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SECURITIES AND EXCHANGE COMMISSION
of the Securities Exchange Act of 1934
Filed By a Party other than the Registranto
Check the appropriate box:
þ | Preliminary Proxy Statement | o | Confidential, for Use of the Commission Only | |||
o | Definitive Proxy Statement | (as permitted by Rule 14a-6(e)(2)) | ||||
o | Definitive Additional Materials | |||||
o | Soliciting Material Pursuant to §240.14a-12 |
o | No fee required. | |
þ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
1) | Title of each class of securities to which transaction applies: | ||
Common Stock, par value $0.01 per share (the “Common Stock”), of Lear Corporation | |||
2) | Aggregate number of securities to which transaction applies: | ||
76,685,623 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 104,896 shares of Common Stock; and performance shares with respect to 100,103 shares of Common Stock. | |||
3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | ||
The maximum aggregate value was determined based upon the sum of (A) 76,685,623 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 104,896 shares of Common Stock multiplied by $36.00 per share; and (F) performance shares with respect to 100,103 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. | |||
4) | Proposed maximum aggregate value of transaction: | ||
$2,857,990,534 | |||
5) | Total fee paid: | ||
$87,770 |
þ | Fee paid previously with preliminary materials. | |
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
1) | Amount Previously Paid: | ||
2) | Form, Schedule or Registration Statement No.: | ||
3) | Filing Party: | ||
4) | Date Filed: |
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Sincerely, | |
Robert E. Rossiter | |
Chairman and Chief Executive Officer |
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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; | |
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; | |
3. | elect three directors; | |
4. | approve amendments to our Amended and Restated Certificate of Incorporation to provide for the annual election of directors; | |
5. | ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2007; | |
6. | consider two stockholder proposals, if presented at the meeting; and | |
7. | conduct any other business properly before the meeting or any adjournments or postponements thereof. |
By Order of the Board of Directors, | |
Wendy L. Foss | |
Vice President, Finance & Administration and Corporate Secretary | |
, 2007 |
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Lear Corporation |
Parent |
Merger Sub |
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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 | |
• | 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. |
• | our representations and warranties must be true and correct, subject to certain materiality thresholds; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | we must perform certain obligations and satisfy certain requirements with respect to Parent’s debt financing arrangements; and | |
• | we must provide to Parent a certification that our shares of common stock are not United States real property interests. |
• | the representations and warranties made by Parent and Merger Sub must be true and correct, subject to certain materiality thresholds; | |
• | 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; | |
• | 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 | |
• | Parent must deliver to us at closing a solvency opinion. |
• | 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; | |
• | 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; | |
• | 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 | |
• | resolve, propose or agree to do any of the foregoing. |
• | we are permitted to continue discussions and provide non-public information to any party with whom we were having ongoing discussions or negotiations as of March 26, 2007 regarding a possible acquisition proposal (we were otherwise required to 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 | |
• | 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. |
• | by mutual written consent of Lear and Parent; | |
• | by either Lear or Parent if: |
• | 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; | |
• | 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 | |
• | our stockholders do not adopt the merger agreement at the annual meeting or any adjournment or postponement thereof. |
• | by Lear, if: |
• | 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; | |
• | 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 | |
• | if all of the conditions to each party’s 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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• | by Parent, if: |
• | 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; | |
• | 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 or agreement for an acquisition proposal; | |
• | 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; | |
• | 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; | |
• | there has been a Material Adverse Effect that cannot be cured by the Outside Date; or | |
• | any specified force majeure event has occurred, subject to materiality thresholds. |
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Q | When and where is the annual meeting? | |
A. | The annual meeting of stockholders of Lear will be held on June 27, 2007, at 10:00 a.m. (Eastern Time) at Hotel Du Pońt, located at 11th and Market Streets, Wilmington, Delaware 19801. | |
Q. | What do I need to do now? | |
A. | 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. | |
Q. | How do I vote? | |
A: | You may vote by: | |
• signing and dating each proxy card you receive and returning it in the enclosed prepaid envelope; | ||
• using the telephone number printed on your proxy card; or | ||
• if you hold your shares in “street name,” follow the procedures provided by your broker, bank or other nominee. | ||
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. | ||
Q. | How can I change or revoke my vote? | |
A. | You have the right to change or revoke your proxy at any time before the vote taken at the annual meeting by: | |
• delivering to Wendy L. Foss, our Vice President, Finance & Administration and Corporate Secretary, a signed, written revocation letter dated later than the date of your proxy; | ||
• submitting a proxy to Lear with a later date; or | ||
• attending the meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy; you must vote in person a the meeting to revoke your proxy). | ||
Q. | If my shares are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee vote my shares for me? | |
A. | If you hold your shares in “street name” through a bank, broker or other nominee, such bank, broker or nominee will vote those shares in accordance with your instructions. To so instruct your bank, broker or nominee, you should follow the information provided to you by such entity. Without instructions from you, a bank, broker or nominee will be permitted to exercise its own voting discretion with respect to so-called routine matters (such as Proposal Nos. 3 and 5) but may not be permitted to exercise voting discretion with respect to non-routine matters (such as Proposal Nos. 1, 2, 4, 6 and 7.) Thus, if you do |
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not give your bank, broker or nominee specific instructions with respect to Proposal No. 3 (election of directors) and Proposal No. 5 (ratification of auditors), your shares will be voted in such entity’s discretion. If you do not give your bank, broker or nominee specific instructions with respect to the remaining proposals to be presented at the meeting, your shares will not be voted on such matters. These shares are called “broker non-votes.” Shares represented by such broker non-votes will be counted in determining whether there is a quorum. Broker non-votes are not considered votes for or against any particular proposal and therefore will have no direct impact on any proposal. However, with respect to Proposal No. 1 (the proposal to adopt the merger agreement) and Proposal No. 4 (the proposal to amend our Amended and Restated Certificate of Incorporation), because such matters require the affirmative vote of holders of a majority of outstanding common stock, broker non-votes will have the same effect as votes against these proposals. We urge you to provide your bank, broker or nominee with appropriate voting instructions so that all your shares may be voted at the meeting. | ||
Q. | What do I do if I receive more than one proxy or set of voting instructions? | |
A. | 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. | |
Q. | What happens if I sell my shares before the annual meeting? | |
A. | 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. | |
Q. | Will a proxy solicitor be used? | |
A. | Yes. We expect to engage MacKenzie Partners, Inc. to assist in the solicitation of proxies for the annual meeting for a fee of approximately $25,000, a nominal fee per stockholder contact, reimbursement of reasonableout-of-pocket expenses and indemnification against certain losses, costs and expenses. |
Q | What is the proposed merger transaction? | |
A. | 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. | |
Q. | What will I receive in the merger? | |
A. | 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. | |
Q. | What vote is required for Lear’s stockholders to adopt the merger agreement? | |
A. | An affirmative vote of a majority of the outstanding shares of our common stock is required to adopt the merger agreement. The adoption of the merger agreement does not require the affirmative vote of a majority of unaffiliated stockholders. |
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Q. | 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? | |
A. | 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. | |
Q. | How does Lear’s board of directors recommend that I vote on the proposals relating to the merger agreement? | |
A. | 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 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. | |
Q. | What effects will the proposed merger have on Lear? | |
A. | 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”). | |
Q. | Am I entitled to exercise appraisal rights instead of receiving the merger consideration for my shares? | |
A. | 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 103. | |
Q. | When is the merger expected to be completed? | |
A. | 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 77 and 85, respectively. | |
Q. | What happens if the merger is not consummated? | |
A. | 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 itsout-of-pocket expenses as described under the caption “The Merger Agreement — Termination Fees and Expenses.” |
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Q | What are the proposals at the annual meeting in addition to the adoption of the merger agreement? | |
A. | 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. | |
Q. | What effect will the adoption of the merger agreement have on the other proposals? | |
A. | 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 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. | |
Q. | What will happen to the other proposals if the merger agreement is not adopted by stockholders? | |
A. | 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. | |
Q. | What vote is required for Lear’s stockholders to adopt the other proposals? | |
A. | 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. | |
Q. | How does Lear’s board of directors recommend that I vote on the other proposals? | |
A. | 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. | |
Q. | Who can help answer my other questions? | |
A. | 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 Lear’s website at www.lear.com. You may also contact MacKenzie Partners, Inc., who we expect to be our proxy solicitor, toll-free at . | |
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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, management’s 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); | |
• | the fact that the automotive operations of Lear’s three largest customers, General Motors, Ford and DaimlerChrysler, which accounted for approximately 32%, 23% and 10%, respectively, of Lear’s net sales in 2006, 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; | |
• | their belief that the merger was more favorable to Lear’s 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; | |
• | the results of Lear’s extensive strategic planning process, including an examination of the industry risks that may impact Lear’s ability to achieve its strategic plan, as well as the level of investment required by Lear to implement the plan; | |
• | 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; | |
• | the fact that the terms of the merger agreement would provide Lear a45-day post-signing “go shop period” during which we would have the right to solicit additional interest in a transaction involving Lear and, after such45-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”; | |
• | their belief that the terms of the “go shop” process would facilitate an active solicitation of interest from third parties and that neither the Icahn affiliates’ ownership interest in the Company nor board position would be an impediment to obtaining a competing proposal, particularly given the terms of the voting agreement; | |
• | the fact that affiliates of Parent which beneficially owned 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 in favor of a superior proposal that results in consideration of no less than $36.00 per share in cash, net, to Lear’s stockholders; | |
• | their belief that while improvements in Lear’s operating performance could yield improved operating results, the achievement of such improvements is uncertain and subject to significant execution risk; | |
• | 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 3.8% based on the closing price of Lear’s common stock of $34.67 on February 2, 2007 (the trading day prior to the announcement of AREP’s offer to purchase Lear); a premium of 55.1% based on the52-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 |
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announced the private placement of $200 million of our common stock to affiliates of Mr. Icahn), as more fully described under “Special Factors — Background of the Merger”; | ||
• | the financial analyses presented by JPMorgan that are described in “— Opinion of Financial Advisor to the Special Committee” 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 to the Special Committee”; | |
• | 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; | |
• | their belief that, as a public company with substantial leverage, Lear’s ability to finance its restructuring and investment initiatives could be limited, particularly given the effect volatile industry conditions could have on the Company’s financial performance and access to capital markets and the availability of trade credit from an already distressed supplier base; | |
• | 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; | |
• | 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; | |
• | 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 the12-month period prior to the announcement of AREP’s proposal; | |
• | 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 be in the best interests of the stockholders to have a committed buyer in place prior to commencing such process; | |
• | the fact that AREP has provided a guarantee in Lear’s favor with respect to the performance by Parent and Merger Sub of certain of their payment obligations under the merger agreement; | |
• | the fact that our senior management team supported 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; | |
• | 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; and | |
• | 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 reversebreak-up fee payable by Parent if Parent were to breach its obligations under the merger agreement and fail to complete the merger. |
• | 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 |
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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; | ||
• | the fact that the merger could not be completed unless it is approved by the holders of a majority of Lear’s outstanding shares of common stock, and that this decision will allow Lear’s unaffiliated stockholders to make their own informed judgment as to whether the proposed transaction is in their best interests; | |
• | 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 reasonablebreak-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”; | |
• | the fact that the 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; 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. |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; |
• | the requirement that we pay a termination fee of up to $85.2 million and Parent’s and Merger Sub’s reasonableout-of-pocket expenses up to $15 million, if our board of directors terminates the merger agreement under certain circumstances; and |
• | the fact that the receipt of the $36.00 per share cash consideration in the merger will generally be taxable to our stockholders. |
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• | reviewed a draft dated February 7, 2007 of the merger agreement; | |
• | reviewed certain publicly available business and financial information concerning Lear and the industries in which it operates; | |
