SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
HOWELL INDUSTRIES, INC.
(Name of Registrant as Specified In Its Charter)
____________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________________________
2) Form, Schedule or Registration Statement No.: __________________________
3) Filing Party: __________________________________________________________
4) Date Filed: ____________________________________________________________
HOWELL INDUSTRIES, INC.
17515 West Nine Mile Road
Suite 650
Southfield, Michigan 48075
(248) 484-8220
July 14, 1997
DEAR SHAREHOLDER:
You are cordially invited to attend a Special Meeting of Shareholders
(the "Special Meeting") of Howell Industries, Inc. (the "Company"), which
will be held on Wednesday, August 13, 1997 at the Company's corporate
headquarters, located at 17515 West Nine Mile Road, Suite 650, Southfield,
Michigan 48075, commencing at 10:00 A.M., local time. The official Notice of
Special Meeting of Shareholders, Proxy Statement and form of proxy are
enclosed with this letter.
At the Special Meeting you will be asked to consider and approve the
Agreement and Plan of Merger, dated as of May 21, 1997 (the "Merger
Agreement"), by and among the Company, Oxford Automotive, Inc. ("Parent") and
HI Acquisition, Inc. ("Merger Sub"), pursuant to which Merger Sub will merge
with and into the Company (the "Merger") and each outstanding share of the
Company's common stock will be converted into the right to receive $37 in
cash, all as more particularly described in the attached Proxy Statement. The
Board of Directors believes that the Merger is in the best interests of the
Company and its shareholders.
The Board of Directors unanimously has adopted the Merger Agreement
and recommends that you vote in favor of the Merger.
Please read carefully the accompanying Notice of Special Meeting of
Shareholders and Proxy Statement for information regarding the Merger and
related matters.
Whether or not you plan to attend the Special Meeting, please
complete, sign and date the enclosed proxy card and return it promptly in the
enclosed, postage prepaid envelope. If you attend the Special Meeting, you
may vote in person if you wish, even though you have previously returned your
proxy card. Your prompt cooperation will be greatly appreciated.
Please do not send your stock certificates with your proxy card.
Following the approval of the Merger Agreement and the satisfaction of other
conditions to the Merger, you will receive a transmittal form and
instructions for the surrender and exchange of your share certificates.
Sincerely yours,
MORTON SCHIFF
President and Chief Executive Officer
[Intentionally Left Blank]
HOWELL INDUSTRIES, INC.
17515 West Nine Mile Road
Suite 650
Southfield, Michigan 48075
(248) 424-8220
------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held August 13, 1997
TO THE SHAREHOLDERS OF HOWELL INDUSTRIES, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Howell Industries, Inc., a Michigan corporation (the "Company"), will be held
on Wednesday, August 13, 1997 at 10:00 A.M., local time, at the Company's
corporate headquarters, located at 17515 West Nine Mile Road, Suite 650,
Southfield, Michigan 48075, for the following purposes:
1. To consider and approve the Agreement and Plan of Merger,
dated as of May 21, 1997 (the "Merger Agreement"), between the
Company, Oxford Automotive, Inc. ("Parent"), and HI
Acquisition, Inc. ("Merger Sub"), a wholly-owned subsidiary of
Parent. Pursuant to the Merger Agreement, Merger Sub will be
merged into the Company, the Company will become a
wholly-owned subsidiary of Parent and each outstanding share
of common stock of the Company will be converted into the
right to receive $37 in cash.
2. To consider and act upon such other business as may properly
come before the meeting or any adjournment thereof.
Shareholders of record at the close of business on July 10,
1997 will be entitled to notice of, and to vote at, the Special Meeting and
any adjournment thereof.
All shareholders are cordially invited to attend the Special Meeting.
However, the Company urges you to assure your representation at the Special
Meeting by signing and returning the enclosed proxy in the postage prepaid
envelope provided as promptly as possible. The giving of this proxy does not
affect your right to vote in person if you attend the Special Meeting.
By Order of the Board of Directors
CYRIL MOSCOW, Secretary
Southfield, Michigan
July 14, 1997
PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY CARD
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE SPECIAL
MEETING.
[Intentionally Left Blank]
TABLE OF CONTENTS
SUMMARY...............................................................
The Special Meeting............................................
The Merger.....................................................
The Parties....................................................
GENERAL INFORMATION...................................................
PURPOSE OF THE SPECIAL MEETING........................................
VOTING, PROXIES AND REVOCABILITY......................................
THE MERGER............................................................
Background of the Merger.......................................
Recommendation of the Board of Directors of the Company........
Certain Financial Projections of the Company...................
Opinion of Financial Advisor...................................
Required Vote..................................................
Terms of the Merger............................................
Effective Time.................................................
Exchange of Stock Certificates.................................
Sources and Amount of Funds....................................
Representations and Warranties; Covenants; Conditions..........
Modification; Termination......................................
Termination Fee. ..............................................
Expenses.......................................................
Federal Income Tax Consequences to the Company's
Shareholders..................................................
Regulatory Matters.............................................
INTERESTS OF CERTAIN PERSONS IN THE MERGER............................
Shareholder Agreement..........................................
Agreements with Management.....................................
Other Interests................................................
INFORMATION ABOUT THE COMPANY.........................................
SELECTED FINANCIAL DATA OF THE COMPANY................................
INFORMATION ABOUT PARENT AND MERGER SUB...............................
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................................
i
INDEPENDENT PUBLIC ACCOUNTANTS........................................
SHAREHOLDER PROPOSAL DEADLINE.........................................
OTHER BUSINESS........................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................
ii
HOWELL INDUSTRIES, INC.
17515 West Nine Mile Road
Suite 650
Southfield, Michigan 48075
(248) 424-8220
-------------------
PROXY STATEMENT
-------------------
SPECIAL MEETING OF SHAREHOLDERS
August 13, 1997
Approximate date of mailing - July 14, 1997
SUMMARY
The following is only a summary of information contained elsewhere in
this Proxy Statement and does not purport to be complete. All statements in
the following summary are qualified by, and are made subject to, the more
detailed information contained elsewhere in this Proxy Statement and its
Appendices. The full text of the Merger Agreement is attached as Appendix A.
All references in this Proxy Statement to the Merger Agreement and the
transactions to be effected pursuant to the Merger Agreement are qualified in
their entirety by reference to the actual text of the Merger Agreement.
The Special Meeting
Date, Time and Place. The Special Meeting of Shareholders of the
Company will be held at the offices of the Company, located at 17515 West
Nine Mile Road, Suite 650, Southfield, Michigan, on Wednesday,
August 13, 1997 at 10:00 A.M., Eastern Standard Time. See "General
Information."
Record Date; Shares Entitled to Vote. Holders of record of the
Company's common stock ("Common Stock") at the close of business on
July 10, 1997 (the "Record Date") are entitled to notice of, and to
vote at, the Special Meeting and at any adjournment thereof. On such date,
there were 622,738 shares of Common Stock outstanding, each of which will be
entitled to one vote. See "Voting, Proxies and Revocability."
Purpose of the Special Meeting. The purpose of the Special Meeting is
to vote on the approval of the Agreement and Plan of Merger, dated as of May
21, 1997, among Parent, Merger Sub and the Company (the "Merger Agreement").
A copy of the Merger Agreement is attached to this Proxy Statement as
Appendix A. Upon consummation of the Merger,
1
Merger Sub will be merged into the Company, the Company will become a
wholly-owned subsidiary of Parent, and each outstanding share of the Common
Stock will be converted into the right to receive $37 in cash.
Vote Required. Under Michigan law, the affirmative vote of holders of
not less than a majority of the outstanding shares of the Common Stock is
required for approval of the Merger Agreement. Pursuant to an agreement with
Parent, dated as of May 21, 1997, trusts holding 202,972 shares of Common
Stock (32.6%) agreed to vote in favor of the Merger. See "Voting, Proxies and
Revocability" and "Interests of Certain Persons in the Merger." If the Merger
Agreement is not approved by shareholders, the merger cannot be completed, and
the Company will consider the alternatives then available to it.
Security Ownership of Management and Certain Other Persons. As of the
Record Date, NBD Bank and Morton Schiff, as Trustees under the Herbert H.
Freedland Marital Trusts (the "Freedland Trusts") owned approximately 32.6%
of the outstanding Common Stock. The Howell Industries, Inc. Employee Stock
Ownership Plan owned approximately 9.6%. Directors and executive officers as
a group otherwise owned less than 1% of the outstanding Common Stock.
The Merger
Principal Effects of the Merger. The Merger Agreement provides that,
when the Merger becomes effective, each outstanding share of the Common Stock
will be converted into the right to receive $37 in cash.
As a result of the Merger, the outstanding shares of Merger Sub
common stock owned by Parent will be converted into shares of common stock of
the Company, and the Company will, therefore, become a wholly-owned
subsidiary of Parent.
Effective Time of the Merger. If the Merger Agreement is approved by
the shareholders of the Company and if all of the conditions to its
consummation are satisfied or waived, the Merger will become effective upon
the filing of a Certificate of Merger with the Administrator of the
Department of Consumer and Industry Services of the State of Michigan.
Assuming such approval and satisfaction or waiver of such conditions are
obtained, it is expected that this filing will be made and the Merger will
become effective as soon as is practicable after the Special Meeting. The
closing of the Merger may be extended to such other day as Merger Sub, Parent
and the Company mutually agree upon. The Board of Directors of Parent or the
Company may terminate the Merger Agreement if the approval of the Company's
shareholders is not obtained by December 15, 1997, or if the Merger is not
consummated by December 31, 1997. See "The Merger - Effective Time" and "The
Merger Modification; Termination."
Opinion of Financial Advisor. The Company engaged Roney & Co.
("Roney") to act as its financial advisor in connection with the Merger and
related matters. On May 20, 1997, Roney delivered its opinion to the Board of
Directors to the effect that the proposed consideration to be received by the
holders of Common Stock in the Merger ($37.00 per share
2
in cash) is fair to shareholders from a financial point of view. The opinion
of Roney will not be updated and is limited to the facts and circumstances on
May 20, 1997. See "The Merger - Opinion of Financial Advisor." A copy of the
Roney opinion is attached as Appendix B and incorporated into this Proxy
Statement by reference. Shareholders of the Company are urged to read
carefully in its entirety the opinion of Roney which sets forth the
assumptions made, matters considered and limits on the review undertaken.
Certain Federal Income Tax Consequences. The receipt of cash for
shares of the Common Stock pursuant to the Merger will be a taxable
transaction for federal income tax purposes to the shareholders receiving
such cash (and may be a taxable transaction for state, local and foreign tax
purposes as well). A holder of the Common Stock will realize gain or loss
measured by the difference between such shareholder's adjusted tax basis for
the shares of the Common Stock owned by the shareholder at the time of the
Merger and the amount of cash received for such shares. In general, such gain
or loss will be capital gain or loss if the shares of the Common Stock are
capital assets in the hands of such shareholder; any such gain or loss
realized will constitute long-term or short-term capital gain or loss
depending on the shareholder's holding period for such shares and the date
such shares were acquired. See "The Merger - Federal Income Tax Consequences
to the Company's Shareholders."
Shareholders are urged to consult their personal tax advisors with
respect to the tax consequences of the transaction.
Interests of Certain Persons in the Merger. Pursuant to an employment
agreement, Morton Schiff, President and Chief Executive Officer, was to be
employed for a period of three years after a change of control of the
Company. The employment agreement will be amended prior to the Effective Time
to provide for termination of employment after the Merger and a payment of
$607,200 to Mr. Schiff, in lieu of future compensation under his employment
agreement. Mr. Schiff also will receive a cash payment with respect to the
cancellation of his employee stock option to purchase 10,000 shares of Common
Stock at $24 per share.
Other executive officers have bonus and severance agreements with the
Company. In addition, the Merger Agreement provides for indemnification and
insurance for directors and officers. (See "Interests of Certain Persons in
the Merger - Other Interests.")
Appraisal rights. Under the Michigan Business Corporation Act
("MBCA"), holders of the Common Stock are not entitled to any appraisal
rights with respect to the Merger.
Sources and Amount of Funds. The amount of funds to be used to
acquire the shares of Common Stock pursuant to the Merger Agreement is
approximately $23 million. The Company has been informed by Parent that
Parent has funds available to complete the Merger. See "The Merger - Source
and Amount of Funds."
3
The Parties
The Company. The Company is engaged in the original manufacture of
steel automotive structural supports including suspension control arms and
other stampings and assemblies. The Company's principal manufacturing
facility is in Masury, Ohio with additional production in a plant in Lapeer,
Michigan. Almost all sales are to Ford Motor Company and Chrysler
Corporation. The Company is a Michigan corporation with shares traded on the
American Stock Exchange.
Parent. Parent is a privately held Michigan corporation headquartered
in Bloomfield Hills, Michigan. Through its two principal subsidiaries, BMG
North America Limited and Lobdell Emery Corporation, it produces engineered
metal components, assemblies and modules for the automotive industry. Parent
currently operates eight manufacturing facilities located in Canada and the
United States. For the year ended March 31, 1997, on a pro forma basis for
the recent acquisition of Lobdell Emery Corporation, Parent would have had
net sales of approximately $330.2 million.
Merger Sub. Merger Sub is a Michigan corporation which is 100% owned
by Parent. Merger Sub was recently formed in preparation for the Merger and
has not conducted any business.
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Howell Industries, Inc.
(the "Company") for use at the Special Meeting of Shareholders ("Special
Meeting") to be held at the offices of the Company, located at 17515 West
Nine Mile Road, Suite 650, Southfield, Michigan 48075, on Wednesday,
August 13, 1997 at 10:00 A.M., Eastern Standard Time, or any adjournment
thereof, for the purposes set forth below and in the accompanying Notice of
Special Meeting of Shareholders. The merger of HI Acquisition, Inc. ("Merger
Sub"), a wholly-owned subsidiary of Oxford Automotive, Inc. ("Parent"), with
and into the Company is referred to in this Proxy Statement as the "Merger."
This Proxy Statement and the accompanying form of proxy are first being
mailed on or about July 14, 1997 to shareholders of record at the
close of business on July 10, 1997, 1997 (the "Record Date"). The
Company will pay the cost of soliciting proxies, including expenses for
preparing and mailing proxy solicitation materials. In addition to use of the
mails, proxies may be solicited by officers, directors and regular employees
of the Company, without extra compensation, by telephone, telegraph,
facsimile or personal interview.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the shareholders of the Company will vote on
whether to approve the Merger in accordance with the Agreement and Plan of
Merger, dated as of May 21, 1997, among Parent, Merger Sub and the Company
(the "Merger Agreement"). A
4
copy of the Merger Agreement is attached to this Proxy Statement as Appendix
A. Upon consummation of the Merger, Merger Sub will be merged into the
Company, the Company will become a wholly-owned subsidiary of Parent, and
each outstanding share of the Common Stock will be converted into the right
to receive $37 in cash.
THE TRANSACTION TO BE CONSIDERED AT THIS SPECIAL MEETING INVOLVES A
MATTER OF GREAT IMPORTANCE TO THE SHAREHOLDERS. IF THE MERGER IS APPROVED,
UPON THE CONSUMMATION OF THE MERGER, THE SHAREHOLDERS WILL HAVE NO FURTHER
RIGHTS AS SHAREHOLDERS OF THE COMPANY AND WILL HAVE ONLY THE RIGHT TO RECEIVE
A PAYMENT OF $37 PER SHARE IN CASH. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
READ AND CONSIDER CAREFULLY THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT.
VOTING, PROXIES AND REVOCABILITY
July 10, 1997 has been fixed as the Record Date for determining
shareholders of the Company entitled to notice of, and to vote at, the Special
Meeting. At the Special Meeting, shareholders of record at the close of
business on the Record Date will be entitled to one vote for each share of
the Common Stock held. As of the close of business on the Record Date, the
Company had 622,738 shares of Common Stock outstanding.
A majority, or 311,370 shares of Common Stock, must be represented at
the Special Meeting in person or by proxy in order to constitute a quorum for
the transaction of business.
Under Michigan law, the affirmative vote of holders of a majority of
the outstanding shares of the Common Stock is required for approval of the
Merger Agreement. Pursuant to an agreement dated as of May 21, 1997, NBD Bank
and Morton Schiff, as Trustees under the Herbert H. Freedland Marital Trusts
("the Freedland Trusts") agreed to vote approximately 32.6% of the
outstanding shares of Common Stock in favor of the Merger.
Proxies in the enclosed form which are returned in time for the
Special Meeting, and executed in accordance with the instructions thereon
will be voted as specified therein. If no specification is made, the proxies
will be voted FOR approval and adoption of the Merger Agreement.
