event of a
transaction between Lear and Mr. Icahn or any of his
affiliates in which the consideration paid or payable to
Lears stockholders is up to $36.00 per share; or
$15.0 million in the case of any other transaction. Lear
has also agreed to pay JPMorgan a fee in an amount equal to 20%
of any payment received by Lear from another person following or
in connection with the termination, abandonment or failure to
occur of the merger.
In addition, Lear has agreed to indemnify JPMorgan and its
affiliates from and against certain liabilities arising from its
engagement, including liabilities under securities laws. Lear
has also agreed to reimburse JPMorgan for its expenses incurred
in connection with its services, including the fees and
disbursements of counsel retained by JPMorgan.
JPMorgan and its affiliates have performed in the past, and may
continue to perform, certain financial advisory and financing
services for Lear, all for customary compensation. Such past
services have included (i) acting as financial advisor in
connection with a review of strategic alternatives pursuant to
an engagement letter entered into in April 2006 (the fees for
which are to be credited against the fees payable to JPMorgan as
a result of this transaction or any alternative transaction
involving Lear), (ii) acting as a co-lead arranger in
connection with an amendment to Lears primary credit
facility that included a new $1.0 billion term loan in
April 2006, (iii) acting as an underwriter for
$400 million of Lears senior secured
18-month term loan in
July 2005, and (iv) acting as joint lead arranger on
Lears $1.7 billion revolving credit facility in March
2005. In connection with the investment banking services set
forth in subsection (ii), (iii) and (iv) of the
prior sentence, JPMorgan received fees of approximately $12.1
million in addition to customary lending fees.
In addition, at the request of the special committee made to
JPMorgan following the execution of the merger agreement,
JPMorgan agreed to provide financing, for which it may receive
additional fees, in connection with any superior
proposal for Lear, which Lear may solicit in accordance
with the terms of the merger agreement. Following
JPMorgans agreement to provide financing in connection
with any superior proposal for Lear, on
February 27, 2007, the special committee expanded the scope
of services to be provided
37
by Evercore to include financial advisory services in connection
with soliciting and evaluating alternative transaction proposals.
In the ordinary course of JPMorgans business, JPMorgan and
its affiliates may actively trade the debt and equity securities
of Lear or AREP for its own account or for the accounts of its
customers and, accordingly, JPMorgan may at any time hold long
or short positions in such securities.
Mr. Icahns, Mr. Intrieris, AREPs,
Parents and Merger Subs Purpose and Reasons for the
Merger
If the proposed merger is completed, Lear will become a
subsidiary of Parent. For Parent and Merger Sub, the purpose of
the transaction is to effectuate the transactions contemplated
by the merger agreement. For Mr. Icahn, Mr. Intrieri
and AREP, the purpose of the merger is to allow AREP to
indirectly own Lear and to bear the rewards and risks of such
ownership after Lears common stock ceases to be publicly
traded. The transaction has been structured as a cash merger in
order to provide Lears current stockholders (other than
AREP, Parent, Merger Sub and their direct subsidiaries) with
cash for their shares of Lear common stock and to provide a
prompt and orderly transfer of ownership of Lear in a single
step, without the necessity of financing separate purchases of
Lear common stock in a tender offer or implementing a
second-step merger to acquire any shares of common stock not
tendered into any such tender offer, and without incurring any
additional transaction costs associated with such activities.
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub
believe that it is best for Lear to operate as a privately held
entity. As a privately held entity, Lear will have the
flexibility to focus on continuing improvements to its business
without the constraints and distractions caused by the public
equity markets valuation of Lear. In addition,
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub
believe that Lears future business prospects can be
improved through AREPs active participation in the
strategic direction and operation of Lear. Mr. Icahn,
Mr. Intrieri, AREP, Parent and Merger Sub believe that
there will be significant opportunities associated with
AREPs investment in Lear, but they also realize that there
are substantial risks, including the risks and uncertainties
related to Lears prospects, including the prospects
described in managements projections summarized under
Important Information Regarding Lear Financial
Forecasts and the operational and other risks related to
the incurrence by the Surviving Corporation of significant
additional debt as described below under
Financing of the Merger.
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub
believe that structuring the transaction as a merger is
preferable to other transaction structures because it will
enable Parent to acquire all of the equity of Lear at one time
and provides the opportunity for Lears stockholders to
receive fair value for their shares.
The Position of Mr. Icahn, Mr. Intrieri, AREP,
Parent and Merger Sub as to the Fairness of the Merger
Should they be required to do so, Mr. Icahn,
Mr. Intrieri, AREP, Parent and Merger Sub may be required
to express their beliefs as to the fairness of the merger to
Lears unaffiliated stockholders. Mr. Icahn,
Mr. Intrieri, AREP, Parent and Merger Sub are making the
statements included in this section solely for the purposes of
complying with the requirements of
Rule 13e-3 and
related rules under the Exchange Act.
The views of Mr. Icahn, Mr. Intrieri, AREP, Parent and
Merger Sub as to the fairness of the proposed merger should not
be construed as a recommendation to any stockholder as to how
such stockholder should vote on the proposal to approve and
adopt the merger agreement.
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub
did not participate in the deliberations of Lears board of
directors or the special committee regarding, or receive advice
from Lears or the special committees legal or
financial advisors as to, the substantive and procedural
fairness of the proposed merger. Mr. Icahn,
Mr. Intrieri, AREP, Parent and Merger Sub did not undertake
any independent evaluation of the fairness of the proposed
merger to the unaffiliated stockholders of Lear or engage a
financial advisor for such purposes.
38
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub
believe, however, that the proposed merger is substantively and
procedurally fair to Lears unaffiliated stockholders based
on the following factors:
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the current state of the automotive industry and the financial
distress of several of Lears major customers and suppliers; |
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the fact that the automotive operations of Lears three
largest customers have recently experienced significant
operating losses, and these automakers are continuing to
restructure their North American operations, which may have an
adverse impact on Lears operating results and the price of
Lears common stock; |
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the current and historical market prices of Lear common stock,
including the market price of Lear common stock relative to
those of other industry participants and general market indices;
the high volatility of Lear common stock, the fact that the
merger consideration per share represented a premium of 55.1%
based on the 52-week volume weighted average price of Lear
common stock as of February 2, 2007, a premium of 46.4%
based on the closing price of Lear common stock on
October 16, 2006 (the date on which Lear announced the
private placement of $200 million of Lear common stock to
affiliates of Parent) and a premium of 56.5% to the price per
share paid by certain affiliates of Mr. Icahn in the
private placement; |
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the $36.00 per share merger consideration and other terms and
conditions of the merger agreement resulted from extensive
negotiations between the special committee and its advisors and
AREP, Parent and Merger Sub and their respective advisors; |
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the fact that the terms of the merger agreement would provide
Lear a 45-day post-signing go shop period during
which Lear would have the right to solicit additional interest
in a transaction involving Lear and, after such 45-day period,
permit Lear to respond to unsolicited proposals during the
period prior to the stockholders vote, subject to certain
conditions as more fully described below under The Merger
Agreement Solicitation of Other Offers; |
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the special committee consists solely of directors who are not
officers or controlling stockholders of Lear, or affiliated with
AREP or its affiliates; |
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the special committee unanimously determined that the merger
agreement and the merger are fair to the stockholders of Lear
other than Mr. Icahns affiliates and in the best interests
of such stockholders; |
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the board of directors (without the participation of Mr.
Intrieri) unanimously determined that the merger agreement and
the merger are fair to the unaffiliated stockholders of Lear and
in the best interests of such stockholders; |
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the merger will provide consideration to the stockholders
entirely in cash, which provides certainty of value; |
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the special committee retained and received advice from
JPMorgan, as financial advisor, as well as the fairness opinion
referred to under Opinion of Financial
Advisor, and Winston & Strawn and Richards Layton, as
legal advisors, each of which has extensive experience in
transactions similar to the proposed merger; the fact that AREP,
Parent, Merger Sub, Mr. Icahn and Mr. Intrieri did not
participate in or have any influence on the deliberative process
of, or the conclusions reached by, the special committee or the
negotiating positions of the special committee; |
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the fact that appraisal rights under Delaware law are available
to holders of shares of Lears common stock who dissent
from the merger and comply with all of the required procedures
under Delaware law, which provides stockholders who dispute the
fairness of the merger consideration with an opportunity to have
a court determine the fair value of their shares, which may be
more than, less than, or the same as the amount such
stockholders would have received under the merger agreement; |
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the fact that under the merger agreement Lear is only obligated
to negotiate with Parent on one occasion if the initial superior
proposal is $37 per share or greater to Lears stockholders; |
39
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the fact that there is a provision in the merger agreement
allowing the board of directors or the special committee to
withdraw or change its recommendation of the merger agreement,
and to terminate the merger agreement, in certain circumstances
relating to the presence of a superior proposal, subject, in
certain cases, to a payment by Lear to Parent of a termination
fee; and |
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the fact that Lear would not have to establish the existence and
amount of its damages in the event of a failure of the merger to
be consummated under certain circumstances in light of the
$250 million reverse break-up fee payable by Parent if
Parent were to breach its obligations under the merger agreement
and fail to complete the merger. |
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub
did not consider the liquidation value of Lear because they
considered Lear to be a viable, going concern and therefore did
not consider liquidation value to be a relevant methodology.
Further, Mr. Icahn, Mr. Intrieri, AREP, Parent and
Merger Sub did not consider net book value of Lear, which is an
accounting concept, as a factor because they believed that net
book value is not a material indicator of the value of Lear as a
going concern but rather is indicative of historical costs.
Lears net book value per share as of December 31,
2006 was approximately $7.88, or approximately 78% lower than
the $36.00 per share cash merger consideration.
The foregoing discussion of the information and factors
considered and given weight by Mr. Icahn,
Mr. Intrieri, AREP, Parent and Merger Sub in connection
with the fairness of the merger is not intended to be exhaustive
but is believed to include all material factors considered by
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub.
Mr. Icahn, Mr. Intrieri, AREP, Parent and Merger Sub
did not find it practicable to assign, and did not assign,
relative weights to the individual factors considered in
reaching their conclusions as to the fairness of the proposed
merger. Rather, their fairness determinations were made after
consideration of all of the foregoing factors as a whole.
Plans for Lear After the Merger
If the merger agreement is adopted by Lear stockholders and
certain other conditions to the closing of the merger are either
satisfied or waived, Merger Sub will be merged with and into
Lear and Lear will be the Surviving Corporation. Following the
merger, the equity of the Surviving Corporation will be
wholly-owned by Parent and none of Lears current
stockholders will have any equity interest in the Surviving
Corporation. If the merger is completed, Parent will be the sole
beneficiary of the Surviving Corporations future earnings
and growth, if any, and will be entitled to vote on corporate
matters affecting the Surviving Corporation following the
merger. Similarly, Parent will also bear the risks of ongoing
operations, including the risks of any decrease in the Surviving
Corporations value after the merger and the operational
and other risks related to the incurrence by the Surviving
Corporation of significant additional debt as described below
under Financing of the Merger.
Upon consummation of the merger, Lears common stock will
cease to be publicly traded. Following the consummation of the
merger, the registration of Lears common stock and
Lears reporting obligation under the Exchange Act with
respect to Lears common stock will be terminated upon
application to the SEC. In addition, upon consummation of the
merger, Lears common stock will no longer be listed on any
exchange or quotation system, including the NYSE, and price
quotations will no longer be available. Lear will not be subject
to the obligations and constraints, and the related direct and
indirect costs, associated with having publicly traded equity
securities.
None of the current directors of Lear will remain directors of
the Surviving Corporation. Parents current intention is
for the directors of Merger Sub immediately prior to the merger
to be the directors of the Surviving Corporation upon
consummation of the merger. Parents current intention is
for Lears current executive officers to continue as
executive officers of the Surviving Corporation. At the request
of Parent in connection with the merger agreement, Lear entered
into amendments of the existing employment agreements of each of
Messrs. DelGrosso, Rossiter and Vandenberghe. The
effectiveness of each amendment is conditioned upon the
consummation of the merger. Pursuant to these amendments,
Mr. DelGrosso would serve as Chief Executive Officer of the
Surviving Corporation. Mr. Rossiter initially would serve
as Executive Chairman of the board of directors of the Surviving
Corporation, and Mr. Vandenberghe would serve as Vice
40
Chairman and Chief Financial Officer of the Surviving
Corporation. With the exception of Mr. DelGrosso, the
amendments provide these executive officers with compensation
comparable to their existing employment agreements.
Mr. DelGrosso will receive an increase in his base
compensation from $925,000 to $1,150,000 in connection with his
promotion to Chief Executive Officer. The amendments also
provide that the merger will not be treated as a change in
control for purposes of the employment agreements and
contemplate that each of Messrs. DelGrosso, Rossiter and
Vandenberghe will participate in management equity plans
following the merger. In addition, the amendments allow the
executives to elect to have up to 70% of their accumulated
benefit under a supplemental pension plan paid to them on
January 15, 2008 and up to 30% of such accumulated benefit
paid to them on January 15, 2009.
It is expected that Lears operations will be conducted
substantially as they currently are being conducted. AREP,
Parent and Merger Sub have advised Lear that they do not have
any current intentions, plans or proposals to cause Lear to
engage in an extraordinary corporate transaction following
consummation of the merger such as a merger, reorganization or
liquidation or any other material changes in its business.
Nevertheless, following consummation of the merger, the
management and/or board of directors of the Surviving
Corporation may initiate a review of the Surviving Corporation
and its assets, corporate and capital structure,
capitalizations, operations, business, properties and personnel
to determine what changes, if any, would be desirable following
the merger to enhance the business and operations of the
Surviving Corporation. As a result of this review, the Surviving
Corporation may engage in the types of transactions set forth
above if the management or board of directors of the Surviving
Corporation decides that such transactions are in the best
interest of the Surviving Corporation upon such review. The
Surviving Corporation expressly reserves the right to make any
changes it deems appropriate in light of such evaluations and
review or in light of future developments.
Certain Effects of the Merger
If the merger agreement is approved by Lears stockholders
and the other conditions to the closing of the merger are either
satisfied or waived, Merger Sub will be merged with and into
Lear, the separate corporate existence of Merger Sub will cease
and Lear will continue its corporate existence under Delaware
law as the Surviving Corporation in the merger. As a result of
the proposed merger, Lear will cease to be a publicly-traded
company and will be wholly-owned by Parent. Lears
stockholders immediately prior to the closing of the merger will
no longer have any interest in Lears future earnings or
growth. Following consummation of the merger, the registration
of our common stock and our reporting obligations with respect
to our common stock under the Exchange Act will be terminated
upon application to the SEC. In addition, upon completion of the
proposed merger, shares of our common stock will no longer be
listed on the NYSE or any other stock exchange or quotation
system.
Upon consummation of the merger, each outstanding share of Lear
common stock will be converted into the right to receive $36.00
in cash, without interest and less any applicable withholding
taxes. At the effective time of the merger, except as otherwise
agreed by a holder and Parent, all outstanding restricted stock
units under our equity incentive plans (whether vested or
unvested) will be cancelled and converted into the right to
receive a cash payment equal to the number of restricted stock
units multiplied by $36.00. All outstanding stock appreciation
rights and options to acquire our common stock (whether vested
or unvested) will be cancelled and converted into the right to
receive a cash payment equal to the number of outstanding shares
of our common stock underlying the stock appreciation rights or
options multiplied by the amount (if any) by which $36.00
exceeds the applicable exercise price. All deferred amounts held
in unit accounts denominated in shares of our common stock under
our Outside Directors Compensation Plan will be converted into
the right to receive a cash payment of $36.00 multiplied by the
number of shares deemed held in such deferred unit account,
payable or distributable in accordance with the terms of the
agreement, plan or arrangement relating to such deferred unit
account. All outstanding performance shares (whether vested or
unvested) will be cancelled and converted into the right to
receive a cash payment equal to the target number of units or
shares of common stock previously subject to performance shares
multiplied by $36.00, with respect to that percentage of such
performance shares that vest upon a change in control as
provided in our Long-Term Stock Incentive Plan. All payments of
the merger consideration will be without interest and less any
applicable withholding taxes.
41
Following the merger, the entire equity in Lear will be owned by
Parent. If the merger is completed, the AREP unitholders will be
the sole beneficiaries of our future earnings and growth.
Similarly, the AREP unitholders will also bear the risks of
ongoing operations including the risks of any decrease in our
value after the merger and the operational and other risks
related to the incurrence by Lear of indebtedness as described
below under Financing of the Merger. If
the merger is completed, the unaffiliated stockholders of Lear
will have no interest in Lears net book value or any
future net earnings.
The table below sets forth the interests of the affiliates of
Mr. Icahn in Lears net book value and net loss prior
to and immediately after the merger, based upon the net book
value of Lear at December 31, 2006 and the net loss of Lear
for the year ended December 31, 2006.
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Ownership Prior to Merger(1)(2) | |
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Ownership After Merger(3) | |
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$ (in millions) | |
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Percentage | |
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$ (in millions) | |
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Percentage | |
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Net book value at December 31, 2006
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$ |
94.2 |
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15.7 |
% |
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$ |
602.0 |
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100.0 |
% |
Net loss for the year ended December 31, 2006
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$ |
(110.7 |
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15.7 |
% |
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$ |
(707.5 |
) |
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100.0 |
% |
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(1) |
Based upon 76,642,783 shares of common stock outstanding as
of March 15, 2007. |
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(2) |
Based upon beneficial ownership of affiliates of Mr. Icahn
of 11,994,943 shares of common stock as of March 15,
2007. Please see footnote (1) of Security Ownership
of Certain Beneficial Owners and Management for a
description of the beneficial ownership of affiliates of
Mr. Icahn. |
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(3) |
Does not give effect to indebtedness to be incurred in
connection with the merger. |
In connection with the merger, certain of Lears management
will receive benefits and be subject to obligations in
connection with the merger that are different from, or in
addition to, the benefits and obligations of Lears
stockholders generally, as described in more detail under
Interests of Lears Directors and
Executive Officers in the Merger.
In connection with the merger, there may be certain material
U.S. federal income tax consequences to Lears
stockholders, as described in more detail under
Material U.S. Federal Income Tax
Consequences of the Merger to Our Stockholders.
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Directors and Management of the Surviving
Corporation |
Upon consummation of the merger, the directors of Merger Sub and
the officers of Lear immediately prior to the effective time of
the merger will be the initial directors and officers of the
Surviving Corporation, except as Merger Sub may otherwise
determine.
Upon consummation of the merger, the charter and by-laws of the
Surviving Corporation shall be the charter and by-laws of Merger
Sub, except that the name of the Surviving Corporation shall be
Lear Corporation.
Financing of the Merger
Parent and Merger Sub estimate that the total amount of funds
necessary to consummate the merger and related transactions will
be approximately $4.0 billion, of which $2.7 billion
will be funded by two new senior secured credit facilities. On
February 8, 2007, Parent entered into a commitment letter
with Bank of America and BAS, pursuant to which such parties
committed to provide to Parent the debt financing necessary to
complete the transactions contemplated by the merger agreement.
As described in the commitment letter, Bank of America will act
as sole and exclusive administrative agent and BAS will act as
sole lead arranger and sole bookrunner for the new credit
facilities. The credit facilities, along with available cash of
Lear, Parent and Merger Sub on the closing date, are intended to
refinance and replace Lears existing credit facilities and
to fund the transactions contemplated by the merger agreement.
Funding of the debt financing is subject to the
42
satisfaction of the conditions set forth in the commitment
letters. Pursuant to the debt financing commitments, and subject
to their terms and conditions, Bank of America committed to
provide, in the aggregate:
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a $2.6 billion seven-year senior secured term loan facility
for the purpose of financing a portion of the merger,
refinancing certain existing indebtedness of Lear and paying the
transaction costs associated with the foregoing; and |
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a $1.0 billion five-year senior secured revolving credit
facility, with sublimits and subfacilities consistent with
Lears existing credit facility, for the purpose of
financing the merger (including payment of fees and expenses),
providing ongoing working capital and for other general
corporate purposes of Lear and its subsidiaries. Up to
$400 million of the revolving credit facility will be
available for the issuance of letters of credit, and up to
$300 million will be available for swingline loans. |
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Conditions Precedent to the Debt Financing
Commitments |
The availability of the debt financing described above is
subject, among other things, to satisfaction of the following
conditions:
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consummation of the merger prior to or substantially
simultaneously with the initial borrowing under the term loan
and revolving facilities, in all material respects in accordance
with the terms of the merger agreement, |
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negotiation, execution and delivery of definitive documentation
for the debt financing; |
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American Real Estate Holdings Limited Partnership, through
Parent, making an equity contribution of at least
$1.3 billion prior to or substantially simultaneously with
the initial borrowing under the term loan and revolving
facilities; |
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repayment of all indebtedness under Lears existing credit
facilities, release of all related liens and completion of a
tender offer for outstanding securities under certain of
Lears indentures or receipt by Bank of America of call
notices sufficient to redeem all indebtedness under certain of
Lears indentures; |
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the accuracy in all material respects of certain representations
and warranties of Lear contained in the merger agreement and
certain representations and warranties of Merger Sub and Lear
contained in the definitive documentation for the debt
facilities; |
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receipt by Bank of America of audited financial statements of
Lear for the fiscal year ended December 31, 2006, unaudited
financial statements for each subsequent fiscal quarter ended
45 days or more prior to the closing of the merger and pro
forma unaudited financial statements for the fiscal year ended
December 31, 2006 and for each subsequent fiscal quarter
ended 45 days or more prior to the closing of the
merger; and |
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other customary conditions for leveraged acquisition financings. |
We cannot assure you that the conditions to the debt financing
will be met.
Parent has agreed with us that it will use its reasonable best
efforts to obtain the debt financing contemplated by the debt
financing commitments. The debt financing, however, is not a
condition to the consummation of the merger. See The
Merger Agreement Financing. The debt financing
commitments expire on September 30, 2007.
The borrower of the term loans and under the revolving credit
facility will be Lear, as the Surviving Corporation, upon the
consummation of the merger. BAS will arrange a syndicate of
banks, financial institutions and other entities, including Bank
of America, to act as lenders under the term loan and revolving
credit facilities.
43
Limited Guaranty
In connection with the merger agreement, AREP and Lear entered
into a limited guaranty under which AREP has guaranteed the
payment by Parent and Merger Sub of their obligations under
section 7.4(f) of the merger agreement. Under
section 7.4(f) of the merger agreement, if we terminate the
merger agreement under certain circumstances, we will be
entitled to receive (1) liquidated damages of
$250 million if we have satisfied our conditions to the
closing but Parent has failed to take all necessary steps to
consummate the merger and there has not been a failure of Parent
and Merger Sub to obtain the debt financing necessary to
consummate the merger as a result of a breach or default by the
commitment parties or (2) if there has been a failure of
Parent and Merger Sub to obtain the debt financing necessary to
consummate the merger as a result of a breach or default by the
commitment parties, an amount equal to our actual damages but in
no case greater than $25 million in excess of any amounts
received by Parent, Merger Sub or their affiliates from the
lenders under the debt financing commitments with respect to
claims for breach of the debt financing commitments. AREPs
obligations under the limited guaranty will remain in full force
and effect until the closing of the transactions contemplated by
the merger agreement or the termination of the merger agreement
(except that AREPs obligation to guaranty payment shall
survive such termination). The limited guaranty is our sole
recourse against the guarantor.
The summary of the material terms of the guaranty above and
elsewhere in this proxy statement is qualified in its entirety
by reference to the guaranty of payment, a copy of which is
attached to this proxy statement as Appendix D and which we
incorporate by reference into this document.
Interests of Lears Directors and Executive Officers in
the Merger
Certain members of our board of directors and executive officers
may have interests in the merger that are different from, or are
in addition to, the interests of our stockholders generally. The
special committee and our board of directors were aware of these
interests and considered them, among other matters, in approving
the merger agreement. The consummation of the merger will
constitute a change of control for purposes of each of the plans
and agreements described below.
We have existing employment agreements with fifteen of our
officers. Under the employment agreements, Lear may generally
reduce an executives base salary or bonus, defer payment
of his compensation, or eliminate or modify his benefits,
without giving rise to a claim of constructive termination, so
long as such changes are made for all executive officers;
however, any such actions by Lear within one year after a change
in control would give the executive a basis for termination for
good reason. Our executive officers receive certain benefits
under their employment agreements upon an involuntary
termination of employment by Lear without cause (or termination
by the executive with good reason). These benefits are in the
form of cash severance, pension vesting enhancement,
continuation of medical/welfare benefits and an excise tax
gross-up. Please see Executive Compensation
Potential Payments Upon Termination or a Change of Control
for a detailed description of the compensation payable to each
of our five highest paid executive officers upon termination of
employment following a change of control.
At the request of Parent in connection with the merger
agreement, we entered into amendments of the existing employment
agreements of each of Messrs. DelGrosso, Rossiter and
Vandenberghe. The effectiveness of each amendment is conditioned
upon the consummation of the merger with Parent and Merger Sub.
Pursuant to these amendments, Mr. DelGrosso would serve as
Chief Executive Officer of Lear. Mr. Rossiter initially
would serve as Executive Chairman of the board of directors of
Lear, and Mr. Vandenberghe would serve as Vice Chairman and
Chief Financial Officer of Lear. With the exception of
Mr. DelGrosso, who would be promoted to Chief Executive
Officer, the amendments provide these executive officers with
compensation comparable to their existing employment agreements.
Mr. DelGrosso will receive an increase in his base
compensation from $925,000 to $1,150,000 in connection with his
promotion to Chief Executive Officer. The amendments also
provide that the merger will not be treated as a change in
control for purposes of the employment agreements, as amended,
and contemplate that each of Messrs. DelGrosso, Rossiter and
44
Vandenberghe will participate in management equity plans
following the merger. In addition, the amendments allow the
executives to elect to have up to 70% of their accumulated
benefit under the supplemental pension plans paid to them on
January 15, 2008 and up to 30% of such accumulated benefit
paid to them on January 15, 2009.
The summary of the material terms of the employment agreement
amendments above and elsewhere in this proxy statement is
qualified in its entirety by reference to the employment
agreement amendments, copies of which are attached to this proxy
statement as Appendix E and which are incorporated by
reference into this document.
Our Long-Term Stock Incentive Plan provides for accelerated
vesting or payout of equity awards upon a change in control,
even for an executive who does not terminate employment. These
benefits, which apply to all employees and outside directors who
hold equity awards, include the following:
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stock options and stock appreciation rights become immediately
exercisable and remain so throughout their entire term; |
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restrictions on restricted stock units lapse; and |
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|
a pro rata number of performance shares and performance units
vest and pay out as of the date of the change in control. The
amount is determined based on the length of time in the
performance period that elapsed prior to the effective date of
the change in control, assuming achievement of all relevant
performance objectives at target levels. |
In connection with the merger agreement, we entered into
amendments of the Long-Term Stock Incentive Plan award
agreements of each of Messrs. Rossiter, DelGrosso,
Vandenberghe, Ninivaggi, Brackenbury and Scott. Pursuant to
these amendments, restrictions on restricted stock units will
not lapse, and performance shares and performance units will not
vest, in connection with the merger until two business days
after the merger closes. The affected awards will become payable
at that time.
As of March 15, 2007, there were approximately
722,200 shares of our common stock issuable pursuant to
stock options granted under our equity incentive plans to our
current executive officers and directors. Under the terms of the
equity plans and the merger agreement, except as otherwise
agreed to by Parent and a holder of an option, each outstanding
option held by an executive officer or director that is
unexercised as of the effective time of the merger will become
fully vested, cancelled and converted into the right to receive
a cash payment equal to the number of shares of our common stock
underlying the outstanding options multiplied by the amount (if
any) by which $36.00 exceeds the option exercise price, without
interest and less any applicable withholding taxes.
The following table identifies, for each of our directors and
executive officers, (1) the aggregate number of shares of
our common stock subject to outstanding options with an exercise
price below $36.00 as of March 15, 2007, all of which are
fully vested, (2) the weighted average exercise price of
these
in-the-money
options, (3) the aggregate value of these
in-the-money
options and (4) the number of shares of our common stock
underlying underwater options as of March 15,
2007 to be cancelled upon the consummation
45
of the merger. The information in the table assumes that all
options remain outstanding on the closing date of the merger and
that Parent and the holder have not otherwise agreed to separate
treatment of these options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-The-Money Options(1) | |
|
Underwater Options | |
|
|
| |
|
to be Cancelled | |
|
|
Number of | |
|
Weighted | |
|
|
|
in Merger(2) | |
|
|
Shares | |
|
Average | |
|
|
|
| |
|
|
Underlying | |
|
Exercise | |
|
Aggregate | |
|
Number of Shares | |
Name |
|
Options | |
|
Price($) | |
|
Value($) | |
|
Underlying Options | |
|
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter(3)
|
|
|
81,250 |
|
|
|
35.93 |
|
|
|
5,688 |
|
|
|
170,000 |
|
James H. Vandenberghe(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,000 |
|
Douglas G. DelGrosso
|
|
|
32,500 |
|
|
|
35.93 |
|
|
|
2,275 |
|
|
|
100,000 |
|
Daniel A. Ninivaggi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond E. Scott
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,000 |
|
James M. Brackenbury
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000 |
|
Shari L. Burgess
|
|
|
1,950 |
|
|
|
35.93 |
|
|
|
137 |
|
|
|
7,750 |
|
Roger A. Jackson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,000 |
|
James L. Murawski
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew J. Simoncini
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500 |
|
David E. Fry(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
Vincent J. Intrieri(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conrad L. Mallett(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000 |
|
Larry W. McCurdy(3)
|
|
|
2,500 |
|
|
|
29.03 |
|
|
|
17,425 |
|
|
|
7,750 |
|
Roy E. Parrott(3)
|
|
|
1,250 |
|
|
|
35.93 |
|
|
|
88 |
|
|
|
5,250 |
|
David P. Spalding(3)
|
|
|
2,500 |
|
|
|
29.03 |
|
|
|
17,425 |
|
|
|
7,750 |
|
James A. Stern(3)
|
|
|
2,500 |
|
|
|
29.03 |
|
|
|
17,425 |
|
|
|
7,750 |
|
Henry D.G. Wallace(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard F. Wallman(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000 |
|
|
|
(1) |
Exercise price of options is below the $36.00 per share
merger consideration. |
|
(2) |
Exercise price of options is above the $36.00 per share
merger consideration. |
|
(3) |
The individual is a director. |
|
|
|
Stock Appreciation Rights |
As of March 15, 2007, there were approximately 769,218
stock appreciation rights (SARs) granted under our equity
incentive plans to our current executive officers. None of our
non-employee directors have been granted stock appreciation
rights. Under the terms of the incentive plans and the merger
agreement, except as otherwise agreed to by Parent and a holder
of a stock appreciation right, each outstanding stock
appreciation right that is unexercised as of the effective time
of the merger will become fully vested (if not already),
cancelled and converted into the right to receive a cash payment
equal to the number of outstanding shares of our common stock
underlying the stock appreciation rights multiplied by the
amount by which $36.00 exceeds the stock appreciation right
exercise price, without interest and less any applicable
withholding tax.
The following table identifies, for each of our executive
officers, the aggregate number of shares subject to stock
appreciation rights (which are all in the money) as
of March 15, 2007, the weighted-average exercise price of
unvested stock appreciation rights, the value of the unvested
stock appreciation rights, the weighted-average exercise price
of the aggregate (vested and unvested) stock appreciation rights
and the value of the aggregate stock appreciation rights. The
information in the table assumes that all these stock
appreciation
46
rights remain outstanding as of the closing of the merger and
that Parent and the holder have not otherwise agreed to separate
treatment of these stock appreciation rights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
|
|
|
|
Average Exercise | |
|
|
|
Average Exercise | |
|
Aggregate | |
|
|
Aggregate | |
|
Price of | |
|
Value of | |
|
Price of Vested | |
|
Value of Vested | |
|
|
Number | |
|
Unvested | |
|
Unvested | |
|
and Unvested | |
|
and Unvested | |
Name |
|
of SARs | |
|
SARs($) | |
|
SARs($) | |
|
SARs($) | |
|
SARs($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
222,750 |
|
|
|
29.21 |
|
|
|
1,168,729 |
|
|
|
28.88 |
|
|
|
1,585,980 |
|
James H. Vandenberghe
|
|
|
123,750 |
|
|
|
29.21 |
|
|
|
649,294 |
|
|
|
28.88 |
|
|
|
881,100 |
|
Douglas G. DelGrosso
|
|
|
123,750 |
|
|
|
29.21 |
|
|
|
649,294 |
|
|
|
28.88 |
|
|
|
881,100 |
|
Daniel A. Ninivaggi
|
|
|
70,950 |
|
|
|
29.64 |
|
|
|
365,382 |
|
|
|
29.28 |
|
|
|
476,784 |
|
Raymond E. Scott
|
|
|
59,400 |
|
|
|
29.21 |
|
|
|
311,661 |
|
|
|
28.88 |
|
|
|
422,928 |
|
James M. Brackenbury
|
|
|
45,900 |
|
|
|
29.21 |
|
|
|
311,661 |
|
|
|
29.21 |
|
|
|
311,661 |
|
Shari L. Burgess
|
|
|
17,199 |
|
|
|
29.63 |
|
|
|
88,645 |
|
|
|
29.27 |
|
|
|
115,749 |
|
Roger A. Jackson
|
|
|
55,350 |
|
|
|
29.31 |
|
|
|
289,008 |
|
|
|
28.96 |
|
|
|
389,664 |
|
James L. Murawski
|
|
|
17,199 |
|
|
|
29.63 |
|
|
|
88,645 |
|
|
|
29.27 |
|
|
|
115,749 |
|
Matthew J. Simoncini
|
|
|
32,970 |
|
|
|
30.06 |
|
|
|
167,983 |
|
|
|
29.70 |
|
|
|
207,711 |
|
As of March 15, 2007, there were approximately 512,878
restricted stock units outstanding under our equity incentive
plans held by our current executive officers. Our non-employee
directors do not hold any restricted stock units. Under the
terms of the equity incentive plans, except as otherwise agreed
to by Parent and a holder of a restricted stock unit, each
outstanding restricted stock unit that is outstanding as of the
consummation of the merger will become fully vested, cancelled
and converted into the right to receive a cash payment equal to
the number of outstanding restricted stock units multiplied by
$36.00, without interest and less any applicable withholding tax.
The following table identifies, for each of our executive
officers, the aggregate number of shares of our common stock
subject to outstanding units as of March 15, 2007 and the
value of these units that will become fully vested in connection
with the merger. The table also identifies the aggregate value
as of March 15, 2007 of the dividend equivalent accounts
associated with the restricted stock units for each executive
officer. These dividend equivalent accounts are paid out upon
vesting of the underlying restricted stock units. The
information in the table assumes that all these units remain
outstanding on the closing date of the merger and that Parent
and the holder have not otherwise agreed to separate treatment
of such restricted stock units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Value | |
|
|
|
|
Aggregate | |
|
of Dividend | |
Name |
|
Number of Units | |
|
Value($) | |
|
Equivalents($) | |
|
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
158,556 |
|
|
|
5,708,016 |
|
|
|
167,767 |
|
James H. Vandenberghe
|
|
|
96,598 |
|
|
|
3,477,528 |
|
|
|
98,012 |
|
Douglas G. DelGrosso
|
|
|
69,670 |
|
|
|
2,508,120 |
|
|
|
62,106 |
|
Daniel A. Ninivaggi
|
|
|
37,968 |
|
|
|
1,366,848 |
|
|
|
33,888 |
|
Raymond E. Scott
|
|
|
38,925 |
|
|
|
1,401,300 |
|
|
|
34,790 |
|
James M. Brackenbury
|
|
|
31,119 |
|
|
|
1,120,284 |
|
|
|
31,185 |
|
Shari L. Burgess
|
|
|
11,052 |
|
|
|
397,872 |
|
|
|
10,925 |
|
Roger A. Jackson
|
|
|
37,136 |
|
|
|
1,336,896 |
|
|
|
37,795 |
|
James L. Murawski
|
|
|
8,755 |
|
|
|
315,180 |
|
|
|
7,312 |
|
Matthew J. Simoncini
|
|
|
23,099 |
|
|
|
831,564 |
|
|
|
16,051 |
|
47
As of March 15, 2007, there were approximately
86,566 shares of our common stock subject to performance
shares held by our current executive officers, which generally
vest at the end of the respective three-year performance periods
if performance goals are met. Our non-employee directors have
not been granted performance shares. At the effective time of
the merger, except as otherwise agreed by a holder and Parent,
all outstanding performance shares (whether vested or unvested)
will be cancelled and converted pro-rata into the right to
receive a cash payment equal to the target number of shares of
common stock previously subject to performance shares multiplied
by $36.00, without interest and less any applicable withholding
taxes, based on the number of completed months that have elapsed
within the applicable
36-month performance
period as of the effective date.
The following table identifies, for each of our executive
officers, the aggregate number of shares of our common stock
subject to performance shares as of March 15, 2007, the
pro-rata number of the performance shares as of March 15,
2007 and the value of those pro-rata performance shares that
will become fully vested and payable in connection with the
merger. For each additional month that elapses after
March 1, 2007, the value of an additional 1/36 of the
performance shares will be payable upon completion of the
merger. The information in the table assumes that all
performance shares remain outstanding on the closing date of the
merger and that Parent and the holder have not otherwise agreed
to separate treatment of such performance shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Pro Rata | |
|
|
|
|
Performance | |
|
Performance | |
|
Aggregate Pro Rata | |
Name |
|
Shares | |
|
Shares @ 3/15/07 | |
|
Value($) | |
|
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
28,470 |
|
|
|
14,088 |
|
|
|
507,168 |
|
James H. Vandenberghe
|
|
|
11,971 |
|
|
|
5,924 |
|
|
|
213,264 |
|
Douglas G. DelGrosso
|
|
|
11,045 |
|
|
|
5,255 |
|
|
|
189,180 |
|
Daniel A. Ninivaggi
|
|
|
6,244 |
|
|
|
3,039 |
|
|
|
109,404 |
|
Raymond E. Scott
|
|
|
5,686 |
|
|
|
2,753 |
|
|
|
99,108 |
|
James M. Brackenbury
|
|
|
5,706 |
|
|
|
2,767 |
|
|
|
99,612 |
|
Shari L. Burgess
|
|
|
3,746 |
|
|
|
1,823 |
|
|
|
65,628 |
|
Roger A. Jackson
|
|
|
5,871 |
|
|
|
2,886 |
|
|
|
103,896 |
|
James L. Murawski
|
|
|
3,717 |
|
|
|
1,802 |
|
|
|
64,872 |
|
Matthew J. Simoncini
|
|
|
4,110 |
|
|
|
1,998 |
|
|
|
71,928 |
|
|
|
|
Cash-Settled Performance Units |
As of March 15, 2007, there were approximately 77,250
cash-settled performance units held by our current executive
officers, all of which were unvested. Our non-employee directors
have not been granted performance units. At the effective time
of the merger, except as otherwise agreed by a holder and
Parent, all outstanding performance units will be cancelled and
converted pro-rata into the right to receive a cash payment
equal to the target number of units multiplied by the stated
per-unit value of $30.00, without interest and less any
applicable withholding taxes, based on the number of completed
months that have elapsed within the
36-month performance
period as of the effective date.
The following table identifies, for each of our executive
officers, the aggregate number of performance units as of
March 15, 2007, the pro-rata portion of the performance
units as of March 15, 2007 and the value of those pro-rata
performance units that will be paid to the executive officers in
connection with the merger. For each additional month that
elapses after March 1, 2007, the value of an additional
1/36 of the performance units will be payable upon completion of
the merger. The information in the table assumes that
48
all performance units remain outstanding on the closing date of
the merger and that Parent and the holder have not otherwise
agreed to separate treatment of such performance units.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Pro Rata | |
|
|
|
|
Performance | |
|
Performance | |
|
Aggregate Pro Rata | |
Name |
|
Units | |
|
Units @ 3/15/07 | |
|
Value($) | |
|
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
20,250 |
|
|
|
1,125 |
|
|
|
33,750 |
|
James H. Vandenberghe
|
|
|
11,250 |
|
|
|
625 |
|
|
|
18,750 |
|
Douglas G. DelGrosso
|
|
|
11,250 |
|
|
|
625 |
|
|
|
18,750 |
|
Daniel A. Ninivaggi
|
|
|
8,700 |
|
|
|
483 |
|
|
|
14,490 |
|
Raymond E. Scott
|
|
|
5,400 |
|
|
|
300 |
|
|
|
9,000 |
|
James M. Brackenbury
|
|
|
5,400 |
|
|
|
300 |
|
|
|
9,000 |
|
Shari L. Burgess
|
|
|
2,100 |
|
|
|
117 |
|
|
|
3,510 |
|
Roger A. Jackson
|
|
|
5,400 |
|
|
|
300 |
|
|
|
9,000 |
|
James L. Murawski
|
|
|
2,100 |
|
|
|
117 |
|
|
|
3,510 |
|
Matthew J. Simoncini
|
|
|
5,400 |
|
|
|
300 |
|
|
|
9,000 |
|
For a more detailed description of the compensation payable
through equity awards and otherwise to each of our five highest
paid executive officers following a change of control, please
see Executive Compensation Potential Payments
Upon Termination or Change of Control.
|
|
|
Director Compensation Plan |
Pursuant to the Lear Corporation Outside Directors Compensation
Plan, each non-employee director receives annually on the last
business day of each January, restricted units representing
shares of Lear common stock having a value of $90,000 on the
date of the grant. These restricted units vest in equal
installments on each of the first three anniversaries of the
grant date and the value of the vested units is payable in cash
at such time. Directors may elect to defer receipt of these cash
amounts into stock unit accounts and/or interest bearing
accounts, which accrue interest at the prime rate. During the
vesting period, non-employee directors receive credits in the
interest account equal to amounts that would be paid as
dividends on the shares represented by the restricted units.
Non-employee directors may also elect to defer receipt of their
quarterly cash retainer and meeting fees into the stock unit or
interest accounts.
Under the terms of the Outside Directors Compensation Plan, upon
a change of control the unvested restricted units and the
balance of the directors deferred stock unit account will
be converted into an obligation to pay cash in an amount equal
to the number of restricted units and deferred stock units held
in such account (collectively, Units) multiplied by
$36.00. This obligation will be payable or distributable in
accordance with the terms of the agreement, plan or arrangement
relating to such account. As of March 15, 2007, the
aggregate value of such Units held by current directors was
approximately $3.8 million. In addition, upon the
completion of the merger, the value of all interest accounts
held under the Outside Directors Compensation Plan will be paid
to the respective directors.
49
The following table identifies, for each of our non-employee
directors, the aggregate number of deferred stock units and
restricted units (collectively, Units) held as of
March 15, 2007, the value of such Units, and the aggregate
value of the directors dividend and interest accounts as
of March 15, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Value | |
|
|
|
|
|
|
of Dividend and | |
|
|
|
|
|
|
Interest | |
Name |
|
Number of Units | |
|
Aggregate Value($) | |
|
Accounts($) | |
|
|
| |
|
| |
|
| |
David E. Fry
|
|
|
9,508 |
|
|
|
342,288 |
|
|
|
3,905 |
|
Vincent J. Intrieri
|
|
|
2,992 |
|
|
|
107,712 |
|
|
|
|
|
Conrad L. Mallett
|
|
|
9,477 |
|
|
|
341,172 |
|
|
|
168,693 |
|
Larry W. McCurdy
|
|
|
22,681 |
|
|
|
816,516 |
|
|
|
21,736 |
|
Roy E. Parrott
|
|
|
6,128 |
|
|
|
220,608 |
|
|
|
2,535 |
|
David P. Spalding
|
|
|
18,185 |
|
|
|
654,660 |
|
|
|
123,726 |
|
James A. Stern
|
|
|
20,823 |
|
|
|
749,628 |
|
|
|
20,884 |
|
Henry D.G. Wallace
|
|
|
7,884 |
|
|
|
283,824 |
|
|
|
3,335 |
|
Richard F. Wallman
|
|
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6,749 |
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242,964 |
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2,535 |
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Indemnification and Insurance |
Parent and Merger Sub have agreed that all rights to
indemnification existing in favor of the current or former
directors, officers and employees of Lear or any of its
Subsidiaries (the Indemnified Persons) as provided
in our Amended and Restated Certificate of Incorporation or
bylaws, or the articles of organization, bylaws or similar
constituent documents of any of our subsidiaries as in effect as
of the date of this Agreement with respect to matters occurring
prior to the effective time of the merger will survive the
merger and continue in full force and effect for a period of not
less than six (6) years after the effective time of the
merger unless otherwise required by law.
In addition, the Surviving Corporation will, to the fullest
extent permitted under applicable law, indemnify and hold
harmless (and advance funds in respect of each of the foregoing)
each Indemnified Person against any costs or expenses (including
advancing reasonable attorneys fees and expenses in
advance of the final disposition of any claim, suit, proceeding
or investigation to each Indemnified Person to the fullest
extent permitted by law), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement (with the
prior written consent of Parent) in connection with any actual
or threatened claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative (an
Action), arising out of, relating to or in
connection with any action or omission occurring or alleged to
have occurred whether before the effective time of the merger
(including acts or omissions in connection with such persons
serving as an officer, director or other fiduciary in any entity
if such service was at the request or for the benefit of Lear),
except for in any case, any claim, judgments, fines, penalties
and amounts to be paid which relate to any act or omission which
constitutes a material violation of law and except for other
exceptions to indemnification that are required by law. In the
event of any such Action, the Surviving Corporation will
reasonably cooperate with the Indemnified Person in the defense
of any such Action, and will pay all reasonable expenses,
including reasonable attorneys fees, that may be incurred
by any Indemnified Person in enforcing the indemnity and other
obligations provided in the merger agreement.
We are required to purchase on or prior to the effective time of
the merger, and the Surviving Corporation is required to
maintain with reputable and financially sound carriers, tail
policies to the current directors and officers
liability insurance and fiduciary liability insurance policies
maintained by us and our subsidiaries on the date of the merger
agreement. The tail policies and fiduciary liability policies
must be effective for six years after the effective time of the
merger with respect to claims arising from facts or events that
existed or occurred prior to or at the effective time of the
merger. The policies must also contain coverage that is at least
as protective to the persons covered by the existing policies,
and must in any event include non-management directors Side A
(DIC) coverage. The Surviving Corporation must provide
copies of the policies to the past, current and future directors
and officers of Lear entitled to the benefit of such policies as
reasonably requested.
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The Surviving Corporation is only required to provide as much
coverage as can be obtained by paying aggregate premiums equal
to 300% of the aggregate annual amount we currently pay for such
coverage. AREP may substitute an alternative for the tail
policies that affords, in the aggregate, no less favorable
protection to such officers and directors, provided that any
such alternative is approved by our board of directors prior to
the effective time of the merger.
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Special Committee Compensation |
The special committee consists of three disinterested and
independent directors, Messrs. McCurdy, Stern and Wallace.
Our board of directors authorized the compensation for the
special committee members, in addition to the reimbursement of
expenses and payment of all other fees as members of the board
of directors. The board of directors determined that each member
of the special committee will receive remuneration in the amount
of $2,500 per meeting attended in consideration of his
acting in such capacity. The approved compensation for the
special committee members was not, and is not, contingent upon
the consummation or approval of any transaction involving Lear.
Our board of directors elected Vincent J. Intrieri to the board
of directors in November 2006 pursuant to the terms of a stock
purchase agreement entered into between Lear and affiliates of
and funds managed by Mr. Icahn. The stock purchase
agreement permitted these stockholders to designate one person
to serve on our board of directors for so long as they retain a
direct or indirect interest in at least 15% of our outstanding
common stock. Mr. Intrieris initial term expires at
our 2008 annual meeting of stockholders. Mr. Intrieri
currently is a Senior Managing Director of Icahn Partners LP and
Icahn Partners Master Fund LP, private investment funds
controlled by Mr. Icahn, and a director of API, the general
partner of AREP. As described in Special
Factors Background of the Merger,
Mr. Intrieri participated in meetings relating to the
merger and negotiation of the merger agreement on behalf of
Parent and Merger Sub. Mr. Intrieri did not participate in
any of the meetings of our board of directors at which the
merger or merger agreement was discussed, or in any vote with
respect thereto.
Material U.S. Federal Income Tax Consequences of the
Merger to Our Stockholders
The following discussion is a summary of the material
U.S. federal income tax consequences of the merger to
U.S. holders (as defined below) of Lear common
stock whose shares are converted into the right to receive cash
in the merger. This summary is based on the provisions of the
Internal Revenue Code of 1986, as amended (the
Code), U.S. Treasury regulations promulgated
thereunder, judicial authorities and administrative rulings, all
as in effect as of the date of the proxy statement and all of
which are subject to change, possibly with retroactive effect.
For purposes of this discussion, the term
U.S. holder means a beneficial owner of shares
of our common stock that is, for U.S. federal income tax
purposes:
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an individual who is a citizen or resident of the United States; |
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a corporation (including any entity treated as a corporation for
U.S. federal income tax purposes) created or organized
under the laws of the United States, any state thereof, or the
District of Columbia; |
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a trust that (i) is subject to the supervision of a court
within the United States and the control of one or more
U.S. persons or (ii) has a valid election in effect
under applicable U.S. Treasury regulations to be treated as
a U.S. person; or |
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an estate that is subject to U.S. federal income tax on its
income regardless of its source. |
Holders of our common stock who are not U.S. holders may be
subject to different tax consequences than those described below
and are urged to consult their tax advisors regarding their tax
treatment under U.S. and
non-U.S. tax laws.
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The following does not purport to consider all aspects of
U.S. federal income taxation of the merger that might be
relevant to U.S. holders in light of their particular
circumstances, or those U.S. holders that may be subject to
special rules (for example, dealers in securities or currencies,
brokers, banks, financial institutions, insurance companies,
mutual funds, tax-exempt organizations, stockholders subject to
the alternative minimum tax, partnerships (or other flow-through
entities and their partners or members), persons whose
functional currency is not the U.S. dollar, stockholders
who hold our stock as part of a hedge, straddle, constructive
sale or conversion transaction or other integrated investment,
stockholders that acquired our common stock pursuant to the
exercise of an employee stock option or otherwise as
compensation, or U.S. holders who exercise statutory
appraisal rights), nor does it address the U.S. federal
income tax consequences to U.S. holders that do not hold
our common stock as capital assets within the
meaning of Section 1221 of the Code (generally, property
held for investment). In addition, the discussion does not
address any aspect of foreign, state, local, estate, gift or
other tax law that may be applicable to a U.S. holder.
The tax consequences to stockholders that hold our common stock
through a partnership or other pass-through entity, generally,
will depend on the status of the stockholder and the activities
of the partnership. Partners in a partnership or other
pass-through entity holding our common stock should consult
their tax advisors.
This summary of certain material U.S. federal income tax
consequences is for general information only and is not tax
advice. Holders are urged to consult their tax advisors with
respect to the application of U.S. federal income tax laws
to their particular situations as well as any tax consequences
arising under the U.S. federal estate or gift tax rules, or
under the laws of any state, local, foreign or other taxing
jurisdiction or under any applicable tax treaty.
Exchange of Shares of Common Stock for Cash Pursuant to the
Merger Agreement. The receipt of cash in exchange for shares
of our common stock pursuant to the merger will be a taxable
transaction for U.S. federal income tax purposes. In
general, a U.S. holder whose shares of common stock are
converted into the right to receive cash in the merger will
recognize capital gain or loss for U.S. federal income tax
purposes in an amount equal to the difference, if any, between
the amount of cash received with respect to such shares and the
stockholders adjusted tax basis in such shares. Gain or
loss will be determined separately for each block of shares
(i.e., shares acquired at the same cost in a single transaction)
surrendered for cash pursuant to the merger. Such gain or loss
will be long-term capital gain or loss provided that a
stockholders holding period for such shares is more than
one year at the time of the consummation of the merger.
Long-term capital gains of individuals are generally eligible
for reduced rates of taxation. The deductibility of capital
losses is subject to certain limitations.
Backup Withholding and Information Reporting. A
stockholder may be subject to backup withholding at the
applicable rate (currently 28 percent) on the cash payments
to which such stockholder is entitled pursuant to the merger,
unless the stockholder properly establishes an exemption or
provides a taxpayer identification number and otherwise complies
with the backup withholding rules. Each stockholder should
complete and sign the substitute Internal Revenue Service
(IRS)
Form W-9 included
as part of the letter of transmittal and return it to the paying
agent, in order to provide the information and certification
necessary to avoid backup withholding, unless an applicable
exemption applies and is established in a manner satisfactory to
the paying agent. Backup withholding is not an additional tax.
Any amounts withheld under the backup withholding rules
generally will be allowable as a refund or a credit against a
stockholders U.S. federal income tax liability
provided the required information is timely furnished to the IRS.
Regulatory Approvals
Under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the HSR Act), and the rules
promulgated thereunder by Federal Trade Commission (the
FTC), the merger may not be completed until
notification and report forms have been filed with the FTC and
the Antitrust Division of the Department of Justice (the
DOJ), and the applicable waiting period has expired
or been terminated. Lear and Mr. Icahn filed notification
and report forms under the HSR Act with the FTC and the
Antitrust Division of the DOJ, and the waiting period commenced
on February 16, 2007. At any time before or after
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consummation of the merger, the Antitrust Division of the DOJ or
the FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including
seeking to enjoin the consummation of the merger or seeking
divestiture of substantial assets of Lear or Parent. At any time
before or after the consummation of the merger, any state could
take such action under antitrust laws as it deems necessary or
desirable in the public interest. Such action could include
seeking to enjoin the consummation of the merger or seeking
divestiture of substantial assets of Lear or Parent. Private
parties may also seek to take legal action under antitrust laws.
In addition, the merger is subject to various foreign antitrust
laws. To the extent required, the parties have made or expect to
make merger filings in certain foreign jurisdictions, and to
observe the applicable waiting periods prior to completing the
merger.
While there can be no assurance that the merger will not be
challenged by a governmental authority or private party on
antitrust grounds, Lear, based on a review of information
provided by Parent relating to the businesses in which it and
its affiliates are engaged, believes that the merger can be
effected in compliance with federal, state and foreign antitrust
laws. The term antitrust laws means the Sherman
Antitrust Act, as amended, the Clayton Antitrust Act of 1914, as
amended, the HSR Act, the Federal Trade Commission Act of 1914,
as amended, and all other Federal, state and foreign statutes,
rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade.
Voting Agreement
In connection with the execution of the merger agreement, we
entered into a voting agreement with Icahn Partners LP, Icahn
Partners Master Fund LP, Koala Holding Limited Partnership
and High River Limited Partnership, which are affiliates of AREP
and Mr. Icahn. Pursuant to the voting agreement, such
holders agreed, among other things, to vote all their shares of
Lear common stock in favor of:
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the adoption of the merger agreement and the approval of the
merger; and |
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any definitive agreement with respect to a superior proposal (as
defined under The Merger Agreement
Solicitation of Other Offers). |
The agreement to vote shares in favor of the merger agreement or
another definitive agreement are subject to the merger
consideration being no less than $36.00 per share in cash
net to Lears stockholders.
The voting agreement prohibits each of the parties described
above from, at any time prior to the termination of the voting
agreement, transferring, assigning or encumbering their shares
of Lear common stock, except that each of those parties will be
able to:
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transfer or agree to transfer shares to any affiliate, provided
that the transferee agrees in writing to be bound by the voting
agreement; and |
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pledge shares pursuant to margin and/or other pledge
arrangements, provided that the voting rights for any new margin
or pledge arrangement are subject to restriction. |
Each of the parties described above has also waived, to the full
extent of the law, and agreed not to assert any appraisal rights
pursuant to Section 262 of the DGCL or otherwise in
connection with the merger. Those parties also agreed not to
deposit any of their shares into a voting trust, enter into a
voting agreement or grant any proxy or power of attorney with
respect to the shares.
The voting agreement terminates upon the earlier of termination
of the merger agreement and the effective time of the merger. If
the merger agreement is terminated because of Lear entering into
a definitive agreement with respect to a superior proposal, the
voting agreement will survive until such definitive agreement
terminates or the merger contemplated by the superior proposal
becomes effective.
The summary of the material terms of the voting agreement above
and elsewhere in this proxy statement is qualified in its
entirety by reference to the voting agreement, a copy of which
is attached to this proxy statement as Appendix C and which
we incorporate by reference into this document. In connection
with the
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merger, Parent also entered into a voting agreement with Icahn
Partners LP, Icahn Partners Master Fund LP, Koala Holding
Limited Partnership and High River Limited Partnership under the
same terms as those described above.
Delisting and Deregistration of Common Stock
If the merger is completed, our common stock will be delisted
from the NYSE and deregistered under the Exchange Act and we
will no longer file periodic reports with the SEC on account of
our common stock.
Litigation Related to the Merger
Between February 9, 2007 and February 21, 2007,
certain stockholders filed six purported class action lawsuits
against Lear, certain members of our board of directors and AREP
and certain of its affiliates. Three of the lawsuits were filed
in the Delaware Court of Chancery and have since been
consolidated into a single action. Three of the lawsuits were
filed in Michigan Circuit Court. The class action complaints,
which are substantially similar, generally allege that the
merger agreement unfairly limits the process of selling Lear and
that certain members of our board of directors have breached
their fiduciary duties in connection with the merger agreement
and have acted with conflicts of interest in approving the
merger agreement. The lawsuits seek to enjoin the merger, to
invalidate the merger agreement and to enjoin the operation of
certain provisions of the merger agreement, a declaration that
certain members of our board of directors breached their
fiduciary duties in approving the merger agreement and an award
of unspecified damages or rescission in the event that the
proposed merger with Merger Sub is completed. On
February 23, 2007, the plaintiffs in the consolidated
Delaware action filed a consolidated amended complaint, a motion
for expedited proceedings and a motion to preliminarily enjoin
the merger contemplated by the merger agreement. On
March 1, 2007, a Lear employee filed on behalf of himself,
various Lear employee benefit plans and participants in those
plans a two-count putative class action lawsuit in the Eastern
District of Michigan against Lear, certain employees, officers
and/or members of Lears board of directors, Lears
Employee Benefits Committee, AREP and Messrs. Intrieri and
Icahn. The complaint alleges that the merger agreement, as it
relates to the sale of Lear common stock held by the plans, is a
prohibited transaction that violates ERISA and that various
defendants breached their ERISA-imposed fiduciary duties by
approving the merger agreement. Plaintiffs state that they are
seeking to enjoin the plans sale of common stock and
restoration of alleged losses to the plans. We believe that each
of the lawsuits is without merit and intend to defend against
them vigorously.
Provisions for Unaffiliated Stockholders
No provision has been made (i) to grant Lears
unaffiliated stockholders access to the corporate files of Lear,
any other party to the proposed merger or any of their
respective affiliates or (ii) to obtain counsel or
appraisal services at the expense of Lear or any other such
party or affiliate.
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THE MERGER AGREEMENT
The summary of the material terms of the merger agreement
below and elsewhere in this proxy statement is qualified in its
entirety by reference to the merger agreement, a copy of which
is attached to this proxy statement as Appendix A and which
we incorporate by reference into this document. This summary
does not purport to be complete and may not contain all of the
information about the merger agreement that is important to you.
We encourage you to carefully read the merger agreement in its
entirety.
The merger agreement has been included to provide you with
information regarding its terms. It is not intended to provide
any other factual information about Lear. Such information can
be found elsewhere in this proxy statement and in the other
public filings we make with the SEC, which are available without
charge at www.sec.gov.
The merger agreement contains representations and warranties
Lear, Parent and Merger Sub made to each other as of specific
dates. The assertions embodied in those representations and
warranties were made solely for purposes of the contract between
Lear, Parent and Merger Sub and may be subject to important
qualifications and limitations agreed by Lear, Parent and Merger
Sub in connection with negotiating its terms. Moreover, certain
representations and warranties may not be accurate or complete
as of any specified date because they are subject to a
contractual standard of materiality different from those
generally applicable to stockholders or were used for the
purpose of allocating risk among Lear, Parent and Merger Sub
rather than establishing matters as facts. For the foregoing
reasons, you should not rely on the representations and
warranties as statements of factual information.
The Merger
The merger agreement provides for the merger of Merger Sub with
and into Lear upon the terms, and subject to the conditions, of
the merger agreement. As the Surviving Corporation, Lear will
continue to exist following the merger. Upon consummation of the
merger, the directors of Merger Sub and the officers of Lear
immediately prior to the effective time of the merger will be
the initial directors and officers, respectively, of the
Surviving Corporation, except as Merger Sub may otherwise
determine.
We, Parent or Merger Sub may terminate the merger agreement
prior to the consummation of the merger in some circumstances,
whether before or after the adoption by our stockholders of the
merger agreement. Additional details on termination of the
merger agreement are described in Termination
of the Merger Agreement beginning on page 68.
Effective Time
The merger will be effective at the time a duly executed and
verified certificate of merger is filed with the Secretary of
State of the State of Delaware and such further actions as may
be required by law to make the merger effective. We expect to
complete the merger as promptly as practicable after our
stockholders adopt the merger agreement and, if necessary, the
expiration of the Marketing Period described below.
Unless otherwise agreed by the parties to the merger agreement,
the parties are required to close the merger no later than the
third business day after the satisfaction or waiver of the
conditions described under Conditions to the
Merger beginning on page 63, except that
notwithstanding the satisfaction or waiver of such conditions,
the parties will not be obligated to close the merger until the
earlier to occur of a date during the Marketing Period specified
by Parent on at least three business days notice to us and
the final day of the Marketing Period.
For purposes of the merger agreement, Marketing
Period means the first period of fifteen
(15) consecutive business days after the later to occur of
the date Parent and its financing sources have received certain
financial and other information required to be provided by Lear
under the merger agreement in connection with Parents
financing of the merger, and the first business day following
the date on which the conditions to each partys
obligations to effect the merger have been satisfied (other than
conditions that can only be satisfied at closing). If the
requisite stockholder vote is the last of all the conditions to
be satisfied, Parent must use its reasonable best efforts to
consummate the merger within five days following the vote.
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The purpose of the Marketing Period is to provide Parent a
reasonable and appropriate period of time during which it can
market and place the permanent debt financing contemplated by
the debt financing commitments for the purposes of financing the
merger. To the extent Parent determines it does not need the
benefit of the Marketing Period to market and place the debt
financing, it may, in its sole discretion, determine to waive
the Marketing Period and close the merger prior to the
expiration of the Marketing Period if all closing conditions are
otherwise satisfied or waived.
Merger Consideration
Each share of our common stock issued and outstanding
immediately prior to the effective time of the merger will be
converted into the right to receive $36.00 in cash, without
interest and less certain applicable withholding taxes, other
than shares owned by Parent, Merger Sub or any subsidiary of
Parent or shares held by holders who have properly demanded and
perfected their appraisal rights.
After the merger is effective, each holder of any shares of our
common stock (other than the excepted shares described above)
will no longer have any rights with respect to the shares,
except for the right to receive the merger consideration. See
Appraisal Rights beginning on page 76.
Treatment of Options and Other Awards
Restricted Stock Units. At the effective time of the
merger, except as otherwise agreed by a holder and Parent, all
outstanding restricted stock units (whether vested or unvested)
will be cancelled and converted into the right to receive a cash
payment equal to the number of restricted stock units multiplied
by $36.00, without interest and less any applicable withholding
taxes.
Stock Appreciation Rights. Immediately prior to the
effective time of the merger, except as otherwise agreed by a
holder and Parent, all outstanding stock appreciation rights
(whether vested or unvested) will be cancelled and converted
into the right to receive a cash payment equal to the number of
outstanding shares of our common stock underlying the stock
appreciation rights multiplied by the amount (if any) by which
$36.00 exceeds the stock appreciation right exercise price,
without interest and less any applicable withholding taxes.
Deferred Unit Accounts. At the effective time of the
merger, except as otherwise agreed by a holder and Parent, all
deferred amounts held in unit accounts denominated in shares of
our common stock under our Outside Directors Compensation Plan
will be converted into the right to receive a cash payment of
$36.00 multiplied by the number of shares deemed held in such
deferred unit account, payable or distributable in accordance
with the terms of the agreement, plan or arrangement relating to
such deferred unit account, less any required withholding taxes.
Stock Options. At the effective time of the merger,
except as otherwise agreed by a holder and Parent, all
outstanding options to acquire our common stock under equity
incentive plans (whether vested or unvested) will be cancelled
and converted into the right to receive a cash payment equal to
the number of shares of our common stock underlying the options
multiplied by the amount (if any) by which $36.00 exceeds the
exercise price, without interest and less any applicable
withholding taxes.
Performance Shares. At the effective time of the merger,
except as otherwise agreed by a holder and Parent, all
outstanding performance shares (whether vested or unvested) will
be cancelled and converted into the right to receive a cash
payment equal to the target number of units or shares of common
stock previously subject to performance shares multiplied by
$36.00, without interest and less any applicable withholding
taxes, with respect to that percentage of such performance
shares that vest upon a change in control as provided in the
equity incentive plan.
Payment for the Shares of Common Stock
Parent will designate a paying agent reasonably acceptable to us
to make payment of the merger consideration as described above.
At or prior to the effective time of the merger, Parent will
deposit or cause to be deposited in trust with the paying agent
the funds necessary to pay the aggregate merger consideration.
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As soon as reasonably practicable but no later than three
business days after the effective time of the merger, the
Surviving Corporation will cause the paying agent to send you a
letter of transmittal and instructions advising you how to
surrender your shares of common stock in exchange for the merger
consideration. The paying agent will pay you your merger
consideration after you have provided to the paying agent your
signed letter of transmittal and any other items specified by
the letter of transmittal. Interest will not be paid or accrue
in respect of the merger consideration. The Surviving
Corporation will reduce the amount of any merger consideration
paid to you by any applicable withholding taxes. Shares of our
common stock will be immediately cancelled upon receipt of stock
certificates representing the shares.
If any cash deposited with the paying agent is not claimed
within one year following the effective time of the merger, such
cash will be returned to the Surviving Corporation upon demand
subject to any applicable unclaimed property laws. Any unclaimed
amounts remaining immediately prior to when such amounts would
escheat to or become property of any government entity will be
returned to the Surviving Corporation free and clear of any
prior claims or interest. Any former stockholder of Lear that
has not claimed its merger consideration may look only to the
Surviving Corporation for payment.
No dividends or other distributions with respect to capital
stock of the Surviving Corporation with a record date after the
effective time of the merger shall be paid to the holder of any
unsurrendered certificate. At the effective time of the merger,
we will close our stock ledger. After that time, there will be
no further transfer of shares of our common stock.
Representations and Warranties
The merger agreement contains representations and warranties by
each of the parties to the merger agreement. These
representations and warranties have been made solely for the
benefit of the other parties to the merger agreement and:
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may be intended not as statements of fact, but rather as a way
of allocating the risk to one of the parties if those statements
prove to be inaccurate; |
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have been qualified by disclosures that were made to the other
party in connection with the negotiation of the merger
agreement, which disclosures are not reflected in the merger
agreement; |
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may apply standards of materiality in a way that is different
from what may be viewed as material to you or other
investors; and |
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were made only as of the date of the merger agreement or such
other date or dates as may be specified in the merger agreement
and are subject to more recent developments. |
Accordingly, these representations and warranties may not
describe the actual state of affairs as of the date they were
made or at any other time.
In the merger agreement, Lear, Parent and Merger Sub each made
representations and warranties relating to, among other things:
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corporate organization and existence; |
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corporate power and authority to enter into and consummate the
transactions contemplated by, and enforceability of, the merger
agreement; |
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the absence of conflicts with or defaults under organizational
documents, other contracts and applicable laws; |
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information supplied for inclusion in this proxy statement; |
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required regulatory filings and consents and approvals of
governmental entities; |
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litigation; |
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brokers; and |
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documents filed with the SEC, including financial statements. |
Lear also made representations and warranties relating to:
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capital structure; |
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subsidiaries and joint ventures; |
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absence of certain changes or events since December 31,
2005; |
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compensation, employee benefit and labor matters; |
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tax matters; |
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compliance with applicable laws; |
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environmental matters; |
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intellectual property matters; |
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material leases and title to properties; |
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material contracts; |
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insurance; |
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the receipt by the special committee and the board of directors
of a fairness opinion from JPMorgan; |
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the required vote of Lear stockholders; |
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state takeover statutes; |
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rights agreements; |
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customers and suppliers; |
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affiliate transactions; |
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product warranties and product liability claims; and |
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compliance with the Foreign Corrupt Practices Act. |
Parent and Merger Sub also each made representations and
warranties relating to:
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the debt financing commitments; |
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the delivery of the limited guaranty; |
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ownership and prior activities of Merger Sub; and |
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the required vote of Parents stockholders. |
Many of Lears representations and warranties are qualified
by a Material Adverse Effect standard. For purposes of the
merger agreement, Material Adverse Effect is defined
to mean a material adverse event, change, effect, development,
condition or occurrence on or with respect to the business,
results of operations, financial condition or prospects of Lear
and our subsidiaries, taken as a whole, other than to the extent
resulting from:
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changes in general economic conditions, including those
affecting the financial, banking, currency, interest rates or
capital markets; or |
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conditions generally affecting any of the industries or markets
in which Lear and our significant subsidiaries operate; |
except, in each case, where such matters will be taken into
account in determining a Material Adverse Effect to the extent
of any disproportionate effect on Lear and our significant
subsidiaries, taken as a whole, relative
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to other companies operating in the same industries or segments
and geographic markets as Lear and our significant subsidiaries.
Conduct of Business Prior to Closing
We have agreed in the merger agreement that, until the
consummation of the merger, except as permitted by the merger
agreement, required by applicable law or the regulatory
requirements of the NYSE, or consented to in writing by Parent,
we will:
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conduct, and cause our subsidiaries to conduct, our operations
in the ordinary and usual course consistent with past
practice; and |
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use, and cause each of our subsidiaries to use, reasonable best
efforts to preserve intact in all material respects our business
organization, keep available the services of current officers
and key employees and preserve the goodwill of and maintain
satisfactory relationships with our customers and those other
persons with whom we or our subsidiaries have material business
relationships. |
We have also agreed that, until the consummation of the merger,
except as permitted by the merger agreement, required by
applicable law or the regulatory requirements of the NYSE, or
consented to in writing by Parent, we and our subsidiaries will
not:
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amend or otherwise change our or our significant
subsidiaries organizational or governing documents; |
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issue, sell, grant options, pledge, dispose of or encumber, or
authorize or propose the issuance, sale, grant of options or
rights to purchase or pledge any of our securities, our
subsidiaries securities or rights to acquire such
securities, other than: with Lear or our wholly-owned
subsidiaries; pursuant to the exercise of options or SARs or
settlement of RSUs, performance shares or deferred unit
accounts, in each case, that are outstanding as of the date of
the merger agreement and in accordance with the existing terms
of such awards; the issuance of certain permitted equity
incentive compensation awards; and as required under our credit
facility and indentures; |
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acquire or redeem, directly or indirectly, or amend any Lear
securities other than in connection with the exercise of
outstanding equity awards, or any securities of our significant
subsidiaries other than in the ordinary course of business; |
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split, combine, redenominate or reclassify our or our
subsidiaries capital stock or declare, set aside, make or
pay any dividend or distribution (whether in cash, stock,
property or otherwise) on any shares of our capital stock,
options, warrants, convertible securities or other rights of any
kind to acquire or receive our capital stock, except for any
dividend or distribution by any subsidiary to us, to any
wholly-owned subsidiary or to any other person in proportion to
the ownership interest in such subsidiary; |
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engage in or offer to make any acquisition, by means of a
merger, consolidation or otherwise, or any sale, lease,
encumbrance or other disposition of assets or securities outside
the ordinary course of business and involving a transaction
value in excess of $10 million (or $30 million in the
aggregate); |
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except in the ordinary course of business and except as
permitted otherwise, enter into, make any proposal for, renew,
extend or amend or modify in any material respect, terminate,
cancel, waive, release or assign any right or claim under,
certain categorized contracts, or amend or terminate certain
categorized contracts or grant any release or relinquishment of
any material rights under certain categorized contracts; |
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except for borrowings under our existing credit, securitization
and factoring facilities in the ordinary course of business,
incur, create, assume or otherwise become liable for, or prepay
any indebtedness for borrowed money (including the issuance of
any debt security) in excess of $50 million; |
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assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for
the obligations of, or make any loans, advances or capital
contributions to, any other person (other than us or any one of
our wholly-owned subsidiaries), in any case outside the ordinary
course of business in an aggregate amount in excess of
$10 million; |
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other than in the ordinary course of business, enter into or
materially increase or decrease the outstanding balances of any
intercompany loan or intercompany debt arrangements, except in
connection with our securitization facilities; |
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mortgage, pledge or otherwise similarly encumber any of our
material assets (tangible or intangible), or create, assume or
suffer to exist any liens except for specified permitted liens; |
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incur capital expenditures that would result in us materially
exceeding or making it reasonably likely we will materially
exceed the 2007 capital expenditure forecast we publicly
disclosed prior to entering the merger agreement; |
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change in any material respect any of the accounting, reserving,
underwriting, claims or actuarial methods, principles or
practices that we use, or any of the working capital policies
applicable to us and our subsidiaries, except as required by
law, GAAP or applicable statutory accounting principles; |
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other than in the ordinary course of business, after
consultation with Parent, make or change any material tax
election, settle or compromise any material tax liability, agree
to an extension of the statute of limitations with respect to
the assessment or determination of material taxes, file any
amended tax return with respect to any material tax, enter into
any closing agreement with respect to any material tax or
surrender any right to claim a material tax refund or enter into
any transaction that could give rise to a disclosure obligation
as a reportable transaction under applicable tax law; |
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agree to grant or grant any stock-related, cash-based,
performance or similar awards or bonuses or any other award that
may be settled in Lear shares, preferred shares, or other Lear
securities or in securities of our subsidiaries; |
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enter into, forgive, renew, or amend in any material respect any
loans to officers or directors or any of their respective
affiliates or associates; |
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enter into any new, or amend, terminate or renew any existing
material employee benefit plan, except as required by law or any
collective bargaining agreement; |
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grant any material increases in the compensation, perquisites or
benefits or pay any bonuses to any executive officers or
directors, except for our pension savings plan previously
communicated to employees and as required by law or any
collective bargaining agreement; |
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accelerate the vesting or payment of any compensation payable or
the benefits provided or to become payable or provided to any of
our current or former directors, officers, employees,
independent contractors or service providers (other than as
required by the terms of our employee benefit plans applicable
to such individuals as in effect on the date of the merger
agreement), or otherwise pay any amounts not due such
individual, except as required by law or any collective
bargaining agreement; |
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take any action with respect to salary, compensation, benefits
or other terms and conditions of employment that would
reasonably be expected to result in the holder of a change in
control or similar agreement having good reason to
terminate employment and collect severance payments and benefits
pursuant to such agreement, except as required by law or any
collective bargaining agreement; |
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make any deposits or contributions of cash or other property to
or take any other action to fund or in any other way secure the
payment of compensation or benefits under employee benefit plans
or agreement subject to such plans, other than in the ordinary
course consistent with past practice; |
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except as required by law or in the ordinary course of business,
enter into, materially amend or extend any collective bargaining
or other labor agreement; |
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renew or enter into any non-compete, exclusivity,
non-solicitation or similar agreement that would restrict or
limit, in any material respect, the operations of Lear and our
subsidiaries or the Surviving Corporation after the effective
time of the merger; |
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compromise, settle or agree to settle any suit, action, claim,
proceeding or investigation (including any suit, action, claim,
proceeding or investigation relating to the merger agreement) or
consent to the |
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same, other than compromises, settlements or agreements in the
ordinary course of business following reasonable consultation
with and taking into account the views of Parent that involve
only the payment of monetary damages not in excess of
$5 million individually or $15 million in the
aggregate or consistent with the reserves of $18.4 million
reflected in our balance sheet at December 31, 2006, in any
case without the imposition of material equitable relief on, or
the admission of wrongdoing by, us or any of our subsidiaries; |
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enter into any agreement, understanding or arrangement with
respect to the voting or registration of our securities or the
securities of any of our subsidiaries; |
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fail to use reasonable best efforts to keep in force our current
material insurance policies or replacement or revised provisions
providing reasonable insurance coverage with respect to our
assets, operations and activities and those of our subsidiaries; |
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merge or consolidate Lear or any of our subsidiaries with any
person, other than with Lear or any of our subsidiaries, and
other than mergers or consolidations of subsidiaries in
acquisitions that are otherwise permitted by the merger
agreement; |
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adopt a plan of complete or partial liquidation or resolutions
providing for a complete or partial liquidation, dissolution,
restructuring, recapitalization or other reorganization of us or
any of our significant subsidiaries; |
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fail to comply with our related party transaction policy; |
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amend, modify or waive in any material respect any of the
provisions of the transaction documents, or enter into any new
or additional agreements related thereto, in connection with the
sale of our North American interiors business (without the
consent of Parent, which shall not be unreasonably withheld),
except for actions that do not materially and adversely affect
the economics of such transactions; |
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other than in the ordinary course of business (and not for
speculative purposes), enter into any contract that involves any
exchange traded,
over-the-counter or
other swap, cap, floor, collar, futures contract, forward
contract, option or any other derivative financial instrument or
contract; or |
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authorize, commit or agree to take any of the foregoing actions. |
Agreement to Take Further Action and to Use Reasonable Best
Efforts
Subject to the terms and conditions set forth in the merger
agreement, each of the parties to the merger agreement has
agreed to use its reasonable best efforts to take, or cause to
be taken, all appropriate action, to file or cause to be filed
all documents and to do or cause to be done all things
necessary, proper or advisable under applicable laws to
expeditiously consummate the merger or any of the transactions
contemplated by the merger agreement, including preparing and
filing as promptly as practicable all documentation to effect
all necessary filings, consents, licenses, approvals,
authorizations, permits or orders from governmental entities or
other persons.
The parties to the merger agreement have also agreed to
cooperate with one another to promptly determine whether any
other filings are required to be made or whether any other
consents should be obtained under applicable law. In no event
will Parent, Merger Sub or any of their respective affiliates be
required to agree (1) to limit in any manner whatsoever or
not to exercise any rights of ownership of any securities
(including the shares of Lear common stock), or to divest,
dispose of or hold separate any securities or all or a portion
of their respective businesses, assets or properties or a
portion of the business, assets or properties of us or our
subsidiaries, or (2) to limit in any material respect the
ability of such entities to conduct their respective businesses
or own such assets or properties or to conduct the businesses or
own the properties or assets of Lear and its subsidiaries or to
control their respective businesses or operations of our or our
subsidiaries businesses or operations. In addition, the
obligations described in the preceding paragraph will not apply
to either Parent or Merger Sub if compliance with such
obligations would result in, or would reasonably be expected to,
result in a Material Adverse Effect.
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We have also agreed, upon the request of Parent or Merger Sub,
to take all reasonable steps to exclude the applicability of, or
to assist, at Parents cost and expense, in any challenge
to the validity or applicability to the merger or any other
transaction contemplated by the merger agreement of, any state
takeover laws.
Financing
We have agreed to, and have agreed to cause our subsidiaries to
(and to use our reasonable best efforts to cause our and their
respective representatives to), at Parents sole expense,
provide all cooperation as may be reasonably requested by Parent
that is necessary, proper or advisable in connection with the
arrangement of the debt financing, including (each of which
obligations shall be satisfied by us using our reasonable best
efforts to comply):
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participation in a reasonable number of meetings, presentations,
road shows, due diligence sessions and sessions with rating
agencies; |
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assisting with the preparation of materials for rating agency
presentations, offering documents, private placement memoranda,
bank information memoranda, prospectuses and similar documents
required in connection with the debt financing, except that we
do not need to issue any private placement memoranda or
prospectuses or other similar documents in relation to high
yield debt securities and any such memoranda or prospectuses
must contain disclosure and financial statements with respect to
Lear or the Surviving Corporation reflecting the Surviving
Corporation and/or its subsidiaries as the obligor; |
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furnishing Parent and its financing sources with financial and
other pertinent information regarding Lear as may be reasonably
requested by Parent as promptly as reasonably practical; |
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using reasonable best efforts to obtain, and to cooperate and
assist with obtaining, accountants comfort letters, legal
opinions, appraisals, surveys, engineering reports, title
insurance and other documentation and items relating to the debt
financing as reasonably requested by Parent; |
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using commercially reasonable efforts to execute and deliver any
pledge and security documents, other definitive financing
documents or other certificates as may be reasonably requested
by Parent and otherwise reasonably facilitating the pledging of
collateral (including cooperation in connection with the payoff
of existing indebtedness and the release of related liens, if
any), except that no obligation of Lear or its subsidiaries
under such executed documents will be effective until the
effective time of the merger; |
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taking all actions necessary to permit potential lenders and
equity sources to evaluate our current assets, cash management
and accounting systems, policies and procedures relating thereto
for the purpose of establishing collateral agreements and to
establish bank accounts and other accounts; and |
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using reasonable best efforts to obtain waivers, consents,
estoppels and approvals from other parties to material leases,
encumbrances or contracts to which any of our subsidiaries is a
party and to arrange discussions among Parent, Merger Sub and
their financing sources with other parties to material leases,
encumbrances and contracts. |
The merger agreement limits our obligation to incur any fees or
liabilities with respect to the debt financing prior to the
effective time of the merger. Parent has also agreed to
reimburse us for all reasonable and documented
out-of-pocket costs if
the merger agreement is terminated, except under certain
circumstances, and to indemnify and hold harmless Lear, our
subsidiaries, directors, officers, employees, representatives
and advisors from and against all losses, damages, claims, costs
or expenses suffered or incurred in connection with any action
taken by them at the request of Parent or Merger Sub or in
connection with the arrangement of the debt financing.