• | 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; | |
• | 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 Lear’s common stock and certain publicly traded securities of such other companies; | |
• | reviewed certain internal financial analyses and forecasts prepared by the management of Lear relating to its business, for which you should see “Important Information Regarding Lear — Financial Forecasts”; and | |
• | performed such other financial studies and analyses and considered such other information as JPMorgan deemed appropriate for the purposes of its opinion. |
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• | comparable company trading multiples analysis, | |
• | precedent transaction multiples analysis, and | |
• | discounted cash flow analysis. |
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Price Per | Price Per | |||||||||||||||||||||||||||||||
Firm | Firm | Firm | Firm | Firm | Firm | Share/2007 | Share/2008 | |||||||||||||||||||||||||
Value/2007 | Value/2008 | Value/2007 | Value/2008 | Value/2007 | Value/2008 | Earnings | Earnings | |||||||||||||||||||||||||
Sales | Sales | EBITDA | EBITDA | EBIT | EBIT | Per Share | Per Share | |||||||||||||||||||||||||
North American automotive suppliers: | ||||||||||||||||||||||||||||||||
American Axle & Manufacturing Holdings Inc.* | 0.57 | x | 0.56 | x | 4.9 | x | 4.3 | x | 12.1 | x | 9.0 | x | 16.0 | x | 10.4x | |||||||||||||||||
ArvinMeritor, Inc.* | 0.27 | 0.26 | 5.7 | 5.0 | 9.2 | 7.4 | 16.5 | 10.4 | ||||||||||||||||||||||||
BorgWarner Inc.* | 1.01 | 0.89 | 7.1 | 6.4 | 11.7 | 10.4 | 14.8 | 12.9 | ||||||||||||||||||||||||
Commercial Vehicle Group, Inc. | 0.78 | 0.61 | 7.9 | 5.1 | 10.1 | 6.0 | 15.0 | 8.1 | ||||||||||||||||||||||||
Donaldson Company, Inc. | 1.65 | 2.74 | 11.6 | N/M | 14.1 | N/A | 19.4 | N/M | ||||||||||||||||||||||||
Eaton Corporation | 1.06 | 1.02 | 8.1 | 7.4 | 10.9 | 9.8 | 12.7 | 11.3 | ||||||||||||||||||||||||
Gentex Corporation | 3.52 | 3.17 | 12.5 | 11.0 | 15.3 | 13.2 | 22.0 | 19.3 | ||||||||||||||||||||||||
Johnson Controls Inc.* | 0.67 | 0.62 | 9.0 | 8.1 | 12.9 | 11.4 | 15.1 | 13.2 | ||||||||||||||||||||||||
Magna International Inc.* | 0.32 | 0.29 | 4.3 | 3.8 | 7.5 | 6.2 | 11.5 | 9.6 | ||||||||||||||||||||||||
Modine Manufacturing Company | 0.58 | 0.54 | 6.9 | 6.4 | 13.0 | 11.4 | 15.8 | 14.9 | ||||||||||||||||||||||||
Stoneridge, Inc. | 0.62 | 0.55 | 6.3 | 5.7 | 11.2 | 9.7 | 25.7 | 15.9 | ||||||||||||||||||||||||
Tenneco Inc.* | 0.44 | 0.41 | 5.4 | 5.1 | 9.0 | 8.4 | 12.5 | 10.7 | ||||||||||||||||||||||||
TRW Automotive Holdings Corp.* | 0.42 | 0.41 | 4.7 | 4.6 | 8.3 | 8.0 | 12.3 | 10.8 | ||||||||||||||||||||||||
Visteon Corporation* | 0.23 | 0.22 | 4.2 | 5.9 | 14.5 | N/M | N/M | N/M | ||||||||||||||||||||||||
Global automotive suppliers: | ||||||||||||||||||||||||||||||||
Autoliv, Inc. | 0.94 | x | 0.89 | x | 6.6 | x | 5.9 | x | 10.8 | x | 9.6 | x | 14.9 | x | 13.1x | |||||||||||||||||
Brembo SpA | 1.06 | 1.00 | 6.5 | 6.0 | 10.1 | 9.1 | 12.8 | 11.0 | ||||||||||||||||||||||||
Continental AG | 1.20 | 1.14 | 7.2 | 6.7 | 10.9 | 9.9 | 16.0 | 14.4 | ||||||||||||||||||||||||
Denso Corporation | 1.20 | 1.10 | 8.3 | 7.5 | N/A | N/A | 19.4 | 17.3 | ||||||||||||||||||||||||
ElringKlinger AG | 2.57 | N/A | 10.3 | N/A | 14.8 | N/A | 24.6 | N/A | ||||||||||||||||||||||||
Faurecia SA | 0.25 | N/A | 4.2 | N/A | 14.2 | N/A | 19.4 | N/A | ||||||||||||||||||||||||
GKN PLC | 0.68 | N/A | 6.0 | N/A | 9.4 | N/A | 12.3 | N/A | ||||||||||||||||||||||||
Grammer AG | 0.35 | N/A | 4.5 | N/A | 7.1 | N/A | 10.6 | N/A | ||||||||||||||||||||||||
SOGEFI SpA | 0.98 | 0.96 | 6.2 | 6.1 | 9.0 | 8.9 | 12.7 | 12.1 | ||||||||||||||||||||||||
Tomkins plc | 0.92 | 0.90 | 7.2 | 6.8 | 10.6 | 9.7 | 13.6 | 12.6 | ||||||||||||||||||||||||
Trelleborg AB | 0.84 | 0.82 | 7.6 | 7.2 | 11.2 | 10.3 | 11.9 | 10.6 | ||||||||||||||||||||||||
Valeo SA | 0.39 | 0.38 | 4.1 | 3.8 | 13.2 | 12.0 | 17.0 | 14.9 |
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Price Per | Price Per | |||||||||||||||||||||||||||||||
Firm | Firm | Firm | Firm | Firm | Firm | Share/2007 | Share/2008 | |||||||||||||||||||||||||
Value/2007 | Value/2008 | Value/2007 | Value/2008 | Value/2007 | Value/2008 | Earnings | Earnings | |||||||||||||||||||||||||
Sales | Sales | EBITDA | EBITDA | EBIT | EBIT | Per Share | Per Share | |||||||||||||||||||||||||
North American automotive suppliers: | ||||||||||||||||||||||||||||||||
Median | 0.60 | x | 0.56 | x | 6.6 | x | 5.7 | x | 11.4 | x | 9.3 | x | 15.1 | x | 11.0x | |||||||||||||||||
Median of Select Peers(1) | 0.43 | x | 0.41 | x | 5.2 | x | 5.0 | x | 10.5 | x | 8.4 | x | 14.8 | x | 10.7x | |||||||||||||||||
Global suppliers: | ||||||||||||||||||||||||||||||||
Median | 0.93 | x | 0.93 | x | 6.5 | x | 6.4 | x | 10.8 | x | 9.7 | x | 14.2 | x | 12.9x |
(1) | The companies considered in this computation are marked with an asterisk (*) in the list of “North American automotive suppliers” above. JPMorgan selected a group of peers from the list of comparable companies that were all North American Tier I automotive suppliers with similar product and customer base characteristics to Lear to provide a subset of the comparable companies that more closely resembled Lear with respect to such characteristics. |
Multiples of Firm | ||||||||
Value/2007 | ||||||||
EBITDA | ||||||||
High | Low | |||||||
North American Automotive Suppliers | 12.5x | 4.2x | ||||||
North American Select Peers | 9.0x | 4.2x | ||||||
Global Suppliers | 10.3x | 4.1x |
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Firm | ||||||||||||||||
Firm Value/ | Value/ | Firm Value/ | ||||||||||||||
Date Announced | Acquirer | Target | Sales | EBIT | EBITDA | |||||||||||
October 2006 | Robert Bosch GmbH | Pacifica Group Ltd. | 0.69 | x | 12.0 | x | 5.4 | x | ||||||||
October 2006 | Hitachi, Ltd. | Clarion Co., Ltd. | 0.47 | 16.3 | 8.4 | |||||||||||
September 2006 | Asahi Tec Corporation | Metaldyne Corporation | 0.64 | 27.4 | 6 | |||||||||||
June 2006 | Platinum Equity LLC | Textron Fastening Systems business of Textron Inc. | 0.35 | N/A | N/A | |||||||||||
May 2006 | Red Diamond Capital Partners, L.P. | Automotive division of Avon Rubber plc | 0.38 | 4.2 | 4.2 | |||||||||||
April 2006 | Continental AG | Automotive electronics business of Motorola, Inc. | 0.63 | N/A | 8.9 | |||||||||||
January 2006 | Bain Capital, LLC | Sensors and controls business of Texas Instruments Incorporated | 2.62 | 11.4 | 10.1 | |||||||||||
December 2005 | Cooper-Standard Automotive Inc. | Automotive brake and fuel tubing business of ITT Industries, Inc. | 0.48 | 9.3 | 4.6 | |||||||||||
September 2005 | The Carlyle Group | AxleTech Industries, Inc. | 1.40 | N/A | 9.0 | |||||||||||
March 2005 | Johnson Controls, Inc. | Battery business of Delphi Corporation | 0.36 | N/A | 4.0 | |||||||||||
January 2005 | Valeo SA | Engine electronics division of Johnson Controls, Inc. | 0.94 | 12.7 | 9.5 | |||||||||||
November 2004 | BorgWarner Germany GmbH | BERU AG | 1.47 | 9.6 | 6.5 | |||||||||||
October 2004 | Magna International | Tesma International Inc. | 0.81 | 7.9 | 5.5 | |||||||||||
October 2004 | Magna International | Decoma International Inc. | 0.34 | 5.5 | 3.4 | |||||||||||
September 2004 | The Cypress Group | Cooper-Standard Automotive Inc. | 0.63 | 4.7 | 8.5 | |||||||||||
July 2004 | The Cypress Group | Dana AG | 0.47 | 8.1 | 6.1 | |||||||||||
July 2004 | Thomas H Lee Partners | Progressive Moulded Products Ltd. | 1.40 | N/A | 7.0 |
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Firm | ||||||||||||||||
Firm Value/ | Value/ | Firm Value/ | ||||||||||||||
Date Announced | Acquirer | Target | Sales | EBIT | EBITDA | |||||||||||
July 2004 | Montagu Private Equity | Stabilus GmbH | 1.10 | N/A | 6.4 | |||||||||||
June 2004 | Kohlberg & Company LLC | Stanadyne Corporation | 1.10 | 12.3 | 7.0 | |||||||||||
May 2004 | GS Capital Partners | Autocam Corporation | 1.21 | N/A | 7.0 | |||||||||||
March 2004 | Continental AG | Phoenix AG | 0.48 | 12.5 | 5.8 | |||||||||||
September 2003 | Vestar Capital Partners | FL Selenia SpA | 1.40 | 20.3 | 7.9 | |||||||||||
May 2003 | Hg Capital | W.E.T. Automotive Systems AG | 1.00 | 6.1 | 4.9 | |||||||||||
May 2003 | Tomkins plc | Stackpole Limited | 1.24 | 10.9 | 6.2 | |||||||||||
May 2003 | The Carlyle Group | Automotive parts business of UIS, Inc. | 0.89 | N/A | 6.1 | |||||||||||
May 2003 | Rheinmetall AG | Kolbenschmidt Pierburg AG | 0.36 | 8.5 | 3.1 | |||||||||||
March 2003 | Castle Harlan, Inc. | Advanced Accessory Systems, LLC | 0.79 | N/A | 5.6 | |||||||||||
November 2002 | The Blackstone Group | Automotive business of TRW Inc. | 0.46 | 10.6 | 4.9 | |||||||||||
November 2002 | The Carlyle Group | Edscha AG | 0.58 | 7.8 | 4.9 | |||||||||||
August 2002 | CVC Capital | Kwik-Fit Holdings Limited | 0.40 | 5.1 | 3.6 | |||||||||||
August 2002 | Johnson Controls, Inc. | Automotive battery business of Varta AG | 0.53 | 10.8 | 5.7 | |||||||||||
August 2002 | Questor Management Co. LLC | Teksid Aluminum SpA | 0.56 | N/A | 6.8 | |||||||||||
July 2002 | Magna International Inc. | Donnelly Corporation | 0.49 | 25.5 | 8.9 | |||||||||||
July 2002 | Doughty Hanson & Co. | A.T.U. Group | 1.11 | 13.9 | 10.5 | |||||||||||
May 2002 | Hitachi, Ltd. | Unisia JECS Corporation | 0.35 | 28.5 | 4.8 | |||||||||||
January 2002 | CSFB | Oxford Automotive, Inc. | 0.30 | 25.3 | 4.9 |
Firm Value/ | Firm Value/ | Firm Value/ | ||||||||||
Sales | EBIT | EBITDA | ||||||||||
Median | 0.63 | x | 10.8 | x | 6.1x |
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2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||||||||||||||||||
Unlevered free cash flow | $ | 243 | $ | 439 | $ | 468 | $ | 527 | $ | 425 | $ | 429 | $ | 434 | $ | 442 | $ | 446 | $ | 457 |
• | a premium of 3.8% based on the closing price of Lear’s 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); | |
• | a discount of 10.2% based on the closing price of Lear’s common stock on February 8, 2007 (the trading day prior to announcement of the merger) of $40.07; | |
• | a premium of 7.0% based on the closing price of Lear’s common stock of $33.66 one week prior to February 2, 2007; | |
• | a premium of 21.9% based on the closing price of Lear’s common stock of $29.53 one month before February 2, 2007; | |
• | a premium of 46.4% based on the closing price of Lear’s 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); | |
• | a premium of 1.2% based on the52-week high of Lear’s common stock of $35.56 as of February 2, 2007; |
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• | a premium of 55.1% based on the52-week volume weighted average price of Lear’s common stock of $23.21 as of February 2, 2007; and | |
• | a premium of 130.8% based on the52-week low of Lear’s common stock of $15.60 as of February 2, 2007. |
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• | the current state of the automotive industry and the financial distress of several of Lear’s major customers and suppliers which could result in lower production volumes and have an adverse impact on Lear’s operating results and the price of Lear’s common stock; | |
• | the fact that the automotive operations of Lear’s three largest customers have recently experienced significant operating losses, and these automakers are continuing to restructure their North American | |
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operations, which may have an adverse impact on Lear’s operating results and the price of Lear’s common stock; | ||
• | 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 3.8% based on the closing price of Lear’s common stock of $34.67 on February 2, 2007, the trading day prior to the announcement of the offer to purchase Lear by affiliates of Mr. Icahn, a premium of 55.1% based on the52-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; | |
• | the $36.00 per share merger consideration is fair in relation to the Company’s going concern value; | |
• | the fact that the terms of the merger agreement would provide Lear a45-day post-signing “go shop” period during which Lear would have the right to solicit additional interest in a transaction involving Lear and, after such45-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”; | |
• | the board of directors (without the participation of Mr. Intrieri) unanimously determined that the merger agreement and the merger are substantively and procedurally fair to the unaffiliated stockholders of Lear and in the best interests of such stockholders; | |
• | the merger will provide consideration to the stockholders entirely in cash, which provides certainty of value; | |
• | the fact that appraisal rights under Delaware law are available to holders of shares of Lear’s 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; | |
• | 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 Lear’s stockholders; and | |
• | 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 reversebreak-up fee payable by Parent if Parent were to breach its obligations under the merger agreement and fail to complete the merger. | |
• | 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; | |
• | the special committee consists solely of directors who are not officers or controlling stockholders of Lear, or affiliated with AREP or its affiliates; | |
• | the special committee unanimously determined that the merger agreement and the merger are substantively and procedurally fair to the unaffiliated stockholders of Lear and in the best interests of such stockholders; | |
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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 the AREP Group 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; and | |
• | 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. | |
Opinion of Morgan Joseph & Co. Inc. |
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• | the February 6, 2007 draft of the merger agreement (which at such date Morgan Joseph assumed was, with respect to all material terms and conditions thereof, substantially in the form of the definitive agreement executed and delivered by the parties thereto); | |
• | the Annual Report on Form 10-K filed by Lear with the SEC for its fiscal year ended December 31, 2005, the Quarterly Reports on Form 10-Q filed by Lear with the SEC for its fiscal quarters ended April 1, 2006, July 1, 2006, September 30, 2006, and certain other filings made by Lear with the SEC under the Exchange Act; | |
• | the Annual Report on Form 10-K filed by AREP with the SEC for its fiscal year ended December 31, 2005, the Quarterly Reports on Form 10-Q filed by AREP with the SEC for its fiscal quarters ended March 31, 2006, June 30, 2006 and September 30, 2006, and certain other Exchange Act filings made by AREP with the SEC; | |
• | certain other publicly available business and financial information concerning Lear and AREP, respectively, and the industries in which they operate, which Morgan Joseph believed to be relevant; | |
• | certain internal information and other data relating to Lear and AREP, respectively, and their respective business and prospects, including budgets, projections and certain presentations prepared by Lear and AREP, respectively, which were provided to Morgan Joseph by AREP’s senior management; | |
• | the reported sales prices and trading activity of Lear’s common stock; | |
• | certain publicly available information concerning certain other companies which Morgan Joseph believed to be relevant and the trading markets for certain of such other companies’ securities; | |
• | the financial terms of certain recent unrelated transactions which Morgan Joseph believed to be relevant; and | |
• | the resolutions of the board of directors of API, dated February 2, 2007, establishing and appointing the membership of the special committee of the board of directors of API and prescribing its authority and mandate with respect to the proposed merger, a complete and correct copy of which were provided to Morgan Joseph by AREP’s senior management. |
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Selected Comparable Transactions Analysis |
• | Robert Bosch/ Pacifica Group Ltd. (October 18, 2006); | |
• | Asahi Tec Corp./ Metaldyne Corp. (September 1, 2006); | |
• | EQT Partners/MTU Friedrichshafen GmbH (December 28, 2005); | |
• | BorgWarner Germany/ Beru AG (November 1, 2004); | |
• | Magna International, Inc./ Tesma International Inc. (October 25, 2004); | |
• | Cypress Group, Goldman Sachs/ Cooper-Standard Holdings Inc. (September 9, 2004); | |
• | Cypress Group/ Dana Corp. (automotive parts division) (July 9, 2004); | |
• | Cypress Group/ Affina Group Inc. (July 9, 2004); | |
• | Carlyle Group/ United Components Inc. (May 1, 2003); | |
• | Blackstone Group/ TRW Inc. (automotive parts division) (November 17, 2002); | |
• | Timkin Co./ The Torrington Company (October 16, 2002); | |
• | Collins & Aikman Corp./ Textron Automotive Trim (August 7, 2001); and | |
• | Heartland Industrial Partners/ Collins & Aikman Corp. (January 12, 2001). |
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Multiples Observed from the Selected Transactions |
25th | 50th | 75th | ||||||||||
Percentile | Percentile | Percentile | ||||||||||
Multiple of Transaction Value: | ||||||||||||
/LTM Sales | 0.6x | 0.7x | 0.7x | |||||||||
/LTM EBITDA(1) | 5.1x | 6.0x | 6.8x | |||||||||
/LTM EBIT(2) | 8.3x | 10.1x | 10.6x |
(1) | “EBITDA” means earnings before interest, taxes, depreciation and amortization. |
(2) | “EBIT” means earnings before interest and taxes. |
Selected Publicly Traded Companies Analysis |