A shareholder giving a proxy has the power to revoke it at any time
before it is exercised by filing with the Secretary of the Company at the
Company's principal executive offices, 17515 West Nine Mile Road, Suite 650,
Southfield, Michigan 48075, either an instrument revoking the proxy or a duly
executed proxy bearing a later date. A proxy will be revoked automatically if
the shareholder who executed it is present at the Special Meeting and
votes in person.
5
This Special Meeting may be adjourned, and additional proxies
solicited, if at the time of the Special Meeting the votes necessary to
approve the Merger Agreement have not been obtained. Any adjournment of the
Special Meeting will require the affirmative vote of a majority of the Common
Stock represented at the Special Meeting, in person or by proxy, even if less
than a quorum.
THE MANAGEMENT AND THE BOARD OF DIRECTORS OF THE COMPANY HAVE
DETERMINED UNANIMOUSLY THAT THE MERGER IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS SHAREHOLDERS AND RECOMMEND THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
THE MERGER
Background of the Merger
In recent years, the Company, in common with other suppliers to
original equipment automotive manufacturers, has faced increased customer
pressure for cost reductions, quality improvements, and additional services.
Manufacturers also have adopted policies to reduce the number of their
suppliers. In 1994, in order to improve its production capabilities, the
Company began a plant consolidation program under which most of its
production activities would be conducted at its Masury, Ohio plant. The
disruption and inefficiencies of the consolidation and the simultaneous
introduction of production of new parts adversely affected earnings. In early
1996, the Board of Directors began to consider the advisability of the sale
of the Company. Among the considerations reviewed were the changes in the
original equipment automotive supply industry, the slow progress in achieving
anticipated operating results at the Company's Masury plant, the likely need
for a new chief executive officer within the next few years, and the limited
market for the Company's shares, with resulting lack of liquidity for major
shareholders. After completion of the fiscal year ended July 31, 1996, the
Board of Directors reviewed the foregoing factors and the Company's business
position and engaged Roney to explore the possible sale or merger of the
Company. The engagement of Roney was announced on November 11, 1996.
In late 1996, Roney contacted a large number of potential purchasers
to determine interest in a possible acquisition. Fifty-nine companies
requested additional information and executed confidentiality agreements.
Roney distributed a confidential offering memorandum to those companies and
received written indications of interest from eight companies. Six companies
made plant visits in December, 1996 and January, 1997. In January, 1997, a
prospective purchaser indicated a purchase price of $51 per share and during
February engaged in an extensive business investigation. In March, 1997, that
purchaser revised its proposal to $37 per share, subject to further
investigation.
Roney continued discussions with other potential purchasers. Among
those contacted was Parent which had earlier indicated an interest in the
Company. Another potential purchaser made a proposal of $40 per share which
it ultimately withdrew because of business
6
uncertainties. On April 21, 1997, after a preliminary business review, Parent
proposed a price of $34 per share. Intensive negotiation of the price and
terms for a sale followed. On April 30, 1997, representatives of Parent and
the Company reached a tentative understanding at a price of $37 per share,
subject to Parent's satisfaction with it business investigation and the
negotiation of a mutually acceptable agreement. Parent and its consultants
then undertook a detailed review of the Company's business and counsel
prepared an agreement. The Merger Agreement was approved by the Board of
Directors on May 20, 1997. The Merger Agreement was executed and publicly
announced on May 21, 1997.
Recommendation of the Board of Directors of the Company
The Board of Directors of the Company unanimously adopted the Merger
Agreement and directed that it be submitted to the shareholders for their
approval. The terms of the Merger, including the conversion rate of $37 in
cash for each outstanding share of the Common Stock, are the result of
arm's-length negotiations between representatives of the Company and of
Parent.
The Board of Directors recommends the approval of the Merger
Agreement by the shareholders of the Company in the belief that the Merger is
in the best interests of the Company and its shareholders. In making the
determination, the Board of Directors considered, among other factors, the
following: (i) the purchase price of $37 per share ($23,041,306 in the
aggregate) reflects a premium over the market price (before the announcement
of a possible sale) of the Common Stock, (ii) the belief of the Board of
Directors based upon the response to the Company's sale solicitation and the
Company's business prospects that the Merger will permit the Company's
shareholders to realize more for their shares than they could otherwise
reasonably expect to recieve in the near future, notwithstanding the increase
in earnings in the nine months ended April 30, 1997, (iii) the business risks
of operation as a comparatively small original equipment automotive supplier
in the changing automotive industry, (iv) the belief of the Board of Directors
that the proposed Merger was the best proposal received by the Company after
its solicitation process, (v) the belief of the Board of Directors that no
other bidder at a higher price would be forthcoming in light of the
extensive potential buyer contacts made by Roney over more than five months,
(vi) the recommendation of Company management that the Merger Agreement be
approved, (vii) the past earnings of the Company and its future prospects,
(viii) historical market prices for the Common Stock, (ix) the Company's book
value and the fair market value of its assets, (x) the analysis performed by
Roney, including the comparable company analysis that showed a range of values
from $38.08 to $39.47 and an overall mean value of $38.78 per share which was
higher than the $37.00 purchase price, and (xi) the opinion of Roney, the
Company's financial advisor, that the proposed cash consideration to be
received by shareholders pursuant to the Merger is fair to such shareholders
from a financial point of view. The Board of Directors did not assign relative
weight to the foregoing factors or determine that any factor was of greater
importance than another factor. Rather, the Board of Directors viewed its
position and recommendations as being based on the totality of the information
presented to it and considered by it. For a description of Roney's opinion and
fee in connection with the Merger, see "Opinion of Financial Advisor" and
"Expenses."
Accordingly the Board of Directors of the Company believes that,
under all the circumstances, the purchase price of $37 per share is in the
best interests of the Company's shareholders. The Board, therefore,
recommends that the Merger Agreement be approved by the shareholders of the
Company.
See "Interests of Certain Persons in the Merger" concerning interests
of various persons in the Merger.
Certain Financial Projections of the Company
During the course of discussions between Parent and the Company that
led to the execution of the Merger Agreement, the Company provided Parent and
other prospective purchasers with non-public business and financial
information about the Company, including then current projections of future
results of operations for the fiscal years ending July 31, 1997, 1998, 1999,
2000,and 2001. Projections of net sales (dollars in thousands) for such
fiscal years were $94,997, $89,262, $79,596, $75,329 and $80,314,
respectively; operating profit projections (dollars in thousands) were
$2,742, $3,162, $3,220, $3,051 and $3,077, respectively; and projections of
net income (dollars in thousands) for such fiscal years were $1,993, $2,183,
$2,257, $2,240 and $2,327, respectively. These projections did not give
effect to the Merger or its financing.
The Company does not as a matter of course make public any
projections as to future performance or earnings. The projections were not
prepared with a view to public disclosure or compliance with the published
guidelines of the Securities and Exchange Commission or the guidelines
established by the American Institute of Certified Public Accountants
regarding projections or forecasts. The Company's internal operating
projections (upon which the projections provided to Parent were based in
part) are , in general, prepared solely for internal use and capital
budgeting and other management decisions and are subjective in many respects
and thus susceptible to various interpretations and periodic revisions based
on actual experience and business developments. The projections were based on
a number of assumptions that are beyond the control of the Company or
Parent. Many of the assumptions upon which the projections were based are
dependent upon economic forecasting (both general and specific to the
Company's business), which is inherently uncertain and subjective.
Accordingly, there can be no assurance that the projected results would be
realized or that actual results would not be significantly higher or lower
than those projected.
7
Opinion of Financial Advisor
In November, 1996, the Company's Board of Directors retained Roney to
act as the Company's exclusive financial adviser with respect to the possible
sale or merger of the Company. As part of its services, Roney analyzed the
Company and its operations, historical performance and future prospects;
identified and contacted selected companies acceptable to the Company's Board
of Directors to solicit indications of interest in a possible business
combination with the Company; participated in negotiations concerning the
financial aspects of the Merger Agreement and provided an opinion as to the
fairness, from a financial point of view of the consideration paid to holders
of the Common Stock.
Roney is a nationally recognized investment banking firm regularly
engaged, with respect to manufacturing companies and other corporations, in
the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, and
secondary distributions of listed and unlisted securities. No limitations
were imposed by the Company Board of Directors upon Roney with respect to the
investigations made or procedures followed by Roney in rendering its opinion.
On May 20, 1997 Roney orally delivered its opinion to the Company
Board of Directors to the effect that the purchase price is fair, from a
financial point of view, to the holders of Common Stock. A subsequently
provided written opinion describes the assumptions made, matters considered
and the scope of the review undertaken and procedures followed by Roney. A
copy of Roney's opinion is attached as Appendix B. Roney's opinion to the
Board of Directors addresses only the fairness from a financial point of view
of the consideration to be received by such shareholders pursuant to the
Merger Agreement and does not constitute a recommendation to any shareholder
of the Company with respect to the approval of the transactions contemplated
by the Merger Agreement. SHAREHOLDERS ARE URGED TO READ CAREFULLY SUCH
OPINION IN ITS ENTIRETY, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN. THE SUMMARY OF THE RONEY
OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
For purposes of its opinion and in connection with its review of the
proposed transaction, Roney, among other things: (a) participated in
discussions and negotiations among representatives of the Company and Parent
and their respective legal advisers that resulted in the Merger Agreement;
(b) reviewed the Merger Agreement; (c) reviewed publicly available financial
statements, both audited and unaudited, for the Company, including those
included in the Annual Report on Form 10-K for the year ended July 31, 1996,
the Quarterly Reports on Form 10-Q for the periods ended October 31, 1996 and
January 31, 1997 and the most recent annual proxy statement for the Company;
(d) reviewed financial statements and other financial and operating data
prepared by Company management, including financial statements at April 30,
1997; (e) reviewed financial projections of Company, prepared on a stand
alone basis, by Company management; (f) discussed aspects of the past and
current
8
business operations, results of customer reviews and purchasing strategies,
financial condition and future prospects of the Company with members of its
management; (g) reviewed reported market prices and historical trading
activity of Company Common Stock; (h) reviewed aspects of the financial
performance of the Company and compared such financial performance of the
Company with the stock market data relating to the company and similar data
available for other manufacturing companies and their securities; (i)
reviewed the financial terms, to the extent publicly available, of recent
business combinations involving other manufacturing companies; and (j)
conducted such other studies, analyses and examinations as Roney deemed
appropriate.
Roney relied upon and assumed without independent verification the
accuracy and completeness of all of the financial and other information
provided to it by the Company, its respective representatives and of the
publicly available information reviewed by Roney. Roney did not independently
verify and relied on and assumed that the aggregate accruals set forth in the
balance sheet of the Company at April 30, 1997, were adequate to cover such
matters and complied fully with applicable law and sound business practice as
of the date of such financial statements. Roney did not independently verify
the carrying values of property, plant and equipment carried on the Company's
balance sheets. Roney was not retained to and did not conduct a physical
inspection of any of the properties or facilities of the Company, nor did
Roney make any independent evaluation or appraisal of assets, liabilities or
prospects of the Company.
Set forth below is a summary of the analyses performed by Roney in
reaching its May 20, 1997 opinion.
In analyzing the value of the Common Stock, Roney (i) analyzed the
market prices at which the Common Stock traded in the 12-month period
immediately preceding the adoption of the Merger Agreement on May 20, 1997
(the "Approval Date") and the implied purchase price premiums over certain of
those market prices to be paid to the Company's shareholders in the Merger,
based on the cash consideration offered by Parent (the "Purchase Price
Premium Analysis"); (ii) performed an analysis of the Company's book and
forced asset sale values; (iii) performed a discounted cash flow analysis;
(iv) performed a comparable company analysis; and (v) performed a comparable
transaction analysis.
The following description summarizes the analyses used by Roney as
the basis for its opinion:
Stock Trading History. Roney analyzed the closing prices of the
Common Stock over the 12-month period preceding the Approval Date and the
purchase price premiums implied by the Parent's offer as of certain such
dates. This analysis resulted in a range of purchase price premiums for the
Common Stock of 29% based upon the last trade of the Common Stock prior to
the Company publicly announcing its intention to explore sale or
9
merger ($28.75 on November 11, 1996). Roney noted that the market for Common
Stock was highly illiquid for a publicly traded security and experienced
sustained periods with limited trading volume. In addition, Roney analyzed
the relationship between the movements of such common stock prices to the
market prices of common stocks of the companies in the Company Group (as
defined below in the comparable company analysis).
Book Value Analysis. Roney performed a Net Book Value and Forced
Asset Sale Value Analysis for the Company based upon the balance sheet
information dated March 31, 1997. In comparing the Company's book value per
share of $32.16, as of March 31, 1997, Roney noted an approximate premium of
15% between book value and the purchase price of $37.00. This analysis
resulted in a range of values for the Common Stock of $32.16 to $34.79 per
share with a mean value of $33.47 per share.
Discounted Cash Flow Analysis. Roney performed a discounted cash flow
analysis of the projected unleveraged cash flows of the Company from August
1, 1997 through July 31, 2001, if the Company performed in accordance with
management's forecast. Roney also analyzed two other scenarios utilizing
figures that were different than management's forecast. Roney also estimated
the terminal value of the Company's common equity as of July 31, 1997, by
applying a range of multiples to the Company's projected 2001 cash flow.
Roney applied discount rates of 11.5%, 13.5%, and 15.5% and terminal value
multiples of 5.0x, 5.5x and 6.0x to the projected unleveraged cash flows.
This analysis resulted in a range of values (including cash and investments
on the Company's balance sheet of approximately $1.60 per share) for the
company of $25.01 to $31.39 per share, with a mean value of $28.20.
Comparable Company Analysis. Roney reviewed certain actual and
estimated financial, operating and stock market information of the Company
and a group ("Company Group") of publicly traded automotive supplier
companies judged to be generally comparable to the Company. Automotive
supplier companies selected as comparable to the Company were Autocam
Corporation, Arvin Industries, Inc., Breed Technologies, Dana Corporation,
Excel Industries, Inc., Gentex Corporation, Gencorp, Inc., Intermet
Corporation, The Lamson & Sessions Co., Modine Manufacturing Co., Mascotech,
Inc., Shiloh Industries, Inc., Simpson Industries, Inc., Stant Corporation,
Superior Industries Int'l, Tower Automotive, Inc., Varlen Corporation, and
Walbro Corporation. Roney also compared equity values as a multiple of
trailing net income, projected 1997 net income, and current book value in
addition to reviewing multiples of last twelve months operating income and
last twelve months sales. All multiples were calculated using closing stock
prices on May 19, 1997. Applying the comparable company multiples to the
subject, the indicated value of each share of Common Stock ranged from $38.08
to $39.47, with an overall mean value of $38.78.
Analysis of Selected Merger Transactions. Using publicly available
information, Roney analyzed the purchase prices and multiples paid in the
following selected transactions in the automotive supplier industry from 1993
through April, 1997: Automotive Industries, Inc./ASAA Technologies, Inc.,
Automotive Industries, Inc./Fibercraft/DES Con Eng., Inc., Tower
Automotive/Kalamazoo Stamping, JPE, Inc./StarBoard Industries, JPE,
Inc./Industrial
10
Automotive Fasteners, JPE, Inc./Plastic Trim, Inc., Douglas and
Lomason/Bestop, Inc., Johnstone American Industries, Inc./Truck Components,
Inc., Lear Seating, Inc./Automotive Industries, Inc., Larizza Industries,
Inc./Collins & Aikman Corp., Tower Automotive/Trylon - Mascotech; Lear
Corp../Masland Corporation, Intermet Corp./Sudbury, Inc., Tower Automotive,
Inc./APC Division of A.O. Smith, Tomkins PLC/Stant Corporation, and GKN
PLC/Sinter Metals. Roney compared purchase prices as a multiple of earnings
before interest and taxes ("EBIT") for the year that each transaction was
consummated. These calculations yielded a range of multiples from
approximately 4x to 19x EBIT resulting in an average of approximately 8.09x.
This analysis resulted in a range for each share of Common Stock of $27.43 to
$43.42, with a mean of $35.43.
The book value analysis, discounted cash flow analysis, comparable
company analysis, and comparable transaction analysis resulted in an overall
value range for each share of Common Stock of $30.67 to $37.27, with a mean
of $33.97.
In connection with its written opinion, Roney performed procedures to
update certain of its analyses and reviewed the assumptions on which such
analyses were based and the factors considered in connection therewith.
Although the summary set forth above does not purport to be complete
a description of the analyses performed by Roney, the material analyses
performed by Roney in rendering its opinion have been summarized above.