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Parent has agreed to use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done,
all things necessary or advisable to arrange and obtain the debt
financing on the terms and conditions described in the financing
commitments.
Conditions to the Merger
Conditions to Each Partys Obligations. Each
partys obligation to complete the merger is subject to the
satisfaction or waiver, at or prior to the effective time of the
merger, of the following conditions:
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the merger agreement must have been adopted by the affirmative
vote of the holders of a majority of the outstanding shares of
our common stock; |
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there is no order, injunction or decree issued by any court or
agency of competent jurisdiction preventing the consummation of
the merger or any of the transactions contemplated by the merger
agreement; and |
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any waiting period (and any extension thereof) applicable to the
merger or any of the transactions contemplated by the merger
agreement under the HSR Act will have expired or been terminated
and, except as could not reasonably be expected to have a
Material Adverse Effect, approvals and authorizations from other
applicable antitrust authorities will have been granted. |
Conditions to Parents and Merger Subs
Obligations. The obligation of Parent and Merger Sub to
complete the merger is subject to the satisfaction or waiver, at
or prior to the effective time of the merger, of the following
additional conditions:
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our representations and warranties with respect to our
capitalization, our Title IV employee pension benefits
plans and our covenant not to materially reduce the value of the
collateral under our primary credit facility must be true and
correct in all material respects; |
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all other representations and warranties made by us in the
merger agreement must be true and correct as of the date of the
merger agreement and as of the closing date as if made at and as
of such time (without giving effect to any qualification as to
materiality or Material Adverse Effect set forth in
such representations and warranties), except where the failure
to be so true and correct could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect; provided that any representations made by us as of a
specific date need only be so true and correct as of the date
made; |
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we must have performed in all material respects all obligations
required to be performed under the merger agreement at or prior
to the effective time of the merger; |
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since the date of the merger agreement, there must not have been
any event, change, effect, development, condition or occurrence
that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; |
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there must not have been any specified force majeure event that
has had or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect (without taking into
account the provisos included in the definition of Material
Adverse Effect); |
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we must deliver to Parent at closing a certificate signed on
behalf of Lear by its Chief Executive Officer or Chief Financial
Officer with respect to the satisfaction of the foregoing
conditions relating to representations, warranties and
obligations; |
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we must perform certain obligations and satisfy certain
requirements to cooperate with Parents debt financing
arrangements; and |
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we must provide to Parent a certification that our shares of
common stock are not United States real property interests. |
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Conditions to Lears Obligations. Our obligation to
complete the merger is subject to the satisfaction or waiver, at
or prior to the effective time of the merger, of the following
further conditions:
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the representations and warranties made by Parent and Merger Sub
in the merger agreement must be true and correct (without giving
effect to any materiality qualifications set forth
in such representations and warranties) as of the date of the
merger agreement and as of the closing date as if made as of
such time, except where the failure of such representations and
warranties to be so true and correct could not reasonably be
expected to cause any event, change, effect, development,
condition or occurrence that would prevent or materially delay
consummation of the merger, receipt of the debt financing by
Parent or the ability of Parent and Merger Sub to perform their
obligations under the merger agreement or AREP under the
guaranty; provided that any representations made by Parent and
Merger Sub as of a specific date need only be true and correct
as of the date made; |
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Parent and Merger Sub must have performed in all material
respects all obligations required to be performed by them under
the merger agreement at or prior to the effective time of the
merger; |
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Parents delivery to us at closing of a certificate with
respect to the satisfaction of the foregoing conditions relating
to representations, warranties and obligations; and |
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Parents delivery to us at closing of a solvency opinion
from a firm reasonably acceptable to us and Parent, addressed to
our board of directors, in customary form and substance. |
Our board of directors may waive compliance with any of these
conditions, although our board of directors is not aware of any
condition to the merger that cannot be satisfied. Under Delaware
law, after the merger agreement has been adopted by our
stockholders, the merger consideration cannot be changed and the
merger agreement cannot be altered in a manner adverse to our
stockholders without re-submitting the revisions to our
stockholders for their approval.
Solicitation of Other Offers
Until 11:59 p.m., Eastern Standard Time, on March 26,
2007 (which we sometimes refer to as the end of the go
shop period), we have the right (acting under direction of
our board of directors or, if then in existence, the special
committee) to directly or indirectly initiate, solicit and
encourage acquisition proposals (including by way of providing
access to non-public information pursuant to one or more
acceptable confidentiality agreements), and participate in
discussions or negotiations with respect to acquisition
proposals or otherwise cooperate with or assist or participate
in, or facilitate any such discussions or negotiations. We must
promptly provide or make available to Parent any non-public
information concerning us or our subsidiaries that is provided
to any person given such access which was not previously
provided or made available to Parent.
After 11:59 p.m., Eastern Standard Time, on March 26,
2007, until the effective time of the merger or termination of
the merger agreement, we have agreed not to, and to cause our
subsidiaries and take reasonable best efforts to cause our
representatives not to, directly or indirectly:
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initiate, solicit or knowingly encourage the submission of any
inquiries, proposals or offers or any other efforts or attempts
that constitute or may reasonably be expected to lead to, any
acquisition proposal or engage in any discussions or
negotiations with respect thereto or otherwise cooperate with or
assist or participate in, or knowingly facilitate any such
inquiries, proposals, offers, discussions or negotiations; |
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approve or recommend, or publicly propose to approve or
recommend, any acquisition proposal; |
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enter into any merger agreement, letter of intent, agreement in
principle, share purchase agreement, asset purchase agreement or
share exchange agreement, option agreement or other similar
agreement relating to an acquisition proposal; |
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enter into any agreement requiring us to abandon, terminate or
fail to consummate the transactions contemplated by the merger
agreement or breach our obligations under the merger
agreement; or |
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resolve, propose or agree to do any of the foregoing. |
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Notwithstanding these restrictions:
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we are permitted to continue the activities set forth in the
first bullet point in the preceding paragraph from and after
March 27, 2007 with respect to any party that has made an
acquisition proposal on or prior to March 26, 2007 or with
whom we are having ongoing discussions or negotiations as of
March 26, 2007 regarding a possible acquisition proposal
(we must otherwise immediately cease or cause to be terminated
any other solicitation, encouragement, discussion or negotiation
with any person conducted prior to March 27, 2007 by us,
our subsidiaries or any of our representatives with respect to
any acquisition proposal and use reasonable best efforts to
cause to be returned or destroyed in accordance with the
applicable confidentiality agreement any confidential
information provided to such person on behalf of us or any of
our subsidiaries, except as permitted below); and |
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at any time after the date of the merger agreement and prior to
the approval of the merger agreement by our stockholders, we are
permitted to furnish information with respect to Lear and its
subsidiaries to any person making an acquisition proposal and
participate in discussions or negotiations with the person
making the acquisition proposal regarding the acquisition
proposal (provided that we will not, will not allow our
subsidiaries to, and will use reasonable best efforts to cause
our representatives not to, disclose any non-public information
to such person without first entering into an acceptable
confidentiality agreement with such person and will promptly
provide or make available to Parent any non-public information
concerning Lear or its subsidiaries provided or made available
to such other person which was not previously provided or made
available to Parent), so long as, in the case of a person with
whom we did not have ongoing negotiations at the end of the
go shop period: |
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such acquisition proposal was a written acquisition proposal
that we received from a third party that our board of directors
(acting upon the prior recommendation of a special committee, if
any) believes in good faith to be bona fide; |
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we have not intentionally or materially breached our obligations
under the solicitation provisions of the merger agreement; |
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our board of directors (acting upon the prior recommendation of
a special committee, if any) determines in good faith, after
consultation with its financial advisors and outside counsel,
that such acquisition proposal constitutes or would reasonably
be expected to result in a superior proposal; and |
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after consultation with its outside counsel, our board of
directors (acting upon the prior recommendation of a special
committee, if any) determines in good faith that failure to take
such action would reasonably be expected to be a breach of its
fiduciary duties to our stockholders under applicable law. |
In addition, we may terminate the merger agreement and enter
into a definitive agreement with respect to a superior proposal
under certain circumstances. See
Recommendation Withdrawal/ Termination in
Connection with a Superior Proposal.
Within 24 hours after March 11, 2007, we were required
to notify Parent in writing of the identity of each person who
has made an acquisition proposal, with whom we are having
ongoing discussions or negotiations or to whom we have provided
non-public information. We are also required to provide Parent a
copy of each such acquisition proposal. From and after
March 11, 2007, we must also notify Parent within
24 hours if we, or our representatives:
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receives any acquisition proposal; |
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receives any request for information relating to us other than
requests for information in the ordinary course of business and
unrelated to an acquisition proposal or requests from any party
with whom we had on-going negotiations at the end of the
go shop period; |
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receives any inquiry or request for discussions or negotiations
regarding any acquisition proposal; or |
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enters into an acceptable confidentiality agreement. |
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We must notify Parent within 24 hours of the identity of
any person making any request or proposal referenced above and
provide to Parent a copy of such acquisition proposal, inquiry
or request. From and after March 11, 2007, we must keep
Parent reasonably informed (orally and in writing) on a current
basis (and in any event no later than 24 hours after the
occurrence of any changes or developments of the status of any
acquisition proposal, inquiry or request (including pricing and
other material terms and conditions thereof and of any material
modification thereto), and any material developments (including
through discussions and negotiations), including furnishing
copies of any written inquiries, correspondence and draft
documentation). In any event, we must promptly (within
24 hours) notify Parent orally and in writing if we
determine to begin providing information or to engage in
negotiations concerning an acquisition proposal.
We have agreed that we will not, and will cause our subsidiaries
not to, enter into any confidentiality agreement with any person
subsequent to the date of the merger agreement except an
acceptable confidentiality agreement, defined below,
and neither us nor any of our subsidiaries will be a party to
any agreement that prohibits us from providing or making
available to Parent or Merger Sub any information provided or
made available to any other person pursuant to such an
acceptable confidentiality agreement. Except to facilitate the
making of a superior proposal, we have agreed that we will not,
and will cause each of our subsidiaries not to, terminate,
waive, amend or modify any provision of, or grant permission or
request under, any standstill or confidentiality agreement to
which we or any of our subsidiaries is a party, and we will, and
will cause our subsidiaries to, enforce the provisions of any
such agreement. We may permit a proposal to be made under a
standstill agreement, however, if we determine in good faith,
after consultation with outside counsel, that such actions are
necessary to comply with the fiduciary duties of our board of
directors to our stockholders under applicable law.
Parent and Merger Sub have agreed not to take any action with
the purpose of restricting competing proposals or prohibiting,
whether under any new or existing agreement, any lender from
providing debt financing to any person making or contemplating
making an acquisition proposal.
An acceptable confidentiality agreement means a
confidentiality and standstill agreement that contains
confidentiality and standstill provisions that are in the
aggregate no less favorable to us than those contained in our
confidentiality agreement with AREP, provided that any such
confidentiality agreement need not contain provisions limiting
the ability of the other party to have discussions or share
information with, or enter into agreements, understandings or
arrangements with potential sources of debt or equity financing
or co-bidders, and provided further that any such
confidentiality agreement must permit us to disclose to Parent
and Merger Sub the information contemplated by the solicitation
provision of the merger agreement.
An acquisition proposal means any inquiry, proposal
or offer from any person or group of persons other than Parent,
Merger Sub or their respective affiliates relating to any direct
or indirect acquisition or purchase of a business that
constitutes 30% or more of our consolidated net revenues, or 30%
or more of our voting capital stock or options or warrants to
acquire our voting capital stock, any tender offer or exchange
offer that if consummated would result in any person or group of
persons beneficially owning 30% or more of our voting capital
stock or options or warrants to acquire our voting capital
stock, or any merger, reorganization, consolidation, share
exchange, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Lear or any of our
subsidiaries whose business constitutes 30% or more of our
consolidated net revenues, in each case excluding the
disposition of our North American interior business.
A superior proposal means any bona fide acquisition
proposal (except that references to 30% will be deemed to be
reference to more than 50%) that our board of
directors (acting upon the prior recommendation of a special
committee, if any) has determined in its good faith judgment,
after consultation with its financial advisor and outside
counsel and after taking into account all legal, financial,
regulatory and other aspects of the proposal, including the
financing terms or financeability of such proposal, is on terms
more favorable to our stockholders from a financial point of
view than the transactions contemplated by the merger agreement
and is reasonably capable of being consummated.
66
Recommendation Withdrawal/ Termination in Connection with a
Superior Proposal
The merger agreement requires us to call, give notice of,
convene and hold a meeting of our stockholders to adopt the
merger agreement. In this regard, our board of directors
resolved to recommend that our stockholders adopt the merger
agreement. However, if our board of directors (acting upon the
prior recommendation of a special committee, if any) determines
in good faith, after consultation with outside counsel, that the
failure to take such action would reasonably be expected to be a
breach of its fiduciary duties to our stockholders under
applicable law, it may, at any time prior to the adoption of the
merger agreement by our stockholders:
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withdraw, modify or qualify, or propose publicly to withdraw,
modify or qualify, in a manner adverse to Parent or Merger Sub,
its recommendation that our stockholders adopt the merger
agreement; or |
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approve, recommend or endorse, or propose publicly to approve,
recommend or endorse, any acquisition proposal; or |
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make other statements that are reasonably calculated or expected
to have the same effects described in the first two bullets
above; and/or |
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terminate the merger agreement and enter into a definitive
agreement with respect to an acquisition proposal that our board
of directors (acting upon the prior recommendation of a special
committee, if any) concludes in good faith, after consultation
with outside counsel and its financial advisors, is a superior
proposal, after considering all of the adjustments to the terms
of the merger agreement which may be offered by Parent. |
To the extent the board proposes to take the foregoing actions
with regard to its recommendation, it may only do so if:
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we have not intentionally or materially breached our obligations
under the no solicitation provision of the merger agreement; |
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we have given written notice to Parent at least ten calendar
days in advance of our intention to take such action with
respect to such superior proposal, which notice specifies the
material terms and conditions of any such superior proposal, and
we contemporaneously provided a copy of the relevant proposed
transaction agreements with the party making such superior
proposal and other material documents; |
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we, and we cause our financial and legal advisors to, negotiate
in good faith during such ten-day period with Parent (to the
extent Parent desires to negotiate) to make such adjustments in
the terms and conditions of the merger agreement so that such
acquisition proposal ceases to constitute a superior
proposal; and |
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in the event of a material revision to a superior proposal, we
deliver a new written notice according to the provisions of the
second bullet point above to Parent, except that the notice
period shall be ten days for the first material revision to a
superior proposal and three days for each subsequent material
revision to a superior proposal, and we are only obligated to
negotiate with Parent on one occasion if the initial superior
proposal is $37 per share or greater to our stockholders. |
We agree that any violation of the restrictions set forth in
this solicitation provision of the merger agreement by any of
our representatives will be deemed to be a breach of the
solicitation provision by us.
In addition, we are not entitled to enter into any agreement
with respect to a superior proposal unless the merger agreement
has been or is concurrently terminated in accordance with its
terms and we have concurrently paid to Parent the applicable
termination fee as described in further detail in
Termination Fees and Expenses beginning
on page 70.
Our board of directors is not prohibited by the merger agreement
from (i) taking and disclosing to our stockholders a
position contemplated by
Rule 14e-2(a) and
Rule 14d-9 under
the Exchange Act (other than any prohibited disclosure of
confidential information to third parties) but, if such
statement constitutes a
67
change of board recommendation (as defined in the merger
agreement), then the terms of the merger agreement applicable to
a change in board recommendation will apply; or
(ii) disclosing that the board of directors (acting upon
the prior recommendation of a special committee, if any) has
received an acquisition proposal and the terms of such proposal,
if the board of directors (acting through a special committee,
if any) determines, after consultation with its outside legal
counsel, that it is required to make such disclosure in
connection with its fiduciary duties under applicable law or to
comply with obligations under the federal securities laws or the
rules of the NYSE.
We agreed in the merger agreement not to take any action to
exempt any person (other than Parent, Merger Sub and their
affiliates) from the restrictions on business
combinations contained in Section 203 of the DGCL (or
any similar provision of any other law) or otherwise to cause
these restrictions not to apply, unless (i) the merger
agreement is simultaneously terminated by the parties
mutual consent or by us in connection with an alternative
acquisition agreement or (ii) the person receiving the
exemption agrees that the exemption is limited to permitting it
to form a group for purposes of making an acquisition proposal
without becoming an interested person for purposes
of Section 203 of the DGCL as a result of forming such
group, and further agrees that the group and its members
continue to remain subject to Section 203 of the DGCL for
all other purposes.
The merger agreement requires our board of directors, after
consultation with outside counsel and consistent with the
exercise of its fiduciary duties, to take such actions
consistent with its obligations under the merger agreement as it
deems reasonably required to assure the integrity of the process
contemplated by the solicitation provisions of the merger
agreement.
Termination of the Merger Agreement
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the consummation of the merger,
whether before or after stockholder approval has been obtained:
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by mutual written consent of Lear and Parent; |
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by either Lear or Parent if: |
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any court of competent jurisdiction or other governmental entity
issues a final and non-appealable order, decree, ruling, or
action restraining, enjoining or otherwise prohibiting any of
the transactions contemplated by the merger agreement, or any
governmental entity finally and non-appealably declines to grant
any of the approvals, the receipt of which is necessary to
satisfy certain regulatory approval conditions to closing; but
in each case, only to the extent the party seeking to terminate
will have used its reasonable best efforts to contest, appeal
and remove such order, decree, ruling or action in accordance
with the reasonable best efforts provision of the merger
agreement; |
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the merger is not completed on or before September 15,
2007, as extended at the election of Parent to the end of the
Marketing Period if the Marketing Period has commenced and the
end of the Marketing Period would be later (such date, as
extended, the Outside Date), so long as the failure
of the merger to be completed by such date is not due to the
failure of the party seeking to terminate the merger agreement
to perform or comply in all material respects with the covenants
and agreements of such party set forth in the merger agreement;
provided that if all of the conditions to the closing are
satisfied on or prior to September 15, 2007 except for
regulatory approval conditions, then Parent may elect to extend
the Outside Date to no later than November 1, 2007 or, if
there is an ongoing arbitration, to a date no later than seven
days after final decision of the arbitrators; or |
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the requisite stockholder vote with respect to the adoption of
the merger agreement has not been obtained at the annual meeting
or any adjournment or postponement thereof. |
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Parent or Merger Sub has breached any of its representations,
warranties, covenants or agreements under the merger agreement
in a manner that, if occurring or continuing at the effective
time, would result in the failure of the conditions set forth in
section 6.3(a) or 6.3(b) of the merger agreement, |
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as the case may be, which breach is not cured, or by its nature
cannot be cured, by the earlier of (i) the Outside Date and
(ii) 30 days following written notice to the party
committing such breach; |
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the termination is effected prior to receipt of the requisite
stockholder approval in accordance with and subject to the terms
and conditions of the superior proposal termination right of the
solicitation provision of the merger agreement, provided that we
substantially concurrently with such termination enter into the
alternative acquisition agreement; or |
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all of the conditions to each partys obligation to effect
the merger have been satisfied, and Parent has failed to
consummate the merger no later than ten calendar days after the
last day of the Marketing Period. |
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we have breached any of our representations, warranties,
covenants or agreements under the merger agreement in a manner
that, if occurring or continuing at the effective time, would
result in the failure of the conditions set forth in
section 6.3(a) or 6.3(b) of the merger agreement, as the
case may be, which breach is not cured, or by its nature cannot
be cured, by the earlier of (i) the Outside Date and
(ii) 30 days following written notice to the party
committing such breach; |
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a change of the recommendation of our board of directors has
occurred; |
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we or our board of directors (or any committee thereof)
approves, adopts or recommends any acquisition proposal or
approves or recommends, or enters into or allows us or any of
our subsidiaries to enter into, a letter of intent, agreement in
principle or definitive agreement for an acquisition proposal; |
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we fail to issue a press release reaffirming the recommendation
of our board of directors that our stockholders adopt the merger
agreement within 48 hours of a request to do so by Parent
and after we first published or otherwise disclosed an
acquisition proposal or material modification to an acquisition
proposal to our stockholders; |
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we have intentionally or materially breached any of our
obligations under the solicitation provision or the stockholder
approval provisions of the merger agreement; we have failed to
include in this proxy statement our board recommendation; |
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we or our board of directors (or any committee thereof)
authorizes or publicly proposes any of the actions in the
preceding four bullet points; |
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there has been an event, change, effect, development, condition
or occurrence that has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect that cannot be cured by the Outside Date; or |
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any specified force majeure event has occurred that has had or
could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect (without taking into
account the provisos included in the definition of Material
Adverse Effect) that cannot be cured by the Outside Date. |
The party desiring to terminate the merger agreement pursuant to
any of the provisions above, except for by mutual written
consent of Lear and Parent, will give written notice of such
termination to the other party in accordance with the notice
provision of the merger agreement, specifying the provision or
provisions of the merger agreement pursuant to which such
termination is effected.
69
Fees and Expenses
Lear estimates that if the merger is completed, the fees and
expenses incurred by Lear in connection with the merger will be
approximately as follows:
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Description |
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Financial advisory fees
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$ |
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Legal fees and expenses
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Accounting fees and expenses
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Proxy solicitation fees
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SEC filing fees
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Printing and mailing costs
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Miscellaneous
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Total
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$ |
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In general, all expenses incurred by a party to the merger
agreement will be paid by that party. If the merger agreement is
terminated under certain circumstances, we may be required to
pay Parent a termination fee and reimburse Parent for certain
out-of-pocket expenses.
Under certain other circumstances, Parent must pay us a
termination fee. See Termination Fees and
Expenses.
Termination Fees and Expenses
If we terminate the merger agreement or the merger agreement is
terminated by Parent or Merger Sub, under the conditions
described in further detail below, we must pay a termination fee
to Parent.
We must pay a termination fee of $85.2 million plus up to
$15 million of Parents
out-of-pocket expenses
if:
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we or Parent terminates the merger agreement because the
requisite stockholder vote for the merger is not obtained and we
enter into a definitive agreement with respect to an acquisition
proposal within twelve months after the termination of the
merger agreement, the requisite vote of our stockholders is
obtained for the alternative transaction within such twelve
month period and such transaction is completed; |
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we or Parent terminates the merger agreement because the merger
is not completed on or before September 15, 2007, as may be
extended under the terms of the merger agreement, all conditions
for our obligation to complete the merger are satisfied and we
have failed to take all actions on our part to consummate the
merger; |
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Parent terminates the merger agreement because we have breached
any of our representations, warranties, covenants or agreements
under the merger agreement in a manner that, either individually
or in the aggregate and, in the case of the representations and
warranties, measured on the date of the merger agreement or, if
provided in the merger agreement, as of any subsequent date (as
if made on such date), would result in, if occurring or
continuing at the effective time, the failure of certain
conditions to closing; |
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Parent terminates the merger agreement after the end of the
go shop period because of a change of the
recommendation of our board of directors has occurred, we or our
board of directors (or any committee thereof) approves, adopts
or recommends any acquisition proposal or approves or
recommends, or enters into or allows us or any of our
subsidiaries to enter into, a letter of intent, agreement in
principle or definitive agreement for an acquisition proposal; |
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Parent terminates the merger agreement after the end of the
go shop period because we fail to issue a press
release reaffirming the recommendation of our board of directors
that our stockholders adopt the merger agreement within
48 hours of a request to do so by Parent following the date
that an acquisition proposal or material modification to an
acquisition proposal is first published, sent or given to our
stockholders; |
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Parent terminates the merger agreement after the end of the
go shop period because we have intentionally or
materially breached any of our obligations under the
non-solicitation provision or the stockholder approval
provisions of the merger agreement; we have failed to include in
this proxy statement our board recommendation; or we or our
board of directors (or any committee thereof) authorizes or
publicly proposes any of the foregoing actions of this and the
preceding two bullet points; or |
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we terminate the merger agreement after the end of the go
shop period because we enter into an alternative
acquisition agreement prior to receipt of the requisite
stockholder approval for the merger with Merger Sub. |
We must pay a termination fee of $73.5 million plus up to
$6 million of Parents expenses if:
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Parent terminates the merger agreement during the go
shop period because of a change of the recommendation of
our board of directors has occurred, we or our board of
directors (or any committee thereof) approves, adopts or
recommends any acquisition proposal or approves or recommends,
or enters into or allows us or any of our subsidiaries to enter
into, a letter of intent, agreement in principle or definitive
agreement for an acquisition proposal; |
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Parent terminates the merger agreement during the go
shop period because we fail to issue a press release
reaffirming the recommendation of our board of directors that
our stockholders adopt the merger agreement within 48 hours
of a request to do so by Parent following the date an
acquisition proposal or material modification to an acquisition
proposal is first published, sent or given to our stockholders; |
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Parent terminates the merger agreement during the go
shop period because we have intentionally or materially
breached any of our obligations under the non-solicitation
provision or the stockholder approval provisions of the merger
agreement; we have failed to include in this proxy statement our
board recommendation; or we or our board of directors (or any
committee thereof) authorizes or publicly proposes any of the
foregoing actions of this and the preceding two bullet
points; or |
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we terminate the merger agreement during the go shop
period because we enter into an alternative acquisition
agreement prior to receipt of the requisite stockholder approval
for the merger with Merger Sub. |
Parent has agreed to pay us a termination fee of
$250 million if:
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we terminate the merger agreement because Parent or Merger Sub
has breached any of its representations, warranties, covenants
or agreements under the merger agreement in a manner that,
either individually or in the aggregate and, in the case of the
representations and warranties, measured on the date of the
merger agreement or, if provided in the merger agreement, as of
any subsequent date (as if made on such date), would result in,
if occurring or continuing at the effective time, the failure of
certain conditions to closing; |
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we terminate the merger agreement because the merger is not
completed on or before September 15, 2007, as may be
extended by the terms of the merger agreement, all conditions
for Parents obligation to complete the merger are
satisfied and Parent or Merger Sub has failed to take all
actions on its part to consummate the merger; or |
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we terminate the merger agreement because Parent has failed to
consummate the merger no later than ten calendar days after the
last day of the Marketing Period and all of the conditions to
Parents obligation to effect the merger have been
satisfied. |
Notwithstanding the foregoing, if we terminate the merger
agreement because the merger is not completed on or before
September 15, 2007, as may be extended under the terms of
the merger agreement, all conditions to Parents obligation
to complete the merger are satisfied, Parent or Merger Sub has
failed to take all actions on its part to consummate the merger,
and Parent and Merger Sub have failed to obtain the debt
financing necessary to consummate the merger as a result of a
breach or default by the lenders under the debt financing
commitments, then, in any claim we make for actual damages,
Parent, Merger Sub, guarantor and their affiliates, individually
or collectively, will not be liable to us or our affiliates in
an amount more than $25 million in excess of the amount
actually received by Parent, Merger Sub, guarantor or their
affiliates from the lenders under the debt financing commitments
with respect to claims for the lenders breach of their
debt financing commitments. Parent and Merger Sub have agreed to
pursue any such claims against the lenders diligently and in
good faith. The merger agreement contains further provisions
governing the exclusivity of remedies and the limitations on
liabilities of the parties.
Indemnification and Insurance
Parent and Merger Sub have agreed that all rights to
indemnification existing in favor of the current or former
directors, officers and employees of Lear or any of its
Subsidiaries (the Indemnified Persons) as provided
in our Amended and Restated Certificate of Incorporation or
bylaws, or the articles of organization, bylaws or similar
constituent documents of any of our subsidiaries as in effect as
of the date of this Agreement with respect to matters occurring
prior to the effective time of the merger will survive the
merger and continue in full force and effect for a period of not
less than six (6) years after the effective time of the
merger unless otherwise required by law.
In addition, the Surviving Corporation will, to the fullest
extent permitted under applicable law, indemnify and hold
harmless (and advance funds in respect of each of the foregoing)
each Indemnified Person against any costs or expenses (including
advancing reasonable attorneys fees and expenses in
advance of the final disposition of any claim, suit, proceeding
or investigation to each Indemnified Person to the fullest
extent permitted by law), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement (with the
prior written consent of Parent) in connection with any actual
or threatened claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative (an
Action), arising out of, relating to or in
connection with any action or omission occurring or alleged to
have occurred whether before the effective time of the merger
(including acts or omissions in connection with such persons
serving as an officer, director or other fiduciary in any entity
if such service was at the request or for the benefit of Lear),
except for in any case, any claim, judgments, fines, penalties
and amounts to be paid which relate to any act or omission which
constitutes a material violation of law and except for other
exceptions to indemnification that are required by law. In the
event of any such Action, the Surviving Corporation will
reasonably cooperate with the Indemnified Person in the defense
of any such Action, and will pay all reasonable expenses,
including reasonable attorneys fees, that may be incurred
by any Indemnified Person in enforcing the indemnity and other
obligations provided in the merger agreement.
We are required to purchase on or prior to the effective time of
the merger, and the Surviving Corporation is required to
maintain with reputable and financially sound carriers, tail
policies to the current directors and officers
liability insurance and fiduciary liability insurance policies
maintained by us and our subsidiaries on the date of the merger
agreement. The tail policies and fiduciary liability policies
must be effective for six years after the effective time of the
merger with respect to claims arising from facts or events that
existed or occurred prior to or at the effective time of the
merger. The policies must also contain coverage that is at least
as protective to the persons covered by the existing policies,
and must in any event include non-management directors Side A
(DIC) coverage. The Surviving Corporation must provide
copies of the policies to the past, current and future directors
and officers of Lear entitled to the benefit of such policies as
reasonably requested. The Surviving Corporation is only required
to provide as much coverage as can be obtained by paying
aggregate premiums equal to 300% of the aggregate amount we
currently pay for such coverage. Guarantor
72
may substitute an alternative for the tail policies that
affords, in the aggregate, no less favorable protection to such
officers and directors, provided that any such alternative is
approved by our board of directors prior to the effective time
of the merger.
Employee Benefits
Until January 1, 2008, current employees (other than
current employees who have entered into or will enter into an
individual employment agreement with us or any of our
subsidiaries) who terminate employment with the Surviving
Corporation will be entitled to severance benefits that are no
less favorable, in the aggregate, than those that would have
been provided to them immediately prior to the effective time of
the merger.
Amendment, Extension and Waiver
To the extent permitted by applicable law, the parties may amend
the merger agreement at any time, except that after our
stockholders have adopted the merger agreement, there will be no
amendment that by law requires further approval of our
stockholders. The merger agreement may not be amended, changed,
supplemented or otherwise modified except by a written
instrument signed by all of the parties to the merger agreement.
At any time before the consummation of the merger, each of the
parties to the merger agreement may, by written instrument:
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extend the time for the performance of any of the obligations or
other acts of the other parties; |
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waive any inaccuracies in the representations and warranties of
the other parties contained in the merger agreement or in any
document delivered pursuant to the merger agreement; or |
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waive compliance with any of the agreements or conditions
contained in the merger agreement. |
Governing Law and Arbitration
The merger agreement is governed by and construed in accordance
with the laws of the State of Delaware, without giving effect to
choice of law principles that would result in the application of
the laws of another jurisdiction. The merger agreement specifies
procedures for binding arbitration which, at Parents sole
option, may be instituted in the event of a disagreement between
the parties regarding whether there has occurred any event,
change, effect, development or condition pursuant to which
Parent, in its sole discretion, believes it may terminate the
merger agreement based on (i) the parties failure to
complete the merger by the Outside Date; (ii) our breach of
our representations, warranties, covenants or agreements;
(iii) a Material Adverse Effect having occurred or
(iv) a specified force majeure event having occurred.
Except for disputes regarding these matters, each of the parties
has consented to the personal jurisdiction of any Delaware
chancery or federal court located in Wilmington, Delaware in the
event any dispute arises out of the merger agreement or any
transaction contemplated by it.
Assignment
The merger agreement may not be assigned by any party by
operation or law or otherwise without the prior written consent
of the other parties, except that:
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Parent or Merger Sub may assign any of their respective rights
and obligations to any direct or indirect subsidiary of AREP so
long as such assignment does not delay or impede the
consummation of the transaction contemplated by the merger
agreement; and |
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AREP may transfer directly or indirectly all or any portion of
the common stock or other equity of Parent or Merger Sub to any
affiliate or sell up to 49% of the common stock or other equity
of Parent or Merger Sub to any person but no such transfer or
sale will relieve AREP, Parent or Merger Sub of their respective
obligations under the merger agreement. |
73
IMPORTANT INFORMATION REGARDING
MR. ICAHN, MR. INTRIERI, PARENT, MERGER SUB AND
AREP
None of the persons named herein have been, during the last five
years: (a) convicted in a criminal proceeding (excluding
traffic violations and similar violations or misdemeanors); or
(b) party to any judicial or administrative proceeding
(except for matters that were dismissed without sanction or
settlement) that resulted in a judgment, decree or final order
enjoining any filing person from future violations of, or
prohibiting activities subject to, federal or state securities
laws, or a finding of any violation of federal or state
securities laws.
Unless otherwise noted, each natural person named herein is a
United States citizen. Unless otherwise noted, each person named
herein has a telephone number of
(212) 702-4300 and
a business address of c/o American Real Estate Partners,
L.P., 767 Fifth Avenue, Suite 4700, New York, New York
10153.
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Information Regarding Carl C. Icahn |
Carl C. Icahn, Chairman of the Board. Carl C.
Icahns principal occupation is as an investor and fund
manager of his affiliated entities. Mr. Icahn has served as
Chairman of the Board of API since 1990. Mr. Icahn has
served as chairman of the board and a director of Starfire
Holding Corporation, or Starfire, a privately-held holding
company, and chairman of the board and a director of various
subsidiaries of Starfire, since 1984. Through his entities, CCI
Onshore Corp. and CCI Offshore Corp., Mr. Icahn manages
private investment funds, including Icahn Partners LP and Icahn
Partners Master Fund LP. Since 1994, Mr. Icahn has
been the principal beneficial stockholder of American Railcar,
Inc., or American Railcar, a publicly traded company that is
primarily engaged in the business of manufacturing covered
hopper and tank railcars, and has served as chairman of the
board and as a director of American Railcar since 1994. From
October 1998 through May 2004, Mr. Icahn was the president
and a director of Stratosphere Corporation, which operates the
Stratosphere Casino Hotel & Tower. Mr. Icahn has
been chairman of the board and a director of XO Holdings,
Inc. since February 2006 and was chairman of the board and a
director of XO Communications, Inc. (XO Holdings
predecessor) from January 2003 to February 2006.
XO Holdings, Inc. is a publicly traded telecommunications
services provider that is majority owned by various entities
controlled by Mr. Icahn. In May 2005, Mr. Icahn became
a director of Blockbuster Inc., a publicly traded provider of
in-home movie rental and game entertainment. In September 2006,
Mr. Icahn became a director of ImClone Systems
Incorporated, or Imclone Systems, a publicly traded
biopharmaceutical company, and since October 2006 has been the
chairman of the board of ImClone Systems.
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Information Regarding Vincent J. Intrieri |
Vincent J. Intrieri, Director. Vincent J.
Intrieris principal occupation is as Senior Managing
Director of Icahn Partners LP and Icahn Partners Master
Fund LP. Mr. Intrieri has served as a director of API
since July 2006. Since February 2007, Mr. Intrieri has served as
President and director of Parent and Merger Sub. Since December
2006, Mr. Intrieri has been a director of National Energy
Group, Inc., or NEGI. Since November 2004, Mr. Intrieri has
been a Senior Managing Director of Icahn Partners LP and Icahn
Partners Master Fund LP, private investment funds
controlled by Mr. Icahn. Since January 1, 2005,
Mr. Intrieri has been Senior Managing Director of Icahn
Associates Corp. and High River Limited Partnership. Since April
2005, Mr. Intrieri has been the president and chief
executive officer of Philip Services Corporation, a metal
recycling and industrial services company controlled by
Mr. Icahn. Since August 2005, Mr. Intrieri has served
as a director of American Railcar. From March 2005 to December
2005, Mr. Intrieri was a Senior Vice President, the
Treasurer and the Secretary of American Railcar.
Mr. Intrieri has served as a director of XO Holdings since
February 2006. Prior to that, he had served as a director of XO
Communications, Inc. (XO Holdings predecessor) from
January 2003 to February 2006. Since April 2003,
Mr. Intrieri has been Chairman of the Board of Directors
and a director of Viskase Companies, Inc., a publicly traded
company that is majority owned by various entities controlled by
Mr. Icahn. Since November 2006, Mr. Intrieri has been
a director of Lear.
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Information Regarding American Real Estate Partners,
L.P. |
American Real Estate Partners, L.P., or AREP, is a master
limited partnership formed in Delaware on February 17, 1987
with principal offices at 767 Fifth Avenue,
Suite 4700, New York, New York 10153. AREP is a diversified
holding company engaged in a variety of businesses including
Gaming, Real Estate and Home Fashion. In addition, AREP invests
its available liquidity in debt and equity securities with a
view towards enhancing returns as it continues to assess further
acquisitions of operating businesses.
AREPs general partner is American Property Investors, Inc.
AREP owns its businesses and conducts its investment activities
through a subsidiary limited partnership, American Real Estate
Holdings Limited Partnership, or AREH, and its subsidiaries.
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Information Regarding AREP Car Holdings Corp. |
AREP Car Holdings Corp., or Parent, is a Delaware corporation
formed on February 1, 2007, with principal offices at
767 Fifth Avenue, Suite 4700, New York, New York
10153. Parent is a wholly-owned subsidiary of AREH and was
formed solely for the purpose of engaging in the planned
acquisition of Lear and other related transactions.
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Information Regarding AREP Car Acquisition Corp. |
AREP Car Acquisition Corp., or MergerSub, is a Delaware
corporation formed on February 1, 2007, with principal
offices at 767 Fifth Avenue, Suite 4700, New York, New
York 10153. MergerSub is a wholly-owned subsidiary of Parent and
was formed solely for the purpose of engaging in the planned
acquisition of Lear and other related transactions.
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APPRAISAL RIGHTS
Under the DGCL, you have the right to dissent from the merger
and to receive payment in cash for the fair value of your common
stock as determined by the Delaware Court of Chancery, together
with a fair rate of interest, if any, as determined by the
court, in lieu of the consideration you would otherwise be
entitled to pursuant to the merger agreement. These rights are
known as appraisal rights. Lears stockholders electing to
exercise appraisal rights must comply with the provisions of
Section 262 of the DGCL in order to perfect their rights.
Lear will require strict compliance with the statutory
procedures.
The following is intended as a brief summary of the material
provisions of the Delaware statutory procedures required to be
followed by a stockholder in order to dissent from the merger
and perfect appraisal rights.
This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by
reference to Section 262 of the DGCL, the full text of
which appears in Appendix F to this proxy statement.
Failure to precisely follow any of the statutory procedures set
forth in Section 262 of the DGCL may result in a
termination or waiver of your appraisal rights.
Section 262 requires that stockholders be notified that
appraisal rights will be available not less than 20 days
before the stockholders meeting to vote on the merger. A
copy of Section 262 must be included with such notice. This
proxy statement constitutes Lears notice to its
stockholders of the availability of appraisal rights in
connection with the merger in compliance with the requirements
of Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of
Section 262 contained in Appendix F since failure to
timely and properly comply with the requirements of
Section 262 will result in the loss of your appraisal
rights under the DGCL.
If you elect to demand appraisal of your shares, you must
satisfy each of the following conditions:
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You must deliver to Lear a written demand for appraisal of your
shares before the vote with respect to the merger is taken. This
written demand for appraisal must be in addition to and separate
from any proxy or vote abstaining from or voting against the
adoption of the merger agreement. Voting against or failing to
vote for the adoption of the merger agreement by itself does not
constitute a demand for appraisal within the meaning of
Section 262, and failure to vote against the adoption of
the merger agreement does not, by itself, constitute a waiver of
your appraisal rights. |
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You must not vote in favor of the adoption of the merger
agreement. A vote in favor of the adoption of the merger
agreement, by proxy, by telephone or in person, will constitute
a waiver of your appraisal rights in respect of the shares so
voted and will nullify any previously filed written demands for
appraisal. |
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You must hold of record your shares of common stock on the date
the written demand for appraisal is made and you must continue
to hold your shares of record through the effective time of the
merger. |
If you fail to comply with any of these conditions and the
merger is completed, you will be entitled to receive the cash
payment for your shares of common stock as provided for in the
merger agreement, but you will have no appraisal rights with
respect to your shares of common stock.
All demands for appraisal should be addressed to Lear
Corporation, 21557 Telegraph Road, Southfield, Michigan 48033,
Attention: General Counsel, and must be delivered before the
vote on the merger agreement is taken at the 2007 Annual Meeting
of Stockholders, and should be executed by, or on behalf of, the
record holder of the shares of our common stock. The demand must
reasonably inform Lear of the identity of the stockholder and
the intention of the stockholder to demand appraisal of his, her
or its shares.
To be effective, a demand for appraisal by a holder of our
common stock must be made by, or in the name of, such registered
stockholder, fully and correctly, as the stockholders name
appears on his or her stock certificate(s). Beneficial owners
who do not also hold the shares of record may not directly make
appraisal demands to Lear. The beneficial holder must, in such
cases, have the registered owner, such as a broker or other
nominee, submit the required demand in respect of those
shares. If shares are owned of record in a
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fiduciary capacity, such as by a trustee, guardian or custodian,
execution of a demand for appraisal should be made by or for the
fiduciary; and if the shares are owned of record by more than
one person, such as in a joint tenancy or tenancy in common, the
demand should be executed by or for all joint owners. An
authorized agent, including an authorized agent for two or more
joint owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in
executing the demand, he or she is acting as agent for the
record owner. A record owner, such as a broker, who holds shares
as a nominee for others, may exercise his or her right of
appraisal with respect to the shares held for one or more
beneficial owners, while not exercising this right for other
beneficial owners. In that case, the written demand should state
the number of shares as to which appraisal is sought. Where no
number of shares is expressly mentioned, the demand will be
presumed to cover all shares held in the name of the record
owner.
If you hold your shares of common stock in a brokerage
account or in other nominee form and you wish to exercise
appraisal rights, you should consult with your broker or the
other nominee to determine the appropriate procedures for the
making of a demand for appraisal by the nominee.
Within 10 days after the effective time of the merger, the
Surviving Corporation must give written notice that the merger
has become effective to each Lear stockholder who has properly
made a written demand for appraisal and who did not vote in
favor of the adoption of the merger agreement. At any time
within 60 days after the effective time, any stockholder
who has demanded an appraisal has the right to withdraw the
demand and to accept the cash payment specified by the merger
agreement for his or her shares of common stock. Within
120 days after the effective date of the merger, any
stockholder who has complied with Section 262 shall, upon
written request to the Surviving Corporation, be entitled to
receive a written statement setting forth the aggregate number
of shares not voted in favor of the adoption of the merger
agreement and with respect to which demands for appraisal rights
have been received and the aggregate number of holders of such
shares. Such written statement will be mailed to the requesting
stockholder within 10 days after such written request is
received by the Surviving Corporation or within 10 days
after expiration of the period for delivery of demands for
appraisal, whichever is later. Within 120 days after the
effective time, either the Surviving Corporation or any
stockholder who has complied with the requirements of
Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the
shares held by all stockholders entitled to appraisal. Upon the
filing of the petition by a stockholder, service of a copy of
such petition shall be made upon the Surviving Corporation. The
Surviving Corporation has no obligation to file such a petition
in the event there are dissenting stockholders. Accordingly, the
failure of a stockholder to file such a petition within the
period specified could nullify the stockholders previously
written demand for appraisal.
If a petition for appraisal is duly filed by a stockholder and a
copy of the petition is delivered to the Surviving Corporation,
the Surviving Corporation will then be obligated, within
20 days after receiving service of a copy of the petition,
to provide the Chancery Court with a duly verified list
containing the names and addresses of all stockholders who have
demanded an appraisal of their shares and with whom agreements
as to the value of their shares have not been reached by the
Surviving Corporation. After notice to dissenting stockholders
who demanded appraisal of their shares, the Chancery Court is
empowered to conduct a hearing upon the petition and to
determine those stockholders who have complied with
Section 262 and who have become entitled to the appraisal
rights provided thereby.
After determination of the stockholders entitled to appraisal of
their shares of our common stock, the Chancery Court will
appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of
interest, if any. When the value is determined, the Chancery
Court will direct the payment of such value, with interest
accrued thereon during the pendency of the proceeding, if the
Chancery Court so determines, to the stockholders entitled to
receive the same, upon surrender by such holders of those shares.
In determining fair value, the Chancery Court is required to
take into account all relevant factors. You should be aware
that the fair value of your shares as determined under
Section 262 could be more than, the same as or less than
the value that you are entitled to receive under the terms of
the merger agreement.
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Costs of the appraisal proceeding may be imposed upon the
Surviving Corporation and the stockholders participating in the
appraisal proceeding by the Chancery Court as the Chancery Court
deems equitable in the circumstances. Upon the application of a
stockholder, the Chancery Court may order all or a portion of
the expenses incurred by any stockholder in connection with the
appraisal proceeding, including, without limitation, reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal. Any stockholder who had demanded appraisal rights
will not, after the effective time of the merger, be entitled to
vote shares subject to that demand for any purpose or to receive
payments of dividends or any other distribution with respect to
those shares, other than with respect to payment as of a record
date prior to the effective time of the merger; however, if no
petition for appraisal is filed within 120 days after the
effective time of the merger, or if the stockholder delivers a
written withdrawal of his or her demand for appraisal and an
acceptance of the terms of the merger within 60 days after
the effective time of the merger, then the right of that
stockholder to appraisal will cease and that stockholder will be
entitled to receive the cash payment for shares of his, her or
its common stock pursuant to the merger agreement. Any
withdrawal of a demand for appraisal made more than 60 days
after the effective time of the merger may only be made with the
written approval of the Surviving Corporation and must, to be
effective, be made within 120 days after the effective time.
In view of the complexity of Section 262, Lears
stockholders who may wish to dissent from the merger and pursue
appraisal rights should consult their legal advisors.
YOUR BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF
THE MERGER
AND THE MERGER AGREEMENT.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
THE PROPOSAL UNLESS STOCKHOLDERS SPECIFY A CONTRARY
VOTE.
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ADJOURNMENT OF THE ANNUAL MEETING
(PROPOSAL NO. 2)
Lear is asking its stockholders to vote on a proposal to adjourn
or postpone the 2007 Annual Meeting of Stockholders of Lear
Corporation, if necessary, to permit the solicitation of proxies
if there are not sufficient votes at the time of the meeting to
approve the proposal to adopt the merger agreement.
YOUR BOARD RECOMMENDS A VOTE FOR THE ADJOURNMENT
PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
THE PROPOSAL
UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
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ELECTION OF DIRECTORS
(PROPOSAL NO. 3)
The Board consists of three classes. One class of directors is
elected at each annual meeting of stockholders to serve a three
year term. Directors elected at the 2007 Annual Meeting of
Stockholders will hold office until their successors are elected
at the 2010 Annual Meeting of Stockholders. Directors not up for
election this year will continue in office for the remainder of
their terms.
The Nominating and Corporate Governance Committee has nominated
Larry W. McCurdy, Roy E. Parrott and Richard F. Wallman to stand
for election to the Board. The Board has determined that each
nominee is an independent director under the NYSE listing
requirements. Unless contrary instructions are given, the shares
represented by your proxy will be voted FOR the election of all
nominees.
All nominees have consented to being named in this proxy
statement and to serve if elected. However, if any nominee
becomes unable to serve, proxy holders will have discretion and
authority to vote for another nominee proposed by our Board.
Alternatively, our Board may reduce the number of directors to
be elected at the meeting.
Nominees For Terms Expiring at the 2010 Annual Meeting
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Mr. McCurdy has been a director of Lear since 1988. In July
2000, Mr. McCurdy retired from Dana Corporation, a motor
vehicle parts manufacturer and aftermarket supplier, where he
served as President, Dana Automotive Aftermarket Group, since
July 1998. Mr. McCurdy was Chairman of the Board, President
and Chief Executive Officer of Echlin, a motor vehicle parts
manufacturer, from March 1997 until July 1998 when it was merged
into Dana Corporation. Prior to this, Mr. McCurdy was
Executive Vice President, Operations of Cooper Industries, a
diversified manufacturing company, from April 1994 to March
1997. Mr. McCurdy also serves as a director of Mohawk
Industries, Inc., as well as the non-executive Chairman of
Affinia Group Inc., a privately-held supplier of aftermarket
motor vehicle parts. |
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Mr. Parrott has been a director of Lear since February
1997. In January 2003, Mr. Parrott retired from Metaldyne
Corporation where he served as President of Business Operations
since December 2000. Metaldyne Corporation, an integrated metal
solutions supplier, purchased Simpson Industries, Inc. in
December 2000. Previously, Mr. Parrott was the Chief
Executive Officer of Simpson Industries, Inc. from 1994 to
December 2000 and Chairman of Simpson Industries, Inc. from
November 1997 to December 2000. In June 2005, Mr. Parrott
was elected as Chairman of the Board of Michigan Biotechnology
Institute (M.B.I.), a non-profit corporation dedicated to the
research and commercial development of physical science
technologies. |
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Richard F. Wallman |
Age: 56 |
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Mr. Wallman has been a director of Lear since November
2003. Mr. Wallman has more than 25 years of
executive-level operations and financial oversight experience,
most recently as Senior Vice President and Chief Financial
Officer of Honeywell International, Inc. from 1999 to 2003 and
of its predecessor, AlliedSignal, Inc., from 1995 to 1999. He
has also held positions with International Business Machines
Corporation, Chrysler Corporation and Ford Motor Company.
Mr. Wallman also serves as a director of Hayes-Lemmerz
International, Inc., Ariba, Inc., Avaya Inc., Roper Industries,
Inc. and ExpressJet Holdings, Inc. |
YOUR BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH NOMINEE.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
THE PROPOSAL
UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
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DIRECTORS AND BENEFICIAL OWNERSHIP
Directors
Set forth below is a description of the business experience of
each of our directors other than Messrs. McCurdy, Parrott
and Wallman, whose biographies are set forth above. The terms of
Messrs. Intrieri, Mallett, Rossiter and Vandenberghe expire
at the annual meeting in 2008, and the terms of
Messrs. Fry, Spalding, Stern and Wallace expire at the
annual meeting in 2009. In October 2006, certain affiliates of
Mr. Icahn purchased approximately 8.7 million shares
of our common stock. In connection with such acquisition, the
purchasers were granted a contractual right to nominate one
member to our Board. The Board elected Mr. Intrieri to fill
a vacancy on the Board to satisfy this obligation.
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Dr. Fry, who has been a director of Lear since August
2002, had served as the President and Chief Executive Officer of
Northwood University, a university of business administration
with campuses in Midland, Michigan, Dallas, Texas and Palm
Beach, Florida, from 1982 until early 2006 and is now President
Emeritus. Dr. Fry also serves as a director of Decker
Energy International. Dr. Fry is also a director and member
of the executive committee of the Automotive Hall of Fame and
past Chairman of the Michigan Higher Education Facilities
Authority. |
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Vincent J. Intrieri |
Age: 50 |
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Mr. Intrieri has been a director of Lear since November
2006. Mr. Intrieri has been affiliated with Icahn
Associates Corp. since 1998. He has been a director of American
Property Investors, Inc., the general partner of American Real
Estate Partners, L.P., affiliates of Mr. Carl C. Icahn,
since July 2006. Since November 2004, Mr. Intrieri has been
Senior Managing Director of Icahn Partners LP and Icahn Partners
Master Fund LP, private investment funds controlled by
Mr. Icahn. From 1998 to March 2003, Mr. Intrieri
served as portfolio manager for Icahn Associates Corp.
Mr. Intrieri has also served as the Senior Managing
Director of other entities owned and controlled by
Mr. Icahn. He is the President and Chief Executive Officer
of Philip Services Corporation, a director of American Railcar
Industries, Inc. and a director of XO Holdings, Inc., each
affiliated with Mr. Icahn. He is also the Chairman of the
Board of Viskase Companies, Inc., a public company in which
Mr. Icahn holds an interest. Since December 2006,
Mr. Intrieri has been a director of National Energy Group,
Inc., a publicly owned company formerly engaged in the business
of managing the exploration, production and operations of
natural gas and oil properties, a majority of the common stock
of which is held by American Real Estate Partners, L.P. |
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Conrad L. Mallett, Jr. |
Age: 54 |
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Justice Mallett, who has been a director of Lear since August
2002, has been the President and CEO of Sinai-Grace Hospital
since August 2003. Prior to his current position, Justice
Mallett served as the Chief Administrative Officer of the
Detroit Medical Center since March 2003. Previously, he served
as President and General Counsel of Hawkins Food Group LLC from
April 2002 to March 2003, and Transition Director for Detroit
Mayor Kwame M. Kilpatrick and Chief Operating Officer for the
City of Detroit from January 2002 to April 2002. From August
1999 to April 2002, Justice Mallett was General Counsel and
Chief Administrative Officer of the Detroit Medical Center.
Justice Mallett was also a Partner in the law firm of Miller,
Canfield, Paddock & Stone from January 1999 to August
1999. Justice Mallett was a Justice of the Michigan Supreme
Court from December 1990 to January 1999 and served a two-year
term as Chief Justice beginning in 1997. Justice Mallett also
serves as a General Board Member of the Metropolitan Detroit
YMCA. |
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Robert E. Rossiter |
Age: 61 |
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Mr. Rossiter is our Chairman and Chief Executive Officer,
a position he has held since January 2003. Mr. Rossiter has
served as our Chief Executive Officer since October 2000, as our
President from 1984 until December 2002 and as our Chief
Operating Officer from 1988 until April 1997 and from November
1998 until October 2000. Mr. Rossiter also served as our
Chief Operating Officer International Operations
from April 1997 until November 1998. Mr. Rossiter has been
a director of Lear since 1988. |
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David P. Spalding |
Age: 52 |
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Mr. Spalding has been a director of Lear since 1991.
Mr. Spalding is the Vice President of Alumni Relations for
Dartmouth College, a position he has held since October 2005.
Prior to joining Dartmouth College, Mr. Spalding was a Vice
Chairman of The Cypress Group L.L.C., a private equity fund
manager, since 1994. Mr. Spalding is also the chairman of
the investment committee of the Make-A-Wish Foundation of Metro
New York. |
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Mr. Stern has been a director of Lear since 1991.
Mr. Stern is Chairman of The Cypress Group L.L.C., a
private equity fund manager, a position he has held since 1994.
He is also a director of Affinia Group Inc. and AMTROL, Inc. |
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James H. Vandenberghe |
Age: 57 |
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Mr. Vandenberghe is our Vice Chairman, a position he has
held since November 1998, and has served as our Chief Financial
Officer since March 2006. Mr. Vandenberghe also served as
our President and Chief Operating Officer North
American Operations from April 1997 until November 1998, our
Chief Financial Officer from 1988 until April 1997 and as our
Executive Vice President from 1993 until April 1997.
Mr. Vandenberghe has been a director of Lear since 1995 and
also serves as a director of DTE Energy. |
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Henry D.G. Wallace |
Age: 61 |
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Mr. Wallace has been a director of Lear since February
2005. Mr. Wallace worked for 30 years at Ford Motor
Company until his retirement in 2001 and held several
executive-level operations and financial oversight positions,
most recently as Group Vice President, Mazda & Asia
Pacific Operations in 2001, Chief Financial Officer in 2000 and
Group Vice President, Asia Pacific Operations in 1999.
Mr. Wallace also serves as a director of AMBAC Financial
Group, Inc., Diebold, Inc. and Hayes-Lemmerz International, Inc. |
Board Information
The Board has approved Corporate Governance Guidelines and a
Code of Business Conduct and Ethics. All of our corporate
governance documents, including the Corporate Governance
Guidelines, the Code of Business Conduct and Ethics and
committee charters, are available on our website at
www.lear.com or in printed form upon request by
contacting Lear Corporation at 21557 Telegraph Road, Southfield,
Michigan 48033, Attention: Investor Relations. The Board
regularly reviews corporate governance developments and modifies
these documents as warranted. Any modifications will be
reflected on our website.
In 2006, our full Board held eight (8) meetings and
executed one (1) written consent. In addition to our full
Board meetings, our directors attend meetings of permanent
committees established by our Board. Each director participated
in at least 75% of the total number of meetings of our Board and
the committees on
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which he or she serves. Our directors are encouraged to attend
all annual and special meetings of our stockholders. In 2006,
all of our directors attended the annual meeting of stockholders
held on May 11, 2006.
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Meetings of Non-Employee Directors |
In accordance with our Corporate Governance Guidelines and the
listing standards of the NYSE, our non-management directors meet
regularly in executive sessions of the Board without management
present. Our non-management directors have elected Larry W.
McCurdy as the Presiding Director of such non-management
sessions of our Board.
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Independence of Directors |
The Board has adopted Corporate Governance Guidelines to address
significant issues of corporate governance, including Board and
Board Committee composition and responsibilities, compensation
of directors, executive selection and succession planning and
director tenure. The Nominating and Corporate Governance
Committee is responsible for overseeing and reviewing the
Corporate Governance Guidelines and reporting and recommending
to the Board any changes to the Guidelines.
The Companys Corporate Governance Guidelines adopted by
the Board of Directors provide that a majority of the members of
the Board, and each member of the Audit Committee, Compensation
Committee and Nominating and Corporate Governance Committee,
must meet the criteria for independence set forth under
applicable law and the NYSE listing standards. No director
qualifies as independent unless the Board determines that the
director has no direct or indirect material relationship with
the Company. The Board has established guidelines to assist in
determining director independence. These guidelines are set
forth as Exhibit A to our Corporate Governance Guidelines
and can be found on our website at www.lear.com and are
set forth on Appendix G attached hereto. In addition to
applying these director independence guidelines, the Board will
consider all relevant facts and circumstances that it is aware
of in making an independence determination.
Based on the NYSE listing standards and our director
independence guidelines, the Board has affirmatively determined
that (i) Anne K. Bingaman (a director during a portion of
2006) and Mr. Wallace have no relationship with us (other
than as a director or stockholder) and are independent,
(ii) Messrs. Fry, Intrieri, Mallett, McCurdy, Parrott,
Spalding, Stern and Wallman have only immaterial relationships
with us and are independent and (iii) Messrs. Rossiter
and Vandenberghe are not independent. Mr. Rossiter is our
Chairman and Chief Executive Officer and Mr. Vandenberghe
is our Vice Chairman and Chief Financial Officer.
In making its determination with respect to Dr. Fry, the
Board noted that until February 2005, Mr. Rossiter served
as a Trustee of Northwood University, of which Dr. Fry was
President and Chief Executive Officer until early 2006.
Mr. Rossiter did not serve on the compensation committee of
the Board of Trustees of Northwood. Northwood is a university
which prepares and trains students for careers in the automotive
industry. Lear actively recruits employees from Northwood and
has sponsored automotive programs at Northwood in the past. The
Board believes that Mr. Rossiters uncompensated
service as a Trustee of Northwood and Lears sponsorship of
automotive programs at the university furthered the interests of
Lear. The Board has concluded that these relationships were not
material and that Dr. Fry is independent.
In making its determination with respect to Mr. Intrieri,
the Board considered that Mr. Intrieri is employed by,
and/or a director of, various entities controlled by
Mr. Carl Icahn, who beneficially owned approximately 16% of
our outstanding common stock as of December 31, 2006.
Lears business with any of such entities was
inconsequential in each of the last three years. The Board also
considered the fact that Lear has done business for the past
several years with Federal-Mogul Corporation. It is expected
that once Federal-Mogul exits bankruptcy court protection,
affiliates of Mr. Icahn may, subject to confirmation of
Federal-Moguls pending plan of reorganization, own a
controlling interest in it. However, the Board noted that
(i) Lears business with Federal-Mogul was
significantly less than the thresholds contained in the
NYSEs guidelines and Lears independence guidelines,
(ii) Lears business relationship with Federal-Mogul
predates Mr. Icahns significant equity interest in
the Company, and (iii) Mr. Intrieri is neither
employed by, nor a
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director of, Federal-Mogul and has had no involvement in
Lears business with Federal-Mogul. The Board has concluded
that these relationships are not material and that
Mr. Intrieri is independent.
In making its determination with respect to Mr. McCurdy,
the Board considered the fact that Mr. McCurdy is the
Chairman of the Board of a company (i) in which
Mr. Stern is an investor and on the board of which
Mr. Stern also serves and (ii) formed by an investment
fund in which Mr. Spalding was Vice-Chairman and
Mr. Stern is the Chairman. Lear has done no business with
such company in the past three years. The Board has concluded
that these relationships are not material and that
Mr. McCurdy is independent.
In making its determination with respect to Mr. Parrott,
the Board considered that one child of Mr. Parrott is
currently employed by Lear (in a junior-level materials
specialist position at one of our plants) and two other children
of Mr. Parrott were previously employed by Lear. None of
these family members lives in the same household as
Mr. Parrott and none is dependent on him for financial
support. Mr. Parrott has not sought or participated in any
employment decisions regarding these family members. The Board
also considered the fact that Mr. Parrott sits on the board
of a foundation that supports a university to which Lear made
modest donations and made certain tuition payments on behalf of
employees. The Board has concluded that these relationships are
not material and that Mr. Parrott is independent.
In making its determination with respect to Mr. Spalding,
the Board considered that we employ a brother of
Mr. Spalding in a non-executive position (a senior account
manager at one of our divisions). The employment relationship is
on an arms-length basis and Mr. Spalding has no
involvement or interest, directly or indirectly, in employment
decisions affecting his brother. The Board also considered that
Mr. Spalding was a director of a company with which Lear
has done business in the past few years. Mr. Spalding was
also the Vice Chairman of an investment fund that previously
held an interest in a company, and currently holds an interest
in another company, with which Lear conducted business in the
past few years. The amount of such business falls well below
NYSE guidelines and Lears director independence
guidelines. In addition, Messrs. Rossiter and Vandenberghe
have small investments as limited partners in the investment
fund. The Board has concluded that these relationships are not
material and that Mr. Spalding is independent.
In making its determination with respect to Mr. Stern, the
Board considered that Mr. Stern is a director of a company
with which Lear has done business in the past few years and
which was previously controlled by the investment fund of which
Mr. Stern is the Chairman. Further, the investment fund
owns a significant interest in a company with which Lear has
conducted business in the past three years. The amount of such
business falls well below NYSE guidelines and Lears
director independence guidelines. The Board has concluded that
these relationships are not material and that Mr. Stern is
independent.
In making its determination with respect to Mr. Wallman,
the Board considered that Mr. Wallman is on the board of
directors of two companies with which Lear has done business in
the last three years. The amount of such business falls well
below NYSE guidelines and Lears director independence
guidelines. The Board has concluded that these relationships are
not material and that Mr. Wallman is independent.
In addition, the Board also considered the fact that each of
Messrs. Fry, Mallett and Stern are board members of certain
charities to which Lear made modest donations in the past few
years. The donated amounts to these charities fell far below
NYSE guidelines and Lears director independence
guidelines. Also, Messrs. McCurdy, Spalding, Stern, Wallace
and Wallman have held certain concurrent board memberships at
other companies.
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Communications to the Board |
Stockholders and interested parties can contact the Board
(including the presiding director and non-management directors)
through written communication sent to Lear Corporation, 21557
Telegraph Road, Southfield, Michigan 48033, Attention: General
Counsel. Lears General Counsel reviews all written
communications and forwards to the Board a summary and/or copies
of any such correspondence that is directed to the Board or
that, in the opinion of the General Counsel, deals with the
functions of the Board or Board Committees or that he otherwise
determines requires the Boards or any Board
Committees attention.
84
Concerns relating to accounting, internal accounting controls or
auditing matters are immediately brought to the attention of our
internal audit department and handled in accordance with
procedures established by the Audit Committee with respect to
such matters. From time to time, the Board may change the
process by which stockholders may communicate with the Board.
Any such changes will be reflected in our Corporate Governance
Guidelines, which are posted on our website at
www.lear.com.
Communications of a confidential nature can be made directly to
Lears non-management directors or the Chairman of the
Audit Committee regarding any matter, including any accounting,
internal accounting control or auditing matter, by submitting
such concerns to the Audit Committee or the Presiding Director.
Any submissions to the Audit Committee or the Presiding Director
should be marked confidential and addressed to the Chairman of
the Audit Committee or the Presiding Director, as the case may
be, c/o Lear Corporation, P.O. Box 604, Southfield,
Michigan 48037. In addition, confidential communications may be
submitted in accordance with other procedures set forth from
time to time in our Corporate Governance Guidelines, which are
posted on our website at www.lear.com. The submission
should contain, to the extent possible, a full and complete
description of the matter, the parties involved, the date of the
occurrence or, if the matter is ongoing, the date the matter was
initiated and any other information that the reporting party
believes would assist the Audit Committee or the Presiding
Director in the investigation of such matter.
In 2006, the Audit Committee, which held eight (8) meetings
during the year, consisted of Mr. McCurdy, Mr. Stern,
Mr. Wallace and Mr. Wallman, all of whom were
non-employee directors and currently remain members of the
Committee. Mr. McCurdy served as the Chairman of the Audit
Committee. The Board has determined that all of the current
members of the Audit Committee are independent as defined in the
listing standards of the NYSE and that all such members are
financially literate. In addition, the Board has determined that
Mr. McCurdy, Mr. Wallace and Mr. Wallman are
audit committee financial experts, as defined in
Item 407(d) of
Regulation S-K
under the Securities Exchange Act of 1934, as amended, and have
accounting or related financial management expertise. Our
Corporate Governance Guidelines limit the number of audit
committees on which an Audit Committee member can be a member to
three or less without approval of the Board. Mr. Wallman
serves on the audit committees of three public company boards in
addition to our Audit Committee. The Board has determined that
such simultaneous service does not impair
Mr. Wallmans ability to effectively serve on the
Audit Committee and has thus approved the simultaneous service
by Mr. Wallman on the Audit Committee and on the audit
committees of up to three additional public company boards of
directors. For a description of the Audit Committees
responsibilities and findings, see Audit Committee
Report beginning on page 143. The Audit Committee
operates under a written charter setting forth its functions and
responsibilities. A copy of the current charter is available on
our website at www.lear.com or in printed form upon
request.
The Compensation Committee held nine (9) meetings during
2006 and executed one (1) written consent. The Compensation
Committee consisted of Messrs. Mallett, Spalding, McCurdy
and Wallman, all of whom were non-employee directors and
currently remain members of the Committee. Mr. Spalding
served as the Chairman of the Compensation Committee. Anne K.
Bingaman also served on the Compensation Committee until her
resignation from the Board in May 2006. Mr. Mallett was
appointed to the Compensation Committee in May 2006. The
Compensation Committee has overall responsibility for approving
and evaluating director and officer compensation plans, policies
and programs of the Company and reviewing the disclosure of such
plans, policies and programs to the Companys stockholders
in the annual proxy statement. The Board has determined that all
of the current members of the Compensation Committee are
independent as defined in the listing standards of the NYSE. The
Compensation Committee operates under a written charter setting
forth its functions and responsibilities. A copy of the current
charter is available on our website at www.lear.com or in
printed form upon request.
In consultation with the Companys management, the
Compensation Committee establishes the general policies relating
to senior management compensation and oversees the development
and implementation of
85
such compensation programs. Accordingly, the Companys
human resources executives and staff support the Compensation
Committee in its work. These members of management work with
compensation consultants whose engagements have been approved by
the Committee, accountants and legal counsel, as necessary, to
implement the Compensation Committees decisions, to
monitor evolving competitive practices and to make compensation
recommendations to the Compensation Committee. The
Companys human resources management develops specific
compensation recommendations for senior executives, which are
first reviewed by senior management and then presented to the
Compensation Committee and its independent compensation
consultant. The Committee has final authority to approve, modify
or reject the recommendations and to make its decisions in
executive session. The Compensation Committee approves all
awards to executive officers. Under the Companys equity
award policy, an aggregate equity award pool to non-executives
may be approved by the Compensation Committee and allocated to
individuals by a committee consisting of the CEO and the
Chairman of the Compensation Committee.
The Compensation Committee has retained Towers Perrin as its
independent compensation consultant. The consultant reports
directly to the Committee as requested but also supports
management in the development and recommendation of compensation
programs and packages. The Compensation Committee has the sole
authority to approve the scope and terms of the engagement of
such compensation consultant and to terminate such engagement.
The mandate of the consultant is to serve the Company and work
for the Committee in its review of executive compensation
practices, including the competitiveness of pay levels, design
issues, market trends and technical considerations. Towers
Perrin has assisted the Committee with the development of
competitive market data and a related assessment of the
Companys executive compensation levels, evaluation of
long-term incentive grant strategy and compilation and review of
total compensation data and tally sheets (including data for
certain termination and change in control scenarios) for certain
of the Companys named executive officers. As part of this
process, the Committee also reviewed a comprehensive global
survey of peer group companies which was compiled by Towers
Perrin in 2006 and is generally compiled every two years.
The Executive Committee currently consists of
Messrs. Stern, McCurdy, Parrott, Rossiter, Spalding and
Wallace, with Mr. Stern serving as Chairman.
Mr. Wallace was appointed to the Executive Committee in May
2006. The Executive Committee meets, as needed, during intervals
between meetings of our Board and may exercise certain powers of
our Board relating to the general supervision and control of the
business and affairs of the Company. In 2006, the Executive
Committee held one meeting and executed four (4) written
consents.
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Nominating and Corporate Governance Committee |
In 2006, the Nominating and Corporate Governance Committee,
which held five (5) meetings during the year, consisted of
Messrs. Stern, Fry and Mallett, all of whom currently
remain members of the Committee. Mr. Stern served as the
Chairman of the Nominating and Corporate Governance Committee.
The Board of Directors has determined that the current members
of the Nominating and Corporate Governance Committee are
independent as defined in the listing standards of the NYSE.
The Nominating and Corporate Governance Committee is responsible
for, among other things: (i) identifying individuals
qualified to become members of the Board, consistent with
criteria approved by the Board; (ii) recommending to the
Board director nominees for the next annual meeting of the
stockholders of Lear; (iii) in the event of a vacancy on or
an increase in the size of the Board, recommending to the Board
director nominees to fill such vacancy or newly established
Board seat; (iv) recommending to the Board director
nominees for each committee of the Board; (v) establishing
and reviewing annually Lears Corporate Governance
Guidelines and Code of Business Conduct and Ethics; and
(vi) reviewing potential conflicts of interest involving
executive officers of Lear. The Nominating and Corporate
Governance Committee operates under a written charter setting
forth its functions and responsibilities. A copy of the current
charter is available on our website at www.lear.com or in
printed form upon request.
86
A Special Committee, comprised of Messrs. McCurdy,
Spalding, Stern and Wallace, held one (1) meeting in 2006.
The Special Committee was created for the purpose of reviewing
final terms of various refinancings in 2006.
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Recommendation of Directors by Stockholders |
In accordance with its charter, the Nominating and Corporate
Governance Committee will consider candidates for election as a
director of Lear recommended by any Lear stockholder, provided
that the recommending stockholder follows the same procedures
set forth in Section 2.3 of Lears By-Laws for
nominations by stockholders of persons to serve as directors.
Pursuant to Section 2.3 of the By-Laws, nominations of
persons for election to the Board at a meeting of stockholders
may be made by any stockholder of Lear entitled to vote for the
election of directors at the meeting who sends a timely notice
in writing to the Secretary of Lear. To be timely, a
stockholders notice must be delivered to, or mailed and
received by, the Secretary of Lear at the principal executive
offices of Lear not less than 60 nor more than 90 days
prior to the meeting; provided, however, that if Lear has not
publicly disclosed the date of the meeting at least
70 days prior to the meeting date, notice may be timely
made by a stockholder if received by the Secretary of Lear not
later than the close of business on the tenth day following the
day on which Lear publicly disclosed the meeting date. For
purposes of the By-Laws, publicly disclosed or
public disclosure means disclosure in a press
release reported by the Dow Jones News Service, Associated Press
or a comparable national news service or in a document publicly
filed by us with the SEC.
The stockholders notice or recommendation is required to
contain certain prescribed information about each person whom
the stockholder proposes to recommend for election as a
director, the stockholder giving notice and the beneficial
owner, if any, on whose behalf notice is given. The
stockholders notice must also include the consent of the
person proposed to be nominated and to serve as a director if
elected. Recommendations should be sent to Lear Corporation,
21557 Telegraph Road, Southfield, Michigan 48033; Attention:
Daniel A. Ninivaggi, Executive Vice President,
Secretary & General Counsel.
A copy of our By-Laws has been filed with the SEC as an exhibit
to our Current Report on
Form 8-K filed on
August 9, 2002.
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Criteria for Selection of Directors |
The following are the general criteria for the selection of
Lears directors that the Nominating and Corporate
Governance Committee utilizes in evaluating candidates for Board
membership. None of the following criteria should be construed
as minimum qualifications for director selection nor is it
expected that director nominees will possess all of the criteria
identified. Rather, they represent the range of complementary
talents, backgrounds and experiences that the Nominating and
Corporate Governance Committee believes would contribute to the
effective functioning of our Board. The general criteria set
forth below are not listed in any particular order of importance.
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Strong automotive background, with an understanding of
Lears customers and markets. |
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Extensive general business background with a record of
achievement. |
|
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|
Financial and accounting expertise. |
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Gender, racial and geographic diversity. |
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Strong international experience, particularly in those regions
in which Lear seeks to conduct business. |
|
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|
Understands the potential role of technology in the development
of Lears business. |
|
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|
Marketing or sales background in the automotive industry. |
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|
Schedule is sufficiently flexible to permit attendance at Board
meetings at regularly scheduled times. |
87
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|
A contributor but accepting of opinions of others and supportive
of decisions that are in the stockholders best interests. |
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|
Able to assimilate complex business problems and analyze them in
the context of Lears strategic goals. |
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A team player yet possessing independence to appropriately
question and challenge corporate strategy, as required. |
The Nominating and Corporate Governance Committee is responsible
for, subject to approval by the Board, establishing and
periodically reviewing the criteria for Board membership and
selection of new directors, including independence standards.
The Nominating and Corporate Governance Committee may also
recommend to the Board changes to the portfolio of director
skills, experience, perspective and background required for the
effective functioning of the Board considering Lears
strategy and its regulatory, geographic and market environments.
Any such changes to the director selection criteria must be
approved by the Board.
The Nominating and Corporate Governance Committee considers
candidates for Board membership suggested by its members and
other Board members, as well as management and stockholders.
Once a potential candidate has been identified, the Nominating
and Corporate Governance Committee evaluates the potential
candidate based on the Boards criteria for selection of
directors (described above) and the composition and needs of the
Board at the time.
If a director candidate were to be recommended by a stockholder
in accordance with the procedures set forth under
Recommendation of Directors by Stockholders above,
the Nominating and Corporate Governance Committee would evaluate
such candidate in the same manner in which it evaluates other
director candidates considered by the committee.
The Nominating and Corporate Governance Committee has approved
the retention of Russell Reynolds Associates, Inc., a
third-party search firm, to assist the committee with its search
for qualified director candidates. The firm has the task of
identifying potential director candidates based on the criteria
for the selection of Lears directors approved by the Board
of Directors.
88
DIRECTOR COMPENSATION
Compensation of Directors
As described more fully below, the following chart summarizes
the annual compensation for our non-employee directors during
2006.
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|
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|
|
|
|
|
|
|
|
|
|
|
Fees Earned or | |
|
|
|
|
|
|
|
|
Paid in Cash | |
|
Stock Awards | |
|
Options Awards | |
|
|
Name |
|
($)(1)(2) | |
|
($)(2)(3) | |
|
($)(2)(3) | |
|
Total($) | |
|
|
| |
|
| |
|
| |
|
| |
Anne K. Bingaman*
|
|
$ |
34,500 |
|
|
$ |
(20,417 |
) |
|
|
|
|
|
$ |
14,083 |
|
David E. Fry
|
|
$ |
64,500 |
|
|
$ |
77,917 |
|
|
$ |
13,549 |
|
|
$ |
155,966 |
|
Vincent J. Intrieri**
|
|
$ |
12,750 |
|
|
|
|
|
|
|
|
|
|
$ |
12,750 |
|
Conrad L. Mallett, Jr.
|
|
$ |
72,000 |
|
|
$ |
77,917 |
|
|
$ |
13,549 |
|
|
$ |
163,466 |
|
Larry W. McCurdy
|
|
$ |
114,000 |
|
|
$ |
77,917 |
|
|
$ |
13,549 |
|
|
$ |
205,466 |
|
Roy E. Parrott
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|
$ |
58,500 |
|
|
$ |
77,917 |
|
|
$ |
13,549 |
|
|
$ |
149,966 |
|
David P. Spalding
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|
$ |
83,500 |
|
|
$ |
77,917 |
|
|
$ |
13,549 |
|
|
$ |
174,966 |
|
James A. Stern
|
|
$ |
89,500 |
|
|
$ |
77,917 |
|
|
$ |
13,549 |
|
|
$ |
180,966 |
|
Henry D.G. Wallace
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|
$ |
70,500 |
|
|
$ |
77,917 |
|
|
|
|
|
|
$ |
148,417 |
|
Richard F. Wallman
|
|
$ |
82,500 |
|
|
$ |
77,917 |
|
|
$ |
13,549 |
|
|
$ |
173,966 |
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|
|
|
* |
Ms. Bingaman resigned from the Board effective May 31,
2006. |
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|
** |
Mr. Intrieri was elected to the Board on November 9,
2006. |
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(1) |
Includes cash retainer fees and meeting attendance fees, each as
discussed in more detail below. Dollar amounts are comprised as
follows: |
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|
|
|
Name |
|
Annual Retainer Fee($) | |
|
Aggregate Meeting Fees($) | |
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|
| |
|
| |
Anne K. Bingaman
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|
|
22,500 |
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|
12,000 |
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David E. Fry
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|
|
45,000 |
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|
|
19,500 |
|
Vincent J. Intrieri
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|
|
11,250 |
|
|
|
1,500 |
|
Conrad L. Mallett, Jr.
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|
|
45,000 |
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|
|
27,000 |
|
Larry W. McCurdy
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|
75,000 |
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|
|
39,000 |
|
Roy E. Parrott
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|
45,000 |
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|
|
13,500 |
|
David P. Spalding
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|
|
55,000 |
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|
|
28,500 |
|
James A. Stern
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|
|
55,000 |
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|
|
34,500 |
|
Henry D.G. Wallace
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|
|
45,000 |
|
|
|
25,500 |
|
Richard F. Wallman
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|
|
45,000 |
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|
|
37,500 |
|
|
|
(2) |
Non-employee directors may elect to defer portions of their cash
retainer and meeting fees into deferred stock units or an
interest bearing account under the Outside Directors
Compensation Plan. The following directors elected to defer the
following percentages of their cash retainer and meeting fees
earned in 2006: Dr. Fry 50% of retainer into
deferred stock units; Mr. Mallett 50% of
retainer into deferred stock units and 50% of retainer into
interest account; and Messrs. McCurdy, Spalding and
Stern 100% of retainer and meeting fees into
deferred stock units. |
89
|
|
|
The aggregate restricted unit awards, deferred stock units and
stock options outstanding for each director in the table set
forth above as of December 31, 2006 is as follows: |
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|
Name |
|
Aggregate Restricted Units | |
|
Deferred Stock Units | |
|
Stock Options | |
|
|
| |
|
| |
|
| |
Anne K. Bingaman
|
|
|
|
|
|
|
|
|
|
|
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|
David E. Fry
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|
|
4,645 |
|
|
|
2,036 |
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|
|
4,000 |
|
Vincent J. Intrieri
|
|
|
|
|
|
|
|
|
|
|
|
|
Conrad L. Mallett, Jr.
|
|
|
4,645 |
|
|
|
2,873 |
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|
|
4,000 |
|
Larry W. McCurdy
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|
|
4,645 |
|
|
|
14,422 |
|
|
|
10,250 |
|
Roy E. Parrott
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|
|
4,645 |
|
|
|
|
|
|
|
6,500 |
|
David P. Spalding
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|
|
4,645 |
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|
|
10,569 |
|
|
|
10,250 |
|
James A. Stern
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|
|
4,645 |
|
|
|
12,801 |
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|
|
10,250 |
|
Henry D.G. Wallace
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|
|
4,659 |
|
|
|
564 |
|
|
|
|
|
Richard F. Wallman
|
|
|
4,645 |
|
|
|
|
|
|
|
2,000 |
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|
|
(3) |
For the restricted unit and stock option grants, the value shown
is what is recognized (for current and prior grants) for
financial statement reporting purposes with respect to the
Companys 2006 financial statements in accordance with
FAS 123(R). The grant date fair value of the
January 31, 2006 restricted unit grant to the directors
(other than to Mr. Intrieri) was $90,000.