• | American Axle & Manufacturing Holdings Inc.; | |
• | Dana Corp.; | |
• | Faurecia SA; | |
• | Johnson Controls Inc.; | |
• | Magna International, Inc.; | |
• | TRW Automotive Holdings Corp.; |
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• | Valeo SA; and | |
• | Visteon Corp. |
Multiples Observed from the Selected Companies |
25th | 50th | 75th | ||||||||||
Percentile | Percentile | Percentile | ||||||||||
Multiple of Enterprise Value: | ||||||||||||
/LTM EBITDA | 4.5x | 4.9x | 5.7x | |||||||||
/2006 Estimated EBITDA | 4.7x | 5.5x | 6.2x | |||||||||
/2007 Estimated EBITDA | 4.5x | 4.7x | 4.9x |
Multiples for Lear |
Multiple of Enterprise Value: | ||||
/LTM EBITDA | 6.8x | |||
/2006 Estimated EBITDA | 6.8x | |||
/2007 Estimated EBITDA | 5.4x |
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Discounted Cash Flow Analysis |
Enterprise Value | ||||||||||||||||
Net Present | ||||||||||||||||
Value of | ||||||||||||||||
Free Cash | ||||||||||||||||
Flow as of | ||||||||||||||||
December 31, | ||||||||||||||||
2006(1) | 4.5x | 5.0x | 5.5x | |||||||||||||
WACC | ||||||||||||||||
10.0% | $ | 1,958.5 | $ | 5,323.1 | $ | 5,697.0 | $ | 6,070.8 | ||||||||
11.0% | $ | 1,914.8 | $ | 5,159.7 | $ | 5,520.3 | $ | 5,880.8 | ||||||||
12.0% | $ | 1,872.6 | $ | 5,003.2 | $ | 5,351.0 | $ | 5,698.8 |
(1) | Represents the net present value of free cash flow as of December 31, 2006 for the years 2007 through 2010. |
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Equity Value per Share(1) | ||||||||||||||||
Net Debt | ||||||||||||||||
and Minority | ||||||||||||||||
Interest as of | ||||||||||||||||
December 31, | ||||||||||||||||
2006(2) | 4.5x | 5.0x | 5.5x | |||||||||||||
WACC | ||||||||||||||||
10.0% | $ | 2,061.0 | $ | 41.31 | $ | 46.04 | $ | 50.78 | ||||||||
11.0% | $ | 2,061.0 | $ | 39.24 | $ | 43.80 | $ | 48.37 | ||||||||
12.0% | $ | 2,061.0 | $ | 37.26 | $ | 41.66 | $ | 46.07 |
(1) | Based on 79.0 million fully diluted shares outstanding February 2, 2007. |
(2) | Does not include amounts outstanding under asset backed securitizations and factoring facilities. |
Premiums Paid Analysis |
Target Offer Premium to | ||||||||||||
1 Day Prior | 1 Week Prior | 1 Month Prior | ||||||||||
Average Offer Premium | 52.3 | % | 69.0 | % | 24.9 | % | ||||||
Lear Merger Offer Premium | 3.8 | % | 4.0 | % | 29.2 | % |
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A.T. Kearney Report |
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Project Methodology |
Summary of Findings |
• | The seating market shows growth potential because seats are increasing in content and are increasingly used for vehicle differentiation; | |
• | Lear operates in a seat market with consolidated competition and rational pricing; | |
• | Lear has strong people, operations and systems; | |
• | Lear is favorably viewed in the industry and is trusted by most auto makers to deliver major programs; and | |
• | Lear’s business has a strong balance of market presence in North America and Europe with a growing Asian presence. |
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• | Generic risks associated with the North American based automotive Tier I market, including declining sales from the traditional “Big 3” auto makers, cost pressures from auto makers and raw material pricing volatility; | |
• | Lear’s ability to quickly transition sales and associated cost structure from North America to Asia and Eastern Europe are impacted by a significant union presence in Lear operations in North America and declining North American revenue which will create excess capacity in that region; and | |
• | A softening of Lear’s revenue pipeline in 2008 and 2009 with limited commercial opportunities in that timeframe. |
• | In late 2006 and projected into 2007, Lear has improved operating income levels to 3.2% and has rebounded from a weak performance in 2005; | |
• | Lear is executing a restructuring program for a total restructuring savings of approximately $125.0 million annually with an investment of approximately $300.0 million over the 2005-2007 timeframe; | |
• | Lear enjoys a strong relationship with its major customers and has successfully executed new program launches; | |
• | A review of 10 of Lear’s major programs representing in excess of $4 billion in revenues indicated that all programs reviewed were positive contributors with manageable risks; | |
• | Lear’s program management system and culture provide strong financial control, assumption tracking and execution management; | |
• | Lear is implementing a metal strategy to increase vertical integration and expand the metal and mechanism content, which requires it to increase competency in this complex area; | |
• | There is softness in the North American revenue pipeline in 2008 and 2009 that can be offset by aggressive sales activity in the near-future and/or increased restructuring and cost savings efforts; and | |
• | The Electrical distribution business is 4th in the market place, while electronics is a sub-scale niche player: | |
• | While these businesses are stable performers, their smaller size and differing competencies may require strategies different from that for the seating business. |
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Ownership Prior to | ||||||||||||||||
Merger(1)(2) | Ownership After Merger(3) | |||||||||||||||
$ (in millions) | Percentage | $ (in millions) | Percentage | |||||||||||||
Net book value at December 31, 2006 | $ | 94.2 | 15.6 | % | $ | 602.0 | 100.0 | % | ||||||||
Net loss for the year ended December 31, 2006 | $ | (110.7 | ) | 15.6 | % | $ | (707.5 | ) | 100.0 | % | ||||||
Net book value at March 31, 2007 | $ | 108.3 | 15.6 | % | $ | 692.5 | 100.0 | % | ||||||||
Net income for the three months ended March 31, 2007 | $ | 7.8 | 15.6 | % | $ | 49.9 | 100.0 | % |
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(1) | Based upon 76,685,623 shares of common stock outstanding as of May 14, 2007. |
(2) | Based upon beneficial ownership of affiliates of Mr. Icahn of 11,994,943 shares of common stock as of May 14, 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. |
(3) | Does not give effect to indebtedness to be incurred in connection with the merger. |
Directors and Management of the Surviving Corporation |
Charter and By-laws |
Charter and By-laws |
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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 | |
• | a $1.0 billion five-year senior secured revolving credit facility, with sublimits and subfacilities consistent with Lear’s 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. |
Sources of Funds | |||||
Lear cash on hand | $ | 155.2 | |||
Term loan facility | 2,600.0 | ||||
Revolving credit facility | — | ||||
AREP equity contribution | 1,300.0 | ||||
Total | $ | 4,055.2 | |||
Uses of Funds | |||||
Purchase of common stock | 2,856.7 | ||||
Refinancing existing debt(a) | 1,118.4 | ||||
Estimated transaction costs | 80.1 | ||||
Existing revolving credit facility | — | ||||
Total | $ | 4,055.2 | |||
(a) | Consists of $997.0 term loan and $121.4 of outstanding senior notes (including redemption payments). |
Conditions Precedent to the Debt Financing Commitments |
• | 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, | |
• | negotiation, execution and delivery of definitive documentation for the debt financing; | |
• | American Real Estate Holdings Limited Partnership, through Parent, making an equity contribution of at least $1.3 billion prior to or substantially simultaneously with the initial borrowing under the term loan and revolving facilities; | |
• | repayment of all indebtedness under Lear’s existing credit facilities, release of all related liens and completion of a tender offer for outstanding securities under certain of Lear’s indentures or receipt by |
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Bank of America of call notices sufficient to redeem all indebtedness under certain of Lear’s indentures; | ||
• | the accuracy in all material respects of certain representations and warranties of Lear contained in the merger agreement and certain representations and warranties of Merger Sub and Lear contained in the definitive documentation for the debt facilities; | |
• | receipt by Bank of America of audited financial statements of Lear for the fiscal year ended December 31, 2006, unaudited financial statements for each subsequent fiscal quarter ended 45 days or more prior to the closing of the merger and pro forma unaudited financial statements for the fiscal year ended December 31, 2006 and for each subsequent fiscal quarter ended 45 days or more prior to the closing of the merger; and | |
• | other customary conditions for leveraged acquisition financings. |
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Aggregate Merger Payments |
Payments for Direct Stock Holdings | Aggregate | |||||||||||||||
Payments on | ||||||||||||||||
Number of | Merger | Outstanding | Total Merger | |||||||||||||
Shares(#)(1) | Consideration($) | Awards(5)(6) | Payments($)(6) | |||||||||||||
Executive Officers | ||||||||||||||||
Robert E. Rossiter | 93,957 | (2) | 3,382,452 | 8,008,369 | 11,390,821 | |||||||||||
James H. Vandenberghe | 63,003 | 2,268,108 | 4,688,654 | 6,956,762 | ||||||||||||
Douglas G. DelGrosso | 34,813 | (3) | 1,253,268 | 3,661,531 | 4,914,799 | |||||||||||
Daniel A. Ninivaggi | 12,914 | 464,904 | 2,001,414 | 2,466,318 | ||||||||||||
Raymond E. Scott | 8,021 | 288,756 | 1,967,126 | 2,255,882 | ||||||||||||
James M. Brackenbury | 6,900 | 248,400 | 1,571,742 | 1,820,142 | ||||||||||||
Shari L. Burgess | 2,566 | 92,376 | 593,821 | 686,197 | ||||||||||||
Roger A. Jackson | 7,979 | 287,244 | 1,877,251 | 2,164,495 | ||||||||||||
James L. Murawski | 1,189 | 42,804 | 506,623 | 549,427 | ||||||||||||
Matthew J. Simoncini | 2,780 | 100,080 | 1,136,254 | 1,236,334 | ||||||||||||
Directors | ||||||||||||||||
David E. Fry | 1,103 | 39,708 | 346,193 | 385,901 | ||||||||||||
Vincent J. Intrieri | 0 | 0 | 107,712 | 107,712 | ||||||||||||
Conrad L. Mallett | 475 | 17,100 | 509,865 | 526,965 | ||||||||||||
Larry W. McCurdy | 2,000 | 72,000 | 855,677 | 927,677 | ||||||||||||
Roy E. Parrott | 3,230 | 116,280 | 223,231 | 339,511 | ||||||||||||
David P. Spalding | 6,000 | 216,000 | 795,811 | 1,011,811 | ||||||||||||
James A. Stern | 6,400 | (4) | 230,400 | 787,937 | 1,018,337 | |||||||||||
Henry D.G. Wallace | 1,000 | 36,000 | 287,159 | 323,159 | ||||||||||||
Richard F. Wallman | 1,500 | 54,000 | 245,499 | 299,499 |
(1) | Amounts shown exclude indirect holdings in 401(k) plan stock accounts. Shares held in 401(k) accounts will be sold and the cash consideration will be reallocated in the remaining accounts under the 401(k) plan. |
(2) | Includes 45,000 shares held in a grantor retained annuity trust for the benefit of Mr. Rossiter’s children. |
(3) | Includes 19,713 shares held in trust by Mr. DelGrosso’s spouse. |
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(4) | Includes 2,400 shares held in trust for Mr. Stern’s children. |
(5) | For executive officers, includes payments on outstanding stock options, stock appreciation rights, restricted stock units, performance shares and cash-settled performance units. For directors, includes payments on outstanding stock options, deferred stock units and restricted units. Specific amounts payable for each type of award are shown in more detail in the tables beginning on page 62. |
(6) | Represents gross payments. Actual payments will be subject to applicable withholding taxes. |
Employment Agreements |
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Equity Awards |
• | stock options and stock appreciation rights become immediately exercisable and remain so throughout their entire term; | |
• | restrictions on restricted stock units lapse; and | |
• | 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. |
Stock Options |
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In-The-Money Options(1) | Underwater Options | |||||||||||||||
to be Cancelled in | ||||||||||||||||
Number of | Weighted | 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 $36.00 per share merger consideration. |
(3) | The individual is a director. |
Stock Appreciation Rights |
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Weighted | Weighted | |||||||||||||||||||
Average Exercise | Average Exercise | Aggregate | ||||||||||||||||||
Aggregate | Price of | Value of | Price of Vested | Value of Vested | ||||||||||||||||
Number | Unvested | Unvested | and Unvested | and Unvested | ||||||||||||||||
Name | of SARs | SARs($) | SARs($) | SARs($) | SARs($) | |||||||||||||||
Robert E. Rossiter | 222,750 | 29.21 | 1,168,729 | 28.88 | 1,585,980 | |||||||||||||||
James H. Vandenberghe | 123,750 | 29.21 | 649,294 | 28.88 | 881,100 | |||||||||||||||
Douglas G. DelGrosso | 123,750 | 29.21 | 649,294 | 28.88 | 881,100 | |||||||||||||||
Daniel A. Ninivaggi | 70,950 | 29.64 | 365,382 | 29.28 | 476,784 | |||||||||||||||
Raymond E. Scott | 59,400 | 29.21 | 311,661 | 28.88 | 422,928 | |||||||||||||||
James M. Brackenbury | 45,900 | 29.21 | 311,661 | 29.21 | 311,661 | |||||||||||||||
Shari L. Burgess | 17,199 | 29.63 | 88,645 | 29.27 | 115,749 | |||||||||||||||
Roger A. Jackson | 55,350 | 29.31 | 289,008 | 28.96 | 389,664 | |||||||||||||||
James L. Murawski | 17,199 | 29.63 | 88,645 | 29.27 | 115,749 | |||||||||||||||
Matthew J. Simoncini | 32,970 | 30.06 | 167,983 | 29.70 | 207,711 |
Restricted Stock Units |
Aggregate Value | ||||||||||||
Aggregate | of Dividend | |||||||||||
Name | Number of Units | Value($) | Equivalents($) | |||||||||
Robert E. Rossiter | 158,556 | 5,708,016 | 167,767 | |||||||||
James H. Vandenberghe | 96,598 | 3,477,528 | 98,012 | |||||||||
Douglas G. DelGrosso | 69,670 | 2,508,120 | 62,106 | |||||||||
Daniel A. Ninivaggi | 37,968 | 1,366,848 | 33,888 | |||||||||
Raymond E. Scott | 38,925 | 1,401,300 | 34,790 | |||||||||
James M. Brackenbury | 31,119 | 1,120,284 | 31,185 | |||||||||
Shari L. Burgess | 11,052 | 397,872 | 10,925 | |||||||||
Roger A. Jackson | 37,136 | 1,336,896 | 37,795 | |||||||||
James L. Murawski | 8,755 | 315,180 | 7,312 | |||||||||
Matthew J. Simoncini | 23,099 | 831,564 | 16,051 |
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Performance Shares |
Number of | Pro Rata | |||||||||||
Performance | Performance | Aggregate Pro Rata | ||||||||||
Name | Shares | Shares @ 3/15/07 | Value($) | |||||||||
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 |
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Number of | Pro Rata | |||||||||||
Performance | Performance | Aggregate Pro Rata | ||||||||||
Name | Units | Units @ 3/15/07 | Value($) | |||||||||
Robert E. Rossiter | 20,250 | 1,125 | 33,750 | |||||||||
James H. Vandenberghe | 11,250 | 625 | 18,750 | |||||||||
Douglas G. DelGrosso | 11,250 | 625 | 18,750 | |||||||||
Daniel A. Ninivaggi | 8,700 | 483 | 14,490 | |||||||||
Raymond E. Scott | 5,400 | 300 | 9,000 | |||||||||
James M. Brackenbury | 5,400 | 300 | 9,000 | |||||||||
Shari L. Burgess | 2,100 | 117 | 3,510 | |||||||||
Roger A. Jackson | 5,400 | 300 | 9,000 | |||||||||
James L. Murawski | 2,100 | 117 | 3,510 | |||||||||
Matthew J. Simoncini | 5,400 | 300 | 9,000 |
Director Compensation Plan |
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Aggregate Value | ||||||||||||
of Dividend and | ||||||||||||
Interest | ||||||||||||
Name | Number of Units | Aggregate Value($) | 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 | 6,749 | 242,964 | 2,535 |
Indemnification and Insurance |
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Special Committee Compensation |
Mr. Vincent Intrieri |
• | an individual who is a citizen or resident of the United States; | |
• | 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; | |
• | 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 | |
• | an estate that is subject to U.S. federal income tax on its income regardless of its source. |
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• | the adoption of the merger agreement and the approval of the merger; and | |
• | any definitive agreement with respect to a superior proposal (as defined under “The Merger Agreement — Solicitation of Other Offers”). |
• | transfer or agree to transfer shares to any affiliate, provided that the transferee agrees in writing to be bound by the voting agreement; and | |
• | 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. |
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• | general economic conditions in the markets in which we operate, including changes in interest rates or currency exchange rates; | |
• | the financial condition of our customers or suppliers; | |
• | fluctuations in the production of vehicles for which we are a supplier; | |
• | disruptions in the relationships with our suppliers; | |
• | labor disputes involving us or our significant customers or suppliers or that otherwise affect us; | |
• | our ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions; | |
• | the outcome of customer productivity negotiations; | |
• | the impact and timing of program launch costs; | |
• | the costs and timing of facility closures, business realignment or similar actions; | |
• | increases in our warranty or product liability costs; | |
• | risks associated with conducting business in foreign countries; | |
• | competitive conditions impacting our key customers and suppliers; | |
• | raw material costs and availability; | |
• | our ability to mitigate the significant impact of increases in raw material, energy and commodity costs; | |