However, the preparation of a fairness opinion is not necessarily susceptible
to partial analysis or summary description. Roney believes that its analyses
and the summary set forth above must be considered as a whole, and that
selecting portions of its analyses, without considering all factors and
analyses, would create an incomplete view of the process underlying the
analyses by which Roney reached its opinions. In addition, Roney may have
given various analyses more weight than others. Also Roney may have deemed
various assumptions more or less probable than other assumptions, so that the
ranges of valuations resulting from any particular analysis described above
should not be taken to be Roney's view of the actual value of the Company.
In performing its analyses, Roney made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company. The
analyses performed by Roney are not necessarily indicative of actual value or
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of
Roney's analysis of the fairness, from a financial point of view, of the
consideration to be received. The analyses do not purport to be appraisals or
to reflect the prices at which a company might actually be sold or the prices
at which any securities may trade at the present time or at any time in the
future. Roney used in its analyses various projections of future performance
prepared by the management of the Company. The projections are based on
numerous variables and assumptions which are inherently unpredictable.
Accordingly, actual results could vary significantly from those assumed in
the projections and any related analyses. Roney's opinion does not address
the relative merits of the Merger as compared to
11
any alternative business strategies that might exist for the Company or the
effect of any other business combination in which the Company might engage.
In addition, as described above, Roney's opinion to the Company's Board of
Directors was one of many factors taken into consideration by the Company's
Board of Directors in making its determination to approve the Merger
Agreement.
Pursuant to the terms of Roney's engagement, the Company has agreed
to pay Roney a transaction fee for its advisory services of 1 1/2% of the
consideration paid to shareholders ($345,620, of which $50,000 has been
paid). The Company has also agreed to reimburse Roney for its reasonable
out-of-pocket expenses, including the fees and expenses of legal counsel, and
to indemnify Roney and certain related persons or entities against certain
liabilities, including liabilities under the federal securities laws,
relating to or arising out of its engagement.
Required Vote
Approval of the Merger Agreement requires the affirmative vote of a
majority of the outstanding shares of the Common Stock. Abstentions and
broker non-votes will be counted for purposes of determining whether a quorum
is present at the Special Meeting, but they will have the effect of a "no"
vote with respect to the approval of the Merger Agreement, because such
approval requires the affirmative vote of a majority of the outstanding
shares of Common Stock. The Freedland Trusts have agreed to vote 32.6% of the
outstanding shares in favor of the Merger. See "Interests of Certain persons
in the Merger - Shareholder Agreement."
Terms of the Merger
A copy of the Merger Agreement is attached to this Proxy Statement as
Appendix A and all references in this Proxy Statement to the Merger Agreement
and the transactions to be effected pursuant to the Merger Agreement are
qualified in their entirety by reference to the actual text of the Merger
Agreement. The Merger Agreement provides for the merger of Merger Sub, a
wholly-owned subsidiary of Parent, into the Company. After consummation of
the Merger, the Articles of Incorporation and Bylaws of Merger Sub will be
the Articles of Incorporation and Bylaws of the surviving corporation, and
the directors and officers of Merger Sub will be the directors and officers
of the surviving corporation. The Merger Agreement further provides that,
when the Merger becomes effective, each outstanding share of the Common Stock
will be cancelled and retired, and each such share will be converted into the
right to receive $37 in cash, without interest.
At the Effective Time, Merger Sub will cease to exist and the Company
will automatically assume all liabilities and obligations of Merger Sub. As a
result of the Merger, the outstanding shares of Merger Sub common stock owned
by Parent will be converted into shares of common stock of the Company, and
the Company will, therefore, become a wholly-owned subsidiary of Parent. As
of the effective time of the Merger, the Common Stock is
12
expected to be delisted from the American Stock Exchange, and shares of the
Common Stock will no longer be traded on the American Stock Exchange. In
addition, the registration of the Common Stock under the Securities Exchange
Act of 1934 will be terminated.
Effective Time
If the Merger Agreement is approved by the shareholders of the
Company and if all of the conditions to its consummation are satisfied or
waived, the Merger will become effective upon the filing of a Certificate of
Merger with the Department of Consumer and Industry Services of the State of
Michigan (the "Effective Time"). Assuming such approval and satisfaction or
waiver of such conditions are obtained, it is expected that this filing will
be made and the Merger will become effective as soon as is practicable after
the Special Meeting; provided, that the closing of the Merger may be extended
to such other day as Merger Sub, Parent and the Company shall mutually agree
upon. The Board of Directors of Parent or the Company may terminate the
Merger Agreement under certain circumstances.
See "Modification; Termination."
Exchange of Stock Certificates
At the Effective Time, certificates representing shares of Common
Stock will be deemed to represent solely the right to receive cash in the
amount of $37 per share. Promptly after the Effective Time, a transmittal
letter will be forwarded to the Company's shareholders of record by a bank
selected by Parent (the "Disbursing Agent"), giving them instructions
concerning the exchange of their stock certificates for payment.
HOLDERS OF THE COMPANY'S COMMON STOCK SHOULD NOT FORWARD
THEIR STOCK CERTIFICATES UNTIL RECEIPT OF THE LETTER OF
INSTRUCTIONS.
Upon surrender to the Disbursing Agent of certificates representing
their shares of Common Stock and of the transmittal letter described above,
properly endorsed, shareholders will be entitled to receive $37 in cash per
share of Common Stock.
Sources and Amount of Funds
The amount of funds to be used to acquire the shares of Common Stock
pursuant to the Merger Agreement is approximately $23 million. The Company
has been informed by Parent that Parent has funds available to complete the
Merger.
Representations and Warranties; Covenants; Conditions
The Company, Merger Sub and Parent have made representations and
warranties to, and agreed to covenants with, one another in the Merger
Agreement. The representations and
13
warranties of the Company concern, among other things, the Company's
outstanding capital stock, the absence of certain violations or breaches
caused by the Merger, consents and approvals required, compliance with laws,
financial condition, results of operations, absence of certain changes or
events between July 31, 1996 and the Effective Time, ownership of, and
encumbrances on, the Company's assets, liabilities (including tax and
environmental matters), legal proceedings, employee benefit plans, licenses,
insurance coverage, brokers' fees, intellectual property, contracts, and
labor matters. The representations and warranties of Parent and Merger Sub
concern, among other things, their organization, authority relative to the
Merger Agreement and consents and approvals required. Also, the Company has
agreed that the Company's Board of Directors will recommend to the Company's
shareholders the approval of the Merger Agreement, subject to the fiduciary
duties of the directors.
In addition, the Company has agreed not to solicit, directly or
indirectly, any tender or exchange offer, merger, business combination, sale
of a significant amount of assets or equity interest, recapitalization,
restructuring, or similar transaction involving the Company ("Acquisition
Proposal") or, subject to the fiduciary duties of the Company's Board of
Directors, furnish information or engage in discussions or negotiations with
any person or entity concerning an Acquisition Proposal. If the Company
accepts an Acquisition Proposal or the Board of Directors recommends against
the Merger, the Company will pay Parent a fee of $1,000,000 under certain
circumstances. See "Termination Fee." The Company has also covenanted not to
declare any dividend, other than as provided in the Merger Agreement, or
other distribution with respect to the Common Stock before the Merger,
without the prior written consent of Parent. If the Merger is consummated,
all representations, warranties and covenants in the Merger Agreement
terminate, except for covenants related to payment for the Common Stock, the
covenant to indemnify the Company's officers and directors (see "Interests of
Certain Persons in the Merger") and specified confidentiality and
miscellaneous obligations of the parties.
The consummation of the Merger is subject to a number of conditions,
including the following: (i) the representations and warranties of each party
in the Merger Agreement shall be true and correct, (ii) all actions required
to be performed by a party at or before the Effective Time shall have been so
performed, including, among other things, the delivery of legal opinions and
certificates of officers, (iii) the Merger Agreement shall have been approved
by the requisite vote of holders of the Common Stock, and (iv) no action or
proceeding shall have been instituted by any governmental authority to
restrain or invalidate the Merger Agreement.
The Merger Agreement provides that the party whose obligation to
proceed is subject to the satisfaction of such condition, may waive the
satisfaction of any such condition in writing. This provision would not allow
the parties to waive the requirement that the Company's shareholders approve
the Merger Agreement.
14
Modification; Termination
At any time before the Effective Time, the Company, Merger Sub and
Parent may, by written agreement, extend the time for the performance of any
obligation or other act of the parties under the Merger Agreement, waive
compliance with any agreements or conditions, waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered in connection with the Merger Agreement, or,
notwithstanding any shareholder approval, amend the Merger Agreement;
provided, that after approval of the Merger Agreement by the Company's
shareholders, no amendment may be made that by law requires further approval
by such shareholders unless such approval shall be obtained.
The Merger Agreement may be terminated, notwithstanding shareholder
approval, at any time before the Effective Time under various circumstances,
including, (i) by written consent of Parent and the Company, (ii) by either
Parent or the Company if the Merger is not consummated by December 31, 1997
(except by a party whose failure to fulfill an obligation caused or resulted
in the failure to consummate the Merger), (iii) by either Parent or the
Company if a court or governmental authority prevents the Merger, except by a
party whose non-compliance with its obligations materially contributed to the
court or governmental action, (iv) by Parent or the Company if the requisite
vote of the shareholders is not obtained by December 15, 1997, except that
the Company may not elect to terminate the Merger Agreement if it has not
complied with its obligations concerning the Special Meeting, (v) by Parent
or the Company if representations or warranties of the other party are untrue
or upon breach of an agreement or covenant of the other party, and the
condition is not cured as set forth in the Merger Agreement, (vi) by Parent
if the Board of Directors of the Company changes its approval of the Merger
or recommends to the shareholders an Acquisition Proposal, (vii) by Parent if
any person other than Parent or its affiliates or the Freedland Trusts
becomes the beneficial owner of 19.9% of the outstanding Common Stock, or
(viii) by the Company if it executes a definitive agreement with respect to
an Acquisition Proposal in accordance with the Merger Agreement.
Termination Fee
The Company has agreed to pay a termination fee of $1,000,000 (the
"Fee") to Parent if the Merger is terminated because of the change of the
recommendation of the Board of Directors of the Company or the Company has
entered into a definitive agreement with respect to an Acquisition Proposal,
or if the Merger is terminated by Parent because a person other than Parent
or its affiliates or the Freedland Trusts acquires 19.9% of the outstanding
Common Stock and, within one year of the termination, a person shall acquire
ownership of a majority of the outstanding Common Stock, or obtain
representation on the Board of Directors, or enter into a definitive
agreement with the Company with respect to an Acquisition Proposal.
15
Expenses
Except for the Fee and a provision in the Merger Agreement providing
for the payment of Parent's reasonable out-of-pocket expenses if the
shareholders fail to approve the Merger at the Special Meeting despite a
favorable Board recommendation, each party to the Merger Agreement will pay
its own costs and expenses incident to the Merger Agreement and the related
transactions. The Company has entered into an agreement with Roney, which has
acted as financial advisor for the Company in connection with the Merger. The
Company will pay Roney an aggregate fee of $345,620 for its services less
$50,000 previously paid, if the Merger is consummated, plus Roney's
reasonable out-of-pocket expenses. See "Opinion of Financial Advisor."
Federal Income Tax Consequences to the Company's Shareholders
The receipt of cash for shares of the Common Stock pursuant to the
Merger will be a taxable transaction for federal income tax purposes to the
shareholders receiving such cash (and may be a taxable transaction for state,
local and foreign tax purposes as well). A holder of the Common Stock will
realize gain or loss measured by the difference between such shareholder's
adjusted tax basis for the shares of the Common Stock owned by the
shareholder at the time of the Merger and the amount of cash received for
such shares. In general, such gain or loss will be capital gain or loss if
the shares of the Common Stock are capital assets in the hands of such
shareholder; any such gain or loss realized will constitute long-term or
short-term capital gain or loss depending on the shareholder's holding period
for such shares and the date such shares were acquired. Under current federal
law, a non-corporate shareholder will be taxed at a maximum rate of 28% on
long-term capital gain.
No ruling has been or will be requested from the Internal Revenue
Service as to any of the tax effects of the transactions discussed in this
Proxy Statement.
The foregoing is only a general description of certain of the federal
income tax consequences of the Merger to holders of the Common Stock, without
giving consideration to the particular facts and circumstances of each
shareholder's situation, and is based on present law. Shareholders are urged
to consult their personal tax advisors with respect to the tax consequences
of the transaction, including the federal, state, local and foreign tax
consequences of the Merger.
Regulatory Matters
Pursuant to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), Parent and the Company
each filed a Notification and Report Form for review under the HSR Act with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice. The waiting periods for the HSR Act with respect to such filings
expired on July 11, 1997. Parent and the Company do not believe
that any additional governmental filings are required with respect to the
Merger,
16
other than the filing of the Certificate of Merger required to be filed with
the Administrator of the Department of Consumer and Industry Services of the
State of Michigan.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Shareholder Agreement
Pursuant to an agreement dated as of May 21, 1997 (the "Shareholder
Agreement"), the Freedland Trusts granted to Parent and Merger Sub the option
to purchase the 202,972 shares of the Common Stock held by the Freedland
Trusts at a purchase price of $37 per share, subject to adjustment. The
option is exercisable until the earlier of the termination of the Merger
Agreement or December 31, 1997. The Shareholder Agreement further provides
that the Freedland Trusts shall vote the shares in favor of the Merger and
against any action that would interfere with the Merger. The Freedland Trusts
also agreed not to solicit any Acquisition Proposal except as permitted by
the Merger Agreement.
Agreements with Management
Pursuant to an employment agreement, Mr. Schiff is to be employed for
a period of three years after a change of control in his present position, at
his current salary and with an annual bonus of not less than the average
bonus he received for the three prior fiscal years, plus incidental benefits.
Prior to the Effective Time, the Employment Agreement will be amended to
provide that Mr. Schiff's employment would terminate after the Merger, and
that he will receive a cash payment of $607,200 in lieu of further
compensation under the employment agreement. Mr. Schiff also will receive
$130,000 in connection with the cancellation of his option to purchase 10,000
shares of Common Stock at $24 per share.
Pursuant to bonus and severance agreements dated November 14, 1996,
Mark Duddles and Dean McLeod, Vice Presidents, will receive cash bonuses of
$36,667 and $35,000, respectively, if they remain employees until the
Effective Time and they are to receive severance compensation if their
employment is involuntarily terminated within 12 months after the Effective
Time.
Other Interests
The Merger Agreement provides that the Company shall indemnify each
present and former director or officer or employee of the Company against
expenses and liabilities incurred in connection with duties in such
capacities to the fullest extent permitted by applicable law. The Merger
Agreement also provides that, subject to limitations, the Company shall
maintain in effect for three years from the Effective Time the current
directors and officers liability insurance policies maintained by the Company
or substantially equivalent coverage. The directors of the Company also have
the benefit of individual indemnification agreements which require
indemnification, the advancement of expenses, and the maintenance of
insurance.
17
INFORMATION ABOUT THE COMPANY
The Company is engaged in original manufacture of components for the
automotive industry. The Company's products are steel automotive structural
supports including suspension control arms and other stampings and
assemblies. The Company manufactures underbody structural supports primarily
in its Masury, Ohio plant. Miscellaneous structural supports are manufactured
in a plant in Lapeer, Michigan. Almost all sales are to Ford Motor Company
and Chrysler Corporation.
Howell Industries, Inc. was incorporated under the laws of the State
of Michigan in 1934. Unless the context otherwise requires, all reference to
the Company in this Proxy Statement refer to Howell Industries, Inc. The
Company's executive offices are located at 17515 West Nine Mile Road, Suite
650, Southfield, Michigan 48075, and its telephone number is (248) 424-8220.
The Company is subject to the information requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files reports
and other information with the Commission. Such reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission in Washington, D.C. at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Offices in New York
(Seven World Trade Center, 13th Floor, New York, New York 10048) and Chicago
(Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621-2511) or through the Commission's Web site at
http://www.sec.gov. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Common Stock is listed on the
American Stock Exchange. After the Merger, registration of the Common Stock
under the Exchange Act and the listing of the Common Stock on the American
Stock Exchange are expected to be terminated.
SELECTED FINANCIAL DATA OF THE COMPANY
The following financial data relating to the Company for the five
years ended July 31, 1996, have been derived from the audited Financial
Statements of the Company. The following selected financial data for the nine
months ended April 30, 1997 and 1996, have been derived from the Company's
unaudited financial statements, and in the opinion of management includes all
adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of such information for such periods on a consistent basis.