Mr. Intrieri, who became a director on November 9,
2006, did not receive a grant of restricted units in 2006. No
stock options were granted in 2006. The value reported in the
table for stock options represents the applicable portion of the
2004 option grants which was expensed in 2006. The amount for
Ms. Bingaman reflects the reversal of the compensation
costs of awards that were previously expensed by the Company
which she forfeited upon her resignation. See Note 11 of
the Companys financial statements for 2006, incorporated
by reference in this proxy statement, for the assumptions made
in determining FAS 123(R) values. |
Summary of Director Compensation
In 2006, non-employee directors were compensated pursuant to our
Outside Directors Compensation Plan, which provides for an
annual retainer of $45,000 for each of our non-employee
directors with an additional retainer of $20,000 for the
Chairman of the Audit Committee and an additional $10,000
retainer for each of the Chairmen of the Compensation Committee
and the Nominating and Corporate Governance Committee, as well
as for our Presiding Director. In addition, each non-employee
director received a fee of $1,500 for each Board and committee
meeting attended. The non-employee director annual retainer and
meeting fees were paid quarterly pursuant to the Outside
Directors Compensation Plan. Directors were also reimbursed for
their expenses incurred in attending meetings.
Pursuant to the Outside Directors Compensation Plan, each
non-employee director receives annually on the last business day
of each January, restricted units representing shares of Lear
common stock having a value of $90,000 on the date of the grant.
Restricted unit grants were made on January 31, 2006 to all
non-employee directors, other than to Mr. Intrieri, who was
elected to the Board on November 9, 2006 and received no
restricted units in 2006. The restricted units granted to
non-employee directors vest over the three-year period following
the grant date, with one-third of each recipients
restricted units vesting on each of the first three
anniversaries of the grant date. During the vesting period,
non-employee directors receive credits in a dividend equivalent
account equal to amounts that would be paid as dividends on the
shares represented by the restricted units. Once a restricted
unit vests, the non-employee director holding such restricted
unit will be entitled to receive a cash distribution equal to
the value of a share of Lear common stock on the date of
vesting, plus any amount in his or her dividend equivalent
account. The restricted units are also immediately vested upon a
directors termination of service due to death,
disability, retirement or upon a
change in control of Lear (as each such term is
defined in the Outside Directors Compensation Plan) prior to or
concurrent with the directors termination of service.
90
A non-employee director may elect to defer receipt of all or a
portion of his or her annual retainer and meeting fees, as well
as any cash payments made upon vesting of restricted units. At
the non-employee directors election, amounts deferred will
be:
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credited to a notional account and bear interest at an annual
rate equal to the prime rate (as defined in the Outside
Directors Compensation Plan); or |
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credited to a stock unit account. |
Each stock unit is equal in value to one share of Lear common
stock, but does not have voting rights. Stock units are credited
with dividend equivalents which are paid into an interest
account (credited with interest at an annual rate equal to the
prime rate (as defined in the Outside Directors Compensation
Plan)) if and when the Company declares and pays a dividend on
its common stock.
In general, amounts deferred are paid to a non-employee director
as of the earliest of:
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the date elected by such director; |
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the date the director ceases to be a director; or |
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the date a change of control (as defined in the Outside
Directors Compensation Plan) occurs. |
Amounts deferred are paid in cash in a single sum payment or, at
the directors election, in installments. Deferred stock
units are paid based on the fair market value of our common
stock on the payout date.
A non-employee director may elect to defer receipt of all or a
portion of the payment due to him or her when a restricted unit
vests, including the amount in his or her dividend equivalent
account. This deferral is generally subject to the same
requirements that apply to deferrals of the annual retainer and
meeting fees.
In February 1997, we implemented stock ownership guidelines for
non-employee directors. These ownership guidelines require each
non-employee director to own stock or deferred stock units equal
in value to three times the Base Retainer within five years of
becoming a director.
Directors who are also our employees receive no compensation for
their services as directors except reimbursement of expenses
incurred in attending meetings of our Board or Board committees.
91
PROPOSAL TO AMEND OUR AMENDED AND RESTATED CERTIFICATE
OF
INCORPORATION TO PROVIDE FOR THE ANNUAL ELECTION OF
DIRECTORS
(PROPOSAL NO. 4)
The Board recommends that stockholders approve certain
amendments to Lears Amended and Restated Certificate of
Incorporation (the Amendments) in order to eliminate
the current classified structure of the Board and phase in over
a three-year period the annual election of each member of the
Board. If stockholders approve the Amendments at the Annual
Meeting, corresponding changes to Lears By-Laws will also
take effect.
Currently, the Board is divided into three classes, with
directors in each class standing for election for three-year
terms, once every three years. If stockholders approve
Proposal No. 4 at the Annual Meeting, beginning at the
2008 Annual Meeting, successors to the class of directors whose
terms then expire will be elected for a one-year term expiring
at the next-succeeding Annual Meeting after their election, with
the effect that from and after the 2010 Annual Meeting, the
Board will be declassified and all directors will then stand for
annual election. Under the Amendments, the current members of
the Board, including those directors elected at the 2007 Annual
Meeting, will continue to serve out the remainder of their
stockholder-approved terms of office in order to ensure a smooth
transition to a system of annual elections before standing for
annual election upon the conclusion of their existing terms.
In making its determination to recommend declassification, the
Board considered arguments both for and against the classified
board structure. Weighing in favor of the classified board
structure is the Boards belief that historically a
classified board structure with staggered three-year terms has
helped ensure that at any given point at least two-thirds of the
Lear Board has prior experience and familiarity with our
business and the complex global markets in which we operate. The
Board believes that such long-term institutional knowledge
benefits Lear and enables the Board to provide long-term
strategic planning. The Board also considered the fact that a
classified board structure may help safeguard Lear against
unsolicited third-party efforts to take control of Lear without
paying fair value for Lears business and assets, by
preventing the unilateral removal of directors by a potential
acquirer at a single annual meeting. The Board also considered
the possibility that the classified board structure enhances the
independence of the non-employee directors who sit on the Board.
On the other hand, the Board recognizes an emerging consensus
among investors that the classified board structure may reduce
the accountability of directors to stockholders by decreasing
the frequency with which such directors stand for re-election.
The Board also recognizes that director elections are the
primary means by which Lear stockholders affect corporate
management and thus that the classified board structure may have
an adverse impact on stockholder influence over company policy.
The Board also took into consideration the fact that at
Lears 2006 Annual Meeting of Stockholders, a substantial
majority of Lears stockholders voted in favor of a
proposal requesting that directors take the steps necessary to
declassify the Board. After weighing these factors, the Board,
upon the recommendation of the Nominating and Corporate
Governance Committee, has determined that it is an appropriate
time to propose declassifying the board and believes the
Amendments are advisable and in the best interests of Lear and
its stockholders.
92
Vacancies on the Board
Generally, vacancies on the Board are currently treated, and
will be treated pursuant to the Amendments, if adopted, as set
forth in the table below.
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Terms of office for directors |
|
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elected to fill vacancies resulting |
|
Terms of office for directors |
|
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from an increase in the size of a |
|
elected to fill vacancies not |
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class of directors/increase in the |
|
resulting from an increase in |
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Who fills vacancies? |
|
number of directors |
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the number of directors |
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Current vacancy provisions
|
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Majority of the Board, subject to certain restrictions. |
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Same term as the remaining term of the class into which he or
she was elected. |
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Same term as his or her predecessor. |
Vacancy provisions under the Amendments
|
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Majority of the Board, subject to certain restrictions. |
|
For directors elected to fill such vacancies from and after the
2010 Annual Meeting of Stockholders, the term shall expire at
the annual meeting of stockholders next following his or her
election. |
|
Same term as his or her predecessor. |
Removal of Directors
Under Delaware law, absent a provision in the certificate of
incorporation which otherwise provides, stockholders may remove
directors only for cause while a board is classified. For
Delaware corporations without a classified board, the holders of
a majority in voting power of the stock entitled to vote at an
election of directors are entitled to remove directors with or
without cause. Therefore, if stockholders approve the Amendments
at the Annual Meeting, amendments to Lears By-Laws
(previously approved by the Board, but subject to stockholder
approval of Proposal No. 4 and the effectiveness of
the Amendments) will automatically become effective. These
By-Law amendments provide that, from and after the 2010 Annual
Meeting, Lears directors may be removed with or without
cause by the vote of stockholders holding a majority of the
voting power entitled to vote on directors generally.
Text of the Amendments
The text of the proposed Amendments to Lears Amended and
Restated Certificate of Incorporation is attached to this proxy
statement as Appendix H, with deletions indicated by
strike-outs and additions indicated by double-underlining. If
the proposal is approved by the stockholders, conforming
amendments to Lears By-Laws as indicated in the attached
Appendix I with deletions again indicated by strike-outs
and additions by double-underlining, will become effective. The
summaries above of the Amendments and the amendments to the
By-Laws are qualified in their entirety to the text of such
documents set forth in Appendices H and I.
Vote Required for Approval
Approval of the Amendments requires the affirmative vote of the
holders of a majority of outstanding shares of Lears
common stock entitled to vote on Proposal No. 4.
Effectiveness of Amendments
If approved, the Amendments will become effective upon the
filing of a Certificate of Amendment to Lears Amended and
Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware, which Lear would file as soon as
practicable following the Annual Meeting. If the proposal is not
approved by the requisite stockholder vote, the Board will
remain classified.
YOUR BOARD RECOMMENDS A VOTE FOR THIS
PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
THE PROPOSAL
UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
93
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC
ACCOUNTING FIRM
(PROPOSAL NO. 5)
Our Audit Committee has appointed Ernst & Young LLP as
our independent registered public accounting firm for the year
ending December 31, 2007. A proposal will be presented at
the meeting to ratify this appointment. Ratification of the
appointment of our independent registered public accounting firm
requires the affirmative vote of the majority of shares present
in person or represented by proxy at the meeting and entitled to
vote. If the stockholders fail to ratify such selection, another
independent registered public accounting firm will be considered
by our Audit Committee, but the Audit Committee may nonetheless
choose to engage Ernst & Young LLP. Even if the
appointment of Ernst & Young LLP is ratified, the Audit
Committee in its discretion may select a different independent
registered public accounting firm at any time during the year if
it determines that such a change would be in the best interests
of Lear and its stockholders. We have been advised that a
representative of Ernst & Young LLP will be present at
the meeting and will be available to respond to appropriate
questions and, if such person chooses to do so, make a statement.
YOUR BOARD RECOMMENDS A VOTE FOR RATIFICATION
OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2007.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR
THE PROPOSAL UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
94
STOCKHOLDER PROPOSAL
(PROPOSAL NO. 6)
The Office of the Comptroller of the City of New York, Bureau of
Asset Management, at 1 Centre Street, Room 736, New York,
NY 10007-2341, as custodian and trustee of the New York City
Police Pension Fund, owner of 27,900 shares of our common
stock, the New York City Teachers Retirement System, owner
of 59,719 shares, and the New York City Fire Department
Pension Fund, owner of 7,550 shares, and as custodian of
the New York City Board of Education Retirement System, owner of
4,100 shares, has advised Lear of its intention to present
the following resolution at the Annual Meeting. The foregoing
shareholdings are based on information provided to us by the
Office of the Comptroller of the City of New York. We have not
independently verified such information. In accordance with
applicable proxy regulations, the proposed resolution and
supporting statement, for which Lear accepts no responsibility,
are set forth below.
Director Election Majority Vote Standard Proposal
Submitted by William C. Thompson, Jr., Comptroller,
City of New York, on behalf of the Boards of Trustees of the New
York City Pension Funds
Resolved: That the shareholders of Lear Corporation
(Company) hereby request that the Board of Directors
initiate the appropriate process to amend the Companys
governance documents (certificate of incorporation or bylaws) to
provide that director nominees shall be elected by the
affirmative vote of the majority of votes cast at an annual
meeting of shareholders, with a plurality vote standard retained
for contested director elections, that is, when the number of
director nominees exceeds the number of board seats.
Supporting Statement:
In order to provide shareholders a meaningful role in director
elections, our Companys director election vote standard
should be changed to a majority vote standard. A majority vote
standard would require that a nominee receive a majority of the
votes cast in order to be elected. The standard is particularly
well-suited for the vast majority of director elections in which
only board nominated candidates are on the ballot. We believe
that a majority vote standard in board elections would establish
a challenging vote standard for board nominees and improve the
performance of individual directors and entire boards. Our
Company presently uses a plurality vote standard in all director
elections. Under the plurality vote standard, a nominee for the
board can be elected with as little as a single affirmative
vote, even if a substantial majority of the votes cast are
withheld from the nominee.
In response to strong shareholder support for a majority vote
standard in director elections, an increasing number of
companies, including Intel, Dell, Motorola, Texas Instruments,
Safeway, Home Depot, Gannett, and Supervalu, have adopted a
majority vote standard in company by-laws. Additionally, these
companies have adopted director resignation policies in their
bylaws or corporate governance policies to address post-election
issues related to the status of director nominees that fail to
win election. Other companies have responded only partially to
the call for change by simply adopting post-election director
resignation policies that set procedures for addressing the
status of director nominees that receive more
withhold votes than for votes. At the
time of the submission of this proposal, our Company and its
board had not taken either action.
We believe the critical first step in establishing a meaningful
majority vote policy is the adoption of a majority vote standard
in Company governance documents. Our Company needs to join the
growing list of companies that have taken this action. With a
majority vote standard in place, the board can then consider
action on developing post election procedures to address the
status of directors that fail to win election. A combination of
a majority vote standard and a post-election director
resignation policy would establish a meaningful right for
shareholders to elect directors, while reserving for the board
an important post-election role in determining the continued
status of an unelected director. We feel that this combination
of the majority vote standard with a post-election policy
represents a true majority vote standard.
95
Board of Directors Statement in Opposition to
Proposal No. 6
The Board recommends a vote AGAINST the foregoing
shareholder proposal because it is not in the best interests of
Lear or its stockholders. Our Board believes that meaningful
stockholder participation in the election of the Companys
directors is critical to the Companys long term success.
Of equal importance is that the Companys election
procedures provide for certainty in the election of a qualified
board that satisfies applicable legal and regulatory
requirements. The proposal sacrifices the latter in favor of the
former.
Like most large public companies incorporated in Delaware and
elsewhere, Lear employs a plurality voting standard for director
elections, which ensures that nominees who receive the most
affirmative votes are elected to the Board, regardless of
whether such nominees received a majority of votes cast. Unlike
a majority vote standard, which is a relatively recent
innovation, plurality voting enjoys a long track record. Because
the plurality system applies equally to any candidate nominated
for election to the Board, whether or not such candidate is
nominated by stockholders or management, the Board firmly
believes that the plurality system is both fair and impartial.
The risks of adopting a majority vote standard in director
elections include certain unresolved issues with majority
voting, such as how to proceed under a majority vote standard
with respect to elections in which few or no candidates receive
a majority vote. Lear is a Delaware corporation, and under
current Delaware law an incumbent director continues in office
until her or her successor is elected and qualified or until the
incumbent director is removed or retires. In elections of
incumbent directors, this so-called holdover rule
would result in a majority vote standard representing only a
symbolic change from the plurality voting system, since
incumbent directors who are not elected by a majority vote would
nonetheless remain in office.
The proponent has advocated adopting a director resignation
policy which would, in effect, alter the holdover rule. While
the proponent does not clearly describe the type of resignation
policy it advocates, under a typical resignation policy, if a
director receives less than a majority of votes cast on his or
her election, he or she must tender a resignation, which the
board then reviews and determines whether to accept. A majority
vote standard with this type of resignation policy could bring
about other serious adverse legal and practical consequences
which the proponent fails to address. For example, if
stockholders approve managements Proposal No. 4
at the Annual Meeting, all members of the Board will be up for
re-election in 2010. As a result, if multiple directors do not
receive a majority of for votes and therefore are
required to resign, this could create a large number of
immediate board vacancies. This in turn could trigger change in
control provisions in the Companys various compensation
plans and contractual arrangements (which could have serious
consequences to the Company), give unwarranted influence to
special interest voters, or result in immediate non-compliance
with SEC laws and regulations and/or NYSE listing standards. The
proponent makes no recommendation for addressing any of these
possible scenarios which could result if Lear adopts majority
voting with a resignation policy. While some large public
companies have embraced a majority vote standard and/or adopted
director resignation policies, the Board believes that caution
in this still-developing area of corporate governance is the
most prudent approach.
The Board will continue monitoring the debate surrounding the
majority vote standard and will take any appropriate actions to
maintain Lears high standards of corporate governance. The
Board believes that it is in the best interests of the Company
and its stockholders to maintain plurality voting. Lear has
implemented strong corporate governance procedures designed to
nominate directors who will further the best interests of the
Company and its stockholders. The Board maintains a Nominating
and Corporate Governance Committee that is composed entirely of
independent directors and nine of the 11 members of the Board
are independent. Further, the Board has consistently received
broad stockholder support. For example, in the last five years,
directors were supported by an average vote of 91.8% of votes
cast and no director received more withhold votes
than for votes. As a result, the proponents
proposal would not have had any effect on director elections
during that period of time. The Board believes that these votes
reflect stockholders confidence in the Board and in the
governance protections the Board has implemented. In addition,
the Board is highly responsive to stockholder votes and, as a
result, would consider any vote result in which a director
received less
96
than a majority of for votes. For example, at the
Companys 2006 Annual Meeting, stockholders overwhelmingly
voted in favor of a stockholder proposal requesting Board
declassification. As a result of that vote and other factors,
the Board has recommended that stockholders vote for
Proposal No. 4 to declassify the Board. For these
reasons, we urge you to vote against this proposal.
YOUR BOARD RECOMMENDS A VOTE AGAINST THIS
STOCKHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
AGAINST THE PROPOSAL
UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
97
STOCKHOLDER PROPOSAL
(PROPOSAL NO. 7)
The Office of the Comptroller of the City of New York at 1
Centre Street, New York, NY 10007-2341, as custodian and trustee
of the New York City Employees Retirement System, the
owner of 54,941 shares of our common stock, has advised
Lear of its intention to present the following resolution at the
Annual Meeting. The foregoing shareholdings are based on
information provided to us by the Office of the Comptroller of
the City of New York. We have not independently verified such
information. In accordance with applicable proxy regulations,
the proposed resolution and supporting statement, for which Lear
accepts no responsibility, are set forth below.
LEAR CORPORATION
GLOBAL HUMAN RIGHTS STANDARDS
Submitted by William C. Thompson, Jr., Comptroller,
City of New York ,on behalf of the Board of Trustees of the New
York City Employees Retirement System
Whereas, Lear Corporation currently has overseas
operations, and
Whereas, reports of human rights abuses in the overseas
subsidiaries and suppliers of
U.S.-based corporations
has led to an increased public awareness of the problems of
child labor, sweatshop conditions, and the denial of
labor rights in U.S. corporate overseas operations, and
Whereas, corporate violations of human rights in these
overseas operations can lead to negative publicity, public
protests, and a loss of consumer confidence which can have a
negative impact on shareholder value, and
Whereas, a number of corporations have implemented
independent monitoring programs with respected human rights and
religious organizations to strengthen compliance with
international human rights norms in subsidiary and supplier
factories, and
Whereas, many of these programs incorporate the
conventions of the International Labor Organization
(ILO) on workplace human rights, and the United
Nations Norms on the Responsibilities of Transnational
Corporations with Regard to Human Rights (UN Norms),
which include the following principles:
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1. |
All workers have the right to form and join trade unions and to
Bargain collectively. (ILO Conventions 87 and 98; UN Norms,
section D9). |
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2. |
Workers representatives shall not be the subject of
discrimination and shall have access to all workplaces necessary
to enable them to carry out their representation functions. (ILO
Convention 135; UN Norms, section D9) |
|
|
3. |
There shall be no discrimination or intimidation in employment.
Equality of opportunity and treatment shall be provided
regardless of race, color, sex, religion, political opinion,
age, nationality, social origin or other distinguishing
characteristics. (ILO Conventions 100 and 111;UN Norms,
section B2). |
|
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4. |
Employment shall be freely chosen. There shall be no use of
force, including bonded or prison labor. (ILO
Conventions 29 and 105; UN Norms, section D5). |
|
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5. |
There shall be no use of child labor. (ILO Convention 138; UN
Norms, section D6), and, |
Whereas, independent monitoring of corporate adherence to
these internationally recognized principles is essential if
consumer and investor confidence in our companys
commitment to human rights is to be maintained,
Therefore, be it resolved that the shareholders request
that the company commit itself to the implementation of a code
of conduct based on the aforementioned ILO human rights
standards and United Nations Norms on the Responsibilities
of Transnational Corporations with Regard to Human Rights, by
its international suppliers and in its own international
production facilities, and commit to a program of outside,
independent monitoring of compliance with these standards.
98
Board of Directors Statement in Opposition to
Proposal No. 7
The Board recommends a vote AGAINST the foregoing
stockholder proposal because it is not in the best interests of
Lear or its stockholders.
Lear fully supports ethical business principles and human rights
standards and the Board believes that Lears compliance
program and existing monitoring practices are effective in
ensuring compliance with these standards. Lear has a
long-standing record of support for, and promotion of, workplace
human rights. Lear also requires its employees to observe high
standards of ethical conduct and business practices and strives
to do business with those who demonstrate high ethical standards
and behavior.
Lear maintains a Code of Business Conduct and Ethics (the
Code). The Code (1) requires that all of
Lears business be conducted in compliance with the letter
and spirit of applicable laws, (2) allows Lear to purchase
products only from reputable and qualified individuals or firms,
(3) states that Lear is committed to providing equal
opportunity in all aspects of employment and will not tolerate
any illegal discrimination or harassment of any kind,
(4) states that Lear is committed to maintaining high
standards of business conduct in the United States and abroad,
(5) specifically prohibits the use of child and/or forced
labor by Lear or its suppliers and states that Lear will conduct
periodic monitoring of compliance with these and other labor
policies, and (6) provides employees with the right of
freedom of association and collective bargaining. The Code is
translated into nine languages and is available to all
employees. Lear provides training regarding the Code to its
employees, including web-based training where possible.
In addition, Lear maintains a global anti-discrimination policy
which prohibits illegal discrimination and states that Lear will
treat all individuals with dignity and respect and will conduct
its business ethically. This policy is reflected in the Code,
Lears Equal Employment Opportunity Policy and Lears
Harassment Free Workplace Policy. Lears Environmental
Health and Safety Policy confirms that Lear is dedicated to
employee health and safety. Lears Vision/ Mission
Statement contains a mission statement that Lear will conduct
its business with integrity and will maintain an environment
that is safe and clean and that treats all individuals with
respect and dignity. Each of these documents provides a uniform
set of workplace standards and principles that apply to the
worldwide operations of Lear and its affiliates. Further,
Lears posture with respect to labor relations is that
employees have the right to choose (or not) to affiliate with
legally sanctioned organizations without unlawful interference,
and where trade unions are present Lear deals with them fairly
and conducts negotiations in a purposeful and non-adversarial
manner. Lear is proud of its longstanding history of positive
relationships with the unions that represent its employees
worldwide. Lear has also adopted a Global Working Conditions
Policy which prohibits Lear from using any type of forced labor,
child labor or abusive or corrupt business practices.
In addition to the foregoing, Lears Global Purchasing
Terms and Conditions (the Terms and Conditions)
prohibit suppliers and their subcontractors from using any type
of forced or child labor, or engaging in abusive or corrupt
business practices. Lear may terminate a business relationship
if a supplier violates the Terms and Conditions. Lear also has
the right to audit and monitor suppliers compliance with
the Terms and Conditions. Further, the Terms and Conditions
prohibit Lears suppliers from using any third party to
perform any act that is prohibited by the Code. These Terms and
Conditions are consistent with Lears agreements with its
major customers.
Lear monitors and enforces the Code, the Terms and Conditions
and other policies affecting workplace human rights through a
compliance program that includes oversight by a Compliance
Committee, made up of various members of senior management, that
reviews Lears compliance efforts, assesses its programs,
facilitates the monitoring, auditing and evaluation of its
programs and periodically reports its progress to the Audit
Committee. Lears compliance function oversees the
worldwide distribution of these policies and compliance with
such standards. An annual Conflicts of Interest/ Code of Conduct
Questionnaire, which was electronically distributed to over
3,000 employees in 2006, requires confirmation that employees
have received and read the Code and have reported violations.
Results of this questionnaire are reported to Lears Audit
Committee. The compliance program allows Lear employees to
anonymously report potential violations either to an intranet
site, an internal email account or a post office box. An
employee can also report violations to his or her local
supervisor, the human resources department, the legal department
or the board of directors. Such
99
reports are investigated and action is taken as needed to
address any violations and to prevent reoccurrence. Retaliation
against whistleblowers is not tolerated. Furthermore, Lear
regularly assesses the effectiveness of its compliance programs.
The Board believes that the one-size-fits-all
approach in the stockholder proposal is inappropriate for
Lears complex, global business. It also believes that the
Code, the Terms and Conditions and Lears other policies
and business practices address the substantive areas covered by
the stockholder proposal and that its existing monitoring
processes effectively ensure compliance with the business
principles and human rights standards advocated by the
proponent. Furthermore, our management reviews and amends our
policies and practices as necessary and is committed to their
enforcement worldwide. Therefore, the Board believes that
modifying such practices and standards would not provide any
added benefits beyond those already achieved by our existing
compliance program. The Board also believes that independent
monitoring would not provide sufficient additional benefits to
warrant the substantial incremental costs. As a result, the
Board does not believe that implementation of the stockholder
proposal would be in the best interests of Lear or its
stockholders.
YOUR BOARD RECOMMENDS A VOTE AGAINST THIS
STOCKHOLDER PROPOSAL.
PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED
AGAINST THE PROPOSAL
UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.
100
IMPORTANT INFORMATION REGARDING LEAR
Executive Officers of Lear
The table below sets forth the names, ages and positions of our
executive officers. Executive officers are elected annually by
our Board of Directors and serve at the pleasure of our Board.
None of the persons named herein have been, during the last five
years: (a) convicted in a criminal proceeding (excluding traffic
violations and similar violations and misdemeanors); or (b)
party to any judicial or administrative proceeding (except for
matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree of final order enjoining any
filing person from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
Unless otherwise noted, each natural person named herein is a
United States citizen.
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Name |
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Age | |
|
Position |
|
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| |
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James M. Brackenbury
|
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48 |
|
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Senior Vice President and President, European Operations |
Shari L. Burgess
|
|
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48 |
|
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Vice President and Treasurer |
Douglas G. DelGrosso
|
|
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45 |
|
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President and Chief Operating Officer |
Roger A. Jackson
|
|
|
60 |
|
|
Senior Vice President, Human Resources |
James L. Murawski
|
|
|
55 |
|
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Vice President and Corporate Controller |
Daniel A. Ninivaggi
|
|
|
42 |
|
|
Executive Vice President, Secretary and General Counsel |
Robert E. Rossiter
|
|
|
61 |
|
|
Chairman and Chief Executive Officer |
Raymond E. Scott
|
|
|
41 |
|
|
Senior Vice President and President, North American Seating
Systems Group |
Matthew J. Simoncini
|
|
|
46 |
|
|
Senior Vice President, Finance and Chief Accounting Officer |
James H. Vandenberghe
|
|
|
57 |
|
|
Vice Chairman and Chief Financial Officer |
Set forth below is a description of the business experience of
each of our executive officers.
|
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James M. Brackenbury |
|
Mr. Brackenbury is our Senior Vice President and President,
European Operations, a position he has held since September
2006. Previously, he served as our Senior Vice President and
President, North American Seating Operations from April 2006
until September 2006 and our President, Mexican/ Central
American Regional Group from November 2004 until September 2006.
Prior to that, he served as our President, DaimlerChrysler
Division since December 2003 and in other positions dating back
to 1983 when he joined Lear as a product engineer. |
|
Shari L. Burgess |
|
Ms. Burgess is our Vice President and Treasurer, a position
she has held since August 2002. Previously, she served as our
Assistant Treasurer since July 2000 and in various financial
positions since November 1992. |
|
Douglas G. DelGrosso |
|
Mr. DelGrosso is our President and Chief Operating Officer,
a position he has held since May 2005. Previously, he served as
our President and Chief Operating Officer Americas
since August 2004, our President and Chief Operating
Officer Europe, Asia and Africa since August 2002,
our Executive Vice President International since
September 2001, our Senior Vice President Product
Focus Group since October 2000 and our Senior Vice President and
President North American and South American
Operations since May 1999. Prior to this, Mr. DelGrosso
held several senior operational positions and has been employed
by Lear since 1984. |
|
Roger A. Jackson |
|
Mr. Jackson is our Senior Vice President, Human Resources,
a position he has held since October 1995. Prior to joining
Lear, he was employed as Vice President, Human Resources at
Allen Bradley, a wholly-owned |
101
|
|
|
|
|
subsidiary of Rockwell International, since 1991.
Mr. Jackson was employed by Rockwell International or one
of its subsidiaries from December 1977 until September 1995. |
|
James L. Murawski |
|
Mr. Murawski is our Vice President and Corporate
Controller, a position he has held since March 2005. Previously,
he served as our Vice President of Internal Audit since June
2003. Prior to joining Lear, Mr. Murawski was employed in
public accounting at Deloitte & Touche for fourteen
years and in various financial positions at Collins &
Aikman Corporation, TRW Automotive and LucasVarity. |
|
Daniel A. Ninivaggi |
|
Mr. Ninivaggi is our Executive Vice President, Secretary
and General Counsel, a position he has held since August 2006.
Mr. Ninivaggi also serves as our Chief Administrative
Officer. Previously, he served as our Senior Vice President,
Secretary and General Counsel since June 2004 and joined Lear as
our Vice President, Secretary and General Counsel in July 2003.
Prior to joining Lear, Mr. Ninivaggi was a partner since
1998 of Winston & Strawn LLP, specializing in corporate
finance, securities law and mergers and acquisitions. |
|
Robert E. Rossiter |
|
Mr. Rossiter is our Chairman and Chief Executive Officer, a
position he has held since January 2003. Mr. Rossiter has
served as our Chief Executive Officer since October 2000, as our
President from 1984 until December 2002 and as our Chief
Operating Officer from 1988 until April 1997 and from November
1998 until October 2000. Mr. Rossiter also served as our
Chief Operating Officer International Operations
from April 1997 until November 1998. Mr. Rossiter has been
a director of Lear since 1988. |
|
Raymond E. Scott |
|
Mr. Scott is our Senior Vice President and President, North
American Seating Systems Group, a position he has held since
August 2006. Previously, he served as our Senior Vice President
and President, North American Customer Group since June 2005,
our President, European Customer Focused Division since June
2004 and our President, General Motors Division since November
2000. |
|
Matthew J. Simoncini |
|
Mr. Simoncini is our Senior Vice President, Finance and
Chief Accounting Officer, a position he has held since August
2006. Previously, he served as our Vice President, Global
Finance since February 2006, our Vice President of Operational
Finance since June 2004, our Vice President of
Finance Europe since 2001 and prior to 2001, in
various senior financial positions for both Lear and United
Technologies Automotive, which was acquired by Lear in 1999. |
|
James H. Vandenberghe |
|
Mr. Vandenberghe is our Vice Chairman, a position he has
held since November 1998, and has served as our Chief Financial
Officer since March 2006. Mr. Vandenberghe also served as
our President and Chief Operating Officer North
American Operations from April 1997 until November 1998, our
Chief Financial Officer from 1988 until April 1997 and as our
Executive Vice President from 1993 until April 1997.
Mr. Vandenberghe has been a director of Lear since 1995. |
102
Selected Financial Data
The following statement of operations, balance sheet and cash
flow statement data were derived from our consolidated financial
statements. Our consolidated financial statements for the years
ended December 31, 2006, 2005, 2004, 2003 and 2002, have
been audited by Ernst & Young LLP. The selected
financial data below should be read in conjunction with our
consolidated financial statements and the notes thereto filed
with the SEC, which are incorporated by reference in this proxy
statement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, |
|
2006(1) | |
|
2005(2) | |
|
2004 | |
|
2003 | |
|
2002 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(In millions)(3) | |
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$ |
17,838.9 |
|
|
$ |
17,089.2 |
|
|
$ |
16,960.0 |
|
|
$ |
15,746.7 |
|
|
$ |
14,424.6 |
|
|
Gross profit
|
|
|
927.7 |
|
|
|
736.0 |
|
|
|
1,402.1 |
|
|
|
1,346.4 |
|
|
|
1,260.3 |
|
|
Selling, general and administrative expenses
|
|
|
646.7 |
|
|
|
630.6 |
|
|
|
633.7 |
|
|
|
573.6 |
|
|
|
517.2 |
|
|
Goodwill impairment charges
|
|
|
2.9 |
|
|
|
1,012.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on divestiture of Interior business
|
|
|
636.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
209.8 |
|
|
|
183.2 |
|
|
|
165.5 |
|
|
|
186.6 |
|
|
|
210.5 |
|
|
Other expense, net(4)
|
|
|
85.7 |
|
|
|
38.0 |
|
|
|
38.6 |
|
|
|
51.8 |
|
|
|
52.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before provision for income taxes, minority
interests in consolidated subsidiaries, equity in net (income)
loss of affiliates and cumulative effect of a change in
accounting principle
|
|
|
(653.4 |
) |
|
|
(1,128.6 |
) |
|
|
564.3 |
|
|
|
534.4 |
|
|
|
480.5 |
|
|
Provision for income taxes
|
|
|
54.9 |
|
|
|
194.3 |
|
|
|
128.0 |
|
|
|
153.7 |
|
|
|
157.0 |
|
|
Minority interests in consolidated subsidiaries
|
|
|
18.3 |
|
|
|
7.2 |
|
|
|
16.7 |
|
|
|
8.8 |
|
|
|
13.3 |
|
|
Equity in net (income) loss of affiliates
|
|
|
(16.2 |
) |
|
|
51.4 |
|
|
|
(2.6 |
) |
|
|
(8.6 |
) |
|
|
(1.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of a change in accounting
principle
|
|
|
(710.4 |
) |
|
|
(1,381.5 |
) |
|
|
422.2 |
|
|
|
380.5 |
|
|
|
311.5 |
|
|
Cumulative effect of a change in accounting principle, net of
tax(5)
|
|
|
2.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(298.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(707.5 |
) |
|
$ |
(1,381.5 |
) |
|
$ |
422.2 |
|
|
$ |
380.5 |
|
|
$ |
13.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share
|
|
$ |
(10.31 |
) |
|
$ |
(20.57 |
) |
|
$ |
6.18 |
|
|
$ |
5.71 |
|
|
$ |
0.20 |
|
|
Diluted net income (loss) per share(6)
|
|
$ |
(10.31 |
) |
|
$ |
(20.57 |
) |
|
$ |
5.77 |
|
|
$ |
5.31 |
|
|
$ |
0.29 |
|
|
Weighted average shares outstanding basic
|
|
|
68,607,262 |
|
|
|
67,166,668 |
|
|
|
68,278,858 |
|
|
|
66,689,757 |
|
|
|
65,365,218 |
|
|
Weighted average shares outstanding diluted(6)
|
|
|
68,607,262 |
|
|
|
67,166,668 |
|
|
|
74,727,263 |
|
|
|
73,346,568 |
|
|
|
71,289,991 |
|
|
Dividends per share
|
|
$ |
0.25 |
|
|
$ |
1.00 |
|
|
$ |
0.80 |
|
|
$ |
0.20 |
|
|
$ |
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
$ |
3,890.3 |
|
|
$ |
3,846.4 |
|
|
$ |
4,372.0 |
|
|
$ |
3,375.4 |
|
|
$ |
2,507.7 |
|
|
Total assets
|
|
|
7,850.5 |
|
|
|
8,288.4 |
|
|
|
9,944.4 |
|
|
|
8,571.0 |
|
|
|
7,483.0 |
|
|
Current liabilities
|
|
|
3,887.3 |
|
|
|
4,106.7 |
|
|
|
4,647.9 |
|
|
|
3,582.1 |
|
|
|
3,045.2 |
|
|
Long-term debt
|
|
|
2,434.5 |
|
|
|
2,243.1 |
|
|
|
1,866.9 |
|
|
|
2,057.2 |
|
|
|
2,132.8 |
|
|
Stockholders equity
|
|
|
602.0 |
|
|
|
1,111.0 |
|
|
|
2,730.1 |
|
|
|
2,257.5 |
|
|
|
1,662.3 |
|
Statement of Cash Flows Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
$ |
285.3 |
|
|
$ |
560.8 |
|
|
$ |
675.9 |
|
|
$ |
586.3 |
|
|
$ |
545.1 |
|
|
Cash flows from investing activities
|
|
|
(312.2 |
) |
|
|
(541.6 |
) |
|
|
(472.5 |
) |
|
|
(346.8 |
) |
|
|
(259.3 |
) |
|
Cash flows from financing activities
|
|
|
277.4 |
|
|
|
(347.0 |
) |
|
|
166.1 |
|
|
|
(158.6 |
) |
|
|
(295.8 |
) |
|
Capital expenditures
|
|
|
347.6 |
|
|
|
568.4 |
|
|
|
429.0 |
|
|
|
375.6 |
|
|
|
272.6 |
|
Other Data (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges(7)
|
|
|
|
|
|
|
|
|
|
|
3.7 |
x |
|
|
3.4 |
x |
|
|
3.0x |
|
|
Employees as of year end
|
|
|
104,276 |
|
|
|
115,113 |
|
|
|
110,083 |
|
|
|
111,022 |
|
|
|
114,694 |
|
|
North American content per vehicle(8)
|
|
$ |
646 |
|
|
$ |
586 |
|
|
$ |
588 |
|
|
$ |
593 |
|
|
$ |
579 |
|
|
North American vehicle production(9)
|
|
|
15.2 |
|
|
|
15.8 |
|
|
|
15.7 |
|
|
|
15.9 |
|
|
|
16.4 |
|
|
European content per vehicle(10)
|
|
$ |
335 |
|
|
$ |
345 |
|
|
$ |
351 |
|
|
$ |
310 |
|
|
$ |
247 |
|
|
European vehicle production(11)
|
|
|
19.2 |
|
|
|
18.9 |
|
|
|
18.9 |
|
|
|
18.2 |
|
|
|
18.1 |
|
103
|
|
(1) |
Results include $636.0 million of charges related to the
divestiture of the Interior business, $2.9 million of
goodwill impairment charges, $10.0 million of fixed asset
impairment charges, $99.7 million of restructuring and
related manufacturing inefficiency charges (including
$5.8 million of fixed asset impairment charges),
$47.9 million of charges related to the extinguishment of
debt, $26.9 million of gains related to the sales of our
interests in two affiliates and $19.5 million of net tax
benefits related to the expiration of the statute of limitations
in a foreign taxing jurisdiction, a tax audit resolution, a
favorable tax ruling and several other tax items. |
|
(2) |
Results include $1,012.8 million of goodwill impairment
charges, $82.3 million of fixed asset impairment charges,
$104.4 million of restructuring and related manufacturing
inefficiency charges (including $15.1 million of fixed
asset impairment charges), $39.2 million of
litigation-related charges, $46.7 million of charges
related to the divestiture and/or capital restructuring of joint
ventures, $300.3 million of tax charges, consisting of a
U.S. deferred tax asset valuation allowance of
$255.0 million and an increase in related tax reserves of
$45.3 million, and a tax benefit related to a tax law
change in Poland of $17.8 million. |
|
(3) |
Except per share data, weighted average shares outstanding,
ratio of earnings to fixed charges, employees as of year end and
content per vehicle information. |
|
(4) |
Includes state and local non-income taxes, foreign exchange
gains and losses, discounts and expenses associated with our
asset-backed securitization and factoring facilities, losses on
the extinguishment of debt, gains and losses on the sales of
fixed assets and other miscellaneous income and expense. |
|
(5) |
The cumulative effect of a change in accounting principle in
2006 resulted from the adoption of Statement of Financial
Accounting Standards No. 123(R), Share Based
Payment. The cumulative effect of a change in accounting
principle in 2002 resulted from goodwill impairment charges
recorded in conjunction with the adoption of Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets. |
|
(6) |
On December 15, 2004, we adopted the provisions of Emerging
Issues Task Force 04-08, The Effect of Contingently
Convertible Debt on Diluted Earnings per Share.
Accordingly, diluted net income per share and weighted average
shares outstanding diluted have been restated to
reflect the 4,813,056 shares issuable upon conversion of
our outstanding zero-coupon convertible senior notes since the
issuance date of February 14, 2002. |
|
(7) |
Fixed charges consist of interest on debt,
amortization of deferred financing fees and that portion of
rental expenses representative of interest. Earnings
consist of income (loss) before provision for income taxes,
minority interests in consolidated subsidiaries, equity in the
undistributed net (income) loss of affiliates, fixed charges and
cumulative effect of a change in accounting principle. Earnings
in 2006 and 2005 were insufficient to cover fixed charges by
$651.8 million and $1,123.3 million, respectively.
Accordingly, such ratio is not presented for these years. |
|
(8) |
North American content per vehicle is our net sales
in North America divided by estimated total North American
vehicle production. Content per vehicle data excludes business
conducted through non-consolidated joint ventures. Content per
vehicle data for 2005 has been updated to reflect actual
production levels. |
|
(9) |
North American vehicle production includes car and
light truck production in the United States, Canada and Mexico
as provided by Wards Automotive. Production data for 2005
has been updated to reflect actual production levels. |
|
|
(10) |
European content per vehicle is our net sales in
Europe divided by estimated total European vehicle production.
Content per vehicle data excludes business conducted through
non-consolidated joint ventures. Content per vehicle data for
2005 has been updated to reflect actual production levels. |
|
(11) |
European vehicle production includes car and light
truck production in Austria, Belgium, Bosnia, Czech Republic,
Finland, France, Germany, Hungary, Italy, Kazakhstan,
Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia,
Spain, Sweden, Turkey, Ukraine and United Kingdom as provided by
J.D. Power and Associates. Production data for 2005 has been
updated to reflect actual production levels. |
104
Financial Forecasts
As a matter of course, Lear does not make public projections as
to future performance or earnings beyond the current fiscal
year. Any projections for extended fiscal periods are inherently
unreliable due to the unpredictability of the underlying
assumptions and estimates. However, internal financial forecasts
prepared by management were made available to the Icahn Group,
as well as to the special committee and its financial advisor in
connection with their evaluation of the merger. This same
information has been provided to other interested parties in
connection with the go shop process. We have
included below a summary of these projections to give our
stockholders access to certain nonpublic information provided to
the Icahn Group, the special committee and its financial advisor
and other interested parties for purposes of considering and
evaluating the merger. The inclusion of this information should
not be regarded as an indication that Lear, our special
committee or board of directors or JPMorgan considered, or now
considers, it to be a reliable prediction of future results.
Lear advised the recipients of the projections that its internal
financial forecasts, upon which the projections were based, are
subjective in many respects. The projections reflect numerous
assumptions with respect to industry performance, general
business, economic, market and financial conditions and other
matters, all of which are difficult to predict and are beyond
Lears control. The projections also reflect estimates and
assumptions related to the business of Lear that are inherently
subject to significant economic and competitive uncertainties,
all of which are difficult to predict and many of which are
beyond Lears control. As a result, there can be no
assurance that the projected results will be realized or that
actual results will not be significantly higher or lower than
projected. The financial projections were prepared for internal
use and to assist the Icahn Group and the financial advisor to
the special committee with their respective due diligence
investigations of Lear and not with a view toward public
disclosure or toward complying with GAAP, the published
guidelines of the SEC regarding projections or the guidelines
established by the American Institute of Certified Public
Accountants for preparation and presentation of prospective
financial information. Lears independent registered public
accounting firm has not examined or compiled any of the
financial projections, expressed any conclusion or provided any
form of assurance with respect to the financial projections and,
accordingly, assumes no responsibility for them. The financial
projections do not take into account any circumstances or events
occurring after the date they were prepared.
Projections of this type are based on estimates and assumptions
that are inherently subject to factors such as industry
performance, general business, economic, regulatory, market and
financial conditions, as well as changes to the business,
financial condition or results of operations of Lear, including
the factors described under Forward-Looking
Statements beginning on page 12, which factors may
cause the financial projections or the underlying assumptions to
be inaccurate. Since the projections cover multiple years, such
information by its nature becomes even less reliable with each
successive year.
Since the time the projections were provided to the various
parties, the Company has made publicly available its actual
results of operations for the year ended December 31, 2006.
You should review Lears Annual Report on
Form 10-K for the
year ended December 31, 2006, which is incorporated by
reference in this proxy statement, to obtain this information.
For the foregoing reasons, as well as the bases and assumptions
on which the financial projections were compiled, the inclusion
of specific portions of the financial projections in this proxy
statement should not be regarded as an indication that such
projections will be an accurate prediction of future events, and
they should not be relied on as such. Lear does not intend to
update or otherwise revise the following financial projections
to reflect circumstances existing after the date when made or to
reflect the occurrence of future events, even if any or all of
the assumptions are shown to be in error.
In connection with the strategic planning process we initiated
in 2005, we prepared a comprehensive long-range financial plan.
The financial plan included a five-year financial forecast that
was based on numerous assumptions and estimates, including
assumptions regarding vehicle production volumes and the
successful implementation of the Companys business
strategy. In this regard, automobile production volumes for the
Companys key vehicle platforms were largely based on
forecasts published by recognized industry forecasting services.
105
During July and August 2006, management presented the long-range
financial plan to our board of directors. At a July 2006 board
meeting, JPMorgan presented its financial analysis of the
Company, based on Lears long-range financial plan. The
long-range financial plan presented to our board included the
following estimated operating results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007(1) |
|
2008(1) |
|
2009(1) |
|
2010(1) |
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$ |
14,894 |
|
|
$ |
14,806 |
|
|
$ |
14,492 |
|
|
$ |
14,910 |
|
EBITDA(2)
|
|
|
879 |
|
|
|
925 |
|
|
|
1,010 |
|
|
|
1,089 |
|
Operating Income(3)
|
|
|
542 |
|
|
|
585 |
|
|
|
684 |
|
|
|
781 |
|
|
|
(1) |
Subsequent to the preparation of the long-range financial plan,
we entered into an agreement to transfer substantially all of
our North American interiors business and our interests in two
China joint ventures to IAC North America, a joint venture with
WL Ross and Franklin. We expect this transaction to close in the
first quarter of 2007. The financial projections provided
exclude the results of operations of this business for the
entire forecast period, other than the results of the two China
joint ventures and other immaterial and ancillary interiors
businesses which we subsequently determined to include in the
IAC North America transaction. |
|
(2) |
EBITDA is defined as income before interest, other expense,
income taxes, depreciation and amortization and includes
approximately $330 million of restructuring costs during
the forecast period. |
|
(3) |
Operating income is defined as income before interest, other
expense and income taxes and includes approximately
$330 million of restructuring costs during the forecast
period. |
Following the initial discussions between members of our senior
management and Mr. Icahn in January 2007, we began the
process of updating the long-range financial plan presented to
our board of directors in July 2006 to reflect material changes
in the long-term North American vehicle production outlook. The
adjustments with respect to the production outlook were based on
published forecasts by the same industry forecasting services
that were utilized in preparing the original long-range
financial plan. In addition, given the magnitude of the
projected production declines since the preparation of the
original plan, we further revised our financial plan to reflect
additional cash investments of $150 million to support our
supply chain and to fund additional restructuring actions
designed to align our operations with the revised industry
production outlook. In updating our long-range financial plan,
we also reflected our actual 2006 financial results and the
results of our 2007 budget process, which was not yet complete
in July 2006. Accordingly, the variances in our updated
financial plan from our July 2006 financial plan are
attributable to the fact that the two sets of projections were
each prepared at different times utilizing the then currently
available information. The updated long-range financial plan
included the following estimated operating results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007(1) |
|
2008(1) |
|
2009(1) |
|
2010(1) |
|
|
|
|
|
|
|
|
|
Net Sales(2)
|
|
$ |
15,104 |
|
|
$ |
13,933 |
|
|
$ |
13,622 |
|
|
$ |
13,860 |
|
EBITDA(3)
|
|
|
810 |
|
|
|
835 |
|
|
|
886 |
|
|
|
939 |
|
Operating Income(4)
|
|
|
488 |
|
|
|
521 |
|
|
|
582 |
|
|
|
655 |
|
|
|
(1) |
Subsequent to the preparation of the long-range financial plan,
we entered into an agreement to transfer substantially all of
our North American interiors business and our interests in two
China joint ventures to IAC North America, a joint venture with
WL Ross and Franklin. We expect this transaction to close in the
first quarter of 2007. The financial projections provided
exclude the results of operations of this business, including
the two China joint ventures, for the entire forecast period. |
|
(2) |
Reflects the projected decrease in net sales in each year from
2008 through 2010 from the July 2006 long-range financial plan
based on lower forecasted industry vehicle production volumes. |
|
(3) |
EBITDA is defined as income before interest, other expense,
income taxes, depreciation and amortization. EBITDA, as
presented, includes approximately $340 million of base
restructuring costs during the forecast period but excludes the
$150 million to support our supply chain and to fund
additional restructuring actions referred to above. For the
years 2008 through 2010, EBITDA has been reduced by |
106
|
|
|
an assumed 15% of the sales decline resulting from lower
forecasted industry vehicle production volumes. Management
believes that this variable margin on net sales represents a
reasonable estimate of the short and long-term impact of
production declines, but the actual impact would depend on a
variety of factors, including the timing and duration of such
production declines. |
|
(4) |
Operating income is defined as income before interest, other
expense and income taxes and includes approximately
$340 million of base restructuring costs during the
forecast period. |
Market Price of Common Stock
Lears common stock is listed on the NYSE under the symbol
LEA. The Transfer Agent and Registrar for
Lears common stock is The Bank of New York, located in New
York, New York. On February 16, 2007, there were 1,328
holders of record of Lears common stock.
The high and low sales prices per share of our common stock, as
reported on the NYSE, and the amount of our dividend
declarations for 2005, 2006 and the first quarter of 2007
(through March 9, 2007) are shown below:
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Price Range of | |
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Common Stock | |
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Cash Dividend |
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For the year ended December 31, 2007: |
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High | |
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Low | |
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Per Share |
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| |
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| |
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1st
Quarter (through March 9, 2007)
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$ |
40.62 |
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$ |
27.79 |
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$ |
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Price Range of | |
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Common Stock | |
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Cash Dividend | |
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For the year ended December 31, 2006: |
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High | |
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Low | |
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Per Share | |
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| |
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| |
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| |
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4th Quarter
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$ |
34.01 |
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$ |
20.70 |
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$ |
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3rd Quarter
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$ |
24.41 |
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$ |
18.30 |
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$ |
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2nd Quarter
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$ |
28.00 |
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$ |
16.24 |
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$ |
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1st Quarter
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$ |
29.73 |
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$ |
16.01 |
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$ |
0.25 |
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Price Range of | |
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Common Stock | |
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Cash Dividend | |
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For the year ended December 31, 2005: |
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High | |
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Low | |
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Per Share | |
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| |
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| |
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| |
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4th Quarter
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$ |
33.50 |
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$ |
27.09 |
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$ |
0.25 |
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3rd Quarter
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$ |
42.77 |
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$ |
32.43 |
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|
$ |
0.25 |
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2nd Quarter
|
|
$ |
44.29 |
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|
$ |
33.89 |
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|
$ |
0.25 |
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|
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|
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1st Quarter
|
|
$ |
60.05 |
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|
$ |
43.96 |
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$ |
0.25 |
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The closing sale price of the our common stock on the NYSE on
February 2, 2007, the last trading day prior to our
announcement that AREP made an offer to acquire all our issued
and outstanding shares of common stock for $36.00 per share
in cash, was $34.67. The $36.00 per share to be paid for
each share of our common stock in the merger represents a
premium of 3.8% to the closing price on February 2, 2007.
The $36.00 per share merger consideration represents a
premium of 55.1% based on the
52-week volume weighted
average price of our common stock as of February 2, 2007,
and a premium of 46.4% based on the closing price of our common
stock on October 16, 2006, the date on which Lear announced
the private placement of $200 million of our common stock
to affiliates of Mr. Icahn.
If the merger is consummated, each share of our common stock
will be converted into the right to receive $36.00 in cash,
without interest and less any applicable withholding taxes, and
our common stock will be removed from listing on the NYSE and
there will be no further public market for shares of our common
stock.
Stockholders should obtain a current market quotation for
Lear common stock before making any decision with respect to the
merger.
We initiated a quarterly cash dividend program in January 2004.
In March 2006, our quarterly cash dividend program was suspended
indefinitely. The payment of cash dividends in the future is
dependent upon
107
our financial condition, results of operations, capital
requirements, alternative uses of capital and other factors.
Also, we are subject to the restrictions on the payment of
dividends contained in the agreement governing our primary
credit facility.
In November 2004, our Board of Directors approved a common stock
repurchase program covering the discretionary repurchase of up
to 5,000,000 shares of our common stock through
November 15, 2006. As of December 31, 2006, we had
repurchased 490,900 shares of our outstanding common stock
under this program prior to its expiration. There were no shares
repurchased under this program during the quarter ended
December 31, 2006, and the program was not extended beyond
November 15, 2006.
Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth, as of March 15, 2007
(except as indicated below), beneficial ownership, as defined by
SEC rules, of our common stock and ownership of restricted stock
units and deferred stock units by the persons or groups
specified. Each of the persons listed below has sole voting and
investment power with respect to the beneficially owned shares
listed unless otherwise indicated. The percentage calculations
set forth in the table are based on 76,642,783 shares of
common stock outstanding on March 15, 2007 rather than
based on the percentages set forth in various stockholders
Schedules 13D and 13G as applicable.
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Number of Shares | |
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Percentage of | |
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of Common Stock | |
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Common Stock | |
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Number of | |
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Owned Beneficially | |
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Owned Beneficially | |
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Stock Units Owned(21) | |
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| |
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| |
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| |
Carl C. Icahn and affiliated companies(1)
|
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11,994,943 |
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15.65 |
% |
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N/A |
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Pzena Investment Management, LLC(2)
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6,775,279 |
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|
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8.84 |
% |
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N/A |
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Merrill Lynch & Co., Inc.(3)
|
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6,431,917 |
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|
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8.39 |
% |
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N/A |
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Vanguard Windsor Funds(4)
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6,170,100 |
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|
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8.05 |
% |
|
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N/A |
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Robert E. Rossiter(5)(6)
|
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358,336 |
(8) |
|
|
* |
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|
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158,556 |
|
James H. Vandenberghe(5)(6)
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236,205 |
(9) |
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* |
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|
|
96,598 |
|
David C. Wajsgras(6)(7)
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202 |
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* |
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0 |
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Douglas G. DelGrosso(6)
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175,533 |
(10) |
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* |
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69,670 |
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Daniel A. Ninivaggi(6)
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16,296 |
(11) |
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|
* |
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|
37,968 |
|
Raymond E. Scott(6)
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41,342 |
(12) |
|
|
* |
|
|
|
38,925 |
|
David E. Fry(5)
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5,103 |
(13) |
|
|
* |
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|
|
9,508 |
|
Vincent J. Intrieri(5)
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0 |
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|
|
* |
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|
|
2,992 |
|
Conrad L. Mallett(5)
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|
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4,475 |
(14) |
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|
* |
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9,477 |
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Larry W. McCurdy(5)
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12,250 |
(15) |
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|
* |
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|
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22,681 |
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Roy E. Parrott(5)
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9,730 |
(16) |
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* |
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|
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6,128 |
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David P. Spalding(5)
|
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16,250 |
(17) |
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* |
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18,185 |
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James A. Stern(5)
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16,650 |
(18) |
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* |
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20,823 |
|
Henry D.G. Wallace(5)
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|
|
1,000 |
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|
|
* |
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|
|
7,884 |
|
Richard F. Wallman(5)
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|
|
3,500 |
(19) |
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|
* |
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6,749 |
|
Total Executive Officers and Directors as a Group (19
individuals)
|
|
|
958,822 |
(20) |
|
|
1.24 |
% |
|
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617,305 |
(22) |
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|
(1) |
We have been informed by Mr. Icahn, High River Limited
Partnership (High River), Hopper Investments LLC
(Hopper), Koala Holding LLC (Koala),
Barberry Corp. (Barberry), Icahn Partners Master
Fund LP (Icahn Master), Icahn Offshore LP
(Icahn Offshore), CCI Offshore Corp. (CCI
Offshore), Icahn Partners LP (Icahn Partners),
Icahn Onshore LP (Icahn Onshore) and CCI Onshore
Corp. (CCI Onshore) (collectively, the
Reporting Persons) in a report on Schedule 13D
dated October 17, 2006, as amended, that (a) they may
be deemed to beneficially own |
108
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11,994,943 shares and (b): (i) High River has sole
voting power and sole dispositive power with regard to
659,860 shares and each of Hopper, Barberry and
Mr. Icahn (A) has shared voting power and shared
dispositive power with regard to such shares and
(B) disclaims beneficial ownership of such shares for all
other purposes; (ii) Koala has sole voting power and sole
dispositive power with regard to 1,739,130 shares and each
of Barberry and Mr. Icahn (A) has shared voting power
and shared dispositive power with regard to such shares and
(B) disclaims beneficial ownership of such shares for all
other purposes; (iii) Icahn Master has sole voting power
and sole dispositive power with regard to 5,526,235 shares
and each of Icahn Offshore, CCI Offshore and Mr. Icahn
(A) has shared voting power and shared dispositive power
with regard to such shares and (B) disclaims beneficial
ownership of such shares for all other purposes; and
(iv) Icahn Partners has sole voting power and sole
dispositive power with regard to 4,069,718 shares and each
of Icahn Onshore, CCI Onshore and Mr. Icahn (A) has shared
voting power and shared dispositive power with regard to such
shares and (B) disclaims beneficial ownership of such
shares for all other purposes. Barberry is the sole member of
Koala and Hopper, which is the general partner of High River.
CCI Offshore is the general partner of Icahn Offshore, which is
the general partner of Icahn Master. CCI Onshore is the general
partner of Icahn Onshore, which is the general partner of Icahn
Partners. Each of Barberry, CCI Offshore and CCI Onshore is
100 percent owned by Mr. Icahn. As a result,
Mr. Icahn is in a position indirectly to determine the
investment and voting decisions made by each of the Reporting
Persons. The principal business address of each of High River,
Hopper, Koala, Barberry, Icahn Offshore, CCI Offshore, Icahn
Partners, Icahn Onshore and CCI Onshore is White Plains Plaza,
445 Hamilton Avenue Suite 1210, White Plains,
NY 10601. The principal business address of Icahn Master is
c/o Walkers SPV Limited, P.O. Box 908GT, 87 Mary
Street, George Town, Grand Cayman, Cayman Islands. The principal
business address of Mr. Icahn is c/o Icahn Associates
Corp., 767 Fifth Avenue, 47th Floor, New York, New York
10153. |
|
|
(2) |
We have been informed by Pzena Investment Management, LLC
(PIM), in an amended report on Schedule 13D
dated February 13, 2007, and a Form 4 filed on
February 16, 2007, that (a) PIM is a registered
investment advisor and (b) PIM exercises sole voting power
over 5,204,734 shares, shared voting power over no shares,
sole dispositive power over 6,776,279 shares and shared
dispositive power over no shares. The principal business address
of PIM is 120 W. 45th St., 20th Floor, New York, New
York 10036. |
|
(3) |
We have been informed by Merrill Lynch & Co., Inc.
(ML) and Merrill Lynch Financial Markets, Inc.
(MLFM) in a report on Schedule 13G dated
February 14, 2007, as amended, that (a) they are a
registered broker dealer and (b) ML disclaims beneficial
ownership of all shares held by MLFM and both ML and MLFM
disclaim sole voting power, disclaim shared voting power,
disclaim sole dispositive power and disclaim shared dispositive
power. The principal business address of ML and MLFM is 4 World
Financial Center, 250 Vessey St., New York, New York 10080. |
|
(4) |
We have been informed by Vanguard Windsor Funds
Vanguard Windsor Fund 51-0082711 (Vanguard) in
an amended report on Schedule 13G dated February 13,
2007, that (a) Vanguard is a registered investment company
under Section 8 of the Investment Company Act of 1940 and
(b) Vanguard exercises sole voting power over
6,170,100 shares, shared voting power over no shares, sole
dispositive power over no shares and shared dispositive power
over no shares. The principal business address of Vanguard is
100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
|
(5) |
The individual is a director. |
|
(6) |
The individual is a Named Executive Officer. |
|
(7) |
Mr. Wajsgras resigned as our Executive Vice President and
Chief Financial Officer effective March 10, 2006. |
|
(8) |
Includes 251,250 shares of common stock issuable under
options and 12,422 shares of common stock issuable under
stock-settled stock appreciation rights currently exercisable or
exercisable within 60 days of the date specified above.
Also includes 45,000 shares of common stock held by a
grantor retained annuity trust. |
109
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|
(9) |
Includes 165,000 shares of common stock issuable under
options and 6,901 shares of common stock issuable under
stock-settled stock appreciation rights currently exercisable or
exercisable within 60 days of the date specified above. |
|
|
(10) |
Includes 132,500 shares of common stock issuable under
options and 6,901 shares of common stock issuable under
stock-settled stock appreciation rights currently exercisable or
exercisable within 60 days of the date specified above.
Also includes 19,713 shares of common stock held in
Mr. DelGrossos wifes revocable trust. |
|
(11) |
Includes 3,312 shares of common stock issuable under
stock-settled stock appreciation rights currently exercisable or
exercisable within 60 days of the date specified above. |
|
(12) |
Includes 29,000 shares of common stock issuable under
options and 3,312 shares of common stock issuable under
stock-settled stock appreciation rights currently exercisable or
exercisable within 60 days of the date specified above. |
|
(13) |
Includes 4,000 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the date specified above. |
|
(14) |
Includes 4,000 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the date specified above. |
|
(15) |
Includes 10,250 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the date specified above. |
|
(16) |
Includes 6,500 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the date specified above. |
|
(17) |
Includes 10,250 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the date specified above. |
|
(18) |
Includes 10,250 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the date specified above. Also, includes 2,400 shares of
common stock held in a revocable trust for the benefit of
Mr. Sterns children. Mr. Stern disclaims
beneficial ownership of these shares. |
|
(19) |
Includes 2,000 shares of common stock issuable under
options currently exercisable or exercisable within 60 days
of the date specified above. |
|
(20) |
Includes 722,200 shares of common stock issuable under
options and 38,616 shares of common stock issuable under
stock-settled stock appreciation rights currently exercisable or
exercisable within 60 days of the date specified above. |
|
(21) |
Includes the restricted stock units owned by our executive
officers and the restricted units and deferred stock units owned
by our non-employee directors. These restricted stock units,
restricted units and deferred stock units are subject to all the
economic risks of stock ownership but may not be voted or sold
and, therefore, ownership of such units is not deemed to
constitute beneficial ownership of common stock. In addition,
the restricted stock units and restricted units are subject to
vesting provisions as set forth in the respective grant
agreements. |
|
(22) |
Consists of 512,878 restricted stock units owned by our
executive officers in the aggregate, 37,811 restricted units
owned by our non-employee directors in the aggregate and 66,616
deferred stock units owned by our non-employee directors in the
aggregate. |
Section 16(a) Beneficial Ownership Reporting
Compliance
Based upon our review of reports filed with the SEC and written
representations that no other reports were required, we believe
that all of our directors and executive officers complied with
the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934 during 2006.
Prior Purchases and Sales of Lear Common Stock and Common
Stock Equivalents
Except for the transactions set forth in the tables below, there
were no transactions with respect to Lears common stock or
common stock equivalents during the past sixty (60) days
effected by the directors and
110
executive officers of Lear, including Mr. Intrieri. Neither
Lear nor Parent, Merger Sub, Mr. Icahn and their affiliates
purchased or sold any of Lears common stock during the
past sixty (60) days. Common stock equivalents listed in
the second table include restricted stock units held by our
executive officers and restricted units and deferred stock units
acquired and disposed of (upon vesting) by our non-employee
directors under our Outside Directors Compensation Plan.
Restricted units and deferred stock units vest and settle in
cash only (unless receipt is deferred) and no actual shares of
common stock are issuable under our Outside Directors
Compensation Plan.
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Amount of |
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Common |
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Price Per |
|
Acquisition/ |
|
|
Name |
|
Stock |
|
Share($) |
|
Disposition |
|
Trade Date |
|
|
|
|
|
|
|
|
|
Daniel A. Ninivaggi
|
|
|
5,906 |
|
|
|
|
|
|
Acquisition(1) |
|
01/31/2007 |
Daniel A. Ninivaggi
|
|
|
1,857 |
|
|
|
33.86 |
|
|
Disposition(2) |
|
01/31/2007 |
Daniel A. Ninivaggi
|
|
|
505 |
|
|
|
33.86 |
|
|
Disposition(3) |
|
01/31/2007 |
Robert E. Rossiter
|
|
|
42,651 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
Robert E. Rossiter
|
|
|
15,807 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
Robert E. Rossiter
|
|
|
26,844 |
|
|
|
36.53 |
|
|
Disposition(5) |
|
03/15/2007 |
James H. Vandenberghe
|
|
|
22,526 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
James H. Vandenberghe
|
|
|
7,143 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
James H. Vandenberghe
|
|
|
15,383 |
|
|
|
36.54 |
|
|
Disposition(5) |
|
03/15/2007 |
Douglas G. DelGrosso
|
|
|
7,425 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
Douglas G. DelGrosso
|
|
|
2,175 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
Daniel A. Ninivaggi
|
|
|
101 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
Daniel A. Ninivaggi
|
|
|
30 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
Raymond E. Scott
|
|
|
5,615 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
Raymond E. Scott
|
|
|
1,646 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
James M. Brackenbury
|
|
|
1,015 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
James M. Brackenbury
|
|
|
257 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
Shari L. Burgess
|
|
|
1,789 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
Shari L. Burgess
|
|
|
524 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
Roger A. Jackson
|
|
|
6,206 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
Roger A. Jackson
|
|
|
1,819 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
James L. Murawski
|
|
|
819 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
James L. Murawski
|
|
|
239 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
Matthew J. Simoncini
|
|
|
2,553 |
|
|
|
|
|
|
Acquisition(4) |
|
03/15/2007 |
Matthew J. Simoncini
|
|
|
748 |
|
|
|
36.76 |
|
|
Disposition(2) |
|
03/15/2007 |
|
|
|
|
|
|
|
|
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Amount of |
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|
|
|
|
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|
Common |
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Price Per |
|
|
|
|
|
|
Stock |
|
Share |
|
Acquisition/ |
|
|
Name |
|
Equivalents |
|
Equivalent($) |
|
Disposition |
|
Trade Date |
|
|
|
|
|
|
|
|
|
David E. Fry
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
David E. Fry
|
|
|
556.7929 |
(7) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
David E. Fry
|
|
|
1,177.394 |
(9) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
David E. Fry
|
|
|
1,734.1869 |
(10) |
|
|
33.83 |
|
|
Acquisition(8) |
|
01/31/2007 |
David E. Fry
|
|
|
166.2725 |
|
|
|
33.83 |
|
|
Acquisition(11) |
|
01/31/2007 |
Vincent J. Intrieri
|
|
|
332.5451 |
|
|
|
33.83 |
|
|
Acquisition(11) |
|
01/31/2007 |
Vincent J. Intrieri
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
Conrad L. Mallett, Jr.
|
|
|
867.0935 |
|
|
|
33.83 |
|
|
Acquisition(8) |
|
01/31/2007 |
Conrad L. Mallett, Jr.
|
|
|
2,660.3606 |
|
|
|
33.83 |
|
|
Acquisition(6) |
|
01/31/2007 |
Conrad L. Mallett, Jr.
|
|
|
556.7929 |
(7) |
|
|
33.83 |
|
|
Disposition(12) |
|
01/31/2007 |
Conrad L. Mallett, Jr.
|
|
|
1,177.394 |
(9) |
|
|
33.83 |
|
|
Disposition(12) |
|
01/31/2007 |
Conrad L. Mallett, Jr.
|
|
|
166.2725 |
|
|
|
33.83 |
|
|
Acquisition(11) |
|
01/31/2007 |
Larry W. McCurdy
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
Larry W. McCurdy
|
|
|
556.7929 |
(7) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
Larry W. McCurdy
|
|
|
1,177.394 |
(9) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
Larry W. McCurdy
|
|
|
1,734.1869 |
(10) |
|
|
33.83 |
|
|
Acquisition(8) |
|
01/31/2007 |
Larry W. McCurdy
|
|
|
953.2959 |
|
|
|
33.83 |
|
|
Acquisition(11) |
|
01/31/2007 |
Roy E. Parrott
|
|
|
1,177,394 |
|
|
|
33.83 |
|
|
Disposition(13) |
|
01/31/2007 |
Roy E. Parrott
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
Roy E. Parrott
|
|
|
556.7929 |
(7) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
Roy E. Parrott
|
|
|
556.7929 |
|
|
|
33.83 |
|
|
Acquisition(8) |
|
01/31/2007 |
David P. Spalding
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of |
|
|
|
|
|
|
|
|
Common |
|
Price Per |
|
|
|
|
|
|
Stock |
|
Share |
|
Acquisition/ |
|
|
Name |
|
Equivalents |
|
Equivalent($) |
|
Disposition |
|
Trade Date |
|
|
|
|
|
|
|
|
|
David P. Spalding
|
|
|
556.7929 |
(7) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
David P. Spalding
|
|
|
1,177.394 |
(9) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
David P. Spalding
|
|
|
1,734.1869 |
(10) |
|
|
33.83 |
|
|
Acquisition(8) |
|
01/31/2007 |
David P. Spalding
|
|
|
310.3754 |
|
|
|
33.83 |
|
|
Acquisition(11) |
|
01/31/2007 |
James A. Stern
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
James A. Stern
|
|
|
556.7929 |
(7) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
James A. Stern
|
|
|
1,177.394 |
(9) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
James A. Stern
|
|
|
1,734.1869 |
(10) |
|
|
33.83 |
|
|
Acquisition(8) |
|
01/31/2007 |
James A. Stern
|
|
|
716.8194 |
|
|
|
33.83 |
|
|
Acquisition(11) |
|
01/31/2007 |
Henry D. G. Wallace
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
Henry D. G. Wallace
|
|
|
1,177.394 |
(9) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
Henry D. G. Wallace
|
|
|
1,177.394 |
|
|
|
33.83 |
|
|
Acquisition(10) |
|
01/31/2007 |
Richard F. Wallman
|
|
|
2,660.3606 |
|
|
|
|
|
|
Acquisition(6) |
|
01/31/2007 |
Richard F. Wallman
|
|
|
556.7929 |
(7) |
|
|
33.83 |
|
|
Disposition(13) |
|
01/31/2007 |
Richard F. Wallman
|
|
|
1,177.394 |
(9) |
|
|
33.83 |
|
|
Disposition(8) |
|
01/31/2007 |
Richard F. Wallman
|
|
|
1,177.394 |
|
|
|
33.83 |
|
|
Acquisition(10) |
|
01/31/2007 |
Henry D.G. Wallace
|
|
|
563.9098 |
(9) |
|
|
|
|
|
Disposition(8) |
|
02/10/2007 |
Henry D.G. Wallace
|
|
|
563.9098 |
|
|
|
38.69 |
|
|
Acquisition(10) |
|
02/10/2007 |
Robert E. Rossiter
|
|
|
10,934 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
James H. Vandenberghe
|
|
|
5,851 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
Douglas G. DelGrosso
|
|
|
4,876 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
Daniel A. Ninivaggi
|
|
|
5,536 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
Raymond E. Scott
|
|
|
7,548 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
James M. Brackenbury
|
|
|
2,973 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
Shari L. Burgess
|
|
|
1,265 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
Roger A. Jackson
|
|
|
6,235 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
James L. Murawski
|
|
|
1,012 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
Matthew J. Simoncini
|
|
|
5,422 |
|
|
|
(14 |
) |
|
Acquisition(15) |
|
03/15/2007 |
Robert E. Rossiter
|
|
|
42,651 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
James H. Vandenberghe
|
|
|
22,526 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
Douglas G. DelGrosso
|
|
|
7,425 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
Daniel A. Ninivaggi
|
|
|
101 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
Raymond E. Scott
|
|
|
5,615 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
James M. Brackenbury
|
|
|
1,015 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
Shari L. Burgess
|
|
|
1,789 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
Roger A. Jackson
|
|
|
6,206 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
James L. Murawski
|
|
|
819 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
Matthew J. Simoncini
|
|
|
2,553 |
|
|
|
(16 |
) |
|
Disposition (4) |
|
03/15/2007 |
|
|
|
|
(1) |
Grant of restricted common stock. |
|
|
(2) |
Payment of exercise price or tax liability by delivering or
withholding securities incident to the receipt, exercise or
vesting of certain derivative securities. |
|
|
(3) |
Additional shares to satisfy tax obligations. |
|
|
(4) |
Conversion of restricted stock units upon vesting into shares of
common stock on a one for one basis. |
|
|
(5) |
Open market sale pursuant to 10b5-1 trading plan. |
|
|
(6) |
Annual grant of Restricted Units in 2007 under the Lear
Corporation Outside Directors Compensation Plan. Each restricted
unit is equal in value to one share of Lear common stock and
settles in cash upon vesting unless a deferral election has been
made. Restricted Units vest in three equal annual installments
beginning on the first anniversary of the grant date. |
|
|
(7) |
Represents the vesting of a tranche of the 2005 Restricted Units
granted under the Lear Corporation Outside Directors
Compensation Plan. Each restricted unit is equal in value to one
share of Lear common stock and settles in cash upon vesting
unless a deferral election has been made. |
|
|
(8) |
Conversion of restricted units upon vesting into deferred stock
units, pursuant to deferral elections. Each deferred stock unit
is equal in value to one share of Lear common stock and settles
in cash upon vesting, |
112
|
|
|
|
|
which is the earlier to occur of a change in control of Lear or
the date the individual ceases to be a director. |
|
|
(9) |
Represents the vesting of a tranche of the 2006 Restricted Units
granted under the Lear Corporation Outside Directors
Compensation Plan. Each restricted unit is equal in value to one
share of Lear common stock and settles in cash upon vesting
unless a deferral election has been made. |
|
|
(10) |
Shares represent deferred stock units received in lieu of cash
upon vesting of restricted units pursuant to a deferral election
under the Lear Corporation Outside Directors Compensation Plan.
Each deferred stock unit is equal in value to one share of Lear
common stock and settles in cash upon vesting. |
|
(11) |
Receipt of deferred stock units in lieu of the quarterly cash
retainer pursuant to a deferral election under the Lear
Corporation Outside Directors Compensation Plan. |
|
(12) |
Vesting and settling of restricted units with one-half converted
into deferred stock units and one-half deferred into an interest
bearing account. |
|
(13) |
Vesting and settling of restricted units for cash. |
|
(14) |
Depending on the amount of the deferral, a portion of the units
was credited at $23.71 per unit and/or a portion was credited at
$20.75 per unit. |
|
(15) |
Grant of restricted stock units pursuant to deferred
compensation elections. Restricted stock units generally vest
and settle on the third anniversary of the grant date in the
form of shares of common stock on a one for one basis after
required tax withholding. |
|
(16) |
These restricted stock units were granted in 2004 based on
deferrals of salary and bonus. Such units were credited upon
grant at a per unit price of $49.25 and/or $43.09 depending on
the amount of salary and bonus deferred. |
Other than the transactions described below, neither Lear nor
Parent, Merger Sub, Mr. Icahn and their affiliates have
purchased any Lear common stock during the past two years.
In November 2004, our Board of Directors approved a common stock
repurchase program covering the discretionary repurchase of up
to 5,000,000 shares of our common stock through
November 15, 2006. As of December 31, 2006, we had
repurchased 490,900 shares of our outstanding common stock
under this program prior to its expiration. The program was not
extended beyond November 15, 2006. During the first quarter
of 2005, we repurchased 490,900 shares of our outstanding
common stock at an average purchase price of $51.72 per
share, excluding commissions of $0.03 per share. There were
no shares repurchased during the second, third or fourth
quarters of 2005, and there were no shares repurchased during
the year ended December 31, 2006.
On October 17, 2006, Lear entered into a Stock Purchase
Agreement with Icahn Partners LP, Icahn Partners Master
Fund LP and Koala Holding LLC, affiliates of
Mr. Icahn, pursuant to which Lear agreed to issue and sell
to such purchasers 8,695,653 shares of its common stock at
a price per share of $23.00. Lear completed this private
placement on November 8, 2006.
113
COMPENSATION DISCUSSION AND ANALYSIS
The following discusses the material elements of the
compensation for our Chief Executive Officer, Chief Financial
Officer and three other highest compensated executive officers
(collectively, the Named Executive Officers) during
the year ended December 31, 2006. To assist in
understanding compensation for 2006, we have included a
discussion of our compensation policies and decisions for
periods before and after 2006. To avoid repetition, in the
discussion that follows we make occasional cross-references to
specific compensation data and terms for our Named Executive
Officers contained in Executive Compensation which
begins on page 111. In addition, because we have a global
team of managers, with senior managers in 33 countries, our
compensation program is designed to provide some common
standards throughout the Company and therefore much of what is
discussed below applies to executives in general and is not
limited specifically to our Named Executive Officers.
Executive Compensation Philosophy and Objectives
The objectives of our compensation policies are to:
|
|
|
|
|
optimize profitability and growth; |
|
|
|
link the interests of management with those of stockholders; |
|
|
|
align managements compensation mix with our business
strategy and compensation philosophy; |
|
|
|
provide management with incentives for excellence in individual
performance; |
|
|
|
maintain a strong link between executive pay and performance; |
|
|
|
promote teamwork among our global managers; and |
|
|
|
attract and retain highly qualified and effective officers and
key employees. |
To achieve these objectives, we believe that the total
compensation program for executive officers should consist of
the following:
|
|
|
|
|
base salary |
|
|
|
long-term incentives |
|
|
|
termination/change in control benefits |
|
|
|
annual incentives |
|
|
|
retirement plan benefits |
|
|
|
certain health, welfare and other benefits |
The Compensation Committee routinely reviews the elements noted
above which are designed to both attract and retain executives
while also providing proper incentives for performance. In
general, the Compensation Committee monitors compensation levels
ensuring that a higher proportion of an executives total
compensation is awarded in the form of at risk
components (dependent on individual and company performance) as
the executives responsibilities increase. The Compensation
Committee selects the specific form of compensation within each
of the above-referenced groups based on competitive industry
practices, the cost to the Company versus the benefit provided
to the recipient, the impact of accounting and tax rules and
other relevant factors.
Benchmarking
To ensure that our executive compensation is competitive in the
marketplace, we benchmark ourselves against two comparator
groups of companies: one consisting of Tier 1 automotive
suppliers and one consisting of these same automotive suppliers
as well as general industrial companies whose revenues on
average are comparable to those of Lear. For 2006, this larger
group consisted of 40 companies (listed below). Although
this group is generally consistent in its
make-up from year to
year, companies may be added or removed from the list based on
their willingness to participate in annual executive surveys. We
reviewed a comprehensive global survey of these companies which
was compiled by Towers Perrin, the Compensation Committees
independent consultant, in 2006 and is generally compiled every
two years. The Compensation Committee targets total remuneration
of our senior executives at the median of these groups with a
potential for
114
compensation above that level in return for comparable
performance. However, any percentile chosen is only a target and
actual compensation is dependent on various factors. Examples of
these factors include the Companys actual financial
performance and satisfactory performance of specified management
objectives. Overall performance may result in compensation
outcomes which are more or less than the target. We believe that
the comparator group listed below is representative of the
market in which we compete for executive talent. We believe that
in the challenging automotive industry environment, it is
appropriate to include companies outside of our industry in our
comparator group because many of our executives possess
transferable skills. The comparator companies are as follows
(auto suppliers group members are identified with an asterisk
(*)):
|
|
|
|
|
3M
|
|
Goodyear Tire & Rubber* |
|
Oshkosh Truck* |
Alcoa
|
|
Harley-Davidson |
|
Parker Hannifin |
American Axle & Mfg*
|
|
Hayes-Lemmerz* |
|
Phelps Dodge |
American Standard
|
|
Honeywell |
|
PPG Industries* |
ArvinMeritor*
|
|
ITT-Corporate |
|
Raytheon |
Black & Decker
|
|
Johnson Controls* |
|
Rockwell Automation |
Boeing
|
|
Lafarge North America |
|
Rockwell Collins |
BorgWarner*
|
|
Lockheed Martin |
|
Schlumberger |
Caterpillar
|
|
Masco |
|
Textron |
Cooper Tire & Rubber*
|
|
Modine Manufacturing* |
|
United States Steel |
Dura Automotive Systems*
|
|
Motorola |
|
United Technologies |
Emerson Electric
|
|
Navistar International* |
|
USG |
General Dynamics
|
|
Northrop Grumman |
|
Visteon* |
Goodrich
|
|
|
|
|
Total Compensation Review
For 2006, the Compensation Committee reviewed tally sheets
setting forth all components of the compensation for
Messrs. Rossiter, Vandenberghe, DelGrosso and Ninivaggi.
The tally sheets included a specific review of dollar amounts
for salary, bonus, long-term incentive compensation, outstanding
equity award holdings, and outstanding balances and the actual
projected payout obligation under our qualified and
non-qualified executive retirement plans. These tally sheets
also contained potential payment obligations under the
employment agreements of such executives, including an analysis
of the resulting impact created by a change in control of the
Company. The Compensation Committee is committed to reviewing
tally sheets on an annual basis.