• | the outcome of legal or regulatory proceedings to which we are or may become a party; | |
• | unanticipated changes in cash flow, including our ability to align our vendor payment terms with those of our customers; | |
• | the finalization of our restructuring strategy; and | |
• | other risks described from time to time in our SEC filings. |
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• | delivering to Wendy L. Foss, our Vice President, Finance & Administration and Corporate Secretary, a signed, written revocation letter dated later than the date of your proxy; | |
• | submitting a proxy to Lear with a later date; or | |
• | attending the meeting and voting in person (your attendance at the meeting will not, by itself, revoke your proxy; you must vote in person at the meeting to revoke your proxy). |
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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; | |
• | 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; | |
• | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and | |
• | 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. |
• | corporate organization and existence; | |
• | corporate power and authority to enter into and consummate the transactions contemplated by, and enforceability of, the merger agreement; | |
• | the absence of conflicts with or defaults under organizational documents, other contracts and applicable laws; | |
• | information supplied for inclusion in this proxy statement; | |
• | required regulatory filings and consents and approvals of governmental entities; | |
• | litigation; | |
• | brokers; and |
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• | documents filed with the SEC, including financial statements. |
• | capital structure; | |
• | subsidiaries and joint ventures; | |
• | absence of certain changes or events since December 31, 2005; | |
• | compensation, employee benefit and labor matters; | |
• | tax matters; | |
• | compliance with applicable laws; | |
• | environmental matters; | |
• | intellectual property matters; | |
• | material leases and title to properties; | |
• | material contracts; | |
• | insurance; | |
• | the receipt by the special committee and the board of directors of a fairness opinion from JPMorgan; | |
• | the required vote of Lear stockholders; | |
• | state takeover statutes; | |
• | rights agreements; | |
• | customers and suppliers; | |
• | affiliate transactions; | |
• | product warranties and product liability claims; and | |
• | compliance with the Foreign Corrupt Practices Act. |
• | the debt financing commitments; | |
• | the delivery of the limited guaranty; | |
• | ownership and prior activities of Merger Sub; and | |
• | the required vote of Parent’s stockholders. |
• | changes in general economic conditions, including those affecting the financial, banking, currency, interest rates or capital markets; or | |
• | conditions generally affecting any of the industries or markets in which Lear and our significant subsidiaries operate; |
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• | conduct, and cause our subsidiaries to conduct, our operations in the ordinary and usual course consistent with past practice; and | |
• | 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. |
• | amend or otherwise change our or our significant subsidiaries’ organizational or governing documents; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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); | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | enter into, forgive, renew, or amend in any material respect any loans to officers or directors or any of their respective affiliates or associates; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | ||
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | fail to comply with our related party transaction policy; | |
• | 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; | |
• | 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 | |
• | authorize, commit or agree to take any of the foregoing actions. |
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Cooperation of Lear |
• | participation in a reasonable number of meetings, presentations, road shows, due diligence sessions and sessions with rating agencies; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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 | |
• | 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. |
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Debt Financing |
• | 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; | |
• | 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 | |
• | 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. |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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); | |
• | 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; | |
• | we must perform certain obligations and satisfy certain requirements to cooperate with Parent’s debt financing arrangements; and | |
• | we must provide to Parent a certification that our shares of common stock are not United States real property interests. |
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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; | |
• | 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; | |
• | Parent’s delivery to us at closing of a certificate with respect to the satisfaction of the foregoing conditions relating to representations, warranties and obligations; and | |
• | Parent’s 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. |
• | 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; | |
• | approve or recommend, or publicly propose to approve or recommend, any acquisition proposal; | |
• | 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; | |
• | 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 | |
• | resolve, propose or agree to do any of the foregoing. |
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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 with whom we were having ongoing discussions or negotiations as of March 26, 2007 regarding a possible acquisition proposal (we were otherwise required to 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 | |
• | 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: | |
• | 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; | |
• | we have not intentionally or materially breached our obligations under the solicitation provisions of the merger agreement; | |
• | 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 | |
• | 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. |
• | receives any acquisition proposal; | |
• | 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; | |
• | receives any inquiry or request for discussions or negotiations regarding any acquisition proposal; or | |
• | enters into an acceptable confidentiality agreement. |
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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 | |
• | 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 effects described in the first two bullets above; and/or | |
• | 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. |
• | we have not intentionally or materially breached our obligations under the no solicitation provision of the merger agreement; | |
• | 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; | |
• | 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 | |
• | 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. |
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• | by mutual written consent of Lear and Parent; | |
• | by either Lear or Parent if: |
• | 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; | |
• | 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 | |
• | 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. |
• | by Lear, if: |
• | 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; | ||
• | 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 | |
• | all of the conditions to each party’s 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. |
• | by Parent, if: |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | we or our board of directors (or any committee thereof) authorizes or publicly proposes any of the actions in the preceding four bullet points; | |
• | 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 | |
• | 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. |
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Description | Amount | |||
Financial advisory fees | $ | 12,750,000 | ||
Legal and accounting fees and expenses | 5,500,000 | |||
Proxy solicitation fees | 40,000 | |||
SEC filing fees | 87,770 | |||
Printing and mailing costs | 400,000 | |||
Miscellaneous | 322,230 | |||
Total | $ | 19,100,000 | ||
Payable by Lear |
Termination Fees |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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; | |
• | 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 |
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acquisition proposal or material modification to an acquisition proposal is first published, sent or given to our stockholders; | ||
• | 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 | |
• | 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. |
• | Parent had terminated the merger agreement during the “go shop” period because a change of the recommendation of our board of directors had occurred, we or our board of directors (or any committee thereof) approved, adopted or recommended any acquisition proposal or approved, recommended or entered into or allowed us or any of our subsidiaries to enter into, a letter of intent, agreement in principle or definitive agreement for an acquisition proposal; | |
• | Parent had terminated the merger agreement during the “go shop” period because we failed 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 was first published, sent or given to our stockholders; | |
• | Parent terminated the merger agreement during the “go shop” period because we intentionally or materially breached any of our obligations under the non-solicitation provision or the stockholder approval provisions of the merger agreement; we failed to include in this proxy statement our board recommendation; or we or our board of directors (or any committee thereof) authorized or publicly proposed any of the foregoing actions of this and the preceding two bullet points; or | |
• | we terminated the merger agreement during the “go shop” period because we entered into an alternative acquisition agreement prior to receipt of the requisite stockholder approval for the merger with Merger Sub. |
Payable by Parent |
• | 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; | |
• | 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 Parent’s 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 | |
• | 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 Parent’s obligation to effect the merger have been satisfied. |
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• | extend the time for the performance of any of the obligations or other acts of the other parties; | |
• | 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 | |
• | waive compliance with any of the agreements or conditions contained in the merger agreement. |
• | 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 | |
• | 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. |
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Information Regarding Carl C. Icahn |
Information Regarding Vincent J. Intrieri |
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Information Regarding American Real Estate Partners, L.P. |
Information Regarding AREP Car Holdings Corp. |
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Information Regarding AREP Car Acquisition Corp. |
Information Regarding Certain Other Entities |
American Property Investors, Inc. |
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American Real Estate Holdings Limited Partnership |
Information Regarding Icahn Partners LP |
Information Regarding Icahn Partners Master Fund LP |
Information Regarding Koala Holding Limited Partnership |
Information Regarding High River Limited Partnership |
Information Regarding Icahn Onshore LP |
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Information Regarding Icahn Offshore LP |
Information Regarding Hopper Investments LLC |
Information Regarding CCI Onshore Corp. |
Information Regarding CCI Offshore Corp. |
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Information Regarding Barberry Corp. |
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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. | |
• | 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. | |
• | 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. |
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Larry W. McCurdy | Age: 71 |
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. |
Roy E. Parrott | Age: 66 |
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. |
Richard F. Wallman | Age: 57 |
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. |
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David E. Fry | Age: 64 |
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. |
Vincent J. Intrieri | Age: 50 |
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. |
Conrad L. Mallett, Jr. | Age: 54 |
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 |
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. |
David P. Spalding | Age: 53 |
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. |
James A. Stern | Age: 56 |
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. |
James H. Vandenberghe | Age: 57 |
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. |
Henry D.G. Wallace | Age: 61 |
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. |
Corporate Governance |
Board Meetings |
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Meetings of Non-Employee Directors |
Independence of Directors |
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Communications to the Board |
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Audit Committee |
Compensation Committee |
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Executive Committee |
Nominating and Corporate Governance Committee |
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Special Committee |
Recommendation of Directors by Stockholders |
Criteria for Selection of Directors |
• | Strong automotive background, with an understanding of Lear’s customers and markets. | |
• | Extensive general business background with a record of achievement. | |
• | Financial and accounting expertise. | |
• | Gender, racial and geographic diversity. | |
• | Strong international experience, particularly in those regions in which Lear seeks to conduct business. | |
• | Understands the potential role of technology in the development of Lear’s business. | |
• | Marketing or sales background in the automotive industry. | |
• | Schedule is sufficiently flexible to permit attendance at Board meetings at regularly scheduled times. |
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• | A contributor but accepting of opinions of others and supportive of decisions that are in the stockholders’ best interests. | |
• | Able to assimilate complex business problems and analyze them in the context of Lear’s strategic goals. | |
• | A team player yet possessing independence to appropriately question and challenge corporate strategy, as required. |
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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 | $ | 58,500 | $ | 77,917 | $ | 13,549 | $ | 149,966 | ||||||||
David P. Spalding | $ | 83,500 | $ | 77,917 | $ | 13,549 | $ | 174,966 | ||||||||
James A. Stern | $ | 89,500 | $ | 77,917 | $ | 13,549 | $ | 180,966 | ||||||||
Henry D.G. Wallace | $ | 70,500 | $ | 77,917 | — | $ | 148,417 | |||||||||
Richard F. Wallman | $ | 82,500 | $ | 77,917 | $ | 13,549 | $ | 173,966 |
* | Ms. Bingaman resigned from the Board effective May 31, 2006. |
** | Mr. Intrieri was elected to the Board on November 9, 2006. |
(1) | Includes cash retainer fees and meeting attendance fees, each as discussed in more detail below. Dollar amounts are comprised as follows: |
Name | Annual Retainer Fee($) | Aggregate Meeting Fees($) | ||||||
Anne K. Bingaman | 22,500 | 12,000 | ||||||
David E. Fry | 45,000 | 19,500 | ||||||
Vincent J. Intrieri | 11,250 | 1,500 | ||||||
Conrad L. Mallett, Jr. | 45,000 | 27,000 | ||||||
Larry W. McCurdy | 75,000 | 39,000 | ||||||
Roy E. Parrott | 45,000 | 13,500 | ||||||
David P. Spalding | 55,000 | 28,500 | ||||||
James A. Stern | 55,000 | 34,500 | ||||||
Henry D.G. Wallace | 45,000 | 25,500 | ||||||
Richard F. Wallman | 45,000 | 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. |
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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: |
Name | Aggregate Restricted Units | Deferred Stock Units | Stock Options | |||||||||
Anne K. Bingaman | — | — | — | |||||||||
David E. Fry | 4,645 | 2,036 | 4,000 | |||||||||
Vincent J. Intrieri | — | — | — | |||||||||
Conrad L. Mallett, Jr. | 4,645 | 2,873 | 4,000 | |||||||||
Larry W. McCurdy | 4,645 | 14,422 | 10,250 | |||||||||
Roy E. Parrott | 4,645 | — | 6,500 | |||||||||
David P. Spalding | 4,645 | 10,569 | 10,250 | |||||||||
James A. Stern | 4,645 | 12,801 | 10,250 | |||||||||
Henry D.G. Wallace | 4,659 | 564 | — | |||||||||
Richard F. Wallman | 4,645 | — | 2,000 |