Such selected financial data should be read in conjunction with the Financial
Statements and
18
unaudited Financial Statements and the Notes relating to such Statements
incorporated by reference in this Proxy Statement.
HOWELL INDUSTRIES, INC.
Nine Months Ended
April 30 Years Ended July 31
-------------------------- -------------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
SELECTED FINANCIAL DATA
Net sales $72,358,533 $60,026,644 $79,211,000 $62,635,405 $63,004,461 $45,385,637 $39,434,334
Cost of products sold 66,167,213 54,748,102 72,356,066 55,856,885 53,667,625 38,165,826 32,781,437
Depreciation 1,154,430 1,131,390 1,435,354 1,231,295 1,103,032 1,068,054 1,066,812
Provision for plant
consolidation (800,000) 1,900,000
Interest income 68,626 93,405 121,393 287,498 496,286 573,632 845,923
Interest expense 5,243 188 220 2,488 1,011 42,767
Taxes on income 1,048,000 605,000 267,000 720,000 882,000 885,000 848,000
Earnings after income taxes,
before cumulative effect of
change in method of
accounting for income taxes 1,970,530 1,135,847 474,791 1,556,818 1,808,952 2,220,915 2,032,387
Cumulative effect of change
in method of accounting for
income taxes 240,000
Net earnings 1,970,530 1,135,847 474,791 1,556,818 2,048,952 2,220,915 2,032,387
Earnings per share after
income taxes, before
cumulative effect of change
in method of accounting for
income taxes 3.16 1.82 0.76 2.21 2.09 2.56 2.28
Earnings per share on
cumulative effect of change
in method of accouting for
income taxes 0.28
Net earnings per common
share 3.16 1.82 0.76 2.21 2.37 2.56 2.28
Cash dividends declared per
common share 0.75 0.75 1.00 1.00 1.00 1.00 1.00
BALANCE SHEET DATA
Working capital $11,643,538 $13,488,318 $12,765,561 $12,736,926 $20,806,412 $17,243,153 $19,808,897
Total assets 35,067,570 33,837,615 28,273,849 25,545,981 33,733,152 29,983,471 29,747,713
Deferred tax asset 59,000 4,000 59,000 4,000 751,000
Deferred tax liability 124,000 106,000 124,000 106,000 396,000 679,000 683,000
Long term debt -- -- -- -- -- -- --
Shareholders' equity 20,463,929 19,777,193 18,960,452 19,108,399 25,494,819 24,310,605 23,733,485
Book value per share 32.86 31.76 30.45
19
Common Stock Prices
Quarter Fiscal 1997 Fiscal 1996 Fiscal 1995
- ------- ----------- ----------- -----------
Ended High Low High Low High Low
- ----- ---- --- ---- --- ---- ---
October 31 36 3/4 27 1/8 26 3/4 24 1/4 30 1/4 27 1/4
January 31 45 28 1/4 25 1/4 23 5/8 28 26 1/4
April 30 49 35 27 7/8 23 5/8 30 26
July 31 (through
July 9, 1997) 36 1/4 36 1/8 31 3/4 25 7/8 31 26 1/2
On May 26, 1997, the date preceding the announcement of the proposed
merger, there were no trades on the American Stock Exchange, and the closing
bid price was $40. As of October 1, 1996, there were 292 holders of record
the Common Stock. During each of the first three quarters of fiscal year
1997, the Company declared dividends of $.25 per share of Common Stock
outstanding.
INFORMATION ABOUT PARENT AND MERGER SUB
Parent is a privately held Michigan corporation headquartered in
Bloomfield Hills, Michigan. Through its two principal subsidiaries, BMG North
America Limited and Lobdell Emery Corporation, it produces engineered metal
components, assemblies and modules for the automotive industry. Parent
currently operates eight manufacturing facilities located in Canada and the
United States. For the year ended March 31, 1997, on a pro forma basis for
the recent acquisition of Lobdell Emery Corporation, Parent would have had
net sales of approximately $330.2 million.
Merger Sub is a Michigan corporation which is wholly owned by Parent.
Merger Sub was recently formed in preparation for the Merger and has not
conducted any business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of July 1,
1997, regarding the beneficial ownership of the Common Stock by each director
of the Company, each person known by the Company to own beneficially more
than 5% of the outstanding Common Stock, each executive officer of the
Company and all directors and executive officers as a group:
20
Percent of
Name of Number of Shares Outstanding
Beneficial Owner Beneficially Owned Common Stock
- ---------------- ------------------ ------------
Herbert H. Freedland
Marital Trusts(1)
c/o NBD Bank
1116 West Long Lake Road
Bloomfield Hills, MI 48302 202,972 32.6%
Howell Industries, Inc.
Employee Stock Ownership Plan
17515 West Nine Mile Road, Suite 650
Southfield, MI 48075 60,005 9.6%
Dimensional Fund Advisors, Inc.(2)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 51,600 8.3%
Richard H. Cummings, Director 100 *
Alan E. Schwartz, Director 0 *
Morton Schiff, Director,
President and Treasurer(3) 223,664 35.9%
Mark W. Duddles, Vice President 178(4) *
Dean A. McLeod, Vice President 0 *
All directors and officers as a
group (5 persons) 223,942 36%
<FN>
*Less than 1%
- --------
(1) NBD Bank and Morton Schiff are Co-Trustees of the Herbert H. Freedland
Marital Trusts established under the Herbert H. Freedland Trust Agreement,
dated November 3, 1972. The Trustees disclaim beneficial ownership of the
shares. Parent has an option to purchase the shares. See "Interests of
Certain Persons in the Merger - Shareholder Agreement."
(2) Based on information provided in Schedule 13-G dated February 5, 1997.
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 51,600 shares of Howell
Industries, Inc. stock as of December 31, 1996, all of which shares are held
in portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(3) Includes 10,000 shares which Mr. Schiff has a right to acquire pursuant
to the 1995 Stock Incentive Plan for key employees. Also includes 202,972
shares held by the Herbert H. Freedland Marital Trusts and 10,692 shares held
by the Company's Stock Ownership Plan.
(4) Held by the Company's Employee Stock Ownership Plan.
21
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche, LLP ("Deloitte & Touche") was the Company's
independent public accounting firm for the fiscal year ended July 31, 1996. A
representative of Deloitte & Touche is expected to be present at the Special
Meeting and will have the opportunity to make a statement if he desires to do
so. The representative will also be available to respond to appropriate
questions from shareholders.
SHAREHOLDER PROPOSAL DEADLINE
A shareholder proposal intended to be presented at the 1997 Annual
Meeting, if such a meeting is held, must have been received by the Company on
or before June 29, 1997 to be considered for inclusion in the Company's proxy
statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Company is not aware of any matters to be brought before the
Special Meeting except those set forth in the attached Notice of Special
Meeting of Shareholders. However, if any other matters are properly presented
at the Special Meeting for action, it is the intention of the proxy holders
named in the enclosed form of proxy to vote on such matters in their
discretion.
Shareholders are urged to specify their choice on the matters to be
voted on at the Special Meeting and to date, sign and return the enclosed
proxy in the envelope provided. A prompt response is helpful and your
cooperation will be appreciated.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are specifically incorporated by reference
into this Proxy Statement: (i) the Company's Annual Report on Form 10-K for
the year ended July 31, 1996, filed with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (File No.
1-04615), (ii) the Company's Quarterly Reports on Form 10-Q for the quarters
ended October 31, 1996, January 31, 1997 and April 30, 1997, filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934 (File No. 1-04615), and (iii) all other reports filed pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 since July 31, 1996
(File No. 1-04615).
The Company will provide without charge to each person, including any
beneficial owner, to whom this Proxy Statement is delivered, upon written or
oral request of such person, by first class mail or other equally prompt
means, within one business day of receipt of such request, a copy of any and
all of the information that has been incorporated by reference in this Proxy
Statement (not including exhibits to the information that is incorporated by
reference unless such exhibits are specifically incorporated by reference
into the information that this Proxy Statement incorporates). Requests for
such copies should be addressed to Howell Industries, Inc., 17515 West Nine
Mile Road, Suite 650, Southfield, Michigan 48075, Attention: Treasurer,
(248) 424-8220.
22
[Intentionally Left Blank]
Appendix A
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OXFORD AUTOMOTIVE, INC. AND
HI ACQUISITION, INC.
and
HOWELL INDUSTRIES, INC.
Dated as of May 21, 1997
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I THE MERGER.......................................................... 2
SECTION 1.1 The Merger............................................. 2
SECTION 1.2 Effective Time........................................ 2
SECTION 1.3 Effect of the Merger.................................. 2
SECTION 1.4 Articles of Incorporation, By-Laws.................... 2
SECTION 1.5 Directors and Officers................................ 3
SECTION 1.6 Effect on Capital Stock............................... 3
SECTION 1.7 Exchange of Certificates.............................. 4
SECTION 1.8 Stock Transfer Books.................................. 5
SECTION 1.9 No Further Ownership Rights in Company Common Stock... 5
SECTION 1.10 Lost, Stolen or Destroyed Certificates............... 6
SECTION 1.11 Taking of Necessary Action; Further Action........... 6
SECTION 1.12 Material Adverse Effect.............................. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 6
SECTION 2.1 Organization and Qualification; Subsidiaries.......... 7
SECTION 2.2 Articles of Incorporation and By-Laws................. 7
SECTION 2.3 Capitalization........................................ 7
SECTION 2.4 Authority Relative to this Agreement.................. 8
SECTION 2.5 Material Agreements; No Conflict; Required Filings
and Consents....................................... 9
SECTION 2.6 Compliance, Permits................................... 10
SECTION 2.7 SEC Filings; Financial Statements..................... 11
SECTION 2.8 Absence of Certain Changes or Events.................. 11
SECTION 2.9 No Undisclosed Liabilities............................ 12
SECTION 2.10 Absence of Litigation................................ 12
SECTION 2.11 Employee Benefit Plans, Employment Agreements........ 12
SECTION 2.12 Labor Matters........................................ 14
SECTION 2.13 Restrictions on Business Activities.................. 14
SECTION 2.14 Title to Property..................................... 14
SECTION 2.15 Taxes................................................. 14
SECTION 2.16 Environmental Matters................................. 16
SECTION 2.17 Intellectual Property................................. 18
SECTION 2.18 Interested Party Transactions......................... 19
SECTION 2.19 Insurance............................................. 19
SECTION 2.20 Opinion of Financial Advisor.......................... 20
SECTION 2.21 Brokers............................................... 20
SECTION 2.22 Change in Control Payments............................ 20
SECTION 2.23 Expenses.............................................. 20
SECTION 2.24 Products Liability and Warranty Claims................ 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB...................................................... 21
SECTION 3.1 Organization and Qualification; Subsidiaries.......... 21
SECTION 3.2 Articles of Incorporation and By-Laws................. 21
SECTION 3.3 Authority Relative to this Agreement.................. 21
SECTION 3.4 No Conflict, Required Filings and Consents............ 21
SECTION 3.5 Share Ownership........................................ 22
SECTION 3.6 Ownership of Merger Sub; No Prior Activities........... 22
SECTION 3.7 Financing.............................................. 22
SECTION 3.8 Solvency............................................... 22
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER............................. 23
SECTION 4.1 Conduct of Business by the Company Pending the Merger. 23
SECTION 4.2 No Solicitation....................................... 25
ARTICLE V ADDITIONAL AGREEMENTS............................................... 27
SECTION 5.1 HSR Act............................................... 27
SECTION 5.2 Shareholder Meeting................................... 27
SECTION 5.3 Access to Information; Confidentiality................ 27
SECTION 5.4 Consents; Approvals................................... 27
SECTION 5.5 Indemnification and Insurance......................... 28
SECTION 5.6 Notification of Certain Matters....................... 29
SECTION 5.7 Further Action........................................ 29
SECTION 5.8 Public Announcements. ................................ 29
SECTION 5.9 Conveyance Taxes...................................... 29
SECTION 5.10 Shareholder Agreement; Michigan Law................... 29
SECTION 5.11 Title Policy and Survey............................... 30
ARTICLE VI CONDITIONS TO THE MERGER..................................... 31
SECTION 6.1 Conditions to Obligation of Each Party to Effect
the Merger......................................... 31
SECTION 6.2 Additional Conditions to Obligations of Parent
and Merger Sub.................................... 32
SECTION 6.3 Additional Conditions to Obligation of the Company.... 33
ARTICLE VII TERMINATION......................................................... 34
SECTION 7.1 Termination........................................ 34
SECTION 7.2 Effect of Termination.............................. 36
SECTION 7.3 Fees and Expenses.................................. 36
ARTICLE VIII GENERAL PROVISIONS................................................ 37
SECTION 8.1 Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc...................... 37
SECTION 8.2 Notices............................................ 37
SECTION 8.3 Certain Definitions................................ 39
SECTION 8.4 Amendment.......................................... 40
SECTION 8.5 Waiver............................................. 40
SECTION 8.6 Headings........................................... 40
SECTION 8.7 Severability....................................... 40
SECTION 8.8 Entire Agreement................................... 40
SECTION 8.9 Assignment; Guarantee of Merger Sub................ 40
SECTION 8.10 Parties in Interest............................... 40
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies
Cumulative....................................... 41
SECTION 8.12 Governing Law..................................... 41
SECTION 8.13 Counterparts...................................... 41
Section 2.1 Organization and Qualification; Subsidiaries
Section 2.3 Capitalization
Section 2.5(a) Material Agreements
Section 2.5(b) Agreement Defaults
Section 2.5(c) No Conflict
Section 2.6(a) Compliance
Section 2.6(b) Permits
Section 2.7(a) SEC Filings; Financial Statements
Section 2.8 Absence of Changes
Section 2.9 Undisclosed Liabilities
Section 2.10 Absence of Litigation
Section 2.11(a) Employee Plans and Agreements
Section 2.11(b) Employee Benefit Matters
Section 2.11(c) Employee Option Plans
Section 2.11(d) Agreements with Employees and Consultants
Section 2.12 Labor Matters
Section 2.15(b) Taxes
Section 2.16(a) Environmental Matters
Section 2.17(b) Intellectual Property
Section 2.17(c) Intellectual Property Licenses
Section 2.18 Interested Party Transactions
Section 2.19 Insurance
Section 2.22 Change in Control Payments
Section 2.23 Expenses
Section 2.24 Product Liability and Warranty Claims
Section 4.1(e) Conduct of Business
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 21, 1997 (this
"Agreement"), among Oxford Automotive, Inc., a Michigan corporation
("Parent"), HI Acquisition, Inc., a Michigan corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and Howell Industries, Inc., a Michigan
corporation (the "Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company have each determined that it is advisable and in the best interests
of their respective shareholders for Parent to enter into a business
combination with the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors
of Parent, Merger Sub and the Company have each approved the merger of Merger
Sub with and into the Company (the "Merger") in accordance with the
applicable provisions of the Michigan Business Corporation Act (the "MBCA")
and upon the terms and subject to the conditions set forth herein;
WHEREAS, pursuant to the Merger, each outstanding share (a "Share")
of the Company's common stock (the "Company Common Stock"), shall be
converted into the right to receive the Merger Consideration (as defined in
Section 1.6(a)), upon the terms and subject to the conditions set forth
herein; and
WHEREAS, as an inducement to Parent to acquire the Company, and as a
condition to Parent's willingness to enter into this Agreement, Parent,
Merger Sub and the Herbert H. Freedland Trust (the "Shareholder") are
entering into a shareholder agreement (the "Shareholder Agreement") pursuant
to which the Shareholder has agreed to (i) grant Parent and Merger Sub an
irrevocable option to buy its Shares at $37.00 per Share, and (ii) in the
event that such irrevocable option is not theretofore exercised, to vote its
Shares in favor of the Merger, in each case upon the terms and subject to the
conditions set forth therein;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
A-1
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in Section
1.2), and subject to and upon the terms and conditions of this Agreement, and
the MBCA, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue
as the surviving corporation. The Company as the surviving corporation after
the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to
Section 7.1 and subject to the satisfaction or waiver of the conditions set
forth in Article VI, the consummation of the Merger will take place as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Article VI, at the
offices of Dykema Gossett PLLC, 1577 North Woodward Avenue, Suite 300,
Bloomfield Hills, Michigan, unless another date, time or place is agreed to
in writing by the parties hereto (the "Closing").
SECTION 1.2 Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger as contemplated by the MBCA (the "Certificate of Merger"), together
with any required related certificates, with the Department of Consumer and
Industry Services of the State of Michigan, in such form as required by, and
executed in accordance with the relevant provisions of, the MBCA (the time of
such filing being the "Effective Time").