Role of Executive Officers in Setting Compensation Levels
Our human resources executives and staff support the
Compensation Committee in its work. These members of management
work with compensation consultants whose engagements have been
approved by the Committee, accountants and legal counsel, as
necessary, to implement the Compensation Committees
decisions, to monitor evolving competitive practices and to make
compensation recommendations to the Compensation Committee. Our
human resources management develops specific compensation
recommendations for senior executives, which are first reviewed
by senior management and then presented to the Compensation
Committee and its independent compensation consultant (Towers
Perrin). The Committee has final authority to approve, modify or
reject the recommendations and to make its decisions in
executive session.
115
Elements of Compensation
As identified above, the elements of our executive compensation
program consist of a base salary, annual incentives, long-term
incentives, retirement plan benefits, termination/change in
control benefits, and certain health, welfare and other
benefits. A discussion of each of these elements of compensation
follows.
Base salaries are paid to our executive officers in order to
provide a steady stream of current income. Base salary is also
used as a measure for other elements of our compensation
program. For example, annual incentive targets in 2006 were set
as a percentage of base salary (from 60% to 150% for our Named
Executive Officers). In addition, those executives who receive
annual performance share grants are awarded a target amount of
performance shares equal to 25% of an executives base
salary (50% for Mr. Rossiter) as of January 1 of each
year. Because the amount of base salary can establish the range
of potential compensation for other elements, we take special
care in establishing a base salary that is competitive and at a
level commensurate with an executives experience,
performance and job responsibilities.
Base salaries for our executive officers are targeted around the
median level for comparable positions with our comparator group.
On an annual basis, we review respective responsibilities,
individual performance, Lears business performance and
base salary levels for senior executives at companies within our
comparator peer group. Base salaries for our executive officers
are established at levels considered appropriate in light of the
duties and scope of responsibilities of each officers
position. In this regard, the Compensation Committee also
considers the compensation practices and corporate financial
performance of companies within our peer group. Our Compensation
Committee uses this data as a factor in determining whether, and
the extent to which, it will approve an annual merit salary
increase for each of our executive officers. Merit increases in
base salary for our senior executives are also determined by the
results of the Boards annual leadership review. At this
review, Mr. Rossiter assesses approximately 25 of our top
executives and presents his perspectives to our Board.
Mr. Rossiters base salary and total compensation are
reviewed by the Committee during the annual CEO performance
review. Generally in February of each year the CEO discusses
with the Committee his goals and objectives for the upcoming
year and the Committee evaluates his performance for the prior
year against previous goals and objectives.
As part of this process, Mr. Rossiters base salary
was increased in December 2004 by the Committee to $1,100,000
from $1,000,000. The Committee considered that Mr. Rossiter
had declined any increase in salary for the past several years
and that his salary compared to Chief Executive Officers of
comparator group companies was no longer competitive nor
commensurate with his responsibilities and contributions.
Mr. Vandenberghes salary continues to be $925,000.
Mr. DelGrossos salary was increased effective
January 1, 2007 to $925,000 in light of the consolidation
of our operations leadership into one position.
Mr. Ninivaggis salary was increased from $500,000 to
$700,000 in August 2006 upon his promotion to executive vice
president and the expansion of his responsibilities as our chief
administrative officer. Mr. Scotts salary was
increased to $500,000 in September 2006 based on his promotion
to the position of Senior Vice President and
President North American Seating Systems Group (our
largest business unit). In addition, in lieu of additional
increases in base salary levels and to recognize their
respective promotions, certain of our senior executives,
including Mr. DelGrosso, Mr. Scott and
Mr. Wajsgras (our former Chief Financial Officer), were
granted supplemental restricted stock units effective
January 3, 2006 and/or were credited with equivalent value
which they deferred into their Management Stock Purchase Plan
accounts.
Our executive officers participate in the Annual Incentive
Compensation Plan, which was approved by stockholders in 2005.
Under this plan the Compensation Committee makes annual cash
incentive awards designed to reward successful financial
performance and the achievement of goals considered important to
our future. Awards are typically made in the first quarter of
each year based on our performance achieved in the prior fiscal
year.
116
Target Bonus. Each Named Executive Officer is assigned an
annual target opportunity under the Annual Incentive
Compensation Plan expressed as a percentage of such
officers base salary. The target opportunities in 2006
were 150%, 100%, 100%, 80% and 60% of base salary for
Messrs. Rossiter, Vandenberghe, DelGrosso, Ninivaggi and
Scott, respectively. Mr. Ninivaggis actual bonus
target was pro-rated between 60% and 80% due to his
August 21, 2006 promotion, resulting in a blended target of
65% for 2006. The Compensation Committee assesses the
competitiveness of these targets every two years in connection
with the executive compensation survey.
Measures. Historically, the target opportunity for a
given years performance had been based 50% upon whether
our earnings per share reached a threshold established by the
Compensation Committee and 50% upon whether the return on our
net assets reached a threshold set by the Compensation
Committee. In 2006, the Compensation Committee determined that
any Annual Incentive award would be based 50% on the achievement
of certain amounts of free cash flow and 50% on the achievement
of certain levels of operating income, excluding special items.
These measures were used because they are important measures of
operating performance, relied upon by investors and analysts in
evaluating our operating performance. These measures, by their
terms, exclude certain factors over which executives have little
or no control.
The 2006 budgeted target levels of these measures were set at
$427 million for operating income, which would result in a
payment of 75% of the bonus opportunity for that portion, and
$278 million for free cash flow, excluding the free cash
flow impact of restructuring costs, which would result in a
payment of 100% of the bonus opportunity for that portion. Final
results for 2006, which were presented to the Compensation
Committee in February 2007, were operating income, excluding
special items, of $397 million, or 52% of the bonus
opportunity for such portion, and free cash flow, excluding
restructuring costs, of $207 million, or 32% of the bonus
opportunity for such portion, generating an overall result of
42% of the target bonus opportunity.
In addition, in assessing the Companys 2006 financial
results, the Compensation Committee took into consideration
several factors impacting the Companys operating
performance, including lower than originally forecasted industry
production in North America and a continuation of high raw
material and commodity prices. At the same time, the management
team was successful in raising over $2.0 billion of debt
and equity financing and made substantial progress in effecting
the divestiture of the Companys troubled interiors
business segment. Based on the Companys financial
performance and these other considerations, the Compensation
Committee approved an annual bonus payout for bonus eligible
employees, including the Named Executive Officers, at 50% of the
target bonus opportunity. The Compensation Committee also
approved an additional discretionary amount for
Mr. Ninivaggi based on his significant contributions to the
Companys strategic initiatives during 2006.
The long-term incentive component of our executive compensation
program is designed to provide our senior management with
substantial at-risk components and to align the interests of our
senior management with those of our stockholders. To achieve
these goals, we have adopted a portfolio approach
that recognizes the strengths and weaknesses that various forms
of long-term incentives provide. Accordingly, from time to time
we have:
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|
granted awards that reward increases in the value of our stock
(stock-settled stock appreciation rights); |
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|
granted awards that support retention of our management team and
reward both maintaining and increasing the value of our stock
(restricted stock units); |
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granted long-term cash incentives tied to the achievement of
specific business objectives (cash-based performance
units); and |
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granted long-term stock incentives tied to the achievement of
specified business objectives that also reward increases in the
value of our stock (performance share awards). |
117
In addition, we have also:
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approved stock ownership guidelines for members of senior
management; and |
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permitted certain members of senior management to defer a
portion of their base salary and annual incentive bonus into
restricted stock units under the Management Stock Purchase Plan. |
While base salaries and annual incentives for our executives
have been competitive compared to companies in our comparator
groups, our long-term and equity compensation has lagged the
comparator groups used in Towers Perrins latest executive
compensation survey. We have attempted to mitigate this
shortfall, and increase employee incentives, by introducing the
award of cash-based performance units and by modifying our
traditional performance share structure, each as described below.
Restricted Stock Units, Stock Appreciation Rights and
Performance Units
Equity grants are generally approved in November of each year.
The Compensation Committee strives to achieve a proper balance
between grants of long-term equity awards with time-based
vesting such as restricted stock units and grants of equity
awards whose value is entirely performance-based, such as stock
appreciation rights and performance shares. In 2003 and 2004,
the Compensation Committee awarded time-vested restricted stock
units to executives in lieu of awarding stock options. The
Compensation Committee took into account that restricted stock
units result in less dilution of the ownership interests of
existing stockholders than the options they replaced and
restricted stock units are effective incentives for our superior
performing employees to remain with us and to continue their
performance during periods of stock price fluctuations, when
stock options may have no realizable value. Based on a review of
evolving market practices and industry trends, in 2005 the
Compensation Committee approved a combination of equity awards
for members of senior management with 75% of the value coming
from stock-settled stock appreciation rights and 25% of the
value coming from time-vested restricted stock units. The
Compensation Committee believes that stock-settled stock
appreciation rights result in less dilution to existing
stockholders than a comparable amount of options and are more
performance-based than time-vested restricted stock units. This
is consistent with the Compensation Committees desire to
make a substantial portion of executive compensation dependent
on Company performance. In addition, participants do not need to
fund the exercise price to exercise a stock appreciation right.
In November 2006, the Compensation Committee approved awards to
certain of our executives (including the Named Executive
Officers) consisting of restricted stock units, stock
appreciation rights and cash-based performance units. These
awards are described in more detail beginning on page 123.
The addition of cash-based performance units (which awards were
finalized in February 2007) as part of the long-term incentive
program was based on the Committees objective of providing
additional incentive compensation based on the Companys
operating performance but limiting dilution to stockholders. In
addition, by assigning these performance units a specific dollar
value upon grant instead of tying their value to our common
stock, we limit the exposure of these awards to cyclical stock
price fluctuations and focus the Companys management team
on the generation of targeted returns that create long-term
shareholder value. The Compensation Committee established a
target dollar amount of performance units for each Named
Executive Officer and the awards were formally made in the first
quarter of 2007. Payment of these awards is dependent upon the
Company achieving certain levels of earnings growth during the
2007-2009 period. The total value of the Compensation
Committees November 2006 awards to our Named Executive
Officers was allocated as follows: 35% to restricted stock
units; 35% to stock appreciation rights; and 30% to performance
units. We believe this approach provides the appropriate balance
necessary to create incentives for higher levels of performance
while encouraging long-term retention.
In addition, in recognition of his promotion and expanded
responsibilities as described above, Mr. Ninivaggi was
awarded restricted stock units with an aggregate grant date
value at $500,000, less applicable withholding, of which
$300,000 of the award was granted on November 9, 2006 and
$200,000 was granted on January 31, 2007. These awards
vested upon grant but must be held until the earlier of the
termination of Mr. Ninivaggis employment with the
Company or January 31, 2008, before they are eligible for
sale.
118
Performance Share Awards
We generally award a target number of performance shares to our
senior executives in the first quarter of each year for a
three-year performance period. Performance share awards ensure
that a significant component of certain executives
compensation depends upon the achievement of specified
performance objectives over that period. The Compensation
Committee chooses from various measures of corporate performance
to determine the level of payout of performance share awards. In
2006 no payment was made for the 2003-2005 cycle as results over
the period did not achieve minimum thresholds.
As in prior years, the Compensation Committee granted
performance share awards in 2006 to selected senior management
personnel under the Long-Term Stock Incentive Plan with target
performance shares equal on the date of the award to a specified
percentage of each such employees base salary on
January 1, 2006. The specified percentage for
Mr. Rossiter was 50% and for each of the other Named
Executive Officers was 25%. However, the performance measures
were modified from those in prior years. The 2006-2008
performance criteria for these performance share awards are
(i) our relative return to stockholders compared to a peer
group consisting of the component companies within the S&P
500 Index and (ii) improvement on return on invested
capital. Specific quantitative amounts of these performance
criteria and their respective payment levels (threshold, target
and superior) are described beginning on page 126 under
Grants of Plan-Based Awards Performance
Shares. In prior years, for the relative return to
stockholders measure we had used a peer group of representative
independent automotive suppliers, which in 2005 consisted of
ArvinMeritor, Inc., Dana Corporation, Delphi Automotive Systems
Corporation, Eaton Corporation, Johnson Controls, Inc., Magna
International, Inc., and Visteon Corporation. The Compensation
Committee chose to move to the S&P 500 Index because it is a
broader group and, therefore, more representative of investment
alternatives available to our stockholders and more indicative
of relative performance.
In order to protect our executives against the cyclical nature
of the automotive supply industry, we also introduced an
alternative annual calculation under the terms of these
performance share awards. It had been our experience in the past
that one year of poor performance could virtually eliminate any
possibility of an award from an entire cycle of performance
share awards. Therefore, the Compensation Committee concluded
that relying exclusively on cumulative three-year performance
for these awards does not always provide an effective incentive
for executives, given the cyclicality of the automotive
industry. The 2006-2008 award cycle includes an alternative
calculation whereby participants can earn a pro rata amount of
performance shares in each year of the performance period to the
extent performance objectives are achieved in any single year of
the performance period. This alternative calculation will be
applied if an executive would earn more performance shares
thereby than by measuring performance over the three-year
period. Payout of these awards under either calculation, if
earned, occurs at the end of the three-year performance period.
The Compensation Committee has delayed final approval of the
awards for the 2007-2009 cycle pending further review of
Lears long-term planning objectives.
Management Stock Ownership Requirements
The Compensation Committee has implemented stock ownership
guidelines providing that our officers achieve, within five
years of reaching senior officer status, specified stock
ownership levels, based on a multiple of such officers
base salary. These guidelines are intended to create a strong
link between our long-term success and the ultimate compensation
of our officers. Compliance with the stock ownership guidelines
is determined in January of each year. If executives do not
comply with the guidelines (which are subject to certain
transition rules), the Company may pay up to 50% of their bonus
awards in the form of stock until they are in compliance. The
value of stock and stock equivalents is based, in part, on a
twelve-month average stock price in order to mitigate the effect
of stock price fluctuations. The stock ownership levels which
must be
119
achieved by our senior officers within the five-year period,
based on a multiple of such officers base salary, are as
follows:
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|
Multiple of | |
Position |
|
Base Salary | |
|
|
| |
Chief Executive Officer
|
|
|
5 |
x |
Vice Chairman and Chief Financial Officer
|
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|
4 |
x |
Chief Operating Officer
|
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|
3 |
x |
Executive/ Senior Vice Presidents
|
|
|
2.5 |
x |
Corporate Vice Presidents
|
|
|
2 |
x |
Given the degree of stock price volatility experienced by the
Company over the last several years, the Compensation Committee
is considering alternative stock ownership guidelines that
retain, as a fundamental objective, significant stock ownership
by senior management.
Management Stock Purchase Plan
In furtherance of its goal of aligning the interests of officers
and key employees with those of our stockholders, the
Compensation Committee permits our Named Executive Officers and
certain management personnel to participate in the Management
Stock Purchase Plan. The program is part of the Long-Term Stock
Incentive Plan and, in 2006, there were approximately 290
eligible participants. Under this program, members of management
can elect to defer a portion of their base salary and/or annual
incentive bonuses and receive restricted stock units credited at
a discount to the fair market value of our common stock.
Participants in the MSPP are also subject to the stock ownership
guidelines describe above. The discount rates on restricted
stock units purchased with deferred salary or bonus are based on
the following scale:
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|
Value of Restricted Stock Units | |
Total Dollar Amount of Salary and Bonus Deferrals, Expressed |
|
Applicable | |
|
Received as a Percentage of the | |
as a Percentage of the Participants Base Salary |
|
Discount Rate | |
|
Amount Deferred | |
|
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| |
|
| |
15% or less
|
|
|
20 |
% |
|
|
125 |
% |
Over 15% and up to 100%
|
|
|
30 |
% |
|
|
143 |
% |
Over 100%
|
|
|
20 |
% |
|
|
125 |
% |
Participants in the MSPP are electing to invest their personal
wealth in Company stock for a significant period of time. In
consideration for deferring their 2006 base salary and 2006
bonus in a deferral election made in December 2005, participants
were credited with a number of restricted stock units under the
Long-Term Stock Incentive Plan equal to 125% or 143% of the
amount deferred divided by the fair market value of a share of
common stock determined in a manner approved by the Compensation
Committee. This formula effectively provided participants with a
20% or 30% discount on restricted stock units credited under the
Plan, depending on the amount of the deferral as set forth in
the above table. For restricted stock units credited in March
2006 for 2006 base salary deferral elections, the fair market
value of a share of common stock was based on the average of the
high and low prices of our common stock during the last five
trading days of 2005, which was $28.32 per share. For
restricted stock units to be credited in March 2007 for 2006
bonus deferral elections, the fair market value of a share of
common stock was based on the average of the closing trading
prices during the last five trading days of 2006, which was
$29.64 per share.
Generally, a participant must hold restricted stock units and
remain employed for at least three years following the grant
date, at which time the participant receives, net of taxes, a
number of shares of common stock equal to the restricted stock
units held and a cash payment equal to the amount of dividends,
if any, the participant would have earned if he or she had held
shares of common stock rather than restricted stock units,
together with accrued interest on such dividends.
Equity Award Policy
We do not time the grant of equity awards in coordination with
the release of material non-public information. Our equity
awards are generally approved and effective on the dates of our
regularly scheduled
120
Compensation Committee meetings. In 2006 the Compensation
Committee approved and formalized our equity award policy. It
provides that the effective grant date of equity awards must be
either the date of Compensation Committee or other committee
approval or some future date specifically identified in such
approval. The exercise price of stock options and grant price of
stock appreciation rights shall be the closing market price of
our common stock on the grant date. The Compensation Committee
must approve all awards to our executive officers. An aggregate
award pool to non-executives may be approved by the Compensation
Committee and allocated to individuals by a committee consisting
of the CEO and the Chairman of the Compensation Committee.
Our Named Executive Officers participate in our retirement
savings plan, qualified pension plan, pension equalization plan
and supplemental savings plan. The general terms of these plans
and formulas for calculating benefits thereunder are summarized
following the Summary Compensation Table, Pension Benefits table
and Nonqualified Deferred Compensation table, respectively, in
the Executive Compensation section beginning on
page 128. These benefits provide rewards for long service
to the Company and an income source in an executives
post-employment years. In 2006, we elected to freeze our
salaried defined benefit pension plan effective
December 31, 2006 and established a defined contribution
retirement plan effective January 1, 2007. In making this
transition, we considered that from a financial perspective the
volatility of the market makes the costs associated with funding
a defined benefit plan increasingly unpredictable. In contrast,
the more predictable cost structure of a defined contribution
plan makes it easier to effectively budget and manage plan
expenses. In general, our pension and retirement benefits are
competitive with those of other companies in our comparator
groups, but only if executives retire at the normal retirement
age of 65. Our plans do not provide for enhanced credits or
benefits upon early retirement.
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Termination/ Change in Control Benefits |
As described in detail and quantified beginning on
page 135, our Named Executive Officers receive certain
benefits under their employment agreements upon certain
termination of employment events, including following a change
in control of the Company. They also receive, as do all
employees who hold equity awards, accelerated or pro rata
vesting of equity awards upon a change in control of the
Company. These benefits are intended to ensure that senior
management is not influenced by their personal situations and
are able to be objective in evaluating a potential change in
control transaction. In addition, the benefits associated with
early vesting of equity awards protect employees in the event of
a change in control and ensure an orderly transition of
leadership.
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|
Health, Welfare and Certain Other Benefits |
To remain competitive in the market for a high caliber
management team, Lear provides its executive officers, including
our Chief Executive Officer, with health and welfare benefits.
The Estate Preservation Plan, in which certain of our senior
executives participate, provides the beneficiaries of a
participant with death benefits which may be used to pay estate
taxes on inherited common stock. In addition, in the past we had
provided certain perquisites, including financial counseling
services, reimbursement of country club membership dues, the use
of a company automobile and limited personal use of the
corporate aircraft. In certain instances, the Company had also
provided tax gross-up
payments for the imputed income associated with such
perquisites. Beginning in 2006 for our Named Executive Officers,
we transitioned from the provision of individual perquisites
toward the provision to each executive of an aggregate
perquisite allowance. This gives the executives freedom to
choose the form of benefit and eliminates our cost of
administering the perquisites program. We also permit limited
personal use of the company aircraft by our most senior
executives. For additional information regarding perquisites,
please see Executive Compensation Summary
Compensation Table beginning on page 123 and footnote
(6) to the Summary Compensation Table.
121
Tax Treatment of Executive Compensation
One of the factors the Compensation Committee considers when
determining compensation is the anticipated tax treatment to
Lear and to the executives of the various payments and benefits.
Section 162(m) of the Internal Revenue Code limits the
deductibility of non-performance based compensation in excess of
$1,000,000 paid to any Named Executive Officer appearing in the
Summary Compensation Table. The Compensation Committee generally
considers this limit when determining compensation; however,
there are instances where the Committee has concluded, and may
conclude in the future, that it is appropriate to exceed the
limitation on deductibility under Section 162(m) to ensure
that executive officers are compensated in a manner that it
believes to be consistent with the Companys best interests
and those of its stockholders. For example, as described above,
in 2004 the Compensation Committee chose to increase
Mr. Rossiters salary to $1,100,000, thereby making
$100,000 of it non-deductible. In making this decision, the
Committee weighed the cost of this non-deductible compensation
against the benefit of awarding competitive compensation to our
Chief Executive Officer.
Impact of Accounting Treatment
We have generally considered the accounting treatment of various
forms of awards in determining the components of our overall
compensation program. For example, we considered the
commencement of option expensing under the fair value accounting
guidance of FAS123 as a factor in switching from option awards
to restricted stock units in 2003. In addition, we have
generally sought to grant stock-settled equity awards which
receive fixed accounting treatment as opposed to cash-settled
equity awards which receive variable accounting treatment. We
intend to continue to evaluate these factors in the future.
122
EXECUTIVE COMPENSATION
The following table shows information concerning the annual
compensation for services to the Company in all capacities of
the Chief Executive Officer, Chief Financial Officer and the
other most highly compensated executive officers of the Company
(our Named Executive Officers) during the last
completed fiscal year.
SUMMARY COMPENSATION TABLE
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Change in | |
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|
|
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|
|
|
|
|
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|
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|
Pension | |
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Value and | |
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|
Non-Equity | |
|
Nonqualified | |
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Incentive | |
|
Deferred | |
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Stock | |
|
Option | |
|
Plan | |
|
Compensation | |
|
All Other | |
|
Total | |
|
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|
|
Salary | |
|
Bonus | |
|
Awards | |
|
Awards | |
|
Compensation | |
|
Earnings | |
|
Compensation | |
|
Compensation | |
|
|
|
|
(1) | |
|
(1),(2) | |
|
(3) | |
|
(4) | |
|
(1),(2) | |
|
(5) | |
|
(6) | |
|
(7) | |
Name and Principal Position |
|
Year | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
(a) |
|
(b) | |
|
(c) | |
|
(d) | |
|
(e) | |
|
(f) | |
|
(g) | |
|
(h) | |
|
(i) | |
|
(j) | |
|
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| |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
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| |
Robert E. Rossiter,
|
|
|
2006 |
|
|
$ |
1,100,000 |
|
|
$ |
132,000 |
|
|
$ |
2,540,097 |
|
|
$ |
944,106 |
|
|
$ |
693,000 |
|
|
$ |
697,329 |
|
|
$ |
192,344 |
(8) |
|
$ |
6,298,876 |
|
|
Chairman and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Vandenberghe,
|
|
|
2006 |
|
|
$ |
925,000 |
|
|
$ |
74,000 |
|
|
$ |
1,417,369 |
|
|
$ |
524,503 |
|
|
$ |
388,500 |
|
|
$ |
416,243 |
|
|
$ |
93,658 |
|
|
$ |
3,839,273 |
|
|
Vice Chairman and Chief Financial Officer |
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|
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David C. Wajsgras,
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2006 |
|
|
$ |
130,000 |
|
|
$ |
0 |
|
|
$ |
(639,537 |
) |
|
$ |
(57,791 |
) |
|
$ |
0 |
|
|
$ |
0 |
(10) |
|
$ |
11,243 |
(11) |
|
$ |
(556,085 |
) |
|
Former Executive Vice President and Chief Financial Officer(9) |
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|
|
|
Douglas G. DelGrosso,
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|
|
2006 |
|
|
$ |
770,000 |
|
|
$ |
74,000 |
|
|
$ |
1,013,164 |
|
|
$ |
466,709 |
|
|
$ |
388,500 |
|
|
$ |
82,210 |
|
|
$ |
0 |
(12) |
|
$ |
2,794,583 |
|
|
President and Chief Operating Officer |
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|
|
Daniel A. Ninivaggi,
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|
2006 |
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|
$ |
572,917 |
|
|
$ |
169,850 |
|
|
$ |
863,627 |
|
|
$ |
232,497 |
|
|
$ |
150,150 |
|
|
$ |
30,089 |
|
|
$ |
57,716 |
|
|
$ |
2,076,846 |
|
|
Executive Vice President, Secretary and General Counsel |
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|
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|
|
Raymond E. Scott,
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|
|
2006 |
|
|
$ |
453,958 |
|
|
$ |
22,560 |
|
|
$ |
455,591 |
|
|
$ |
224,021 |
|
|
$ |
118,440 |
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|
$ |
28,082 |
|
|
$ |
139,700 |
(13) |
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$ |
1,442,352 |
|
|
Senior Vice President and President, North American Seating
Systems Group |
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|
(1) |
Under the Management Stock Purchase Plan, Named Executive
Officers elected to defer portions of their 2006 salaries and
bonuses. Salaries and bonuses are reported without giving effect
to any amount deferred under that plan. The Named Executive
Officers deferred the following amounts of their total salary
and bonus earned in 2006: Mr. Rossiter, $577,500;
Mr. Vandenberghe, $416,250; Mr. DelGrosso, $215,625;
Mr. Ninivaggi, $153,000; and Mr. Scott, $141,000.
Amounts deferred under the Management Stock Purchase Plan are
used to purchase restricted stock units at a discount to the
fair market value of our common stock. The respective amounts
charged as an expense to the Company in 2006 for this premium
portion is reflected in the stock awards column.
Messrs. DelGrosso and Scott have deferred receipt of
supplemental restricted stock unit awards into the Management
Stock Purchase Plan in the amounts of $144,896 and $46,042,
respectively. For further information regarding the Management
Stock Purchase Plan, see Compensation Discussion and
Analysis above and the Grants of Plan-Based Awards table
(including footnote (4) thereto) beginning on page 126. |
|
|
(2) |
The total annual incentive bonus for 2006 is divided between
columns (d) and (g). The amount shown in column
(g) was earned based on the pre-established criteria
approved by the Compensation Committee. The amount shown in
column (d) is the discretionary portion of the annual
incentive bonus that was approved by the Compensation Committee
based on a variety of qualitative factors. |
|
|
(3) |
Represents the compensation costs of restricted stock units,
restricted stock and performance shares for financial reporting
purposes for the year under FAS 123(R). See Note 11 of
the Companys financial statements for 2006, incorporated
by reference in this proxy statement, for the assumptions made
in determining FAS 123(R) values. For retirement eligible
grantees, the first half of the grant is expensed |
123
|
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|
|
in the year of the grant and the second half is expensed over
two years. There can be no assurance that the FAS 123(R)
value will ever be realized. The amount for Mr. Wajsgras
reflects the net result of reversing a portion of the
compensation costs of awards that were previously expensed by
the Company which he forfeited upon his resignation. |
|
|
(4) |
Represents the compensation costs of stock-settled stock
appreciation rights for financial reporting purposes for the
year under FAS 123(R). See Note 11 of the
Companys financial statements for 2006, incorporated by
reference in this proxy statement, for the assumptions made in
determining FAS 123(R) values. For retirement eligible
grantees, the entire amount is expensed in one year. There can
be no assurance that the FAS 123(R) value will ever be
realized. The amount for Mr. Wajsgras reflects the net
result of reversing a portion of the compensation costs of
awards that were previously expensed by the Company which he
forfeited upon his resignation. |
|
|
(5) |
Represents the aggregate change in actuarial present value of
the executives accumulated benefit under all defined
benefit and actuarial pension plans (including supplemental
plans) from the pension plan measurement date used for financial
statement reporting purposes with respect to the prior fiscal
years audited financial statements to the respective
measurement date for the covered fiscal year. |
|
|
(6) |
The amount shown in column (i) reflects for each Named
Executive Officer (with those amounts in each category in excess
of $10,000 specifically noted): |
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|
|
matching contributions allocated by the Company to each of the
Named Executive Officers pursuant to the Retirement Savings Plan
(described below) and the Executive Supplemental Savings Plan
(fully described beginning on page 134 under the heading
Nonqualified Deferred Compensation); |
|
|
|
imputed income with respect to life insurance coverage; |
|
|
|
life insurance premiums paid by the Company, including $12,128
in premiums for Mr. Rossiter and $12,720 in premiums for
Mr. Vandenberghe; and |
|
|
|
a perquisite allowance provided by the Company that is equal to
the greater of 7.5% of the base salary rate as of
December 31, 2006 and $42,000, which amounted to allowances
as follows: Mr. Rossiter, $82,500; Mr. Vandenberghe,
$69,375; Mr. DelGrosso, $69,375 (based on a salary rate of
$925,000, which includes the value of a supplemental restricted
stock unit grant awarded in January 2006); Mr. Ninivaggi,
$52,500; and Mr. Scott, $42,000. |
|
|
|
|
(7) |
For each Named Executive Officer, the percentages of total
compensation in 2006 that were attributable to base salary and
total bonus (the amounts identified in columns (d) and (g))
were as follows: Mr. Rossiter, base salary 17.5%, bonus
13.1%; Mr. Vandenberghe, base salary 24.1%, bonus 12.0%;
Mr. Wajsgras, base salary 92.0% (disregarding negative
amounts in the Summary Compensation Table), bonus 0%;
Mr. DelGrosso, base salary 27.6%, bonus 16.5%;
Mr. Ninivaggi, base salary 27.6%, bonus 15.4%;
Mr. Scott, base salary 31.5%, bonus 9.8%. |
|
|
(8) |
In addition to the items noted in footnote 6 above, the
amount in column (i) includes the aggregate incremental
cost of $45,866 for personal use of the corporate aircraft,
which was determined based on the variable cost to the Company
of such use, and an associated tax
gross-up of $33,822. |
|
|
(9) |
Mr. Wajsgras resigned as our Executive Vice President and
Chief Financial Officer effective March 10, 2006. |
|
|
(10) |
Mr. Wajsgrass aggregate pension value decreased by
$182,082 as a result of his resignation prior to becoming fully
vested in the Pension Equalization Program and the Executive
Supplemental Savings Plan. |
|
(11) |
The amount in column (i) includes $10,719 relating to
financial counseling services and country club membership dues. |
|
(12) |
Mr. DelGrosso received the items noted in footnote 6
above, however, these amounts were more than offset by net tax
reimbursements of $96,563 paid by Mr. DelGrosso to Lear
related to his foreign assignment. The net tax reimbursements
are comprised of taxes paid by Lear in the amount of $182,500,
offset by tax equalization payments made by Mr. DelGrosso
to Lear in the amount of $279,063. |
124
|
|
(13) |
Includes $56,643 relating to Mr. Scotts overseas
assignment compensation (which primarily reflects tax
equalization payments, reimbursement for foreign housing costs
and certain associated tax gross-ups), $20,000 relating to
country club membership fees and $13,529 for a tax
gross-up relating to
country club membership fees. |
We have entered into employment agreements with each of our
Named Executive Officers. Unless terminated earlier pursuant to
a written notice of termination provided by us or the executive,
each employment agreement with our Named Executive Officers
remains in effect until the earlier of (i) the date two
years after a written notice of non-renewal is provided by us or
the executive or (ii) the date the executive reaches his or
her normal retirement date under our retirement plan for
salaried employees then in effect. Each employment agreement
specifies the annual base salary for the executive, which may be
increased at the discretion of the Compensation Committee. In
addition, the employment agreements specify that the executives
are eligible for an annual incentive compensation bonus at the
discretion of the Compensation Committee. Under the terms of the
employment agreements, each Named Executive Officer is also
eligible to participate in the welfare, retirement, perquisite
and fringe benefit, and other benefit plans, practices, policies
and programs, as may be in effect from time to time, for senior
executives of the Company generally. Under the employment
agreements, the Company may generally reduce an executives
base salary or bonus, defer payment of his compensation, or
eliminate or modify his benefits, without giving rise to a claim
of constructive termination, so long as such changes are made
for all executive officers of the Company; however, any such
actions by the Company within one year after a change in control
(as defined in the employment agreement) would give the
executive a basis for termination for good reason.
Each executive who enters into an employment agreement agrees to
comply with certain confidentiality covenants both during
employment and after termination. He also agrees to comply with
certain non-competition and non-solicitation covenants during
his employment and for two years after the date of termination,
unless he is terminated by us for cause, pursuant to a notice of
non-renewal from us, or if he terminates employment for other
than good reason, in which cases he agrees to comply with such
covenants for one year after the date of termination. Upon any
transfer of all or substantially all of our assets to a
successor entity, we will require the successor entity expressly
to assume performance of the employment agreement.
We have established a Retirement Savings Plan pursuant to
Section 401(k) of the Internal Revenue Code for non-union
salaried employees who have completed one month of service.
Under the Retirement Savings Plan, each eligible employee may
elect to defer, on a pre-tax basis, a portion of his or her base
salary and annual bonus each year. The plan was originally
established with a company matching provision of 50%, 75% and
100% on an employees compensation up to a maximum of 5% of
an employees base salary and annual incentive bonus,
depending on years of service. Effective January 1, 2002,
matching contributions were suspended, but were subsequently
reinstated effective April 1, 2003 at a reduced rate of 25%
and 50% on an employees compensation up to a maximum of 5%
of an employees base salary and annual incentive bonus,
depending on years of service. In addition, the plan was amended
effective January 1, 2003 to allow for discretionary
company matching contributions. Company matching contributions
were initially invested in a money market-type fund and could be
transferred by the participant to other funds under the
Retirement Savings Plan at any time. Matching contributions
become vested under the Retirement Savings Plan at a rate of 20%
for each full year of service. Effective July 1, 2006,
matching contributions were suspended.
125
GRANTS OF PLAN-BASED AWARDS
The following table discloses the grants of plan-based awards to
our Named Executive Officers in 2006.
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All | |
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All Other | |
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Grant | |
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Other | |
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Option | |
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Date | |
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|
Estimated Possible Payouts | |
|
Estimated Future Payouts | |
|
Stock | |
|
Awards: | |
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Fair | |
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|
Under Non-Equity Incentive Plan | |
|
Under Equity Incentive | |
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Awards: | |
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Number | |
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Value of | |
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|
Awards | |
|
Plan Awards | |
|
Number | |
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of | |
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Exercise | |
|
Stock | |
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|
(1) | |
|
(2) | |
|
of | |
|
Securities | |
|
or Base | |
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and | |
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| |
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| |
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Shares | |
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Under- | |
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Price of | |
|
Option | |
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Maxi- | |
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Maxi- | |
|
of Stock | |
|
lying | |
|
Option | |
|
Awards | |
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|
|
|
|
|
Threshold | |
|
Target | |
|
mum | |
|
Threshold | |
|
Target | |
|
mum | |
|
or Units | |
|
Options | |
|
Awards | |
|
($) | |
Name |
|
Grant Date | |
|
Approval | |
|
($) | |
|
($) | |
|
($) | |
|
(#) | |
|
(#) | |
|
(#) | |
|
(#) | |
|
(#) | |
|
($/Sh) | |
|
(3) | |
(a) |
|
(b) | |
|
Date | |
|
(c) | |
|
(d) | |
|
(e) | |
|
(f) | |
|
(g) | |
|
(h) | |
|
(i) | |
|
(j) | |
|
(k) | |
|
(l) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
3/15/2006(4 |
) |
|
|
11/10/2005(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,606 |
|
|
|
|
|
|
|
|
|
|
$ |
111,975 |
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
$ |
0 |
|
|
$ |
1,650,000 |
|
|
$ |
2,310,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,711 |
|
|
|
19,421 |
|
|
|
29,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,626 |
|
|
|
|
|
|
|
|
|
|
$ |
739,966 |
|
|
|
|
11/9/2006(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,875 |
|
|
$ |
31.32 |
|
|
$ |
936,259 |
|
James H. Vandenberghe
|
|
|
3/15/2006(4 |
) |
|
|
11/10/2005(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,124 |
|
|
|
|
|
|
|
|
|
|
$ |
94,161 |
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
$ |
0 |
|
|
$ |
925,000 |
|
|
$ |
1,295,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,083 |
|
|
|
8,166 |
|
|
|
12,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006(6 |
) |
|
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|
|
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|
|
13,126 |
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|
|
|
|
|
|
|
|
|
$ |
411,106 |
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|
|
|
11/9/2006(7 |
) |
|
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|
|
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|
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|
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|
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|
|
39,375 |
|
|
$ |
31.32 |
|
|
$ |
520,144 |
|
David C. Wajsgras
|
|
|
1/3/2006 |
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|
|
11/10/2005(8 |
) |
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|
|
2,562 |
|
|
|
|
|
|
|
|
|
|
$ |
72,479 |
|
Douglas G. DelGrosso
|
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|
1/3/2006 |
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|
11/10/2005(8 |
) |
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|
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|
|
5,121 |
|
|
|
|
|
|
|
|
|
|
$ |
144,873 |
|
|
|
|
3/15/2006(4 |
) |
|
|
11/10/2005(5 |
) |
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,488 |
|
|
|
|
|
|
|
|
|
|
$ |
225,346 |
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
$ |
0 |
|
|
$ |
925,000 |
|
|
$ |
1,295,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,083 |
|
|
|
8,166 |
|
|
|
12,249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,126 |
|
|
|
|
|
|
|
|
|
|
$ |
411,106 |
|
|
|
|
11/9/2006(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39,375 |
|
|
$ |
31.32 |
|
|
$ |
520,144 |
|
Daniel A. Ninivaggi
|
|
|
3/15/2006(4 |
) |
|
|
11/10/2005(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,103 |
|
|
|
|
|
|
|
|
|
|
$ |
6,245 |
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
$ |
0 |
|
|
$ |
357,500 |
|
|
$ |
500,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,207 |
|
|
|
4,414 |
|
|
|
6,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,150 |
|
|
|
|
|
|
|
|
|
|
$ |
317,898 |
|
|
|
|
11/9/2006(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,578 |
|
|
|
|
|
|
|
|
|
|
$ |
300,000 |
|
|
|
|
11/9/2006(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,450 |
|
|
$ |
31.32 |
|
|
$ |
402,245 |
|
Raymond E. Scott
|
|
|
3/15/2006(4 |
) |
|
|
11/10/2005(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,032 |
|
|
|
|
|
|
|
|
|
|
$ |
57,543 |
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
$ |
0 |
|
|
$ |
282,000 |
|
|
$ |
394,800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/23/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,031 |
|
|
|
4,061 |
|
|
|
6,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11/9/2006(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,300 |
|
|
|
|
|
|
|
|
|
|
$ |
197,316 |
|
|
|
|
11/9/2006(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,900 |
|
|
$ |
31.32 |
|
|
$ |
249,669 |
|
|
|
(1) |
The threshold, target and maximum amounts represent 0%, 100% and
140%, respectively, of the total bonus opportunity for each
Named Executive Officer. The total bonus opportunity for the
Named Executive Officers is based on a percentage of base
salary, which was 150% for Mr. Rossiter, 100% for
Messrs. Vandenberghe and DelGrosso, and 60% for
Mr. Scott. The total bonus opportunity for
Mr. Ninivaggi was 60% through August 21, 2006, at
which time it was increased to 80% of base salary. Amounts
actually paid for 2006 performance were equal to 50% of target,
except with respect to Mr. Ninivaggi, who received an
additional discretionary amount. Those amounts are set forth in
columns (d) and (g) of the Summary Compensation Table. |
|
(2) |
Represents the performance share awards granted under the
Long-Term Stock Incentive Plan for the 2006 through 2008
performance period. |
|
(3) |
See Note 11 of the Companys financial statements for
2006, incorporated by reference in this proxy statement, for the
assumptions made in determining FAS 123(R) values. |
|
(4) |
Represents total restricted stock units awarded under the
Management Stock Purchase Plan (MSPP) in 2006 based on
deferral elections with respect to salary and bonus. The Grant
Date Fair Value, however, reflects only the premium portion (as
a result of the discounted unit price) awarded to each Named
Executive Officer based on such officers deferral
election. The amounts shown for this award would include
deferrals of 2006 salary and 2005 bonus payable in 2006,
however, no bonus was paid in 2006. For |
126
|
|
|
Messrs. DelGrosso and Scott, the fair value of their MSPP
awards also includes the amounts of their supplemental
restricted stock unit awards that they deferred into the MSPP
which were $144,896 and $46,042, respectively. |
|
(5) |
The Compensation Committee approved the 2006 Management Stock
Purchase Plan Terms and Conditions at its meeting in November
2005. |
|
(6) |
Represents restricted stock units granted under the Long-Term
Stock Incentive Plan. |
|
(7) |
Represents stock-settled stock appreciation rights awarded under
the Long-Term Stock Incentive Plan. |
|
(8) |
The Compensation Committee approved the awards at its meeting in
November 2005, to be granted on January 3, 2006. |
Bonuses
A summary description of the Companys Annual Incentive
Compensation Plan is set forth in the Compensation Discussion
and Analysis, above.
Restricted Stock
Units
The Companys equity-based awards to the Named Executive
Officers for 2006 included restricted stock units. The
restricted stock unit awards consisted of (i) restricted
stock units granted under the Long-Term Stock Incentive Plan,
which are valued based on the price of our common stock on the
grant date, (ii) awards under the Management Stock Purchase
Plan (MSPP) based on deferral elections with respect to
salary and bonus earned in the respective years and
(iii) supplemental restricted stock units awarded to
certain executives in lieu of additional base salary increases.
Restricted stock units are converted into shares of our common
stock on a one-for-one basis, net of taxes, on the respective
vesting dates.
One-half of the restricted stock units in clause (i) above
vest on the second anniversary of the grant date, and the
remaining half vest on the fourth anniversary of the grant date,
provided the recipient remains employed by the Company and
certain other conditions are satisfied. Delivery of shares is
made at the time of vesting unless the employee has elected to
defer delivery. An employee may elect to defer delivery of
shares for up to ten years. With respect to the MSPP, the
restricted stock unit awards reported reflect the premium
portion (as a result of the discounted unit price) awarded to
each Named Executive Officer based on such officers
deferral election, and the value of each such award is reported
as of its respective grant date. The MSPP restricted stock units
generally vest three years from the date of grant. Except with
respect to the amounts deferred into the MSPP, the supplemental
restricted stock units vested on the first anniversary of the
grant date in accordance with their terms.
Holders of restricted stock units are entitled to dividend
equivalents if and when cash dividends are declared and paid on
our common stock. The dividend equivalents are calculated by
multiplying the dividend amount by the number of restricted
stock units held. The dividend equivalents are credited to an
account established by the Company for bookkeeping purposes only
and credited monthly with interest at an annual rate equal to
the prime rate. Dividend equivalents vest in accordance with the
vesting schedule of the restricted stock units to which they
relate.
Restricted Stock
A description of the restricted stock award to
Mr. Ninivaggi is included in the Compensation Discussion
and Analysis, beginning on page 114.
Stock Appreciation
Rights
The Companys equity-based awards to the Named Executive
Officers for 2006 included stock-settled stock appreciation
rights. The stock appreciation rights entitle the executive,
upon exercise, to receive shares of our common stock equal to
the aggregate difference between the grant price of each
exercised stock appreciation right and the fair market value of
one share of common stock on the date the stock appreciation
right is exercised. The grant price was equal to the closing
price of the Company common stock on the New
127
York Stock Exchange on the grant date. The stock appreciation
rights will vest and become exercisable on the third anniversary
of the grant date, provided the recipient remains employed by
the Company and certain other conditions are satisfied. The
stock appreciation rights will expire seven years from the grant
date, unless earlier exercised. If the executive retires after
age 55 with 10 or more years of vesting service (as defined
in the Pension Plan), the executive will be deemed vested in the
stock appreciation rights that would have become vested during
the 24 months following his or her retirement date and the
executive will have 13 months from his or her retirement
date to exercise the vested stock appreciation rights. If the
recipients employment terminates due to death or
disability, all stock appreciation rights will immediately vest
in full and the recipient (or his or her beneficiary) will have
13 months to exercise the vested stock appreciation rights.
Upon a termination of employment for any reason other than those
described above, the recipient will have 30 days from the
termination date to exercise vested stock appreciation rights.
If a change in control (as defined in the Long-Term Stock
Incentive Plan) of the Company occurs, all stock appreciation
rights will immediately vest in full.
Performance Shares
On March 23, 2006, the Compensation Committee also approved
performance share awards to certain members of the
Companys management under the terms of the Long-Term Stock
Incentive Plan for the three-year period ending
December 31, 2008. The number of performance shares
actually earned will depend on the attainment of certain levels
(threshold, target or superior) of two equally-weighted
performance measures during the three-year period ending
December 31, 2008: (i) improvement on return on
invested capital and (ii) relative return to shareholders
compared to a peer group consisting of component companies
within the S&P 500 Index.
If any of the levels of performance are attained, performance
shares will be paid out in shares of the Companys common
stock on a one-for-one basis after the end of the performance
period. Attainment of the threshold level will result in a
payout at 50% of the targeted level; attainment of the target
level will result in a payout at 100% of the targeted level; and
attainment of the superior level will result in a payout at 150%
of the targeted level. In the alternative, the executives may
earn a pro rata amount of performance shares in each year of the
performance period to the extent such performance objectives are
attained in any single year of the performance period. This
alternative calculation will be applied if an executive would
earn more performance shares thereby than by measuring
performance over the three-year period. A summary of the
performance objectives for the 2006-2008 performance share
awards follows: (i) Improvement in Return on Invested
Capital has threshold, target and superior levels of 3%, 5% and
7% per year average improvement, respectively; and
(ii) Relative Return to Shareholders has threshold, target
and superior levels if the Company is ranked above the 42nd,
57th and 85th percentile, respectively.
128
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table shows outstanding stock options, stock
appreciation rights, restricted stock units and performance
shares as of December 31, 2006 for each Named Executive
Officer.
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Stock Awards | |
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Equity | |
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Incentive | |
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Plan | |
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Awards: | |
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Equity | |
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Market | |
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Option Awards | |
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Incentive | |
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or | |
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Plan | |
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Payout | |
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Equity | |
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Awards: | |
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Value of | |
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Incentive | |
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Market | |
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Number of | |
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Unearned | |
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Plan | |
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Value of | |
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Unearned | |
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Shares, | |
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Awards: | |
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Number | |
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Shares or | |
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Shares, | |
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Units or | |
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Number of | |
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Number of | |
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Number of | |
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of Shares | |
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Units of | |
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Units or | |
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Other | |
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Securities | |
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Securities | |
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Securities | |
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or Units | |
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Stock | |
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Other | |
|
Rights | |
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Underlying | |
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Underlying | |
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Underlying | |
|
|
|
of Stock | |
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That | |
|
Rights | |
|
That | |
|
|
Unexercised | |
|
Unexercised | |
|
Unexercised | |
|
Option | |
|
|
|
That | |
|
Have Not | |
|
That | |
|
Have Not | |
|
|
Options | |
|
Options | |
|
Unearned | |
|
Exercise | |
|
Option | |
|
Have Not | |
|
Vested | |
|
Have Not | |
|
Vested | |
|
|
(#) | |
|
(#) | |
|
Options | |
|
Price | |
|
Expiration | |
|
Vested | |
|
(1) | |
|
Vested | |
|
(1) | |
Name |
|
Exercisable | |
|
Unexercisable | |
|
(#) | |
|
($) | |
|
Date | |
|
(#) | |
|
($) | |
|
(#) | |
|
($) | |
(a) |
|
(b) | |
|
(c) | |
|
(d) | |
|
(e) | |
|
(f) | |
|
(g) | |
|
(h) | |
|
(i) | |
|
(j) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
45,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
54.22 |
|
|
|
5/12/2008 |
|
|
|
190,272(4) |
|
|
$ |
5,618,732 |
|
|
|
14,236 |
(5) |
|
$ |
420,389 |
|
|
|
|
81,250 |
|
|
|
0 |
|
|
|
|
|
|
$ |
35.93 |
|
|
|
5/3/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
41.83 |
|
|
|
6/14/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,625 |
|
|
|
101,250 |
(2) |
|
|
|
|
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
70,875 |
(3) |
|
|
|
|
|
$ |
31.32 |
|
|
|
11/9/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James H. Vandenberghe
|
|
|
40,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
54.22 |
|
|
|
5/12/2008 |
|
|
|
113,272(6) |
|
|
$ |
3,344,922 |
|
|
|
5,986 |
(7) |
|
$ |
176,767 |
|
|
|
|
50,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
39.00 |
|
|
|
3/19/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
41.83 |
|
|
|
6/14/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,125 |
|
|
|
56,250 |
(2) |
|
|
|
|
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
39,375 |
(3) |
|
|
|
|
|
$ |
31.32 |
|
|
|
11/9/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David C. Wajsgras
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
$ |
41.83 |
|
|
|
3/10/2006 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
0 |
|
|
$ |
0 |
|
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
$ |
27.74 |
|
|
|
3/10/2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas G. DelGrosso
|
|
|
20,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
54.22 |
|
|
|
5/12/2008 |
|
|
|
77,339(8) |
|
|
$ |
2,283,821 |
|
|
|
5,523 |
(9) |
|
$ |
163,094 |
|
|
|
|
30,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
39.00 |
|
|
|
3/19/2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,500 |
|
|
|
0 |
|
|
|
|
|
|
$ |
35.93 |
|
|
|
5/3/2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
41.83 |
|
|
|
6/14/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,125 |
|
|
|
56,250 |
(2) |
|
|
|
|
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
39,375 |
(3) |
|
|
|
|
|
$ |
31.32 |
|
|
|
11/9/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel A. Ninivaggi
|
|
|
13,500 |
|
|
|
27,000 |
(2) |
|
|
|
|
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
|
32,533(10) |
|
|
$ |
960,699 |
|
|
|
3,122 |
(11) |
|
$ |
92,193 |
|
|
|
|
0 |
|
|
|
30,450 |
(3) |
|
|
|
|
|
$ |
31.32 |
|
|
|
11/9/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond E. Scott
|
|
|
4,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
54.22 |
|
|
|
5/12/2008 |
|
|
|
36,992(12) |
|
|
$ |
1,092,374 |
|
|
|
2,844 |
(13) |
|
$ |
83,983 |
|
|
|
|
25,000 |
|
|
|
0 |
|
|
|
|
|
|
$ |
41.83 |
|
|
|
6/14/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,500 |
|
|
|
27,000 |
(2) |
|
|
|
|
|
$ |
27.74 |
|
|
|
11/10/2012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
18,900 |
(3) |
|
|
|
|
|
$ |
31.32 |
|
|
|
11/9/2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Total values calculated by multiplying total number of shares or
units by the market price of Company stock at the close of the
last trading day in 2006, which was $29.53 per share. |
|
|
(2) |
Stock appreciation rights, one-half of which vest on
November 10, 2007 and one-half of which vest on
November 10, 2008. |
|
|
(3) |
Stock appreciation rights which vest on November 9, 2009. |
129
|
|
|
|
(4) |
Represents 42,651 restricted stock units granted under the
Management Stock Purchase Plan that vest on March 14, 2007;
24,014 restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2008; 15,606
restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2009; 22,500
restricted stock units granted under the Long-Term Stock
Incentive Plan that vest on November 13, 2008; 45,000
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 11, 2007 and
the other half of which vest on November 11, 2009; 16,875
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 10, 2007 and
the other half of which vest on November 10, 2009; 23,626
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 9, 2008 and
the other half of which vest on November 9, 2010. In
addition, Mr. Rossiter is entitled to receive two
years vesting acceleration of his restricted stock units
upon his retirement because he is over age 55 with ten
years of service. |
|
|
(5) |
Represents 4,525 performance shares awarded under the Long-Term
Stock Incentive Plan at threshold for the 2005 to 2007
performance period and 9,711 performance shares awarded under
the Long-Term Stock Incentive Plan at threshold for the 2006 to
2008 performance period. Does not include performance shares for
the 2004 to 2006 performance period, which expired without
payment. |
|
|
(6) |
Represents 22,526 restricted stock units granted under the
Management Stock Purchase Plan that vest on March 14, 2007;
17,582 restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2008; 13,123
restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2009; 12,540
restricted stock units granted under the Long-Term Stock
Incentive Plan that vest on November 13, 2008; 25,000
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 11, 2007 and
the other half of which vest on November 11, 2009; 9,375
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 10, 2007 and
the other half of which vest on November 10, 2009; 13,126
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 9, 2008 and
the other half of which vest on November 9, 2010. In
addition, Mr. Vandenberghe is entitled to receive two
years vesting acceleration of his restricted stock units
upon his retirement because he is over age 55 with ten
years of service. |
|
|
(7) |
Represents 1,903 performance shares awarded under the Long-Term
Stock Incentive Plan at threshold for the 2005 to 2007
performance period and 4,083 performance shares awarded under
the Long-Term Stock Incentive Plan at threshold for the 2006 to
2008 performance period. Does not include performance shares for
the 2004 to 2006 performance period, which expired without
payment. |
|
|
(8) |
Represents 7,425 restricted stock units granted under the
Management Stock Purchase Plan that vest on March 14, 2007;
3,804 restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2008; 11,488
restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2009; 9,000 restricted
stock units granted under the Long-Term Stock Incentive Plan
that vest on November 13, 2008; 18,000 restricted stock
units granted under the Long-Term Stock Incentive Plan, half of
which vest on November 11, 2007 and the other half of which
vest on November 11, 2009; 9,375 restricted stock units
granted under the Long-Term Stock Incentive Plan, half of which
vest on November 10, 2007 and the other half of which vest
on November 10, 2009; 5,121 restricted stock units granted
under the Long-Term Stock Incentive Plan that vested on
January 3, 2007; 13,126 restricted stock units granted
under the Long-Term Stock Incentive Plan, half of which vest on
November 9, 2008 and the other half of which vest on
November 9, 2010. |
|
|
(9) |
Represents 1,440 performance shares awarded under the Long-Term
Stock Incentive Plan at threshold for the 2005 to 2007
performance period and 4,083 performance shares awarded under
the Long-Term Stock Incentive Plan at threshold for the 2006 to
2008 performance period. Does not include performance shares for
the 2004 to 2006 performance period, which expired without
payment. |
|
|
(10) |
Represents 101 restricted stock units granted under the
Management Stock Purchase Plan that vest on March 14, 2007;
1,379 restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2008; 1,103 restricted
stock units granted under the Management Stock Purchase Plan
that vest on March 14, 2009; 5,100 restricted stock units
granted under the Long-Term Stock |
130
|
|
|
Incentive Plan that vest on November 13, 2008; 10,200
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 11, 2007 and
the other half of which vest on November 11, 2009; 4,500
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 10, 2007 and
the other half of which vest on November 10, 2009; 10,150
restricted stock units granted under the Long-Term Stock
Incentive Plan, half of which vest on November 9, 2008 and
the other half of which vest on November 9, 2010. |
|
(11) |
Represents 915 performance shares awarded under the Long-Term
Stock Incentive Plan at threshold for the 2005 to 2007
performance period and 2,207 performance shares awarded under
the Long-Term Stock Incentive Plan at threshold for the 2006 to
2008 performance period. Does not include performance shares for
the 2004 to 2006 performance period, which expired without
payment. |
|
(12) |
Represents 5,615 restricted stock units granted under the
Management Stock Purchase Plan that vest on March 14, 2007;
4,486 restricted stock units granted under the Management Stock
Purchase Plan that vest on March 14, 2008; 2,031 restricted
stock units granted under the Management Stock Purchase Plan
that vest on March 14, 2009; 4,560 restricted stock units
granted under the Long-Term Stock Incentive Plan that vest on
November 13, 2008; 9,500 restricted stock units granted
under the Long-Term Stock Incentive Plan, half of which vest on
November 11, 2007 and the other half of which vest on
November 11, 2009; 4,500 restricted stock units granted
under the Long-Term Stock Incentive Plan, half of which vest on
November 10, 2007 and the other half of which vest on
November 10, 2009; 6,300 restricted stock units granted
under the Long-Term Stock Incentive Plan, half of which vest on
November 9, 2008 and the other half of which vest on
November 9, 2010. |
|
(13) |
Represents 813 performance shares awarded under the Long-Term
Stock Incentive Plan at threshold for the 2005 to 2007
performance period and 2,031 performance shares awarded under
the Long-Term Stock Incentive Plan at threshold for the 2006 to
2008 performance period. Does not include performance shares for
the 2004 to 2006 performance period, which expired without
payment. |
OPTION EXERCISES AND STOCK VESTED
The following table sets forth certain information regarding
stock-based awards that vested during 2006 for our Named
Executive Officers. No stock options or stock appreciation
rights were exercised by our Named Executive Officers in 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards | |
|
|
Option Awards | |
|
| |
|
|
| |
|
Number of | |
|
|
|
|
Number of | |
|
Value | |
|
Shares Acquired | |
|
Value | |
|
|
Shares Acquired | |
|
Realized on | |
|
on Vesting | |
|
Realized on | |
|
|
on Exercise | |
|
Exercise | |
|
(1) | |
|
Vesting | |
Name |
|
(#) | |
|
($) | |
|
(#) | |
|
($) | |
(a) |
|
(b) | |
|
(c) | |
|
(d) | |
|
(e) | |
|
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
|
|
|
|
|
|
|
|
48,119 |
(2) |
|
$ |
780,986 |
|
|
|
|
|
|
|
|
|
|
|
|
22,500 |
(3) |
|
$ |
744,750 |
|
James H. Vandenberghe
|
|
|
|
|
|
|
|
|
|
|
11,548 |
(2) |
|
$ |
187,437 |
|
|
|
|
|
|
|
|
|
|
|
|
12,540 |
(3) |
|
$ |
415,074 |
|
David C. Wajsgras
|
|
|
|
|
|
|
|
|
|
|
8,512 |
(4) |
|
$ |
154,067 |
|
|
|
|
|
|
|
|
|
|
|
|
11,233 |
(4) |
|
$ |
203,317 |
|
|
|
|
|
|
|
|
|
|
|
|
10,589 |
(4) |
|
$ |
191,661 |
|
|
|
|
|
|
|
|
|
|
|
|
427 |
(5) |
|
$ |
10,405 |
|
Douglas G. DelGrosso
|
|
|
|
|
|
|
|
|
|
|
6,587 |
(2) |
|
$ |
106,919 |
|
|
|
|
|
|
|
|
|
|
|
|
9,000 |
(3) |
|
$ |
297,900 |
|
Daniel A. Ninivaggi
|
|
|
|
|
|
|
|
|
|
|
5,100 |
(3) |
|
$ |
168,810 |
|
|
|
|
|
|
|
|
|
|
|
|
9,578 |
(6) |
|
$ |
300,000 |
|
Raymond E. Scott
|
|
|
|
|
|
|
|
|
|
|
1,184 |
(2) |
|
$ |
19,223 |
|
|
|
|
|
|
|
|
|
|
|
|
4,560 |
(3) |
|
$ |
150,936 |
|
131
|
|
(1) |
Excludes performance shares for the 2004 to 2006 performance
period, which expired without payment. |
|
(2) |
Vesting of restricted stock units under the Management Stock
Purchase Plan on March 14, 2006. |
|
(3) |
Vesting of a portion of the restricted stock units granted under
the Long-Term Stock Incentive Plan on November 13, 2003. |
|
(4) |
Early payout of restricted stock units granted under the 2003
(8,512 shares), 2004 (11,233 shares) and 2005
(10,589 shares) Management Stock Purchase Plan based on the
price of Company common stock on March 10, 2006. Amounts
were distributed after the six-month holding period required by
section 409A of the Internal Revenue Code. |
|
(5) |
Amount of supplemental restricted stock unit award granted on
January 3, 2006, based on pro-rata vesting. |
|
(6) |
Number of shares of restricted stock that were fully vested when
granted on November 9, 2006. |
PENSION BENEFITS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number | |
|
|
|
Payments | |
|
|
|
|
of Years | |
|
Present Value of | |
|
During | |
|
|
|
|
Credited | |
|
Accumulated Benefit | |
|
Last Fiscal | |
|
|
|
|
Service | |
|
(1) | |
|
Year | |
Name |
|
Plan name(s) |
|
(#) | |
|
($) | |
|
($) | |
(a) |
|
(b) |
|
(c) | |
|
(d) | |
|
(e) | |
|
|
|
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
Pension Plan (tax-qualified plan) |
|
|
35.3 |
(2) |
|
$ |
579,371 |
|
|
$ |
0 |
|
|
|
Pension Equalization Program |
|
|
35.3 |
(2) |
|
$ |
5,079,645 |
|
|
$ |
0 |
|
|
|
Executive Supplemental Savings Plan |
|
|
35.3 |
(2) |
|
$ |
4,355,004 |
|
|
$ |
0 |
|
James H. Vandenberghe
|
|
Pension Plan (tax-qualified plan) |
|
|
33.8 |
|
|
$ |
536,674 |
|
|
$ |
0 |
|
|
|
Pension Equalization Program |
|
|
33.8 |
|
|
$ |
2,875,332 |
|
|
$ |
0 |
|
|
|
Executive Supplemental Savings Plan |
|
|
33.8 |
|
|
$ |
2,044,499 |
|
|
$ |
0 |
|
David C. Wajsgras(3)
|
|
Pension Plan (tax-qualified plan) |
|
|
6.6 |
|
|
$ |
63,523 |
|
|
$ |
0 |
|
|
|
Pension Equalization Program |
|
|
6.6 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
Executive Supplemental Savings Plan |
|
|
6.6 |
|
|
$ |
0 |
|
|
$ |
0 |
|
Douglas G. DelGrosso
|
|
Pension Plan (tax-qualified plan) |
|
|
22.7 |
|
|
$ |
200,015 |
|
|
$ |
0 |
|
|
|
Pension Equalization Program |
|
|
22.7 |
|
|
$ |
676,167 |
|
|
$ |
0 |
|
|
|
Executive Supplemental Savings Plan |
|
|
22.7 |
|
|
$ |
359,733 |
|
|
$ |
0 |
|
Daniel A. Ninivaggi(4)
|
|
Pension Plan (tax-qualified plan) |
|
|
3.3 |
|
|
$ |
24,669 |
|
|
$ |
0 |
|
|
|
Pension Equalization Program |
|
|
3.3 |
|
|
$ |
51,779 |
|
|
$ |
0 |
|
|
|
Executive Supplemental Savings Plan |
|
|
3.3 |
|
|
$ |
7,341 |
|
|
$ |
0 |
|
Raymond E. Scott(5)
|
|
Pension Plan (tax-qualified plan) |
|
|
18.2 |
|
|
$ |
132,593 |
|
|
$ |
0 |
|
|
|
Pension Equalization Program |
|
|
18.2 |
|
|
$ |
121,620 |
|
|
$ |
0 |
|
|
|
Executive Supplemental Savings Plan |
|
|
18.2 |
|
|
$ |
100,134 |
|
|
$ |
0 |
|
|
|
(1) |
The benefit under the Pension Plan for each Named Executive
Officer is based on post-commencement valuation mortality and
commencement of benefits at age 65. The assumed discount
rate applicable to a September 30, 2006 measurement is
6.00%. |
|
(2) |
Credited service is limited to 35 years for all purposes
under the Pension Plan, the Pension Equalization Program and the
Executive Supplemental Savings Plan Pension
Make-up Account. |
|
(3) |
Mr. Wajsgras was not vested in the Pension Equalization
Program at the time of his termination of employment. In
addition, he was not vested in the Executive Supplemental
Savings Plan Pension
Make-up Account at the
time of his termination of employment, since all of such
benefits were attributable to compensation in excess of the
Internal Revenue Code compensation limits, and such benefits
generally vest after a participant has either (i) attained
age 55 and has 10 years of vesting service, |
132
|
|
|
attained age 65, or becomes eligible for disability
retirement under the Pension Plan, or (ii) attained
20 years of vesting service. |
|
(4) |
Mr. Ninivaggi was not vested in his Pension Plan benefits
because he has less than five years of service. In addition, he
was not vested in any of the Pension Equalization Program or
Executive Supplemental Savings Plan Pension
Make-up Account
benefits he has accrued to date, since all of such benefits were
attributable to compensation in excess of the Internal Revenue
Code compensation limits, and such benefits generally vest after
a participant has either (i) attained age 55 and has
10 years of vesting service, attained age 65, or
becomes eligible for disability retirement under the Pension
Plan, or (ii) attained 20 years of vesting service. |
|
(5) |
Mr. Scott is fully vested in his Pension Plan benefits.
However, he is not vested in the Pension Equalization Program or
the Executive Supplemental Savings Plan Pension
Make-up Account, since
all of such benefits were attributable to compensation in excess
of the Internal Revenue Code compensation limits, and such
benefits generally vest after a participant has either
(i) attained age 55 and has 10 years of vesting
service, attained age 65, or becomes eligible for
disability retirement under the Pension Plan, or
(ii) attained 20 years of vesting service. |
Qualified Pension Plan
The Named Executive Officers (as well as other eligible
employees) participate in the Lear Corporation Pension Plan,
which has been frozen as to any new benefits as of
December 31, 2006. The Pension Plan is intended to be a
qualified pension plan under the Internal Revenue Code, and its
benefits are integrated with Social Security benefits. In
general, an eligible employee becomes a participant on the
July 1st or
January 1st after
completing one year of service (as defined in the plan).
Benefits are funded by employer contributions that are
determined under accepted actuarial principles and the Internal
Revenue Code. The Company may make contributions in excess of
any minimum funding requirements when the Company believes it is
financially advantageous to do so and based on its other capital
requirements and other considerations.
The Pension Plan contains multiple benefit formulas. Under the
principal formula which applies to all Named Executive Officers,
pension benefits are based on a participants final
average earnings, which is the average of the
participants compensation for the five calendar years in
the last 10 years of employment in which the participant
had his highest earnings. Compensation is defined under the plan
to mean (i) all cash compensation reported for federal
income tax purposes other than long-term incentive bonuses, and
(ii) any elective contributions that are not includable in
gross income under Internal Revenue Code Section 125 or
401(k). A participants annual retirement benefit, payable
as a life annuity at age 65, equals the greater of:
|
|
|
|
|
(a) 1.10% times final average annual earnings times years
of credited service before 1997 (to a maximum of 35 years),
plus (b) 1.00% times final average annual earnings times
years of credited service after 1996 (with a maximum of
35 years reduced by years of credited service before 1997),
plus (c) 0.65% times final average annual earnings in
excess of covered compensation (as defined in I.R.S. Notice
89-70) times years of credited service (with a maximum of
35 years); and |
|
|
|
$360.00 times years of credited service. |
Any employee who on December 31, 1996 was an active
participant and age 50 or older earned benefits under the
1.10% formula for years of credited service through 2001.
Credited service under the Pension Plan includes all years of
pension service under the Lear Siegler Seating Corp. Pension
Plan, and a participants retirement benefit under the
Pension Plan is reduced by his benefit under the Lear Siegler
Seating Corp. Pension Plan. The benefits under the Pension Plan
become vested once the participant accrues five years of vesting
service under the plan. Service performed after
December 31, 2006 will continue to count towards vesting
credit even though no additional benefits will accrue under the
plan after that date.
133
Pension Equalization Program
The Pension Equalization Program, which has been frozen as to
any new benefits as of December 31, 2006, provides benefits
in addition to the Pension Plan. The Pension Plan is subject to
rules in the Internal Revenue Code that restrict the level of
retirement income that can be provided to, and the amount of
compensation that can be considered for, highly paid executives
under the Pension Plan. The Pension Equalization Program is
intended to supplement the benefits under the Pension Plan for
certain highly paid executives whose Pension Plan benefits are
limited by those Internal Revenue Code limits. A
participants Pension Equalization Program benefit equals
the difference between the executives actual vested
accrued Pension Plan benefit and the Pension Plan benefit the
executive would have accrued under the Lear Corporation formula
if the Internal Revenue Code limits on considered cash
compensation and total benefits did not apply. Highly
compensated executives and other employees whose compensation
exceeds the Internal Revenue Code limits for at least three
years are eligible to participate in the Pension Equalization
Program. Each of the Named Executive Officers participated in
the Pension Equalization Program. The benefits under the Pension
Equalization Program become vested once the participant has
either (i) attained age 55 and has 10 years of
vesting service, attained age 65, or becomes eligible for
disability retirement under the Pension Plan, or
(ii) attained 20 years of vesting service. Vesting
service will continue to accrue after December 31, 2006.
Executive Supplemental Savings Plan
In addition to the Pension Plan and the Pension Equalization
Program, we have established the Lear Corporation Executive
Supplemental Savings Plan. The Executive Supplemental Savings
Plan provides retirement benefits that would have been accrued
through December 31, 2006 under the Pension Plan and/or the
Pension Equalization Program if the participant had not elected
to defer compensation under the plan or the Management Stock
Purchase Plan (through a Pension
Make-up Account).
Participants become vested in the benefits under the Pension
Make-up Account that
are based on Pension Plan benefits (attributable to compensation
up the Internal Revenue Code compensation limits) after three
years of vesting service. Participants do not vest in amounts
that would have otherwise accrued under the Pension Equalization
Program (benefits based on compensation in excess of the
Internal Revenue Code compensation limits) until they meet the
vesting requirements of that program, as described above. The
Executive Supplemental Savings Plan also has a defined
contribution element, as described in the following section.
NONQUALIFIED DEFERRED COMPENSATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive | |
|
Registrant | |
|
Aggregate | |
|
|
|
|
|
|
Contributions | |
|
Contributions | |
|
Earnings | |
|
Aggregate | |
|
Aggregate | |
Name |
|
in Last FY | |
|
in Last FY | |
|
in Last | |
|
Withdrawals/ | |
|
Balance at | |
|
|
(1) | |
|
(2) | |
|
FY | |
|
Distributions | |
|
Last FYE | |
|
|
($) | |
|
($) | |
|
($) | |
|
($) | |
|
($) | |
(a) |
|
(b) | |
|
(c) | |
|
(d) | |
|
(e) | |
|
(f) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
$ |
38,500 |
|
|
$ |
8,250 |
|
|
$ |
59,881 |
|
|
$ |
0 |
|
|
$ |
1,481,542 |
|
James H. Vandenberghe
|
|
$ |
32,375 |
|
|
$ |
7,812 |
|
|
$ |
48,089 |
|
|
$ |
0 |
|
|
$ |
1,191,283 |
|
David C. Wajsgras
|
|
$ |
10,400 |
|
|
$ |
0 |
|
|
$ |
10,667 |
|
|
$ |
117,999 |
|
|
$ |
158,676 |
|
Douglas G. DelGrosso
|
|
$ |
100,500 |
|
|
$ |
4,938 |
|
|
$ |
41,916 |
|
|
$ |
0 |
|
|
$ |
1,076,678 |
|
Daniel A. Ninivaggi
|
|
$ |
0 |
|
|
$ |
2,375 |
|
|
$ |
1,773 |
|
|
$ |
0 |
|
|
$ |
44,503 |
|
Raymond E. Scott
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
6,384 |
|
|
$ |
0 |
|
|
$ |
155,202 |
|
|
|
(1) |
Amounts are included in columns (c), (d) or (g), as
applicable, of the Summary Compensation Table. |
|
(2) |
Amounts are included in column (j) of the Summary
Compensation Table. |
Executive Supplemental Savings Plan
The Executive Supplemental Savings Plan has both defined benefit
and a defined contribution elements. The defined benefit element
has been quantified in the Pension Benefits table. The
Nonqualified Deferred
134
Compensation table identifies the defined contribution pieces of
the Executive Supplemental Savings Plan. One purpose of the plan
is to provide participants with the opportunity to make elective
deferrals of compensation that could not be made under the
Retirement Savings Plan due to limits imposed by the Internal
Revenue Code on the amount of pre-tax contributions a
participant can make to the Retirement Savings Plan and/or the
amount of compensation that can be recognized under the
Retirement Savings Plan. In addition, the Executive Supplemental
Savings Plan also provides retirement benefits that would have
been accrued under the Lear Corporation Pension Plan for service
through December 31, 2006 and under the new Defined
Contribution Retirement Plan for service after December 31,
2006, if the participant had not elected to defer compensation
under the plan or the Management Stock Purchase Plan.
Participants are always vested in amounts they elect to defer
under the Executive Supplemental Savings Plan and they generally
become vested in the other benefits under the Executive
Supplemental Savings Plan after three years of vesting service
(as defined in the Pension Plan). Participants do not vest in
amounts that would have otherwise accrued under the Pension
Equalization Program until they meet the vesting requirements of
that plan. Plan earnings are credited at the monthly compound
equivalent of the average of the
10-year Treasury Note
rates, as published in the Wall Street Journal Midwest edition,
in effect as of the first business day of each of the four
calendar quarters preceding the calendar year.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The table below shows estimates of the compensation payable to
each of our Named Executive Officers upon termination of
employment with the Company. The amount each executive will
actually receive depends on the circumstances surrounding his
termination of employment. The amount payable is shown for each
of six categories of termination triggers. All amounts are
calculated as if the executive terminated effective
December 31, 2006. The actual amounts due to any one of the
executives on his termination of employment can only be
determined at the time of his termination. There can be no
assurance that a termination or change in control would produce
the same or similar results as those described below if it
occurs on any other date or at any other stock price, or if any
assumption is not, in fact, correct.
Accrued amounts (other than pension vesting enhancement as noted
below) under the Companys pension and deferred
compensation plans are not included in this table. For these
amounts, see the Pension Benefits table on page 132 and the
Nonqualified Deferred Compensation table on page 134.
Vested stock options and stock appreciation rights are also
excluded from this table. For these amounts, see the Outstanding
Equity Awards at Fiscal Year-End table on page 129.
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Pension | |
|
Continuation of | |
|
Accelerated | |
|
|
|
|
|
|
Cash | |
|
Vesting | |
|
Medical/Welfare | |
|
Vesting or | |
|
|
|
|
|
|
Severance | |
|
Enhancement | |
|
Benefits | |
|
Payout of | |
|
Excise Tax | |
|
Total | |
Named Executive |
|
(Base & | |
|
(Present | |
|
(Present | |
|
Equity | |
|
Gross- | |
|
Termination | |
Officer(1) |
|
Bonus)(2)($) | |
|
Value)(3)($) | |
|
Value)(4)($) | |
|
Awards(5)($) | |
|
Up(6)($) | |
|
Benefits($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Robert E. Rossiter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination (or for Good Reason) With
Change in Control
|
|
$ |
5,212,000 |
|
|
$ |
0 |
|
|
$ |
3,606,935 |
|
|
$ |
6,284,192 |
|
|
$ |
0 |
|
|
$ |
15,103,127 |
|
Involuntary Termination (or for Good Reason)
|
|
$ |
5,212,000 |
|
|
$ |
0 |
|
|
$ |
42,646 |
|
|
$ |
6,181,098 |
|
|
|
N/A |
|
|
$ |
11,435,744 |
|
Retirement(7)
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
5,021,784 |
|
|
|
N/A |
|
|
$ |
5,021,784 |
|
Voluntary Termination (or for Cause)
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
2,384,212 |
(8) |
|
|
N/A |
|
|
$ |
2,384,212 |
|
Disability
|
|
$ |
2,200,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
6,284,192 |
|
|
|
N/A |
|
|
$ |
8,484,192 |
|
Death
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
6,284,192 |
|
|
|
N/A |
|
|
$ |
6,284,192 |
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension | |
|
Continuation of | |
|
Accelerated | |
|
|
|
|
|
|
Cash | |
|
Vesting | |
|
Medical/Welfare | |
|
Vesting or | |
|
|
|
|
|
|
Severance | |
|
Enhancement | |
|
Benefits | |
|
Payout of | |
|
Excise Tax | |
|
Total | |
Named Executive |
|
(Base & | |
|
(Present | |
|
(Present | |
|
Equity | |
|
Gross- | |
|
Termination | |
Officer(1) |
|
Bonus)(2)($) | |
|
Value)(3)($) | |
|
Value)(4)($) | |
|
Awards(5)($) | |
|
Up(6)($) | |
|
Benefits($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
James H. Vandenberghe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination (or for Good Reason) With
Change in Control
|
|
$ |
3,476,480 |
|
|
$ |
0 |
|
|
$ |
1,271,613 |
|
|
$ |
3,666,965 |
|
|
$ |
0 |
|
|
$ |
8,415,058 |
|
Involuntary Termination (or for Good Reason)
|
|
$ |
3,476,480 |
|
|
$ |
0 |
|
|
$ |
35,686 |
|
|
$ |
3,581,071 |
|
|
|
N/A |
|
|
$ |
7,093,237 |
|
Retirement(7)
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
2,965,627 |
|
|
|
N/A |
|
|
$ |
2,965,627 |
|
Voluntary Termination (or for Cause)
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,509,467 |
(8) |
|
|
N/A |
|
|
$ |
1,509,467 |
|
Disability
|
|
$ |
1,850,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3,666,965 |
|
|
|
N/A |
|
|
$ |
5,516,965 |
|
Death
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3,666,965 |
|
|
|
N/A |
|
|
$ |
3,666,965 |
|
Douglas G. DelGrosso
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination (or for Good Reason) With
Change in Control
|
|
$ |
2,934,320 |
|
|
$ |
0 |
|
|
$ |
651,858 |
|
|
$ |
2,389,947 |
|
|
$ |
0 |
|
|
$ |
5,976,125 |
|
Involuntary Termination (or for Good Reason)
|
|
$ |
2,934,320 |
|
|
$ |
0 |
|
|
$ |
16,404 |
|
|
$ |
2,145,070 |
|
|
|
N/A |
|
|
$ |
5,095,794 |
|
Retirement(7)
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Voluntary Termination (or for Cause)
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
590,907 |
(8) |
|
|
N/A |
|
|
$ |
590,907 |
|
Disability
|
|
$ |
1,850,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
2,389,947 |
|
|
|
N/A |
|
|
$ |
4,239,947 |
|
Death
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
2,389,947 |
|
|
|
N/A |
|
|
$ |
2,389,947 |
|
Daniel A. Ninivaggi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination (or for Good Reason) With
Change in Control
|
|
$ |
1,846,780 |
|
|
$ |
14,751 |
|
|
$ |
15,611 |
|
|
$ |
1,090,215 |
|
|
$ |
843,862 |
|
|
$ |
3,811,219 |
|
Involuntary Termination (or for Good Reason)
|
|
$ |
1,846,780 |
|
|
$ |
0 |
|
|
$ |
15,611 |
|
|
$ |
969,736 |
|
|
|
N/A |
|
|
$ |
2,832,127 |
|
Retirement(7)
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Voluntary Termination (or for Cause)
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
70,100 |
(8) |
|
|
N/A |
|
|
$ |
70,100 |
|
Disability
|
|
$ |
1,400,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,090,215 |
|
|
|
N/A |
|
|
$ |
2,490,215 |
|
Death
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,090,215 |
|
|
|
N/A |
|
|
$ |
1,090,215 |
|
Raymond E. Scott
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Involuntary Termination (or for Good Reason) With
Change in Control
|
|
$ |
1,396,580 |
|
|
$ |
219,067 |
|
|
$ |
15,611 |
|
|
$ |
1,229,267 |
|
|
$ |
0 |
|
|
$ |
2,860,525 |
|
Involuntary Termination (or for Good Reason)
|
|
$ |
1,396,580 |
|
|
$ |
0 |
|
|
$ |
15,611 |
|
|
$ |
1,132,420 |
|
|
|
N/A |
|
|
$ |
2,544,611 |
|
Retirement(7)
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Voluntary Termination (or for Cause)
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
356,325 |
(8) |
|
|
N/A |
|
|
$ |
356,325 |
|
Disability
|
|
$ |
1,000,000 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
1,229,267 |
|
|
|
N/A |
|
|
$ |
2,229,267 |
|
Death
|
|
$ |
0 |
|
|
$ |
272,474 |
|
|
$ |
0 |
|
|
$ |
1,229,267 |
|
|
|
N/A |
|
|
$ |
1,501,741 |
|
136
|
|
(1) |
Mr. Wajsgras is excluded from this chart because he
resigned from the Company effective March 10, 2006.
Mr. Wajsgrass resignation was a voluntary termination
under his employment agreement so he did not receive cash
severance, pension enhancement, continuation of medical and
welfare benefits, accelerated vesting of equity awards or any
other severance benefits. After his termination,
Mr. Wajsgras was entitled to a payout of shares and cash
with a total value of $588,980 from the Management Stock
Purchase Plan, which represented the amounts he deferred into
the plan, as adjusted for stock price fluctuations, and his
dividend equivalent account. |
|
(2) |
Cash severance is paid in semi-monthly installments, without
interest, through the severance period (which is generally two
years), except that the installments otherwise payable in the
first six months are paid in a lump sum on the date that is six
months after the date of termination, to the extent required by
Section 409A of the Internal Revenue Code. In addition to
the amounts shown in the table, the executive will receive any
accrued salary, bonus (including a prorated bonus based on
actual performance in the event of death or termination without
cause or for good reason or, in the event of termination upon
disability, a full bonus for the year based on actual
performance) and all other amounts to which he is entitled under
the terms of any compensation or benefit plans of the Company
upon termination for any reason. |
|
(3) |
Additional vesting credit is given during the severance period.