(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 Company’s 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 Company’s financial statements for 2006, incorporated by reference in this proxy statement, for the assumptions made in determining FAS 123(R) values. |
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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 | |
• | credited to a stock unit account. |
• | the date elected by such director; | |
• | the date the director ceases to be a director; or | |
• | the date a change of control (as defined in the Outside Directors Compensation Plan) occurs. |
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Terms of office for directors | ||||||
elected to fill vacancies resulting | Terms of office for directors | |||||
from an increase in the size of a | elected to fill vacancies not | |||||
class of directors/increase in the | resulting from an increase in | |||||
Who fills vacancies? | number of directors | the number of directors | ||||
Current vacancy provisions | Majority of the Board, subject to certain restrictions. | Same term as the remaining term of the class into which he or she was elected. | Same term as his or her predecessor. | |||
Vacancy provisions under the Amendments | 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. |
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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). | |
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). | |
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). | |
5. | There shall be no use of child labor. (ILO Convention 138; UN Norms, section D6), and, | |
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Name | Age | Position | ||||
James M. Brackenbury | 48 | Senior Vice President and President, European Operations | ||||
Shari L. Burgess | 48 | Vice President and Treasurer | ||||
Douglas G. DelGrosso | 45 | President and Chief Operating Officer | ||||
Roger A. Jackson | 61 | Senior Vice President, Human Resources | ||||
James L. Murawski | 55 | Vice President and Corporate Controller | ||||
Daniel A. Ninivaggi | 42 | Executive Vice President, General Counsel and Chief Administrative Officer | ||||
Robert E. Rossiter | 61 | Chairman and Chief Executive Officer Senior Vice President and President, North American | ||||
Raymond E. Scott | 41 | 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 |
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. |
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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 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, General Counsel and Chief Administrative Officer, positions he has held since August 2006. 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. |
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Three Months Ended | |||||||||||||||||||||||||||||
Year Ended December 31, | |||||||||||||||||||||||||||||
March 31, | April 1, | ||||||||||||||||||||||||||||
2006(1) | 2005(2) | 2004 | 2003 | 2002 | 2007 | 2006 | |||||||||||||||||||||||
(In millions)(3) | |||||||||||||||||||||||||||||
Statement of Operations Data: | |||||||||||||||||||||||||||||
Net sales | $ | 17,838.9 | $ | 17,089.2 | $ | 16,960.0 | $ | 15,746.7 | $ | 14,424.6 | $ | 4,406.1 | $ | 4,678.5 | |||||||||||||||
Gross profit | 927.7 | 736.0 | 1,402.1 | 1,346.4 | 1,260.3 | 310.9 | 219.2 | ||||||||||||||||||||||
Selling, general and administrative expenses | 646.7 | 630.6 | 633.7 | 573.6 | 517.2 | 126.5 | 165.0 | ||||||||||||||||||||||
Goodwill impairment charges | 2.9 | 1,012.8 | — | — | — | — | — | ||||||||||||||||||||||
Loss on divestiture of Interior business | 636.0 | — | — | — | — | 25.6 | — | ||||||||||||||||||||||
Interest expense | 209.8 | 183.2 | 165.5 | 186.6 | 210.5 | �� | 51.5 | 47.7 | |||||||||||||||||||||
Other expense, net(4) | 85.7 | 38.0 | 38.6 | 51.8 | 52.1 | 16.2 | 0.1 | ||||||||||||||||||||||
Income (loss) before provision (benefit) 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 | 91.1 | 6.4 | ||||||||||||||||||||
Provision (benefit) for income taxes | 54.9 | 194.3 | 128.0 | 153.7 | 157.0 | 32.4 | (0.2 | ) | |||||||||||||||||||||
Minority interests in consolidated subsidiaries | 18.3 | 7.2 | 16.7 | 8.8 | 13.3 | 10.1 | 4.3 | ||||||||||||||||||||||
Equity in net (income) loss of affiliates | (16.2 | ) | 51.4 | (2.6 | ) | (8.6 | ) | (1.3 | ) | (1.3 | ) | (12.7 | ) | ||||||||||||||||
Income (loss) before cumulative effect of a change in accounting principle | (710.4 | ) | (1,381.5 | ) | 422.2 | 380.5 | 311.5 | 49.9 | 15.0 | ||||||||||||||||||||
Cumulative effect of a change in accounting principle, net of tax(5) | 2.9 | — | — | — | (298.5 | ) | — | 2.9 | |||||||||||||||||||||
Net income (loss) | $ | (707.5 | ) | $ | (1,381.5 | ) | $ | 422.2 | $ | 380.5 | $ | 13.0 | $ | 49.9 | $ | 17.9 | |||||||||||||
Basic net income (loss) per share | $ | (10.31 | ) | $ | (20.57 | ) | $ | 6.18 | $ | 5.71 | $ | 0.20 | $ | 0.65 | $ | 0.27 | |||||||||||||
Diluted net income (loss) per share(6) | $ | (10.31 | ) | $ | (20.57 | ) | $ | 5.77 | $ | 5.31 | $ | 0.29 | $ | 0.64 | $ | 0.26 | |||||||||||||
Weighted average shares outstanding — basic | 68,607,262 | 67,166,668 | 68,278,858 | 66,689,757 | 65,365,218 | 76,410,482 | 67,216,992 | ||||||||||||||||||||||
Weighted average shares outstanding — diluted(6) | 68,607,262 | 67,166,668 | 74,727,263 | 73,346,568 | 71,289,991 | 77,989,851 | 67,941,067 | ||||||||||||||||||||||
Dividends per share | $ | 0.25 | $ | 1.00 | $ | 0.80 | $ | 0.20 | $ | — | $ | — | $ | 0.25 | |||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||||||||||
Current assets | $ | 3,890.3 | $ | 3,846.4 | $ | 4,372.0 | $ | 3,375.4 | $ | 2,507.7 | $ | 3,698.0 | $ | 4,079.8 | |||||||||||||||
Total assets | 7,850.5 | 8,288.4 | 9,944.4 | 8,571.0 | 7,483.0 | 7,661.0 | 8,481.3 | ||||||||||||||||||||||
Current liabilities | 3,887.3 | 4,106.7 | 4,647.9 | 3,582.1 | 3,045.2 | 3,687.7 | 4,269.9 | ||||||||||||||||||||||
Long-term debt | 2,434.5 | 2,243.1 | 1,866.9 | 2,057.2 | 2,132.8 | 2,431.8 | 2,237.8 | ||||||||||||||||||||||
Stockholders’ equity | 602.0 | 1,111.0 | 2,730.1 | 2,257.5 | 1,662.3 | 692.5 | 1,134.6 | ||||||||||||||||||||||
Statement of Cash Flows Data: | |||||||||||||||||||||||||||||
Cash flows from operating activities | $ | 285.3 | $ | 560.8 | $ | 675.9 | $ | 586.3 | $ | 545.1 | $ | (41.8 | ) | $ | 39.4 | ||||||||||||||
Cash flows from investing activities | (312.2 | ) | (541.6 | ) | (472.5 | ) | (346.8 | ) | (259.3 | ) | (115.1 | ) | (64.7 | ) | |||||||||||||||
Cash flows from financing activities | 277.4 | (347.0 | ) | 166.1 | (158.6 | ) | (295.8 | ) | (22.4 | ) | (21.8 | ) | |||||||||||||||||
Capital expenditures | 347.6 | 568.4 | 429.0 | 375.6 | 272.6 | 29.2 | 92.6 | ||||||||||||||||||||||
Other Data (unaudited): | |||||||||||||||||||||||||||||
Ratio of earnings to fixed charges(7) | — | — | 3.7 | x | 3.4 | x | 3.0x | 2.5x | 1.1x | ||||||||||||||||||||
Employees as of year end | 104,276 | 115,113 | 110,083 | 111,022 | 114,694 | 89,904 | 114,639 | ||||||||||||||||||||||
North American content per vehicle(8) | $ | 645 | $ | 586 | $ | 588 | $ | 593 | $ | 579 | $ | 585 | $ | 640 | |||||||||||||||
North American vehicle production(9) | 15.3 | 15.8 | 15.7 | 15.9 | 16.4 | 3.8 | 4.1 | ||||||||||||||||||||||
European content per vehicle(10) | $ | 335 | $ | 345 | $ | 351 | $ | 310 | $ | 247 | $ | 347 | $ | 329 | |||||||||||||||
European vehicle production(11) | 19.2 | 18.9 | 18.9 | 18.2 | 18.1 | 5.1 | 5.1 |
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(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 2006 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 Ward’s Automotive. Production data for 2006 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. |
(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. |
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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 | ||||||||||||
Capital Expenditures | (259 | ) | (235 | ) | (252 | ) | (227 | ) | ||||||||
Free Cash Flow (Unlevered) | 343 | 531 | 600 | 588 |
(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 completed this transaction on March 31, 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. Free Cash Flow (Unlevered) includes $(150) million of estimated cash expenditures in 2007 associated with the planned divestiture of our North American interiors business. |
(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. |
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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 | ||||||||||||
Capital Expenditures | (246 | ) | (221 | ) | (235 | ) | (209 | ) | ||||||||
Free Cash Flow (Unlevered) | 243 | 439 | 468 | 527 |
(1) | Subsequent to the preparation of the July ’06 Long Range 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 completed this transaction on March 31, 2007. The financial projections provided exclude the results of operations of this business, including the two China joint ventures, for the entire forecast period. Free Cash Flow (Unlevered) includes $(120) million of estimated cash expenditures in 2007 associated with the operation and divestiture of our North American interiors business. |
(2) | Reflects the projected decrease in net sales in each year from 2008 through 2010 from the July ’06 Long-Range 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 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. |
Price Range of | ||||||||||||
Common Stock | ||||||||||||
Cash Dividend | ||||||||||||
For the year ended December 31, 2007: | High | Low | Per Share | |||||||||
2nd Quarter (through May 14, 2007) | $ | 38.01 | $ | 35.40 | $ | — | ||||||
1st Quarter | $ | 40.62 | $ | 27.79 | $ | — |
Price Range of | ||||||||||||
Common Stock | ||||||||||||
Cash Dividend | ||||||||||||
For the year ended December 31, 2006: | High | Low | Per Share | |||||||||
4th Quarter | $ | 34.01 | $ | 20.70 | $ | — | ||||||
3rd Quarter | $ | 24.41 | $ | 18.30 | $ | — | ||||||
2nd Quarter | $ | 28.00 | $ | 16.24 | $ | — | ||||||
1st Quarter | $ | 29.73 | $ | 16.01 | $ | 0.25 |
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Price Range of | ||||||||||||
Common Stock | ||||||||||||
Cash Dividend | ||||||||||||
For the year ended December 31, 2005: | High | Low | Per Share | |||||||||
4th Quarter | $ | 33.50 | $ | 27.09 | $ | 0.25 | ||||||
3rd Quarter | $ | 42.77 | $ | 32.43 | $ | 0.25 | ||||||
2nd Quarter | $ | 44.29 | $ | 33.89 | $ | 0.25 | ||||||
1st Quarter | $ | 60.05 | $ | 43.96 | $ | 0.25 |
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Number of Shares | Percentage of | |||||||||||
of Common Stock | Common Stock | Number of | ||||||||||
Owned Beneficially | Owned Beneficially | Stock Units Owned(21) | ||||||||||
Carl C. Icahn and affiliated companies(1) | 11,994,943 | 15.65 | % | N/A | ||||||||
Pzena Investment Management, LLC(2) | 6,775,279 | 8.84 | % | N/A | ||||||||
Merrill Lynch & Co., Inc.(3) | 6,431,917 | 8.39 | % | N/A | ||||||||
Vanguard Windsor Funds(4) | 6,170,100 | 8.05 | % | N/A | ||||||||
Robert E. Rossiter(5)(6) | 358,336 | (8) | * | 158,556 | ||||||||
James H. Vandenberghe(5)(6) | 236,205 | (9) | * | 96,598 | ||||||||
David C. Wajsgras(6)(7) | 202 | * | 0 | |||||||||
Douglas G. DelGrosso(6) | 175,533 | (10) | * | 69,670 | ||||||||
Daniel A. Ninivaggi(6) | 16,296 | (11) | * | 37,968 | ||||||||
Raymond E. Scott(6) | 41,342 | (12) | * | 38,925 | ||||||||
David E. Fry(5) | 5,103 | (13) | * | 9,508 | ||||||||
Vincent J. Intrieri(5) | 0 | * | 2,992 | |||||||||
Conrad L. Mallett(5) | 4,475 | (14) | * | 9,477 | ||||||||
Larry W. McCurdy(5) | 12,250 | (15) | * | 22,681 | ||||||||
Roy E. Parrott(5) | 9,730 | (16) | * | 6,128 | ||||||||
David P. Spalding(5) | 16,250 | (17) | * | 18,185 | ||||||||
James A. Stern(5) | 16,650 | (18) | * | 20,823 | ||||||||
Henry D.G. Wallace(5) | 1,000 | * | 7,884 | |||||||||
Richard F. Wallman(5) | 3,500 | (19) | * | 6,749 | ||||||||
Total Executive Officers and Directors as a Group (19 individuals) | 1,028,140 | (20) | 1.33 | % | 617,305 | (22) |
* | Less than 1% |
(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 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 |
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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. |
(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. DelGrosso’s wife’s 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. |
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(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. Stern’s 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, 47,235 restricted units owned by our non-employee directors in the aggregate and 57,192 deferred stock units owned by our non-employee directors in the aggregate. |
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Amount of | ||||||||||||||||
Common | Price Per | |||||||||||||||
Stock | Share | Acquisition/ | ||||||||||||||
Name | Equivalents | Equivalent($) | Disposition | Trade Date | ||||||||||||
Conrad L. Mallett, Jr. | 3,905.9973 | 36.51 | Disposition | (1) | 04/03/2007 | |||||||||||
David E. Fry | 152.3564 | 36.92 | Acquisition | (2) | 04/30/2007 | |||||||||||
Vincent J. Intrieri | 385.9697 | 36.92 | Acquisition | (2) | 04/30/2007 | |||||||||||
Conrad L. Mallet, Jr. | 152.3564 | 36.92 | Acquisition | (2) | 04/30/2007 | |||||||||||
Larry W. McCurdy | 1,767.3348 | 36.92 | Acquisition | (2) | 04/30/2007 | |||||||||||
David P. Spaulding | 365.6555 | 36.92 | Acquisition | (2) | 04/30/2007 | |||||||||||
James A. Stern | 1,550.6501 | 36.92 | Acquisition | (2) | 04/30/2007 |
(1) | Disposition of deferred stock units pursuant to a domestic relations order. |
(2) | Receipt of deferred stock units in lieu of all or a portion of the quarterly cash retainer and/or meeting fees pursuant to a deferral election under the Lear Corporation Outside Directors Compensation Plan. |
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• | optimize profitability and growth; | |
• | link the interests of management with those of stockholders; | |
• | align management’s 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. |
• | base salary | |
• | long-term incentives | |
• | termination/change in control benefits | |
• | annual incentives | |
• | retirement plan benefits | |
• | certain health, welfare and other benefits | |
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• 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 |
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Base Salary |
Annual Incentives |
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Long-Term Incentives |
• | granted awards that reward increases in the value of our stock (stock-settled stock appreciation rights); | |
• | granted awards that support retention of our management team and reward both maintaining and increasing the value of our stock (restricted stock units); | |
• | granted long-term cash incentives tied to the achievement of specific business objectives (cash-based performance units); and | |
• | 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). |
• | 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. |
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Multiple of | ||||
Position | Base Salary | |||
Chief Executive Officer | 5x | |||
Vice Chairman and Chief Financial Officer | 4x | |||
Chief Operating Officer | 3x | |||
Executive/Senior Vice Presidents | 2.5x | |||
Corporate Vice Presidents | 2x |
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 Participant’s Base Salary | Discount Rate | Amount Deferred | ||||||
15% or less | 20 | % | 125 | % | ||||
Over 15% and up to 100% | 30 | % | 143 | % | ||||
Over 100% | 20 | % | 125 | % |
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Retirement Plan Benefits |
Termination/Change in Control Benefits |
Health, Welfare and Certain Other Benefits |
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Change in | |||||||||||||||||||||||||||||||||||||
Pension | |||||||||||||||||||||||||||||||||||||
Value and | |||||||||||||||||||||||||||||||||||||
Non-Equity | Nonqualified | ||||||||||||||||||||||||||||||||||||
Incentive | Deferred | ||||||||||||||||||||||||||||||||||||
Stock | Option | Plan | Compensation | All Other | Total | ||||||||||||||||||||||||||||||||
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) | ||||||||||||||||||||||||||||
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 | |||||||||||||||||||||||||||||||||||||
David C. Wajsgras, | 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) | |||||||||||||||||||||||||||||||||||||
Douglas G. DelGrosso, | 2006 | $ | 770,000 | $ | 74,000 | $ | 1,013,164 | $ | 466,709 | $ | 388,500 | $ | 82,210 | $ | 0 | (12) | $ | 2,794,583 | |||||||||||||||||||
President and Chief Operating Officer | |||||||||||||||||||||||||||||||||||||
Daniel A. Ninivaggi, | 2006 | $ | 572,917 | $ | 169,850 | $ | 863,627 | $ | 232,497 | $ | 150,150 | $ | 30,089 | $ | 57,716 | $ | 2,076,846 | ||||||||||||||||||||
Executive Vice President, General Counsel and Chief Administrative Officer | |||||||||||||||||||||||||||||||||||||
Raymond E. Scott, | 2006 | $ | 453,958 | $ | 22,560 | $ | 455,591 | $ | 224,021 | $ | 118,440 | $ | 28,082 | $ | 139,700 | (13) | $ | 1,442,352 | |||||||||||||||||||
Senior Vice President and President, North American Seating Systems Group |
(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 152. | |
(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 Company’s 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 |
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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 Company’s 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 executive’s 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 year’s 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): |