SECTION 1.3 Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in this Agreement, the Certificate of
Merger and the applicable provisions of the MBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.4 Articles of Incorporation, By-Laws.
(a) Articles of Incorporation. Unless otherwise determined by Parent
prior to the Effective Time, at the Effective Time the Articles of
Incorporation of the Company, as in
A-2
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the MBCA and such Articles of Incorporation.
(b) By-Laws. Unless otherwise determined by Parent prior to the
Effective Time, the By-Laws of the Company, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the MBCA, the Articles of Incorporation
of the Surviving Corporation and such By-Laws.
SECTION 1.5 Directors and Officers. The Board of Directors of Merger
Sub immediately prior to the Effective Time shall be the initial Board of
Directors of the Surviving Corporation, each member to hold office in
accordance with the Articles of Incorporation and By-Laws of the Surviving
Corporation, and the officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
SECTION 1.6 Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the Parent, Merger Sub,
the Company or the holders of any of the following securities:
(a) Conversion of Securities. Each Share issued and outstanding
immediately prior to the Effective Time (excluding any Shares to be canceled
pursuant to Section 1.6(b)) shall be converted into the right to receive
$37.00, in cash, without interest (the "Merger Consideration").
(b) Cancellation. Each Share owned by Parent, Merger Sub or any
direct or indirect wholly owned subsidiary of the Company or Parent
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be
outstanding, be canceled and retired without payment of any consideration
therefor and cease to exist.
(c) Stock Options. At or immediately prior to the Effective Time,
each outstanding employee and director stock option to purchase Shares (an
"Option") granted under the Howell Industries, Inc. 1995 Stock Incentive Plan
for Key Employees (such plans or arrangements, the "Company Stock Option
Plan"), shall be canceled, and each holder of any such Option, whether or not
then vested or exercisable, shall be paid by the Company, at or immediately
prior to the Effective Time for each such Option, in consideration therefor
an amount in cash determined by multiplying (i) the excess, if any, of $37.00
per Share over the applicable exercise price of such Option by (ii) the
number of Shares such holder could have purchased (assuming full vesting of
all Options) had such holder exercised such Option in full immediately prior
to the Effective Time. The Company shall use all reasonable efforts to
effectuate the foregoing, including without limitation, amending the Option
Plans and obtaining any necessary consents from Option holders; provided,
however, that prior to the
A-3
Effective Time, the Board of Directors of the Company shall adopt such
resolutions or take such other actions as are required to adjust and which
action, if any, shall be acceptable in all reasonable respects to the Parent,
effective immediately prior to the Effective Time, the terms of each
outstanding Option as to which any such consent is not obtained prior to the
Effective Time to provide that such Option shall be converted into the right,
upon exercise of such Option at any time after the Effective Time, to receive
an amount in cash equal to $37.00 for each Share subject to such Option, or,
alternatively, upon the surrender and cancellation of such Option at any time
after the Effective Time to receive an amount in cash determined by
multiplying (i) the excess, if any, of $37.00 per Share over the applicable
exercise price of such Option by (ii) the number of Shares subject to such
Option, in either case without interest or any other adjustment thereto.
(d) Capital Stock of Merger Sub. Each share of common stock, without
par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, without par value, of the
Surviving Corporation.
SECTION 1.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall designate NBD Bank, Comerica Bank,
Michigan National Bank, or other bank or trust company satisfactory to the
Company, to act as agent for holders of Company Common Stock (the "Exchange
Agent"), to receive funds to which such holders shall become entitled
pursuant to Section 1.6(a). Parent shall deposit immediately prior to or at
the Effective Time such funds with the Exchange Agent. Such funds shall be
invested by the Exchange Agent as directed by Parent or the Surviving
Corporation in trust for the benefit of the holders of Company Common Stock,
for payment in accordance with this Section 1.7 in exchange for outstanding
Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each
holder of record of Certificates (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent and the Company may reasonably specify), and (ii) instructions to
effect the surrender of the Certificates in exchange for payment of the
Merger Consideration. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration, and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company as of the Effective Time, the Merger Consideration may be paid in
accordance with this Article I to a transferee if the Share is presented to
the Exchange Agent, accompanied by
A-4
all documents required to evidence and effect such transfer pursuant to this
Section 1.7(b) and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 1.7(b) such
Certificates shall represent solely the right to receive the Merger
Consolidation with respect to each of the Shares represented thereby.
(c) Transfers of Ownership. If any Merger Consideration is to be paid
in a name other than that in which the Certificate surrendered in exchange
therefor is registered, it will be a condition to the payment thereof that
the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will
have paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the payment of the Merger Consideration to any name
other than that of the registered holder of the certificate surrendered, or
have established to the satisfaction of Parent or any agent designated by it
that such tax has been paid or is not payable.
(d) Termination of Fund; No Liability. At any time following six
months after the Effective Time, the Surviving Corporation shall be entitled
to require the Exchange Agent to deliver to it any funds (including interest
received with respect thereto) which had been made available to the Exchange
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving
Corporation (subject to abandoned property, escheat or other similar laws)
only as general creditors thereof with respect to the Merger Consideration
payable upon the surrender of their Certificates, without any interest
thereon. Notwithstanding the foregoing, neither Parent, Merger Sub nor the
Company shall be liable to any holder of Company Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) Withholding Rights. Parent or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of Company Common Stock such
amounts as Parent or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by Parent or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent or the Exchange Agent.
SECTION 1.8 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of Company Common Stock thereafter on the records
of the Company.
SECTION 1.9 No Further Ownership Rights in Company Common Stock. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining
A-5
to such Shares, and there shall be no further registration of transfers on
the records of the Surviving Corporation of Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Shares
are presented to the Surviving Corporation for any reason, they shall be
canceled and exchanged as provided in this Article I.
SECTION 1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, the Merger
Consideration as provided in this Article; provided, however, that Parent
may, in its discretion and as a condition precedent to the payment thereof,
require the owner of such lost, stolen or destroyed Certificates to deliver a
bond in such sum as it may reasonably direct as indemnity against any claim
that may be made against Parent or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
SECTION 1.11 Taking of Necessary Action; Further Action. Each of
Parent, Merger Sub and the Company will take all such reasonable and lawful
action as may be necessary or appropriate in order to effectuate the Merger
in accordance with this Agreement as promptly as practicable. If, at any time
after the Effective Time, any such further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub immediately prior to the
Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and
necessary action.
SECTION 1.12 Material Adverse Effect. When used in connection with
the Company or any of its subsidiaries, or Parent or any of its subsidiaries,
as the case may be, the term "Material Adverse Effect" means any change,
effect or circumstance that, individually or when taken together with all
other such changes, effects or circumstances that have occurred prior to the
date of determination of the occurrence of the Material Adverse Effect, (a)
is or is reasonably likely to be materially adverse to the business, assets
(including intangible assets), financial condition or results of operations
of the Company and its subsidiaries or Parent and its subsidiaries, as the
case may be, in each case taken as a whole, or (b) is or is reasonably likely
to prevent the consummation of the transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
that, except as set forth in the written disclosure schedule delivered on or
prior to the date hereof by the Company to Parent that is arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article II (the "Company Disclosure Schedule"):
A-6
SECTION 2.1 Organization and Qualification; Subsidiaries. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority necessary
to own, lease and operate the properties it purports to own, operate or lease
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing and in good standing or to have such
power, authority and Approvals could not reasonably be expected to have a
Material Adverse Effect. Each of the Company and each of its subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that could not reasonably be
expected to have a Material Adverse Effect. A true and complete list of all
of the Company's subsidiaries, together with the jurisdiction of
incorporation of each subsidiary, the authorized capitalization of each
subsidiary, and the percentage of each subsidiary's outstanding capital stock
owned by the Company or another subsidiary, is set forth in Section 2.1 of
the Company Disclosure Schedule. Except as set forth in Section 2.1 of the
Company Disclosure Schedule, the Company does not directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or
entity, with respect to which interest the Company has invested or is
required to invest $100,000 or more, excluding securities in any publicly
traded company held for investment by the Company and comprising less than
five percent of the outstanding stock of such company.
SECTION 2.2 Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of its Articles of
Incorporation and By-Laws as amended to date, and has furnished or made
available to Parent the Articles of Incorporation and By-Laws (or equivalent
organizational documents) of each of its subsidiaries (the "Subsidiary
Documents"). Such Articles of Incorporation, By-Laws and Subsidiary Documents
are in full force and effect. Neither the Company nor any of its subsidiaries
is in violation of any of the provisions of its Articles of Incorporation or
By-Laws or Subsidiary Documents.
SECTION 2.3 Capitalization. The authorized capital stock of the
Company consists of (i) 2,500,000 shares of Company Common Stock and (ii)
250,000 shares of preferred stock, $1.00 par value, none of which preferred
stock is issued and outstanding. As of May 20, 1997, (i) 622,738 shares of
Company Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable, (ii) no shares of Company Common Stock
were held by subsidiaries of the Company, and (iii) 10,000 shares of Company
Common Stock were reserved for future issuance pursuant to outstanding stock
options granted under the Company Stock Option Plans. No material change in
such capitalization has occurred between May 20, 1997 and the date hereof.
Except as set forth in Section 2.3 or Section 2.11 of the Company Disclosure
Schedule, there are no options, warrants or other rights,
A-7
agreements, arrangements or commitments of any character relating to the
issued or unissued capital stock of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue or sell any shares
of capital stock of, or other equity interests in, the Company or any of its
subsidiaries. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. Except as disclosed in Section
2.3 of the Company Disclosure Schedule, there are no obligations, contingent
or otherwise, of the Company or any of its subsidiaries to repurchase, redeem
or otherwise acquire any shares of Company Common Stock or the capital stock
of any subsidiary or to provide funds to or make any investment (in the form
of a loan, capital contribution, guaranty or otherwise) in any such
subsidiary or any other entity. Except as set forth in Sections 2.1 and 2.3
of the Company Disclosure Schedule, all of the outstanding shares of capital
stock of each of the Company's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and all such shares are owned by the
Company or another subsidiary of the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations in the Company's
voting rights, charges or other encumbrances of any nature whatsoever
(collectively, "Liens").
SECTION 2.4 Authority Relative to this Agreement. (a) The Company has
all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated (other than the approval of this Agreement by
the holders of at least a majority of the outstanding shares of Company
Common Stock entitled to vote in accordance with the MBCA and the Company's
Articles of Incorporation and By-Laws). The Board of Directors of the Company
has determined that it is advisable and in the best interest of the Company's
shareholders for the Company to enter into a business combination with Parent
upon the terms and subject to the conditions of this Agreement, and has
unanimously recommended that the Company's shareholders approve and adopt
this Agreement and the Merger. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and Merger Sub, as applicable, constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms.
(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement and the Shareholder Agreement including, but not limited to, all
actions required to render the provisions of Section 775 through Section 784
of the MBCA restricting business combinations with "interested shareholders"
inapplicable to such transactions and to provide that none of Parent, Merger
Sub or any of their affiliates shall
A-8
become an"interested shareholder" upon the execution and delivery of the
Shareholder Agreement or the acquisition of Shares pursuant thereto, such
that any business combination thereafter proposed among Parent or Merger Sub
or their affiliates and the Company shall be exempt from the requirements of
such Sections. The Company has taken all action necessary to opt out of
Sections 790 through 799 of the MBCA in order to render the provisions of
such statutes restricting voting rights of "control shares" inapplicable to
Shares acquired by Parent, Merger Sub or their affiliates pursuant to the
Merger or the Shareholder Agreement.
SECTION 2.5 Material Agreements; No Conflict; Required Filings and
Consents.
(a) Section 2.5(a) of the Company Disclosure Schedule includes a list
of (i) all loan agreements, indentures, mortgages, pledges, conditional sale
or title retention agreements, security agreements, guaranties, standby
letters of credit, equipment leases or lease purchase agreements to which the
Company or any of its subsidiaries is a party or by which any of them is
bound, other than office equipment and vehicle leases in an aggregate amount
not exceeding $50,000; (ii) all contracts, agreements, commitments or other
understandings or arrangements to which the Company or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets are bound or affected, but excluding contracts,
agreements, commitments or other understandings or arrangements entered into
in the ordinary course of business and involving, in each case, payments or
receipts by the Company or any of its subsidiaries of less than $20,000 in
any single instance; and (iii) all agreements which, as of the date hereof,
are required to be filed as "material contracts" with the Securities Exchange
Commission ("SEC") pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, and the SEC's rules and regulations thereunder (the
"Exchange Act").
(b) Except as disclosed in Section 2.5(b) of the Company Disclosure
Schedule, (i) neither the Company nor any of its subsidiaries has breached,
is in default under, or has received written notice of any breach of or
default under, any of the agreements, contracts or other instruments referred
to in clauses (i), (ii) or (iii) of Section 2.5(a), (ii) to the best
knowledge of the Company, no other party to any of the agreements, contracts
or other instruments referred to in clauses (i), (ii) or (iii) of Section 2.5
(a) has breached or is in default of any of its obligations thereunder, and
(iii) each of the agreements, contracts and other instruments referred to in
clauses (i), (ii) or (iii) of Section 2.5(a) is in full force and effect.
(c) Except as set forth in Section 2.5(c) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not, (i) conflict
with or violate the Articles of Incorporation or By-Laws of the Company, (ii)
conflict with or violate any federal, foreign, state or provincial law, rule,
regulation, order, judgment or decree (collectively, "Laws") applicable to
the Company or any of its subsidiaries or by which its or any of their
respective properties is bound or affected, or (iii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or
both would become a default under), or impair the Company's or any of its
subsidiaries'
A-9
rights or alter the rights or obligations of any third party under, or give
to others any rights of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the properties or assets of
the Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected.
(d) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any federal, foreign, state or provincial governmental or
regulatory authority except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, state securities laws ("Blue Sky Laws"),
the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), any required foreign
antitrust or similar filings and the filing and recordation of appropriate
merger or other documents as required by the MBCA, and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make
such filings or notifications, would not prevent consummation of the Merger,
or otherwise prevent the Company from performing its obligations under this
Agreement, or would not otherwise have a Material Adverse Effect. As provided
by Section 762(2)(a) and (b) of the MBCA, no shareholder is entitled to
dissent from the Merger. Neither the Articles of Incorporation or By-laws
provide the shareholders with, nor has the Board of Directors of the Company
provided, pursuant to resolution or otherwise, the shareholders with, a right
to dissent from the Merger in accordance with the provisions of Section
762(1)(f) of the MBCA.
SECTION 2.6 Compliance, Permits.
(a) Except as disclosed in Section 2.6(a) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in conflict
with, or in default or violation of, (i) any Law applicable to the Company or
any of its subsidiaries or by which its or any of their respective properties
is bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, franchise or other instrument or obligation to
which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective
properties is bound or affected.
(b) Except as disclosed in Section 2.6(b) of the Company Disclosure
Schedule, the Company and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and
approvals from governmental authorities which are necessary for the operation
of the business of the Company and its subsidiaries taken as a whole as it is
now being conducted (collectively, the "Company Permits"). The Company and
its subsidiaries are in compliance with the terms of the Company Permits,
except where the failure to so comply could not reasonably be expected to
have a Material Adverse Effect.
A-10
SECTION 2.7 SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required
to be filed with the SEC and has made available to Parent (i) its Annual
Reports on Form 10-K for the fiscal years ended July 31, 1996, 1995 and 1994,
(ii) its Quarterly Reports on Form 10-Q for the periods ended October 31,
1996 and January 31, 1997, (iii) all proxy statements relating to the
Company's meetings of Shareholders (whether annual or special) since August
1, 1993, (iv) all other reports or registration statements filed by the
Company with the SEC, and (v) all amendments and supplements to all such
reports and registration statements filed by the Company with the SEC
(collectively, the "Company SEC Reports"). Except as disclosed in Section 2.7
of the Company Disclosure Schedule, the Company SEC Reports (i) were prepared
in all material respects in accordance with the requirements of the
Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
None of the Company's subsidiaries is required to file any forms, reports or
other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto), and each fairly presents in all material
respects the consolidated financial position of the Company and its
subsidiaries as at the respective dates thereof and the consolidated results
of its operations and cash flows and shareholders equity for the periods
indicated, except that the unaudited interim financial statements may not
include footnotes and were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount.