Since Messrs. Rossiter, Vandenberghe and DelGrosso are
fully vested in their pension benefits, the vesting credit only
affects Mr. Ninivaggis and Mr. Scotts
pension benefits. |
|
(4) |
Consists of continuation of health insurance, life insurance
premium and imputed income amounts. Also includes the required
payments to fund the guaranteed coverage under the Estate
Preservation Plan, where applicable, which is as follows:
Mr. Rossiter, $3,564,289; Mr. Vandenberghe,
$1,235,927; and Mr. DelGrosso, $635,454.
Messrs. Ninivaggi and Scott do not participate in the
Estate Preservation Plan. |
|
(5) |
Represents (i) accelerated vesting of stock appreciation
rights (aggregate difference between the grant price and the
December 29, 2006 closing price of the Companys
common stock), restricted stock units, and performance shares,
and (ii) accelerated payout of Management Stock Purchase
Plan accounts (restricted stock units credited based on salary
and bonus deferrals). Payments under any of the plans of the
Company that are determined to be deferred compensation subject
to Section 409A of the Internal Revenue Code are delayed by
six months to the extent required by such provision. Accelerated
portions of the restricted stock units and performance shares
are valued based on the December 29, 2006 closing price of
the Companys common stock. |
|
(6) |
The Company has agreed to reimburse each executive for any
excise taxes he is subject to under Section 280G of the
Internal Revenue Code upon a change in control, as well as any
income and excise taxes payable by the executive as a result of
any reimbursements for the Section 280G excise taxes. |
|
(7) |
The Company does not provide for enhanced early retirement
benefits under its pension programs. As of December 31,
2006 only Mr. Rossiter and Mr. Vandenberghe are
retirement-eligible. |
|
(8) |
Amounts attributable to the return of amounts deferred by the
executive under the Management Stock Purchase Plan, as adjusted
by the terms of the plan. |
Payments and benefits to a Named Executive Officer upon
termination or a change in control of the Company are determined
according to the terms of his employment agreement and equity or
incentive awards and the Companys compensation and
incentive plans. The severance benefit payments set forth in the
table and discussed below are generally available to the fifteen
officers, including the Named Executive Officers, who currently
have employment agreements with the Company. The amounts due to
an executive upon his or her termination of employment depend
largely on the circumstances of his or her termination, as
described below.
137
Change in Control
The employment agreements do not provide benefits solely upon a
change in control, but the Long-Term Stock Incentive Plan
provides for accelerated vesting or payout of equity awards upon
a change in control, even if the executive does not terminate
employment. The benefits include:
|
|
|
|
|
Stock options and stock appreciation rights become immediately
exercisable and remain so throughout their entire term. |
|
|
|
Restrictions on restricted stock units lapse. |
|
|
|
A pro rata number of performance shares and performance units
vest and pay out as of the date of the change in control. The
amount is determined based on the length of time in the
performance period that elapsed prior to the effective date of
the change in control, assuming achievement of all relevant
performance objectives at target levels. If the Compensation
Committee determines that actual achievements are higher than
target at the time of the change in control, the prorated
payouts will be increased by extrapolating actual performance to
the end of the performance period. |
Upon a change in control, without termination, based on unvested
awards outstanding as of December 31, 2006, the value of
the accelerated vesting or payout for each of the Named
Executive Officers is as follows: Mr. Rossiter, $6,284,192;
Mr. Vandenberghe, $3,666,965; Mr. DelGrosso,
$2,389,947; Mr. Ninivaggi, $1,090,215; and Mr. Scott,
$1,229,267. Mr. Wajsgras is not included here because his
employment with the Company terminated in 2006. Of these
amounts, the following portions are attributable to early payout
of Management Stock Purchase Plan (MSPP) accounts,
including amounts which were credited based on each
executives salary and bonus deferrals: Mr. Rossiter,
$2,544,411; Mr. Vandenberghe, $1,638,027;
Mr. DelGrosso, $690,475; Mr. Ninivaggi, $78,025; and
Mr. Scott, $374,886.
In addition, upon a change in control, the Companys
obligation to maintain each executives life insurance
coverage under the Lear Corporation Estate Preservation Plan
becomes irrevocable and the executives are no longer required to
pay premiums. The Company is also then required to fund an
irrevocable rabbi trust to pay all projected
premiums. The required payments to fund the guaranteed coverage
under the Estate Preservation Plan, where applicable, is as
follows: Mr. Rossiter, $3,564,289; Mr. Vandenberghe,
$1,235,927; and Mr. DelGrosso, $635,454.
Messrs. Ninivaggi and Scott do not participate in the
Estate Preservation Plan. As described in the table above,
Messrs. Ninivaggi and Scott would receive additional
pension vesting credit valued at $14,751 and $219,067,
respectively.
Under the Long-Term Stock Incentive Plan, subject to the
exception stated below, a change in control will be
deemed to have occurred as of the first day any one or more of
the following paragraphs is satisfied:
|
|
|
(a) Any person (other than the Company or a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company, or a corporation owned directly or
indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company)
becomes the beneficial owner, directly or indirectly, of
securities of the Company, representing more than twenty percent
(twenty-five percent for awards granted on or after
November 1, 2006) of the combined voting power of the
Companys then outstanding securities. |
|
|
(b) During any period of twenty-six consecutive months
beginning on or after May 3, 2001, individuals who at the
beginning of the period constituted the Board of Directors of
the Company cease for any reason (other than death, disability
or voluntary retirement) to constitute a majority of the Board
of Directors. For this purpose, any new director whose election
by the Board of Directors, or nomination for election by the
Companys stockholders, was approved by a vote of at least
two-thirds of the directors then still in office, and who either
were directors at the beginning of the period or whose election
or nomination for election was so approved, will be deemed to
have been a director at the beginning of any twenty-six month
period under consideration. |
|
|
(c) The stockholders of the Company approve: (i) a
plan of complete liquidation or dissolution of the Company; or
(ii) an agreement for the sale or disposition of all or
substantially all the Companys assets; or (iii) a
merger, consolidation or reorganization of the Company with or
involving any other |
138
|
|
|
corporation, other than a merger, consolidation or
reorganization that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least eighty
percent (seventy-five percent for awards granted on or after
November 1, 2006) of the combined voting power of the
voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or
reorganization. |
Even if one of the foregoing paragraphs is satisfied, however,
there is no change in control unless or until it would be
treated as such under Section 409A of the Internal Revenue
Code to the extent such provision applies.
Payments Made Upon Involuntary Termination (or for Good
Reason) With a Change in Control
An executive whose employment is involuntarily terminated
without cause upon a change in control is entitled to the
amounts he would receive upon the occurrence of either event, an
involuntary termination (described below) or a change in control
(described above). In addition, the Company will reimburse each
executive for any excise taxes he becomes subject to under
Section 280G of the Internal Revenue Code upon a change in
control, as well as any income and excise taxes payable by the
executive as a result of any reimbursements for the
Section 280G excise taxes.
Payments Made Upon Involuntary Termination (or for Good
Reason)
Upon termination of employment by the executive for good reason
(described below) or by the Company other than for cause or
incapacity (each as defined in the employment agreement), the
executive will receive base salary (at the higher of the rate in
effect upon termination or the rate in effect 90 days prior
to termination) through the date of termination, plus all other
amounts owed under any compensation or benefit plans, including
a bonus prorated for the portion of the performance period
occurring prior to the date of termination. If the executive
executes a release relating to his employment, he will also
receive payments for a two-year severance period after the
termination date equal to the sum of the base salary (at the
highest rate received during the term of the agreement) and
aggregate bonus he would have received for the same period
(based on the highest annual bonus received during the period of
two calendar years preceding the termination). In addition to
the foregoing, (i) all outstanding equity-based awards and
other benefits that are subject to time-based vesting criteria
will continue to vest during the severance period and, following
the conclusion of the severance period, remaining unvested
awards and other benefits will vest on a pro rata basis, and
(ii) all benefits that vest under compensation and benefit
plans based on the satisfaction of specific performance measures
will be paid to the executive after the end of the performance
period on a pro rata basis, if and to the extent all relevant
performance targets are actually achieved.
Outstanding restricted stock units continue to vest through the
two-year severance period and those restricted stock units that
are not vested at the end of that period will become vested on a
pro rata basis at that time. Stock options and stock
appreciation rights that would vest during the severance period
vest in full immediately upon termination, stock options and
stock appreciation rights that would not otherwise vest by the
end of the severance period vest on a prorated basis immediately
upon termination, and become exercisable for 13 months
following the date of termination (but not later than date stock
option or stock appreciation right would otherwise expire). The
executive will be entitled to receive payout with respect to his
performance shares and performance units at the end of the cycle
on a pro rata basis determined with reference to the number of
full months of employment completed prior to termination.
For purposes of triggering the foregoing severance payments, the
employment agreements define the term good reason as
any of the following circumstances or events:
|
|
|
(a) Any reduction by the Company in the executives
base salary or adverse change in the manner of computing his
bonus, except for
across-the-board salary
reductions or changes to the manner of computing bonuses
similarly affecting all executive officers of the Company. |
139
|
|
|
(b) The failure by the Company to pay or provide to the
executive any amounts of base salary or bonus or any benefits
which are due to him pursuant to the terms of the employment
agreement, except pursuant to an
across-the-board
compensation deferral similarly affecting all executive
officers, or to pay to him any portion of an installment of
deferred compensation due under any deferred compensation
program of the Company. |
|
|
(c) Except in the case of
across-the-board
reductions, deferrals, eliminations, or plan modifications
similarly affecting all executive officers, the failure by the
Company to continue to provide the executive with benefits
substantially similar in the aggregate to the Companys
life insurance, medical, dental, health, accident or disability
plans in which he was participating on the date the employment
agreement was signed. |
|
|
(d) Except on a temporary basis while the executive is
incapacitated, a material adverse change in his
responsibilities, position, reporting relationships, authority
or duties. |
|
|
(e) Any material breach of the employment agreement by the
Company. |
|
|
(f) Following a change in control, transfer of the
executives principal place of employment to a location
fifty or more miles from its location immediately preceding the
transfer. |
The language in paragraphs (a) through
(c) concerning reductions, changes, deferrals,
eliminations, or plan modifications similarly affecting all
executive officers of the Company do not, however, apply to
circumstances or events occurring in anticipation of, or within
one year after, a change in control, as defined in the
employment agreement. The definition of change in control is
generally the same as the definition above, except that the
relevant ownership percentage in paragraph (a) remains
twenty percent, and the relevant voting power in
paragraph (c) remains eighty percent, even after
November 1, 2006 and there is no exception for
circumstances or events that are not treated as a change in
control under Section 409A of the Internal Revenue Code.
In order for an executive to be treated as having good reason
for his termination, he must provide a notice of termination to
the Company within sixty days of the date he knew or should have
known of the circumstances or events giving rise to the good
reason. In addition, if the Company corrects the situation or
the executive gives express written consent to it, he will not
have good reason for termination.
The settlement from the MSPP will depend on how late into the
three-year restriction period the executive terminates. If the
termination is before March 15 of the first year of the period,
any base salary he earned prior to his termination and elected
to defer under the MSPP will simply be paid out in cash. If he
terminates on March 15 of the first year of the period or later,
he will receive the sum of the following:
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(a) shares for a pro rata amount of the restricted stock
units in his MSPP account, based on the portion of the
three-year restriction period he was actually employed by the
Company, and |
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(b) with respect to the remaining restricted stock units in
his MSPP account, the lesser of the number of shares
attributable to his actual deferred salary and bonus (based on
the closing stock price on the date of termination), or the
restricted stock units in his MSPP account at the time of his
termination associated with actual salary and bonus deferrals. |
Payments Made Upon Retirement
The employment agreements do not distinguish between retirement
and voluntary termination for other reasons, but under the
Long-Term Stock Incentive Plan, an executive who retires with 10
or more years of service and who is age 55 or older when he
terminates is entitled to additional vesting credit. The
executive will be entitled to receive the shares underlying the
restricted stock units that would have vested if the date of
termination had been 24 months later than it actually was.
All of his stock options will immediately vest and his stock
appreciation rights will immediately vest to the extent they
would have vested if the date of termination had been
24 months later than it actually was. The executives
vested stock options and stock appreciation rights will become
exercisable for 13 months following date of termination
(but not later than the date the stock options or stock
appreciation rights would otherwise expire). With respect to the
performance
140
shares and performance units, the executive will be entitled to
receive payout at the end of cycle on a pro rata basis (based on
the number of full months of the performance period he completed
prior to termination).
The settlement from the MSPP will depend on how late into the
three-year restriction period the executive terminates. If the
termination is before March 15 of the first year of the period,
any base salary he earns prior to his termination and elects to
defer under the MSPP will simply be paid out in cash. If he
terminates on March 15 of the first year of the period or later,
he will receive the number of shares equal to the restricted
stock units in his MSPP account at the time of his termination
associated with actual salary and bonus deferrals.
Payments Made Upon Voluntary Termination (or for
Cause)
An executive who voluntarily resigns or whose employment is
terminated by the Company for cause (as defined in the
employment agreement) will be entitled to receive unpaid salary
and benefits, if any, he has accrued through the effective date
of his termination. If an executive terminates voluntarily and
has not completed 10 or more years of service and attained
age 55 or older, he will be entitled to receive all of the
shares underlying his vested restricted stock units, but all
unvested restricted stock units (other than under the MSPP, as
described below) will be forfeited. He will also have
30 days to exercise any vested stock appreciation right,
but will immediately forfeit the right to exercise any stock
option, whether or not vested. The executive will not be
entitled to receive any payout with respect to his performance
shares or performance units unless he has been continuously
employed until the end of the performance cycle and the
applicable performance goals have been met.
If an executive is terminated for cause (as defined in the
Long-Term Stock Incentive Plan), he will immediately forfeit all
restricted stock units, stock options and stock appreciation
rights. The executive will not be entitled to receive any payout
with respect to his performance shares or performance units
unless he has been continuously employed until the end of the
performance cycle and the applicable performance goals have been
met.
The settlement from the MSPP will depend on how late into the
three-year restriction period the executives employment
terminates. If an executives employment terminates before
March 15 of the first year of the restriction period, any base
salary he earned prior to his termination and elected to defer
under the MSPP will be paid in cash. If his employment
terminates on March 15 of the first year of the period or later,
he will receive the number of shares equal to the lesser of the
number of shares attributable to his actual deferred salary and
bonus (based on the closing stock price on the date of
termination), or the restricted stock units in his MSPP account
at the time of his termination associated with actual salary and
bonus deferrals.
Payments Made Upon Termination for Disability
Following termination of executives employment for
disability, the executive will receive all compensation payable
under the Companys disability and medical plans. The
Company will also pay him a supplemental amount so that the
aggregate amount he receives from all sources equal, for the
remainder of the year of his termination, his base salary at the
rate in effect on the date of termination plus any bonus and
other amounts he would have been entitled to if his employment
had continued until the end of the calendar year. He will
continue to receive payments of amounts due from the
Companys disability and medical plans, plus any
supplemental payments necessary to ensure that the aggregate
amount he receives, for two full years after the end of the
calendar year in which he terminates, equals his base salary at
the rate in effect on the date of termination. These payments
will be made according to the terms of the plans and the
Companys normal payroll procedures. Any payments the
executive receives more than two years after his date of
termination will be made according to the terms of the
retirement, insurance, and other compensation programs then in
effect.
All of a disabled executives outstanding stock options and
stock appreciation rights will immediately vest and become
exercisable for 13 months following date of termination
(but not later than the date the stock options or stock
appreciation rights would otherwise expire). His performance
shares and performance units will be paid out, but only for the
portion of the three-year performance period he was actually
employed (based on full months of employment) prior to his
termination.
141
The settlement from the MSPP will depend on how late into the
three-year restriction period the executive terminates. If the
termination is before March 15 of the first year of the period,
any base salary he earns prior to his termination and elects to
defer under the MSPP will simply be paid out in cash. If he
terminates on March 15 of the first year of the period or later,
he will receive the number of shares equal to the restricted
stock units in his MSPP account at the time of his termination
associated with actual salary and bonus deferrals.
Payments Made Upon Death
Following the death of the executive, we will pay to his estate
or designated beneficiary a pro rata portion of any bonus earned
prior to the date of death. His stock options and stock
appreciation rights, if any, will immediately vest in full as of
the date of death and may be exercised by the estate or
designated beneficiary for 13 months following the date of
death (but not later than the date the stock options or stock
appreciation rights would otherwise expire). His performance
shares and performance units will be paid out, but only for the
portion of the three-year performance period he was actually
employed (based on full months of employment) prior to his death.
The settlement from the MSPP will depend on how late into the
three-year restriction period the executive dies. If he dies
before March 15 of the first year of the period, any base salary
he earns prior to his death and elects to defer under the MSPP
will simply be paid out in cash. If he dies on March 15 of the
first year of the period or later, his estate or designated
beneficiary will receive the number of shares equal to the
restricted stock units in his MSPP account at the time of his
death associated with actual salary and bonus deferrals.
The payments described above will be paid in lump sum or as
administratively practicable following the executives
death.
Conditions and Obligations of the Executive
Each executive who has entered into an employment agreement with
the Company is obligated to:
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comply with confidentiality, non-competition and
non-solicitation covenants during employment; |
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comply with non-competition and non-solicitation covenants for
one year after the date of termination (extended to two years in
the case of termination upon disability, termination by the
Company without cause or by the executive for good reason); |
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in order to receive severance payments due under the employment
agreement, sign a general release relating to his employment
(applies only in the case of termination upon disability,
termination by the Company without cause or by the executive for
good reason); |
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return data and materials relating to the business of the
Company in his possession; |
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make himself reasonably available to the Company to respond to
periodic requests for information regarding the Company or his
employment; and |
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cooperate with litigation matters or investigations as the
Company deems necessary. |
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The following persons served on our Compensation Committee
during 2006: Ms. Anne K. Bingaman and Messrs. Mallett,
McCurdy, Spalding and Wallman. No member of the Compensation
Committee was, during the fiscal year ended December 31,
2006, an officer, former officer or employee of the Company or
any of our subsidiaries. None of our executive officers served
as a member of:
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the compensation committee of another entity in which one of the
executive officers of such entity served on our Compensation
Committee; |
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the board of directors of another entity, one of whose executive
officers served on our Compensation Committee; or |
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the compensation committee of another entity in which one of the
executive officers of such entity served as a member of our
Board. |
COMPENSATION COMMITTEE REPORT
The information contained in this report shall not be deemed
to be soliciting material or to be filed
with the SEC or subject to Regulation 14A or 14C other than
as set forth in Item 407 of
Regulation S-K, or
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended (the Exchange Act),
except to the extent that we specifically request that the
information contained in this report be treated as soliciting
material, nor shall such information be incorporated by
reference into any past or future filing under the Securities
Act of 1933, as amended (the Securities Act), or the
Exchange Act, except to the extent that we specifically
incorporate it by reference in such filing.
The Compensation Committee of Lear Corporation has reviewed and
discussed the Compensation Discussion and Analysis required by
Item 402(b) of
Regulation S-K
with management and, based on such review and discussions, the
Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy
statement.
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David P. Spalding, Chairman |
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Conrad L. Mallett, Jr. |
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Larry W. McCurdy |
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Richard F. Wallman |
AUDIT COMMITTEE REPORT
The information contained in this report shall not be deemed
to be soliciting material or to be filed
with the SEC or subject to Regulation 14A or 14C, other
than as set forth in Item 407 of
Regulation S-K, or
subject to the liabilities of Section 18 of the Exchange
Act, except to the extent that we specifically request that the
information contained in this report be treated as soliciting
material, nor shall such information be incorporated by
reference into any past or future filing under the Securities
Act or the Exchange Act, except to the extent that we
specifically incorporate it by reference in such filing.
The Audit Committee of the Board of Directors is responsible for
evaluating audit performance, appointing, compensating,
retaining and overseeing the work of our independent registered
public accounting firm and evaluating policies and procedures
relating to internal accounting functions and controls. The
Audit Committee is currently comprised of Messrs. McCurdy,
Stern, Wallace and Wallman, each a non-employee director, and
operates under a written charter which was last amended by our
Board in November 2004. Our Board has determined that all
members of the Audit Committee are independent as defined in the
New York Stock Exchange listing standards.
The Audit Committee members are neither professional accountants
nor auditors, and their functions are not intended to duplicate
or to certify the activities of management and the independent
auditor, nor can the Audit Committee certify that the
independent auditor is independent under applicable
rules. The Audit Committee serves a board-level oversight role
in which it provides advice, counsel and direction to management
and the auditors on the basis of the information it receives,
discussions with management and the auditors and the experience
of the Audit Committees members in business, financial and
accounting matters. Our management has the primary
responsibility for the financial statements and reporting
process, including our systems of internal controls. In
fulfilling its oversight responsibilities, the Audit Committee
reviewed and discussed with management the audited financial
statements included in the Annual Report on
Form 10-K for the
fiscal year ended December 31, 2006, as well as the report
of management and the opinion thereon of Ernst & Young
LLP, Lears independent registered public accounting firm
for the year ended December 31,
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2006, regarding Lears internal control over financial
reporting required by Section 404 of the Sarbanes-Oxley Act.
The Audit Committee has discussed with Ernst & Young
LLP the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (Communication With
Audit Committees) which include, among other items, matters
related to the conduct of the audit of Lears financial
statements. The Audit Committee has also received written
disclosures and the letter from Ernst & Young LLP
required by Independence Standards Board Standard No. 1
(which relates to the auditors independence from Lear and
its related entities) and has discussed with Ernst &
Young LLP its independence from Lear.
Based on the review and discussions referred to above, the Audit
Committee has recommended to the Board of Directors that
Lears audited financial statements be included in
Lears Annual Report on
Form 10-K for the
fiscal year ended December 31, 2006, and be filed with the
United States Securities and Exchange Commission.
This report is submitted by Messrs. McCurdy, Stern, Wallace
and Wallman, being all of the members of the Audit Committee.
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Larry W. McCurdy, Chairman |
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James A. Stern |
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Henry D.G. Wallace |
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Richard F. Wallman |
FEES OF INDEPENDENT ACCOUNTANTS
In connection with the audit of the 2006 financial statements,
the Company entered into an engagement agreement with
Ernst & Young LLP which sets forth the terms by which
Ernst & Young LLP will perform audit services for the
Company. That agreement is subject to alternative dispute
resolution procedures and an exclusion of punitive damages.
In addition to retaining Ernst & Young LLP to audit our
consolidated financial statements for 2006, Lear retained
Ernst & Young LLP, as well as other accounting firms,
to provide tax and other advisory services in 2006. We
understand the need for Ernst & Young LLP to maintain
objectivity and independence in its audit of our financial
statements. It is also the Audit Committees goal that the
fees that the Company pays to Ernst & Young LLP for
permitted non-audit services in any year should not exceed the
audit and audit-related fees paid to Ernst & Young LLP
in such year, a goal which the Company achieved in 2006 and 2005.
In order to assure that the provision of audit and non-audit
services provided by Ernst & Young LLP, the
Companys independent registered public accounting firm,
does not impair their independence, the Audit Committee is
required to pre-approve the audit and permitted non-audit
services to be performed by Ernst & Young LLP, other
than de minimis services that satisfy the requirements
pertaining to de minimis exceptions for non-audit services
described in Section 10A of the Securities Exchange Act of
1934. The Audit Committee also has adopted policies and
procedures for pre-approving all audit and permitted non-audit
work performed by Ernst & Young LLP. Any pre-approval
is valid for 14 months from the date of such pre-approval,
unless the Audit Committee specifically provides for a different
period. Any pre-approval must also set forth in detail the
particular service or category of services approved and is
generally subject to a specific cost limit.
The Audit Committee has adopted policies regarding the
Companys ability to hire employees, former employees and
certain relatives of employees of the Companys independent
accountants.
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During 2006 and 2005, we retained Ernst & Young LLP to
provide services in the following categories and amounts:
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Fiscal Year Ended December 31, | |
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2006 | |
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2005 | |
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Audit fees(1)
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$ |
9,832,000 |
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$ |
8,639,000 |
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Audit-related fees(2)
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763,000 |
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202,000 |
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Tax fees(3)
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1,978,000 |
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1,828,000 |
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All other fees
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(1) |
Audit fees include services related to the annual audit of our
consolidated financial statements, the audit of our internal
controls over financial reporting, the reviews of our quarterly
reports on
Form 10-Q,
international statutory audits, services related to the
divestiture of our interior business and other services that are
normally provided by the independent accountants in connection
with our regulatory filings. |
(2) |
Audit-related fees include services related to the audits of
U.S. and Canadian employee benefit plans and audit procedures on
the North American interior business financial statements. |
(3) |
Tax fees include services related to tax compliance, tax advice
and tax planning. |
All of the audit, audit-related, tax and other services
performed by Ernst & Young LLP were pre-approved by the
Audit Committee in accordance with the pre-approval policies and
procedures described above.
CERTAIN TRANSACTIONS
Review, Approval or Ratification of Transactions with Related
Persons
We have established a written policy that has been broadly
disseminated within Lear regarding commercial transactions with
related parties. This policy assists Lear in identifying,
reviewing, monitoring and, as necessary, approving commercial
transactions with related parties. The policy requires that any
transaction, or series of transactions, with related party
vendors in excess of $500,000, whether undertaken in or outside
the ordinary course of our business, are presented to the Audit
Committee for approval.
Lear has implemented various procedures to ensure compliance
with its related party transaction policy. For example,
Lears standard purchasing terms and conditions require
vendors to advise Lear upon any such vendor becoming aware of
certain directors, employees or stockholders of the vendor being
affiliated with a director or officer (or immediate family
member of either) of Lear or its subsidiaries. This requirement
applies if such person is involved in the vendors
relationship with Lear or if such person receives any direct or
indirect compensation or benefit based on that relationship.
Company policy prohibits Lear employees from simultaneously
working for any customer or vendor of Lear.
Each year, we circulate conflict of interest questionnaires to
all our directors, members of senior management, purchasing
personnel and certain other employees. Based on the results of
these questionnaires, the legal department reports all known
transactions or relationships with related persons to, among
others, our Chief Accounting Officer. The Chief Accounting
Officer then ensures that all vendors identified as related
party vendors are entered into a centralized payables system
(CPS) in North America. No payments are permitted to
related party vendors in North America that are not included in
the CPS. A list of known related party vendors is periodically
circulated to directors, executive officers and certain other
employees for updating.
At least twice per year, the Chief Accounting Officer reports to
the Vice President of Internal Audit on related party
relationships, including those with customers, as well as the
amount of business performed between Lear and each related party
vendor during the preceding six months,
year-to-date and for
the preceding fiscal year. At least annually, the Vice President
of Internal Audit prepares an audit plan for reviewing
significant transactions with related parties and reports such
audit plan and the results to the Audit
145
Committee. The Audit Committee also receives a summary of all
transactions with related party vendors at least annually.
In connection with any required Audit Committee approval, a
member of our senior management must represent to the Audit
Committee that the related party vendor at issue has been held
to the same standards as unaffiliated third parties. Audit
Committee members having (or having an immediate family member
that has) a direct or indirect interest in the transaction, must
recuse himself/herself from consideration of the transaction.
The Chief Accounting Officer, General Counsel and Vice President
of Internal Audit meet at least twice per year to confirm the
adequate monitoring and reporting of related person
transactions. The Chief Accounting Officer then reports on such
monitoring and disclosure at least annually to the Audit
Committee, which in turn reports to the full Board regarding its
review and approval of related person transactions.
During 2006, our related party transaction policy and practices
did require the review by the Audit Committee of business
transactions with the entities affiliated with Terrence
Kittleson, Brian Rossiter, Jayme Rossiter and Terrence Rossiter,
which transactions are described in more detail below under
Certain Transactions.
With respect to the employment of related parties, Lear has
adopted a written policy that has been broadly disseminated
within Lear regarding the employment of immediate family members
of Lears directors and executive officers. The policy does
not prohibit such employment, but rather requires the
identification, monitoring and review of such employment
relationships by Lears human resources department and the
Compensation Committee of the Board.
Pursuant to this policy, we have adopted procedures which assist
us in identifying and reviewing such employment relationships.
Each year, our directors and executive officers provide the
Company with the names of their immediate family members who are
employed by the Company. All human resources activity regarding
these family members, including but not limited to changes in
compensation and job title, are reviewed prior to the action and
compiled in a report to assure related parties are held to the
same employment standards as non-affiliated employees or
parties. Our human resources department then reviews employment
files and reports annually to the Compensation Committee of the
Board with respect to any related persons employed by Lear. The
Compensation Committee then reports such relationships to the
full Board.
During 2006, these procedures did result in the review by the
Compensation Committee of the employment relationships set forth
below under Certain Transactions.
In addition, the Companys Code of Business Conduct and
Ethics prohibits activities that conflict with, or have the
appearance of conflicting with, the best interests of the
Company and its stockholders. Such conflicts of interest may
arise when an employee, or a member of the employees
family, receives improper personal benefits as a result of such
individuals position in the Company. Also, another written
policy prohibits any employee from having any involvement in
employment and compensation decisions regarding any of his or
her family members that are employed by the Company.
Certain Transactions
Noelle Gill, a former Divisional Human Resources Manager in
Lears Electrical Systems Division, is the daughter of Roy
Parrott, a Director of Lear. In 2006, Ms. Gill was paid
$120,414, which included payments relating to the vesting of a
prior years grant of restricted stock units
(RSUs) of $2,705. Ms. Gill also received 112
restricted stock units and 336 stock appreciation rights in
2006. Ms. Gill resigned her position with Lear in January
2007.
Terrence Kittleson, a
brother-in-law of
Lears Chairman and Chief Executive Officer, Robert
Rossiter, is employed by CB Richard Ellis (formerly Trammell
Crow Company) as an Executive Vice President. CB Richard Ellis
provides Lear with real estate brokerage as well as property and
project management services. In 2006, Lear paid $3,963,061 to CB
Richard Ellis for these services. Lear has engaged CB Richard
Ellis in the
146
ordinary course of its business and in accordance with its
normal procedures for engaging service providers of these types
of services.
Scott Ratsos, a Vice President of Engineering at Lears
Seating Systems Division, is a
son-in-law of Robert
Rossiter, Lears Chairman and Chief Executive Officer. In
2006, Mr. Ratsos was paid $179,854, which included payments
relating to the vesting of a prior years grant of RSUs of
$8,011. Mr. Ratsos also received 840 restricted stock units
and 2,520 stock appreciation rights in 2006.
Brian Rossiter, a brother of Lears Chairman and Chief
Executive Officer, Robert Rossiter, owns an entity that has
represented Center Manufacturing in the sale of automotive
products to Lear. In 2006, Lear paid $23,039,605 for tooling,
steel stampings and assemblies that it purchased from Center
Manufacturing. The entity owned by Brian Rossiter received a
commission with respect to a portion of these sales at customary
rates. Until December 2006, Brian Rossiter was also an owner of
Creative Seating Innovations, Inc. In 2006, Lear paid $1,437,636
to Creative Seating Innovations for prototype tooling and parts.
Lear made its purchases from Center Manufacturing and Creative
Seating Innovations in the ordinary course of its business and
in accordance with its normal sourcing procedures for these
types of products.
Brian T. Rossiter, a Platform Director at Lears Seating
Systems Division, is the son of Robert Rossiter, Lears
Chairman and Chief Executive Officer. In 2006, Brian T. Rossiter
was paid $214,892, which included payments relating to an
international assignment of $104,237 and payments relating to
the vesting of a prior years grant of RSUs of $2,317 that
he deferred until a later year.
Jayme Rossiter, a
sister-in-law of Robert
Rossiter, Lears Chairman and Chief Executive Officer, has
an ownership interest in Elite Support Management Group, LLC. In
2006, Lear paid $471,960 to Elite Support for the provision of
information technology temporary support personnel. Lear engaged
Elite Support to provide these services in the ordinary course
of its business and in accordance with its normal procedures for
engaging service providers of these types of services.
Terrence Rossiter, a brother of Lears Chairman and Chief
Executive Officer, Robert Rossiter, has been employed as a
computer equipment salesperson by Sequoia Services Group
(Sequoia), a subsidiary of Analysts International,
since 1994. Sequoia has provided equipment and contract services
to Lear since 1991. In 2006, Lear paid $6,649,291 to Sequoia for
the purchase of computer equipment and for computer-related
services. Terrence Rossiter was not involved in the provision of
computer-related services to Lear. Lear purchased this equipment
and these services in the ordinary course of its business and in
accordance with its normal sourcing procedures for equipment,
software and services of these types. Terrence Rossiter is also
a sales representative for The Materials Group. In 2006, Lear
paid The Materials Group $745,921 for plastic resins. This
purchase was in Lears ordinary course of business and in
accordance with its normal sourcing procedures for these types
of products.
Patrick VandenBoom, an Information Technology Director for Lear,
is the brother-in-law
of James Vandenberghe, Lears Vice Chairman and Chief
Financial Officer. In 2006, Mr. VandenBoom was paid
$167,814, which included payments relating to the vesting of a
prior years grant of RSUs of $9,008. Mr. VandenBoom
also received 266 restricted stock units and 798 stock
appreciation rights in 2006.
William Zimmer, the brother of Paul Joseph Zimmer, former Senior
Vice President and President, North American Interior Systems
Group, is a Platform Manager in Lears Interior Systems
Division. In 2006, William Zimmer was paid $130,172.
Affiliates of Mr. Carl C. Icahn are bondholders of
Federal-Mogul Corporation, which is currently in bankruptcy
court protection. Certain affiliates of Mr. Icahn also own
approximately 15.7% of our outstanding common stock. In 2006,
Lear paid Federal-Mogul Corporation $15,628,836 for various
goods. We expect that once Federal-Mogul Corporation exits
bankruptcy court protection, affiliates of Mr. Icahn may,
subject to confirmation of Federal-Mogul Corporations
pending plan of reorganization, own a controlling interest in it.
STOCKHOLDER PROPOSALS FOR 2008 ANNUAL MEETING OF
STOCKHOLDERS
If the merger is consummated, we will not have public
stockholders and there will be no public participation in any
future meeting of stockholders. If the merger is not completed
or if we are otherwise
147
required to do so under applicable law, however, we would hold a
2008 Annual Meeting of Stockholders. If the merger agreement is
not adopted, stockholders who intend to present proposals at the
Annual Meeting of Stockholders in 2008 pursuant to
Rule 14a-8 under
the Securities Exchange Act of 1934 must send notice of their
proposal to us so that we receive it no later
than ,
2007, assuming this proxy statement is first released to
stockholders
on ,
2007. Stockholders who intend to present proposals at the Annual
Meeting of Stockholders in 2008 other than pursuant to
Rule 14a-8 must
comply with the notice provisions in our by-laws. The notice
provisions in our by-laws require that, for a proposal to be
properly brought before the Annual Meeting of Stockholders in
2008, proper notice of the proposal be received by us not less
than 120 days or more than 150 days prior to the first
anniversary of the mailing date of this proxy statement.
Stockholder proposals should be addressed to Lear Corporation,
21557 Telegraph Road, Southfield, Michigan 48033, Attention:
General Counsel.
OTHER MATTERS
We know of no other matters to be submitted to the stockholders
at the meeting. If any other matters properly come before the
meeting, persons named in the enclosed proxy intend to vote the
shares they represent in accordance with their own judgments.
If two or more stockholders sharing the same address are
receiving multiple copies of our annual report and proxy
statement and wish to receive only one copy, such stockholders
may notify their broker if their shares are held in a brokerage
account or may notify us if they hold registered shares. Such
registered stockholders may notify us by sending a written
request to Lear Corporation, Investor Relations,
21557 Telegraph Road, Southfield, Michigan 48033.
Upon written request by any stockholder entitled to vote at
the meeting, we will promptly furnish, without charge, a copy of
the Form 10-K
Annual Report for 2006 which we filed with the SEC, including
financial statements and schedules. If the person requesting the
report was not a stockholder of record
on ,
2007, the request must contain a good faith representation that
he or she was a beneficial owner of our common stock at the
close of business on that date. Requests should be addressed to
Daniel A. Ninivaggi, Lear Corporation, 21557 Telegraph Road,
Southfield, Michigan 48033.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements
and other information with the SEC under the Exchange Act. You
may read and copy any document we file at the SECs Public
Reference Room located at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the
operation of the public reference room by calling the SEC at
1-800-SEC-0330. Our
filings with the SEC also are available from the SECs
internet site at www.sec.gov, which contains reports,
proxy and information statements and other information regarding
issuers that file electronically.
The SEC allows us to incorporate by reference into
this proxy statement the information that we file with them,
which means that we can disclose important information to you by
referring you to those documents. Any statement contained or
incorporated by reference in this proxy statement 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 subsequently filed document which also is incorporated by
reference herein, modifies or supersedes such earlier 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. We incorporate by reference the
documents listed below:
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our Annual Report on
Form 10-K for the
fiscal year ended December 31, 2006; |
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Current Reports on
Form 8-K
and 8-K/ A, as
filed with the SEC on January 11, 2007, January 25,
2007, February 9, 2007 and February 14, 2007. |
All documents that we file pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
proxy statement and prior to the date of the annual meeting are
incorporated by reference in this
148
proxy statement, pursuant to the requirements of
Schedule 14A and
Schedule 13E-3,
from the date of filing of the documents, other than, unless we
specifically provide otherwise, portions of these documents that
are either (1) described in paragraphs (i),
(k) and (l) of Item 402 of
Regulation S-K
promulgated by the SEC or (2) furnished under
Item 2.02 or Item 7.01 of a Current Report on
Form 8-K.
Information that we file with the SEC will automatically update
and may replace information previously filed with the SEC.
Because the merger is a going private transaction,
Lear, AREP, Merger Sub, Mr. Icahn and Mr. Intrieri have
filed with the SEC a Transaction Statement on Schedule 13E-3
with respect to the proposed merger. The Schedule 13E-3,
including any amendments and exhibits filed or incorporated by
reference as part of it, is available for inspection as set
forth above. The Schedule 13E-3 will be amended to report
promptly any material changes in the information set forth in
the most recent Schedule 13E-3 filed with the SEC.
Our website address is www.lear.com. We make available on
our website, free of charge, the periodic reports that we file
with or furnish to the SEC, as well as all amendments to these
reports, as soon as reasonably practicable after such reports
are filed with or furnished to the SEC. Other than the documents
specifically incorporated by reference, the information on our
website is not a part of this proxy statement.
We will provide a copy of any document incorporated by reference
in this proxy statement and any exhibit specifically
incorporated by reference in those documents, without charge, by
written or oral request directed to us at the following address
and telephone number:
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Lear Corporation |
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21557 Telegraph Road |
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Southfield, Michigan 48033 |
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Attention: Investor Relations |
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Telephone: (248) 447-1500 |
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or |
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MacKenzie Partners, Inc. |
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105 Madison Avenue |
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New York, New York 10016 |
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Telephone
(collect): [ ] |
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Telephone (toll
free): [ ] |
You should rely only on the information contained or
incorporated by reference in this proxy statement to vote your
shares at the special meeting. We have not authorized anyone to
provide you with information that is different from what is
contained in this proxy statement. This proxy statement is
dated ,
2007. You should not assume that the information contained in
this proxy statement is accurate as of any date other than that
date, and neither the mailing of this proxy statement to
stockholders nor the issuance of the merger consideration
pursuant to the merger shall create any implication to the
contrary.
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By Order of the Board of Directors |
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![-s- Daniel A. Ninivaggi](https://cdn.kscope.io/43118120ab0c7e39b7a417a23dab53ef-k12958pmninivagd.gif) |
|
Daniel A. Ninivaggi |
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Executive Vice President, Secretary & General
Counsel |
149
Appendix A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AREP CAR HOLDINGS CORP.,
AREP CAR ACQUISITION CORP.,
AND
LEAR CORPORATION
Dated as of February 9, 2007
A-1
TABLE OF CONTENTS
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Page |
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ARTICLE I THE MERGER |
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A-8 |
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Section 1.1
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The Merger |
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A-8 |
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Section 1.2
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Consummation of the Merger |
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A-9 |
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Section 1.3
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Effects of the Merger |
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A-9 |
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Section 1.4
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Certificate of Incorporation and Bylaws |
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A-9 |
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Section 1.5
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Directors and Officers |
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A-9 |
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Section 1.6
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Conversion of Shares |
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A-9 |
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Section 1.7
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Conversion of Common Stock of Merger Sub |
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A-9 |
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Section 1.8
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Withholding Taxes |
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A-10 |
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Section 1.9
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Subsequent Actions |
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A-10 |
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ARTICLE II DISSENTING SHARES; PAYMENT FOR SHARES;
TREATMENT OF EQUITY- BASED AWARDS |
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A-10 |
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Section 2.1
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Dissenting Shares |
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A-10 |
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Section 2.2
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Payment for Shares |
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A-10 |
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Section 2.3
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Closing of the Companys Transfer Books |
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A-12 |
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Section 2.4
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Treatment of Equity-Based or Equity-Linked Awards and Deferred
Compensation |
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A-12 |
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Section 2.5
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Further Actions |
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A-13 |
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY |
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A-13 |
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Section 3.1
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Organization and Qualification |
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A-13 |
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Section 3.2
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Capitalization |
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A-14 |
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Section 3.3
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Authority for this Agreement; Board Action |
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A-15 |
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Section 3.4
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Consents and Approvals; No Violation |
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A-15 |
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Section 3.5
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Reports; Financial Statements |
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A-16 |
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Section 3.6
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Absence of Certain Changes |
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A-17 |
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Section 3.7
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Proxy Statement; Other Filings |
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A-18 |
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Section 3.8
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Brokers; Certain Expenses |
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A-18 |
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Section 3.9
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Employee Matters |
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A-18 |
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Section 3.10
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Employees |
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A-21 |
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Section 3.11
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Litigation |
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A-21 |
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Section 3.12
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Tax Matters |
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A-22 |
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Section 3.13
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Compliance with Law; No Default |
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A-24 |
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Section 3.14
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Environmental Matters |
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A-25 |
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Section 3.15
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Intellectual Property |
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A-26 |
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Section 3.16
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Real Property |
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A-27 |
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Section 3.17
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Material Contracts |
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A-27 |
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Section 3.18
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Insurance |
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A-28 |
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Section 3.19
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Opinion |
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A-29 |
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Section 3.20
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Required Vote of Company Stockholders |
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A-29 |
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Section 3.21
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State Takeover Statutes |
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A-29 |
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Section 3.22
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Rights Agreements |
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A-29 |
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Section 3.23
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Customers and Suppliers |
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A-29 |
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A-2
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Page |
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Section 3.24
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Affiliate Transactions |
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A-29 |
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Section 3.25
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Product Warranties; Product Liability Claims |
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A-30 |
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Section 3.26
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Foreign Corrupt Practices Act |
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A-30 |
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB |
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A-30 |
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Section 4.1
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Organization |
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A-30 |
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Section 4.2
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Authority for this Agreement |
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A-30 |
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Section 4.3
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Proxy Statement; Other Filings |
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A-30 |
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Section 4.4
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Consents and Approvals; No Violation |
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A-31 |
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Section 4.5
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Debt Financing |
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A-31 |
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Section 4.6
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Guarantee |
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A-32 |
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Section 4.7
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Litigation |
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A-32 |
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Section 4.8
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Ownership of Merger Sub; No Prior Activities |
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A-32 |
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Section 4.9
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Vote Required |
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A-32 |
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Section 4.10
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Brokers |
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A-32 |
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Section 4.11
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Financial Statements |
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A-32 |
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Section 4.12
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Limitation on Warranties |
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A-33 |
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ARTICLE V COVENANTS |
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A-33 |
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Sction 5.1
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Conduct of Business of the Company |
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A-33 |
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Section 5.2
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Solicitation |
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A-35 |
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Section 5.3
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Access to Information |
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A-39 |
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Section 5.4
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Stockholder Approval |
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A-40 |
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Section 5.5
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Proxy Statement; Other Filings |
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A-40 |
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Section 5.6
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Reasonable Best Efforts; Consents and Governmental Approvals |
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A-41 |
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Section 5.7
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Indemnification and Insurance |
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A-42 |
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Section 5.8
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Employee Matters |
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A-43 |
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Section 5.9
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Takeover Laws |
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A-44 |
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Section 5.10
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Notification of Certain Matters |
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A-44 |
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Section 5.11
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Financing |
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A-44 |
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Section 5.12
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Subsequent Filings |
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A-46 |
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Section 5.13
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Press Releases |
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A-46 |
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Section 5.14
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Restructuring Cooperation |
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A-46 |
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Section 5.15
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Resignation of Directors |
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A-46 |
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ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER |
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A-46 |
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Section 6.1
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Conditions to Each Partys Obligation to Effect the Merger |
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A-46 |
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Section 6.2
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Conditions to Obligations of Parent and Merger Sub |
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A-47 |
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Section 6.3
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Conditions to Obligations of the Company |
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A-47 |
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ARTICLE VII TERMINATION; AMENDMENT; WAIVER |
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A-48 |
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Section 7.1
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Termination |
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A-48 |
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Section 7.2
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Written Notice of Termination |
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A-49 |
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Section 7.3
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Effect of Termination |
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A-50 |
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Section 7.4
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Fees and Expenses |
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A-50 |
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A-3
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Page |
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Section 7.5
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Amendment |
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A-51 |
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Section 7.6
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Extension; Waiver; Remedies |
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A-52 |
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ARTICLE VIII |
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MISCELLANEOUS |
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A-52 |
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Section 8.1
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Representations and Warranties |
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A-52 |
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Section 8.2
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Entire Agreement; Assignment |
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A-52 |
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Section 8.3
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Jurisdiction; Venue; Arbitration |
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A-52 |
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Section 8.4
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Validity |
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A-54 |
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Section 8.5
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Notices |
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A-54 |
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Section 8.6
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Governing Law |
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A-55 |
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Section 8.7
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Descriptive Headings |
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A-55 |
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Section 8.8
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Parties in Interest |
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A-55 |
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Section 8.9
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Rules of Construction |
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A-55 |
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Section 8.10
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Counterparts |
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A-55 |
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Section 8.11
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Certain Definitions |
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A-56 |
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A-4
Glossary of Defined Terms
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Defined Terms |
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Defined in |
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409A Authorities
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SECTION 3.9(k) |
Acceptable Confidentiality Agreement
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SECTION 8.11(a) |
Acquisition Proposal
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SECTION 5.2(i) |
Action
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SECTION 5.7(a) |
Affiliate
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SECTION 8.11(b) |
Agreement
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Preamble |
AJCA
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SECTION 3.9(k) |
Alternative Acquisition Agreement
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SECTION 5.2(e)(i) |
Associate
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SECTION 8.11(b) |
Bank Amount
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SECTION 7.3(f)(B)(II) |
beneficial ownership
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SECTION 8.11(c) |
Business Day
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SECTION 8.11(d) |
Breach Fee
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SECTION 7.3(f)(A) |
Bylaws
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SECTION 8.11(e) |
Certificate of Incorporation
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SECTION 8.11(f) |
Certificate of Merger
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SECTION 1.2 |
Change of Board Recommendation
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SECTION 5.2(e) |
Closing
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SECTION 1.2 |
Closing Date
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SECTION 1.2 |
Code
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SECTION 1.8 |
Commitment Parties
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SECTION 7.3(f) |
Company
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Preamble |
Company Board Recommendation
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SECTION 3.3(b) |
Company Breakup Fee
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SECTION 7.3(c) |
Company Fairness Opinion
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SECTION 3.19 |
Company Financial Advisor
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SECTION 3.8 |
Company Intellectual Property
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SECTION 3.15(a) |
Company Joint Venture
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SECTION 8.11(g) |
Company Owned Intellectual Property
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SECTION 3.15(a) |
Company SEC Reports
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SECTION 8.11(h) |
Company Securities
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SECTION 3.2(a) |
Confidentiality Agreement
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SECTION 8.11(i) |
Controlled Group Liability
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SECTION 8.11(j) |
Corporation Law
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Recitals |
Covered Event
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SECTION 8.11(k) |
Current Employees
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SECTION 5.8(b) |
Debt Financing
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SECTION 4.5 |
Debt Financing Commitments
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SECTION 4.5 |
Deferred Unit Account
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SECTION 2.4(c) |
Delaware Secretary
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SECTION 1.2 |
Disclosure Letter
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ARTICLE III |
Disputed Matter
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SECTION 8.3(d) |
Dissenting Shares
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SECTION 2.1 |
Effective Time
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SECTION 1.2 |
Environment
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SECTION 3.14(c)(i) |
Environmental Claim
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SECTION 3.14(c)(ii) |
A-5
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Defined Terms |
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Defined in |
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Environmental Law
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SECTION 3.14(c)(iii) |
ERISA
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SECTION 8.11(x) |
ERISA Affiliate
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SECTION 3.9(c) |
Exchange Act
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SECTION 3.4(b) |
Excluded Party
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SECTION 5.2(b) |
Excluded Shares
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SECTION 1.6 |
Expenses
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SECTION 7.3(e) |
Foreign Antitrust Laws
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SECTION 3.4(b) |
Force Majeure Event
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SECTION 8.11(l) |
GAAP
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SECTION 8.11(m) |
Governmental Entity
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SECTION 3.4(b) |
Guarantee
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Recitals |
Guarantor
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Recitals |
Hazardous Materials
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SECTION 3.14(c)(iv) |
hereby
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SECTION 8.11(n) |
herein
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SECTION 8.11(n) |
hereinafter
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SECTION 8.11(n) |
HSR Act
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SECTION 3.4(b) |
including
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SECTION 8.11(o) |
Indemnified Persons
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SECTION 5.7(a) |
Initiation Date
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SECTION 8.11(p) |
Intellectual Property Rights
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SECTION 3.15(a) |
knowledge
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SECTION 8.11(q) |
Laws
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SECTION 3.13 |
Liens
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SECTION 8.11(r) |
LTSIP
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SECTION 2.4(a) |
Marketing Period
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SECTION 8.11(s) |
Material Adverse Effect
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SECTION 8.11(t) |
Material Contract
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SECTION 3.17(a) |
Merger
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SECTION 1.1 |
Merger Consideration
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SECTION 1.6 |
Merger Sub
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Preamble |
MSPP
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SECTION 2.4(d) |
Nonqualified Deferred Compensation Plan
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SECTION 3.9(k) |
Notice Period
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SECTION 5.2(e)(i) |
Option
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SECTION 2.4(a) |
Option Plans
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SECTION 2.4(a) |
Other Filings
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SECTION 3.7 |
Outside Date
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SECTION 7.1(c) |
Owned Real Property
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SECTION 3.16(a) |
Parent
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Preamble |
Parent Disclosure Letter
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ARTICLE IV |
Parent Material Adverse Effect
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SECTION 8.11(u) |
Paying Agent
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SECTION 2.2(a) |
Payment Fund
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SECTION 2.2(a) |
PBGC
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SECTION 3.9(d) |
Performance Shares
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SECTION 2.4(e) |
A-6
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Defined Terms |
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Defined in |
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Permits
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SECTION 3.13 |
Permitted Liens
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SECTION 8.11(v) |
Person
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SECTION 8.11(w) |
Plan
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SECTION 8.11(x) |
Preferred Shares
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SECTION 3.2(a) |
Proxy Statement
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SECTION 3.7 |
Real Property Leases
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SECTION 3.16(b) |
Release
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SECTION 3.14(c)(v) |
Representatives
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SECTION 8.11(y) |
Required Information
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SECTION 5.11(a)(iii) |
Requisite Stockholder Vote
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SECTION 3.20 |
Retiree Welfare Programs
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SECTION 3.9(i) |
RSUs
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SECTION 2.4(b) |
SAR
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SECTION 2.4(a) |
Sarbanes-Oxley Act
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SECTION 3.5(a) |
SEC
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SECTION 3.5(a) |
Securities Act
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SECTION 3.5(a) |
Shares
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SECTION 1.6 |
Significant Customers
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SECTION 3.23 |
Significant Subsidiary
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SECTION 8.11(z) |
Significant Suppliers
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SECTION 3.23 |
Solicitation Period End-Date
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SECTION 8.11(aa) |
Special Committee
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SECTION 8.11(bb) |
Special Meeting
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SECTION 5.4 |
Stock Purchase Agreement
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SECTION 3.3(b) |
Subsidiary
|
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SECTION 8.11(cc) |
Subsidiary Securities
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SECTION 3.2(b) |
Superior Fee
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SECTION 7.3(d) |
Superior Proposal
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SECTION 5.2(i) |
Supporting Stockholders
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Recitals |
Surviving Corporation
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SECTION 1.1 |
Takeover Laws
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SECTION 3.3(b) |
Tax
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SECTION 3.12(r)(i) |
Tax-Controlled Joint Venture
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|
SECTION 3.12(r)(iii) |
Tax Returns
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SECTION 3.12(r)(ii) |
Title IV Plans
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|
SECTION 3.9(b) |
U.S. Tax-Controlled Joint Venture
|
|
SECTION 3.12(r)(iv) |
Voting Agreement
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Recitals |
Written Notice of Claim
|
|
SECTION 8.3(b) |
Written Notice of Disagreement
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|
SECTION 8.3(b) |
A-7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 9, 2007
(this Agreement), by and among AREP Car
Holdings Corp., a Delaware corporation
(Parent), AREP Car Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent
(Merger Sub), and Lear Corporation, a
Delaware corporation (the Company).
RECITALS
WHEREAS, the Board of Directors of the Company (with one member
who is also a director of Guarantor abstaining), acting upon the
unanimous recommendation of the Special Committee, has
determined that this Agreement and the transactions contemplated
hereby, including the Merger, are advisable and fair to, and in
the best interests of, the stockholders of the Company;
WHEREAS, the Board of Directors of the Company (with one member
abstaining), acting upon the unanimous recommendation of the
Special Committee, has unanimously adopted resolutions approving
the acquisition of the Company by Parent, the execution of this
Agreement and the consummation of the transactions contemplated
hereby and recommending that the Companys stockholders
adopt this Agreement pursuant to the General Corporation Law of
the State of Delaware (the Corporation Law)
and approve the transactions contemplated hereby, including the
Merger;
WHEREAS, the Boards of Directors of Parent and Merger Sub have
each approved, and the Board of Directors of Merger Sub has
declared it advisable for Merger Sub to enter into, this
Agreement providing for the Merger in accordance with the
Corporation Law, upon the terms and subject to the conditions
set forth herein;
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in
connection with this Agreement;
WHEREAS, certain terms are used in this Agreement as defined
subsequently in this Agreement (including
Section 8.11);
WHEREAS, concurrently with the execution of this Agreement, as a
condition and inducement to the Companys willingness to
enter into this Agreement, the Company and Icahn Partners LP,
Icahn Partners Master Fund LP, Koala Holding Limited
Partnership and High River Limited Partnership (the
Supporting Stockholders) have entered into a
voting agreement (the Voting
Agreement); and
WHEREAS, concurrently with the execution of this Agreement, as a
condition and inducement to the Companys willingness to
enter into this Agreement, American Real Estate Partners, L.P.
(Guarantor) has provided a limited guarantee
(the Guarantee) in favor of the Company, in
the form set forth on Section 4.6 of the Parent
Disclosure Letter.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties set forth herein, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The
Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the
Corporation Law, at the Effective Time, Merger Sub shall be
merged with and into the Company (the
Merger). The Company shall be the surviving
corporation in the Merger (the Surviving
Corporation) and the separate corporate existence of
Merger Sub shall cease.
Section 1.2 Consummation
of the Merger. Subject to the terms and conditions of
this Agreement, the closing of the transactions contemplated
hereby (the Closing) will take place at
10:00 a.m., local time, as promptly as practicable but in
no event later than the third Business Day after the
satisfaction or waiver (by the party entitled to grant such
waiver) of the conditions (other than those conditions that by
their nature are
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to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions) (the date of the Closing, the
Closing Date) set forth in
Article VI, at the offices of DLA Piper US LLP, 1251
Avenue of the Americas, New York, New York 10020;
provided, however, that notwithstanding the
satisfaction or waiver of the conditions set forth in
Article VI as of any date, the parties shall not be
required to effect the Closing until the earlier of (a) a
date during the Marketing Period specified by Parent on no less
than three Business Days notice to the Company and
(b) the final day of the Marketing Period (subject in each
case to the satisfaction or waiver (by the party entitled to
grant such waiver) of all of the conditions (other than those
conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those
conditions) set forth in Article VI as of the date
determined pursuant to this proviso). Subject to the terms and
conditions hereof, Merger Sub and the Company shall cause the
Merger to be consummated on the Closing Date by filing with the
Secretary of State of the State of Delaware (the
Delaware Secretary), on or prior to the
Closing Date, a duly executed and verified certificate of merger
(the Certificate of Merger), as required by
the Corporation Law, and shall take all such further actions as
may be required by Law to make the Merger effective. The time
the Merger becomes effective in accordance with applicable Law
is referred to as the Effective Time.
Section 1.3 Effects
of the Merger. The Merger shall have the effects set
forth herein and in the applicable provisions of the Corporation
Law. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time, all the property,
rights, privileges, immunities, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation
and all debts, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.4 Certificate
of Incorporation and Bylaws. The Certificate of
Incorporation shall, by virtue of the Merger, be amended in its
entirety to read as the certificate of incorporation of Merger
Sub in effect immediately prior to the Effective Time, except
that Article I thereof shall provide that the name
of the Corporation shall be Lear Corporation. Such
certificate of incorporation, as so amended, shall be the
certificate of incorporation of the Surviving Corporation until
thereafter amended as permitted by Law and such certificate of
incorporation. The bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the bylaws of
the Surviving Corporation until thereafter amended in accordance
with the terms of the bylaws of the Surviving Corporation, the
certificate of incorporation of the Surviving Corporation and as
permitted by Law.
Section 1.5 Directors
and Officers. The directors of Merger Sub immediately
prior to the Effective Time and the officers of the Company
immediately prior to the Effective Time shall be the directors
and officers, respectively, of the Surviving Corporation (other
than those who Merger Sub determines shall not remain as
officers of the Surviving Corporation) until their successors
have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the
certificate of incorporation and bylaws of the Surviving
Corporation.
Section 1.6 Conversion
of Shares. Each share of common stock of the Company,
par value $0.01 per share (each, a Share
and collectively, the Shares), issued and
outstanding immediately prior to the Effective Time (other than
(x) Shares owned by Parent, Merger Sub or any Subsidiary of
Parent (collectively, the Excluded Shares),
all of which, at the Effective Time, shall be cancelled without
any consideration being exchanged therefor, and
(y) Dissenting Shares) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be
converted at the Effective Time into the right to receive in
cash an amount per Share (subject to any applicable withholding
Tax specified in Section 1.8) equal to $36, without
interest (the Merger Consideration), upon the
surrender of such Shares as provided in Section 2.2.
At the Effective Time, all such Shares shall no longer be
outstanding and shall automatically be cancelled and shall cease
to exist, and the names of the former registered holders shall
be removed from the registry of holders of such shares and,
subject to Section 2.1, each holder of a Share shall
cease to have any rights with respect thereto, except the right
to receive the Merger Consideration, without interest, as
provided herein.
Section 1.7 Conversion
of Common Stock of Merger Sub. Each share of common
stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall, by
virtue
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of the Merger and without any action on the part of the holder
thereof, be converted into and become one share of common stock
of the Surviving Corporation.
Section 1.8 Withholding
Taxes. Parent, the Surviving Corporation and the Paying
Agent shall be entitled to deduct and withhold from the
consideration otherwise payable to a holder of Shares, Options,
SARs, RSUs, Performance Shares and units held in Deferred Unit
Accounts pursuant to the Merger or this Agreement, any stock
transfer Taxes and such amounts as are required to be withheld
under the Internal Revenue Code of 1986, as amended (the
Code), or any applicable provision of state,
local or foreign Tax law. To the extent that amounts are so
withheld and remitted to the applicable Governmental Entity,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares,
Options, SARs, RSUs, Performance Shares and units held in
Deferred Unit Accounts in respect of which such deduction and
withholding was made.
Section 1.9 Subsequent
Actions. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to continue, vest,
perfect or confirm of record or otherwise the Surviving
Corporations right, title or interest in, to or under any
of the rights, properties, privileges, franchises or assets of
the Company as a result of, or in connection with, the Merger,
or otherwise to carry out the intent of this Agreement, the
officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of
the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of the
Company or otherwise, all such other actions and things as may
be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights,
properties, privileges, franchises or assets in the Surviving
Corporation or otherwise to carry out the intent of this
Agreement.
ARTICLE II
DISSENTING SHARES; PAYMENT FOR SHARES;
TREATMENT OF EQUITY-BASED AWARDS
Section 2.1 Dissenting
Shares. Notwithstanding anything in this Agreement to
the contrary, Shares that are issued and outstanding immediately
prior to the Effective Time and which are held by stockholders
who shall not have voted to adopt this Agreement and who
properly demand appraisal for such Shares in accordance with
Section 262 of the Corporation Law (the Dissenting
Shares) shall not be converted into or be exchangeable
for the right to receive the Merger Consideration, but shall be
converted into the right to receive such consideration as may be
determined to be due to holders of Dissenting Shares pursuant to
Section 262 of the Corporation Law, unless such holder
fails to perfect or withdraws or otherwise loses his rights to
appraisal. If, after the Effective Time, a holder of Dissenting
Shares fails to perfect or withdraws or loses his right to
appraisal, such Dissenting Shares shall thereupon be deemed to
have been converted, at the Effective Time, into the right to
receive the Merger Consideration, without any interest thereon.
The Company shall give Parent and Merger Sub (a) prompt
written notice (but in any event within forty-eight
(48) hours) of any demands for appraisal of any Shares,
attempted withdrawals of such demands and any other instruments
served pursuant to the Corporation Law and received by the
Company relating to rights to be paid the fair value
of Dissenting Shares, as provided in Section 262 of the
Corporation Law and (b) the opportunity to participate in
and direct all negotiations and proceedings with respect to
demands for appraisal under the Corporation Law. The Company
shall not, except with the prior written consent of Parent,
voluntarily make or agree to make any payment with respect to
any demands for appraisals of capital stock of the Company,
offer to settle or settle any such demands or approve any
withdrawal of any such demands except to the extent required by
applicable law.
Section 2.2 Payment
for Shares. (a) At or prior to the Effective Time,
Parent will deposit or cause to be deposited with a bank or
trust company designated by Parent (and reasonably acceptable to
the Company) (the Paying Agent) cash in
amounts and at times necessary to make the payments due pursuant
to Section 1.6 to holders of Shares that are issued
and outstanding immediately prior to the Effective Time (such
amounts being hereinafter referred to as the Payment
Fund). As directed by Parent, the Payment
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Fund shall be invested by the Paying Agent in (i) direct
obligations of the United States of America,
(ii) obligations for which the full faith and credit of the
United States of America is pledged to provide for payment of
all principal and interest, (iii) money market accounts,
certificates of deposit, bank repurchase agreements or
bankers acceptance of, or demand deposits with, commercial
banks having a combined capital and surplus of at least
$1,000,000,000 (based on the most recent financial statements of
such bank which are publicly available) or (iv) commercial
paper obligations rated A-1 or P-1 or better from either
Moodys Investor Services, Inc. or Standard &
Poors, a division of The McGraw Hill Companies, or a
combination thereof, for the benefit of the Surviving
Corporation; provided, that no such investment shall
relieve Parent, the Surviving Corporation or the Paying Agent
from making the payments required by this
Article II. The Payment Fund shall not be used for
any purpose other than to fund payments due pursuant to
Section 1.6, except as provided in this Agreement.
Any profit or loss resulting from, or interest and other income
provided by, such investments shall be for the account of Parent.
(b) As soon as reasonably practicable but no later than
three Business Days after the Effective Time, the Surviving
Corporation shall cause the Paying Agent to mail to each record
holder of a Share, as of the Effective Time which immediately
prior to the Effective Time represented Shares (other than
Excluded Shares), a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and
title to the Shares shall pass, only upon proper delivery of the
Shares to the Paying Agent) and instructions for use in
effecting the surrender of a Share and receiving payment
therefor. Following surrender to the Paying Agent of such letter
of transmittal duly executed, the holder of such Share shall be
paid in exchange therefor cash in an amount (subject to any
applicable withholding Tax as specified in
Section 1.8) equal to the product of the number of
Shares represented by such letter of transmittal multiplied by
the Merger Consideration, and such Shares shall forthwith be
canceled. No interest will be paid or accrued on the cash
payable upon the surrender of the Shares. If payment is to be
made to a Person other than the Person in whose name the Share
surrendered is registered, it shall be a condition of payment
that the letter of transmittal be in proper form for transfer
and that the Person requesting such payment pay any transfer or
other Taxes required by reason of the payment to a Person other
than the registered holder of the Share surrendered or establish
to the satisfaction of the Surviving Corporation that such Tax
has been paid or is not applicable. From and after the Effective
Time and until surrendered in accordance with the provisions of
this Section 2.2, each Share shall represent for all
purposes solely the right to receive, in accordance with the
terms hereof, the Merger Consideration in cash, without any
interest thereon.
(c) At the option of the Surviving Corporation, any portion
of the Payment Fund (including the proceeds of any investments
thereof) that remains unclaimed by the former stockholders of
the Company for one year after the Effective Time shall be
repaid to the Surviving Corporation. Any former stockholders of
the Company who have not complied with this
Section 2.2 prior to the end of such one-year period
shall thereafter look only to the Surviving Corporation (subject
to abandoned property, escheat or other similar Laws) but only
as general creditors thereof for payment of their claim for the
Merger Consideration, without any interest thereon. Neither
Parent nor the Surviving Corporation shall be liable to any
holder of Shares for any monies delivered from the Payment Fund
or otherwise to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Shares shall
not have been surrendered as of a date immediately prior to such
time that unclaimed funds would otherwise become subject to any
abandoned property, escheat or similar Law, any unclaimed funds
payable with respect to such Shares shall, to the extent
permitted by applicable Law, become the property of the
Surviving Corporation, free and clear of all claims or interest
of any Person previously entitled thereto.
(d) No dividends or other distributions with respect to
capital stock of the Surviving Corporation with a record date
after the Effective Time shall be paid to the holder of any
unsurrendered certificate.
(e) In the event that any certificate has been lost, stolen
or destroyed, upon the making of an affidavit of that fact by
the Person claiming such certificate to be lost, stolen or
destroyed, in addition to the posting by such holder of any bond
in such reasonable amount as the Surviving Corporation or the
Paying Agent may direct as indemnity against any claim that may
be made against the Surviving Corporation or the Paying Agent
with respect to such certificate, the Paying Agent will issue in
exchange for such lost, stolen or
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destroyed certificate the Merger Consideration in respect
thereof entitled to be received pursuant to this Agreement.
Section 2.3 Closing
of the Companys Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed
and no transfer of Shares shall thereafter be made. If, after
the Effective Time, Shares are presented to the Surviving
Corporation for transfer, they shall be canceled and exchanged
for the Merger Consideration as provided in this
Article II, subject to applicable Law in the case of
Dissenting Shares.
Section 2.4 Treatment
of Equity-Based or Equity-Linked Awards and Deferred
Compensation. (a) The Company shall provide that,
immediately prior to the Effective Time, each option to purchase
Shares (an Option) and each stock
appreciation right (a SAR) granted under the
Lear Corporation Long-Term Stock Incentive Plan (the
LTSIP), the Lear Corporation 1994 Stock
Option Plan and the Lear Corporation 1996 Stock Option Plan (the
Option Plans) that is outstanding and
unexercised as of the Effective Time (whether vested or
unvested), except for Options and SARs as to which the treatment
in the Merger is hereafter separately agreed in writing by
Parent and the holder thereof, which Options and SARs shall be
treated as so agreed, shall be cancelled, and the holder thereof
shall receive at the Effective Time from the Company, or as soon
as practicable thereafter from the Surviving Corporation, in
consideration for such cancellation, an amount in cash equal to
the product of (i) the number of Shares previously subject
to such Option or SAR and (ii) the excess, if any, of the
Merger Consideration over the exercise price per Share
previously subject to such Option or SAR.
(b) At the Effective Time, each restricted stock unit
granted under the Option Plans (collectively, the
RSUs), including pursuant to any Management
Stock Purchase Plan thereunder, whether vested or unvested, that
is outstanding immediately prior to the Effective Time, except
for RSUs as to which the treatment in the Merger is hereafter
separately agreed in writing by Parent and the holder thereof,
which RSUs shall be treated as so agreed, shall cease to
represent a right or award with respect to Shares and shall be
cancelled and of no further force and effect, and the holder
thereof shall receive at the Effective Time, or as soon as
practicable thereafter from the Surviving Corporation, in
consideration for such cancellation, an amount in cash equal to
the product of (i) the number of Shares previously subject
to such RSU and (ii) the Merger Consideration.
(c) At the Effective Time, all deferred amounts held in the
unit accounts denominated in Shares under the Lear Corporation
Outside Directors Compensation Plan (each, a Deferred
Unit Account), except for deferred amounts as to which
the treatment in the Merger is hereafter separately agreed in
writing by Parent and the holder thereof, which deferred amounts
shall be treated as so agreed, shall be converted into an
obligation to pay cash with a value equal to the product of
(i) the Merger Consideration and (ii) the number of
Shares deemed held in such Deferred Unit Account. Such
obligation shall be payable or distributable in accordance with
the terms of the agreement, plan or arrangement relating to the
Deferred Unit Account.
(d) The Company shall take all action as is necessary to
cause the Companys Management Stock Purchase Plan (the
MSPP) to be suspended effective as of a date
not later than the end of the first full calendar month
beginning after the date of this Agreement, such that the
offering period in effect as of the date of this
Agreement will be the final offering period under the MSPP, and,
as of the Effective Time and subject to the consummation of the
transactions contemplated by this Agreement, the Company shall
terminate the MSPP.
(e) At the Effective Time, each performance share awarded
under the LTSIP (collectively, the Performance
Shares), whether vested or unvested, that is
outstanding immediately prior to the Effective Time, except for
Performance Shares as to which the treatment in the Merger is
hereafter separately agreed by Parent and the holder thereof,
which Performance Shares shall be treated as so agreed, shall
cease to represent a right or award with respect to Shares and
shall be cancelled and of no further force and effect, and the
holder thereof shall receive at the Effective Time, or as soon
as practicable thereafter from the Surviving Corporation, in
consideration for such cancellation, an amount in cash equal to
the product of (i) the target number of Shares or units
previously subject to such Performance Shares and (ii) the
Merger Consideration,
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with respect to that percentage of such Performance Shares which
vest upon a change in control as provided in the LTSIP.
(f) The Board of Directors of the Company (or the
appropriate committee thereof) shall, and such Board of
Directors (or committee thereof) shall cause the Company to,
take any actions necessary to effectuate the foregoing
provisions of this Section 2.4; it being understood
that the intention of the parties is that following the
Effective Time no holder of an Option, SAR, RSU, units in
Deferred Unit Accounts, Performance Shares or any participant in
any Plan, including the LTSIP, or other employee benefit
arrangement of the Company shall have any right thereunder to
acquire (or receive amounts measured by reference to) any
capital stock (including any phantom stock or stock
appreciation rights) of the Company, any Subsidiary or the
Surviving Corporation. Prior to the Effective Time (and to the
extent requested by Parent, at the time that the amounts
provided by this Section 2.4 are paid to the holders
of the Options, SARs, RSUs, units in Deferred Unit Accounts and
Performance Shares), the Company shall deliver to the holders of
the Options, SARs, RSUs, units in Deferred Unit Accounts and
Performance Shares appropriate notices, in form and substance
reasonably acceptable to Parent, setting forth such
holders rights pursuant to this Agreement.
Section 2.5 Further
Actions. Notwithstanding anything in this Agreement to
the contrary, if, between the date of this Agreement and the
Effective Time, there shall have been declared, made or paid any
dividend or distribution on the Shares or the issued and
outstanding Shares shall have been changed into a different
number of shares or a different class by reason of any stock
split, reverse stock split, stock dividend, reclassification,
redenomination, recapitalization, split-up, combination,
exchange of shares or other similar transaction, the Merger
Consideration shall be appropriately adjusted and as so adjusted
shall, from and after the date of such event, be the Merger
Consideration, subject to further adjustment in accordance with
this Section 2.5; provided that nothing
herein shall be construed to permit the Company to take any
action with respect to its securities that is prohibited or not
expressly permitted by the terms of this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as disclosed in the Section of the disclosure letter
dated the date of this Agreement and delivered by the Company to
Parent with respect to this Agreement prior to the date of this
Agreement (the Disclosure Letter) that
specifically relates to such Section or if disclosed in any
other Section of the Disclosure Letter is reasonably apparent on
its face to relate to such Section, of Article III
below, the Company represents and warrants to each of Parent and
Merger Sub as follows:
Section 3.1 Organization
and Qualification. The Company and each of its
Significant Subsidiaries is a duly organized and validly
existing corporation or other legal entity in good standing
under the Laws of its jurisdiction of incorporation or
organization. The Company and each Significant Subsidiary and,
to the knowledge of the Company, each Company Joint Venture has
all corporate or similar power and authority to own its
properties and conduct its business as currently conducted. The
Company and each of its Subsidiaries is duly qualified and in
good standing as a foreign corporation authorized to do business
in each of the jurisdictions in which the character of the
properties owned or held under lease by it or the nature of the
business transacted by it makes such qualification necessary,
except as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect. The Company has heretofore made available to Parent
true, correct and complete copies of the certificate of
incorporation and bylaws (or similar governing documents) as
currently in effect for the Company and each of its Significant
Subsidiaries and Company Joint Ventures. Except as set forth in
Section 3.1 of the Disclosure Letter, neither the
Company nor any of its Significant Subsidiaries, directly or
indirectly, owns any interest in any Person having a value in
excess of $10,000,000 other than wholly-owned Subsidiaries and
the Company Joint Ventures. Neither the Company, any Significant
Subsidiary nor, to the Companys knowledge, any Company
Joint Venture is in violation of its organizational or governing
documents in any material respect.
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Section 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
(i) 150,000,000 Shares and
(ii) 15,000,000 shares of preferred stock of the
Company, par value $0.01 per share (the Preferred
Shares). As of February 2, 2007,
76,293,779 Shares and no Preferred Shares were issued and
outstanding; and 5,696,827 Shares and no Preferred Shares
were held in the Companys treasury. As of
December 31, 2006, there were (i) Options to
purchase 2,790,305 Shares and no Preferred Shares;
1,964,571 Shares and no Preferred Shares covering RSUs;
1,751,854 Shares and no Preferred Shares covering SARs;
169,909 Shares and no Preferred Shares covering Performance
Shares; and 80,444 Shares and no Preferred Shares covering
Deferred Unit Accounts. As of December 31, 2006, there were
463,748 SARs to be settled in cash and $6,764,580 of performance
cash awards outstanding. Since such date and except as set forth
in Section 3.2(a) of the Disclosure Letter, the
Company has not issued any Shares, Preferred Shares or Shares
held in treasury, other than the issuance of Shares upon the
exercise of Options or SARs outstanding on such date and the
issuance of Shares held in treasury upon the settlement of RSUs
and the exercise of Options or SARs outstanding on such date.
Since February 2, 2007, the Company has not granted any
options, restricted stock or RSUs, SARs, Performance Shares,
warrants or rights or entered into any other agreements or
commitments to issue any Shares, Preferred Shares or derivatives
of Shares, and has not split, combined or reclassified any of
its shares of capital stock. All of the outstanding Shares have
been duly authorized and validly issued and are fully paid and
nonassessable and are free of preemptive rights.
Section 3.2(a) of the Disclosure Letter contains a
true, correct and complete list, as of December 31, 2006,
of the aggregate Options, RSUs, SARs, Performance Shares,
Deferred Unit Accounts, performance cash awards and other
equity-based awards outstanding. Except as set forth in
Section 3.2(a) of the Disclosure Letter, there are
no outstanding (i) securities of the Company convertible
into or exchangeable for shares of capital stock or voting
securities or ownership interests in the Company;
(ii) options, warrants, rights or other agreements or
commitments to acquire from the Company, or obligations of the
Company to issue, any capital stock, voting securities or other
ownership interests in (or securities convertible into or
exchangeable for capital stock or voting securities or other
ownership interests in) the Company; (iii) obligations of
the Company to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other
similar agreement or commitment relating to any capital stock,
voting securities or other ownership interests in the Company
(the items in clauses (i), (ii) and (iii), together
with the capital stock of the Company, being referred to
collectively as Company Securities); or
(iv) obligations of the Company or any of its Subsidiaries
to make any payments directly or indirectly based (in whole or
in part) on the price or value of the Shares or Preferred
Shares. Neither the Company nor any of its Subsidiaries has any
outstanding stock appreciation rights, phantom stock,
performance based rights or similar rights or obligations (other
than as set forth in Section 3.2(a) of the
Disclosure Letter). Other than with respect to the awards set
forth in Section 3.2(a) of the Disclosure Letter,
there are no outstanding obligations, commitments or
arrangements, contingent or otherwise, of the Company or any of
its Subsidiaries to purchase, redeem or otherwise acquire any
Company Securities. There are no voting trusts or other
agreements or understandings to which the Company or any of its
Subsidiaries is a party with respect to the voting of capital
stock of the Company other than the Voting Agreement.
(b) The Company or one or more of its Subsidiaries is the
record and beneficial owner of all the equity interests of each
Significant Subsidiary, free and clear of any Lien other than
Permitted Liens, including any limitation or restriction on the
right to vote, pledge or sell or otherwise dispose of such
equity interests (other than any such restrictions as may be
deemed to be imposed by generally applicable federal or state
securities laws), and the capital structure (including
ownership) of each of the Significant Subsidiaries is set forth
in Section 3.2(b) of the Disclosure Letter. All
equity interests of the Significant Subsidiaries held by the
Company or any other Significant Subsidiary are validly issued,
fully paid and non-assessable and were not issued in violation
of any preemptive or similar rights, purchase option, call, or
right of first refusal or similar rights. There are no
outstanding (i) securities of the Company or any of its
Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests
in any Significant Subsidiary; (ii) options, restricted
stock, warrants, rights or other agreements or commitments to
acquire from the Company or any of its Significant Subsidiaries,
or obligations of the Company or any of its Significant
Subsidiaries to issue, any capital stock, voting securities or
other ownership interests in (or securities convertible into or
exchangeable for capital stock or voting securities or other
ownership interests in) any
A-14
Significant Subsidiary; (iii) obligations of the Company or
any of its Subsidiaries to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment relating to
any capital stock, voting securities or other ownership
interests in any Significant Subsidiary (the items in
clauses (i), (ii) and (iii), together with the capital
stock of such Significant Subsidiaries, being referred to
collectively as Subsidiary Securities); or
(iv) obligations of the Company or any of its Significant
Subsidiaries to make any payment directly or indirectly based
(in whole or in part) on the value of any shares of capital
stock of any Significant Subsidiary. There are no outstanding
obligations, commitments or arrangements, contingent or
otherwise, of the Company or any of its Significant Subsidiaries
to purchase, redeem or otherwise acquire any outstanding
Subsidiary Securities. There are no voting trusts or other
agreements or understandings to which the Company or any of its
Significant Subsidiaries is a party with respect to the voting
of capital stock of any Significant Subsidiary.
(c) Section 3.2(c) of the Disclosure Letter
sets forth, as of the date of this Agreement, a true, correct
and complete list of each Company Joint Venture. All equity
interests of the Company Joint Ventures held by the Company or
any other Subsidiary of the Company are validly issued, fully
paid and non-assessable and were not issued in violation of any
preemptive or similar rights, purchase option, call, or right of
first refusal or similar rights.
Section 3.3 Authority
for this Agreement; Board Action. (a) The Company
has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby, including the Merger. The execution and
delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the
Company, and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, other than,
with respect to completion of the Merger, the adoption of this
Agreement by the Requisite Stockholder Vote, prior to the
consummation of the Merger. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by each of Parent and
Merger Sub, constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors rights
and to general equity principles.
(b) The Companys Board of Directors (at a meeting or
meetings duly called and held, and acting upon the unanimous
recommendation of the Special Committee) has unanimously (with
one member abstaining) (i) determined that this Agreement
and the transactions contemplated hereby, including the Merger,
are advisable and fair to, and in the best interests of, the
stockholders of the Company; (ii) approved this Agreement
and the transactions contemplated hereby; (iii) directed
that this Agreement be submitted to the stockholders of the
Company for their adoption and resolved to recommend the
approval and adoption of this Agreement (including the agreement
of merger contained herein) and the transactions contemplated
hereby, including the Merger, by the stockholders of the Company
(including the recommendation of the Special Committee, the
Company Board Recommendation);
(iv) assuming there has been no breach by any of the
Supporting Stockholders of their obligations under
Section 6(a) of the Stock Purchase Agreement dated as of
October 17, 2006 by and among the Company and certain of
the Supporting Stockholders (the Stock Purchase
Agreement) and assuming neither Parent nor Merger Sub
during the past three years has been an interested
stockholder of the Company as defined in Section 203
of the Corporation Law, irrevocably taken all necessary steps to
render the restrictions on business combinations set
forth in Section 203 of the Corporation Law and in the
applicable provisions of the Stock Purchase Agreement
inapplicable to the execution and delivery of this Agreement and
the transactions contemplated hereby, including the Merger; and
(v) irrevocably resolved to elect, to the extent permitted
by Law, for the Company not to be subject to any
moratorium, control share acquisition,
business combination, fair price or
other form of anti-takeover Laws or regulations (collectively,
Takeover Laws) of any jurisdiction that may
purport to be applicable to this Agreement or the transactions
contemplated hereby.