• | 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 160 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 taxgross-up of $33,822. | |
(9) | Mr. Wajsgras resigned as our Executive Vice President and Chief Financial Officer effective March 10, 2006. |
(10) | Mr. Wajsgras’s 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. |
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(13) | Includes $56,643 relating to Mr. Scott’s 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 $13,529 for a taxgross-up relating to country club membership fees. |
Employment Agreements |
Retirement Savings Plan |
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All | All Other | Grant | ||||||||||||||||||||||||||||||||||||||||||||||
Other | Option | Date | ||||||||||||||||||||||||||||||||||||||||||||||
Estimated Possible Payouts | Estimated Future Payouts | Stock | Awards: | Fair | ||||||||||||||||||||||||||||||||||||||||||||
Under Non-Equity Incentive Plan | Under Equity Incentive | Awards: | Number | Value of | ||||||||||||||||||||||||||||||||||||||||||||
Awards | Plan Awards | Number | of | Exercise | Stock | |||||||||||||||||||||||||||||||||||||||||||
(1) | (2) | of | Securities | or Base | and | |||||||||||||||||||||||||||||||||||||||||||
Shares | Under- | Price of | Option | |||||||||||||||||||||||||||||||||||||||||||||
Maxi- | Maxi- | of Stock | lying | Option | Awards | |||||||||||||||||||||||||||||||||||||||||||
Threshold | Target | mum | Threshold | Target | mum | or Units | Options | Awards | ($) | |||||||||||||||||||||||||||||||||||||||
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 | ) | 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 | ) | 13,126 | $ | 411,106 | ||||||||||||||||||||||||||||||||||||||||||||
11/9/2006(7 | ) | 39,375 | $ | 31.32 | $ | 520,144 | ||||||||||||||||||||||||||||||||||||||||||
David C. Wajsgras | 1/3/2006 | 11/10/2005(8 | ) | 2,562 | $ | 72,479 | ||||||||||||||||||||||||||||||||||||||||||
Douglas G. DelGrosso | 1/3/2006 | 11/10/2005(8 | ) | 5,121 | $ | 144,873 | ||||||||||||||||||||||||||||||||||||||||||
3/15/2006(4 | ) | 11/10/2005(5 | ) | 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 Company’s 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 officer’s 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 |
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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 |
Restricted Stock Units |
Restricted Stock |
Stock Appreciation Rights |
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Performance Shares |
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Stock Awards | ||||||||||||||||||||||||||||||||||||
Equity | ||||||||||||||||||||||||||||||||||||
Incentive | ||||||||||||||||||||||||||||||||||||
Plan | ||||||||||||||||||||||||||||||||||||
Awards: | ||||||||||||||||||||||||||||||||||||
Equity | Market | |||||||||||||||||||||||||||||||||||
Option Awards | Incentive | or | ||||||||||||||||||||||||||||||||||
Plan | Payout | |||||||||||||||||||||||||||||||||||
Equity | Awards: | Value of | ||||||||||||||||||||||||||||||||||
Incentive | Market | Number of | Unearned | |||||||||||||||||||||||||||||||||
Plan | Value of | Unearned | Shares, | |||||||||||||||||||||||||||||||||
Awards: | Number | Shares or | Shares, | Units or | ||||||||||||||||||||||||||||||||
Number of | Number of | Number of | of Shares | Units of | Units or | Other | ||||||||||||||||||||||||||||||
Securities | Securities | Securities | or Units | Stock | Other | Rights | ||||||||||||||||||||||||||||||
Underlying | Underlying | Underlying | of Stock | 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. |
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(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 |
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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. |
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 |
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(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. |
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 PensionMake-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 PensionMake-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, |
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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 PensionMake-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 PensionMake-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 |
• | (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 | |
• | $360.00 times years of credited service. |
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Pension Equalization Program |
Executive Supplemental Savings Plan |
Executive | Registrant | Aggregate | ||||||||||||||||||
Contributions | Contributions | Earnings | Aggregate | Aggregate | ||||||||||||||||
Name | in Last FY | in Last FY | in Last | Withdrawals/ | Balance at | |||||||||||||||
(1) | (2) | FY | Distributions | Last FYE | ||||||||||||||||
($) | ($) | ($) | ($) | ($) | ||||||||||||||||
(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. |
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Executive Supplemental Savings Plan |
Pension | Accelerated | |||||||||||||||||||||||
Vesting | Continuation of | Vesting or | ||||||||||||||||||||||
Cash Severance | Enhancement | Medical/Welfare | Payout of | Excise Tax | Total | |||||||||||||||||||
Named Executive | (Base & | (Present | Benefits (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 |
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Pension | Accelerated | |||||||||||||||||||||||
Vesting | Continuation of | Vesting or | ||||||||||||||||||||||
Cash Severance | Enhancement | Medical/Welfare | Payout of | Excise Tax | Total | |||||||||||||||||||
Named Executive | (Base & | (Present | Benefits (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 |
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(1) | Mr. Wajsgras is excluded from this chart because he resigned from the Company effective March 10, 2006. Mr. Wajsgras’s 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. Ninivaggi’s and Mr. Scott’s 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 Company’s 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 Company’s 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. |
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• | 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. |
(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 Company’s 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 Company’s 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 Company’s assets; or (iii) a merger, consolidation or reorganization of the Company with or involving any other |
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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. |
(a) Any reduction by the Company in the executive’s base salary or adverse change in the manner of computing his bonus, except foracross-the-board salary reductions or changes to the manner of computing bonuses similarly affecting all executive officers of the Company. |
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(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 anacross-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 ofacross-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 Company’s 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 executive’s principal place of employment to a location fifty or more miles from its location immediately preceding the transfer. |
(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 | |
(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. |
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• | comply with confidentiality, non-competition and non-solicitation covenants during employment; | |
• | 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); | |
• | 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); | |
• | return data and materials relating to the business of the Company in his possession; | |
• | make himself reasonably available to the Company to respond to periodic requests for information regarding the Company or his employment; and | |
• | cooperate with litigation matters or investigations as the Company deems necessary. |
• | 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 | |
• | the compensation committee of another entity in which one of the executive officers of such entity served as a member of our Board. |
David P. Spalding, Chairman | |
Conrad L. Mallett, Jr. | |
Larry W. McCurdy | |
Richard F. Wallman |
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Larry W. McCurdy, Chairman | |
James A. Stern | |
Henry D.G. Wallace | |
Richard F. Wallman |
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Fiscal Year Ended December 31, | ||||||||
2006 | 2005 | |||||||
Audit fees(1) | $ | 9,832,000 | $ | 8,639,000 | ||||
Audit-related fees(2) | 763,000 | 202,000 | ||||||
Tax fees(3) | 1,978,000 | 1,828,000 | ||||||
All other fees | — | — |
(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. |
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• | our Annual Report on Form 10-K for the fiscal year ended December 31, 2006; | |
• | our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2007; and | |
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• | our 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, February 14, 2007, April 5, 2007 and April 25, 2007 (other than information furnished under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, which are not incorporated by reference). |
Lear Corporation 21557 Telegraph Road Southfield, Michigan 48033 Attention: Investor Relations | |
Telephone: (248) 447-1500 |
or |
MacKenzie Partners, Inc. | |
105 Madison Avenue | |
New York, New York 10016 | |
Telephone (collect): | |
Telephone (toll free): | |
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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. |
By Order of the Board of Directors | |
Wendy L. Foss | |
Vice President, Finance & Administration and Corporate Secretary | |
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Page | |||||||
ARTICLE I THE MERGER | A-8 | ||||||
Section 1.1 | The Merger | A-8 | |||||
Section 1.2 | Consummation of the Merger | A-8 | |||||
Section 1.3 | Effects of the Merger | A-9 | |||||
Section 1.4 | Certificate of Incorporation and Bylaws | A-9 | |||||
Section 1.5 | Directors and Officers | A-9 | |||||
Section 1.6 | Conversion of Shares | A-9 | |||||
Section 1.7 | Conversion of Common Stock of Merger Sub | A-9 | |||||
Section 1.8 | Withholding Taxes | A-10 | |||||
Section 1.9 | Subsequent Actions | A-10 | |||||
ARTICLE II DISSENTING SHARES; PAYMENT FOR SHARES; TREATMENT OF EQUITY- BASED AWARDS | A-10 | ||||||
Section 2.1 | Dissenting Shares | A-10 | |||||
Section 2.2 | Payment for Shares | A-10 | |||||
Section 2.3 | Closing of the Company’s Transfer Books | A-12 | |||||
Section 2.4 | Treatment of Equity-Based or Equity-Linked Awards and Deferred Compensation | A-12 | |||||
Section 2.5 | Further Actions | A-13 | |||||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY | A-13 | ||||||
Section 3.1 | Organization and Qualification | A-13 | |||||
Section 3.2 | Capitalization | A-14 | |||||
Section 3.3 | Authority for this Agreement; Board Action | A-15 | |||||
Section 3.4 | Consents and Approvals; No Violation | A-15 | |||||
Section 3.5 | Reports; Financial Statements | A-16 | |||||
Section 3.6 | Absence of Certain Changes | A-17 | |||||
Section 3.7 | Proxy Statement; Other Filings | A-18 | |||||
Section 3.8 | Brokers; Certain Expenses | A-18 | |||||
Section 3.9 | Employee Matters | A-18 | |||||
Section 3.10 | Employees | A-21 | |||||
Section 3.11 | Litigation | A-21 | |||||
Section 3.12 | Tax Matters | A-22 | |||||
Section 3.13 | Compliance with Law; No Default | A-24 | |||||
Section 3.14 | Environmental Matters | A-25 | |||||
Section 3.15 | Intellectual Property | A-26 | |||||
Section 3.16 | Real Property | A-27 | |||||
Section 3.17 | Material Contracts | A-27 | |||||
Section 3.18 | Insurance | A-28 | |||||
Section 3.19 | Opinion | A-29 | |||||
Section 3.20 | Required Vote of Company Stockholders | A-29 | |||||
Section 3.21 | State Takeover Statutes | A-29 | |||||
Section 3.22 | Rights Agreements | A-29 | |||||
Section 3.23 | Customers and Suppliers | A-29 |
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Page | |||||||
Section 3.24 | Affiliate Transactions | A-29 | |||||
Section 3.25 | Product Warranties; Product Liability Claims | A-30 | |||||
Section 3.26 | Foreign Corrupt Practices Act | A-30 | |||||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB | A-30 | ||||||
Section 4.1 | Organization | A-30 | |||||
Section 4.2 | Authority for this Agreement | A-30 | |||||
Section 4.3 | Proxy Statement; Other Filings | A-30 | |||||
Section 4.4 | Consents and Approvals; No Violation | A-31 | |||||
Section 4.5 | Debt Financing | A-31 | |||||
Section 4.6 | Guarantee | A-32 | |||||
Section 4.7 | Litigation | A-32 | |||||
Section 4.8 | Ownership of Merger Sub; No Prior Activities | A-32 | |||||
Section 4.9 | Vote Required | A-32 | |||||
Section 4.10 | Brokers | A-32 | |||||
Section 4.11 | Financial Statements | A-32 | |||||
Section 4.12 | Limitation on Warranties | A-33 | |||||
ARTICLE V COVENANTS | A-33 | ||||||
Sction 5.1 | Conduct of Business of the Company | A-33 | |||||
Section 5.2 | Solicitation | A-35 | |||||
Section 5.3 | Access to Information | A-39 | |||||
Section 5.4 | Stockholder Approval | A-40 | |||||
Section 5.5 | Proxy Statement; Other Filings | A-40 | |||||
Section 5.6 | Reasonable Best Efforts; Consents and Governmental Approvals | A-41 | |||||
Section 5.7 | Indemnification and Insurance | A-42 | |||||
Section 5.8 | Employee Matters | A-43 | |||||
Section 5.9 | Takeover Laws | A-44 | �� | ||||
Section 5.10 | Notification of Certain Matters | A-44 | |||||
Section 5.11 | Financing | A-44 | |||||
Section 5.12 | Subsequent Filings | A-46 | |||||
Section 5.13 | Press Releases | A-46 | |||||
Section 5.14 | Restructuring Cooperation | A-46 | |||||
Section 5.15 | Resignation of Directors | A-46 | |||||
ARTICLE VI CONDITIONS TO CONSUMMATION OF THE MERGER | A-46 | ||||||
Section 6.1 | Conditions to Each Party’s Obligation to Effect the Merger | A-46 | |||||
Section 6.2 | Conditions to Obligations of Parent and Merger Sub | A-47 | |||||
Section 6.3 | Conditions to Obligations of the Company | A-47 | |||||
ARTICLE VII TERMINATION; AMENDMENT; WAIVER | A-48 | ||||||
Section 7.1 | Termination | A-48 | |||||
Section 7.2 | Written Notice of Termination | A-49 | |||||
Section 7.3 | Effect of Termination | A-50 | |||||
Section 7.4 | Fees and Expenses | A-50 |
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Page | |||||||
Section 7.5 | Amendment | A-51 | |||||
Section 7.6 | Extension; Waiver; Remedies | A-52 | |||||
ARTICLE VIII | MISCELLANEOUS | A-52 | |||||
Section 8.1 | Representations and Warranties | A-52 | |||||
Section 8.2 | Entire Agreement; Assignment | A-52 | |||||
Section 8.3 | Jurisdiction; Venue; Arbitration | A-52 | |||||
Section 8.4 | Validity | A-54 | |||||
Section 8.5 | Notices | A-54 | |||||
Section 8.6 | Governing Law | A-55 | |||||
Section 8.7 | Descriptive Headings | A-55 | |||||
Section 8.8 | Parties in Interest | A-55 | |||||
Section 8.9 | Rules of Construction | A-55 | |||||
Section 8.10 | Counterparts | A-55 | |||||
Section 8.11 | Certain Definitions | A-56 |
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Defined Terms | Defined in | |
409A Authorities | SECTION 3.9(k) | |
Acceptable Confidentiality Agreement | SECTION 8.11(a) | |
Acquisition Proposal | SECTION 5.2(i) | |
Action | SECTION 5.7(a) | |
Affiliate | SECTION 8.11(b) | |
Agreement | Preamble | |
AJCA | SECTION 3.9(k) | |
Alternative Acquisition Agreement | SECTION 5.2(e)(i) | |
Associate | SECTION 8.11(b) | |
Bank Amount | SECTION 7.3(f)(B)(II) | |
beneficial ownership | SECTION 8.11(c) | |
Business Day | SECTION 8.11(d) | |
Breach Fee | SECTION 7.3(f)(A) | |
Bylaws | SECTION 8.11(e) | |
Certificate of Incorporation | SECTION 8.11(f) | |
Certificate of Merger | SECTION 1.2 | |
Change of Board Recommendation | SECTION 5.2(e) | |
Closing | SECTION 1.2 | |
Closing Date | SECTION 1.2 | |
Code | SECTION 1.8 | |
Commitment Parties | SECTION 7.3(f) | |
Company | Preamble | |
Company Board Recommendation | SECTION 3.3(b) | |
Company Breakup Fee | SECTION 7.3(c) | |
Company Fairness Opinion | SECTION 3.19 | |
Company Financial Advisor | SECTION 3.8 | |
Company Intellectual Property | SECTION 3.15(a) | |
Company Joint Venture | SECTION 8.11(g) | |
Company Owned Intellectual Property | SECTION 3.15(a) | |
Company SEC Reports | SECTION 8.11(h) | |
Company Securities | SECTION 3.2(a) | |
Confidentiality Agreement | SECTION 8.11(i) | |
Controlled Group Liability | SECTION 8.11(j) | |
Corporation Law | Recitals | |
Covered Event | SECTION 8.11(k) | |
Current Employees | SECTION 5.8(b) | |
Debt Financing | SECTION 4.5 | |
Debt Financing Commitments | SECTION 4.5 | |
Deferred Unit Account | SECTION 2.4(c) | |
Delaware Secretary | SECTION 1.2 | |
Disclosure Letter | ARTICLE III | |
Disputed Matter | SECTION 8.3(d) | |
Dissenting Shares | SECTION 2.1 | |
Effective Time | SECTION 1.2 | |
Environment | SECTION 3.14(c)(i) | |
Environmental Claim | SECTION 3.14(c)(ii) |
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Defined Terms | Defined in | |
Environmental Law | SECTION 3.14(c)(iii) | |
ERISA | SECTION 8.11(x) | |