SECTION 2.8 Absence of Certain Changes or Events. Except as set forth
in Section 2.8 of the Company Disclosure Schedule or the Company SEC Reports,
since August 1, 1996, the Company has conducted its business in the ordinary
course and there has not occurred: (a) any Material Adverse Effect; (b) any
amendments or changes in the Articles of Incorporation or By-laws of the
Company except as contemplated by this Agreement; (c) any damage to,
destruction or loss of any asset of the Company (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse
Effect; (d) any material change by the Company in its accounting methods,
principles or practices; (e) any material revaluation by the Company of any
of its assets, including, without limitation, writing down the value of
inventory or writing off notes or accounts receivable other than in the
ordinary course of business; (f) any other action or event that would have
required the consent of Parent pursuant to Section 4.1 had such action or
event occurred after the date of this Agreement; or (g) any sale of a
material amount of property or assets of the Company or any of its
subsidiaries, except in the ordinary course of business.
A-11
SECTION 2.9 No Undisclosed Liabilities. Except as is disclosed in
Section 2.9 of the Company Disclosure Schedule or the Company's SEC Reports,
neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) that
have had, or could reasonably be likely to have, a Material Adverse Effect or
would be required to be disclosed or provided for in a balance sheet (or in
the notes thereto) prepared in accordance with generally accepted accounting
principles, except liabilities or obligations (a) adequately provided for in
the Company's audited balance sheet (including any related notes thereto) for
the fiscal year ended July 31, 1996 contained in the Company's Annual Report
on Form 10-K for such year (the "1996 Company Balance Sheet") or (b)
immaterial liabilities or obligations incurred since July 31, 1996 in the
ordinary course of business consistent with past practice.
SECTION 2.10 Absence of Litigation. Except as set forth in Section
2.10 of the Company Disclosure Schedule, there are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties
or rights of the Company or any of its subsidiaries, before any federal,
foreign, state or provincial court, arbitrator or administrative,
governmental or regulatory authority or body that could reasonably be
expected to have a Material Adverse Effect.
SECTION 2.11 Employee Benefit Plans, Employment Agreements.
(a) Section 2.11 (a) of the Company Disclosure Schedule lists all
employee pension plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee welfare
plans (as defined in Section 3(1) of ERISA, and all other material bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements, and any employment, executive compensation,
consulting or severance agreements, written or otherwise, for the benefit of,
or relating to, any current or former employee, officer or director
(including any beneficiary of any such employee) of, or any current or former
consultant (including any beneficiary of any such consultant) to, the
Company, any trade or business (whether or not incorporated) which is a
member of a controlled group including the Company or which is under common
control with the Company (an "ERISA Affiliate") within the meaning of Section
414 of the Code, or any subsidiary of the Company under which the Company
currently has a liability, as well as each plan with respect to which the
Company or an ERISA Affiliate could incur liability under Section 4069 (if
such plan has been or were terminated) or Section 4212(c) of ERISA (all such
plans, practices and programs are referred to as the "Company Employee
Plans"). The Parent has been provided true and correct copies of (i) each
such written Company Employee Plan (other than those referred to in Section
4(b)(4) of ERISA), (ii) the three (3) most recent annual report on Form 5500
series, with accompanying schedules and attachments, filed with respect to
each Company Employee Plan required to make such a filing, and (iii) the
three (3) most recent
A-12
actuarial evaluations or assessments, if any, prepared with respect to any
such Company Employee Plan.
(b) Except as shown on Section 2.11(b) of the Company Disclosure
Schedule (i) none of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person, and neither the
Company nor any ERISA Affiliate has ever maintained, contributed to, or been
required to contribute to, any plan that is or was a "multi-employer plan" as
such term is defined in Section 3(37) of ERISA, a pension plan subject to
Title IV of ERISA or a plan subject to Part 3 of Title I of ERISA; (ii) there
has been no "prohibited transaction," as such term is defined in Section 406
of ERISA and Section 4975 of the Code, with respect to any Company Employee
Plan, which could result in any material liability of the Company or any of
its subsidiaries; (iii) all Company Employee Plans are in compliance in all
material respects with the requirements prescribed by any and all Laws
(including ERISA and the Code), currently in effect with respect thereto
(including all applicable requirements for notification to participants or
the Department of Labor, Internal Revenue Service (the "IRS") or Secretary of
the Treasury), and the Company and each of its subsidiaries have performed
all material obligations required to be performed by them under, are not in
any material respect in default under or violation of, and have no knowledge
of any default or violation by any other party to, any of the Company
Employee Plans; (iv) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code is the subject of a favorable determination letter from
the IRS, and nothing has occurred which may reasonably be expected to impair
such determination; and (v) there are no lawsuits or other claims (other than
claims for benefits in the ordinary course) pending or, to the best knowledge
of the Company, threatened with respect to any Company Employee Plan.
(c) Section 2.3 or Section 2.11(c) of the Company Disclosure Schedule
sets forth a true and complete list of each current or former employee,
officer or director of the Company or any of its subsidiaries who holds (i)
any option to purchase Company Common Stock as of the date hereof, together
with the number of shares of Company Common Stock subject to such option, the
option price of such option (to the extent determined as of the date hereof),
whether such option is intended to qualify as an incentive stock option
within the meaning of Section 422(b) of the Code (an "ISO"), and the
expiration date of such option; (ii) any other right, directly or indirectly,
to acquire Company Common Stock, together with the number of shares of
Company Common Stock subject to such right. Section 2.3 or Section 2.11(c) of
the Company Disclosure Schedule also sets forth the total number of such
ISOs, such nonqualified options and such other rights.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth a
true and complete list of: (i) all employment agreements with employees,
officers or directors of the Company or any of its subsidiaries; (ii) all
agreements with consultants who are individuals with the Company or any of
its subsidiaries; (iii) all employees of, or consultants to, the Company or
any of its subsidiaries who have executed a non-competition agreement with
the
A-13
Company or any of its subsidiaries; (iv) all severance agreements, programs
and policies of the Company or any of its subsidiaries with or relating to
its employees, officers or directors, excluding programs and policies
required to be maintained by law; and (v) all plans, programs, agreements and
other arrangements of the Company or any of its subsidiaries with or relating
to its employees, officers or directors which contain change in control
provisions.
SECTION 2.12 Labor Matters. There are no controversies pending or, to
the knowledge of the Company or any of its subsidiaries, threatened, between
the Company or any of its subsidiaries and any of their respective employees,
which controversies have or could reasonably be expected to have a Material
Adverse Effect. Except as set forth in Section 2.12 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or its subsidiaries, nor does the Company or
any of its subsidiaries know of any activities or proceedings of any labor
union to organize any such employees. Neither the Company nor any of its
subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of the
Company or any of its subsidiaries.
SECTION 2.13 Restrictions on Business Activities. Except for this
Agreement, there is no agreement, judgement, injunction, order or decree
binding upon the Company or any of its subsidiaries which has or could
reasonably be expected to have the effect of prohibiting or impairing any
business practice of the Company or any of its subsidiaries, any acquisition
of property by the Company or any of its subsidiaries or the conduct of
business by the Company or any of its subsidiaries as currently conducted or
as proposed to be conducted by the Company.
SECTION 2.14 Title to Property. The Company and each of its
subsidiaries have good and marketable title to all of their properties and
assets, free and clear of all liens, charges and encumbrances, except liens
for taxes not yet due and payable and such liens or other imperfections of
title, if any, as do not materially detract from the value of or interfere
with the present use of the property affected thereby, and, with respect to
real property, except for defects which will be disclosed as contemplated by
Section 5.11. All leases pursuant to which the Company or any of its
subsidiaries lease from others material amounts of real or personal property
are in good standing, valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default).
SECTION 2.15 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean
taxes, fees, levies, duties, tariffs, imposts, and governmental impositions
or charges of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, including (without
limitation) (i) income, franchise, profits, gross receipts, ad valorem, net
worth, value
A-14
added, sales, use, service, real or personal property, special assessments,
capital stock, license, payroll, withholding, employment, social security,
workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer
and gains taxes, and (ii) interest, penalties, additional taxes and additions
to tax imposed with respect thereto; and "Tax Returns" shall mean returns,
reports, and information statements with respect to Taxes required to be
filed with the IRS or any other federal, foreign, state or provincial taxing
authority, domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
(b) Other than as disclosed in Section 2.15(b) of the Company
Disclosure Schedule, (i) the Company and its subsidiaries have timely filed
all Tax Returns required to be filed by them, (ii) the Company and its
subsidiaries have paid and discharged all Taxes shown to be due on such
returns and have withheld all Taxes required to be withheld with respect to
employees in connection with or with respect to the periods or transactions
covered by such Tax Returns and have paid all other Taxes as are due, except
such as are being contested in good faith by appropriate proceedings (to the
extent that any such proceedings are required) and with respect to which the
Company is maintaining adequate reserves, and (iii) there are no other Taxes
that would be due if asserted by a taxing authority, except with respect to
which the Company is maintaining reserves to the extent currently required
and Taxes which in the aggregate do not exceed $50,000 in amount. Except as
disclosed in Section 2.15(b) of the Company Disclosure Schedule: (i) there
are no tax liens on any assets of the Company or any subsidiary thereof; (ii)
neither the Company nor any of its subsidiaries has granted any waiver of any
statute of limitations with respect to, or any extension of a period for the
assessment of, any Tax; (iii) neither the Company nor any of its subsidiaries
has received any written notice of any Tax deficiency outstanding, proposed
or assessed against the Company or any of its subsidiaries, or of any audit
or other examination threatened, proposed or currently in progress of any Tax
Return of the Company or any of its subsidiaries; (iv) there is no contract,
agreement plan or arrangement, including but not limited to the provisions of
the Agreement, covering any employee or former employee of the Company or any
of its subsidiaries that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to Section
280G or subject to the excise tax pursuant to Section 4999 of the Code; (v)
neither the Company nor any of its subsidiaries is a party to or bound by any
tax indemnity, tax sharing or tax allocation agreements; (vi) neither the
Company nor any of its subsidiaries has filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company; and (vii) neither the Company
nor any of its subsidiaries has ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. The accruals and
reserves for Taxes (including deferred taxes) reflected in the 1996 Company
Balance Sheet are adequate to cover all Taxes required to be accrued through
the date thereof (including interest and penalties, if any, thereon and Taxes
being contested) in accordance with generally accepted accounting principles.
A-15
(c) Neither the Company nor any of its subsidiaries is, or has been,
a United States real property holding corporation (as defined in Section
897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. To the best knowledge of the Company, neither
the Company nor any of its subsidiaries owns any property of a character, the
indirect transfer of which, pursuant to this Agreement, would give rise to
any material documentary, stamp or other transfer tax.
SECTION 2.16 Environmental Matters.
(a) Except as set forth on the Company Disclosure Schedule, which
matters as so disclosed will not in the aggregate involve liability of the
Company or any of its subsidiaries in excess of $600,000, and other
conditions that are not reasonably likely to have a Material Adverse Effect,
the Company and each of its subsidiaries represent and warrant:
(i) Each of the Company and its subsidiaries are and have
been in substantial compliance with all applicable
Environmental Laws (as defined below);
(ii) There is no suit, claim, action, demand, executive or
administrative order, directive, investigation or
proceeding pending or threatened, before any court,
governmental agency or board or other forum against it
or any of its subsidiaries (A) for alleged
noncompliance (including by any predecessor) with, or
liability under, any Environmental Law or (B) relating
to the presence of or release into the environment of
any Hazardous Material (as defined below) or oil,
whether or not occurring at or on a site owned, leased
or operated by it or any of its subsidiaries;
(iii) There is no reasonable basis for any suit, claim,
action, demand, executive or administrative order,
directive or proceeding of a type described in Section
2.16(a)(ii).
(iv) The properties currently or formerly owned or operated
by the Company or any of its subsidiaries (including,
without limitation, soil, groundwater or surface water
on, under or adjacent to the properties, and buildings
thereon) do not contain any Hazardous Material (as
defined below) in excess of what is permitted under
applicable Environmental Law (provided, however, that
with respect to properties formerly owned or
operated by the Company or any of its subsidiaries,
such representation is limited to the period the
Company or any such subsidiary owned or operated such
properties);
(v) Neither the Company nor any of its subsidiaries has
received any notice, demand letter, executive or
administrative order, directive or request for
A-16
information from any Federal, state, local or foreign
governmental entity or any third party indicating that
it may be in violation of, or liable under, any
Environmental Law;
(vi) There are no underground storage tanks on, in or under
any properties of the Company or any of its
subsidiaries and no underground storage tanks have been
closed or removed from any properties which are or
where previously owned by the Company or any of its
subsidiaries (provided, however, that with respect to
properties formerly owned or operated by the
Company or any of its subsidiaries, such representation
is limited to the period the Company or any such
subsidiary owned or operated such properties);
(vii) During the period of the Company's or any of its
subsidiaries, ownership or operation of any of their
respective current properties, there has been no
contamination by or release of Hazardous Material or
oil in, on, under or affecting such properties. Prior
to the period of the Company's or any of its
subsidiaries' ownership or operation of any of their
respective current properties, there was no
contamination by or release of Hazardous Material or
oil in, on, under or affecting any such property.
(b) The following definitions apply for purposes of this Section
3.21: "Environmental Law" means (A) any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, directive, executive or administrative order,
judgment, decree, injunction, requirement or agreement with any governmental
entity, (x) relating to the protection, preservation or restoration of the
environment (which includes, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, structures, soil, surface land,
subsurface land, plant and animal life or any other natural resource), or to
human health or safety, or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of, Hazardous Materials, in each
case as amended and as now in effect, including all current Environmental
Laws. The term Environmental Law includes, without limitation, the federal
Comprehensive Environmental Response Compensation and Liability act of 1980,
the Superfund Amendments and Reauthorization Act, the federal Water Pollution
Control Act of 1972, the federal Clean Air Act, the federal Clean Water Act,
the federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the federal Solid Waste
Disposal and the federal Toxic Substances Control Act, the Federal
insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety
and Health Act of 1970, the Federal Hazardous Materials Transportation Act,
or any so called "Superfund" or "Superlien" law, each as amended and as now
or hereafter in effect, and (B) any common law or equitable doctrine
(including, without limitation, injunctive relief and tort doctrines such as
negligence,
A-17
nuisance, trespass and strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Material; and (iv) "Hazardous
Material" means any substance in any concentration which is or could be
detrimental to human health or safety or to the environment, currently or
hereafter listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any Environmental
Law, whether by type or by quantity, including any substance containing any
such substance as a component. Hazardous Material includes, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance,
toxic substance, hazardous waste, special waste, industrial substance, oil or
petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, asbestos-containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl.
SECTION 2.17 Intellectual Property.
(a) The Company, directly or indirectly, owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, technology, know-how, computer software programs or applications
(in both source code and object code form), and tangible or intangible
proprietary information or material that are material to the business of the
Company and its subsidiaries as currently conducted or as proposed to be
conducted by the Company or its subsidiaries (the "Company Intellectual
Property Rights").
(b) Section 2.17(b) of the Company Disclosure Schedule sets forth a
complete list of all patents, trademarks, registered copyrights, trade names
and service marks, and any applications therefor, included in the Company
Intellectual Property Rights, and specifies, where applicable, the
jurisdictions in which each such Company Intellectual Property Right has been
issued or registered or in which an application for such issuance and
registration has been filed, including the respective registration or
application numbers and the names of all registered owners.
(c) Section 2.17(c) of the Company Disclosure Schedule sets forth a
complete list of all material licenses, sublicenses and other agreements as
to which the Company or any of its subsidiaries is a party and pursuant to
which the Company, any of its subsidiaries or any other person is authorized
to use any Company Intellectual Property Right or other trade secret material
to the Company or any of its subsidiaries, and includes the identity of all
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty (if any) and the term thereof. None of the Company or any
of its subsidiaries is in violation of any license, sublicense or agreement
described on such list except such violations as do not materially impair the
Company's or such subsidiary's rights under such license, sublicense or
agreement. The execution and delivery of this Agreement by the Company, and
the consummation of the transactions contemplated hereby, will neither cause
the Company or any of its subsidiaries to be in violation or default under
any such license, sublicense or agreement,
A-18
nor entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement.