Section 3.4 Consents
and Approvals; No Violation. (a) Neither the
execution and delivery of this Agreement by the Company nor the
consummation of the transactions contemplated hereby will
(i) violate or
A-15
conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws or the respective
certificates of incorporation or bylaws or other similar
governing documents of any Subsidiary of the Company or any
Company Joint Venture; (ii) assuming all consents,
approvals and authorizations contemplated by clause (i)
through (iv) of subsection (b) below have been
obtained, and all filings described in such clauses have been
made, conflict with or violate any Law; (iii) except as set
forth on Section 3.4(a)(iii) of the Disclosure
Letter, violate, or conflict with, or result in a breach of any
provision of, or require any consent, waiver or approval, or
result in a default or give rise to any right of termination,
cancellation, modification or acceleration (or an event that,
with the giving of notice, the passage of time or otherwise,
would constitute a default or give rise to any such right) under
any of the terms, conditions or provisions of any note, bond,
mortgage, lease, license, agreement, contract, indenture or
other instrument or obligation to which the Company or any of
its Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective properties or assets
may be bound; (iv) result (or, with the giving of notice,
the passage of time or otherwise, would result) in the creation
or imposition of any Lien on any asset of the Company or any of
its Subsidiaries; or (v) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to
the Company or any of its Subsidiaries or by which any of their
respective assets are bound, except, in case of
clauses (ii), (iii), (iv) and (v), as would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(b) The execution, delivery and performance of this
Agreement by the Company and the consummation of the
transactions contemplated hereby, including the Merger, by the
Company do not and will not require any consent, approval,
authorization or permit of, or filing with or notification to,
any foreign, federal, state or local government or subdivision
thereof, or governmental, judicial, legislative, executive,
administrative or regulatory authority, agency, commission,
tribunal or body (a Governmental Entity)
except (i) the pre-merger notification requirements under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the HSR Act), or applicable
foreign antitrust, competition or investment Laws
(Foreign Antitrust Laws), (ii) the
applicable requirements of the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder
(the Exchange Act), (iii) the filing of
the Certificate of Merger with the Delaware Secretary and
(iv) any such consent, approval, authorization, permit,
filing or notification the failure of which to make or obtain
(A) would not prevent or materially delay the
Companys performance of its obligations under this
Agreement or (B) has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect. As of the date of this Agreement, the Company is
not aware of any fact, event or circumstance specifically
relating to the Company or any of its Subsidiaries or Affiliates
that would reasonably be expected to prevent or delay the
receipt of any consent, approval, authorization or permit of any
Governmental Entity required pursuant to Article VI
to consummate the transactions contemplated by this Agreement.
Section 3.5 Reports;
Financial Statements. (a) The Company has timely
filed or furnished all forms, reports, statements,
certifications and other documents required to be filed or
furnished by it with or to the Securities and Exchange
Commission (the SEC) since January 1,
2004, all of which have complied, as to form, as of their
respective filing dates in all material respects with all
applicable requirements of the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder
(the Securities Act), the Exchange Act
and the Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder (the Sarbanes-Oxley
Act). None of the Company SEC Reports, including any
financial statements or schedules included or incorporated by
reference therein, at the time filed or furnished, contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. No
executive officer of the Company has failed in any respect to
make the certifications required of him or her under
Section 302 or 906 of the Sarbanes-Oxley Act with respect
to any Company SEC Report. The Company has made available to
Parent true, correct and complete copies of all material written
correspondence between the SEC, on the one hand, and the Company
and any of its Subsidiaries, on the other hand. As of the date
of this Agreement, there are no outstanding or unresolved
comments in comment letters received from the SEC staff with
respect to the Company SEC Reports. To the knowledge of the
Company, none of the Company SEC Reports is the subject of
ongoing SEC review or outstanding SEC comment. None of the
Companys Subsidiaries is required to file periodic reports
with the SEC pursuant to the Exchange Act.
A-16
(b) The audited and unaudited consolidated financial
statements (including the related notes thereto) of the Company
included (or incorporated by reference) in the Company SEC
Reports, as amended or supplemented prior to the date of this
Agreement, have been prepared in accordance with GAAP applied on
a consistent basis and fairly present in all material respects
the consolidated financial position of the Company and its
Subsidiaries as of their respective dates, and the consolidated
stockholders equity, results of operations and cash flows
for the periods presented therein (subject, in the case of
unaudited statements, to normal and recurring year-end
adjustments that are not expected to be material in amount or
effect). All of the Companys Significant Subsidiaries are
consolidated for accounting purposes.
(c) The Company (i) has implemented and maintains
disclosure controls and procedures (as defined in
Rule 13a-15(e) of
the Exchange Act) to ensure that material information relating
to the Company, including its consolidated Subsidiaries, is made
known to the Chief Executive Officer and the Chief Financial
Officer of the Company by others within those entities and
(ii) has disclosed, based on its most recent evaluation
prior to the date of this Agreement, to the Companys
outside auditors and the audit committee of the Companys
Board of Directors (A) any significant deficiencies and
material weaknesses in the design or operation of internal
controls over financial reporting (as defined in
Rule 13a-15(f) of
the Exchange Act) that would reasonably be expected to adversely
affect the Companys ability to record, process, summarize
and report financial information and (B) any fraud, whether
or not material, that involves management or other employees who
have a significant role in the Companys internal controls
over financial reporting.
(d) Neither the Company nor any of its Subsidiaries nor, to
the knowledge of the Company, any director, officer, employee,
auditor, accountant or representative of the Company or any of
its Subsidiaries has received or otherwise had or obtained
knowledge of any material complaint, allegation, assertion or
claim, whether written or oral, regarding deficiencies in the
accounting or auditing practices, procedures, methodologies or
methods of the Company or any of its Subsidiaries or their
respective internal accounting controls, including any material
complaint, allegation, assertion or claim that the Company or
any of its Subsidiaries has engaged in improper accounting or
auditing practices. To the Companys knowledge, no attorney
representing the Company or any of its Subsidiaries, whether or
not employed by the Company or any of its Subsidiaries, has
reported evidence of a material violation of federal or state
securities Laws, breach of fiduciary duty or similar violation
by the Company or any of its officers or directors to the Board
of Directors of the Company or any committee thereof or to any
director or officer of the Company.
(e) Except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement, neither the Company nor any
of its Subsidiaries has any liabilities of any nature, whether
accrued, absolute, fixed, contingent or otherwise (including as
may be owing under indemnity or contribution arrangements),
whether due or to become due, that would be required to be
recorded or reflected on a balance sheet under GAAP that would,
individually or in the aggregate, reasonably be expected to be
material to the Company and its Subsidiaries taken as a whole,
other than such liabilities (i) as and to the extent
reflected or reserved against on the consolidated balance sheet
of the Company dated as of September 30, 2006 (including
the notes thereto) included in the Company SEC Reports,
(ii) that have been incurred in the ordinary course of
business consistent with past practice since September 30,
2006 or (iii) incurred to the extent permitted by
Section 5.1.
Section 3.6 Absence
of Certain Changes. (a) Except as expressly set
forth in the Company SEC Reports filed prior to the date of this
Agreement since December 31, 2005, the Company and its
Subsidiaries have conducted their respective businesses in all
material respects in the ordinary course.
(b) Since December 31, 2005, except as expressly set
forth in the Company SEC Reports filed prior to the date of this
Agreement, the Company and its Subsidiaries have not suffered
any Material Adverse Effect, and there has not been any change,
condition, event or development that would reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect.
(c) Since April 25, 2006, the Company and its
Subsidiaries have not entered into or consummated any
transaction in violation of Section 13.9 of the
Companys Amended and Restated Credit and Guarantee
Agreement dated April 25, 2006.
A-17
Section 3.7 Proxy
Statement; Other Filings. The letter to stockholders,
notice of meeting, proxy statement and form of proxy that will
be provided to stockholders of the Company in connection with
the Merger (including any amendments or supplements) and any
schedules required to be filed with the SEC in connection
therewith (collectively, the Proxy
Statement), at the time the Proxy Statement is first
mailed and at the time of the Special Meeting, and any other
document to be filed by the Company with the SEC in connection
with the Merger (the Other Filings), at the
time of its filing with the SEC, will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement and the Other
Filings will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder. The representations and
warranties contained in this Section 3.7 will not
apply to the failure of the Proxy Statement or any Other Filing
to comply as to form as a result of, or statements or omissions
included in the Proxy Statement or any Other Filings based upon,
information supplied in writing to the Company by Parent or
Merger Sub or any of their respective directors, officers,
Affiliates, agents or other representatives.
Section 3.8 Brokers;
Certain Expenses. No agent, broker, investment banker,
financial advisor or other firm or Person is or shall be
entitled, as a result of any action, agreement or commitment of
the Company or any of its Affiliates, to any brokers,
finders, financial advisors or other similar fee or
commission in connection with any of the transactions
contemplated by this Agreement, except J.P. Morgan
Securities Inc. (the Company Financial
Advisor), whose fees and expenses shall be paid by the
Company, and except as set forth on Section 3.8 of
the Disclosure Letter. A true and correct copy of the engagement
letter with the Company Financial Advisor in connection with the
transactions contemplated hereby has been delivered to Parent
and has not been subsequently, modified, waived, supplemented or
amended.
Section 3.9 Employee
Matters. (a) Section 3.9(a) of the
Disclosure Letter contains a true, correct and complete list of
all material Plans and indicates those Plans that are maintained
primarily for the benefit of employees who are located in any
jurisdiction outside the United States (excluding any such
non-United States plans that are statutory plans). Prior to the
date of this Agreement, the Company has made available to Parent
true, correct and complete copies of each of the following, as
applicable, with respect to each material Plan: (i) the
plan document or agreement or, with respect to any Plan (or an
amendment thereof) that is not in writing, a written description
of the material terms thereof; (ii) the trust agreement,
insurance contract or other documentation of any related funding
arrangement; (iii) the summary plan description;
(iv) the two most recent annual reports, actuarial reports
and/or financial reports; (v) the two most recent required
Internal Revenue Service Forms 5500, including all
schedules thereto; (vi) any material communication to or
from any Governmental Entity or to or from any Plan participant;
(vii) all material amendments or material modifications to
any such documents; (viii) the most recent determination
letter received from the Internal Revenue Service with respect
to each Plan that is intended to be a qualified plan
under Section 401 of the Code; and (ix) any comparable
documents with respect to Plans subject to any foreign Laws that
are required to be prepared or filed under the applicable Laws
of such foreign jurisdiction.
(b) With respect to each Plan, (i) all contributions
due from the Company or any of its ERISA Affiliates (as defined
below) to date have been timely made in all material respects
and all material amounts properly accrued to date or as of the
Effective Time as liabilities of the Company or any of its
Subsidiaries which are not yet due have been properly recorded
on the books of the Company and, to the extent required by GAAP,
adequate reserves are reflected on the financial statements of
the Company, (ii) all premiums due or payable with respect
to insurance policies funding any Plan, for any period through
the date of this Agreement, have been timely made or paid in
full, (iii) each such Plan which is an employee
pension benefit plan (as defined in Section 3(2) of
ERISA) and intended to qualify under Section 401 of the
Code has received a favorable determination letter from the
Internal Revenue Service (or an application for a determination
letter from the Internal Revenue Service has been requested and
pending, and, to the Companys knowledge, nothing has
occurred and no circumstance exists that has or would reasonably
be expected to cause the Internal Revenue Service to not issue a
favorable determination letter) with respect to such
qualification and, to the Companys knowledge, nothing has
occurred since the date of such letter that has or would
reasonably be expected to adversely affect such qualification,
(iv) with respect to any Plan maintained outside the
A-18
United States, all applicable foreign qualifications or
registration requirements have been satisfied, except where any
failure to comply would not result in any material liability to
the Company or its ERISA Affiliates (as defined below),
(v) there are no material actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge of
the Company, threatened with respect to such Plan, any
fiduciaries of such Plan with respect to their duties to any
Plan, or against the assets of such Plan or any trust maintained
in connection with such Plan (other than as disclosed in
Section 3.9(b)(v) of the Disclosure Letter), and
(vi) such Plan has been operated and administered in
compliance in all material respects with its terms and all
applicable Laws and regulations, including ERISA and the Code.
Except with respect to the Companys employee pension
benefit plans that are sponsored by the Company or its ERISA
Affiliates (as defined below) and subject to Title IV of
ERISA (the Title IV Plans), there is not
now, and to the knowledge of the Company there are no existing
circumstances that would reasonably be expected to give rise to,
any requirement for the posting of security with respect to a
Plan or the imposition of any pledge, lien, security interest or
encumbrance on the assets of the Company or any of its
Subsidiaries or any of their respective ERISA Affiliates (as
defined below) under ERISA or the Code, or similar Laws of
foreign jurisdictions, or that would reasonably be expected to
give rise to any Controlled Group Liability for Parent or Merger
Sub after the Effective Date.
(c) Neither the Company nor its Subsidiaries nor any trade
or business, whether or not incorporated, that, together with
the Company or any of its Subsidiaries would be deemed to be a
single employer within the meaning of
Section 4001(b) of ERISA or would be deemed to have a
relationship described in Section 414(m) or 414(o) of the
Code (an ERISA Affiliate), (i) maintains
or contributes to, or has maintained or contributed to,
(x) any employee benefit plan within the
meaning of Section 3(3) of ERISA that is subject to
Section 302 or Title IV of ERISA or Section 412
of the Code or (y) a multiemployer plan within
the meaning of Section 3(37) and 4001(a)(3) of ERISA or a
multiple employer plan within the meaning of
Sections 4063/4064 of ERISA or Section 413(c) of the
Code or (ii) except with respect to the Title IV
Plans, has incurred or reasonably expects to incur any material
liability pursuant to Title I or Title IV of ERISA
(including any Controlled Group Liability) or any foreign Law or
regulation relating to employee benefit plans, whether
contingent or otherwise.
(d) With respect to each Plan that is subject to
Title IV or Section 302 of ERISA or Section 412
or 4971 of the Code: (i) there does not exist any
accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA,
whether or not waived; (ii) no reportable event within the
meaning of Section 4043(c) of ERISA for which the
30-day notice
requirement has not been waived has occurred; (iii) all
premiums to the Pension Benefit Guaranty Corporation (the
PBGC) have been timely paid in full; and
(iv) the PBGC has not instituted proceedings to terminate
any such Plan and, to the Companys knowledge, no condition
exists that presents a material risk that such proceedings will
be instituted or which would constitute grounds under
Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Plan.
(e) With respect to each Plan that is a multiemployer
plan, no complete or partial withdrawal from such Plan has
been made by the Company or any ERISA Affiliate, or by any other
Person, that could result in any material liability to the
Company or any ERISA Affiliate, whether such liability is
contingent or otherwise, and if the Company or any ERISA
Affiliate were to withdraw from any such Plan, such withdrawal
would not result in any material liability to the Company or any
ERISA Affiliate.
(f) With respect to each Plan that is a multiple
employer plan, (i) the Company has performed all of
its respective obligations under such Plan and (ii) the
Company does not have, and no event has occurred or
circumstances exist that could result in, any liability other
than liability limited to the participation of any Company
employee or former Company employee in the ordinary course.
Section 3.9(f) of the Disclosure Letter identifies
each Plan that is a multiple employer plan and
indicates the other participating employers with respect to such
Plan.
(g) No Plan is under audit or, to the knowledge of the
Company, is the subject of an investigation by the Internal
Revenue Service, the U.S. Department of Labor, the PBGC,
the SEC or any other Governmental Entity, nor, to the knowledge
of the Company, is any such audit or investigation pending or,
to the Companys
A-19
knowledge, threatened. Except with respect to underfunding
related to the Title IV Plans, to the Companys
knowledge, no act or omission has occurred and no condition
exists that would subject the Company or an ERISA Affiliate to
any material fine, penalty, tax or liability of any kind imposed
under ERISA or the Code. With respect to each Plan for which
financial statements are required by ERISA, there has been no
material adverse change in the financial status of such Plan
since the date of the most recent such statements provided to
Parent by the Company.
(h) Neither the execution or delivery of this Agreement nor
the consummation of the transactions contemplated by this
Agreement will, either alone or in conjunction with any other
event (whether contingent or otherwise), (i) result in any
payment or benefit becoming due or payable, or required to be
provided, to any director, employee or independent contractor of
the Company or any of its ERISA Affiliates, (ii) increase
the amount or value of any benefit or compensation otherwise
payable or required to be provided to any such director,
employee or independent contractor, (iii) result in the
acceleration of the time of payment, vesting or funding of any
such benefit or compensation or (iv) result in payments in
excess of the amounts set forth in Section 3.9(h) of
the Disclosure Letter that would fail to be deductible by reason
of 280G of the Code and except as disclosed in
Section 3.9(h) of the Disclosure Letter no plan
provides for a gross up or similar payments in
respect of any Taxes that may become payable under
Section 409A or Section 4999(a) of the Code.
(i) Other than as disclosed in the Company SEC Reports,
neither the Company nor any of its ERISA Affiliates has any
material liability with respect to postretirement welfare
benefit plans (the Retiree Welfare Programs)
with respect to any Person other than coverage mandated by
Section 4980B of the Code or state Law. Except as would not
reasonably be expected to result in material liability to the
Company or any of its ERISA Affiliates, there has been no
written communication to employees of the Company or its ERISA
Affiliates that promises or guarantees such employees retiree
health or life insurance benefits or other retiree death
benefits on a permanent basis. Each Retiree Welfare Program can
be amended or terminated at any time in accordance with the
terms of such plan. Each Plan that is a group health
plan (as defined in Section 607(1) of ERISA or
Section 5001(b)(1) of the Code) has been operated at all
times in material compliance with COBRA and the Health Insurance
Portability and Accountability Act of 1996 and any related
regulations or applicable state laws.
(j) Each individual who renders services to the Company or
any of its ERISA Affiliates who is classified by the Company or
any of its ERISA Affiliates, as applicable, as having the status
of an independent contractor or other non-employee status for
any purpose (including for purposes of taxation and tax
reporting and under Plans) is to the knowledge of the Company
properly so characterized.
(k) Each Plan that is a nonqualified deferred
compensation plan within the meaning of
Section 409A(d)(1) of the Code (a Nonqualified
Deferred Compensation Plan) and any award thereunder,
in each case that is subject to Section 409A of the Code,
has been operated in compliance in all material respects with
Section 409A of the Code, based upon a good faith,
reasonable interpretation of (A) Section 409A of the
Code and (B)(1) the proposed regulations issued thereunder,
(2) Internal Revenue Service Notice 2005-1 or
(3) Internal Revenue Service Notice 2006-100
(clauses (A) and (B), together, the 409A
Authorities). Except as would not have or reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect, no Plan that would be a Nonqualified
Deferred Compensation Plan subject to Section 409A of the
Code but for the effective date provisions that are applicable
to Section 409A of the Code, as set forth in
Section 885(d) of the American Jobs Creation Act of 2004,
as amended (the AJCA), has been
materially modified within the meaning of
Section 885(d)(2)(B) of the AJCA after October 3,
2004, based upon a good faith, reasonable interpretation of the
AJCA and the 409A Authorities. Section 3.9(k) of the
Disclosure Letter identifies the Plans that the Company has
determined, based on a good faith, reasonable interpretation of
the 409A Authorities, may constitute Nonqualified Deferred
Compensation Plans.
(l) Each Company Option or other similar right to acquire
Company Shares or other equity of the Company (i) to the
extent it was granted after December 31, 2004, has an
exercise price that has never been and may never be less than
the fair market value of the underlying equity as of the date
such Company Option
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or other right was granted in accordance with all governing
documents and in compliance with all applicable law,
(ii) to the extent it was granted after December 31,
2004, has no feature for the deferral of compensation other than
the deferral of recognition of income until the later of
exercise or disposition of such Company Option or other right,
(iii) to the extent it was granted after December 31,
2004, was granted with respect to a class of stock of the
Company that is service recipient stock (within the
meaning of applicable regulations under Section 409A), and
(iv) has at all times been properly accounted for in
accordance with GAAP in the Companys audited financial
statements included in documents filed with the SEC and provided
to Parent.
(m) The aggregate contributions that would have been
required to allow the Company to terminate all Title IV
Plans in involuntary terminations as of February 2, 2007,
did not exceed $125,000,000. Section 3.9(m) of the
Disclosure Letter discloses the following amounts in connection
with the Title IV Plan liabilities: (i) the total
pension expense to be reported on the Companys financial
reports for 2006; (ii) for the 2006 plan year, the
aggregate contributions required to satisfy the ERISA minimum
contribution requirements for all Title IV Plans, the
aggregate amount of the contributions that have already been
made for 2006, and the aggregate amount of the required minimum
contributions not yet made; and (iii) for the 2007 plan
year, the anticipated aggregate contributions required to
satisfy the ERISA minimum contribution requirements for all
Title IV Plans.
Section 3.10 Employees.
(a) There is no pending or, to the knowledge of the
Company, threatened labor strike, walkout, work stoppage,
slowdown, collective conflict, governmental investigation or
lockout with respect to employees of the Company or any of its
Subsidiaries, and no such strike, walkout, slowdown, collective
conflict, governmental investigation or lockout has occurred
with respect to the Company, that in any such case could be
material to the business of the Company and its Subsidiaries
taken as a whole. Section 3.10(a) of the Disclosure
Letter sets forth a true, complete and correct list in all
material respects of each collective bargaining agreement and/or
labor union contract to which the Company or any of its
Subsidiaries is a party or bound.
(b) Neither the Company nor any of its Subsidiaries is a
party to, or otherwise bound by, any consent decree with, or
citation by, any Governmental Entity relating to its current or
former employees, officers or directors or employment practices.
(c) Except as would not be reasonably expected to result in
any material liability to the Company or any of its
Subsidiaries, the Company and each of its Subsidiaries are in
compliance in all material respects with all applicable local,
state, federal and foreign Laws relating to labor and
employment, including but not limited to Laws relating to
discrimination, disability, labor relations, contracting and
subcontracting of activities, hours of work, payment of wages
and overtime wages, pay equity, immigration, workers
compensation, working conditions, employee scheduling, social
security, union rights, occupational safety and health, family
and medical leave, and employee terminations.
(d) Neither the Company nor any of its Subsidiaries has
incurred any liability or obligation which remains unsatisfied
under the Worker Adjustment and Retraining Notification Act or
any state or local Laws regarding the termination or layoff of
employees.
Section 3.11 Litigation.
Except as is expressly disclosed in the Company SEC Reports
filed prior to the date of this Agreement, there is no claim,
action, suit, proceeding, arbitration, mediation or governmental
investigation pending or, to the knowledge of the Company,
threatened against (or for which the Company or any of its
Subsidiaries has assumed liability) the Company or any of its
Subsidiaries, or any properties or assets of the Company or any
of its Subsidiaries, including by way of indemnity or
contribution, other than any such claim, action, suit,
proceeding, arbitration, mediation or governmental investigation
that (i) would reasonably be expected to result in a
liability in excess of $10,000,000, (ii) seeks injunctive
relief that would materially and adversely affect the business
of the Company and its Subsidiaries taken as a whole or
(iii) if resolved in accordance with plaintiffs
demands, would have or reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries nor any of their
respective properties or assets is subject to any material
outstanding order, writ, injunction or decree. To the knowledge
of the Company, no officer or director of the Company or any of
its Subsidiaries is a defendant in any claim, action, suit,
proceeding, arbitration, mediation or governmental investigation
in connection with his
A-21
or her status as an officer or director of the Company or any of
its Subsidiaries. There are no SEC legal actions, audits,
inquiries or investigations, other governmental actions, audits,
inquiries or investigations by other Governmental Entities or
material internal investigations pending or, to the knowledge of
the Company, threatened, in each case regarding any accounting
practices of the Company or any of its Subsidiaries or any
malfeasance by any director or executive officer of the Company
or any of its Subsidiaries.
Section 3.12 Tax
Matters. Except as expressly disclosed in the
Form 10-K for the
year ended December 31, 2005 or the
Form 10-Q for the
three-month period ended September 30, 2006 filed by the
Company with the SEC and except as set forth in the Disclosure
Letter:
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(a) The Company, each of its Subsidiaries and each
Tax-Controlled Joint Venture have timely filed (or there has
been filed on its behalf) all material returns and reports
relating to Taxes required to be filed by applicable Law with
respect to the Company, each of its Subsidiaries and each
Tax-Controlled Joint Venture or any of their income, properties
or operations. Except as reserved on the Companys
financial statements, all such returns are true, correct and
complete in all material respects and accurately set forth all
items required to be reflected or included in such returns by
applicable federal, state, local or foreign Tax Laws, rules or
regulations. Except as reserved on the Companys financial
statements, the Company, each of its Subsidiaries and each
Tax-Controlled Joint Venture have timely paid all material Taxes
attributable to the Company, any of its Subsidiaries or any
Tax-Controlled Joint Venture that were due and payable, without
regard to whether such Taxes have been assessed or have been
shown on such Tax Returns. To the extent requested by Parent,
the Company has made available to Parent true, correct and
complete copies of all material income Tax Returns, and any
amendments thereto, filed by or on behalf of the Company, any of
its Subsidiaries or any Tax-Controlled Joint Venture or any
member of a group of corporations including the Company, any of
its Subsidiaries or any Tax-Controlled Joint Venture, and any
correspondence with any Taxing authority relating thereto. |
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(b) The Company and each of its Subsidiaries have made
adequate provisions in accordance with GAAP, consistently
applied, in the consolidated financial statements included in
the Company SEC Reports for the payment of all material Taxes
for which the Company or any of its Subsidiaries may be liable
for the periods covered thereby that were not yet due and
payable as of the dates thereof, regardless of whether the
liability for such Taxes is disputed. Since the date of the most
recent consolidated financial statements included in the Company
SEC Reports filed prior to the date hereof, neither the Company
nor any of its Subsidiaries has accrued any liability for Tax,
other than in the ordinary course of business. |
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(c) All federal income Tax Returns and all material state,
local and foreign Tax Returns of the Company, each of its
Subsidiaries and each Tax-Controlled Joint Venture have been
audited and settled, or are closed to assessment, for all years
through (i) 2002, in the case of United States Federal Tax
Returns, (ii) 2000, in the case of Michigan Tax Returns,
(iii) 1999, in the case of foreign Tax Returns and
(iv) 1998, in the case of all other Tax Returns. There is
no claim or assessment pending or, to the knowledge of the
Company, threatened in writing against the Company, any of its
Subsidiaries or any Tax-Controlled Joint Venture for any alleged
material deficiency in Taxes, and neither the Company, any
Subsidiary nor any Tax-Controlled Joint Venture has been
informed in writing of the commencement of any audit or
investigation with respect to any material liability of the
Company, any of its Subsidiaries or any Tax-Controlled Joint
Venture for Taxes that have not been reserved for on the
Companys financial statements. Except for any Taxes
reserved for on the Companys financial statements, no
issue has been raised in writing in any prior examination or
audit that was not resolved favorably and that, by application
of similar principles, reasonably can be expected to result in
the assertion of a material deficiency for any other Tax period
not so examined or audited and for which the statute of
limitations (taking into account extensions) has not expired.
There are no agreements in effect to waive or extend the period
of limitations for the assessment or collection of any material
amount of Tax for which the Company or any of its Subsidiaries
may be liable, nor have any such agreements been requested. No
material assets of the Company or any of its Subsidiaries are
subject to any liens for material Taxes, other than for Tax not
yet due and payable or being contested in good faith. |
A-22
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(d) The Company, each of its Subsidiaries and, to the
Companys knowledge, each Tax-Controlled Joint Venture have
withheld from payments to their employees, independent
contractors, creditors, stockholders and any other applicable
Person (and timely paid to the appropriate Tax authority) proper
and accurate amounts for all periods and, to the extent
required, have remitted such amounts to the appropriate
governmental authorities, in compliance in all material respects
with all Tax withholding provisions of applicable federal,
state, local and foreign Laws (including income, social
security, and employment Tax withholding for all types of
compensation); provided, however, that in the case
of income taxes, this Section 3.12(d)shall not apply
to the extent such Taxes have been reserved for in the
Companys financial statements. |
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(e) There is no material obligation of the Company, any of
its Subsidiaries or any Tax-Controlled Joint Venture to pay or
to contribute to the payment of any Tax or any portion of a Tax
(or any amount calculated with reference to any portion of a
Tax) of any Person other than the Company or any of its
Subsidiaries, including under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local
or foreign law), as transferee or successor, by contract or
otherwise. |
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(f) In the six years immediately preceding the date of this
Agreement, no claim for any material amount of Taxes that
remains unresolved has been made by any authority in a
jurisdiction where neither the Company nor any of its
Subsidiaries has filed Tax Returns that the Company or such
Subsidiary (as relevant) is or may be subject to taxation by
that jurisdiction. |
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(g) The Company is not (and during the five year period
ending on the date hereof, has not been) a United States real
property holding corporation within the meaning of
Section 897 of the Code. |
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(h) Neither the Company, any of its Subsidiaries nor any
U.S. Tax-Controlled Joint Venture has been a party to or a
participant in, or a material advisor (within the meaning of
Section 6111(b)(1) of the Code) with respect to a
transaction which is listed, or otherwise reportable, within the
meaning of Section 6011 of the Code and Treasury
Regulations promulgated thereunder. |
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(i) Neither the Company, any of its Subsidiaries nor any
U.S. Tax-Controlled Joint Venture has executed any closing
agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof, or any similar provision of state
or local Law which, based on current facts and circumstances,
could have a material effect on any period after the Effective
Time. |
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(j) The Company, each of its Subsidiaries and each
U.S. Tax-Controlled Joint Venture has disclosed on its
federal income Tax Returns all positions taken therein that
could give rise to a substantial understatement of federal
income Tax within the meaning of Section 6662 of the Code. |
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(k) Neither the Company, any of its Subsidiaries nor any
U.S. Tax-Controlled Joint Venture is required (or will be
required as a result of the Merger) to include a material item
of income or to exclude a material item of deduction for any
period after the Effective Time pursuant to Section 481(a)
of the Code or any similar provision of state or local Law by
reason of a change in accounting method initiated by it or any
other relevant party, and neither the Company, any of its
Subsidiaries nor any U.S. Tax-Controlled Joint Venture has
any knowledge that the Internal Revenue Service has proposed in
writing any such adjustment or change in accounting method.
Neither the Company, any of its Subsidiaries nor any
U.S. Tax-Controlled Joint Venture has any application
pending with any Governmental Entity requesting permission for
any changes in accounting methods. |
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(l) Section 3.12(l) of the Disclosure Letter
lists each foreign Subsidiary of the Company for which an
election has been made pursuant to Section 7701 of the Code
and regulations thereunder to be treated as other than its
default classification for U.S. federal income tax
purposes, and except as set forth on such schedule, each foreign
Subsidiary of the Company is classified for U.S. federal
income tax purposes according to its default classification. |
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(m) Neither the Company, any of its Subsidiaries nor, to
the Companys knowledge, any Tax-Controlled Joint Venture,
has entered into a transaction under which gain or income has
been realized but the taxation of such gain has been deferred
under any provision of federal, state, local or foreign Tax |
A-23
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Law or by agreement with any Tax authority (including for
example an installment sale, a deferred intercompany transaction
or a gain recognition agreement), or a transaction under which
previously used Tax losses or credits may be recaptured
(including for example a dual consolidated loss or an excess
loss account), in each case if such gain recognition or such
loss or credit recapture, if triggered, would give rise to a
material Tax liability. |
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(n) At no time has the Company or any of its Subsidiaries
had an ownership change described in Section 382(l)(5)(A)
of the Code. |
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(o) There are no Tax sharing or similar agreements or
arrangements to which the Company or any of its Subsidiaries is
a party and which require a payment to any Person other than the
Company or any of its Subsidiaries. |
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(p) Neither the Company nor any of its Subsidiaries has
distributed to its stockholders or security holders stock or
securities of a controlled corporation, nor has stock or
securities of the Company or any of its Subsidiaries been
distributed, in a transaction to which Section 355 of the
Code applies (i) in the two years prior to the date of this
Agreement or (ii) in a distribution that could otherwise
constitute part of a plan or series of related
transactions (within the meaning of Section 355(e) of
the Code) that includes the transactions contemplated by this
Agreement. |
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(q) Neither the Company nor any of its Subsidiaries owns an
interest in a passive foreign investment company within the
meaning of
Sections 1291-1297
of the Code. |
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(r) For purposes of this Agreement,
(i) Tax shall mean all taxes, charges,
fees, levies, imposts, duties, and other assessments, including
any income, alternative minimum or add-on tax, estimated, gross
income, gross receipts, sales, use, transfer, transactions,
intangibles, ad valorem, value-added, escheat, franchise,
registration, title, license, capital,
paid-up capital,
profits, withholding, employee withholding, payroll,
workers compensation, unemployment insurance, social
security, employment, excise, severance, stamp, transfer
occupation, premium, recording, real property, personal
property, federal highway use, commercial rent, environmental
(including taxes under Section 59A of the Code) or windfall
profit tax, custom, duty or other tax, fee or other like
assessment or charge of any kind whatsoever, together with any
interest, penalties, related liabilities, fines or additions to
tax that may become payable in respect thereof imposed by any
country, any state, county, provincial or local government or
subdivision or agency thereof, (ii) Tax
Returns shall mean any and all reports, returns,
computations, declarations, or statements relating to Taxes,
including any schedule or attachment thereto and any related or
supporting workpapers or information with respect to any of the
foregoing, including any amendment thereof, in each case, filed
or required to be filed with any Governmental Authority,
(iii) Tax-Controlled Joint Venture means
any Company Joint Venture as to which the Company or any of its
Subsidiaries (x) is the tax matters partner,
within the meaning of Section 6231(a)(7) of the Code or
(y) has effective control over the preparation of Tax
Returns, and (iv) U.S. Tax-Controlled Joint
Venture means any Tax-Controlled Joint Venture which
is organized under the laws of the United States, any state
thereof or the District of Columbia, or which is engaged in a
trade or business in the United States. |
Section 3.13 Compliance
with Law; No Default. Except as would not reasonably be
expected to be material to the Company and its Subsidiaries,
taken as a whole, neither the Company nor any of its
Subsidiaries is or has during the past three years been in
conflict with, in default with respect to or in violation of any
statute, law, ordinance, rule, regulation, order, writ,
judgment, decree, stipulation, determination, award or
requirement of a Governmental Entity (Laws)
applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries
is, bound or affected. The Company and each of its Subsidiaries
have all material permits, licenses, authorizations, consents,
certificates, approvals and franchises from Governmental
Entities required to own, lease and operate their properties and
conduct their businesses in all material respects as currently
conducted (Permits), and there has occurred
no violation of, suspension, reconsideration, imposition of
penalties or fines, imposition of additional conditions or
requirements, default (with or without notice or lapse of time
or both) under, or event giving rise to any right of
termination, amendment or cancellation of, with or without
notice or lapse of time or both, any such Permit. The Company
and each of its Subsidiaries are in material compliance with the
terms of such Permits. No
A-24
event has occurred and no circumstance exists that would
reasonably be expected to result in the revocation,
cancellation, non-renewal or adverse modification of any such
material Permit.
Section 3.14 Environmental
Matters. (a) Except as has not had and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect:
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(i) each of the Company and its Subsidiaries (A) is
and has been in compliance with applicable Environmental Laws
and (B) has received and is and has been in compliance with
all Permits required under Environmental Laws for the conduct of
its business; |
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(ii) neither the Company nor any of its Subsidiaries has
been in the past ten years or is presently the subject of any
Environmental Claim and, to the knowledge of the Company, no
Environmental Claim is pending or threatened against either the
Company or any of its Subsidiaries or against any Person whose
liability for the Environmental Claim was or may have been
retained or assumed either contractually or by operation of law
by either the Company or any of its Subsidiaries; |
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(iii) neither the Company nor any of its Subsidiaries nor
any other Person has managed, used, stored or disposed of
Hazardous Materials on, at or beneath any properties currently
owned, leased, operated or used or previously owned, leased,
operated or used by the Company or any of its Subsidiaries; |
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(iv) no properties presently owned, leased or operated by
either the Company or any of its Subsidiaries contain any
landfills, surface impoundments, disposal areas, underground
storage tanks, aboveground storage tanks, asbestos or
asbestos-containing material, polychlorinated biphenyls,
radioactive materials or other Hazardous Materials; and |
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(v) no Lien imposed by any Governmental Entity pursuant to
any Environmental Law is currently outstanding and no financial
assurance obligation is in force as to any property leased or
operated by either the Company or any of its Subsidiaries. |
(b) This Section 3.14 contains the exclusive
representations and warranties with respect to environmental
matters.
(c) For purposes of the Agreement:
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(i) Environment means any
ambient, workplace or indoor air, surface water, drinking water,
groundwater, land surface (whether below or above water),
subsurface strata, sediment, plant or animal life, natural
resources, and the sewer, septic and waste treatment, storage
and disposal systems servicing real property or physical
buildings or structures. |
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(ii) Environmental Claim means
any claim, cause of action, investigation or notice by any
Person or any Governmental Entity alleging potential liability
(including potential liability for investigatory costs, cleanup
or remediation costs, governmental or third party response
costs, natural resource damages, property damage, personal
injuries, or fines or penalties) based on or resulting from
(a) the presence or Release of any Hazardous Materials at
any location, whether or not owned or operated by the Company or
any of its Subsidiaries, or (b) any violation of any
Environmental Law. |
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(iii) Environmental Law means any
Law, common Law or any binding agreement issued or entered by or
with any Governmental Entity or Person relating to: (a) the
Environment, including pollution, contamination, cleanup,
preservation, protection and reclamation of the Environment,
(b) exposure of employees or third parties to any Hazardous
Materials, (c) any Release or threatened Release of any
Hazardous Materials, including investigation, assessment,
testing, monitoring, containment, removal, remediation and
cleanup of any such Release or threatened Release, (d) the
management of any Hazardous Materials, including the use,
labeling, processing, disposal, storage, treatment, transport,
or recycling of any Hazardous Materials or (e) the presence
of Hazardous Materials in any building. |
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(iv) Hazardous Materials means
any pollutant, contaminant, petroleum or any fraction thereof,
asbestos or asbestos-containing material, polychlorinated
biphenyls, lead paint, any solid or hazardous, |
A-25
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waste, and any toxic, radioactive, or hazardous substance, or
material including any substance, material or waste which is
defined, regulated or classified as hazardous under any
Environmental Law. |
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(v) Release means any release,
spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or
outdoor Environment, or into or out of any property, including
movement through air, soil, surface water, groundwater or
property. |
Section 3.15 Intellectual
Property. (a) The Company and its Subsidiaries own
all right, title and interest clear of all Liens other than
Permitted Liens, or are validly licensed or otherwise have the
right to use or sell, all patents, patent rights, inventions and
discoveries (whether or not patentable or reduced to practice),
trademarks, trade names, trade dresses, corporate names, company
names, business names, fictitious business names, domain names,
trade styles, service marks, logos and other source or business
identifiers, and the goodwill symbolized thereby, copyrights,
trade secrets and all other confidential or proprietary
information and know-how, whether or not reduced to writing or
any other tangible form, and other proprietary intellectual
property rights and computer programs arising under the Laws of
the United States (including any state or territory), any other
country or group of countries or any political subdivision of
any of the foregoing, whether registered or unregistered
(collectively, Intellectual Property Rights)
used in the business of the Company or any of its Subsidiaries
as of the date of this Agreement, other than such Intellectual
Property Rights that are not material to the business of the
Company and its Subsidiaries taken as a whole (the
Company Intellectual Property). Except as
would not reasonably be expected to be material to the business
of the Company and its Subsidiaries taken as whole,
(i) during the three years preceding the date of this
Agreement, no written claim of invalidity or conflicting
ownership rights with respect to any Company Intellectual
Property that is owned by the Company or any of its Subsidiaries
(the Company Owned Intellectual Property) has
been made by a third party to the Company and no such Company
Owned Intellectual Property is the subject of any pending or, to
the Companys knowledge, threatened action, suit, claim,
investigation, arbitration, interference, petition to cancel,
reexamination, reissue, opposition or other similar proceeding,
and, to the Companys knowledge, no third party is
infringing, misappropriating, or otherwise violating any of the
Company Owned Intellectual Property, (ii) during the three
years preceding the date of this Agreement, no Person has given
written notice to the Company or any of its Subsidiaries that
the use of any Company Intellectual Property by the Company or
any of its Subsidiaries, or that any other activity by any of
the foregoing, is or may be infringing or has or may have
infringed any domestic or foreign registered patent, patent
application, trademark, service mark, trade name, trade dress or
copyright or design right, or that the Company or any of its
Subsidiaries has misappropriated any trade secret or other
confidential information, (iii) to the knowledge of the
Company, the making, using, importation, offering for sale,
selling, manufacturing, marketing, licensing, reproduction,
distribution, or publishing of any method, process, machine,
manufacture or product included in the Company Intellectual
Property, or any other activity undertaken, by the Company or
any of its Subsidiaries, does not infringe any domestic or
foreign registered patent, patent application, trademark,
service mark, trade name, trade dress, copyright or other
Intellectual Property Right of any third party, and does not
misappropriate any trade secrets or other confidential
information of any third party, (iv) except as would not
reasonably be expected to be material to the business of the
Company and of its Subsidiaries taken as a whole, the execution,
delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby will not cause the
forfeiture or termination or give rise to a right of first
offer, forfeiture or termination of any of the Company
Intellectual Property or impair the right of Parent to make,
use, sell, license or dispose of, or to bring any action for the
infringement of, any Company Intellectual Property.
(b) The Company and its Subsidiaries have taken all
necessary and desirable actions to maintain and protect each
item of the Intellectual Property Rights, except for failures to
take such actions that, individually or in the aggregate, would
not be reasonably be expected to be material to the business of
the Company and its Subsidiaries, taken as a whole. The Company
and its Subsidiaries have taken all reasonable precautions to
protect the secrecy, confidentiality, and value of its, trade
secrets and the proprietary nature and value of them included in
the Intellectual Property Rights, except for failures to take
such precautions that, individually or in the aggregate, have
not resulted in and would not reasonably be expected to be
material to the business of the Company and its Subsidiaries,
taken as a whole.
A-26
(c) Neither the Company nor any of its Subsidiaries is,
nor, as a result of the execution and delivery of this Agreement
or its performance of its obligations hereunder, will be, in
violation of any agreement relating to the Intellectual Property
Rights using in the business except for violations that
individually or in the aggregate, would not reasonably be
expected to be material to the business of the Company and its
Subsidiaries taken as a whole. Immediately after the completion
of the transactions contemplated by this Agreement, the Company
will own all right, title and interest in and to or have a
license to use all Intellectual Property Rights used in the
business or that is necessary for the operation of the business
on identical terms and conditions as the Company enjoyed
immediately prior to such transactions, except for failures to
own or have available for use that, individually or in the
aggregate, would not reasonably be expected to be material to
the business of the Company and its Subsidiaries taken as a
whole.
Section 3.16 Real
Property. (a) Section 3.16(a) of the
Disclosure Letter sets forth a true, correct and complete list
of all material real property owned by the Company as of the
date of this Agreement (the Owned Real
Property). With respect to each Owned Real Property,
(i) either the Company or one of its Subsidiaries has good
and marketable title in fee simple to such Owned Real Property,
free and clear of all Liens other than Permitted Liens,
(ii) there are no outstanding options or rights of first
refusal in favor of any other party to purchase such Owned Real
Property or any portion thereof and (iii) there are no
material leases, subleases, licenses, options, rights,
concessions or other agreements affecting any portion of such
Owned Real Property. Except as has not had and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, (a) each material
lease pursuant to which the Company or any of its Subsidiaries
lease all or a portion of any owned Real Property to a third
party is valid, binding and in full force and effect and all
rent and other sums and charges payable to the Company and its
Subsidiaries as landlords thereunder are current, (b) there
are no purchase options, rights of first refusal or similar
rights outstanding with respect to any of the Owned Real
Properties, and (c) no termination event or condition or
uncured default of a material nature on the part of the Company
or, if applicable, its Subsidiary or, to the knowledge of the
Company, the tenant thereunder exists under any such lease.
Neither the Company nor any of its Subsidiaries has received
written notice of any pending and, to the knowledge of the
Company, there is no threatened, condemnation with respect to
any of the Owned Real Properties.
(b) Except as has not had and would not be reasonably
expected to have, individually or in the aggregate, a Material
Adverse Effect, (i) each lease, sublease and other
agreement under which the Company or any of its Subsidiaries
uses or occupies or has the right to use or occupy, now or in
the future (the Real Property Leases), is
valid, binding and in full force and effect and all rent and
other sums and charges payable by the Company or any of its
Subsidiaries as tenants thereunder are current, (ii) no
termination event or condition or uncured default of a material
nature on the part of the Company or, if applicable, its
Subsidiary or, to the knowledge of the Company, the landlord
thereunder exists under any Real Property Lease and
(iii) the Company and each of its Subsidiaries has a good
and valid leasehold interest in each parcel of real property
leased by it free and clear of all Liens, except for Permitted
Liens. Neither the Company nor any of its Subsidiaries has
received written notice of any pending and, to the knowledge of
the Company, there is no threatened, condemnation with respect
to any property leased pursuant to any of the Real Property
Leases.
Section 3.17 Material
Contracts. (a) Section 3.17(a) of the
Disclosure Letter lists all contracts, agreements, commitments,
arrangements, leases (including with respect to personal
property) and other instruments to which the Company or any of
its Subsidiaries is a party or by which the Company, any of its
Subsidiaries or any of their respective properties or assets is
bound (other than Plans) as of the date of this Agreement that:
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(i) are or would be required to be filed by the Company as
a material contract pursuant to Item 601(b)(10)
of Regulation S-K
under the Securities Act or disclosed by the Company on a
Current Report on
Form 8-K; |
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(ii) contain non-compete covenants that restrict in any
material respect the operations of the Company or any of its
Subsidiaries (or which, immediately following the consummation
of the Merger, would restrict in any material respect the
operations of the Surviving Corporation or any of its
Affiliates); |
A-27
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(iii) with respect to a joint venture, partnership, limited
liability or other similar agreement or arrangement, relate to
the formation, creation, operation, management or control of any
partnership or joint venture that is material to the business of
the Company and its Subsidiaries, taken as a whole; |
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(iv) relate to (A) indebtedness for borrowed money or
the deferred purchase price of property and having an
outstanding principal amount in excess of $20,000,000 as of
December 31, 2006 or (B) conditional sale
arrangements, the sale, securitization or servicing of loans or
loan portfolios, in each case in connection with which the
aggregate actual or contingent obligations of the Company and
its Subsidiaries under such contract are greater than
$20,000,000; |
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(v) were entered into after September 30, 2006 or not
yet consummated, and involve the acquisition from another Person
or disposition to another Person, directly or indirectly (by
merger or otherwise), of assets or capital stock or other equity
interests of another Person for aggregate consideration under
such contract in excess of $20,000,000 (other than acquisitions
or dispositions of assets in the ordinary course of business,
including acquisitions and dispositions of inventory); |
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(vi) relate to an acquisition, divestiture, merger or
similar transaction that contains representations, covenants,
indemnities or other obligations (including indemnification,
earn-out or other contingent obligations), that are
still in effect and, individually or in the aggregate, would
reasonably be expected to result in payments in excess of
$20,000,000; |
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(vii) contain material restrictions with respect to payment
of dividends or any distributions in respect of the capital
stock or other equity interests of the Company or any of its
Subsidiaries outside the ordinary course of business; |
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(viii) other than in the ordinary course of business and an
acquisition permitted under clause (vi) above, obligate the
Company to make any capital commitment or expenditure (including
pursuant to any joint venture); |
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(ix) relate to any guarantee or assumption of other
obligations or reimbursement of any maker of a letter of credit,
except for joint venture agreements and other agreements entered
into in the ordinary course of business consistent with past
practice; |
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(x) relate to the purchase or sale of material real
property; or |
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(xi) are license agreements that are material to the
business of the Company and its Subsidiaries, taken as a whole,
pursuant to which the Company or any of its Subsidiaries is a
party and licenses in Company Intellectual Property Rights or
licenses out Company Intellectual Property owned by the Company,
other than license agreements for software that is generally
commercially available. |
Each contract of the type described in clauses (i) through
(xi) is referred to herein as a Material
Contract.
(b) Except as has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect, (i) each Material Contract is valid and
binding on the Company or the Subsidiary that is a party thereto
and, to the knowledge of the Company, each other party thereto
and is in full force and effect, and (ii) the Company and
its Subsidiaries have performed and complied with all
obligations required to be performed or complied with by them
under each Material Contract. There is no default under any
Material Contract by the Company or any of its Subsidiaries or,
to the knowledge of the Company, by any other party, and no
event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder by the
Company or any of its Subsidiaries, or to the knowledge of the
Company, by any other party, except which has not had and would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
Section 3.18 Insurance.
The Company and its Subsidiaries maintain insurance policies
that are customary for companies of similar size in the
industries in which the Company and its Subsidiaries
participate. With respect to each such insurance policy, except
as has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect,
(i) the policy is in full force and
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effect and all premiums due thereon have been paid,
(ii) neither the Company nor any of its Subsidiaries is in
breach or default, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action
which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination or modification of, any
such policy, and (iii) to the knowledge of the Company, no
insurer on any such policy has been declared insolvent or placed
in receivership, conservatorship or liquidation, and no notice
of cancellation or termination has been received with respect to
any policy.
Section 3.19 Opinion.
Prior to the execution of this Agreement, the Company Financial
Advisor has delivered to the Special Committee and the Board of
Directors of the Company its written opinion (the
Company Fairness Opinion) to the effect that,
as of the date thereof and based upon and subject to the matters
set forth therein, the Merger Consideration is fair to the
stockholders of the Company from a financial point of view. A
true, correct and complete copy of Company Fairness Opinion has
been delivered to Parent for informational purposes only. The
Company has obtained the authorization of the Company Financial
Advisor to include a copy of the Company Fairness Opinion in the
Proxy Statement and Other Filings. As of the date of this
Agreement, the Company Fairness Opinion has not been withdrawn,
revoked, waived, amended, modified or supplemented in any
respect.
Section 3.20 Required
Vote of Company Stockholders. The only vote of the
holders of outstanding securities of the Company required by the
Certificate of Incorporation, Bylaws, by Law or otherwise to
complete the Merger is the affirmative vote of the holders of a
majority of the outstanding Shares. The vote required by the
previous sentence is referred to together as the
Requisite Stockholder Vote.
Section 3.21 State
Takeover Statutes. Assuming there has been no breach by
any of the Supporting Stockholders of their obligations under
Section 6(a) of the Stock Purchase Agreement and assuming
neither Parent nor Merger Sub during the past three years has
been an interested stockholder of the Company as
defined in Section 203 of the Corporation Law, the Board of
Directors of the Company has taken all actions necessary so that
the restrictions on business combinations contained in
Section 203 of the Corporation Law and as a result of the
applicable provisions of the Stock Purchase Agreement shall be
inapplicable to the execution, delivery or performance of this
Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement. No other Takeover
Law is applicable to the execution, delivery or performance of
this Agreement, the consummation of the Merger, or the other
transactions contemplated by this Agreement.
Section 3.22 Rights
Agreements. As of the date of this Agreement, neither
the Company nor any of its Subsidiaries is a party to, or has
otherwise adopted, any stockholder rights agreements,
stockholder rights plans, poison pills or other
similar arrangements. The Company shall not, for so long as this
Agreement remains in effect, (i) become a party to or adopt
any such arrangements or (ii) alter or suspend its
announced policy requiring the adoption of such arrangements to
be submitted to a vote of the Companys stockholders.
Section 3.23 Customers
and Suppliers. Section 3.23 of the
Disclosure Letter sets forth a true, complete and correct list
of the Companys 10 largest customers (Significant
Customers) and 10 largest suppliers
(Significant Suppliers) by volume of sales
(by dollar volume) and purchases (by dollar volume),
respectively, for each of 2005 and the first ten months of 2006.
Since December 31, 2005, none of the Company or the
Significant Subsidiaries has received any written indication
from any Significant Customer or Significant Supplier to the
effect that such customer or supplier will stop buying or
supplying materials, products or services from or to the Company
or the Significant Subsidiaries, which would reasonably be
expected to have a Material Adverse Effect.
Section 3.24 Affiliate
Transactions. Except for this Agreement and the Merger,
there are no transactions, or series of related transactions,
agreements, arrangements or understandings, nor are there any
currently proposed transactions, or series of related
transactions, between the Company or any of its Subsidiaries, on
the one hand, and the Companys Affiliates (other than any
Subsidiary of the Company), on the other hand, that would be
required to be disclosed under Item 404 of
Regulation S-K
promulgated under the Securities Act that has not been properly
disclosed.
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Section 3.25 Product
Warranties; Product Liability Claims. As of the date of
this Agreement, no product warranty, product liability, product
recall or similar claims have been made against or with respect
to the Companys business since December 31, 2005
except for claims that are not material to the business of the
Company and its Subsidiaries taken as a whole. No Person
(including, but not limited to, Governmental Entities of any
kind) has asserted in writing any material claim against the
Company or any Significant Subsidiary under any Law relating to
unfair competition, false advertising or other similar claims
arising out of product warranties, guarantees, specifications,
manuals or brochures or other advertising materials used by or
in the conduct of the Companys business.
Section 3.26 Foreign
Corrupt Practices Act. To the knowledge of the Company,
neither the Company nor any of its Subsidiaries, nor any their
Affiliates or any other Persons acting on their behalf has, in
connection with the operation of their respective businesses,
(i) used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any
unlawful expenditures relating to political activity to
government officials, candidates or members of political parties
or organizations, or established or maintained any unlawful or
unrecorded funds in violation of Section 104 of the Foreign
Corrupt Practices Act of 1977, as amended, or any other similar
applicable foreign, Federal or state law, (ii) paid,
accepted or received any unlawful contributions, payments,
expenditures or gifts, or (iii) violated or failed to
comply in any material respect with any export restrictions,
anti-boycott regulations, embargo regulations or other
applicable domestic or foreign laws and regulations.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in the disclosure letter delivered by Parent
to the Company immediately prior to the execution of this
Agreement (the Parent Disclosure Letter),
Parent and Merger Sub jointly and severally represent and
warrant to the Company as follows:
Section 4.1 Organization.
Each of Parent and Merger Sub is a duly organized and validly
existing corporation in good standing under the Laws of the
jurisdiction of its organization. As of the date hereof, all of
the issued and outstanding capital stock of Merger Sub is owned
directly or indirectly by Parent. Each of Parent and Merger Sub
has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as
currently conducted. Each of Parent and Merger Sub is duly
qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions in which
the character of the properties owned by it or the nature of the
business transacted by it makes such qualification necessary,
except as has not had and would not reasonably be expected to
have, individually or in the aggregate, a Parent Material
Adverse Effect or otherwise prevent or materially delay
consummation of the Merger or receipt of the Debt Financing.
Section 4.2 Authority
for this Agreement. Each of Parent and Merger Sub has
all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Parent and Merger Sub and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate proceedings on the part of
Parent and Merger Sub (other than the adoption of this Agreement
by Parent in its capacity as the sole stockholder of Merger
Sub). This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming due
authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of
Parent and Merger Sub enforceable against each of Parent and
Merger Sub in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar Laws of general applicability relating to or affecting
creditors rights and to general equity principles.
Section 4.3 Proxy
Statement; Other Filings. None of the information to be
supplied by Parent, Merger Sub or any Affiliate of Parent or
Merger Sub specifically for inclusion in the Proxy Statement
will, at the date of filing with the SEC, at the time the Proxy
Statement is mailed and at the time of the Special
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Meeting, and none of the information supplied or to be supplied
by Parent, Merger Sub or any Affiliate of Parent or Merger Sub
specifically for inclusion in Other Filings, will, at the date
of filing with the SEC, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, neither
Parent, Merger Sub nor any Affiliate of Parent or Merger Sub
makes any representation or warranty with respect to any
information supplied by the Company that is contained in any of
the foregoing documents.
Section 4.4 Consents
and Approvals; No Violation. (a) Neither the
execution and delivery of this Agreement by Parent or Merger Sub
nor the consummation of the transactions contemplated hereby
will (i) violate or conflict with or result in any breach
of any provision of the respective certificates of incorporation
or bylaws of Parent or Merger Sub, (ii) assuming all
consents, approvals and authorizations contemplated by
Section 4.4(b)(i)(iv) below have been obtained
and all filings described in such clauses have been made,
conflict with or violate any Law, (iii) violate or conflict
with, or result in a breach of any provision of, or require any
consent, waiver or approval or result in a default or give rise
to any right of termination, cancellation, modification or
acceleration (or an event that, with the giving of notice, the
passage of time or otherwise, would constitute a default or give
rise to any such right) under any of the terms, conditions or
provisions of any note, bond, mortgage, lease, license,
agreement, contract, indenture or other instrument or obligation
to which Parent or Merger Sub is a party or by which Parent or
Merger Sub or any of its or their respective properties assets
may be bound, or (iv) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent or
Merger Sub or by which any of its or any of their respective
assets are bound, except in the case of clauses (ii)
through (iv), which would not prevent or materially delay the
consummation of the transactions contemplated hereby.
(b) The execution, delivery and performance of this
Agreement by each of Parent and Merger Sub and the consummation
of the transactions contemplated hereby by each of Parent and
Merger Sub do not and will not require any consent, approval,
authorization or permit of, or filing with or notification to,
any Governmental Entity, except (i) the pre-merger
notification requirements under the HSR Act and Foreign
Antitrust Laws, (ii) the applicable requirements of the
Exchange Act, (iii) the filing of the Certificate of Merger
with the Delaware Secretary and (iv) any such consent,
approval, authorization, permit, filing, or notification the
failure of which to make or obtain would not prevent or
materially delay the consummation of the transactions
contemplated hereby. As of the date of this Agreement, other
than as set forth on Section 4.4(b) of the Parent
Disclosure Letter, neither Parent nor Merger Sub is aware of any
fact, event or circumstance specifically relating to Parent or
Merger Sub or their Affiliates that would reasonably be expected
to prevent or materially delay the receipt of any consent,
approval, authorization or permit of any Governmental Entity
required pursuant to Article VI to consummate the
transactions contemplated by this Agreement.
Section 4.5 Debt
Financing. Parent has delivered to the Company true,
correct and complete copies of executed commitment letter(s) (as
the same may be amended, the Debt Financing
Commitments), as set forth in Section 4.5
of the Parent Disclosure Letter, pursuant to which the lender
parties thereto have agreed, subject to the terms and conditions
thereof, to provide or cause to be provided the debt amounts set
forth therein (the Debt Financing). As of the
date of this Agreement, except as permitted by this Agreement,
none of the Debt Financing Commitments has been amended or
modified, and the respective commitments contained in the Debt
Financing Commitments have not been withdrawn or rescinded. As
of the date of this Agreement, the Debt Financing Commitments
are in full force and effect. There are no conditions precedent
to the funding of the full amount of the Debt Financing, other
than as set forth in the Debt Financing Commitments. The
aggregate proceeds contemplated by the Debt Financing
Commitments, if obtained, together with the available cash of
the Company, Parent and Merger Sub on the Closing Date, will be
sufficient for Parent and Merger Sub to consummate the Merger
upon the terms contemplated by this Agreement, and to pay all
related fees and expenses associated therewith, including
payment of all amounts under Article II of this
Agreement. Neither Parent nor Merger Sub has any reason to
believe that it will be unable to satisfy on a timely basis any
term or condition to be satisfied by it contained in the Debt
Financing Commitments. Parent has fully paid any and all
commitment fees that have been incurred and are due to be paid
in connection with the Debt Financing Commitments, and Parent
will pay when due all other
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commitment fees arising under the Debt Financing Commitments as
and when they become payable. As of the date of this Agreement,
Parent and Merger Sub have no contracts, arrangements or
understandings with any Person concerning the contributions to
be made to Parent or Merger Sub in connection with the
transactions contemplated by this Agreement other than as set
forth in the Debt Financing Commitments, nor any contracts or
non-binding arrangements or understandings with any Person
concerning the ownership and operation of Parent, Merger Sub or
the Surviving Corporation.
Section 4.6 Guarantee.
Concurrently with the execution of this Agreement, Guarantor has
delivered to the Company the Guarantee, dated as of the date of
this Agreement, in favor of the Company, in the form set forth
in Section 4.6 of the Parent Disclosure Letter.
Section 4.7 Litigation.
There is no claim, action, suit, proceeding or governmental
investigation pending or, to the knowledge of Parent, threatened
against Parent or Merger Sub, and neither Parent nor Merger Sub
is subject to any outstanding order, writ, injunction or decree,
in each case, which has had or would reasonably be expected to
have a Parent Material Adverse Effect.
Section 4.8 Ownership
of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement.
(b) All of the outstanding capital stock of Merger Sub is
owned directly by Parent, subject to the final proviso contained
in Section 8.2. As of the date of this Agreement,
there are no options, warrants or other rights (including
registration rights), agreements, arrangements or commitments to
which Merger Sub is a party of any character relating to the
issued or unissued capital stock of, or other equity interests
in, Merger Sub or obligating Merger Sub to grant, issue or sell
any shares of the capital stock of, or other equity interests
in, Merger Sub, by sale, lease, license or otherwise;
provided, that Parent or Merger Sub or Affiliates thereof
may purchase Shares from the Supporting Stockholders. There are
no obligations, contingent or otherwise, of Merger Sub to
repurchase, redeem or otherwise acquire any shares of the
capital stock of Merger Sub.
(c) Except for obligations or liabilities incurred in
connection with its incorporation or organization and the
transactions contemplated by this Agreement, including without
limitation the Debt Financing Commitments, Merger Sub has not
and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or liabilities or
engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with
any Person.
Section 4.9 Vote
Required. No vote of the holders of any class or series
of capital stock or other equity interests of Parent is
necessary to adopt this Agreement, or to consummate the
transactions contemplated hereby. Parent, in its capacity as the
sole stockholder of Merger Sub, shall adopt this Agreement
within twenty-four (24) hours after the execution of this
Agreement.
Section 4.10 Brokers.
No agent, broker, investment banker, financial advisor or other
firm or Person is or shall be entitled, as a result of any
action, agreement or commitment of Parent or Merger Sub or any
of their Affiliates, to any brokers, finders,
financial advisors or other similar fee or commission in
connection with any of the transactions contemplated by this
Agreement, except Morgan Joseph & Co. Inc., whose fees
and expenses shall be paid by Parent or its Affiliates.
Section 4.11 Financial
Statements. Each of the consolidated financial
statements contained in the documents required to be filed by
Guarantor under the Securities Act or the Exchange Act, as the
case may be, from and after January 1, 2006, was prepared
in accordance with GAAP applied (except as may be indicated in
the notes thereto and, in the case of unaudited quarterly
financial statements, as permitted by
Form 10-Q under
the Exchange Act) on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto), and
each of such consolidated financial statements, as amended,
supplemented or restated, if applicable, presented fairly, in
all material respects, the consolidated financial position,
results of operations and cash flows of Guarantor and
Guarantors consolidated Subsidiaries as of the respective
dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited
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quarterly financial statements, to normal year-end adjustments
which would not reasonably be expected to have a material
adverse effect on Guarantor).
Section 4.12 Limitation
on Warranties. Each of Parent and Merger Sub
acknowledges and agrees that it has not been induced by and has
not relied upon any representations, warranties or statements,
whether express or implied, made by the Company, any of its
Subsidiaries, or any of their respective directors, officers,
shareholders, employees, affiliates, agents, advisors or
representatives that are not expressly set forth in this
Agreement, whether or not such representations, warranties or
statements were made in writing or orally.
ARTICLE V
COVENANTS
Section 5.1 Conduct
of Business of the Company. Except as expressly
permitted by this Agreement or as set forth in
Section 5.1 of the Disclosure Letter, as required by
applicable Law or the regulatory requirements of the New York
Stock Exchange or unless Parent shall otherwise consent in
writing, during the period from the date of this Agreement to
the Effective Time, the Company will conduct, and will cause
each of its Subsidiaries to conduct, its operations in all
material respects according to its ordinary and usual course of
business, consistent with past practice, and the Company will
use, and will cause each of its Subsidiaries to use, its
reasonable best efforts to preserve intact in all material
respects its business organization, to keep available the
services of its current officers and key employees and to
preserve the goodwill of and maintain satisfactory relationships
with its customers and those other Persons having material
business relationships with the Company or any of its
Subsidiaries. Without limiting the generality of the foregoing
and except as otherwise expressly permitted in this Agreement or
as set forth in Section 5.1 of the Disclosure Letter
or as required by applicable Law or the regulatory requirements
of the New York Stock Exchange, during the period specified in
the preceding sentence, without the prior written consent of
Parent, the Company will not and will not permit any of its
Subsidiaries to:
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(a) issue, sell, grant options or rights to purchase,
pledge, or authorize or propose the issuance, sale, grant of
options or rights to purchase or pledge, any Company Securities
or Subsidiary Securities, other than (i) to the Company or
any wholly-owned Subsidiary of the Company, (ii) the
issuance of Shares pursuant to the exercise of Options or SARs
or settlement of RSUs or Performance Shares or Deferred Unit
Accounts, in each case, that are outstanding as of the date of
this Agreement and in accordance with the existing terms of such
awards, (iii) the issuance of equity incentive compensation
awards under the LTSIP as set forth in Section 5.1
of the Disclosure Letter and (iv) as required under the
Companys existing credit agreements and indentures; |
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(b) amend or otherwise change the Companys
certificate of incorporation or by-laws or other comparable
governing documents of the Significant Subsidiaries; |
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(c) acquire or redeem, directly or indirectly, or amend
(i) any Company Securities other than in connection with
the exercise of outstanding equity awards or (ii) any
Subsidiaries Securities other than in the ordinary course of
business; |
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(d) split, combine, redenominate or reclassify its capital
stock or declare, set aside, make or pay any dividend or
distribution (whether in cash, stock, property or otherwise) on
any shares of its capital stock, options, warrants, convertible
securities or other rights of any kind to acquire or receive
capital stock of the Company (except for any dividend or
distribution by a Subsidiary to the Company or any wholly-owned
Subsidiary of the Company or to any other Person in proportion
to its ownership interest in such Subsidiary); |
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(e) (i) engage in or offer to make any acquisition, by
means of a merger, consolidation or otherwise, of any business
or division thereof or any sale, lease, encumbrance or other
disposition of assets or securities, in any case outside the
ordinary course of business and involving a transaction value in
excess of $10,000,000 (or $30,000,000 in the aggregate), or
(ii) except in the ordinary course of business and except
in connection with actions expressly permitted pursuant to this
Section 5.1, enter into, make any |
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proposal for, renew, extend or amend or modify in any material
respect, terminate, cancel, waive, release or assign any right
or claim under, a contract or agreement that would be a Material
Contract (if it existed as of the date of this Agreement) or
amend or terminate any Material Contract or grant any release or
relinquishment of any material rights under any Material
Contract; |
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(f) except for borrowings under the Companys existing
credit, securitization and factoring facilities in the ordinary
course of business, incur, create, assume or otherwise become
liable for, or prepay, any indebtedness for borrowed money
(including the issuance of any debt security) having an
aggregate principal amount at any time outstanding in excess of
$50,000,000; |
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(g) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for
the obligations of, or make any loans, advances or capital
contributions to; any other Person (other than the Company or
any wholly-owned Subsidiary of the Company), in any case outside
the ordinary course of business in an aggregate amount in excess
of $10,000,000; |
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(h) other than in the ordinary course of business, enter
into or materially increase or decrease the outstanding balances
of (i) any intercompany loan or (ii) intercompany debt
arrangements, or, except for any of the foregoing actions in
connection with the Companys securitization facilities; |
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(i) mortgage, pledge or otherwise similarly encumber any of
its material assets (tangible or intangible), or create, assume
or suffer to exist any Liens thereupon, other than Permitted
Liens; |
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(j) incur capital expenditures that would result in the
Company materially exceeding or making it reasonably likely it
will materially exceed the 2007 capital expenditure forecast
publicly disclosed by the Company prior to the date of this
Agreement; |
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(k) change in any material respect any of the accounting,
reserving, underwriting, claims or actuarial methods, principles
or practices used by it, or any of the working capital policies
applicable to the Company and its Subsidiaries, except as
required by Law, GAAP or applicable statutory accounting
principles; |
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(l) other than in the ordinary course of business, after
consultation with Parent, make or change any material Tax
election, settle or compromise any material Tax liability, agree
to an extension of the statute of limitations with respect to
the assessment or determination of material Taxes, file any
amended Tax Return with respect to any material Tax, enter into
any closing agreement with respect to any material Tax or
surrender any right to claim a material Tax refund or enter into
any transaction that could give rise to a disclosure obligation
as a reportable transaction under Section 6011
of the Code and the regulations thereunder; |
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(m) agree to grant or grant any stock-related, cash-based,
performance or similar awards or bonuses or any other award that
may be settled in Shares, Preferred Shares, or other Company
Securities or in Subsidiary Securities; |
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(n) enter into, forgive, renew, or amend in any material
respect any loans to officers or directors or any of their
respective Affiliates or Associates; |
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(o) except as may be required by Law or any collective
bargaining agreement, (i) enter into any new, or amend,
terminate or renew any existing material Plan; (ii) grant
any material increases in the compensation, perquisites or
benefits or pay any bonuses to any executive officers or
directors (other than as necessary to implement the pension
savings plan for salaried employees as previously communicated
to such employees); (iii) accelerate the vesting or payment
of any compensation payable or the benefits provided or to
become payable or provided to any of its current or former
directors, officers, employees, independent contractors or
service providers (other than any such acceleration required by
the terms of the Plans applicable to such individuals as in
effect on the date of this Agreement), or otherwise pay any
amounts not due such individual; or (iv) take any action
with respect to salary, compensation, benefits or other terms
and conditions of employment that would reasonably be expected
to result in the holder of a change in control or similar
agreement identified in Section 5.1 of the
Disclosure Letter having |
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good reason to terminate employment and collect
severance payments and benefits pursuant to such agreement; |
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(p) make any deposits or contributions of cash or other
property to or take any other action to fund or in any other way
secure the payment of compensation or benefits under the Plans
or agreement subject to the Plans, other than in the ordinary
course consistent with past practice; |
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(q) except as required by Law or in the ordinary course of
business, enter into, materially amend or extend any collective
bargaining or other labor agreement; |
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(r) renew or enter into any non-compete, exclusivity,
non-solicitation or similar agreement that would restrict or
limit, in any material respect, the operations of the Company
and its Subsidiaries or the Surviving Corporation after the
Effective Time; |
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(s) compromise, settle or agree to settle any suit, action,
claim, proceeding or investigation (including any suit, action,
claim, proceeding or investigation relating to this Agreement or
the transactions contemplated hereby), or consent to the same,
other than compromises, settlements or agreements in the
ordinary course of business following reasonable consultation
with and taking into account the views of Parent that involve
only the payment of monetary damages not in excess of $5,000,000
individually or $15,000,000 in the aggregate or consistent with
the reserves of $18,400,000 reflected in the Companys
balance sheet at December 31, 2006, in any case without the
imposition of material equitable relief on, or the admission of
wrongdoing by, the Company or any of its Subsidiaries; |
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(t) enter into any agreement, understanding or arrangement
with respect to the voting or registration of the Company
Securities or the Subsidiary Securities; |
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(u) fail to use reasonable best efforts to keep in force
its current material insurance policies or replacement or
revised provisions providing reasonable insurance coverage with
respect to the assets, operations and activities of the Company
and its Subsidiaries; |
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(v) merge or consolidate the Company or any of its
Subsidiaries with any Person, other than the Company or any of
its Subsidiaries, and other than mergers or consolidations of
Subsidiaries in acquisitions that are otherwise permitted by
Section 5.1(e); |
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(w) adopt a plan of complete or partial liquidation or
resolutions providing for a complete or partial liquidation,
dissolution, restructuring, recapitalization or other
reorganization of the Company or any of its Significant
Subsidiaries; |
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(x) fail to comply with the Companys related party
transaction policy, a copy of which is attached in
Section 5.1(x) of the Disclosure Letter; |
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(y) amend, modify or waive in any material respect any of
the provisions of the transaction documents, or enter into any
new or additional agreements related thereto, in connection with
the sale of the Companys North American interiors business
(without the consent of Parent, which shall not be unreasonably
withheld); provided, that the foregoing shall not prevent
the Company from taking such actions as do not materially and
adversely affect the economics of such transactions; |
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(z) other than in the ordinary course of business (and not
for speculative purposes), enter into any contract that involves
any exchange traded,
over-the-counter or
other swap, cap, floor, collar, futures contract, forward
contract, option or any other derivative financial instrument or
contract, based on any commodity, security, instrument, asset,
rate or index of any kind or nature whatsoever, whether tangible
or intangible, including commodities, emissions allowances,
renewable energy credits, currencies, interest rates, foreign
currency and indices; or |
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(aa) authorize, commit or agree to take any of the
foregoing actions. |
Section 5.2 Solicitation.
(a) Notwithstanding any other provision of this Agreement
to the contrary, during the period beginning on the date of this
Agreement and continuing until the Solicitation Period End-Date,
the Company and its Representatives shall have the right (acting
under the direction of the Board of
A-35
Directors of the Company or, if then in existence, the Special
Committee) to directly or indirectly: (i) initiate, solicit
and encourage Acquisition Proposals, including by way of
providing access to non-public information pursuant to one or
more Acceptable Confidentiality Agreements; provided,
that the Company shall promptly provide or make available to
Parent any non-public information concerning the Company or its
Subsidiaries that is provided or made available to any Person
given such access which was not previously provided or made
available to Parent; and (ii) participate in discussions or
negotiations with respect to Acquisition Proposals or otherwise
cooperate with or assist or participate in, or facilitate any
such discussions or negotiations.
(b) Subject to Section 5.2(c), from the
Solicitation Period End-Date until the Effective Time or, if
earlier, the termination of this Agreement in accordance with
Article VII, the Company shall not, and shall cause
its Subsidiaries and take reasonable best efforts to cause its
Representatives not to, directly or indirectly:
(i) initiate, solicit or knowingly encourage (including by
way of providing information, it being understood that providing
non-public information in the ordinary course of business will
not, in and of itself, constitute encouragement hereunder) the
submission of any inquiries, proposals or offers or any other
efforts or attempts that constitute or may reasonably be
expected to lead to, any Acquisition Proposal or engage in any
discussions or negotiations with respect thereto (other than to
state only that they are not permitted to have discussions), or
otherwise cooperate with or assist or participate in, or
knowingly facilitate any such inquiries, proposals, offers,
discussions or negotiations or (ii) approve or recommend,
or publicly propose to approve or recommend, an Acquisition
Proposal or enter into any merger agreement, letter of intent,
agreement in principle, share purchase agreement, asset purchase
agreement or share exchange agreement, option agreement or other
similar agreement relating to an Acquisition Proposal, or enter
into any agreement or agreement in principle requiring the
Company to abandon, terminate or fail to consummate the
transactions contemplated hereby or breach its obligations
hereunder or resolve, propose or agree to do any of the
foregoing. Notwithstanding the foregoing, the Company may
continue to take any of the actions described in clause (i)
above from and after the Solicitation Period End-Date with
respect to any party that has made an Acquisition Proposal prior
to the Solicitation Period End-Date or with whom the Company is
having ongoing discussions or negotiations as of the
Solicitation Period End-Date regarding a possible Acquisition
Proposal (each such party, an Excluded
Party). Notwithstanding anything contained in this
Section 5.2 to the contrary, any Excluded Party
shall cease to be an Excluded Party for all purposes under this
Agreement immediately at such time as the Acquisition Proposal
made by such party is withdrawn, is terminated or expires or
such discussions or negotiations have been terminated. The
Company shall promptly notify Parent when an Excluded Party
ceases to be an Excluded Party. At the Solicitation Period
End-Date, other than with respect to Excluded Parties, the
Company shall immediately cease and cause to be terminated any
solicitation, encouragement, discussion or negotiation with any
Person conducted theretofore by the Company, its Subsidiaries or
any of its Representatives with respect to any Acquisition
Proposal and use reasonable best efforts to cause to be returned
or destroyed in accordance with the terms of the applicable
confidentiality agreement any confidential information provided
to such Person on behalf of the Company or any of its
Subsidiaries.
(c) Notwithstanding anything to the contrary contained in
Section 5.2(b) and in addition to the rights of the
Company pursuant to Section 5.2(a), if at any time
following the date of this Agreement and prior to obtaining the
Requisite Stockholder Vote, (i) the Company has received a
written Acquisition Proposal from a third party that the Board
of Directors of the Company (acting upon the prior
recommendation of the Special Committee, if then in existence)
believes in good faith to be bona fide, (ii) the
Company has not intentionally or materially breached this
Section 5.2, (iii) the Board of Directors of
the Company (acting upon the prior recommendation of the Special
Committee, if then in existence) determines in good faith, after
consultation with its financial advisors and outside counsel,
that such Acquisition Proposal constitutes or would reasonably
be expected to result in a Superior Proposal and (iv) after
consultation with its outside counsel, the Board of Directors of
the Company (acting upon the prior recommendation of the Special
Committee, if then in existence) determines in good faith that
failure to take such action would reasonably be expected to be a
breach of its fiduciary duties to the stockholders of the
Company under applicable law, then the Company may
(A) furnish information with respect to the Company and its
Subsidiaries to the Person making such Acquisition Proposal and
(B) participate in discussions or negotiations with the
Person making such Acquisition Proposal regarding such
Acquisition Proposal; provided, that the Company
(x) will not, and
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will not allow its Subsidiaries to, and will use reasonable best
efforts to cause its Representatives not to, disclose any
non-public information to such Person without first entering
into an Acceptable Confidentiality Agreement with such Person
and (y) will promptly provide or make available to Parent
any non-public information concerning the Company or its
Subsidiaries provided or made available to such other Person
which was not previously provided or made available to Parent.
Notwithstanding anything to the contrary contained in
Section 5.2(b) or this Section 5.2(c),
prior to obtaining the Requisite Stockholder Vote, the Company
shall in any event be permitted to take the actions described in
clauses (A) and (B) above with respect to any
Excluded Party.
(d) Within 24 hours following the date that is thirty
(30) days after the date of this Agreement, the Company
shall (i) notify Parent in writing of the identity of each
Person (A) who has made an Acquisition Proposal prior to
such date, (B) with whom the Company is having ongoing
discussions or negotiations or (C) to whom the Company has
provided non-public information and (ii) provide Parent a
copy of each Acquisition Proposal received from any such Person,
including the pricing and other material terms and conditions
(or, where no such copy is available, a description of such
Acquisition Proposal). From and after the date that is thirty
(30) days after the date of this Agreement, the Company
shall promptly (within 24 hours) notify Parent in the event
that the Company, its Subsidiaries or Representatives
(I) receives any Acquisition Proposal, (II) receives
any request for information relating to the Company or any of
its Subsidiaries other than requests for information in the
ordinary course of business and unrelated to an Acquisition
Proposal or requests from an Excluded Party, (III) receives
any inquiry or request for discussions or negotiations regarding
any Acquisition Proposal or (IV) enters into an Acceptable
Confidentiality Agreement. The Company shall notify Parent
promptly (within 24 hours) of the identity of any Person
making any request or proposal referenced in (I), (II),
(III) or (IV) and provide a copy of such Acquisition
Proposal, inquiry or request, including the pricing and other
material terms and conditions (or, where no such copy is
available, a written description of such Acquisition Proposal,
inquiry or request), including any material modifications
thereto. From and after the date that is thirty (30) days
after the date of this Agreement, the Company shall keep Parent
reasonably informed (orally and in writing) on a current basis
(and in any event no later than 24 hours after the
occurrence of any changes or developments of the status of any
Acquisition Proposal, inquiry or request (including pricing and
other material terms and conditions thereof and of any material
modification thereto), and any material developments (including
through discussions and negotiations), including furnishing
copies of any written inquiries, correspondence and draft
documentation). Without limiting the foregoing, from and after
the date that is thirty (30) days after the date of this
Agreement, the Company shall promptly (within 24 hours)
notify Parent orally and in writing if it determines to begin
providing or making available information or to engage in
discussions or negotiations concerning an Acquisition Proposal
pursuant to Section 5.2(c), including but not
limited to, with respect to a Person who would be an Excluded
Party at the Solicitation Period End-Date. The Company shall
not, and shall cause its Subsidiaries not to, enter into any
confidentiality agreement with any Person subsequent to the date
of this Agreement except with respect to an Acceptable
Confidentiality Agreement as permitted or required pursuant to
this Section 5.2, and neither the Company nor any of
its Subsidiaries shall be a party to any agreement that
prohibits the Company from providing or making available to
Parent or Merger Sub any information provided or made available
to any other Person pursuant to an Acceptable Confidentiality
Agreement. Except to facilitate the making of a Superior
Proposal, the Company shall not, and shall cause each of its
Subsidiaries not to, terminate, waive, amend or modify any
provision of, or grant permission or request under, any
standstill or confidentiality agreement to which it or any of
its Subsidiaries is a party, and the Company shall, and shall
cause its Subsidiaries to, enforce the provisions of any such
agreement; provided, however, that the Company may
permit a proposal to be made under a standstill agreement if it
determines in good faith, after consultation with outside
counsel, that such actions are necessary to comply with the
fiduciary duties of the Board of Directors to the stockholders
of the Company under applicable Law.