ERISA Affiliate | SECTION 3.9(c) | |
Exchange Act | SECTION 3.4(b) | |
Excluded Party | SECTION 5.2(b) | |
Excluded Shares | SECTION 1.6 | |
Expenses | SECTION 7.3(e) | |
Foreign Antitrust Laws | SECTION 3.4(b) | |
Force Majeure Event | SECTION 8.11(l) | |
GAAP | SECTION 8.11(m) | |
Governmental Entity | SECTION 3.4(b) | |
Guarantee | Recitals | |
Guarantor | Recitals | |
Hazardous Materials | SECTION 3.14(c)(iv) | |
hereby | SECTION 8.11(n) | |
herein | SECTION 8.11(n) | |
hereinafter | SECTION 8.11(n) | |
HSR Act | SECTION 3.4(b) | |
including | SECTION 8.11(o) | |
Indemnified Persons | SECTION 5.7(a) | |
Initiation Date | SECTION 8.11(p) | |
Intellectual Property Rights | SECTION 3.15(a) | |
knowledge | SECTION 8.11(q) | |
Laws | SECTION 3.13 | |
Liens | SECTION 8.11(r) | |
LTSIP | SECTION 2.4(a) | |
Marketing Period | SECTION 8.11(s) | |
Material Adverse Effect | SECTION 8.11(t) | |
Material Contract | SECTION 3.17(a) | |
Merger | SECTION 1.1 | |
Merger Consideration | SECTION 1.6 | |
Merger Sub | Preamble | |
MSPP | SECTION 2.4(d) | |
Nonqualified Deferred Compensation Plan | SECTION 3.9(k) | |
Notice Period | SECTION 5.2(e)(i) | |
Option | SECTION 2.4(a) | |
Option Plans | SECTION 2.4(a) | |
Other Filings | SECTION 3.7 | |
Outside Date | SECTION 7.1(c) | |
Owned Real Property | SECTION 3.16(a) | |
Parent | Preamble | |
Parent Disclosure Letter | ARTICLE IV | |
Parent Material Adverse Effect | SECTION 8.11(u) | |
Paying Agent | SECTION 2.2(a) | |
Payment Fund | SECTION 2.2(a) | |
PBGC | SECTION 3.9(d) | |
Performance Shares | SECTION 2.4(e) |
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Defined Terms | Defined in | |
Permits | SECTION 3.13 | |
Permitted Liens | SECTION 8.11(v) | |
Person | SECTION 8.11(w) | |
Plan | SECTION 8.11(x) | |
Preferred Shares | SECTION 3.2(a) | |
Proxy Statement | SECTION 3.7 | |
Real Property Leases | SECTION 3.16(b) | |
Release | SECTION 3.14(c)(v) | |
Representatives | SECTION 8.11(y) | |
Required Information | SECTION 5.11(a)(iii) | |
Requisite Stockholder Vote | SECTION 3.20 | |
Retiree Welfare Programs | SECTION 3.9(i) | |
RSUs | SECTION 2.4(b) | |
SAR | SECTION 2.4(a) | |
Sarbanes-Oxley Act | SECTION 3.5(a) | |
SEC | SECTION 3.5(a) | |
Securities Act | SECTION 3.5(a) | |
Shares | SECTION 1.6 | |
Significant Customers | SECTION 3.23 | |
Significant Subsidiary | SECTION 8.11(z) | |
Significant Suppliers | SECTION 3.23 | |
Solicitation Period End-Date | SECTION 8.11(aa) | |
Special Committee | SECTION 8.11(bb) | |
Special Meeting | SECTION 5.4 | |
Stock Purchase Agreement | SECTION 3.3(b) | |
Subsidiary | SECTION 8.11(cc) | |
Subsidiary Securities | SECTION 3.2(b) | |
Superior Fee | SECTION 7.3(d) | |
Superior Proposal | SECTION 5.2(i) | |
Supporting Stockholders | Recitals | |
Surviving Corporation | SECTION 1.1 | |
Takeover Laws | SECTION 3.3(b) | |
Tax | SECTION 3.12(r)(i) | |
Tax-Controlled Joint Venture | SECTION 3.12(r)(iii) | |
Tax Returns | SECTION 3.12(r)(ii) | |
Title IV Plans | SECTION 3.9(b) | |
U.S. Tax-Controlled Joint Venture | SECTION 3.12(r)(iv) | |
Voting Agreement | Recitals | |
Written Notice of Claim | SECTION 8.3(b) | |
Written Notice of Disagreement | SECTION 8.3(b) |
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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 Company’s 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 Company’s 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. | |
(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. | |
(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 Company’s financial statements. Except for any Taxes reserved for on the Company’s 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. |
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(d) The Company, each of its Subsidiaries and, to the Company’s 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, thisSection 3.12(d) shall not apply to the extent such Taxes have been reserved for in the Company’s financial statements. | |
(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. | |
(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. | |
(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. | |
(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. | |
(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. | |
(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. | |
(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. | |
(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. | |
(m) Neither the Company, any of its Subsidiaries nor, to the Company’s 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 |
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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. | |
(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. | |
(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. | |
(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. | |
(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. | |
(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, worker’s 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. |
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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; | |
(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; | |
(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; | |
(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 | |
(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. |
(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. | |
(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. | |
(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. | |
(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, |
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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. | |
(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. |
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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; | |
(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); |
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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; | |
(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; | |
(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); | |
(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; | |
(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; | |
(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); | |
(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; | |
(x) relate to the purchase or sale of material real property; or | |
(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. |
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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 inSection 5.1 of the Disclosure Letter and (iv) as required under the Company’s existing credit agreements and indentures; | |
(b) amend or otherwise change the Company’s certificate of incorporation or by-laws or other comparable governing documents of the Significant Subsidiaries; | |
(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; | |
(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); | |
(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 thisSection 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; | |
(f) except for borrowings under the Company’s 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; | |
(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; | |
(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 Company’s securitization facilities; | |
(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; | |
(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; | |
(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; | |
(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; | |
(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; | |
(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; | |
(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 inSection 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; | |
(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; | |
(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; | |
(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; | |
(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 Company’s 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; | |
(t) enter into any agreement, understanding or arrangement with respect to the voting or registration of the Company Securities or the Subsidiary Securities; | |
(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; | |
(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 bySection 5.1(e); | |
(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; | |
(x) fail to comply with the Company’s related party transaction policy, a copy of which is attached inSection 5.1(x) of the Disclosure Letter; | |
(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 Company’s 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; | |
(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 | |
(aa) authorize, commit or agree to take any of the foregoing actions. |
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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 | |
(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 ofSection 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 thisSection 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 Company’s stockholders; for avoidance of doubt, if the initial Superior Proposal received by the Company is greater than $36 per share to the Company’s stockholders but less than $37 per share to the Company’s 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 ofSection 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 Company’s stockholders. |
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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. | |
(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. |
(a) Representations and Warranties. The representations and warranties of the Company contained inSections 3.2,3.6(c) and3.9(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). | |
(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. | |
(c) Officer’s 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 inSections 6.2(a) and6.2(b). | |
(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 thisSection 6.2(d)(ii), the provisos included in the definition of Material Adverse Effect shall not be taken into account). | |
(e) Cooperation with Debt Financing. The Company shall have performed the obligations and satisfied the requirements set forth onAnnex A with respect to the Debt Financing. | |
(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. |
(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). | |
(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. | |
(c) Officer’s 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 inSections 6.3(a) and6.3(b). | |
(d) Solvency Opinion. The Company shall have received a solvency opinion from a firm reasonably acceptable to the Company and Parent, addressed to the Company’s Board of Directors, in customary form and substance. |
(a) by mutual written consent of the Company and Parent; | |
(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 inSection 6.1(c);provided that the party seeking to terminate this Agreement pursuant to thisSection 7.1(b) shall have used its reasonable best efforts to contest, appeal and remove such order, decree, ruling or action in accordance withSection 5.6; | |
(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 thisSection 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 inArticle 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 inSection 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 toSection 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; | |
(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); | |
(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 inSection 6.3(a) or6.3(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 thisSection 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 inSection 6.2(a) or6.2(b)are incapable of being satisfied; | |
(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 inSections 5.2 and5.4), 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 inSection 6.2(a) or6.2(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 thisSection 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 inSection 6.3(a) or6.3(b) are incapable of being satisfied; | |
(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 underSection 5.2 or5.4, (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; | |
(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; | |
(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; | |
(j) by the Company if all of the conditions set forth inSections 6.1 and6.2 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 | |
(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 thisSection 7.1(k), the provisos included in the definition of Material Adverse Effect shall not be taken into account). |
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(i) if | |
(A) either Parent or the Company terminates this Agreement pursuant toSection 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 | |
(B) either Parent or the Company terminates this Agreement pursuant toSection 7.1(c), and, at the time of such termination, the conditions set forth inSections 6.1and6.3 have been satisfied but the Company shall have failed to take all actions on its part necessary to consummate the Merger, or | |
(C) if Parent terminates this Agreement pursuant toSection 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. | |
(ii) if (A) Parent terminates this Agreement pursuant toSection 7.1(g) or (B) the Company terminates this Agreement pursuant toSection 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 thisSection 7.4(b)(ii)) or within two Business Days after (in the case of termination by Parent pursuant to subclause (A) of thisSection 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). |
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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 | |
(B) in the case of subsection (f)(ii) above, | |
(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 | |
(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. |
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c/o American Real Estate Holdings Limited Partnership | |
White Plains Plaza | |
445 Hamilton Avenue — Suite 1210 | |
White Plains, NY 10601 | |
Attention: Felicia Buebel, Esq. | |
Facsimile: (914) 614-7001 | |
Email:fbuebel@arep.com |
c/o American Real Estate Holdings Limited Partnership | |
767 Fifth Avenue | |
47th Floor | |
New York, NY 10153 | |
Attention: Keith Meister | |
Facsimile: (212) 750-5815 | |
Email:Kmeister@sfire.com |
DLA Piper US LLP | |
1251 Avenue of the Americas | |
New York, New York 10020 | |
Attention: Steven L. Wasserman, Esq. | |
Facsimile No.: (212) 884-8448 | |
Email:steven.wasserman@dlapiper.com |
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Lear Corporation | |
21557 Telegraph Road | |
Southfield, Michigan 48033 |
Attention: | Daniel A. Ninivaggi, Esq. Executive Vice President, General Counsel |
Facsimile: (248) 447-1677 | |
Email:dninivaggi@lear.com |
Lear Corporation | |
21557 Telegraph Road | |
Southfield, Michigan 48033 |
Attention: | James H. Vandenberghe Vice Chairman, Chief Financial Officer |
Facsimile: (248) 447-1524 | |
Email:jvandenberghe@lear.com |
Winston & Strawn LLP | |
35 West Wacker Drive | |
Chicago, IL 60601 | |
Attention: Bruce A. Toth, Esq. | |
Facsimile: (312) 558-5700 | |
Email:btoth@winston.com |
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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 bySection 5.2. | |
(b) “Affiliate” and”Associate” shall have the meanings given to such terms in Rule 12b-2 under the Exchange Act. | |
(c) “beneficial ownership” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act. | |
(d) “Business Day”shall have the meaning given to such term in Rule 14d-1(g) under the Exchange Act. | |
(e) “Bylaws”shall mean the Bylaws of the Company, as amended through the date of this Agreement. | |
(f) “Certificate of Incorporation”shall mean the Company’s Certificate of Incorporation as in effect as of the date of this Agreement, including any amendments. | |
(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. | |
(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. | |
(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. | |
(j) “Controlled Group Liability” means any and all liabilities (i) under Title IV of ERISA (as defined inSection 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. | |
(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 toSections 7.1(c), (f), (h) and/or (k). | |
(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. | |
(m) “GAAP”shall mean United States generally accepted accounting principles. | |
(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. | |
(o) “including”shall be deemed to be followed by the phrase “without limitation”. | |
(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 |
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following the date on which the conditions set forth inSections 6.1 and6.2 have been satisfied (other than conditions that by their nature can only be satisfied at the Closing). If the condition set forth inSection 6.1(a) is the last of the conditions set forth inArticle 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. | |
(q) “knowledge”of the Company means actual knowledge of any executive officer of the Company. | |
(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. | |