(d) Either the Company or one of its subsidiaries is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any liens or encumbrances) the Company Intellectual
Property Rights, and has sole and exclusive rights to the use thereof or the
material covered thereby in connection with the services or products in
respect of which the Company Intellectual Property Rights are being used. No
claims with respect to the Company Intellectual Property Rights have been
asserted or, to the knowledge of the Company, are threatened by any person
nor are there any valid grounds, to the knowledge of the Company, for any
bona fide claims (i) to the effect that the manufacture, sale or use of any
of the products of the Company or any of its subsidiaries as now
manufactured, sold or licensed or used or proposed for manufacture, use, sale
or licensing by the Company or any of its subsidiaries infringes on any
copyright, patent, trade mark, service mark or trade secret, (ii) against the
use by the Company or any of its subsidiaries of any trademarks, service
marks, trade names, trade secrets, copyrights, patents, technology, know-how
or computer software programs and applications used in the business of the
Company and its subsidiaries as currently conducted or as proposed to be
conducted, or (iii) challenging the ownership by the Company or any of its
subsidiaries, or the validity or effectiveness, of any of the Company
Intellectual Property Rights. All registered trademarks, service marks and
copyrights held by the Company are valid and subsisting. To the knowledge of
the Company, there is no unauthorized use, infringement or misappropriation
of any of the Company Intellectual Property Rights by any third party,
including any employee or former employee of the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries has entered
into any agreement under which the Company or its subsidiaries is restricted
from selling, licensing or otherwise distributing any of its products to any
class of customers, in any geographic area, during any period of time or in
any segment of the market.
SECTION 2.18 Interested Party Transactions. Except as set forth in
Section 2.18 of the Company Disclosure Schedule, since July 31, 1996, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
SECTION 2.19 Insurance. All material fire and casualty, general
liability, business interruption, product liability, professional liability
and sprinkler and water damage insurance policies maintained by the Company
or any of its subsidiaries are in character and amount at least equivalent to
that carried by persons engaged in similar businesses and subject to the same
or similar perils or hazards, and all such policies are with reputable
insurance carriers, provide full and adequate coverage for all normal risks
incident to the business of the Company and its subsidiaries and their
respective properties and assets. Section 2.19 of the Company Disclosure
Schedule contains a complete and accurate list of all such insurance
policies.
A-19
SECTION 2.20 Opinion of Financial Advisor. The Company has been
advised by its financial advisor, Roney & Co., that in its opinion, as of the
date hereof, the Merger Consideration set forth herein is fair to the holders
of Shares from a financial point of view.
SECTION 2.21 Brokers. No broker, finder or investment banker (other
than Roney & Co., the fees and expenses of whom will be paid by the Company)
is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or its subsidiaries or
affiliates. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and Roney & Co. pursuant
to which such firm would be entitled to any payment relating to the
transactions contemplated hereunder.
SECTION 2.22 Change in Control Payments. Except as set forth on
Section 2.11(d) or Section 2.22 of the Company Disclosure Schedule, neither
the Company nor any of its subsidiaries have any plans, programs or
agreements to which they are parties, or to which they are subject, pursuant
to which payments may be required or acceleration of benefits may be required
upon a change of control of the Company.
SECTION 2.23 Expenses. Section 2.23 of the Company Disclosure
Schedule attached hereto sets forth a description of the expenses of the
Company and its subsidiaries which the Company expects to incur, or has
incurred, in connection with the transactions contemplated by this Agreement.
True and complete copies of any written agreements relating to such expenses
have been provided to Parent.
SECTION 2.24 Products Liability and Warranty Claims. Except as set
forth on the Company Disclosure Schedule:
(a) the Company has not made any oral or written warranties with
respect to the quality or absence of defects of its products or services
which are in force as of the date of this Agreement except for warranties
made to General Motors Corporation, Chrysler Corporation and Ford Motor
Company in the ordinary course of business pursuant to customary purchase
orders or supply agreements;
(b) there are no liabilities of or claims against the Company and, to
the knowledge of the Company, no liabilities or claims are threatened against
the Company, with respect to any product liability (or similar claim) of the
Company or product warranty (or similar claim) of the Company that relates to
any product manufactured or sold by the Company;
(c) the Company has no knowledge of any facts or circumstances which
might reasonable give rise to such liabilities or claims.
A-20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that, except as set forth in the written disclosure
schedule delivered on or prior to the date hereof by Parent to the Company
that is arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article III (the "Parent Disclosure Schedule"):
SECTION 3.1 Organization and Qualification; Subsidiaries. Each of
Parent and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority to carry on its business as
it is now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power, authority and Approvals
could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.2 Articles of Incorporation and By-Laws. Parent and Merger
Sub have heretofore furnished to the Company complete and correct copies of
its Articles of Incorporation and By-Laws, as amended to date. Such Articles
of Incorporation and By-Laws are in full force and effect. Neither Parent nor
Merger Sub is in violation of any of the provisions of its Articles of
Incorporation or By-Laws.
SECTION 3.3 Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub
are necessary to authorize this Agreement or to consummate the transactions
contemplated thereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of Parent and Merger Sub enforceable against each of them in
accordance with its terms.
SECTION 3.4 No Conflict, Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger
Sub do not, and the performance of this Agreement by Parent and Merger Sub
will not, (i) conflict with or violate the Articles of Incorporation or
By-Laws of Parent or Merger Sub, (ii) conflict with or violate any Law
applicable to Parent or any of its subsidiaries or by which its or their
respective properties are bound or affected, or (iii) result in any breach of
or constitute a
A-21
default (or an event which with notice or lapse of time or both would become
a default) under, or impair Parent's or any of its subsidiaries' rights or
alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets of Parent
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective
properties are bound or affected.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub does not, and the performance of this Agreement by Parent and Merger Sub
will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except (i) for the pre-merger notification requirements
of the HSR Act, or any foreign antitrust or similar filings and the filing
and recordation of appropriate merger or other documents as required by the
MBCA, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent consummation of the Merger, or otherwise prevent Parent or Merger
Sub from performing their respective obligations under this Agreement, and
would not have a Material Adverse Effect.
SECTION 3.5 Share Ownership. Neither Parent, Merger Sub nor any of
their affiliates own any shares of Company Common Stock.
SECTION 3.6 Ownership of Merger Sub; No Prior Activities.
(a) Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement.
(b) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement and except
for this Agreement and any other agreements or arrangements contemplated by
this Agreement, Merger Sub has not and will not have incurred, directly or
indirectly, through any subsidiary or affiliate, any obligations or
liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any person.
SECTION 3.7 Financing. Parent has received reasonable assurances that
it shall have financing available to complete the transaction.
SECTION 3.8 Solvency. Upon consummation of the transaction, Parent
and the Company each will be able to meet its debts as they mature and have
assets in excess of its liabilities.
A-22
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business by the Company Pending the Merger.
The Company covenants and agrees that, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent shall otherwise agree in
writing, the Company shall conduct its business and shall cause the
businesses of its subsidiaries to be conducted only in, and the Company and
its subsidiaries shall not take any action except in, the ordinary course of
business and in a manner consistent with past practice other than actions
taken by the Company or its subsidiaries in contemplation of the Merger; and
the Company shall use all reasonable commercial efforts to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers,
employees and consultants of the Company and its subsidiaries and to preserve
the present relationships of the Company and its subsidiaries with customers,
suppliers and other persons with which the Company or any of its subsidiaries
has significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, neither the Company nor
any of its subsidiaries shall, during the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, directly or indirectly do, or propose to do,
any of the following without the prior written consent of Parent:
(a) amend or otherwise change the Articles of Incorporation or
By-Laws of the Company or any of its subsidiaries;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in
the Company, any of its subsidiaries or affiliates (except for the issuance
of shares of Company Common Stock issuable pursuant to Stock Options which
were granted under the Company Stock Option Plan and are outstanding on the
date hereof).
(c) sell, pledge, dispose of or encumber any assets of the Company or
any of its subsidiaries (except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $10,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of any of its capital stock, except that a wholly owned subsidiary
of the Company may declare and pay a dividend to its
A-23
parent and except that the Company may pay normal quarterly dividends of $.25
per Share to shareholders of record on August 31, 1997 and on November 30,
1997, (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or (iii) amend
the terms or change the period of exercisability of, purchase, repurchase,
redeem or otherwise acquire, or permit any subsidiary to purchase,
repurchase, redeem or otherwise acquire, any of its securities or any
securities of its subsidiaries, including, without limitation, shares of
Company Common Stock or any option, warrant or right, directly or indirectly,
to acquire shares of Company Common Stock, or propose to do any of the
foregoing;
(e) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof, except as described in Section 2.8 of the Company
Disclosure Schedule; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any person or,
except in the ordinary course of business consistent with past practice, make
any loans or advances; (iii) enter into or amend any material contract or
agreement calling for aggregate payments in excess of $25,000; (iv) authorize
any capital expenditures or purchase of fixed assets which are, in the
aggregate, in excess of $50,000 (other than for office furnishings in an
amount in the aggregate not to exceed $10,000 and capital expenditures
described in Section 4.1(e) of the Company Disclosure Schedule) for the
Company and its subsidiaries taken as a whole; or (v) enter into or amend any
contract, agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 4.1(e);
(f) other than the payment of normal cash bonuses payable to
employees for the year ending July 31, 1997 in an aggregate amount not to
exceed $260,000, and normal raises reasonably acceptable to Parent, increase
the compensation payable or to become payable to its officers or employees,
or grant any severance or termination pay to, or enter into any employment or
severance agreement with any director, officer or other employee of the
Company or any of its subsidiaries, or establish, adopt, enter into or amend
any collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any current or former directors,
officers or employees, except, in each case, as may be required by law;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(h) make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax
liability or agree to an extension of a statute of limitations;
A-24
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities reflected or
reserved against in the financial statements contained in the Company SEC
Reports filed prior to the date of this Agreement or incurred in the ordinary
course of business and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1 (a) through (i) above, or any action which
would make any of the representations or warranties of the Company contained
in this Agreement untrue or incorrect or prevent the Company from performing
or cause the Company not to perform its covenants hereunder.
SECTION 4.2 No Solicitation.
(a) The Company and its subsidiaries and affiliates will not, and the
Company and its subsidiaries and affiliates will use their best efforts to
ensure that their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents do not, directly or
indirectly: (i) initiate, solicit or encourage, or take any action to
facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Acquisition Proposal (as defined below) of
the Company or any subsidiary or affiliate or an inquiry with respect
thereto, or (ii) in the event of an unsolicited Acquisition Proposal for the
Company, or any subsidiary or affiliate, engage in negotiations or
discussions with, or provide any information or data to any Person (as
defined below) relating to any Acquisition Proposal, unless (i) such
unsolicited Acquisition Proposal is in writing and meets the requirements of
an Acceptable Offer (as defined below) and (ii) the Company's Board of
Directors determines in good faith after consultation with outside legal
counsel to the Company that the failure to engage in such negotiation or
discussions or provide such information would result in a breach of the Board
of Directors' fiduciary duties under applicable law.
(b) The Company shall notify Parent and Merger Sub orally and in
writing of any such offers, proposals or Acquisition Proposals (including
without limitation the terms and conditions thereof and the identity of the
Person making it), within 24 hours of the receipt thereof, and will keep
Parent fully apprised of all developments with respect to any such
Acquisition Proposal. The Company shall give Parent written notice (an
"Intent Notice") of each Acquisition Proposal that the Company intends to
accept as an Acceptable Offer in accordance with the terms hereof (which
shall include without limitation the terms and conditions thereof, the
identity of the Person who made the Acceptable Offer and evidence of
compliance with the provisions of Sections 4.2(e) hereof) at least ten
calendar days prior to accepting such offer or otherwise entering into any
agreement or understanding with respect thereto, in order to provide Parent
with the right of first refusal to substantially match the terms thereof, in
which event the Company shall execute an amendment to this Agreement
presented to it by Parent to reflect such new terms (the "Right of First
Refusal"). For
A-25
purposes hereof, any modification of an Acceptable Offer shall constitute a
new Acquisition Proposal.
(c) The Company shall, and shall cause its Subsidiaries and
affiliates, and their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, immediately cease and
cause to be terminated all existing discussions and negotiations, if any,
with any parties conducted heretofore with respect to any Acquisition
Proposal relating to the Company. Notwithstanding anything to the contrary,
nothing contained in this Section 4.2 shall prohibit the Company or its Board
of Directors from (i) taking and disclosing to the Company's shareholders a
position with respect to a tender offer by a third party pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such
disclosure to the Company's shareholders which the Board of Directors of the
Company determines, in good faith after consultation with outside legal
counsel to the Company, it is required to make under applicable law.
(d) As used in this Agreement, "Acquisition Proposal" when used in
connection with any Person shall mean any tender or exchange offer involving
such Person, any proposal for a merger, consolidation or other business
combination involving such Person or any subsidiary of such Person, any
proposal or offer to acquire in any manner a substantial equity interest in,
or a substantial portion of the business or assets of, such Person or any
subsidiary of such Person, any proposal or offer with respect to any
recapitalization or restructuring with respect to such Person or any
subsidiary of such Person or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to such Person, or
any subsidiary of such Person; provided, however, that, as used in this
Agreement, the term "Acquisition Proposal shall not apply to any transaction
of the type described in this subsection (d) involving Parent, Merger Sub or
their affiliates. As used in this Section 4.2, "Person" shall mean any
corporation, partnership, person or other entity or group (including the
Company and its affiliates and representatives, but excluding Parent or any
of its affiliates or representatives).
(e) As used in this Agreement, "Acceptable Offer" shall mean an
unsolicited bona fide executed written offer for an Acquisition Proposal
received by the Company in accordance with Section 4.2 hereof; provided, that
(i) concurrently with the receipt by the Company of such offer, the offeror
demonstrates proof of its financial capability and authority to consummate
the transactions contemplated by such offer (including without limitation the
payment required by Section 4.2(e)(ii) below); (ii) unless Parent has
exercised the Right of First Refusal, the offeror or the Company shall on the
tenth calendar day following delivery to Parent of the Intent Notice, pay to
Parent, in immediately available funds, the Fee (as defined in Section
7.3(b)); and (iii) such offer provides for net cash proceeds to the Company
or to each shareholder (in addition to amounts paid pursuant to clause (ii)
above) in an amount greater than that provided for hereunder (or, in the
event such amount has been increased pursuant to the exercise by Parent of
its Right of First Refusal, such greater amount).
A-26
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 HSR Act. As promptly as practicable after the date of the
execution of this Agreement, the Company and Parent shall file notifications
under and in accordance with the HSR Act and any applicable antitrust or
similar acts in connection with the Merger and the transactions contemplated
hereby and respond as promptly as practicable to any inquiries received from
the Federal Trade Commission (the "FTC"), the Antitrust Division of the
Department of Justice (the "Antitrust Division"), and any applicable foreign
agencies or authorities having jurisdiction for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other governmental
authority in connection with antitrust matters.
SECTION 5.2 Shareholder Meeting. The Company shall call and hold a
meeting of the shareholders of the Company (the "Shareholder Meeting") as
promptly as practicable and in accordance with applicable laws for the
purpose of voting upon the adoption of this Agreement and the approval of the
Merger. The Company shall use all reasonable efforts to solicit from its
shareholders proxies in favor of the adoption of this Agreement and approval
of the transactions contemplated hereby and shall take all other action
necessary or advisable to secure the vote or consent of shareholders to
obtain such approvals. Subject to fiduciary duties under applicable law as
determined in good faith after consultation with outside legal counsel to the
Company, the Board of Directors of the Company shall recommend and declare
advisable such adoption and approval.
SECTION 5.3 Access to Information; Confidentiality. Upon reasonable
notice, the Company shall (and shall cause its subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of
Parent, reasonable access, during the period to the Effective Time, to all
its properties, books, contracts, commitments and records and, during such
period, the Company shall (and shall cause its subsidiaries to) furnish
promptly to Parent all information concerning its business, properties and
personnel as Parent may reasonably request, and shall make available to
Parent the appropriate individuals (including attorneys, accountants and
other professionals) for discussion of the Company's business, properties and
personnel as Parent may reasonably request. Parent shall keep such
information confidential in accordance with the terms of the confidentiality
agreement, dated November 20, 1997 (the "Confidentiality Agreement"), between
Parent and the Company.
SECTION 5.4 Consents; Approvals. The Company and Parent shall each
use their reasonable best efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States
and foreign governmental and regulatory rulings and approvals), and the
Company and Parent shall make all filings (including, without
A-27
limitation, all filings with United States and foreign governmental or
regulatory agencies) required in connection with the authorization, execution
and delivery of this Agreement by the Company and Parent and the consummation
by them of the transactions contemplated hereby, in each case as promptly as
practicable.
SECTION 5.5 Indemnification and Insurance.
(a) The By-laws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the By-laws of the
Company, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the
Effective Time were directors, officers, employees or agents of the Company,
unless such modification is required by law.