(e) Notwithstanding anything in
Section 5.2(b)(ii) to the contrary, the Board of
Directors of the Company (acting upon the prior recommendation
of the Special Committee, if then in existence) may at any time
prior to obtaining the Requisite Stockholder Vote, if it
determines in good faith, after consultation with outside
counsel, that the failure to take such action would reasonably
be expected to be a breach of its fiduciary duties to the
stockholders of the Company under applicable Law:
(x) withdraw, modify or qualify, or
A-37
propose publicly to withdraw, modify or qualify, in a manner
adverse to Parent or Merger Sub, the Company Board
Recommendation; approve, recommend or endorse, or propose
publicly to approve, recommend or endorse, any Acquisition
Proposal; or make other statements that are reasonably
calculated or expected to have the same effect (a
Change of Board Recommendation); and/or
(y) if the Company receives an Acquisition Proposal which
the Board of Directors of the Company (acting upon the prior
recommendation of the Special Committee, if then in existence)
concludes in good faith, after consultation with outside counsel
and its financial advisors, constitutes a Superior Proposal,
after considering all of the adjustments to the terms of this
Agreement which may be offered by Parent including pursuant to
clause (ii) below, terminate this Agreement and enter into
a definitive agreement with respect to such Superior Proposal
(provided, that and in such event, the Company
substantially concurrently enters into such definitive
agreement); provided, however, that the Company
shall not terminate this Agreement pursuant to the foregoing
clause (y), and any purported termination pursuant to the
foregoing clause (y) shall be void and of no force or
effect, unless in advance of or concurrently with such
termination the Company pays the Superior Fee or the Company
Breakup Fee, as the case may be, pursuant to
Section 7.4(b), and otherwise complies with the
provisions of Section 7.1(i) and
Section 7.4(b); and provided further
that the Board of Directors of the Company (acting upon the
prior recommendation of the Special Committee, if then in
existence) may not withdraw, modify or amend the Company Board
Recommendation in a manner adverse to Parent pursuant to the
foregoing clause (x) (in the case where the Board of
Directors of the Company (acting upon the prior recommendation
of the Special Committee, if then in existence) is considering
another Acquisition Proposal) or terminate this Agreement
pursuant to the foregoing clause (y) unless
(A) the Company shall not have intentionally or materially
breached this Section 5.2 and (B):
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(i) the Company shall have provided prior written notice to
Parent at least ten days in advance (the Notice
Period) of its intention to take such action with
respect to such Superior Proposal, which notice shall specify
the material terms and conditions of any such Superior Proposal
(including the identity of the party making such Superior
Proposal), and shall have contemporaneously provided a copy of
the relevant proposed transaction agreements with the party
making such Superior Proposal and other material documents,
including the definitive agreement with respect to such Superior
Proposal (the Alternative Acquisition
Agreement); and |
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(ii) prior to effecting such Change of Board Recommendation
or terminating this Agreement to enter into a definitive
agreement with respect to such Superior Proposal, the Company
shall, and shall cause its financial and legal advisors to,
during the Notice Period, negotiate with Parent in good faith
(to the extent Parent desires to negotiate) to make such
adjustments in the terms and conditions of this Agreement so
that such Acquisition Proposal ceases to constitute a Superior
Proposal. In the event of any material revisions to a Superior
Proposal (including, without limitation, any revision in price),
the Company shall be required to deliver a new written notice to
Parent and to again comply with the requirements of
Section 5.2(e)(i) with respect to such new written
notice except that the Notice Period with respect thereto shall
be ten days for the first such material revision to a Superior
Proposal and three days for each subsequent material revision to
a Superior Proposal thereafter; provided, however,
the Company shall be obligated to negotiate with Parent pursuant
to this Section 5.2(e)(ii) on only one occasion if,
but only if, the initial Superior Proposal received by the
Company is $37 per share or greater to the Companys
stockholders; for avoidance of doubt, if the initial Superior
Proposal received by the Company is greater than $36 per
share to the Companys stockholders but less than
$37 per share to the Companys stockholders and
thereafter any Person makes a Superior Proposal for a price per
share more than the initial Superior Proposal, then the Company
shall be required to deliver a new written notice to Parent and
comply with the other requirements of
Section 5.2(e)(i) with respect to such new written
notice notwithstanding that the price contained therein is
greater than $37 per share to the Companys
stockholders. |
(f) The Company agrees that any violations of the
restrictions in this Section 5.2 by any
Representative of the Company or any of its Subsidiaries shall
be deemed to be a breach of this Section 5.2 by the
Company.
(g) Although nothing contained in this
Section 5.2 shall prohibit the Board of Directors of
the Company from (i) taking and disclosing to the
stockholders of the Company a position contemplated by
Rule 14e-2(a)
A-38
and Rule 14d-9
promulgated under the Exchange Act (other than any disclosure of
confidential information to third parties prohibited by
Section 5.2(d), if such statement constitutes a
Change of Board Recommendation, then it shall have the effects
of a Change of Board Recommendation for all purposes under this
Agreement, or (ii) disclosing the fact that the Board of
Directors of the Company (acting upon the prior recommendation
of the Special Committee if it still exists) has received an
Acquisition Proposal and the terms of such proposal, if the
Board of Directors of the Company (acting through the Special
Committee if it still exists) determines, after consultation
with its outside legal counsel, that it is required to make such
disclosure in connection with its fiduciary duties under
applicable Law or to comply with obligations under the federal
securities Laws or New York Stock Exchange or the rules and
regulations of any U.S. securities exchange upon which the
capital stock of the Company is listed.
(h) The Company shall not take any action to exempt any
Person (other than Parent, Merger Sub and their respective
Affiliates) from the restrictions on business
combinations contained in Section 203 of the
Corporation Law (or any similar provisions of any other Law) or
otherwise cause such restrictions not to apply, unless
(i) such actions are taken simultaneously with a
termination of this Agreement pursuant to
Section 7.1(a) or 7.1(i) or (ii) such
Person agrees the exemption of such Person is limited to
permitting such Person to form a group for purposes of making an
Acquisition Proposal without becoming an interested
person for purposes of Section 203 of the Corporation
Law as a result of forming such group and further agrees that
the group and its members continue to remain subject to
Section 203 of the Corporation Law for all other purposes.
(i) For purposes of this Agreement,
(i) Acquisition Proposal means any
inquiry, proposal or offer from any Person or group of Persons
other than Parent, Merger Sub or their respective Affiliates
relating to any direct or indirect acquisition or purchase of a
business that constitutes 30% or more of the net revenues of the
Company and its Subsidiaries, taken as a whole, or 30% or more
of the Company Securities, any tender offer or exchange offer
that if consummated would result in any Person or group of
Persons beneficially owning 30% or more of the Company
Securities, or any merger, reorganization, consolidation, share
exchange, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company or any
of its Subsidiaries whose business constitutes 30% or more of
the net revenues of the Company and its Subsidiaries, taken as a
whole, in each case excluding the disposition of the North
American interiors business of the Company and its Subsidiaries,
and (ii) Superior Proposal means any
bona fide Acquisition Proposal (except that reference to
30% will be deemed to be reference to more than 50%)
that (x) is on terms that the Board of Directors of the
Company (acting upon the prior recommendation of the Special
Committee, if then in existence) has determined in its good
faith judgment (after consultation with its financial advisor
and outside counsel and after taking into account all legal,
financial, regulatory and other aspects of the proposal,
including the financing terms thereof) is more favorable to the
Companys stockholders from a financial point of view than
the transactions contemplated by this Agreement; and
(y) which the Board of Directors of the Company (acting
upon the prior recommendation of the Special Committee, if then
in existence) has determined in good faith (after consultation
with its financial advisor and outside counsel and after taking
into account all legal, financial, regulatory and other aspects
of the proposal) is reasonably capable of being consummated
(taking into account the financeability of such proposal).
(j) Neither Parent, Merger Sub nor any of their Affiliates
shall take any action with the purpose of (i) restricting
competing proposals or (ii) prohibiting (whether under any
new or existing agreement) any lender from providing debt
financing to any Person making or contemplating making an
Acquisition Proposal.
(k) After consultation with outside counsel, the Board of
Directors of the Company, consistent with the exercise of its
fiduciary duties, shall take such actions consistent with its
obligations under this Agreement, as it deems reasonably
required to assure the integrity of the process contemplated by
this Section 5.2.
Section 5.3 Access
to Information. (a) Subject to the restrictions
imposed by applicable Law, from and after the date of this
Agreement, the Company will, and will use reasonable best
efforts to cause the Company Joint Ventures to, (i) give
Parent and Merger Sub and (subject to the confidentiality
agreement reasonably satisfactory to the Company) their
prospective lenders and prospective purchasers of Parent or
Merger Sub equity and their respective Representatives
reasonable access (during regular business hours upon
A-39
reasonable notice) to all employees, plants, offices, warehouses
and other facilities and to all books, forecasts, contracts,
commitments and records (including Tax Returns) of the Company,
its Subsidiaries and the Company Joint Ventures and use their
reasonable best efforts to cause the Companys, its
Subsidiaries and the Company Joint Ventures
respective Representatives to provide access to their work
papers and such other information as Parent or Merger Sub may
reasonably request, (ii) consent to the use of the
Companys financial statements for purposes of filings with
the SEC pursuant to securities Laws and use reasonable best
efforts to cause the Companys accountants to provide
consents, comfort letters and any other customary deliverables
in connection with any securities offerings, (iii) subject
to the limitations described in clause (i), permit Parent
and Merger Sub to make such inspections as they may reasonably
require, (iv) cause its officers and those of its
Subsidiaries and of the Company Joint Ventures to furnish Parent
and Merger Sub with such financial and operating data and other
information with respect to the business, properties and
personnel of the Company, its Subsidiaries and of the Company
Joint Ventures as Parent or Merger Sub may from time to time
request and (v) furnish promptly upon request to Parent and
Merger Sub a copy of each report, schedule and other document
filed or received by the Company, any of its Subsidiaries or the
Company Joint Ventures during such period pursuant to the
requirements of the federal or state securities Laws;
provided, however, that any such access shall be
conducted as not to unreasonably interfere with the operation of
the business conducted by the Company, any of its Subsidiaries
or the Company Joint Ventures.
(b) Information obtained by Parent or Merger Sub pursuant
to Section 5.3(a) shall be subject to the provisions
of the Confidentiality Agreement. Parent and Merger Sub are
hereby authorized to release and disclose, and to permit the
release and disclosure of, any information, including non-public
information concerning the Company, including, without
limitation, information concerning its business, operations and
financial condition, in the manner contemplated in the Debt
Financing Commitments.
(c) Nothing in this Section 5.3 shall require
the Company to permit any inspection, or to disclose any
information, that in the reasonable judgment of the Company
would (i) violate any of its respective obligations with
respect to confidentiality; provided, that the Company
shall use its commercially reasonable efforts to obtain the
consent of such third party to such inspection or disclosure, or
(ii) result in a violation of applicable Law or loss of
privilege.
(d) No investigation by and of the parties or their
respective Representatives shall modify, nullify, amend or
otherwise affect the representations, warranties, covenants or
agreements of the other parties set forth herein.
Section 5.4 Stockholder
Approval. Unless this Agreement has been terminated
pursuant to Section 7.1, the Company, acting through
its Board of Directors and in accordance with applicable Law,
shall call a meeting of its stockholders (the Special
Meeting) to be held as soon as reasonably practicable
(and in any event within 45 days) after the SEC clears the
Proxy Statement for the purpose of obtaining the Requisite
Stockholder Vote in connection with this Agreement and the
Merger. Except in the event of a Change of Board Recommendation
specifically permitted by Section 5.2(e),
(a) the Proxy Statement shall include the Company Board
Recommendation, (b) the Board of Directors of the Company
shall use its reasonable best efforts to obtain from its
stockholders the Requisite Stockholder Vote in favor of the
adoption of this Agreement and (c) after the Solicitation
Period End-Date, the Board of Directors shall publicly reaffirm
the Company Board Recommendation within 48 hours after any
such request by Parent (which request shall not be made on more
than three occasions). Unless this Agreement is validly
terminated in accordance with its terms pursuant to
Article VII, the Company shall submit this Agreement
to its stockholders at the Special Meeting even if its Board of
Directors shall have withdrawn, modified or qualified its
recommendation thereof or otherwise effected a Change of Board
Recommendation or proposed or announced any intention to do so.
Section 5.5 Proxy
Statement; Other Filings. As promptly as reasonably
practicable after the date of this Agreement (and in any event
within 35 days assuming Parent timely supplies the
information required from it and timely provides reasonable
cooperation), (a) the Company shall prepare and file with
the SEC, subject to the prior review, comment and approval of
Parent (which approval shall not be unreasonably withheld or
delayed), the Proxy Statement and (b) each of the Company
and Parent shall, or shall cause their respective Affiliates to,
prepare and file with the SEC all Other Filings as required by
the Exchange Act. Each
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of the Company and Parent shall promptly obtain and furnish the
information concerning itself and its Affiliates required to be
included in the Proxy Statement and, to the extent applicable,
the Other Filings. Each of the Company and Parent shall use its
reasonable best efforts to respond as promptly as reasonably
practicable to any comments received from the SEC with respect
to the Proxy Statement or the Other Filings, and the Company
shall cause the Proxy Statement to be mailed to the
Companys stockholders at the earliest reasonably
practicable date after clearing comments received from the SEC.
Each party shall promptly notify the other party upon the
receipt of any comments from the SEC or its staff or any request
from the SEC or its staff for amendments or supplements to the
Proxy Statement or the Other Filings and shall provide the other
party with copies of all correspondence between it, on the one
hand, and the SEC and its staff, on the other hand, relating to
the Proxy Statement or the Other Filings. If at any time prior
to the Special Meeting, any information relating to the Company,
Parent, Merger Sub or any of their respective Affiliates,
directors or officers should be discovered by the Company or
Parent, which should be set forth in an amendment or supplement
to the Proxy Statement or the Other Filings so that the Proxy
Statement or the Other Filings shall not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading, the party that discovers such
information shall promptly notify the other party, and an
appropriate amendment, supplement or other filing incorporated
by reference into the Proxy Statement describing such
information shall be filed with the SEC and, to the extent
required by applicable Law, disseminated to the stockholders of
the Company in each case, as promptly as reasonably practicable.
Notwithstanding anything to the contrary stated above, prior to
filing or mailing the Proxy Statement or filing the Other
Filings (or, in each case, any amendment or supplement thereto)
or responding to any comments of the SEC or its staff with
respect thereto, the party responsible for filing or mailing
such document shall provide the other party an opportunity to
review and comment on such document or response and shall
include in such document or response comments reasonably
proposed by the other party.
Section 5.6 Reasonable
Best Efforts; Consents and Governmental Approvals.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all appropriate action,
to file or cause to be filed, all documents and to do, or cause
to be done, all things necessary, proper or advisable under
applicable Laws to expeditiously consummate and make effective
the transactions contemplated by this Agreement, including
preparing and filing as promptly as practicable all
documentation to effect all necessary filings, consents,
licenses, approvals, authorizations, permits or orders
form Governmental Entities or other Persons.
(b) Without limiting the foregoing in
Section 5.6(a), each of the Company, Parent and
Merger Sub agrees to (i) use its reasonable best efforts to
make any required submissions under the HSR Act and Foreign
Antitrust Laws which the Company or Parent determines should be
made, in each case, with respect to the Merger and the
transactions contemplated hereby as promptly as reasonably
practicable, but in any event, within fifteen (15) Business
Days, in the case of the HSR Act, and, in the case of Foreign
Antitrust Laws, initiate contact with the relevant authorities
(and if possible make relevant submissions) within thirty
(30) Business Days after the date of this Agreement and to
supply as promptly as reasonably practicable any additional
information and documentary material that may be requested
pursuant to the HSR Act or Foreign Antitrust Laws, and each of
the Company, Parent and Merger Sub shall use its reasonable best
efforts to take or cause to be taken all commercially reasonable
actions necessary, proper or advisable consistent with this
Section 5.6 to cause the expiration or termination
of the applicable waiting periods under the HSR Act and Foreign
Antitrust Laws as soon as practicable, and (ii) cooperate
with one another (A) in promptly determining whether any
filings are required to be or should be made or consents,
approvals, permits or authorizations are required to be or
should be obtained under any other federal, state or foreign Law
or whether any consents, approvals or waivers are required to be
or should be obtained from other parties to loan agreements or
other contracts or instruments material to the Companys
business in connection with the consummation of the transactions
contemplated by this Agreement and (B) in promptly making
any such filings, furnishing information required in connection
therewith and seeking to obtain as expeditiously as practicable
any such consents, permits, authorizations, approvals or
waivers. Each of Parent, Merger Sub and the Company shall
promptly inform the other parties hereto of any oral, and
provide copies of any written, communication with a Governmental
Entity regarding any such filings or information. No party
hereto shall
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independently participate in any meeting or discussion with any
Governmental Entity in respect of any such filings,
applications, investigation, or other inquiry without giving the
other parties hereto prior notice of the meeting and, to the
extent permitted by the relevant Governmental Entity, the
opportunity to attend and participate (which, at the request of
any of the parties, shall be limited to outside counsel only).
In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated hereby is
commenced, whether before or after the date hereof, the parties
hereto agree to cooperate and will use their reasonable best
efforts to defend vigorously against it and respond thereto.
(c) Notwithstanding anything to the contrary in this
Agreement, in connection with obtaining any approval or consent
from any Person (other than any Governmental Entity) with
respect to the Merger, (i) without the prior written
consent of Parent (which shall not be unreasonably withhold or
delayed), none of the Company or any of its Subsidiaries shall
pay or commit to pay to such Person whose approval or consent is
being solicited any cash or other consideration, make any
commitment or incur any liability or other material obligation
due to such Person and (ii) except pursuant to the terms of
the Debt Financing Commitments, neither Parent nor Merger Sub
shall be required to pay or commit to pay to such Person whose
approval or consent is being solicited any cash or other
consideration, make any commitment or to incur any liability or
other obligation (provided, however, that Parent
and Merger Sub give the Company the opportunity to make such
payments).
(d) Nothing in this Agreement shall obligate Parent, Merger
Sub or any of their respective Affiliates to agree (i) to
limit in any manner whatsoever or not to exercise any rights of
ownership of any securities (including the Shares), or to
divest, dispose of or hold separate any securities or all or a
portion of their respective businesses, assets or properties or
of the business, assets or properties of the Company or any of
its Subsidiaries or (ii) to limit in any material respect
the ability of such entities (A) to conduct their
respective businesses or own such assets or properties or to
conduct the businesses or own the properties or assets of the
Company and its Subsidiaries or (B) to control their
respective businesses or operations or the businesses or
operations of the Company and its Subsidiaries. Notwithstanding
anything in this Agreement to the contrary, the obligations of
this Section 5.6 shall not apply to each of Parent
and Merger Sub if compliance with this Section 5.6
would result in, or would reasonably be expected to result in, a
Material Adverse Effect.
Section 5.7 Indemnification
and Insurance. (a) Parent and Merger Sub agree that
all rights to indemnification existing in favor of the current
or former directors, officers and employees of the Company or
any of its Subsidiaries (the Indemnified
Persons) as provided in the Certificate of
Incorporation or By-laws, or the articles of organization,
bylaws or similar constituent documents of any of the
Companys Subsidiaries or in any indemnification agreement
or arrangement, as in effect as of the date of this Agreement
with respect to matters occurring prior to the Effective Time
shall survive the Merger and shall continue in full force and
effect for a period of not less than six years after the
Effective Time unless otherwise required by Law. In addition to
and not in limitation of the foregoing, the Surviving
Corporation shall, to the fullest extent permitted under
applicable Law, indemnify and hold harmless (and advance funds
in respect of each of the foregoing) each Indemnified Person
against any costs or expenses (including advancing reasonable
attorneys fees and expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to
each Indemnified Person to the fullest extent permitted by Law),
judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement (with the prior written consent of
Parent) in connection with any actual or threatened claim,
action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative (an
Action), arising out of, relating to or in
connection with any action or omission occurring or alleged to
have occurred whether before the Effective Time (including acts
or omissions in connection with such Persons serving as an
officer, director or other fiduciary in any entity if such
service was at the request or for the benefit of the Company),
except for in any case, any claim, judgments, fines, penalties
and amounts to be paid which relate to any act or omission which
constitutes a material violation of Law and except for other
exceptions to indemnification that are required by Law. In the
event of any such Action, the Surviving Corporation shall
reasonably cooperate with the Indemnified Person in the defense
of any such Action. The Surviving Corporation shall have the
right to assume control of and the defense of, any Action, suit,
proceeding, inquiry or investigation to which this
Section 5.7(a) shall apply; provided,
however, that the Surviving Corporation shall not be
obligated to pay the fees and expenses of more than one counsel
(selected
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by a plurality of applicable Indemnified Persons) for all
Indemnified Persons in any jurisdiction with respect to any
single Action, suit, proceeding, inquiry or investigation,
unless the use of one counsel for such Indemnified Persons would
present such counsel with a conflict of interest that would make
such joint representation inappropriate. The Surviving
Corporation shall pay all reasonable expenses, including
reasonable attorneys fees, that may be incurred by any
Indemnified Person in enforcing the indemnity and other
obligations provided in this Section 5.7(a). The
advancement of any amounts to be paid in respect of legal and
other fees and expenses pursuant to this
Section 5.7(a) shall be subject to an undertaking of
the recipient, to the extent required by the Corporation Law, to
repay such advances if it is ultimately determined that such
person is not entitled to indemnification from the Surviving
Corporation.
(b) The Company shall purchase on or prior to the Effective
Time, and the Surviving Corporation shall maintain with
reputable and financially sound carriers, tail policies to the
current directors and officers liability insurance
and fiduciaries liability insurance policies maintained on the
date of this Agreement by the Company and its Subsidiaries,
which tail policies and fiduciaries liability policies
(i) shall be effective for a period from the Effective Time
through and including the date six years after the Closing Date
with respect to claims arising from facts or events that existed
or occurred prior to or at the Effective Time and
(ii) shall contain coverage that is at least as protective
to the Persons covered by such existing policies (a complete and
accurate copy of which has been made available to Parent) and
shall in any event include nonmanagement directors Side A
(DIC) coverage. The Surviving Corporation shall provide
copies of such policies to the past, current and future
directors and officers of the Company entitled to the benefit
thereof as reasonably requested by such persons from time to
time. Notwithstanding the foregoing, if the coverage described
above cannot be obtained or can only be obtained by paying
aggregate premiums in excess of 300% of the aggregate annual
amount currently paid by the Company for such coverage, the
Surviving Corporation shall only be required to provide as much
coverage as can be obtained by paying aggregate premiums equal
to 300% of the aggregate amount currently paid by the Company
for such coverage. Guarantor may substitute an alternative for
the tail policies that affords, in the aggregate, no less
favorable protection to such officers and directors;
provided, that any such alternative is approved by the
Companys Board of Directors prior to the Effective Time
(which approval may be withheld in its discretion).
(c) This Section 5.7 shall survive the
consummation of the Merger and is intended to benefit, and shall
be enforceable by each Indemnified Person (notwithstanding that
such Persons are not parties to this Agreement) and their
respective heirs and legal representatives. The indemnification
provided for herein shall not be deemed exclusive of any other
rights to which an Indemnified Person is entitled, whether
pursuant to Law, contract or otherwise.
(d) Notwithstanding anything herein to the contrary, if any
claim, action, suit, proceeding or investigation (whether
arising before, at or after the Effective Time) is made against
any Indemnified Person on or prior to the sixth anniversary of
the Effective Time, the provisions of this
Section 5.7 shall continue in effect until the final
disposition of such claim, action, suit, proceeding or
investigation.
(e) In the event that the Surviving Corporation, Parent or
any of their respective successors or assigns
(i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to
any person, then, and in each such case, proper provision shall
be made so that the successors and assigns of the Surviving
Corporation or Parent, as the case may be, shall succeed to the
obligations set forth in this Section 5.7.
(f) Nothing in this Agreement is intended to, shall be
construed to or shall release, waive or impair any rights to
directors and officers insurance claims under any
policy that is or has been in existence with respect to the
Company or any of its Subsidiaries or their respective officers,
directors and employees, it being understood and agreed that the
indemnification provided for in this Section 5.7 is
not prior to or in substitution for any such claims under any
such policies, provided, that for avoidance of doubt,
neither Parent nor the Surviving Corporation shall be required
to make any payments thereunder or in connection therewith.
Section 5.8 Employee
Matters. (a) Prior to the Effective Time, except as
set forth below, the Company will, and will cause its
Subsidiaries to, and from and after the Effective Time, Parent
will, and will
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cause the Surviving Corporation and each of its Subsidiaries to
honor, in accordance with their terms, all Plans. With respect
to each Nonqualified Deferred Compensation Plan, Parent shall or
shall cause the Surviving Corporation and each of its
Subsidiaries to, timely adopt such amendments as are necessary
to comply with Section 409A of the Code.
(b) Parent will cause the Surviving Corporation to give
credit for all service rendered by the individuals employed by
the Company and its Subsidiaries at the Effective Time
(including employees who are not actively at work on account of
illness, disability or leave of absence (the Current
Employees) (or service credited by the Company and its
Subsidiaries) prior to the Effective Time for vesting and
eligibility purposes (but not for accrual purposes, except for
vacation and severance, if applicable) under employee benefit
plans of the Surviving Corporation and its Subsidiaries, to the
same extent as such service was taken into account under the
corresponding Plans of the Company and its Subsidiaries for
those purposes. Current Employees will not be subject to any
pre-existing condition limitation under any health plan of the
Surviving Corporation or its Subsidiaries for any condition for
which they would have been entitled to coverage under the
corresponding Plan of the Company or its Subsidiaries in which
they participated prior to the Effective Time. Parent will cause
the Surviving Corporation and its Subsidiaries to give such
Current Employees credit under such plans for co-payments made
and deductibles satisfied prior to the Effective Time. Nothing
in this Section 5.8 shall limit the right of Parent,
the Surviving Corporation or any of their Subsidiaries to
terminate the employment of any Current Employee at any time.
(c) Until January 1, 2008, Parent shall, and shall
cause the Surviving Corporation to, provide each Current
Employee (other than Current Employees who have entered into or
will enter into an individual employment agreement with the
Company or any of its Subsidiaries) with severance benefits that
are no less favorable, in the aggregate, than those that would
have been provided to such Current Employee immediately prior to
the Effective Time.
(d) No later than three Business Days prior to its
distribution, the Company and its Subsidiaries shall provide
Parent and Merger Sub with a copy of any communication intended
to be made to any of their respective employees relating to the
transactions contemplated hereby, and will provide an
opportunity for Parent and Merger Sub to make reasonable
revisions thereto.
(e) This Section 5.8 shall be binding upon and
inure solely to the benefit of each of the parties to this
Agreement, and nothing in this Section 5.8, express
or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason
of this Section 5.8.
Section 5.9 Takeover
Laws. The Company shall, upon the request of Parent or
Merger Sub, take all reasonable steps to exclude the
applicability of, or to assist at Parents cost and expense
in any challenge to the validity or applicability to the Merger
or any other transaction contemplated by this Agreement of, any
Takeover Laws.
Section 5.10 Notification
of Certain Matters. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company,
of the occurrence or non-occurrence of any event, which is
likely to result in the failure of a condition set forth in
Article VI; provided, however, that
the delivery of any notice pursuant to this
Section 5.10 shall not limit or otherwise affect the
remedies available hereunder to any of the parties receiving
such notice.
Section 5.11 Financing.
(a) Prior to the Closing, the Company shall, and shall
cause its Subsidiaries to, and shall use its reasonable best
efforts to cause its and their respective Representatives to, at
Parents sole expense, provide to Parent and Merger Sub all
cooperation reasonably requested by Parent that is necessary,
proper or advisable in connection with the Debt Financing and
the transactions contemplated by this Agreement, including
(i) participation in a reasonable number of meetings,
presentations, road shows, due diligence sessions and sessions
with rating agencies, (ii) assisting with the preparation
of materials for rating agency presentations, offering
documents, private placement memoranda, bank information
memoranda, prospectuses and similar documents required in
connection with the Debt Financing, including execution and
delivery of customary representation letters reasonably
satisfactory in form and substance to the Company in connection
with bank
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information memoranda; provided, that any private
placement memoranda or prospectuses in relation to high yield
debt securities need not be issued by the Company or any of its
Subsidiaries; provided further, that any such
memoranda or prospectuses shall contain disclosure and financial
statements with respect to the Company or the Surviving
Corporation reflecting the Surviving Corporation and/or its
Subsidiaries as the obligor, (iii) as promptly as
reasonably practical, furnishing Parent and its Debt Financing
sources with financial and other information regarding the
Company and its Subsidiaries as may be reasonably requested by
Parent, including all financial statements, pro forma financial
information, financial data, audit reports and other information
of the type required by
Regulation S-X and
Regulation S-K
under the Securities Act and of type and form customarily
included in a private placement memorandum relating to private
placements under Rule 144A of the Securities Act at the
time during the Companys fiscal year such offerings will
be made (the Required Information),
(iv) using reasonable best efforts to obtain
accountants comfort letters, legal opinions, appraisals,
surveys, engineering reports, title insurance and other
documentation and items relating to the Debt Financing as
reasonably requested by Parent and, if requested by Parent or
Merger Sub, to reasonably cooperate with and assist Parent or
Merger Sub in obtaining such documentation and items,
(v) using commercially reasonable efforts to execute and
deliver any pledge and security documents, other definitive
financing documents, or other certificates, or documents as may
be reasonably requested by Parent (including a certificate of
the Chief Financial Officer of the Company with respect to
solvency matters) and otherwise reasonably facilitating the
pledging of collateral (including cooperation in connection with
the pay off of existing indebtedness and the release of related
Liens, if any), provided, that no obligation of the
Company or any of its Subsidiaries under such executed documents
shall be effective until the Effective Time, (vi) taking
all actions necessary to (A) permit the prospective Debt
Financing and equity sources to evaluate the Companys
current assets, cash management and accounting systems, policies
and procedures relating thereto for the purposes of establishing
collateral arrangements and (B) establish bank and other
accounts in connection with the foregoing and (viii) using
reasonable best efforts to obtain waivers, consents, estoppels
and approvals from other parties to material leases,
encumbrances and contracts to which any of the Subsidiaries of
the Company is a party and to arrange discussions among Parent,
Merger Sub and their financing sources with other parties to
material leases, encumbrances and contracts; it being understood
that the Company shall have satisfied each of its obligations
set forth in clauses (i) through (viii) of this
sentence if the Company shall have used its reasonable best
efforts to comply with such obligations whether or not any
applicable deliverables are actually obtained or provided. The
Company hereby consents to the use of its and its
Subsidiaries logos as may be reasonably necessary in
connection with the Debt Financing; provided, that such
logos are used solely in a manner that is not intended to nor
reasonably likely to harm or disparage the Company or any of its
Subsidiaries or the reputation or goodwill of the Company or any
of its Subsidiaries and its or their marks. Nothing in this
Section 5.11(a) shall require the Company or any of
its Subsidiaries to provide any assistance to the extent it
would interfere unreasonably with the ongoing business or
operations of the Company or any of its Subsidiaries. As of the
date of this Agreement, the Company believes that it will be
able to satisfy on a timely basis the terms and conditions to be
satisfied by it in this Section 5.11(a).
Notwithstanding anything in this Section 5.11(a) to
the contrary, neither the Company nor any of its Subsidiaries
shall be required to pay any commitment fee or similar fee or
incur any liability with respect to the Debt Financing prior to
the Effective Time. Upon the valid termination of this Agreement
(other than in accordance with Section 7.1(f)),
Parent shall, promptly upon request by the Company, reimburse
the Company for all reasonable and documented
out-of-pocket costs
incurred by the Company or any of its Subsidiaries, officers,
employees, representatives and advisors in connection with their
respective obligations pursuant to this
Section 5.11(a). Parent and Merger Sub hereby agree
and acknowledge that the Debt Financing does not constitute a
condition to the consummation of the transactions contemplated
by this Agreement. Parent and Merger Sub shall, on a joint and
several basis indemnify and hold harmless the Company and its
Subsidiaries, directors, officers, employees, representatives
and advisors from and against any and all losses, damages,
claims, costs or expenses suffered or incurred by any of them in
connection with any action taken by them at the request of
Parent or Merger Sub pursuant to this
Section 5.11(a) or in connection with the
arrangement of the Debt Financing and any information utilized
in connection therewith, except to the extent that such losses,
damages, claims, costs or expenses, directly or indirectly,
resulted from or arose out of the gross negligence or willful
misconduct of the Company or any of its Subsidiaries. Nothing
contained in
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this Section 5.11(a) or otherwise shall require the
Company to be an issuer or other obligor with respect to the
Debt Financing prior to the Closing.
(b) Parent shall use its reasonable best efforts to take,
or cause to be taken, all actions and to do, or cause to be
done, all things necessary or advisable to arrange and obtain
the Debt Financing on the terms and conditions described in the
Debt Financing Commitments. Notwithstanding the foregoing,
nothing in this Agreement shall require the Board of Directors
of the Company to take any action to approve any third party
financing provided in connection with the Merger.
(c) Notwithstanding anything to the contrary in this
Agreement, Parent and Merger Sub may at any time with any Person
enter into discussions regarding, and may enter into
arrangements and agreements relating to, the transfer or sale by
Parent, Merger Sub or their Affiliates of a direct or indirect
equity interest in Parent or Merger Sub of up to 49% of such
equity.
Section 5.12 Subsequent
Filings. Until the Effective Time, the Company will use
reasonable best efforts to timely file with the SEC each form,
report and document required to be filed by the Company under
the Exchange Act. As of their respective dates, none of such
reports shall contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim
financial statements of the Company included in such reports
shall be prepared in accordance with GAAP applied on a
consistent basis (except as may be indicated in the notes
thereto) and shall fairly present, in all material respects, the
financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the results of their
operations and cash flows for the periods then ended.
Section 5.13 Press
Releases. Each of the Company, Parent and Merger Sub
agrees that no public release or announcement concerning the
transactions contemplated hereby shall be issued by any party
without the prior written consent of the Company and Parent
(which consent shall not be unreasonably withheld or delayed),
except as such release or announcement may be required by Law or
the rules or regulations of any applicable United States
securities exchange or regulatory or governmental body to which
the relevant party is subject or submits, wherever situated, in
which case the party required to make the release or
announcement shall use its reasonable best efforts to allow each
other party reasonable time to comment on such release or
announcement in advance of such issuance, it being understood
that the final form and content of any such release or
announcement, to the extent so required, shall be at the final
discretion of the disclosing party; provided,
however, that the restrictions set forth in this
Section 5.13 shall not apply to any release or
announcement made or proposed to be made by the Company pursuant
to and in compliance with Section 5.2.
Section 5.14 Restructuring
Cooperation. Prior to the Effective Time, the Company
shall cooperate, cause each Subsidiary to cooperate and use its
reasonable best efforts to cause each Company Joint Venture to
cooperate, in undertaking such restructurings, if any, as are
reasonably requested by Parent in furtherance of the
transactions contemplated by this Agreement and the Debt
Financing.
Section 5.15 Resignation
of Directors. Prior to the Effective Time, the Company
will cause each member of its Board of Directors to execute and
deliver a letter, which will not be revoked or amended prior to
the Effective Time, effectuating his resignation as a director
of the Company effective at the Effective Time.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1 Conditions
to Each Partys Obligation to Effect the Merger.
The respective obligations of the parties to effect the Merger
shall be subject to the satisfaction at or prior to the
Effective Time of the following conditions:
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(a) Stockholder Approval. This Agreement
shall have been duly adopted by the Requisite Stockholder Vote. |
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(b) No Injunctions or Restraints; Illegality.
No order, injunction or decree issued by any court or agency of
competent jurisdiction preventing the consummation of the Merger
or any of the other transactions contemplated by this Agreement
shall be in effect. |
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(c) HSR Act and Foreign Antitrust Laws. Any
waiting period under the HSR Act applicable to the Merger or any
of the other transactions contemplated by this Agreement shall
have expired or early termination thereof shall have been
granted, and any pre-Closing approval or consent under Foreign
Antitrust Laws applicable to the Merger shall have been granted,
except to the extent the failure to obtain any such approval or
consent under Foreign Antitrust Laws could not reasonably be
expected to, individually or in the aggregate, have a Material
Adverse Effect. |
Section 6.2 Conditions
to Obligations of Parent and Merger Sub. The obligation
of Parent and Merger Sub to effect the Merger is also subject to
the satisfaction, or waiver by Parent, at or prior to the
Effective Time, of the following conditions:
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(a) Representations and Warranties. The
representations and warranties of the Company contained in
Sections 3.2, 3.6(c) and 3.9(m) shall
be true and correct in all material respects and the remaining
representations and warranties of the Company set forth herein
shall be true and correct (without giving effect to any
materiality or Material Adverse Effect
qualifications contained therein), except for such failures to
be true and correct as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, in
each case as of the date of this Agreement and as of the Closing
Date as though made as of such date, except to the extent such
representations and warranties expressly relate to an earlier
date (in which case the truth and correctness of such
representations and warranties shall be measured on and as of
such earlier date). |
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(b) Performance of Obligations of the
Company. The Company shall have performed in all
material respects all obligations required to be performed by it
under this Agreement at or prior to the Effective Time. |
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(c) Officers Certificate. Parent shall
have received a certificate signed on behalf of the Company by
the Chief Executive Officer or the Chief Financial Officer
certifying as to the matters set forth in
Sections 6.2(a) and 6.2(b). |
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(d) Absence of Material Adverse Effect. Since
the date of this Agreement, there shall not have occurred
(i) any event, change, effect, development, condition or
occurrence that has had or could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect or
(ii) any Force Majeure Event that has had or could
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect (provided, that for
purposes of this Section 6.2(d)(ii), the provisos
included in the definition of Material Adverse Effect shall not
be taken into account). |
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(e) Cooperation with Debt Financing. The
Company shall have performed the obligations and satisfied the
requirements set forth on Annex A with respect to
the Debt Financing. |
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(f) Tax Certificate. The Company shall have
provided a certificate duly completed and executed pursuant to
Section 1.897-2(h) and 1.1445-2(c) of the Treasury
Regulation, certifying that the Shares of the Company are not
United states real property interests within the meaning of
Section 897(c) of the Code. |
Section 6.3 Conditions
to Obligations of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction
or waiver by the Company at or prior to the Effective Time of
the following conditions:
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(a) Representations and Warranties. The
representations and warranties of Parent and Merger Sub set
forth in this Agreement shall be true and correct (without
giving effect to any materiality qualifications
contained therein), except for such failures to be true and
correct as could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse
Effect, in each case as of the date of this Agreement and as of
the Closing Date as though made as of such date, except to the |
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extent such representations and warranties expressly relate to
an earlier date (in which case such representations and
warranties shall be true and correct on and as of such earlier
date). |
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(b) Performance of Obligations of Parent and Merger
Sub. Parent and Merger Sub shall have performed in all
material respects all obligations required to be performed by
them under this Agreement at or prior to the Effective Time. |
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(c) Officers Certificate. The Company
shall have received a certificate signed on behalf of Parent by
a duly authorized officer certifying as to the matters set forth
in Sections 6.3(a) and 6.3(b). |
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(d) Solvency Opinion. The Company shall have
received a solvency opinion from a firm reasonably acceptable to
the Company and Parent, addressed to the Companys Board of
Directors, in customary form and substance. |
ARTICLE VII
TERMINATION; AMENDMENT; WAIVER
Section 7.1 Termination.
This Agreement may be terminated and the Merger may be abandoned
at any time (notwithstanding approval thereof by the Requisite
Stockholder Vote) prior to the Effective Time (with any
termination by Parent also being an effective termination by
Merger Sub):
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(a) by mutual written consent of the Company and Parent; |
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(b) by either the Company or Parent if (i) any court
of competent jurisdiction or other Governmental Entity shall
have issued an order, decree or ruling, or taken any other
action restraining, enjoining or otherwise prohibiting any of
the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
non-appealable or (ii) any Governmental Entity shall have
finally and non-appealably declined to grant any of the
approvals of any Governmental Entity the receipt of which is
necessary to satisfy the condition set forth in
Section 6.1(c); provided that the party
seeking to terminate this Agreement pursuant to this
Section 7.1(b) shall have used its reasonable best
efforts to contest, appeal and remove such order, decree, ruling
or action in accordance with Section 5.6; |
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(c) by either the Company or Parent if the Merger shall not
have been consummated on or before September 15, 2007, as
extended at the election of Parent, to the end of the Marketing
Period, if the Marketing Period has commenced and such end of
the Marketing Period would be later (such date, as extended
pursuant to this Section 7.1(c), the
Outside Date) unless the failure of the
Closing to occur by such date shall be due to the failure of the
party seeking to terminate this Agreement to perform or comply
in all material respects with the covenants and agreements of
such party set forth in this Agreement; provided,
however, that (i) if all of the conditions to the
Closing set forth in Article VI shall be satisfied
on or prior to September 15, 2007 (other than conditions
with respect to actions the respective parties will take at the
Closing itself, provided that such conditions are capable
of being satisfied) other than those set forth in
Section 6.1(c), then the Outside Date shall be
extended at the election of Parent to a date not later than
November 1, 2007, or (ii) if there is an arbitration
pursuant to Section 8.3 that has not been terminated
by Parent, then the Outside Date shall be extended to a date
(which date shall be specified by Parent) that is no later than
seven days after a final decision of the arbitrators; |
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(d) by either the Company or Parent if the Special Meeting
shall have been convened and a vote with respect to the adoption
of this Agreement by the Requisite Stockholder Vote shall not
have been obtained (unless the Special Meeting is adjourned or
postponed to vote on the Merger at a subsequent date, which in
any event shall not be later than five days prior to the Outside
Date); |
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(e) by the Company if there shall have been a breach of any
of the covenants or agreements or a failure to be true of any of
the representations or warranties set forth in this Agreement on
the part of Parent or Merger Sub, which breach or failure to be
true, either individually or in the aggregate and, in |
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the case of the representations and warranties, measured on the
date of this Agreement or, if provided herein, as of any
subsequent date (as if made on such date), would result in, if
occurring or continuing at the Effective Time, the failure of
the conditions set forth in Section 6.3(a) or
6.3(b), as the case may be, and which is not cured within
the earlier of (i) the Outside Date and (ii) thirty
(30) days following written notice to the party committing
such breach, or which by its nature or timing cannot be cured
within such time period; provided, that the Company shall
not have the right to terminate this Agreement pursuant to this
Section 7.1(e) if the Company is then in material
breach of any of its covenants or agreements contained in this
Agreement such that the conditions in Section 6.2(a)
or 6.2(b)are incapable of being satisfied; |
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(f) by Parent if there shall have been a breach of any of
the covenants or agreements or a failure to be true of any of
the representations or warranties set forth in this Agreement on
the part of the Company (except the covenants and agreements in
Sections 5.2 and 5.4), which breach or
failure to be true, either individually or in the aggregate and,
in the case of the representations and warranties, measured on
the date of this Agreement or, if provided herein, as of any
subsequent date (as if made on such date), would result in, if
occurring or continuing at the Effective Time, the failure of
the conditions set forth in Section 6.2(a) or
6.2(b), as the case may be, and which is not cured within
the earlier of (i) the Outside Date and (ii) thirty
(30) days following written notice to the party committing
such breach, or which by its nature or timing cannot be cured
within such time period; provided, that Parent shall not
have the right to terminate this Agreement pursuant to this
Section 7.1(f) if Parent or Merger Sub is then in
material breach of any of its covenants or agreements contained
in this Agreement such that the conditions contained in
Section 6.3(a) or 6.3(b) are incapable of
being satisfied; |
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(g) by Parent if (i) a Change of Board Recommendation
shall have occurred, (ii) the Company or its Board of
Directors (or any committee thereof) shall (A) approve,
adopt or recommend any Acquisition Proposal or (B) approve
or recommend, or enter into or allow the Company or any of its
Subsidiaries to enter into, a letter of intent, agreement in
principle or definitive agreement for an Acquisition Proposal,
(iii) within 48 hours of a request by Parent for the
Company to reaffirm the Company Board Recommendation following
the date any Acquisition Proposal or any material modification
thereto is first published or sent or given to the stockholders
of the Company, the Company fails to issue a press release that
reaffirms the Company Board Recommendation, (iv) the
Company shall have intentionally or materially breached any of
its obligations under Section 5.2 or 5.4,
(v) the Company shall have failed to include in the Proxy
Statement distributed to stockholders the Company Board
Recommendation, or (vi) the Company or its Board of
Directors (or any committee thereof) shall authorize or publicly
propose any of the foregoing; |
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(h) by Parent if since the date of this Agreement, there
shall have been an event, change, effect, development, condition
or occurrence that has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse
Effect that cannot be cured by the Outside Date; |
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(i) by the Company at any time prior to receipt of the
Requisite Stockholder Vote, in accordance with and subject to
the terms and conditions of, Section 5.2(e);
provided that the Company shall substantially
concurrently with such termination enter into the Alternative
Acquisition Agreement; |
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(j) by the Company if all of the conditions set forth in
Sections 6.1 and 6.2 have been satisfied and
Parent has failed to consummate the Merger no later than ten
calendar days after the final day of the Marketing
Period; or |
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(k) by Parent if a Force Majeure Event has occurred that
has had or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect that cannot be cured
by the Outside Date (provided, that for purposes of this
Section 7.1(k), the provisos included in the
definition of Material Adverse Effect shall not be taken into
account). |
Section 7.2 Written
Notice of Termination. The party desiring to terminate
this Agreement pursuant to clause (b), (c),
(d), (e), (f), (g), (h),
(i), (j) or (k) of Section 7.1
shall give written notice of such
A-49
termination to the other party in accordance with
Section 8.5, specifying the provision or provisions
hereof pursuant to which such termination is effected.
Section 7.3 Effect
of Termination. If this Agreement is terminated and the
Merger is abandoned pursuant to Section 7.1, this
Agreement, except for the provisions of
Sections 5.3(b), 7.2, 7.3, 7.4
and Article VIII and the cost reimbursement and
indemnity provisions of Sections 5.11, shall
forthwith become void and have no effect, without any liability
on the part of any party or its directors, officers,
stockholders or Affiliates.
Section 7.4 Fees
and Expenses. (a) Whether or not the Merger is
consummated, except as otherwise specifically provided herein,
all costs and Expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement
shall be paid by the party incurring such Expenses.
(b) Notwithstanding the foregoing;
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(i) if |
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(A) either Parent or the Company terminates this Agreement
pursuant to Section 7.1(d), and the Company
(I) enters into a definitive agreement with respect to an
Acquisition Proposal within 12 months after the termination
of this Agreement and such transaction is completed and
(II) such Acquisition Proposal has received approval, if
required by applicable Law, by the affirmative vote or consent
of the holders of a majority of the outstanding Shares within
such twelve month period, or |
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(B) either Parent or the Company terminates this Agreement
pursuant to Section 7.1(c), and, at the time of such
termination, the conditions set forth in Sections 6.1
and 6.3 have been satisfied but the Company shall
have failed to take all actions on its part necessary to
consummate the Merger, or |
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(C) if Parent terminates this Agreement pursuant to
Section 7.1(f), then the Company shall pay to Parent
the Superior Fee by wire transfer of same day funds,
(I) with respect to the event set forth in (A), promptly
following the consummation of the transaction in respect of the
Acquisition Proposal; and (II) on the Business Day
immediately following the date of termination with respect to
the events set forth in subsection (B) and
(C) above. |
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(ii) if (A) Parent terminates this Agreement pursuant
to Section 7.1(g) or (B) the Company terminates
this Agreement pursuant to Section 7.1(i), then the
Company shall pay to Parent simultaneously with (in the case of
termination by the Company pursuant to
subclause (B) of this Section 7.4(b)(ii))
or within two Business Days after (in the case of termination by
Parent pursuant to subclause (A) of this
Section 7.4(b)(ii)) such termination, the Superior
Fee (provided, that if such termination is pursuant to
clause (A) or (B) above and such termination
occurs prior to the Solicitation Period End-Date, then such
payment shall instead be in the amount of the Company Breakup
Fee). |
(c) Company Breakup Fee means an
amount in cash equal to (i) $73,500,000, plus (ii) an
amount equal to the lesser of (A) the sum of Parents
and Merger Subs reasonably documented Expenses and
(B) $6,000,000, which Company Breakup Fee shall be paid
(when due and owing) by wire transfer of immediately available
funds to the account or accounts designated by Parent.
(d) Superior Fee means an amount
in cash equal to (i) $85,225,000, plus (ii) an amount
equal to the lesser of (A) the sum of Parents and
Merger Subs reasonably documented Expenses and
(B) $15,000,000, which Superior Fee shall be paid (when due
and owing) by wire transfer of immediately available funds to
the account or accounts designated by Parent.
(e) Expenses means all reasonable
out-of-pocket expenses
(including all fees and expenses of financing sources, counsel,
accountants, investment bankers, experts and consultants to a
party hereto and its affiliates) actually incurred or payable by
a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and
performance of this Agreement.
(f) If the Company terminates this Agreement: (i)(x)
pursuant to Section 7.1(c), and at the time of such
termination, the conditions set forth in
Sections 6.1 and 6.2 (other than
Section 6.2(c)) have been satisfied but Parent has
failed to take all necessary action on its part to consummate
the Merger, or pursuant to
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Section 7.1(e) or 7.1(j); and (y) there
has not been a failure of Parent and Merger Sub to obtain the
Debt Financing necessary to consummate the Merger as a result of
a breach or default by the Commitment Parties (as defined in the
Debt Financing Commitments) under the Debt Financing
Commitments; or (ii)(x) pursuant to Section 7.1(c),
and at the time of such termination, the conditions set forth in
Sections 6.1 and 6.2 (other than
Section 6.2(c)) have been satisfied but Parent has
failed to take all necessary action on its part to consummate
the Merger, or pursuant to Section 7.1(e) or
7.1(j); and (y) there has been a failure of Parent
and Merger Sub to obtain the Debt Financing necessary to
consummate the Merger as a result of a breach or default by the
Commitment Parties under the Debt Financing Commitments, then:
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(A) in the case of subsection (f)(i) above, the
Company shall be entitled to liquidated damages in the amount of
$250,000,000 (Breach Fee), payable one day
after the date of termination of this Agreement by wire transfer
of immediately available funds to the account designated by the
Company; and |
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(B) in the case of subsection (f)(ii) above, |
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(I) the Company shall be entitled to seek any actual
damages in connection with such termination, but in no event
shall Parent, Merger Sub, Guarantor or their Affiliates be
liable to the Company or any of its Affiliates for any indirect,
special, punitive or consequential damages to the extent they do
not recover such damages from the Commitment Parties as a result
of a breach by the Commitment Parties under the Debt Financing
Commitments which the Company acknowledges and agrees that it
has received and reviewed; and |
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(II) notwithstanding anything to the contrary in
clause (I) above, in no event shall Parent, Merger
Sub, Guarantor or their Affiliates, individually or
collectively, be liable to the Company or any of its Affiliates
in an amount more than $25,000,000 in excess of the amounts
(such amounts in the aggregate, the
Bank Amount), if any, actually received,
directly or indirectly, by Parent, Merger Sub, Guarantor or
their Affiliates from the Commitment Parties with respect to
claims for such Commitment Parties breach of their Debt
Financing Commitments. Parent and Merger Sub agree to pursue any
such claims against such Commitment Parties diligently and in
good faith. In the event that there has been a failure of Parent
and Merger Sub to obtain the Debt Financing necessary to
consummate the Merger because of a breach or default by the
Commitment Parties under the Debt Financing Commitments, then
the provisions of this clause (B) shall be the sole
and exclusive remedy of the Company and its Affiliates under, or
arising out of, this Agreement, the Guarantee, and all of the
related documents and agreements or otherwise. |
(g) Each of the Company, Parent and Merger Sub acknowledges
that the agreements contained in this Section 7.4
are an integral part of the transactions contemplated by this
Agreement. In the event that the Company shall fail to pay the
Company Breakup Fee or Superior Fee when due or Parent and
Merger Sub shall fail to pay the Breach Fee or Bank Amount when
due, the Company, on the one hand, and Parent and Merger Sub on
the other shall reimburse the other party for all reasonable
Expenses actually incurred or accrued by such other party
(including reasonable Expenses of counsel) in connection with
the collection under and enforcement of this
Section 7.4. The parties hereto agree and understand
that in no event shall the Company be required to pay
(A) either the Company Breakup Fee or the Superior Fee on
more than one occasion or (B) both the Company Breakup Fee
and the Superior Fee; nor, shall Parent or Merger Sub be
required to pay (C) either the Breach Fee or the Bank
Amount on more than one occasion or (D) both the Breach Fee
and the Bank Amount. The parties agree that any payment of the
Superior Fee, the Company Break-Up Fee, the Breach Fee or the
Bank Amount as applicable, shall be the sole and exclusive
remedy available to Parent and Merger Sub, on the one hand, and
the Company, on the other hand, with respect to this Agreement
and the transactions contemplated hereby, and, upon payment of
the applicable amount, Parent, Merger Sub and the Company and
their respective Affiliates shall have no further liability to
the other parties hereunder.
Section 7.5 Amendment.
To the extent permitted by applicable Law, this Agreement may be
amended by the Company, Parent and Merger Sub, at any time
before or after adoption of this Agreement by the stockholders
of the Company but, after any such stockholder approval, no
amendment shall be made that
A-51
by law requires further approval of the stockholders of the
Company. This Agreement may not be amended, changed,
supplemented or otherwise modified except by an instrument in
writing signed on behalf of all of the parties.
Section 7.6 Extension;
Waiver; Remedies. (a) At any time prior to the
Effective Time, each party hereto may (i) extend the time
for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in
the representations and warranties contained herein by any other
applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or
(iii) waive compliance by any party with any of the
agreements or conditions contained herein. Any agreement on the
part of any party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf
of such party.
(b) The failure of any party hereto to exercise any rights,
power or remedy provided under this Agreement, or to insist upon
compliance by any other party hereto with its obligations
hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Representations
and Warranties. The representations and warranties made
in Articles III and IV or any instrument
delivered pursuant to this Agreement shall not survive beyond
the Effective Time. Each covenant or agreement of the parties in
this Agreement shall not survive beyond the Effective Time,
other than any covenant or agreement that by its terms
contemplates performance after the Effective Time, which shall
survive until fully performed.
Section 8.2 Entire
Agreement; Assignment. This Agreement, together with the
Disclosure Letter, the Parent Disclosure Letter, the
Confidentiality Agreement, the Voting Agreement and the
Guarantee constitute the entire agreement between the parties
with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and
oral, between the parties with respect to subject matter hereof.
The Agreement shall not be assigned by any party by operation of
law or otherwise without the prior written consent of the other
parties; provided, that Parent or Merger Sub may assign
any of their respective rights and obligations to any direct or
indirect Subsidiary of Guarantor so long as such assignment does
not delay or impede the consummation of the transactions
contemplated hereby; provided, that as a condition of
such assignment, the assignee expressly assumes the obligations
of the assignor; provided further, that Guarantor may
transfer directly or indirectly all or any portion of the common
stock or other equity of Parent or Merger Sub to any Affiliate
or sell up to 49% of the stock or equity of Parent or Merger Sub
to any Person but no such transfer or sale shall relieve
Guarantor, Parent or Merger Sub of their respective obligations
hereunder.
Section 8.3 Jurisdiction;
Venue; Arbitration.
(a) Except with respect to a Disputed Matter, each of the
parties hereto (i) consents to submit itself to the
personal jurisdiction of any Delaware chancery or federal court
located in the City of Wilmington in the event any dispute
arises out of this Agreement or any transaction contemplated by
this Agreement, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that it
will not bring any action relating to this Agreement or any
transaction contemplated by this Agreement in any court other
than any such court and (iv) waives any right to trial by
jury with respect to any action related to or arising out of
this Agreement or any transaction contemplated by this
Agreement. Except with respect to a Disputed Matter, each of the
parties irrevocably and unconditionally waives any objection to
the laying of venue of any action, suit or proceeding arising
out of this Agreement or the transactions contemplated hereby in
Delaware chancery or federal courts located in the City of
Wilmington, and hereby further irrevocably and unconditionally
waives and agree not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
A-52
(b) In the event Parent believes that a Covered Event has
occurred, Parent may send a written notice to the Company with a
brief statement of the basis for Parents belief that a
Covered Event has occurred (the Written Notice of
Claim) (which may include the name of the arbitrator
designated by Parent as contemplated in clause (d) below).
If the Company disagrees that a Covered Event has occurred, it
shall provide written notice to Parent containing a brief
statement of the Companys disagreement (the
Written Notice of Disagreement) within three
Business Days after receiving the Written Notice of Claim. If
the Company does not deliver a written notice within three
Business Days stating that the Company agrees in full with the
position of Parent set forth in the Written Notice of Claim, the
parties shall proceed to arbitration pursuant to the terms of
this Section 8.3.
(c) If Parent delivers a Written Notice of Claim, the
Company agrees to provide Parent with full access, in addition
to the access provided in Section 5.3, to any and
all information requested by Parent, including but not limited
to, books and records, reports and similar items, and Parent is
entitled to interview any of the Companys officers and/or
employees.
(d) Any disagreement between the parties regarding whether
a Covered Event has occurred (the Disputed
Matter) shall be resolved by arbitration at the sole
option of Parent. The Company shall appoint an arbitrator in its
Written Notice of Disagreement. Within three Business Days after
receiving the Written Notice of Disagreement, Parent shall
appoint an arbitrator by providing written notice thereof to the
Company (provided, that Parent may make such appointment
in the Written Notice of Claim if it so desires), and the two
selected arbitrators shall select a third arbitrator within
three Business Days of their appointment (with such three
arbitrators constituting the arbitration panel). The parties
agree to use reasonable best efforts to provide information
requested of them by the two arbitrators in connection with the
selection of the third arbitrator. If the arbitrators selected
by the parties are unable or fail to agree upon the third
arbitrator within the time allotted, the third arbitrator shall
be selected by the American Arbitration Association within three
Business Days of notification by either party of the failure to
agree upon the third arbitrator. If either Parent or the Company
fails to designate an arbitrator as provided herein, the
Disputed Matter shall be decided by the arbitrator that has been
so designated.
(e) Within five Business Days after the date of the
selection of the third arbitrator, the parties shall make
simultaneous, verified submissions. Within three Business Days
of the submissions, the parties are entitled to submit verified,
reply submissions. All submissions and other communications
during the arbitration shall be delivered simultaneously to the
other party and the arbitrators. The hearing shall take place in
New York, New York, on the third Business Day following the
expiration of time for the reply submissions. At the hearing,
Parent shall first have the right to present up to three hours
of oral argument, then the Company shall have the right to
present up to four hours of oral argument, and finally Parent
shall have the right to present up to one hour of oral argument.
No witnesses or experts shall testify at the hearing. Neither
party shall be deemed to have the burden of proof, and the
decision by the arbitrators (or the arbitrator in the event one
of the parties fails to designate an arbitrator as provided
herein) shall be by a preponderance of the evidence. The
arbitrators (or the arbitrator in the event one of the parties
fails to designate an arbitrator as provided herein) shall be
entitled to determine any other aspect of the procedure of the
arbitration in the event the parties disagree. The parties
intend for the arbitrators (or the arbitrator in the event one
of the parties fails to designate an arbitrator as provided
herein) to issue a final decision regarding whether a Covered
Event has occurred within three Business Days after the hearing.
The decision of a majority of the arbitrators (or the arbitrator
in the event one of the parties fails to designate an arbitrator
as provided herein) regarding the Disputed Matter shall be final
and binding upon the parties. The costs and expenses of the
arbitrators shall be borne equally by Parent and the Company.
(f) Notwithstanding anything else contained in this
Agreement, including the satisfaction of all of its conditions
to Closing by the Company, at the sole option of Parent, the
Closing shall not occur until at least one and not more than
seven Business Days after the final decision is announced in any
arbitration that is conducted pursuant to this
Section 8.3 and if the Outside Date occurs before a
final decision, then the Outside Date shall be extended to a
date (which date shall be selected by Parent) not more than
seven days following the announcement of the final decision by
the arbitrators. Parent, in its sole discretion, may terminate
the arbitration at any time prior to a final decision of the
arbitrators if and only if the date of such termination
A-53
occurs during the period that is ten days prior to the
expiration date of the Debt Financing Commitments;
provided, that any such termination will be without
prejudice as to whether the subject matter of the Written Notice
of Claim is a Covered Event.
(g) Upon a determination that the subject matter set forth
in a Written Notice of Claim constitutes a Covered Event, Parent
shall have the option to either terminate this Agreement
pursuant to the applicable provision of Section 7.1
or elect to close the transaction contemplated by this Agreement.
(h) In the event it is determined pursuant to this
Section 8.3 that a Covered Event has not occurred,
Parent shall not have the right to terminate this Agreement with
respect to the matter set forth in the Written Notice of Claim.
Section 8.4 Validity.
Whenever possible, each provision or portion of any provision of
this Agreement will be interpreted in such manner as to be
effective and valid under applicable Law; but if any provision
or portion of any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any
applicable Law in any jurisdiction, such invalidity, illegality
or unenforceability will not affect any other provision or
portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable
provision or portion of any provision had never been contained
herein.
Section 8.5 Notices.
All notices, requests, claims, demands and other communications
hereunder shall be given (and shall be deemed to have been duly
received if given) by hand delivery in writing, by nationally
recognized overnight courier service, or by facsimile or
electronic transmission with confirmation of receipt, as follows:
if to Parent or Merger Sub:
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c/o American Real Estate Holdings Limited Partnership |
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White Plains Plaza |
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445 Hamilton Avenue Suite 1210 |
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White Plains, NY 10601 |
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Attention: Felicia Buebel, Esq. |
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Facsimile: (914) 614-7001 |
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Email: fbuebel@arep.com |
and
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c/o American Real Estate Holdings Limited Partnership |
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767 Fifth Avenue |
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47th Floor |
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New York, NY 10153 |
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Attention: Keith Meister |
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Facsimile: (212) 750-5815 |
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Email: Kmeister@sfire.com |
with a copy (which shall not constitute notice) to:
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DLA Piper US LLP |
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1251 Avenue of the Americas |
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New York, New York 10020 |
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Attention: Steven L. Wasserman, Esq. |
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Facsimile No.: (212) 884-8448 |
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Email: steven.wasserman@dlapiper.com |
A-54
if to the Company:
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Lear Corporation |
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21557 Telegraph Road |
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Southfield, Michigan 48033 |
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Attention: |
Daniel A. Ninivaggi, Esq.
Executive Vice President,
General Counsel |
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Facsimile: (248) 447-1677 |
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Email: dninivaggi@lear.com |
and
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Lear Corporation |
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21557 Telegraph Road |
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Southfield, Michigan 48033 |
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Attention: |
James H. Vandenberghe
Vice Chairman, Chief Financial
Officer |
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Facsimile: (248) 447-1524 |
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Email: jvandenberghe@lear.com |
with a copy (which shall not constitute notice) to:
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Winston & Strawn LLP |
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35 West Wacker Drive |
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Chicago, IL 60601 |
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Attention: Bruce A. Toth, Esq. |
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Facsimile: (312) 558-5700 |
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Email: btoth@winston.com |
or to such other address as the Person to whom notice is given
may from time to time furnish to the others in writing in the
manner set forth above.
Section 8.6 Governing
Law. This Agreement shall be governed by and construed
in accordance with the Laws of the State of Delaware (without
giving effect to choice of law principles thereof that would
result in the application of the Laws of another jurisdiction).
Section 8.7 Descriptive
Headings. The descriptive headings herein (including the
Table of Contents) are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning
or interpretation of this Agreement.
Section 8.8 Parties
in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied, including
Section 5.8, is intended to confer upon any other
Person any rights or remedies of any nature whatsoever under or
by reason of this Agreement except for Sections 5.7
and 7.4(f)(B) and 7.4(g) (which provisions are intended
to be for the benefit of the Persons referred to therein, and
may be enforced by any such Persons).
Section 8.9 Rules
of Construction. The parties to this Agreement have each
been represented by counsel during the negotiation and execution
of this Agreement and waive the application of any Laws or rule
of construction providing that ambiguities in any agreement or
other document will be construed against the party drafting such
agreement or other document.
Section 8.10 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same agreement.
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Section 8.11 Certain
Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
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(a) Acceptable Confidentiality
Agreement means a confidentiality and standstill
agreement that contains confidentiality and standstill
provisions that are in the aggregate no less favorable to the
Company than those contained in the Confidentiality Agreement;
provided, that any such confidentiality agreement need
not contain provisions limiting the ability of the party thereto
to have discussions or share information with, or enter into
agreements, understandings or arrangements with potential
sources of debt or equity financing or co-bidders,
provided, further that any such confidentiality
agreement shall permit disclosure by the Company to Parent and
Merger Sub of the information contemplated by
Section 5.2. |
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(b) Affiliate and
Associate shall have the meanings
given to such terms in
Rule 12b-2 under
the Exchange Act. |
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(c) beneficial ownership shall
have the meaning given to such term in
Rule 13d-3 under
the Exchange Act. |
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(d) Business Day shall have the
meaning given to such term in
Rule 14d-1(g)
under the Exchange Act. |
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(e) Bylaws shall mean the Bylaws
of the Company, as amended through the date of this Agreement. |
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(f) Certificate of Incorporation
shall mean the Companys Certificate of Incorporation
as in effect as of the date of this Agreement, including any
amendments. |
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(g) Company Joint Venture shall
mean any Person in which the Company, directly or indirectly,
owns an equity interest that does not have voting power under
ordinary circumstances to elect a majority of the board of
directors or other Person performing similar functions but in
which the Company has rights with respect to the management of
such Person. |
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(h) Company SEC Reports shall
mean all filings made by the Company with the SEC, including
those that the Company may file after the date of this Agreement
until the Closing Date. |
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(i) Confidentiality Agreement
means the confidentiality agreement, dated as of
January 26, 2007 (as amended through the date of this
Agreement), by and between the Company and Guarantor. |
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(j) Controlled Group Liability
means any and all liabilities (i) under Title IV of
ERISA (as defined in Section 4.15(a)(ii)),
(ii) under Section 302 of ERISA, (iii) under
Sections 412 and 4971 of the Code, (iv) resulting from
a violation of the continuation coverage requirements of
Section 601 et seq. of ERISA and Section 4980B of the
Code or the group health plan requirements of Sections 601
et seq. of the Code and Section 601 et seq. of ERISA and
(v) under corresponding or similar provisions of foreign
laws or regulations. |
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(k) Covered Event means any
event, change, effect, development, condition or occurrence
pursuant to which Parent, in its sole discretion, believes it
may terminate this Agreement pursuant to
Sections 7.1(c), (f), (h) and/or (k). |
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(l) Force Majeure Event shall
mean an outbreak or escalation of hostilities, act of terrorism,
nuclear fusion or fission, explosion, disaster, attack, national
emergency, war, riot, fire, flood, hurricane, cyclone,
earthquake, volcanic eruption or other similar acts or acts of
God. |
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(m) GAAP shall mean United States
generally accepted accounting principles. |
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(n) hereby,
herein, hereinafter
and similar terms shall be deemed to refer to this Agreement
in its entirety, rather than to any Article, Section, or other
portion of this Agreement. |
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(o) including shall be deemed to
be followed by the phrase without limitation. |
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(p) Initiation Date shall mean
the latest to occur of (A) the date Parent and its Debt
Financing sources have received from the Company the Required
Information and (B) the first Business Day |
A-56
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following the date on which the conditions set forth in
Sections 6.1 and 6.2 have been satisfied
(other than conditions that by their nature can only be
satisfied at the Closing). If the condition set forth in
Section 6.1(a) is the last of the conditions set
forth in Article VI to be satisfied (other than
conditions that by their nature can only be satisfied at the
Closing), Parent shall use reasonable best efforts to consummate
the Closing within five days following the satisfaction of such
condition. |
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(q) knowledge of the Company
means actual knowledge of any executive officer of the Company. |
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(r) Liens means any mortgages,
deeds of trust, liens (statutory or other) pledges, security
interests, claims, covenants, conditions, restrictions, options,
rights of first offer or refusal, charges, easements,
rights-of-way,
encroachments, third party rights or other encumbrances or title
defects of any kind or nature. |
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(s) Marketing Period shall mean
the first period of 15 consecutive Business Days after the
Initiation Date. |
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(t) Material Adverse Effect shall
mean a material adverse event, change, effect, development,
condition or occurrence on or with respect to the business,
results of operations, financial condition or prospects of the
Company and its Subsidiaries taken as a whole; provided,
however, that, Material Adverse Effect shall not be
deemed to include any event, change, effect, development,
condition or occurrence to the extent resulting from
(A) changes in general economic conditions (including those
affecting the financial, banking, currency, interest rates or
capital markets); or (B) conditions generally affecting any
of the industries or markets in which the Company and its
Significant Subsidiaries operate; provided, that such
matters shall be taken into account in determining a Material
Adverse Effect to the extent of any disproportionate effect on
the Company and its Significant Subsidiaries, taken as a whole,
relative to other companies operating in the same industries or
segments and geographic markets as the Company and its
Significant Subsidiaries. |
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(u) Parent Material Adverse Effect
shall mean any event, change, effect, development, condition
or occurrence that would prevent or materially delay
consummation of the Merger, receipt of the Debt Financing or the
ability of Parent and Merger Sub to perform their obligations
under this Agreement or Guarantor under the Guarantee. |
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(v) Permitted Liens means
(i) Liens permitted under the Companys existing
credit facilities or indentures, (ii) Liens for Taxes not
yet due and payable or that are being contested in good faith
and by appropriate proceedings; (iii) mechanics,
materialmens or other Liens or security interests that
secure a liquidated amount that are being contested in good
faith and by appropriate proceedings; (iv) statutory Liens
of landlords and Liens of carriers, warehousemen, mechanics,
materialmen, workmen, repairmen and other Liens imposed by Law
made in the ordinary course and on a basis consistent with past
practice; (v) Liens incurred or deposits made in the
ordinary course of business and on a basis consistent with past
practice in connection with workers compensation,
unemployment insurance or other types of social security;
(vi) Liens the existence of which are specifically
disclosed in the notes to the consolidated financial statements
of the Company included in the Companys Annual Report on
Form 10-K for the
year ended December 31, 2005 or the Companys
Quarterly Reports on
Form 10-Q for the
periods ended March 31, 2006, June 30, 2006 or
September 30, 2006; and (vii) defects or imperfections
of title, easements, covenants, rights of way, restrictions and
any other charges or encumbrances that do not impair, and could
not reasonably be expected to impair, in any material respect,
the value, marketability or continued use of the property of the
Company. |
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(w) Person shall have a broad
meaning and shall include any individual, corporation, limited
liability company, partnership, association, trust, estate or
other entity or organization. |
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(x) Plan means each
employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (ERISA), that is subject
to ERISA and, excluding any plans that are statutory plans, each
material bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock
option, phantom stock or other equity-based retirement,
vacation, severance, disability, death benefit, hospitalization,
medical or |
A-57
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other employee benefit plan, program, policy, practice,
arrangement, agreement, fund or commitment, and each material
employment, retention, consulting, change in control, salary
continuation, termination or severance plan, program, policy,
practice, arrangement or agreement entered into, maintained,
sponsored or contributed to by the Company or any of its
Subsidiaries or ERISA Affiliates or to which the Company or any
of its Subsidiaries or ERISA Affiliates has any material
obligation to contribute, or with respect to which the Company
or any of its Subsidiaries or ERISA Affiliates has any material
liability, direct or indirect, contingent or otherwise
(including a liability arising out of an indemnification,
guarantee, hold harmless or similar agreement) or otherwise
providing benefits to any current, former or future employee,
officer or director of the Company or any of its Subsidiaries or
ERISA Affiliates or to any beneficiary or dependent thereof. |
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(y) Representatives means, when
used with respect to Parent or the Company, the directors,
officers, employees, consultants, accountants, legal counsel,
investment bankers, agents and other representatives of Parent
or the Company, as applicable, and its Subsidiaries. |
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(z) Significant Subsidiary means
any of its Subsidiaries (a) the consolidated assets of
which equal 5% or more of the consolidated assets of the Company
and its Subsidiaries as of September 30, 2006, or
(b) the consolidated revenues of which equal 5% or more of
the consolidated revenues of the Company and its Subsidiaries
for the four consecutive fiscal quarters ended
September 30, 2006. |
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(aa) Solicitation Period End-Date
means 11:59 p.m. (EST) on the date that is
45 days after the date of this Agreement. |
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(bb) Special Committee means a
committee of the Companys Board of Directors, the members
of which are not affiliated with Parent or Merger Sub and are
not members of the Companys management, formed for the
purpose of, among other things, evaluating and making a
recommendation to the full Board of Directors of the Company
with respect to this Agreement and the transactions contemplated
hereby, including the Merger, and shall include any successor
committee to the Special Committee. |
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(cc) Subsidiary shall mean, when
used with reference to an entity, any other entity of which
securities or other ownership interests having ordinary voting
power to elect a majority of the Board of Directors or other
Persons performing similar functions, or a majority of the
outstanding voting securities of which, are owned directly or
indirectly by such entity, provided, that Subsidiary
shall mean a subsidiary of the Company unless the context
otherwise dictates. |
[Remainder of Page Intentionally Left Blank. Signature Page
Follows.]
A-58
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto
duly authorized, all at or on the day and year first above
written.
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Title: |
Chief Financial Officer |
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AREP CAR ACQUISITION CORP. |
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Title: |
Chief Financial Officer |
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By: |
/s/ Robert E. Rossiter |
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Title: |
Chairman and Chief Executive Officer |
[Signature Page to Agreement and Plan of Merger]
A-59
Appendix B
February 8, 2007
The Special Committee of the Board of Directors
Lear Corporation
21557 Telegraph Road
Southfield, Michigan 48034
Members of the Special Committee of the Board of Directors:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of common stock, par
value $0.01 per share (the Company Common
Stock), of Lear Corporation (the Company)
(other than Icahn Associates Corp. and its affiliates
(collectively, the Shareholder Group)) of the
consideration to be paid to such holders in the proposed merger
(the Merger) of the Company with AREP Car
Acquisition Corp. (the Merger Subsidiary), a
wholly-owned subsidiary of AREP Car Holdings Corp. (the
Merger Partner). Pursuant to the Agreement and Plan
of Merger (the Agreement), among the Company, the
Merger Partner and Merger Subsidiary, the Company will become a
wholly-owned subsidiary of the Merger Partner, and each
outstanding share of Company Common Stock, other than the
Excluded Shares (as defined in the Agreement), shares owned by
any direct or indirect wholly-owned subsidiary of the Company or
Dissenting Shares (as defined in the Agreement), will be
converted into the right to receive $36 per share in cash
(the Consideration).
In arriving at our opinion, we have (i) reviewed a draft
dated February 7, 2007 of the Agreement; (ii) reviewed
certain publicly available business and financial information
concerning the Company and the industries in which it operates;
(iii) compared the proposed financial terms of the Merger
with the publicly available financial terms of certain
transactions involving companies we deemed relevant and the
consideration received for such companies; (iv) compared
the financial and operating performance of the Company with
publicly available information concerning certain other
companies we deemed relevant and reviewed the current and
historical market prices of the Company Common Stock and certain
publicly traded securities of such other companies;
(v) reviewed certain internal financial analyses and
forecasts prepared by the management of the Company relating to
its business; and (vi) performed such other financial
studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of
the management of the Company with respect to certain aspects of
the Merger, and the past and current business operations of the
Company, the financial condition and future prospects and
operations of the Company, and certain other matters we believed
necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed, without
assuming responsibility or liability for independent
verification, the accuracy and completeness of all information
that was publicly available or was furnished to or discussed
with us by the Company or otherwise-reviewed by or for us. We
have not conducted or been provided with any valuation or
appraisal of any assets or liabilities, nor have we evaluated
the solvency of the Company or the Merger Partner under any
state or federal laws relating to bankruptcy, insolvency or
similar matters. Our financial analyses which form the basis of
our opinion were performed in reliance upon the Long Range Plan
with Current Industry Outlook provided to us by management of
the Company at the direction of the Special Committee. In
relying on financial analyses and forecasts provided to us, we
have assumed that they have beeri reasonably prepared based on
assumptions reflecting the best currently available estimates
and judgments by management as to the expected future results of
operations and financial condition of the Company to which such
analyses or forecasts relate. We express no view as to such
analyses
B-1
or forecasts or the assumptions on which they were based. We
have also assumed that the Merger and the other transactions
contemplated by the Agreement will be consummated as described
in the Agreement, and that the definitive Agreement will not
differ in any material respects from the draft thereof furnished
to us. We have also assumed that the representations and
warranties made by the Company and the Merger Partner in the
Agreement and the related agreements are and will be true and
correct in all ways material to our analysis. We are not legal,
regulatory or tax experts and have relied on the assessments
made by advisors to the Company with respect to such issues. We
have further assumed that all material governmental, regulatory
or other consents and approvals necessary for the consummation
of the Merger will be obtained without any adverse effect on the
Company.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to us as of , the date hereof. It should be understood that
subsequent developments may affect this opinion and that we do
not have any obligation to update , revise, or reaffirm this
opinion. Our opinion is limited to the fairness, from a
financial point of view, of the Consideration to be paid to the
holders of the Company Common Stock (other than the Shareholder
Group) in the proposed Merger and we express no opinion as to
the fairness of the Merger to, or any consideration received in
connection therewith by, the holders of any other class of
securities, creditors or other constituencies of the Company or
as to the underlying decision by the Company to engage in the
Merger.
We note that following the public announcement by affiliates of
the Merger Partner of the proposed transaction we were
authorized to and did solicit expressions of interest from a
limited number of parties with respect to the sale of the
Company, however, such parties may not have had a sufficient
length of time to formulate meaningful proposals. Consequently,
we have assumed. that the terms of Merger are the most
beneficial terms from the Companys perspective that could
under the circumstances be negotiated among the parties to such
transactions, and no opinion is expressed whether any
alternative transaction might produce consideration for the
Companys shareholders in an amount in excess of that
contemplated in the Merger.
We have acted as financial advisor to the Special Committee with
respect to the proposed Merger and are receiving a fee from the
Company for our services, a portion of which will be payable
upon our delivery of this opinion. We may also receive a fee
upon the consummation of an alternate transaction involving the
Company, if any. We and our affiliates have performed in the
past, and may continue to perform, certain financial advisory
and financing services for the Company, all for customary
compensation. Such past services have included (i) acting
as financial advisor in connection with a review of strategic
alternatives pursuant to an engagement letter entered into in
April 2006, (ii) acting as a lead arranger in connection
with an amendment to the Companys revolving credit
facility, along with a new $600 million term loan and
$200 million second lien term loan in April 2006,
(iii) acting as an underwriter for $150 million of the
Companys senior secured
18-month term loan in
July 2005, and (iv) acting as joint lead arranger on the
Companys $1.7 billion revolving credit facility in
January 2005. In the ordinary course of our businesses, we and
our affiliates may actively trade the debt and equity securities
of the Company or the Merger Partner for our own account or for
the accounts of customers and, accordingly, we may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion
as of the date hereof that the consideration to be paid to the
holders of the Company Common Stock (other than the Shareholder
Group) in the proposed Merger is fair, from a financial point of
view, to such holders.
B-2
This letter is provided to the Special Committee of the Board of
Directors of the Company (and, at the instruction of the Special
Committee of the Board of Directors of the Company, to the Board
of Directors of the Company) in connection with and for the
purposes of its evaluation of the Merger. This opinion does not
constitute a recommendation to any shareholder of the Company as
to how such shareholder should vote with respect to the Merger
or any other matter. This opinion may not be disclosed, referred
to, or communicated (in whole or in part) to any third party for
any purpose whatsoever except with our prior written approval.
This opinion may be reproduced in full in any proxy or
information statement mailed to shareholders of the Company but
may not otherwise be disclosed publicly in any manner without
our prior written approval.
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Very truly yours, |
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![-s- J.P. Morgan](https://cdn.kscope.io/43118120ab0c7e39b7a417a23dab53ef-k12958pmk1295802.gif) |
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J.P. MORGAN SECURITIES INC. |
B-3
Appendix C
VOTING AGREEMENT
VOTING AGREEMENT, dated as of February 9, 2007 (this
Agreement), by and among the stockholders listed on
the signature page(s) hereto (collectively, the
Stockholders and each individually, a
Stockholder), and Lear Corporation, a Delaware
corporation (the Company). Capitalized terms used
and not otherwise defined herein shall have the respective
meanings ascribed to them in the Merger Agreement (as defined
below).