(s) “Marketing Period”shall mean the first period of 15 consecutive Business Days after the Initiation Date. | |
(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. | |
(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. | |
(v) “Permitted Liens” means (i) Liens permitted under the Company’s 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’, materialmen’s 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 Company’s Annual Report on Form 10-K for the year ended December 31, 2005 or the Company’s 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. | |
(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. | |
(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 |
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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. | |
(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. | |
(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. | |
(aa) “Solicitation Period End-Date” means 11:59 p.m. (EST) on the date that is 45 days after the date of this Agreement. | |
(bb) “Special Committee” means a committee of the Company’s Board of Directors, the members of which are not affiliated with Parent or Merger Sub and are not members of the Company’s 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. | |
(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. |
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AREP CAR HOLDINGS CORP. |
By: | /s/ Hillel Moerman |
Name: Hillel Moerman |
Title: | Chief Financial Officer |
AREP CAR ACQUISITION CORP. |
By: | /s/ Hillel Moerman |
Name: Hillel Moerman |
Title: | Chief Financial Officer |
LEAR CORPORATION |
By: | /s/ Robert E. Rossiter |
Name: Robert E. Rossiter |
Title: | Chairman and Chief Executive Officer |
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Very truly yours, | |
J.P. MORGAN SECURITIES INC. |
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c/o Icahn Associates Corp. | |
767 Fifth Avenue, Suite 4700 | |
New York, New York 10153 | |
Attention: General Counsel | |
Facsimile: 212-688-1158 | |
Email:mweitzen@sfire.com |
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Lear Corporation | |
21557 Telegraph Road | |
Southfield, MI 48033 | |
Attention: Daniel A. Ninivaggi | |
Facsimile: (248)447-1677 | |
E-Mail:dninivaggi@lear.com |
Winston & Strawn LLP | |
35 West Wacker Drive | |
Chicago, IL 60601 | |
Attention: Bruce A. Toth, Esq. | |
Facsimile: (312) 558-5700 | |
Email:btoth@winston.com |
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HIGH RIVER LIMITED PARTNERSHIP |
By: | /s/ Vince J. Intieri |
Name: Vince Intieri | |
Title: Authorized Signatory | |
KOALA HOLDING LIMITED PARTNERSHIP |
By: | /s/ Vince J. Intieri |
Name: Vince Intieri | |
Title: Authorized Signatory | |
ICAHN PARTNERS MASTER FUND LP |
By: | /s/ Keith A. Meister |
Name: Keith Meister | |
Title: Authorized Signatory | |
ICAHN PARTNERS LP |
By: | /s/ Keith A. Meister |
Name: Keith Meister | |
Title: Authorized Signatory | |
LEAR CORPORATION |
By: | /s/ Robert E. Rossiter |
Name: Robert E. Rossiter | |
Title: Chairman and Chief Executive Officer |
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Number of Shares | |||||
Stockholder Name | of Common Stock | ||||
High River Limited Partnership | 659,860 | ||||
Koala Holding Limited Partnership | 1,739,131 | ||||
Icahn Partners Master Fund LP | 5,526,235 | ||||
Icahn Partners LP | 4,069,718 | ||||
Total | 11,994,944 |
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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. | |
(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. | |
(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. | |
(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. | |
(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), |
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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. |
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AMERICAN REAL ESTATE PARTNERS, L.P. | |
By: American Property Investors, Inc., its general partner |
By: | /s/ Hillel Moerman |
Name: Hillel Moerman | |
Title: Chief Financial Officer | |
LEAR CORPORATION |
By: | /s/ Robert E. Rossiter |
Name: Robert E. Rossiter | |
Title: Chairman and Chief Executive Officer |
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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 Company’s Code of Business Ethics and Conduct, the Company’s Corporate Governance Guidelines, or other policies applicable to the Company’s executives generally, as those policies may be amended from time to time by the Company. |
(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. |
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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. | |
(c) During the Term, you shall be eligible for prompt reimbursement for business expenses reasonably incurred by you in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally. | |
(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 Company’s 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 Company’s 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. |
(d) Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following circumstances or events: |
(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 foracross-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”); | |
(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 anacross-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 ofacross-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 Company’s life insurance, medical, dental, health, accident or disability plans in which you are participating following the Closing Date; | |
(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 | |
(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. |
(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: |
(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 Company’s then outstanding securities. | |
(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 Company’s 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. | |
(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 Company’s 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 |
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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 Company’s common stock. |
(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: |
(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. | |
(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: |
(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 | |
(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. |
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. |
(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 |
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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. |
24. | Merger Agreement |
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LEAR CORPORATION |
By: | /s/ Daniel A. Ninivaggi |
Agreed to this 9th day of February, 2007: | |
/s/ Douglas G. DelGrosso | |
Douglas G. DelGrosso |
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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. 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 Company’s Code of Business Ethics and Conduct, the Company’s Corporate Governance Guidelines, or other policies |
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applicable to the Company’s executives generally, as those policies may be amended from time to time by the Company. |
3. | Compensation. |
(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. | |
(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. | |
(c) During the Term, you shall be eligible for prompt reimbursement for business expenses reasonably incurred by you in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally. | |
(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 Company’s 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 Company’s 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. |
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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: |
(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 foracross-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”); | |
(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 anacross-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; | |
(iii) except in the case ofacross-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 Company’s life insurance, medical, dental, health, accident or disability plans in which you are participating following the Effective Date; | |
(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 | |
(v) without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company. |
(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: |
(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 |
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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 Company’s then outstanding securities. | |
(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 Company’s 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. | |
(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 Company’s 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. |
(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: |
(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. | |
(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: |
(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. |
(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. |
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. |
The Company (or any successor thereto) shall fully indemnify you in accordance with the Company’s 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. |
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24. | Merger Agreement |
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 pensionmake-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 PensionMake-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. |
LEAR CORPORATION |
By: | /s/ Daniel A. Ninivaggi |
Agreed to this 9th day of February, 2007: | |
/s/ Robert E. Rossiter | |
Robert E. Rossiter |
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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. 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 Company’s Code of Business Ethics and Conduct, the Company’s Corporate Governance Guidelines, or other policies applicable to the Company’s executives generally, as those policies may be amended from time to time by the Company. |
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3. | Compensation. |
(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. | |
(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. | |
(c) During the Term, you shall be eligible for prompt reimbursement for business expenses reasonably incurred by you in accordance with the Company’s policies, as may be in effect from time to time, for its senior executives generally. | |
(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 Company’s 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 Company’s 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. |
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. |
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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: | |
(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 foracross-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”); | |
(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 anacross-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; | |
(iii) except in the case ofacross-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 Company’s life insurance, medical, dental, health, accident or disability plans in which you are participating following the Effective Date; | |
(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 | |
(v) without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company. |
(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: |
(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 Company’s 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 Company’s 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. | |
(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 Company’s 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 Company’s common stock. |
(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: |
(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. | |
(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: |
(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 | |
(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. |
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 |
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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. | |
(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. |
24. | Merger Agreement |
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LEAR CORPORATION |
By: | /s/ Daniel A. Ninivaggi |
Agreed to this 9th day of February, 2007: | |
/s/ James H. Vandenberghe | |
James H. Vandenberghe |
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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. | |
(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: |
a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; | |
b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts 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; | |
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or | |
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. |
(3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under § 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. |
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(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 stockholder’s shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder’s 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 stockholder’s shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or | |
(2) If the merger or consolidation was approved pursuant to § 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 holder’s 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 holder’s 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 holder’s 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. |
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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 gross revenues of such entity; | |
(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 Company’s 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 organization’s consolidated gross revenues; | |
(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 entity’s 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 unaffiliated third party; or | |
(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 company’s indebtedness to the other does not exceed 2% of the other company’s total consolidated assets as of the end of the fiscal year immediately preceding the date of determination and for which financial statements are available. |
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PRELIMINARY COPY-SUBJECT TO COMPLETION
ADMISSION TICKET
LEAR CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
June 27, 2007 AT 10:00 A.M. (EASTERN TIME)
HOTEL DU POŃT
11TH AND MARKET STREETS
WILMINGTON, DELAWARE 19801
ADMITS ONE STOCKHOLDER AND UP TO TWO GUESTS
▼ DETACH PROXY CARD HERE ▼
Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope. | x Votes must be indicated (x) in Black or Blue Ink. | ||
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. |
| FOR | AGAINST | ABSTAIN | FOR | AGAINST | ABSTAIN | ||||||||||||
1. | 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. | o | o | o | 2. | Approve the adjournment or postponement of the 2007 Annual Meeting of Stockholders 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. | o | o | o | |||||||||
3. | Election of Directors | |||||||||||||||||
FOR | AGAINST | ABSTAIN | ||||||||||||||||
FOR all nominees listed below | o | WITHHOLD AUTHORITY to vote for all nominees listed below | o | *EXCEPTIONS | o | 4. | Approve an amendment to the Lear Corporation Amended and Restated Certificate of Incorporation to provide for the annual election of directors. | o | o | o | ||||||||
Nominees: Larry W. McCurdy, Roy E. Parrott and Richard F. Wallman | | | ||||||||||||||||
| FOR | AGAINST | ABSTAIN | |||||||||||||||
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below). | 6. | Stockholder proposal requesting a majority vote standard in the election of directors. | o | o | o | |||||||||||||
| FOR | AGAINST | ABSTAIN | |||||||||||||||
* Exceptions | 7. | Stockholder proposal regarding global human rights standards. | o | o | o | |||||||||||||
FOR | AGAINST | ABSTAIN | YES | NO | ||||||||||||||
5. | Ratify the appointment of Ernst & Young LLP as Lear Corporation's independent registered public accounting firm for 2007. | o | o | o | 8. | Do you plan to attend the Meeting? | o | o | ||||||||||
SCAN LINE (FPO) |
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. | ||||||
Date Share Owner sign here | Co-Owner sign here |
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Dear Stockholder:
The Annual Meeting of Stockholders (the “Meeting”) of Lear Corporation (the “Company”) will be held at 10:00 a.m. (Eastern time) on June 27, 2007 at Hotel DuPońt, 11th and Market Streets, Wilmington, Delaware 19801.
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 June 27, 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
Change of address | ||||
LEAR CORPORATION P.O. BOX 11211 NEW YORK, NY 10203-0211 |