RECITALS
WHEREAS, as of the date hereof, the Stockholders beneficially
own an aggregate of 11,994,944 shares of common stock of
the Company, as set forth on Schedule I hereto (such
shares, or any other voting or equity securities of the Company
hereafter acquired by any Stockholder prior to the termination
of this Agreement, being referred to herein collectively as the
Shares);
WHEREAS, concurrently with the execution of this Agreement, AREP
Car Holdings Corp., a Delaware corporation (the
Parent), AREP Car Acquisition Corp., a Delaware
corporation and wholly-owned subsidiary of Parent (Merger
Sub), and the Company are entering into an Agreement and
Plan of Merger, dated as of the date hereof (the Merger
Agreement), pursuant to which, upon the terms and subject
to the conditions thereof, Merger Sub will be merged with and
into the Company, and the Company will be the surviving
corporation (the Merger); and
WHEREAS, as a condition to the willingness of the Company to
enter into the Merger Agreement, the Company has required that
the Stockholders agree, and in order to induce the Company to
enter into the Merger Agreement the Stockholders are willing, to
enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be
legally bound hereby, the parties hereby agree, severally and
not jointly, as follows:
Section 1. Voting
of Shares.
Each Stockholder covenants and agrees that until the termination
of this Agreement in accordance with the terms hereof, at the
Companys special meeting of stockholders or any other
meeting of the stockholders of the Company, however called, and
in any action by written consent of the stockholders of the
Company, such Stockholder will vote, or cause to be voted, all
of such Stockholders respective Shares owned at the record
date for such meeting or consent (i) in favor of the
adoption of the Merger Agreement and the approval of the Merger
contemplated by the Merger Agreement and any actions required in
furtherance thereof, as the Merger Agreement may be modified or
amended from time to time (provided, however, that the merger
consideration is no less than $36 per share in cash net to
the Companys stockholders) and (ii) in favor of any
Alternative Acquisition Agreement (provided, however, that the
merger consideration is no less than $36 per share in cash
net to the Companys stockholders) including, in each case,
any other matter on the ballot related to the Merger Agreement
or an Alternative Acquisition Agreement. This Agreement does not
relate to any non voting securities of the Company, or to
derivatives, swaps or other arrangements with respect to shares
of capital stock of the Company where the Stockholder has no
right to vote or direct the vote of such shares.
Section 2. Transfer
of Shares.
(a) Each Stockholder covenants and agrees that such
Stockholder will not directly or indirectly (i) sell,
assign, transfer, tender, pledge, encumber or otherwise dispose
of any of the Shares, (ii) deposit any of the Shares into a
voting trust or enter into a voting agreement or arrangement
with respect to the Shares or grant any proxy or power of
attorney with respect thereto that is inconsistent with this
Agreement or (iii) enter into any contract, option or other
arrangement or undertaking with respect to the direct or
indirect sale, assignment, transfer, tender, pledge,
encumbrance, or other disposition of any Shares; provided,
however, that notwithstanding the foregoing a Stockholder
may transfer Shares or agree to transfer Shares to any Affiliate
of
C-1
the Stockholder, including, but not limited to Parent or Merger
Sub, provided that in each such case the transferee
agrees in writing to be bound by this Agreement. Nothing herein
shall restrict or otherwise limit the encumbrance or pledge of
Shares pursuant to margin and/or other pledge arrangements,
provided that in the event of any new margin or pledge
arrangement, the voting rights of such Shares shall be subject
to Section 1 hereof.
(b) Each Stockholder agrees to extend the Effectiveness
Deadline (as such term is defined in the Stock Purchase
Agreement) to a day sixty (60) days after any termination
of the Merger Agreement.
Section 3. Waiver
of Appraisal Rights. Each Stockholder hereby waives, to
the full extent of the law, and agrees not to assert any
appraisal rights pursuant to Section 262 of the DGCL or
otherwise in connection with the Merger with respect to any and
all Shares held by the undersigned of record or beneficially
owned.
Section 4. Representations
and Warranties of the Stockholders. Each Stockholder on
his or its own behalf hereby severally represents and warrants
to the Company with respect to such Stockholder and such
Stockholders ownership of the Shares as follows:
(a) Number of Shares. Each Stockholder
represents, warrants and agrees that Schedule I annexed
hereto sets forth, adjacent to the name of such stockholder, the
number of Shares of which the Stockholder is the beneficial
owner (it being understood and agreed that the beneficial
ownership shall not include any rights with respect to
derivatives, swaps or other arrangements). Each Stockholder
represents, warrants and agrees that, as of the date hereof,
those Shares on Schedule I constitute all of the Shares of
which such Stockholder has the power to vote or direct the vote.
High River Limited Partnership and Koala Holding Limited
Partnership represent that the Shares subject to this Voting
Agreement are all of the Shares in which Carl C. Icahn or his
affiliates have beneficial ownership or voting rights.
(b) Power, Binding Agreement. The Stockholder
is a limited partnership duly formed, under the laws of its
state of formation and has full limited partnership power and
authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Stockholder and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by the appropriate governing body of
the Stockholder, and, no other limited partnership proceedings
on the part of the Stockholder are necessary to authorize the
execution, delivery and performance of this Agreement by the
Stockholder and the consummation of the transactions
contemplated hereby. The Stockholder has duly and validly
executed this Agreement and this Agreement constitutes a legal,
valid and binding obligation of the Stockholder enforceable
against the Stockholder in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting
creditors rights generally and by general equitable
principles (regardless of whether enforceability is considered
in a proceeding in equity or at law).
Section 5. Representations
and Warranties of the Company. Company represents and
warrants to Stockholders as follows:
(a) Power, Binding Agreement. Company is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has full
corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
Merger Agreement by the Company and the consummation of the
transactions contemplated hereby and thereby have been duly and
validly authorized by the Board of Directors of the Company,
and, no other corporate proceedings on the part of the Company
are necessary to authorize the execution, delivery and
performance of this Agreement and the Merger Agreement by the
Company and the consummation of the transactions contemplated
hereby and thereby. The Company has duly and validly executed
this Agreement and this Agreement constitutes a legal, valid and
binding obligation of the Company enforceable against the
Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting
creditors rights generally and by general equitable
principles (regardless of whether enforceability is considered
in a proceeding in equity or at law).
C-2
Section 6. Termination.
Notwithstanding any other provision herein, the obligations of
the Stockholders set forth in this Agreement shall not be
effective or binding until after such time as the Merger
Agreement is executed and delivered by Parent, Merger Sub and
the Company. This Agreement shall terminate immediately upon the
earlier of (i) termination of the Merger Agreement in
accordance with its terms unless such termination is pursuant to
Section 7.1(g) or 7.1(i) of the Merger Agreement, in which
event this Agreement will terminate upon the termination of any
obligation under the Alternative Acquisition Agreement for which
the Stockholders are required to vote pursuant to the provisions
set forth in Section 1 hereof, and (ii) the Effective
Time or in the event such an Alternative Acquisition Agreement
is entered into, the consummation of the transaction
contemplated by such Alternative Acquisition Agreement, or if
earlier, the termination of such Alternative Acquisition
Agreement. Upon such termination, this Agreement shall
immediately become void, there shall be no liability hereunder
on the part of the Stockholders and all rights and obligations
of the parties to this Agreement shall cease.
Section 7. Specific
Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that
the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in
equity.
Section 8. Miscellaneous.
(a) Entire Agreement. This Agreement
constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, between
the parties with respect thereto. This Agreement may not be
amended, modified or rescinded except by an instrument in
writing signed by each of the parties hereto.
(b) Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible to the fullest extent
permitted by applicable law in a mutually acceptable manner in
order that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
(c) Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware without regard to the principles of conflicts
of law thereof.
(d) Counterparts. This Agreement may be
executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the
same instrument.
(e) Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
duly delivered (i) three business days after being sent by
hand delivery in writing, by facsimile or electronic
transmission, by registered or certified mail, return receipt
requested, postage prepaid, or (ii) one business day after
being sent for next business day delivery, fees prepaid, via a
reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
(i) if to a Stockholder to:
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c/o Icahn Associates Corp. |
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767 Fifth Avenue, Suite 4700 |
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New York, New York 10153 |
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Attention: General Counsel |
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Facsimile: 212-688-1158 |
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Email: mweitzen@sfire.com |
C-3
(ii) if to Company to:
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Lear Corporation |
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21557 Telegraph Road |
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Southfield, MI 48033 |
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Attention: Daniel A. Ninivaggi |
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Facsimile: (248)447-1677 |
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E-Mail:
dninivaggi@lear.com |
(ii) with a copy (which shall not constitute notice) to:
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Winston & Strawn LLP |
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35 West Wacker Drive |
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Chicago, IL 60601 |
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Attention: Bruce A. Toth, Esq. |
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Facsimile: (312) 558-5700 |
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Email: btoth@winston.com |
(f) No Third Party Beneficiaries. This
Agreement is not intended, and shall not be deemed, to confer
any rights or remedies upon any person other than the parties
hereto and their respective successors and permitted assigns.
(g) Assignment. Except as provided in
Section 2 hereof, neither this Agreement nor any of the
rights, interests or obligations under this Agreement may be
assigned or delegated, in whole or in part, by operation of law
or otherwise by any of the parties hereto without the prior
written consent of the other parties and any such assignment
without such prior written consent shall be null and void.
Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and permitted
assigns.
(h) Interpretation. When reference is made in
this Agreement to a Section, such reference shall be to a
Section of this Agreement, unless otherwise indicated. The
headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or
interpretation of this Agreement. The language used in this
Agreement shall be deemed to be the language chosen by the
parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party. Whenever
the context may require, any pronouns used in this Agreement
shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include
the plural, and vice versa. Any reference to any federal, state,
local or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the
context requires otherwise. Whenever the words
include, includes or
including are used in this Agreement, they shall be
deemed to be followed by the words without
limitation. No summary of this Agreement prepared by the
parties shall affect in any way the meaning or interpretation of
this Agreement.
(i) Submission to Jurisdiction. Each of the
parties to this Agreement (i) consents to submit itself to
the personal jurisdiction of any state or federal court sitting
in the State of Delaware in any action or proceeding arising out
of or relating to this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that all claims
in respect of such action or proceeding may be heard and
determined in any such court, (iii) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and
(iv) agrees not to bring any action or proceeding arising
out of or relating to this Agreement or any of the transactions
contemplated by this Agreement in any other court. Each of the
parties hereto waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives
any bond, surety or other security that might be required of any
other party with respect thereto. Any party hereto may make
service on another party by sending or delivering a copy of the
process to the party to be served at the address and in the
manner provided for the giving of notices in Section 9(e).
Nothing in this Section, however, shall affect the right of any
party to serve legal process in any other manner permitted by
law.
C-4
(j) WAIVER OF JURY TRIAL. EACH OF THE COMPANY
AND EACH STOCKHOLDER HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE
ACTIONS OF THE COMPANY, THE COMPANY OR EACH STOCKHOLDER IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS
AGREEMENT.
[remainder of page left blank intentionally]
C-5
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be signed individually or by its respective duly
authorized officer as of the date first written above.
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HIGH RIVER LIMITED PARTNERSHIP |
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Name: Vince Intieri |
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Title: Authorized Signatory |
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KOALA HOLDING LIMITED PARTNERSHIP |
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Name: Vince Intieri |
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Title: Authorized Signatory |
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ICAHN PARTNERS MASTER FUND LP |
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Name: Keith Meister |
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Title: Authorized Signatory |
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ICAHN PARTNERS LP |
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Name: Keith Meister |
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Title: Authorized Signatory |
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LEAR CORPORATION |
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By: |
/s/ Robert E. Rossiter |
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Name: Robert E. Rossiter |
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Title: Chairman and Chief Executive Officer |
C-6
SCHEDULE I
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Number of Shares |
Stockholder Name |
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of Common Stock |
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High River Limited Partnership
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659,860 |
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Koala Holding Limited Partnership
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1,739,131 |
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Icahn Partners Master Fund LP
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5,526,235 |
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Icahn Partners LP
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4,069,718 |
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Total
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11,994,944 |
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C-7
Appendix D
GUARANTY OF PAYMENT
This Guaranty (this Guaranty) is made as of
February 9, 2007 by American Real Estate Partners, L.P., a
Delaware limited partnership (the Guarantor),
in favor of Lear Corporation, a Delaware corporation (the
Company). Unless otherwise defined herein,
all capitalized terms used herein shall have the meaning
ascribed to them in the Agreement (as defined below).
WHEREAS, as an inducement to the Companys willingness to
enter into the Agreement and Plan of Merger (the
Agreement), dated February 9, 2007, by
and among AREP Car Holdings Corp., a Delaware corporation
(Parent), AREP Car Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent
(Merger Sub), and Company, Guarantor has
agreed to guarantee the performance of Parent and Merger Sub,
respectively, of their Obligations (as defined below) under the
Agreement.
NOW, THEREFORE, the Guarantor hereby agrees with the Company as
follows:
Section 1. Guaranty
of Obligations. The Guarantor hereby irrevocably and
unconditionally guarantees to Company the payment by Parent and
Merger Sub of their obligations, if any, to the Company pursuant
to Section 7.4(f) of the Agreement (the
Obligations). This Guaranty is an absolute,
unconditional and continuing guarantee of the payment, and not a
guarantee of collection.
Section 2. Representations
and Warranties. The Guarantor represents and warrants
that:
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(a) Organization and Good Standing. The
Guarantor is a limited partnership duly organized and validly
existing in good standing under the laws of the State of
Delaware and has full power and authority to own its properties
and to conduct its business as such properties are presently
owned and such business is presently conducted. |
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(b) Due Qualification. The Guarantor is duly
qualified to do business and is in good standing as a foreign
corporation, and has obtained all necessary licenses and
approvals, in all jurisdictions in which the ownership or lease
of property or the conduct of its business requires such
qualification, licenses or approvals, except where the failure
to so qualify to obtain such licenses and approvals or to
preserve and maintain such qualification, licenses or approvals
could not reasonably be expected to give rise to a material
adverse effect with respect to the Guarantor. |
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(c) Power and Authority; Due Authorization.
The Guarantor has all necessary limited partnership power and
authority to execute and deliver this Guaranty and to perform
all its obligations hereunder. The execution, delivery and
performance of this Guaranty has been duly authorized by all
necessary limited partnership action. |
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(d) Binding Obligations. This Guaranty
constitutes the legal, valid and binding obligation of the
Guarantor, enforceable against the Guarantor in accordance with
its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law. |
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(e) No Conflict or Violation. The execution,
delivery and performance of this Guaranty, and the fulfillment
of the terms hereof, will not (i) conflict with, violate,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a
default under, (A) the certificate of limited partnership
or Agreement of Limited Partnership, as amended, of the
Guarantor or (B) any indenture, loan agreement, mortgage,
deed of trust, or other material agreement or instrument to
which the Guarantor is a party or by which it or any of its
properties is bound or (ii) conflict with or violate any
federal, state, local or foreign law or any decision, decree,
order, rule or regulation applicable to the Guarantor or any of
its properties of any court or of any federal, state, local or
foreign regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the
Guarantor or any of its properties, except such conflict or
violation described in clause (i)(B) and clause (ii), |
D-1
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individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the ability of the
Guarantor to perform its obligations under this Guaranty or the
validity or enforceability of this Guaranty. |
Section 3. Guarantors
Acknowledgment. The Guarantor hereby acknowledges that
the Company entered into the transactions contemplated by the
Agreement in reliance upon the execution of this Guaranty.
Section 4. Termination
of Guaranty. The Guarantors obligations hereunder
shall continue in full force and effect until the closing of the
transactions contemplated by the Agreement or the termination
thereof as provided therein (except that Section 1 hereof
shall survive such termination).
Section 5. Successors
and Assigns. This Guaranty shall be binding upon the
Guarantor and its successors and assigns, and shall inure to the
benefit of and be enforceable by the Company and its respective
successors, transferees and assigns. The Guarantor may not
assign or transfer any of its obligations hereunder without the
prior written consent of the Company.
Section 6. Amendments
and Waivers. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantor
therefrom shall be effective unless the same shall be in writing
and signed by the Company. No failure on the part of the Company
to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
Section 7. Notices.
All notices and other communications called for hereunder shall
be made in writing and, unless otherwise specifically provided
herein, shall be deemed to have been duly made or given when
delivered by hand or mailed first class, postage prepaid, or, in
the case of telecopied or telexed notice, when transmitted,
answer back received, addressed as follows: (i) if to the
Guarantor, White Plains Plaza, 445 Hamilton
Avenue Suite 1210, White Plains, NY 10601,
Attention: Felicia Buebel, Esq.,
Facsimile: (914) 614-7001 and (ii) if to Company,
at its address for notices set forth in the Agreement.
Section 8. Governing
Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware (without
giving effect to choice of law principles thereof that would
result in the application of the laws of another jurisdiction).
Section 9. Submission
to Jurisdiction. Each of the parties hereto
(a) consents to submit itself to the personal jurisdiction
of any Delaware chancery or federal court located in the City of
Wilmington in the event any dispute arises out of this Agreement
or any transaction contemplated by this Guaranty,
(b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from
any such court, (c) agrees that it will not bring any
action relating to this Guaranty or any transaction contemplated
by this Guaranty in any court other than any such court and
(d) waives any right to trial by jury with respect to any
action related to or arising out of this Guaranty or any
transaction contemplated by this Guaranty. Each of the parties
irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of
this Guaranty or the transactions contemplated hereby in
Delaware chancery or federal courts located in the City of
Wilmington, and hereby further irrevocably and unconditionally
waives and agree not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
Section 10. WAIVER
OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR RELATING TO THIS GUARANTY, OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF EITHER OF THE
PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION
WITH THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
D-2
Section 11. Counterparts.
This Guaranty may be executed in counterparts, each of which
shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same agreement.
Section 12. Miscellaneous.
This Guaranty constitutes the entire agreement of the Guarantor
with respect to the matters set forth herein. No failure on the
part of the Company to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other
right. The rights and remedies herein provided are cumulative
and not exclusive of any remedies provided by law or any other
agreement. The provisions of this Guaranty are severable, and in
any action or proceeding involving any state corporate law, or
any state or federal bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the
obligations of the Guarantor hereunder would otherwise be held
or determined to be avoidable, invalid or unenforceable on
account of the amount of the guaranty, the amount of such
liability shall, without any further action by the Guarantor be
automatically limited and reduced to the highest amount that is
valid and enforceable as determined in such action or
proceeding. The invalidity or unenforceability of any one or
more sections of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are for
ease of reference only and shall not affect the meaning of the
relevant provisions.
[Remainder of page intentionally left blank.]
D-3
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed and delivered as of the date first above written.
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AMERICAN REAL ESTATE PARTNERS, L.P. |
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By: American Property Investors, Inc., its general partner |
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Name: Hillel Moerman |
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Title: Chief Financial Officer |
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LEAR CORPORATION |
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By: |
/s/ Robert E. Rossiter |
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Name: Robert E. Rossiter |
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Title: Chairman and Chief Executive Officer |
[Signature Page to Guaranty]
D-4
Appendix E
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this
Amendment) is made by and between Lear Corporation,
a Delaware corporation (the Company) and Douglas G.
DelGrosso (Employee or you) and is
entered into effective as of the consummation (the Closing
Date) of the transactions contemplated by the AGREEMENT
AND PLAN OF MERGER, dated as of February 9, 2007 (the
Merger Agreement), by and among AREP Car Holdings
Corp., a Delaware corporation (Parent), AREP Car
Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent (Merger Sub), and the Company.
RECITALS
A. The Company employs Employee pursuant to that certain
Employment Agreement by and between the Company and Employee
dated March 15, 2005 (Employment Agreement);
B. The Company and the Employee desire to amend the
Employment Agreement to provide for the Companys continued
employment of Employee.
NOW, THEREFORE, in consideration of the foregoing, the
covenants hereinafter set forth, and for other good and valuable
consideration, intending to be legally bound hereby, the parties
hereto hereby amend the Employment Agreement as follows:
AGREEMENT
1. Section 2 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
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2. Terms of Employment. During the Term, you agree
to be a full-time employee of the Company serving in the
position of Chief Executive Officer. You agree to devote
substantially all of your working time and attention to the
business and affairs of the Company, to discharge the
responsibilities associated with your position with the Company,
and to use your best efforts to perform faithfully and
efficiently such responsibilities. In addition, you agree to
serve in such other or different capacities or offices to which
you may be assigned, appointed or elected from time to time by
the Company. Nothing herein shall prohibit you from devoting
your time to civic and community activities, serving as a member
of the Board of Directors of other corporations that do not
compete with the Company, or managing personal investments, as
long as the foregoing do not interfere with the performance of
your duties hereunder or violate the terms of the Companys
Code of Business Ethics and Conduct, the Companys
Corporate Governance Guidelines, or other policies applicable to
the Companys executives generally, as those policies may
be amended from time to time by the Company. |
2. Section 3 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
3. Compensation.
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(a) As compensation for your services under this Agreement,
you shall be entitled during the Term to receive an initial base
salary the annualized amount of which shall be $1,150,000.00, to
be paid in accordance with existing payroll practices for the
Company. Increases in your base salary, if any, shall be as
approved by the Board or a committee appointed by the Board. In
addition, during the first year of the Term you shall receive an
annual incentive compensation bonus of at least 125% of the
initial base salary (the Initial Bonus). The Initial
Bonus shall be paid on the first anniversary of the Closing
Date. Subsequent bonuses shall be paid in such amount and at
such times as may be approved from time to time by the Board or
a committee appointed by the Board, but in no event later than
two and a half months following the calendar year in which the
subsequent bonuses are earned by you. |
E-1
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(b) During the Term, you shall be eligible for
participation in the welfare, retirement, perquisite and fringe
benefit, and other benefit plans, practices, policies and
programs, as may be in effect from time to time, for senior
executives of the Company generally. |
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(c) During the Term, you shall be eligible for prompt
reimbursement for business expenses reasonably incurred by you
in accordance with the Companys policies, as may be in
effect from time to time, for its senior executives generally. |
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(d) On or as soon as practicable following the Closing
Date, the Company will establish and maintain an Award Plan
(New Plan) providing for awards of up to 6% of the
Companys outstanding common stock to be available for
grants to Company employees. On, or as soon as practicable
following the Closing Date, you shall be awarded an option
(New Option) to purchase .6% of the Companys
then outstanding common stock. The New Option shall have a term
of ten (10) years and shall have an exercise price per
share equal to the aggregate purchase price (to be determined at
the Effective Time, as defined in the Merger Agreement) paid
under the Merger Agreement divided by the number of outstanding
shares of Company common stock following the consummation of the
transactions contemplated by the Merger Agreement. The New
Option shall vest equally on an annual basis at a rate of
twenty-five percent per year over a period of four
(4) years and shall accelerate and fully vest upon
(i) a Change in Control following the Closing Date; or
(ii) your termination pursuant to Section 5(d) of this
Agreement. The Company shall have the right to repurchase any
shares awarded pursuant to the exercise of the New Option at
Fair Market Value following your termination of employment. Fair
Market Value shall be defined as the value of the Company as
determined by a nationally recognized independent appraiser
selected by the Company; provided, however, that in the event
the independent appraiser shall indicate a range of value, the
parties agree that the median of the range shall be used. The
terms of the New Option will be subject to the terms of the New
Plan and the New Option grant agreement. |
3. Section 4(b) of the Employment Agreement
shall be amended by adding the following language at the end of
that section:
Notwithstanding the foregoing, for purposes of the compensation
under this Agreement subject to Section 409A of the Code,
Incapacity shall mean you (A) are unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, or
(B) you are, by reason of any medically determinable
physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement
benefits for a period of not less than three (3) months
under a Company-sponsored group disability plan.
4. Section 4(d) of the Employment Agreement
shall be deleted in its entirety and replaced to read as follows:
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(d) Good Reason. For purposes of this Agreement,
Good Reason shall mean the occurrence of any of the
following circumstances or events: |
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(i) any reduction by the Company in your base salary or
adverse change in the manner of computing your Bonus, as in
effect from time to time, except for
across-the-board salary
reductions or changes to the manner of computing bonuses
similarly affecting all executive officers of the Company
subject to Section 16(b) of the Securities Exchange Act of
1934, as amended, as determined by the Board (executive
officers); |
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(ii) the failure by the Company to pay or provide to you
any amounts of base salary, the Initial Bonus or other Bonuses
or any benefits which are due, owing and payable to you pursuant
to the terms hereof, except pursuant to an
across-the-board
compensation deferral similarly affecting all executive
officers, or to pay to you any portion of an installment of
deferred compensation due under any deferred compensation
program of the Company; |
E-2
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(iii) except in the case of
across-the-board
reductions, deferrals, eliminations, or plan modifications
similarly affecting all executive officers, the failure by the
Company to continue to provide you with benefits substantially
similar in the aggregate to the Companys life insurance,
medical, dental, health, accident or disability plans in which
you are participating following the Closing Date; |
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(iv) except on a temporary basis as described in
Section 4(b), a material adverse change in your
responsibilities, position, reporting relationships, authority
or duties; or |
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(v) without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company. |
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However, the language in Sections 4(d)(i) through
(iii) concerning reductions, changes, deferrals,
eliminations, or plan modifications similarly affecting all
executive officers of the Company shall not be applicable to
circumstances or events occurring in anticipation of, or within
one year after, a Change in Control, as defined in
Section 4(e). In addition, upon a Change in Control, you
shall have the right to resign for Good Reason if your principal
place of employment is transferred to a location fifty
(50) or more miles from its location immediately preceding
the transfer. |
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Notwithstanding anything else herein, Good Reason shall not
exist if, with regard to the circumstances or events relied upon
in your Notice of Termination: (x) you failed to provide a
Notice of Termination to the Company within sixty (60) days
after the date you knew or should have known of such
circumstances or events, (y) the circumstances or events
are fully corrected by the Company prior to the Date of
Termination, or (z) you give your express written consent
to the circumstances or events. |
5. Section 4 (e) shall be deleted in its
entirety and replaced to read as follows:
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(e) Change in Control. For purposes of this
Agreement, a Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more
of the following paragraphs is satisfied: |
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(i) any Person as that term is used in
Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the Exchange Act)
(other than the Company or a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, a
corporation owned directly or indirectly by the shareholders of
the Company in substantially the same proportions as their
ownership of stock of the Company or an affiliate of Carl Icahn)
becomes the Beneficial Owner, as that term is defined in
Rule 13d-3 of the
General Rules and Regulations under the Exchange Act, directly
or indirectly, of securities of the Company, representing more
than fifty percent of the combined voting power of the
Companys then outstanding securities. |
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(ii) during any period of twenty-six consecutive months
beginning on or after the Closing Date, individuals who at the
beginning of the period constituted the Board cease for any
reason (other than death, disability or voluntary retirement) to
constitute a majority of the Board. For this purpose, any new
Director whose election by the Board, or nomination for election
by the Companys shareholders, was approved by a vote of at
least a majority of the Directors then still in office, and who
either were Directors at the beginning of the period or whose
election or nomination for election was so approved, will be
deemed to have been a Director at the beginning of any
twenty-six month period under consideration. |
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(iii) the shareholders of the Company approve: (A) a
plan of complete liquidation or dissolution of the Company; or
(B) an agreement for the sale or disposition of all or
substantially all the Companys assets; or (C) a
merger, consolidation or reorganization of the Company with or
involving any other corporation, other than a merger,
consolidation or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least eighty percent of the combined voting power of the
voting securities of the |
E-3
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Company (or such surviving entity) outstanding immediately after
such merger, consolidation, or reorganization. |
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Notwithstanding anything else herein, a Change in Control shall
not include (x) the transactions contemplated by the Merger
Agreement or any transaction between the Company and/or Parent
and a related party. For this purpose, a related party shall
include any entity that would qualify as under common control,
part of a controlled group, or part of an affiliated service
group under Code section 414 and the Treasury Regulations
thereunder, with 50% replacing 80% wherever it appears in Code
section 414 and the Treasury Regulations thereunder, or
(y) any affiliate of Carl Icahn; or (z) a public
offering of the Companys common stock. |
6. Section 5(d) shall be deleted in its
entirety and replaced to read as follows:
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(d) If your employment shall be terminated (a) by the
Company, except for a termination by the Company for Cause or
Incapacity or by a Notice of Non-Renewal (or due to your death),
or (b) by you for Good Reason, then you shall be entitled
to the benefits provided below: |
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(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given (or, if greater, at the rate in
effect at any time within 90 days prior to the time the
Notice of Termination is given), plus all other amounts to which
you are entitled under any compensation or benefit plans of the
Company, including, without limitation, (a) the Initial
Bonus, which shall not be pro rated in the event you are
terminated prior to the one-year anniversary of the Closing
Date; or (b) if you are terminated after the one-year
anniversary of the Closing Date, a Bonus prorated for the
portion of the Bonus measurement period occurring prior to the
Date of Termination, at the time such payments are due, except
as otherwise provided below. |
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(ii) Conditioned upon your execution of a general release
relating to your employment in form and substance reasonably
acceptable to the Company, the Company shall pay or cause to be
paid to you, in lieu of any further payments to you for the
portion of the Term subsequent to the Date of Termination an
amount (the Severance Payment), which shall be equal
to the sum of: |
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(A) the aggregate base salary (at the highest rate in
effect at any time during the Term) which you would have
received pursuant to this Agreement for the Severance Period had
your employment with the Company continued for such
period, and |
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(B) the aggregate Bonus based upon the highest annual Bonus
that you received with respect to any calendar year during the
two years immediately preceding the calendar year in which the
Date of Termination occurred, or, in the event that the Date of
Termination occurs prior to the first anniversary of the Closing
Date, based upon the Initial Bonus pursuant to Section 3
above. |
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The Severance Payment shall be paid over a period of two
(2) years (the Severance Period) in the
following manner: to the extent Section 409A does not apply
to the Severance Payment, an amount equal to fifty percent (50%)
of the value of the Severance Payment shall be paid in a lump
sum as soon as administratively practicable after your
Termination Date, and an amount equal to the remaining fifty
percent (50%) paid in equal semi-monthly installments, without
interest, beginning six (6) months after the Date of
Termination and continuing through the end of the Severance
Period. To the extent Section 409A applies to the Severance
Payment, an amount equal to fifty (50%) of the value of the
Severance Payment shall be paid on the first day of the seventh
month following the Date of Termination, and the remaining fifty
(50%) shall be paid in equal semimonthly installments without
interest beginning on the eighth month after the Date of
Termination and continuing through the end of the Severance
Period. |
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(iii) All outstanding awards, and all amounts owing or
accrued, on the Date of Termination under the Lear Corporation
Long-Term Stock Incentive Plan (LTSIP), the Lear
Corporation Management Stock Purchase Plan (MSPP),
the Lear Corporation Executive Supplemental |
E-4
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Savings Plan (ESSP) and the Lear Corporation Pension
Equalization Program (PEP), and any other
compensation or equity-based plan, program or arrangement of the
Company in which you participated (including, following a Change
in Control, any additional accruals provided thereunder due to a
Change in Control) and any similar successor plans, programs or
arrangements of the Company in which you have participated, to
the extent not previously paid or provided to you in accordance
with Section 24 of this Agreement, shall become due and
owing on the Date of Termination and shall be paid to you under
the terms and conditions of such plans, programs and
arrangements (and the award agreements and other documents
thereunder). You and the Company acknowledge that references in
this Section 5(d)(iii) to the PEP, the MSPP, the ESSP, and
the LTSIP, shall be deemed to be references to such plans as
amended or restated from time to time and to any similar plan of
the Company that supplements or supersedes any such plans. In
addition, you and the Company acknowledge that references in
this Section 5 to any section of the Code shall be deemed
to be references to such section as amended from time to time or
to any successor thereto. |
7. Section 10(e) shall be deleted in its
entirety.
8. Section 22 shall be amended by adding the
following language at the end of the section:
If and to the extent applicable, Parent shall cause the Company
or the Merger Sub, whichever survives the transaction
contemplated by the Merger Agreement, to select a
specified employee identification date as soon as
administratively feasible following the Closing Date in
accordance with Section 409A of the Code and Treasury
Regulation § 1.409A.
9. A new Section 23 shall be added as follows:
The Company (or any successor thereto) shall fully indemnify you
in accordance with the Companys charter, bylaws and other
organizational documents or as specified under Delaware law,
whichever provides you the greatest rights of indemnity (which
rights shall include rights of advancement). The Company shall
also provide, and maintain as current, a policy of Directors and
Officers liability insurance for the duration of the Agreement
Term.
10. A new Section 24 shall be added as follows:
Notwithstanding the foregoing provisions of this Agreement, all
outstanding awards, and all amounts owing or accrued under the
Lear Corporation LTSIP, MSPP, ESSP PEP, and any other
compensation or equity-based plan, program or arrangement of the
Company in which you participate, shall, in connection with the
consummation of the transactions contemplated by the Merger
Agreement, vest and shall, except as set forth below, be paid to
you under the terms and conditions of such plans, programs or
arrangements (and the award agreements and other documents
thereunder) and in accordance with the terms of the Merger
Agreement and this Amendment. In addition, the Company shall
take such actions as are necessary to allow you to elect to
receive (x) at least 70% of your accrued benefit in PEP and
the ESSP pension
make-up account (the
Pension Make-Up Account)(which provides a
benefit to participants equal to the benefit that would have
accrued under the Lear Corporation Pension Plan and/or the PEP,
had the participants not elected to defer compensation under
Section 2.2 of the ESSP and not elected to defer
compensation under the Management Stock Purchase Plan) on
January 15, 2008 and (y) up to the remaining 30% of
the accrued benefit in PEP and the Pension
Make-up Account on
January 15, 2009.
Any elections and percentages with respect to the payout of the
PEP and Pension Make-Up Account shall be made and fixed no later
than December 31, 2007.
Other than as set forth herein, in all other respects the
Employment Agreement remains in full force and effect in
accordance with the terms thereof.
E-5
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the 9th day of February, 2007.
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By: |
/s/ Daniel A. Ninivaggi |
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Agreed to this 9th day of February, 2007: |
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/s/ Douglas G. DelGrosso |
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Douglas G. DelGrosso |
E-6
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this
Amendment) is made by and between Lear Corporation,
a Delaware corporation (the Company) and Robert E.
Rossiter (Employee or you) and is
entered into effective as of the consummation (the Closing
Date) of the transactions contemplated by the AGREEMENT
AND PLAN OF MERGER, dated as of February 9, 2007 (the
Merger Agreement), by and among AREP Car Holdings
Corp., a Delaware corporation (Parent), AREP Car
Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent (Merger Sub), and the Company.
RECITALS
A. The Company employs Employee pursuant to that certain
Employment Agreement by and between the Company and Employee
dated March 15, 2005 (Employment Agreement);
B. The Company and the Employee desire to amend the
Employment Agreement to provide for the Companys continued
employment of Employee.
NOW, THEREFORE, in consideration of the foregoing, the
covenants hereinafter set forth, and for other good and valuable
consideration, intending to be legally bound hereby, the parties
hereto hereby amend the Employment Agreement as follows:
AGREEMENT
1. Section 1 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
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1. Term. This Agreement shall commence as of the
Closing Date (Effective Date). The initial term of
this Agreement shall be for three (3) years from the
Effective Date. Thereafter, this Agreement shall continue for
consecutive periods of one year unless written notice is
provided by either the Company or you that this Agreement is not
to be further extended (a Notice of Non-Renewal) at
least 60 days prior to the end of the initial term or any
subsequent one year period, as applicable, upon which date this
Agreement will terminate unless earlier terminated upon the
earliest to occur of the date set forth in a Notice of
Termination provided pursuant to Section 4, the date of
your death, or the date you reach your normal retirement date
under the Lear Corporation Pension Plan or its successor (the
initial term as so extended is referred to herein as the
Term). In consideration of the Amendment, the
Company is continuing your employment on the terms set forth in
this Agreement, as amended, and is providing you other good and
valid consideration by entering into this Agreement, as amended,
the receipt and sufficiency of which consideration you hereby
acknowledge by executing this Agreement, as amended by the
Amendment. |
2. Section 2 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
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2. Terms of Employment. During the first two
(2) years of the Term, you agree to be a full-time employee
of the Company serving in the position of Executive Chairman of
the Board of the Company. In the third year of the Term you will
serve as the Non-Executive Chairman of the Board of the Company.
You agree to devote substantially all of your working time and
attention to the business and affairs of the Company, to
discharge the responsibilities associated with your position
with the Company, and to use your best efforts to perform
faithfully and efficiently such responsibilities. In addition,
you agree to serve in such other or different capacities or
offices to which you may be assigned, appointed or elected from
time to time by the Company. Nothing herein shall prohibit you
from devoting your time to civic and community activities,
serving as a member of the Board of Directors of other
corporations that do not compete with the Company, or managing
personal investments, as long as the foregoing do not interfere
with the performance of your duties hereunder or violate the
terms of the Companys Code of Business Ethics and Conduct,
the Companys Corporate Governance Guidelines, or other
policies |
E-7
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applicable to the Companys executives generally, as those
policies may be amended from time to time by the Company. |
3. Section 3 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
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(a) As compensation for your services under this Agreement,
you shall be entitled during the Term to receive an initial base
salary the annualized amount of which shall be $1,150,000.00, in
the first two years, and $700,000.00 in the third year, to be
paid in accordance with existing payroll practices for the
Company. Increases in your base salary, if any, shall be as
approved by the Board or a committee appointed by the Board. In
addition, during the first year of the Term you shall receive an
annual incentive compensation bonus of at least 150% of the
initial base salary (the Initial Bonus). The Initial
Bonus shall be paid on the first anniversary of the Closing
Date. Subsequent bonuses shall be paid in such amount and at
such times as may be approved from time to time by the Board or
a committee appointed by the Board, but in no event later than
two and a half months following the calendar year in which the
subsequent bonuses are earned by you. |
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(b) During the Term, you shall be eligible for
participation in the welfare, retirement, perquisite and fringe
benefit, and other benefit plans, practices, policies and
programs, as may be in effect from time to time, for senior
executives of the Company generally. |
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(c) During the Term, you shall be eligible for prompt
reimbursement for business expenses reasonably incurred by you
in accordance with the Companys policies, as may be in
effect from time to time, for its senior executives generally. |
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(d) On or as soon as practicable following the Effective
Date, the Company will establish and maintain an Award Plan
(New Plan) providing for awards of up to 6% of the
Companys outstanding common stock to be available for
grants to Company employees. On, or as soon as practicable
following the Effective Date, you shall be awarded an option
(New Option) to purchase 0.6% of the Companys
then outstanding common stock. The New Option shall have a term
of ten (10) years and shall have an exercise price per
share equal to the aggregate purchase price (to be determined at
the Effective Time, as defined in the Merger Agreement) paid
under the Merger Agreement divided by the number of outstanding
shares of Company common stock following the consummation of the
transactions contemplated by the Merger Agreement. The New
Option shall vest equally on an annual basis at a rate of
twenty-five percent per year over a period of four
(4) years and shall accelerate and fully vest upon
(i) a Change in Control following the Closing Date; or
(ii) your termination pursuant to Section 5(d) of this
Agreement. The New Option shall become fully vested upon a
Change in Control occurring following the Effective Date. The
Company shall have the right to repurchase any shares awarded
pursuant to the exercise of the New Option at Fair Market Value
following your termination of employment. Fair Market Value
shall be defined as the value of the Company as determined by a
nationally recognized independent appraiser selected by the
Company; provided, however, that in the event the independent
appraiser shall indicate a range of value, the parties agree
that the median of the range shall be used. The terms of the New
Option will be subject to the terms of the New Plan and the New
Option grant agreement. |
4. Section 4(b) of the Employment Agreement
shall be amended by adding the following language at the end of
that section:
Notwithstanding the foregoing, for purposes of the compensation
under this Agreement subject to Section 409A of the Code,
Incapacity shall mean you (A) are unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, or
(B) you are, by reason of any medically determinable
physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not
less than twelve (12) months,
E-8
receiving income replacement benefits for a period of not less
than three (3) months under a Company-sponsored group
disability plan.
5. Section 4(d) of the Employment Agreement
shall be deleted in its entirety and replaced to read as follows:
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(d) Good Reason. For purposes of this Agreement,
Good Reason shall mean the occurrence of any of the
following circumstances or events: |
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(i) any reduction by the Company in your base salary or
adverse change in the manner of computing your Bonus, as in
effect from time to time, except for
across-the-board salary
reductions or changes to the manner of computing bonuses
similarly affecting all executive officers of the Company
subject to Section 16(b) of the Securities Exchange Act of
1934, as amended, as determined by the Board (executive
officers); |
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(ii) the failure by the Company to pay or provide to you
any amounts of base salary, the Initial Bonus or other Bonuses
or any benefits which are due, owing and payable to you pursuant
to the terms hereof, except pursuant to an
across-the-board
compensation deferral similarly affecting all executive
officers, or to pay to you any portion of an installment of
deferred compensation due under any deferred compensation
program of the Company; |
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(iii) except in the case of
across-the-board
reductions, deferrals, eliminations, or plan modifications
similarly affecting all executive officers, the failure by the
Company to continue to provide you with benefits substantially
similar in the aggregate to the Companys life insurance,
medical, dental, health, accident or disability plans in which
you are participating following the Effective Date; |
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(iv) except on a temporary basis as described in
Section 4(b), a material adverse change in your
responsibilities, position, reporting relationships, authority
or duties; or |
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(v) without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company. |
However, the language in Sections 4(d)(i) through
(iii) concerning reductions, changes, deferrals,
eliminations, or plan modifications similarly affecting all
executive officers of the Company shall not be applicable to
circumstances or events occurring in anticipation of, or within
one year after, a Change in Control, as defined in
Section 4(e). In addition, upon a Change in Control, you
shall have the right to resign for Good Reason if your principal
place of employment is transferred to a location fifty
(50) or more miles from its location immediately preceding
the transfer.
Notwithstanding anything else herein, Good Reason shall not
exist if, with regard to the circumstances or events relied upon
in your Notice of Termination: (x) you failed to provide a
Notice of Termination to the Company within sixty (60) days
after the date you knew or should have known of such
circumstances or events, (y) the circumstances or events
are fully corrected by the Company prior to the Date of
Termination, or (z) you give your express written consent
to the circumstances or events.
6. Section 4(e) of the Employment Agreement
shall be deleted in its entirety and replaced to read as follows:
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(e) Change in Control. For purposes of this
Agreement, a Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more
of the following paragraphs is satisfied: |
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(i) any Person as that term is used in
Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the Exchange Act)
(other than the Company or a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, a
corporation owned directly or indirectly by the shareholders of
the Company in substantially the same proportions as their
ownership of stock of the Company or an affiliate of Carl Icahn)
becomes the Beneficial Owner, as that term is defined in
Rule 13d-3 of the
General Rules and Regulations under |
E-9
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the Exchange Act, directly or indirectly, of securities of the
Company, representing more than fifty percent of the combined
voting power of the Companys then outstanding securities. |
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(ii) during any period of twenty-six consecutive months
beginning on or after the Effective Date, individuals who at the
beginning of the period constituted the Board cease for any
reason (other than death, disability or voluntary retirement) to
constitute a majority of the Board. For this purpose, any new
Director whose election by the Board, or nomination for election
by the Companys shareholders, was approved by a vote of at
least a majority of the Directors then still in office, and who
either were Directors at the beginning of the period or whose
election or nomination for election was so approved, will be
deemed to have been a Director at the beginning of any
twenty-six month period under consideration. |
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(iii) the shareholders of the Company approve: (A) a
plan of complete liquidation or dissolution of the Company; or
(B) an agreement for the sale or disposition of all or
substantially all the Companys assets; or (C) a
merger, consolidation or reorganization of the Company with or
involving any other corporation, other than a merger,
consolidation or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least eighty percent of the combined voting power of the
voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or
reorganization. |
Notwithstanding anything else herein, a Change in Control shall
not include (x) the transactions contemplated by the Merger
Agreement or any transaction between the Company and/or Parent
and a related party. For this purpose, a related party shall
include any entity that would qualify as under common control,
part of a controlled group, or part of an affiliated service
group under Code section 414 and the Treasury Regulations
thereunder, with 50% replacing 80% wherever it appears in Code
section 414 and the Treasury Regulations thereunder, or
(y) any affiliate of Carl Icahn; or (z) a public
offering of the Companys common stock.
7. Section 5(d) of the Employment Agreement
shall be deleted in its entirety and replaced to read as follows:
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(d) If your employment shall be terminated (a) by the
Company, except for a termination by the Company for Cause or
Incapacity or by a Notice of Non-Renewal (or due to your death),
or (b) by you for Good Reason, then you shall be entitled
to the benefits provided below: |
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(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given (or, if greater, at the rate in
effect at any time within 90 days prior to the time the
Notice of Termination is given), plus all other amounts to which
you are entitled under any compensation or benefit plans of the
Company, including, without limitation, (a) the Initial
Bonus, which shall not be pro rated in the event you are
terminated prior to the one-year anniversary of the Closing
Date; or (b) if you are terminated after the one-year
anniversary of the Closing Date, a Bonus prorated for the
portion of the Bonus measurement period occurring prior to the
Date of Termination, at the time such payments are due, except
as otherwise provided below. |
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(ii) Conditioned upon your execution of a general release
relating to your employment in form and substance reasonably
acceptable to the Company, the Company shall pay or cause to be
paid to you, in lieu of any further payments to you for the
portion of the Term subsequent to the Date of Termination an
amount (the Severance Payment), which shall be equal
to the sum of: |
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(A) the aggregate base salary (at the highest rate in
effect at any time during the Term) which you would have
received pursuant to this Agreement for the Severance Period had
your employment with the Company continued for such
period, and |
E-10
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(B) the aggregate Bonus based upon the highest annual Bonus
that you received with respect to any calendar year during the
two years immediately preceding the calendar year in which the
Date of Termination occurred, or, in the event that the Date of
Termination occurs prior to the first anniversary of the Closing
Date, based upon the Initial Bonus pursuant to Section 3
above. |
If the Date of Termination occurs within the two year
anniversary of the Closing Date, then the Severance Payment
shall be paid over a period of two (2) years, and if the
Date of Termination occurs thereafter, then the Severance
Payment shall be paid over a period of one (1) year (the
Severance Period) in the following manner: to the
extent Section 409A does not apply to the Severance
Payment, an amount equal to fifty percent (50%) of the value of
the Severance Payment shall be paid in a lump sum as soon as
administratively practicable after your Termination Date, and an
amount equal to the remaining fifty percent (50%) paid in equal
semi-monthly installments, without interest, beginning six
(6) months after the Date of Termination and continuing
through the end of the Severance Period. To the extent
Section 409A applies to the Severance Payment, an amount
equal to fifty (50%) of the value of the Severance Payment shall
be paid on the first day of the seventh month following the Date
of Termination, and the remaining fifty (50%) shall be paid in
equal semimonthly installments without interest beginning on the
eighth month after the Date of Termination and continuing
through the end of the Severance Period.
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(iii) All outstanding awards, and all amounts owing or
accrued, on the Date of Termination under the Lear Corporation
Long-Term Stock Incentive Plan (LTSIP), the Lear
Corporation Management Stock Purchase Plan (MSPP),
the Lear Corporation Executive Supplemental Savings Plan
(ESSP) and the Lear Corporation Pension Equalization
Program (PEP), and any other compensation or
equity-based plan, program or arrangement of the Company in
which you participated (including, following a Change in
Control, any additional accruals provided thereunder due to a
Change in Control) and any similar successor plans, programs or
arrangements of the Company in which you have participated, to
the extent not previously paid or provided to you in accordance
with Section 24 of this Agreement, shall become due and
owing on the Date of Termination and shall be paid to you under
the terms and conditions of such plans, programs and
arrangements (and the award agreements and other documents
thereunder). You and the Company acknowledge that references in
this Section 5(d)(iii) to the PEP, the MSPP, the ESSP, and
the LTSIP, shall be deemed to be references to such plans as
amended or restated from time to time and to any similar plan of
the Company that supplements or supersedes any such plans. In
addition, you and the Company acknowledge that references in
this Section 5 to any section of the Code shall be deemed
to be references to such section as amended from time to time or
to any successor thereto. |
8. Section 10(e) shall be deleted in its
entirety.
9. Section 22 shall be amended by adding the
following language at the end of the section:
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If and to the extent applicable, Parent shall cause the Company
or the Merger Sub, whichever survives the transaction
contemplated by the Merger Agreement, to select a
specified employee identification date as soon as
administratively feasible following the Closing Date in
accordance with Section 409A of the Code and Treasury
Regulation § 1.409A. |
10. A new Section 23 shall be added as follows:
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The Company (or any successor thereto) shall fully indemnify you
in accordance with the Companys charter, bylaws and other
organizational documents or as specified under Delaware law,
whichever provides you the greatest rights of indemnity (which
rights shall include rights of advancement). The Company shall
also provide, and maintain as current, a policy of Directors and
Officers liability insurance for the duration of the Agreement
Term. |
E-11
11. A new Section 24 shall be added as follows:
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Notwithstanding the foregoing provisions of this Agreement, all
outstanding awards, and all amounts owing or accrued under the
Lear Corporation LTSIP, MSPP, ESSP PEP, and any other
compensation or equity-based plan, program or arrangement of the
Company in which you participate, shall, in connection with the
consummation of the transactions contemplated by the Merger
Agreement, vest and shall, except as set forth below, be paid to
you under the terms and conditions of such plans, programs or
arrangements (and the award agreements and other documents
thereunder) and in accordance with the terms of the Merger
Agreement and this Amendment. In addition, the Company shall
take such actions as are necessary to allow you to elect to
receive (x) at least 70% of your accrued benefit in PEP and
the ESSP pension
make-up account (the
Pension Make-Up Account)(which provides a
benefit to participants equal to the benefit that would have
accrued under the Lear Corporation Pension Plan and/or the PEP,
had the participants not elected to defer compensation under
Section 2.2 of the ESSP and not elected to defer
compensation under the Management Stock Purchase Plan) on
January 15, 2008 and (y) up to the remaining 30% of
the accrued benefit in PEP and the Pension
Make-up Account on
January 15, 2009. Any elections and percentages with
respect to the payout of the PEP and Pension Make-Up Account
shall be made and fixed no later than December 31, 2007. |
Other than as set forth herein, in all other respects the
Employment Agreement remains in full force and effect in
accordance with the terms thereof.
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the 9th day of February, 2007.
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By: |
/s/ Daniel A. Ninivaggi |
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Agreed to this 9th day of February, 2007: |
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/s/ Robert E. Rossiter |
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Robert E. Rossiter |
E-12
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (this
Amendment) is made by and between Lear Corporation,
a Delaware corporation (the Company) and
James H. Vandenberghe (Employee or
you) and is entered into effective as of the
consummation (the Closing Date) of the transactions
contemplated by the AGREEMENT AND PLAN OF MERGER, dated as of
February 9, 2007 (the Merger Agreement), by and
among AREP Car Holdings Corp., a Delaware corporation
(Parent), AREP Car Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent
(Merger Sub), and the Company.
RECITALS
A. The Company employs Employee pursuant to that certain
Employment Agreement by and between the Company and Employee
dated March 15, 2005 (Employment
Agreement); and
B. The Company and the Employee desire to amend the
Employment Agreement to provide for the Companys continued
employment of Employee.
NOW, THEREFORE, in consideration of the foregoing, the
covenants hereinafter set forth, and for other good and valuable
consideration, intending to be legally bound hereby, the parties
hereto hereby amend the Employment Agreement as follows:
AGREEMENT
1. Section 1 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
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1. Term. This Agreement shall commence as of the
Closing Date (Effective Date). The initial term of
this Agreement shall be for one (1) year from the Effective
Date. Thereafter, during the Term, you shall serve as a
consultant to the Company for consecutive periods of one year
unless written notice is provided by either the Company or you
that this Agreement is not to be further extended (a
Notice of Non-Renewal) at least 60 days prior
to the end of the initial term or any subsequent one year
period, as applicable, upon which date this Agreement will
terminate unless earlier terminated upon the earlier to occur of
the date set forth in a Notice of Termination provided pursuant
to Section 4, or the date of your death (the initial term
as so extended is referred to herein as the Term).
In consideration of the Amendment, the Company is continuing
your employment and consulting services on the terms set forth
in this Agreement, as amended, and is providing you other good
and valid consideration by entering into this Agreement, as
amended, the receipt and sufficiency of which consideration you
hereby acknowledge by executing this Agreement as amended by the
Amendment. |
2. Section 2 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
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2. Terms of Employment. During the first year of the
Term, you agree to be a full-time employee of the Company
serving in the position of Chief Financial Officer of the
Company. Thereafter, you shall serve as a consultant to the
Company. You agree to devote substantially all of your working
time and attention to the business and affairs of the Company,
to discharge the responsibilities associated with your position
with the Company, and to use your best efforts to perform
faithfully and efficiently such responsibilities. In addition,
you agree to serve in such other or different capacities or
offices to which you may be assigned, appointed or elected from
time to time by the Company. Nothing herein shall prohibit you
from devoting your time to civic and community activities,
serving as a member of the Board of Directors of other
corporations that do not compete with the Company, or managing
personal investments, as long as the foregoing do not interfere
with the performance of your duties hereunder or violate the
terms of the Companys Code of Business Ethics and Conduct,
the Companys Corporate Governance Guidelines, or other
policies applicable to the Companys executives generally,
as those policies may be amended from time to time by the
Company. |
E-13
3. Section 3 of the Employment Agreement shall
be deleted in its entirety and replaced to read as follows:
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(a) As compensation for your services under this Agreement,
during the first year of the Term, you shall be entitled to
receive an initial base salary the annualized amount of which
shall be $925,000.00, to be paid in accordance with existing
payroll practices for the Company. Increases in your base
salary, if any, shall be as approved by the Board or a committee
appointed by the Board. In addition, during the first year of
the Term you shall receive an annual incentive compensation
bonus of at least 100% of your initial base salary (the
Initial Bonus). The Initial Bonus shall be paid on
the first anniversary of the Effective Date. During the period
of the Term that you provide services to the Company as a
consultant, you shall receive a fee of $41,666.66 per month
paid on the 1st day of each month. |
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(b) During the first year of the Term, you shall be
eligible for participation in the welfare, retirement,
perquisite and fringe benefit, and other benefit plans,
practices, policies and programs, as may be in effect from time
to time, for senior executives of the Company generally. |
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(c) During the Term, you shall be eligible for prompt
reimbursement for business expenses reasonably incurred by you
in accordance with the Companys policies, as may be in
effect from time to time, for its senior executives generally. |
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(d) On or as soon as practicable following the Effective
Date, the Company will establish and maintain an Award Plan
(New Plan) providing for awards of up to 6% of the
Companys outstanding common stock to be available for
grants to Company employees. On, or as soon as practicable
following the Effective Date, you shall be awarded an option
(New Option) to purchase .4% of the Companys
then outstanding common stock. The New Option shall have a term
of ten (10) years and shall have an exercise price per
share equal to the aggregate purchase price (to be determined at
the Effective Time, as defined in the Merger Agreement) paid
under the Merger Agreement divided by the number of outstanding
shares of Company common stock following the consummation of the
transactions contemplated by the Merger Agreement. The New
Option shall vest equally on an annual basis at a rate of
twenty-five percent per year over a period of four
(4) years. The New Option shall become fully vested upon a
Change in Control occurring following the Effective Date. The
Company shall have the right to repurchase any shares awarded
pursuant to the exercise of the New Option at Fair Market Value
following the later of (1) termination of your employment,
or (2) expiration of your services as a consultant. Fair
Market Value shall be defined as the value of the Company as
determined by a nationally recognized independent appraiser
selected by the Company; provided, however, that in the event
the independent appraiser shall indicate a range of value, the
parties agree that the median of the range shall be used. The
terms of the New Option will be subject to the terms of the New
Plan and the New Option grant agreement. |
4. Section 4(b) of the Employment Agreement
shall be amended by adding the following language at the end of
that section:
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Notwithstanding the foregoing, for purposes of the compensation
under this Agreement subject to Section 409A of the Code,
Incapacity shall mean you (A) are unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a
continuous period of not less than twelve (12) months, or
(B) you are, by reason of any medically determinable
physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not
less than twelve (12) months, receiving income replacement
benefits for a period of not less than three (3) months
under a Company-sponsored group disability plan. |
E-14
5. Section 4(d) of the Employment Agreement
shall be deleted in its entirety and replaced to read as follows:
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(d) Good Reason. For purposes of this Agreement,
Good Reason shall mean the occurrence of any of the
following circumstances or events during the first year of the
Term: |
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(i) any reduction by the Company in your base salary or
adverse change in the manner of computing your Bonus, as in
effect from time to time, except for
across-the-board salary
reductions or changes to the manner of computing bonuses
similarly affecting all executive officers of the Company
subject to Section 16(b) of the Securities Exchange Act of
1934, as amended, as determined by the Board (executive
officers); |
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(ii) the failure by the Company to pay or provide to you
any amounts of base salary or the Initial Bonus or any benefits
which are due, owing and payable to you pursuant to the terms
hereof, except pursuant to an
across-the-board
compensation deferral similarly affecting all executive
officers, or to pay to you any portion of an installment of
deferred compensation due under any deferred compensation
program of the Company; |
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(iii) except in the case of
across-the-board
reductions, deferrals, eliminations, or plan modifications
similarly affecting all executive officers, the failure by the
Company to continue to provide you with benefits substantially
similar in the aggregate to the Companys life insurance,
medical, dental, health, accident or disability plans in which
you are participating following the Effective Date; |
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(iv) except on a temporary basis as described in
Section 4(b), a material adverse change in your
responsibilities, position, reporting relationships, authority
or duties; or |
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(v) without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company. |
However, the language in Sections 4(d)(i) through
(iii) concerning reductions, changes, deferrals,
eliminations, or plan modifications similarly affecting all
executive officers of the Company shall not be applicable to
circumstances or events occurring in anticipation of, or within
one year after, a Change in Control, as defined in
Section 4(e). In addition, upon a Change in Control, you
shall have the right to resign for Good Reason if your principal
place of employment is transferred to a location fifty
(50) or more miles from its location immediately preceding
the transfer.
Notwithstanding anything else herein, Good Reason shall not
exist if, with regard to the circumstances or events relied upon
in your Notice of Termination: (x) you failed to provide a
Notice of Termination to the Company within sixty (60) days
after the date you knew or should have known of such
circumstances or events, (y) the circumstances or events
are fully corrected by the Company prior to the Date of
Termination, or (z) you give your express written consent
to the circumstances or events.
6. Section 4(e) of the Employment Agreement
shall be deleted in its entirety and replaced to read as follows:
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(e) Change in Control. For purposes of this
Agreement, a Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more
of the following paragraphs is satisfied during the first year
of the Term: |
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(i) any Person as that term is used in
Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the Exchange Act)
(other than the Company or a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, a
corporation owned directly or indirectly by the shareholders of
the Company in substantially the same proportions as their
ownership of stock of the Company, or an affiliate of Carl
Icahn) becomes the Beneficial Owner, as that term is defined in
Rule 13d-3 of the
General Rules and Regulations under the Exchange Act, directly
or indirectly, of securities of the Company, representing more
than fifty percent of the combined voting power of the
Companys then outstanding securities. |
E-15
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(ii) during any period of twenty-six consecutive months
beginning on or after the Effective Date, individuals who at the
beginning of the period constituted the Board cease for any
reason (other than death, disability or voluntary retirement) to
constitute a majority of the Board. For this purpose, any new
Director whose election by the Board, or nomination for election
by the Companys shareholders, was approved by a vote of at
least a majority of the Directors then still in office, and who
either were Directors at the beginning of the period or whose
election or nomination for election was so approved, will be
deemed to have been a Director at the beginning of any
twenty-six month period under consideration. |
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(iii) the shareholders of the Company approve: (A) a
plan of complete liquidation or dissolution of the Company; or
(B) an agreement for the sale or disposition of all or
substantially all the Companys assets; or (C) a
merger, consolidation or reorganization of the Company with or
involving any other corporation, other than a merger,
consolidation or reorganization that would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least eighty percent of the combined voting power of the
voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or
reorganization. |
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Notwithstanding anything else herein, a Change in Control shall
not include (x) the transactions contemplated by the Merger
Agreement or any transaction between the Company and/or Parent
and a related party. For this purpose, a related party shall
include any entity that would qualify as under common control,
part of a controlled group, or part of an affiliated service
group under Code section 414 and the Treasury Regulations
thereunder, with 50% replacing 80% wherever it appears in Code
section 414 and the Treasury Regulations thereunder, or
(y) any affiliate of Carl Icahn, or (z) a public
offering of the Companys common stock. |
7. Section 5(d) of the Employment Agreement
shall be deleted in its entirety and replaced to read as follows:
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(d) If your employment or services shall be terminated
(a) by the Company, except for a termination by the Company
for Cause or Incapacity or by a Notice of Non-Renewal (or due to
your death), or (b) by you for Good Reason, then you shall
be entitled to the benefits provided below: |
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(i) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given (or, if greater, at the rate in
effect at any time within 90 days prior to the time the
Notice of Termination is given), plus all other amounts to which
you are entitled under any compensation or benefit plans of the
Company, including, without limitation, the Initial Bonus,
except as otherwise provided below. |
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(ii) Conditioned upon your execution of a general release
relating to your employment in form and substance reasonably
acceptable to the Company, the Company shall pay or cause to be
paid to you, in lieu of any further payments to you for the
portion of the Term subsequent to the Date of Termination an
amount (the Severance Payment), which shall be equal
to the sum of: |
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(A) the aggregate base salary (at the highest rate in
effect at any time during the Term) which you would have
received pursuant to this Agreement for the Severance Period had
your employment with the Company continued for such
period, and |
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(B) the aggregate Bonus based upon the highest annual Bonus
that you received with respect to any calendar year during the
two years immediately preceding the calendar year in which the
Date of Termination occurred, or, in the event that the Date of
Termination occurs prior to the first anniversary of the
Effective Date, then based upon the Initial Bonus pursuant to
Section 3 above. |
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If the Date of Termination occurs during the first year of the
Term, then the Severance Payment shall be paid over a period of
one (1) year plus the number of days remaining in the first
year of the |
E-16
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Term, and if the Date of Termination occurs thereafter, then the
Severance Payment shall be paid over a period of one
(1) year (the Severance Period) in the
following manner: to the extent that Section 409A does not
apply to the Severance Payment, an amount equal to fifty percent
(50%) of the value of the Severance Payment paid in a lump sum
as soon as administratively practicable after your Date of
Termination, and an amount equal to the remaining fifty percent
(50%) paid in equal semi-monthly installments, without interest,
beginning six (6) months after the Date of Termination and
continuing through the end of the Severance Period. To the
extent Section 409A applies to the Severance Payment, an
amount equal to fifty (50%) of the value of the Severance
Payment shall be paid on the first day of the seventh month
following the Date of Termination, and the remaining fifty (50%)
shall be paid in equal semimonthly installments without interest
beginning on the eighth month after the Date of Termination and
continuing through the end of the Severance Period. |
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(iii) All outstanding awards, and all amounts owing or
accrued, on the Date of Termination under the Lear Corporation
Long-Term Stock Incentive Plan (LTSIP), the Lear
Corporation Management Stock Purchase Plan (MSPP),
the Lear Corporation Executive Supplemental Savings Plan
(ESSP) and the Lear Corporation Pension Equalization
Program (PEP), and any other compensation or
equity-based plan, program or arrangement of the Company in
which you participated (including, following a Change in
Control, any additional accruals provided thereunder due to a
Change in Control) and any similar successor plans, programs or
arrangements of the Company in which you have participated, to
the extent not previously paid or provided to you in accordance
with Section 24 of this Agreement, shall become due and
owing on the Date of Termination and shall be paid to you under
the terms and conditions of such plans, programs and
arrangements (and the award agreements and other documents
thereunder). You and the Company acknowledge that references in
this Section 5(d)(iii) to the PEP, the MSPP, the ESSP, and
the LTSIP, shall be deemed to be references to such plans as
amended or restated from time to time and to any similar plan of
the Company that supplements or supersedes any such plans. In
addition, you and the Company acknowledge that references in
this Section 5 to any section of the Code shall be deemed
to be references to such section as amended from time to time or
to any successor thereto. |
8. Section 10(e) shall be deleted in its
entirety.
9. Section 22 shall be amended by adding the
following language at the end of the section:
If and to the extent applicable, Parent shall cause the Company
or the Merger Sub, whichever survives the transaction
contemplated by the Merger Agreement, to select a
specified employee identification date as soon as
administratively feasible following the Closing Date in
accordance with Section 409A of the Code and Treasury
Regulation § 1.409A.
10. A new Section 23 shall be added as follows:
The Company (or any successor thereto) shall fully indemnify you
in accordance with the Companys charter, bylaws and other
organizational documents or as specified under Delaware law,
whichever provides you the greatest rights of indemnity (which
rights shall include rights of advancement). The Company shall
also provide, and maintain as current, a policy of Directors and
Officers liability insurance for the duration of the Agreement
Term.
11. A new Section 24 shall be added as follows:
Notwithstanding the foregoing provisions of this Agreement, all
outstanding awards, and all amounts owing or accrued under the
Lear Corporation LTSIP, MSPP, ESSP PEP, and any other
compensation or equity-based plan, program or arrangement of the
Company in which you participate, shall, in connection with the
consummation of the transactions contemplated by the Merger
Agreement, vest and shall, except as set forth below, be paid to
you under the terms and conditions of such plans, programs or
arrangements (and the award agreements and other documents
thereunder) and in accordance with the terms of the Merger
Agreement and this Amendment. In addition, the Company shall
take such actions as are necessary to allow
E-17
you to elect to receive (x) at least 70% of your accrued
benefit in PEP and the ESSP pension
make-up account (the
Pension Make-Up Account)(which provides a
benefit to participants equal to the benefit that would have
accrued under the Lear Corporation Pension Plan and/or the PEP,
had the participants not elected to defer compensation under
Section 2.2 of the ESSP and not elected to defer
compensation under the Management Stock Purchase Plan) on
January 15, 2008 and (y) up to the remaining 30% of
the accrued benefit in PEP and the Pension
Make-up Account on
January 15, 2009. Any elections and percentages with
respect to the payout of the PEP and Pension Make-Up Account
shall be made and fixed no later than December 31, 2007.
Other than as set forth herein, in all other respects the
Employment Agreement remains in full force and effect in
accordance with the terms thereof.
IN WITNESS WHEREOF, the parties have executed this Amendment as
of the 9th day of February, 2007.
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By: |
/s/ Daniel A. Ninivaggi |
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Agreed to this 9th day of February, 2007: |
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/s/ James H. Vandenberghe |
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James H. Vandenberghe |
E-18
Appendix F
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE
OF DELAWARE
§ 262. Appraisal rights.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with
respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this
section and who has neither voted in favor of the merger or
consolidation nor consented thereto in writing pursuant to
§ 228 of this title shall be entitled to an appraisal
by the Court of Chancery of the fair value of the
stockholders shares of stock under the circumstances
described in subsections (b) and (c) of this section.
As used in this section, the word stockholder means
a holder of record of stock in a stock corporation and also a
member of record of a nonstock corporation; the words
stock and share mean and include what is
ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and
the words depository receipt mean a receipt or other
instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
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(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of
§ 251 of this title. |
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(2) Notwithstanding paragraph (1) of this
subsection, appraisal rights under this section shall be
available for the shares of any class or series of stock of a
constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except: |
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a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof; |
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b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders; |
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c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or |
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d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph. |
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(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation. |
F-1
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
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(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or |
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(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given. |
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections
(a) and (d) hereof and who is otherwise
F-2
entitled to appraisal rights, may file a petition in the Court
of Chancery demanding a determination of the value of the stock
of all such stockholders. Notwithstanding the foregoing, at any
time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to
withdraw such stockholders demand for appraisal and to
accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and
with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days
after such stockholders written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for
delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining
their fair value exclusive of any element of value arising from
the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest,
the Court may consider all relevant factors, including the rate
of interest which the surviving or resulting corporation would
have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit
discovery or other pretrial proceedings and may proceed to trial
upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section
and who has submitted such stockholders certificates of
stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
F-3
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in
subsection (e) of this section or thereafter with the
written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of
the Court, and such approval may be conditioned upon such terms
as the Court deems just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
F-4
Appendix G
DIRECTOR INDEPENDENCE GUIDELINES
The NYSE Listing Requirements require that the Board consist of
a majority of independent directors and that all members of the
Audit Committee, the Compensation Committee and the Nominating
and Corporate Governance Committee be independent. To be
considered independent under then NYSE Listing Requirements, the
Board must determine that a director does not have any material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a
relationship with the Company). The Board has established these
guidelines to assist it in determining whether a director has a
material relationship with the Company. Under these guidelines,
each of the following relationships (unless required to be
disclosed pursuant to Item 404 of
Regulation S-K
promulgated under the Securities Act of 1933, as amended) shall
be deemed immaterial so that a director who satisfies the
specific independence criteria in the NYSE Listing Requirements
will not be considered to have a material relationship with the
Company solely as a result of any such relationship:
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(1) the director, or his or her immediate family member(1),
is affiliated with an entity with which the Company does
business, unless the amount of purchases or sales of goods and
services from or to the Company, in any of the three fiscal
years preceding the determination and for which financial
statements are available, has exceeded 1% of the consolidated
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(2) the director, or his or her immediate family member,
serves as a trustee, director, officer or employee of a
foundation, university, non-profit organization or tax-exempt
entity to which the Company has made a donation, unless the
Companys aggregate annual donations to the organization,
in any of the three fiscal years preceding the determination and
for which financial statements are available, have exceeded the
greater of $250,000 or 1% of that organizations
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(3) the director, or his or her immediate family member, is
a director, officer or employee of an entity with which the
Company or any officer of the Company has a banking or
investment relationship, unless (x) the amount involved, in
any of the three fiscal years preceding the determination,
exceeds the lesser of $1 million or 1% of such
entitys total deposits or investments or (y) such
banking or investment relationship is on terms and conditions
that are not substantially similar to those available to an
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(4) the director or his or her immediate family member is
an officer of a company that is indebted to the Company, or to
which the Company is indebted, and the total amount of either
companys indebtedness to the other does not exceed 2% of
the other companys total consolidated assets as of the end
of the fiscal year immediately preceding the date of
determination and for which financial statements are available. |
In addition, as required by our Audit Committee Charter, Audit
Committee members must also satisfy the independence
requirements of Section 10A of the Securities Exchange Act
of 1934.
The types of relationships described above are not intended to
be comprehensive, and no inference should be drawn that a
director having a relationship of the type described in items
(1) through (4) above that fails to satisfy any of the
criteria in items (1) through (4) above is not independent.
If a director has a relationship that fails to satisfy any of
the criteria set forth in items (1) through (4) above, the
Board may still determine that such director is independent so
long as the NYSE Listing Requirements do not preclude a finding
of independence as a result of such relationship. The Company
shall disclose such determinations in accordance
(1) As used herein, an immediate family member
includes a persons spouse, parents, children, siblings,
mothers and
fathers-in-law, sons
and daughters-in-law,
brothers and
sisters-in-law, and
anyone (other than any domestic employee) who shares such
persons home; provided, however, that
immediate family member shall exclude stepchildren
that do not share a stepparents home, or the in-laws of
such stepchildren. Upon death, incapacity, legal separation or
divorce, a person shall cease to be an immediate family member.
G-1
with applicable law and stock exchange listing requirements. The
Company intends for the foregoing guidelines to comply with both
the NYSE Listing Requirements in effect as of the date of
adoption of these guidelines and as such NYSE Listing
Requirements are proposed to be amended (as such proposed
amendments were filed by the NYSE with the SEC on
November 23, 2005.)
G-2
Appendix H
PROPOSED AMENDMENTS TO THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF LEAR CORPORATION
[Additions indicated by underlining. Deletions indicated by
strike-outs.]
(d) The directors shall be divided into three classes
designated as Class I, Class II and Class III,
respectively. Each class shall consist, as nearly as may be
possible, of one- third of the total number of directors
constituting the entire Board of Directors. The directors
elected at the annual meeting of stockholders held in 2005 (and
any director elected to the board to serve with that class of
directors) shall serve for a term ending on the date of the
annual meeting of stockholders to be held in 2008. The directors
elected at the annual meeting of stockholders held in 2006 (and
any director elected to the board to serve with that class of
directors) shall serve for a term ending on the date of the
annual meeting of stockholders to be held in 2009. The directors
elected at the annual meeting of stockholders held in 2007 (and
any director elected to the board to serve with that class of
directors) shall serve for a term ending on the date of the
annual meeting of stockholders to be held in 2010. At each
annual meeting of the stockholders commencing with the 2008
annual meeting, successors to the class of directors whose
term expires at the annual meeting shall be elected for
a three year term. Ifterms then expire shall be
elected for a one-year term expiring at the next-succeeding
annual meeting of stockholders after their election, such that,
commencing with the 2010 annual meeting of stockholders, the
foregoing classification of the Board of Directors shall cease.
Prior to the 2010 annual meeting of stockholders, if the
number of directors is changed, any increase or decrease shall
be apportioned among the classes so as to maintain the number of
directors in each class as nearly as equal as possible, but in
no case shall a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office
until the annual meeting for the year in which his term expires
and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement or
removal from office.
(e) Subject to the rights, if any, of holders of any series
of Preferred Stock then outstanding, any vacancy on the Board of
Directors that results from an increase in the number of
directors may be filled by a majority of the Board of Directors
then in office, provided that a quorum is present, and any other
vacancy occurring in the Board of Directors may be filled by a
majority of the directors then in office, even if less than a
quorum. AnyPrior to the 2010 annual meeting
of stockholders, any director elected to fill a vacancy
resulting from an increase in the size of a class of directors
shall hold office for a term that shall coincide with the
remaining term of that class. Commencing with the 2010 annual
meeting of stockholders, any director elected to fill a vacancy
resulting from an increase in the number of directors shall hold
office for a term expiring at the annual meeting of stockholders
next following his or her election. Any director elected to
fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his
or her predecessor.
H-1
Appendix I
PROPOSED AMENDMENTS TO THE BY-LAWS OF LEAR CORPORATION
[Additions indicated by underlining. Deletions indicated by
strike-outs.]
Section 3.2. Resignation,
Removal and Vacancies. Each director shall hold office until his
successor is elected and qualified, subject, however, to his or
her prior death, resignation, retirement or removal from office.
Any director may resign at any time upon written notice to the
Corporation directed to the Board of Directors or the Secretary
of the Corporation. Such resignation shall take effect at the
time specified therein, and unless otherwise specified therein
no acceptance of such resignation shall be necessary to make it
effective. AnyPrior to the 2010 annual
meeting of stockholders, any director or the entire Board of
Directors may be removed, for Cause, by the vote of the holders
of at least a majority of shares of capital stock then entitled
to vote at an election of directors. From and after the 2010
annual meeting of stockholders, any director or the entire Board
of Directors may be removed, with or without Cause, by the vote
of the holders of at least a majority of shares of capital stock
then entitled to vote at an election of directors. Whenever
the holders of shares of any class or series of capital stock
are entitled to elect one or more directors by the provisions of
the Certificate of Incorporation, the provisions of the
preceding sentencetwo sentences shall
apply, in respect to the removal
withwithout Cause of a director or
directors so elected, to the vote of the holders of the
outstanding shares of that class or series of capital stock and
not to the vote of the holders of the outstanding shares of
capital stock as a whole. Unless otherwise provided by the
Certificate of Incorporation, vacancies and newly created
directorships resulting from any increase in the authorized
number of directors may be filled only by the vote of a majority
of the directors then in office provided that a quorum is
present, and any other vacancy occurring in the Board of
Directors may be filled by a majority of the directors then in
office, even if less than a quorum, unless otherwise provided in
the Certificate of Incorporation. Prior to the 2010 annual
meeting of stockholders, any director elected to fill a vacancy
resulting from an increase in the size of a class of directors
shall hold office for a term that shall coincide with the
remaining term of that class. Commencing with the 2010 annual
meeting of stockholders, any director elected to fill a vacancy
resulting from an increase in the number of directors shall hold
office for a term expiring at the annual meeting of stockholders
next following his or her election. Any director elected to
fill a vacancy not resulting from an increase in the number of
directors shall have the same remaining term as that of his or
her predecessor. For the purposes of this Section 3.2,
Cause is defined as the willful and continuous
failure substantially to perform ones duties to the
Corporation or the willful engaging in gross misconduct
materially and demonstrably injurious to the Corporation.
I-1
PRELIMINARY COPY-SUBJECT
TO COMPLETION
ADMISSION TICKET
LEAR CORPORATION
ANNUAL MEETING OF
STOCKHOLDERS
,
2007 AT A.M. (EASTERN TIME)
[ADDRESS]
ADMITS ONE
STOCKHOLDER AND UP TO TWO GUESTS
▼
DETACH PROXY CARD
HERE
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Mark, Sign, Date and Return the Proxy
Card Promptly Using the Enclosed Envelope. |
x Votes must be indicated
(x) in Black or Blue Ink. |
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THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR ADOPTION OF THE MERGER AGREEMENT IN
PROPOSAL NO. 1, THE ADJOURNMENT PROPOSAL IN PROPOSAL NO. 2, THE
NOMINEES IN PROPOSAL NO. 3 AND FOR PROPOSAL NO. 4 AND
PROPOSAL NO. 5. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
AGAINST PROPOSAL NO. 6 AND PROPOSAL NO. 7.
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FOR |
AGAINST |
ABSTAIN |
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FOR |
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AGAINST |
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ABSTAIN |
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Approve the
Agreement and Plan of Merger, dated as of February 9, 2007, by and
among Lear Corporation, AREP Car Holdings Corp. and AREP Car
Acquisition Corp., and the merger contemplated thereby. |
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Approve the
adjournment or postponement of the 2007 Annual Meeting of
Shareholders of Lear Corporation, if necessary, to permit further
solicitation of proxies if there are not sufficient votes at the time
of the Annual Meeting to approve Proposal No. 1 described on this
proxy card. |
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3. |
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Election of Directors |
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FOR |
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AGAINST |
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FOR all nominees listed below |
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WITHHOLD AUTHORITY to vote for all nominees listed below |
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*EXCEPTIONS |
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Approve an
amendment to the Lear Corporation Amended and Restated Certificate of
Incorporation Regarding the Declassification of Directors. |
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Nominees: Larry W.
McCurdy, Roy E. Parrott and Richard F. Wallman |
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FOR |
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AGAINST |
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ABSTAIN |
(INSTRUCTIONS: To withhold authority
to vote for any individual nominee, mark the Exceptions
box and write that nominees name in the space provided below). |
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Stockholder
proposal regarding a majority vote standard in the election of
directors. |
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FOR |
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AGAINST |
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ABSTAIN |
* Exceptions |
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Stockholder
proposal regarding global human rights standards. |
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FOR |
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ABSTAIN |
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YES |
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Ratify the
appointment of Ernst & Young LLP as our independent registered
public accounting firm for 2007. |
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Do you plan to
attend the Meeting? |
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Please sign this proxy and return it promptly whether or not you expect to attend the meeting.
You may nevertheless vote in person if you attend. Please sign
exactly as your name appears herein. Give full title if an Attorney,
Executor, Administrator, Trustee, Guardian, etc. For an account in
the name of two or more persons, each should sign, or if one signs,
he should attach evidence of his authority. |
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Date Share Owner sign here |
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Co-Owner sign here |
Dear Stockholder:
The Annual Meeting of Stockholders (the Meeting) of Lear Corporation (the Company) will be
held at a.m. (Eastern time)
on ,
, 2007 at .
To be sure that your vote is counted, we urge you to complete and sign the proxy/voting
instruction card below, detach it from this letter and return it in the postage paid envelope
enclosed in this package. The giving of such proxy does not affect your right to vote in person if
you attend the Meeting. The prompt return of your signed proxy will aid the Company in reducing the
expense of additional proxy solicitation.
In
order to assist the Company in preparing for the Meeting, please indicate in item 8 on the
proxy whether you currently plan to attend the Meeting.
If you attend the Meeting in person, detach and bring this letter to the Meeting as an
admission ticket for you and up to two of your guests.
,
2007
LEAR CORPORATION
PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors of Lear Corporation for the Annual
Meeting of Stockholders on , 2007 or any adjournment or postponement thereof (the Meeting).
The undersigned appoints James H. Vandenberghe and Daniel A. Ninivaggi, and each of them, with full
power of substitution in each of them, the proxies of the undersigned, to vote for and on behalf of
the undersigned all shares of Lear Corporation Common Stock which the undersigned may be entitled
to vote on all matters properly coming before the Meeting, as set forth in the related Notice of
Annual Meeting and Proxy Statement, both of which have been received by the undersigned.
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned
stockholder. If no direction is given, this proxy will be voted FOR
the adoption of the Merger Agreement in proposal 1, the adjournment
proposal in proposal 2 and the nominees in proposals 3, FOR proposals
4 and 5, and AGAINST proposals 6 and 7.
To change your address, please mark this box. o
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Change of address
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LEAR CORPORATION
P.O. BOX 11211
NEW YORK, NY 10203-0211 |