(b) The Company shall, to the fullest extent permitted under
applicable law or under the Company's Articles of Incorporation, By-laws or
any applicable indemnification agreements and regardless of whether the
Merger becomes effective, indemnify, defend and hold harmless, and, after the
Effective Time, the Surviving Corporation shall, to the fullest extent
permitted under applicable law, indemnify, defend and hold harmless, each
present and former director, officer or employee of the Company or any of its
subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, with respect to any acts or omissions
occurring at or prior to the Effective Time. Subject to the indemnification
agreements disclosed in the Company Disclosure Schedule, any determination
required to be made with respect to whether an Indemnified Party's conduct
complied with the standards set forth under Michigan law, the Company's
Articles of Incorporation, By-laws or indemnification agreements, as the case
may be, shall be made by independent counsel mutually acceptable to Parent
and the Indemnified Party.
(c) The Surviving Corporation shall maintain in effect for three
years from the Effective Time the current directors and officers liability
insurance policies maintained by the Company (or policies of at least the
same coverage containing terms and conditions which are not materially less
favorable to the Indemnified Parties) with respect to matters occurring prior
to the Effective Time, provided that the Surviving Corporation shall not be
required to pay more than 125% of the current annual cost of such insurance.
(d) This Section shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, the Surviving Corporation
and the Indemnified Parties, shall be binding on all successors and assigns
of the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
A-28
SECTION 5.6 Notification of Certain Matters. The Company shall give
prompt notice to Parent of (i) the occurrence or nonoccurrence of any event
the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to become materially
untrue or inaccurate, or (ii) any failure of the Company materially to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to Parent or Merger Sub; and provided further that
failure to give such notice shall not be treated as a breach of covenant for
the purposes of Section 6.2(b) unless the failure to give such notice results
in material prejudice to Parent or Merger Sub.
SECTION 5.7 Further Action. Upon the terms and subject to the
conditions hereof each of the parties hereto shall use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and
otherwise to satisfy or cause to be satisfied all conditions precedent to its
obligations under this Agreement. The foregoing covenant shall not include
any obligation by Parent or the Company to agree to divest, abandon, license
or take similar action with respect to any assets (tangible or intangible) of
Parent or the Company.
SECTION 5.8 Public Announcements. Parent and the Company shall
consult with each other before issuing any press release with respect to the
Merger or this Agreement and shall not issue any such press release or make
any such public statement without the prior consent of the other party, which
shall not be unreasonably withheld; provided, however, that a party may,
without the prior consent of the other party, issue such press release or
make such public statement as may upon the advice of counsel be required by
law or the rules and regulations of the American Stock Exchange, if it has
used all reasonable efforts to consult with the other party prior thereto.
SECTION 5.9 Conveyance Taxes. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees, and any similar taxes which
become payable in connection with the transactions contemplated hereby that
are required or permitted to be filed at or before the Effective Time.
SECTION 5.10 Shareholder Agreement; Michigan Law. The Company,
regardless of any termination of this Agreement (other than a termination of
this Agreement pursuant to Section 7.1(a) or 7.1(h) hereof), shall not (a)
take any action which, in the reasonable judgment of Parent, would impede,
interfere with or attempt to discourage the transactions contemplated by this
Agreement or the Shareholder Agreement, (b) amend, revoke, withdraw or modify
the
A-29
approval of the Merger and the other transactions contemplated hereby so as
to render the restrictions of Section 775 through Section 784 of the MBCA
applicable to Parent, Merger Sub or their affiliates, or to any business
combination proposed by any of them before or after, or as the result of, the
execution and delivery of the Shareholder Agreement or the acquisition of
Shares pursuant thereto, or (c) opt in to Section 790 through Section 799 of
the MBCA, or (d) take action rendering the requirements of any of the
Sections of the MBCA cited in this Section 5.11 inapplicable to any other
Person or any business combination between the Company and any other Person
or its affiliates.
SECTION 5.11 Title Policy and Survey.
(a) Within forty-five (45) days of the date of this Agreement, the
Company shall deliver to the Parent (i) a complete title search issued by a
title insurance company, reasonably acceptable to Parent ("Title Insurer"),
for an ALTA form of owner's policy of title insurance, committing the Title
Insurer to issue such policy at Closing, insuring the Parent as the holder of
a fee simple title to the Owned Real Property, as defined below, in an amount
equal to the fair market value of the Owned Real Property as agreed upon by
the Company and the Parent or, if the Company and the Parent are not able to
so agree, as determined by a third party, independent real property
appraiser, such insurance to meet he requirements set forth in the following
paragraph (the "Title Commitment"), and (ii) copies of all recorded documents
affecting the Owned Real Property that constitute encumbrances against the
Owned Real Property or exceptions to the Company's title. If the Title
Commitment shall contain any encumbrances or exceptions (other than the
Permitted Title Exceptions, as defined below) to which the Parent has
objections, Parent shall notify the Company of such objections in writing
within ten (10) days of the date on which the Parent has received the Title
Commitment and copies of all recorded documents and the survey required by
this Section 5.11. The Company shall use its best efforts to eliminate all
such objected to encumbrances or exceptions within thirty (30) days following
such notice, and shall be required, at or before the Closing, to discharge at
or before the Closing the lien or encumbrance. With respect to any
encumbrances or exceptions which are properly objected to by the Parent and
which the Company shall fail to eliminate within the thirty (30) day period,
the Parent may, at its sole discretion:
(i) Waive its objections to and accept title subject to such
encumbrances or exceptions; or
(ii) Terminate this Agreement.
The Title Commitment shall commit the Title Insurer to provide
coverage as set forth in Section 5.11(a), and to delete the preprinted or
so-called "standard" exceptions, including a survey exception. The Title
Commitment shall include the following endorsements: (i) insuring the gap
between the date of the closing and the date on which any deeds are recorded,
if necessary, whichever is later, (ii) ALTA 3.1 zoning with parking, (iii)
contiguity, (iv) ALTA 9 comprehensive, (v) tax parcel, (vi) survey, and (vii)
a legal description of the Owned Real
A-30
Property in a form and contents satisfactory to the Parent. The Company shall
deliver to the Title Insurer such instruments, documents, indemnities and
releases as the Title Insurer shall reasonably require to obtain the
deletions of those preprinted or "standard" exceptions. The Title Commitment
shall be updated at Closing to confirm that no new liens or encumbrances have
been filed against the Owned Real Property, and shall be endorsed by the
Title Insurer as of the date of Closing. At the Closing, the Parent may elect
to be issued the policy of title insurance meeting the requirements of this
Section 5.11.
(b) Within forty-five (45) days of the date of this Agreement, the
Company shall deliver to the Parent an ALTA/ASCM survey of the Owned Real
Property certified to the Parent and the Title Insurer for the purpose of
permitting the Title Insurer to issue the title insurance policy described in
this Section 5.11 (the "Survey"). The expense of the Survey shall be paid by
the Company. In the event the Survey discloses material encroachments or
other conditions unacceptable to the Parent, the Parent shall so notify the
Company within thirty (30) days of receipt of the Survey, and the Company
shall eliminate or correct such conditions to the satisfaction of the Parent
within thirty (30) days. If the Company shall fail to correct such conditions
within the thirty (30) day period, the Parent shall have the remedies
provided in Section 5.11(a). If this Agreement is terminated on account of
such Survey disclosures, the Survey and any copies of the Survey shall be
delivered to and become the sole property of the Company.
(c) "Owned Real Property" shall mean all real property owned by the
Company, including property located at (i) 170 Sharon Bedford, Masury, Ohio,
and (ii) 100 Fair Street, Lapeer, Michigan. "Permitted Title Exceptions"
shall mean (i) liens for Taxes and assessments not yet due and payable for
which reserves are established on the company's consolidated financial
statements, and (ii) any other encumbrances or exceptions not objected to by
the Parent pursuant to Section 5.11(a), which in the reasonable opinion of
Parent do not materially detract from the value of or interfere with the
present use of the property affected thereby.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall
be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the shareholders of the
Company;
A-31
(b) HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act and any applicable foreign antitrust or similar acts
shall have expired or been terminated;
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued
by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by any administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; and there shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal;
and
(d) Governmental Actions. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation or other
inquiry that might result in such an action or proceeding) by any
governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, nor
shall there be in effect any judgment, decree or order of any governmental
authority, administrative agency or court of competent jurisdiction, in
either case, seeking to prohibit or limit Parent from exercising all material
rights and privileges pertaining to its ownership of the Surviving
Corporation or the ownership or operation by Parent or any of its
subsidiaries of all or a material portion of the business or assets of Parent
or any of its subsidiaries, or seeking to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of Parent or any of its subsidiaries (including the
Surviving Corporation and its subsidiaries), as a result of the Merger or the
transactions contemplated by this Agreement.
SECTION 6.2 Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall, if qualified by
materiality, be true and correct and, if not so qualified, be true and
correct in all material respects at and as of the Effective Time as if made
at and as of such time, except for (i) changes contemplated by this
Agreement, and (ii) those representations and warranties which address
matters only as of a particular date (which shall have been true and correct
to the extent required as of such date), with the same force and effect as if
made at and as of the Effective Time, and Parent and Merger Sub shall have
received a certificate to such effect signed by the President and the Chief
Financial Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required
by this Agreement to be
A-32
performed or complied with by it at or prior to the Effective Time, and
Parent and Merger Sub shall have received a certificate to such effect signed
by the President and the Chief Financial Officer of the Company;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to
be made, by the Company for the due authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by the Company;
(d) Estoppel Certificates. Each of the firms providing services to
the Company with respect to legal services, accounting services, investment
banking services, printing services, environmental services and other
miscellaneous services with respect to the transaction contemplated by this
Agreement shall provide to the Company, in a form reasonably satisfactory to
Parent, a certificate setting forth the total fees owed such person by the
Company with respect to the transaction. Such fees, in the aggregate, shall
not exceed the amounts set forth in Section 2.23 of the Company Disclosure
Schedule;
(e) Agreement Amendments. The Employment Agreement of Morton I.
Schiff, dated August 18, 1994, as amended December 12, 1996, shall have been
amended in a manner reasonably acceptable to Parent so that the total of all
amounts received by Morton I. Schiff from the Company as a result of the
transactions contemplated by this Agreement do not exceed the maximum amount
permitted by Section 280G of the Code so as to prohibit the Company from
deducting such payment as an ordinary and necessary business expense.
(f) Shareholder Agreement. Section 1.1 of the Shareholder Agreement
shall have been approved by the Probate Court for the County of Oakland
without material modification; and
(g) Opinion of Counsel. Parent and Merger Sub shall have received the
opinion of Honigman Miller Schwartz and Cohn, counsel to the Company, the
form and substance of which shall be reasonably satisfactory to parent and
Merger Sub and their counsel.
SECTION 6.3 Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Merger is also subject to the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall, if
qualified by materiality, be true and correct and, if not so qualified, be
true and correct in all material respects on and as of the Effective Time,
except for (i) changes contemplated by this Agreement and, (ii) those
representations and warranties which address matters only as of a particular
date (which shall have been true and correct to the extent required as of
such date) with the same force and effect as if made on and as of the
Effective Time, and the Company shall have received a certificate to such
effect signed by the Chairman and the Chief Financial Officer of Parent;
A-33
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
on or prior to the Effective Time, and the Company shall have received a
certificate to such effect signed by the Chairman and the Chief Financial
Officer of Parent;
(c) Consents Obtained. All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to
be made, by Parent and Merger Sub for the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated hereby shall have been obtained and made by Merger Sub; and
(d) Opinion of Counsel. The Company shall have received the opinion
of Dykema Gossett PLLC, counsel to Parent and Merger Sub, the form and
substance of which shall be reasonably satisfactory to the Company and its
counsel.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
shareholders of the Company:
(a) by mutual written consent duly of the Boards of Directors of
Parent and the Company; or
(b) by either Parent or the Company if the Merger shall not have been
consummated by December 31, 1997 (provided that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before such date); or
(c) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or ruling or
taken any other action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger (provided that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to
any party who has not complied with its obligations under Section 5.7 and
such noncompliance materially contributed to the issuance of any such order,
decree or ruling or the taking of such action); or
(d) by Parent or the Company, if the requisite vote of the
shareholders of the Company shall not have been obtained by December 15,
1997, except that the Company shall
A-34
not be entitled to elect to terminate this Agreement unless it has complied
with its obligations under Section 5.2; or
(e) by Parent or the Company, respectively (i) if any representation
or warranty of the Company or Parent, respectively, set forth in this
Agreement shall be untrue when made or become untrue, or (ii) upon a breach
of any covenant or agreement on the part of the Company or Parent,
respectively, set forth in this Agreement, such that in either case of (i) or
(ii) above the conditions set forth in Section 6.2(a) or 6.2(b), or Section
6.3(a) or 6.3(b), as the case may be, would not be satisfied (either (i) or
(ii) above being a "Terminating Breach"). Notwithstanding the foregoing, if a
Terminating Breach of the type described in (i) above is cured by eliminating
the facts or circumstances giving rise to the untruth (and not by simply
correcting or supplementing the disclosure with respect thereto) (A) within
30 days of the earlier of (i) the date it becomes known to officers of Parent
or the Company, as the case may be, or (ii) the date on which notice is given
by the Company to Parent under Section 5.6 of the Agreement or notice is
given by the Parent to the Company, as the case may be; and (B) upon terms
reasonably satisfactory to the other party (and, in the case of the Company,
without the payment of money), then neither Parent nor the Company,
respectively, may terminate this Agreement on account of such Terminating
Breach; provided, that the right to cure provided in this sentence shall not
be available for any untruth constituting an intentional misstatement or
omission;
(f) by Parent, if: (i) the Board of Directors of the Company shall
withdraw, modify or change its approval or recommendation of this Agreement
or the Merger in a manner adverse to Parent or shall have resolved to do so;
or (ii) the Board of Directors of the Company shall have recommended to the
shareholders of the Company an Acquisition Proposal, or has resolved to do
so; or
(g) by Parent, if any person (or "group", as defined in Section
13(d)(3) of the Exchange Act) other than Parent or its affiliates or the
Shareholder is or becomes the beneficial owner of 19.9% or more of the
outstanding Shares; or
(h) by the Company, if the Company shall have accepted an Acceptable
Offer in compliance with the terms of Section 4.2 hereof as evidenced by the
execution of a definitive agreement with respect thereto; or
(i) by Parent, within 15 calendar days after the date hereof if the
Parent reasonably determines, based on the advice of its environmental
consultant, that (i) the representation in Section 2.16 is incorrect, or (ii)
environmental liabilities of the Company over the three (3) year period
subsequent to the Closing are reasonably anticipated to exceed $600,000; or
(iii) the Company's liabilities relating to the real property previously
conveyed by the Company to Wilkie Brothers Conveyers, Inc. ("Wilkie"),
including, but not limited to, liabilities to Wilkie, the City of Marysville
and the State of Michigan, related to the environmental contamination of such
real property are likely to exceed $580,000.
A-35
(j) by Parent, if the condition set forth in Section 6.2(f) is not
satisfied within forty five (45) days of the date hereof; or
(k) by Parent, pursuant to Section 5.11 or if the condition set forth
in Section 6.2(d) has not been satisfied.
SECTION 7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any
of its affiliates, directors, officers or shareholders except (i) for a
Terminating Breach (A) under Section 7.1(e)(i) if the untruth in the
representation or warranty arose from an intentional misstatement or omission
or (B) under Section 7.1(e)(ii), (ii) as set forth in Section 7.3 and Section
8.1 hereof, and (iii) nothing herein shall relieve any party from liability
for any breach of a covenant or agreement contained in this Agreement.
SECTION 7.3 Fees and Expenses.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated, except that the Company shall promptly reimburse the
Parent for one-half of the filing fee paid by the Parent pursuant to the HSR
Act.
(b) The Company shall pay Parent a fee of $1,000,000 (the "Fee") upon
the first to occur of the following events:
(i) the termination of this Agreement by Parent or the Company
pursuant to Section 7.1(d) at a time when the Parent is also entitled
to terminate this Agreement pursuant to Section 7.1(f), as a result
of the failure to receive the requisite vote for approval and
adoption of this Agreement and Merger by the shareholders of the
Company at the Shareholder Meeting; or
(ii) the termination of this Agreement by Parent pursuant to
Section 7.1(f); or
(iii) the termination of this Agreement by Parent pursuant to
Section 7.1(g) if, within one year of any such termination, a person
shall acquire or beneficially own a majority of the then outstanding
shares of the Company Common Stock or obtained representation on the
Company's Board of Directors or shall enter into a definitive
agreement with the Company with respect to an Acquisition Proposal or
similar business combination; or
(iv) the termination of this Agreement by the Company pursuant
to Section 7.1(h).
A-36
(c) The Company shall reimburse Parent its reasonable out-of-pocket
fees and expenses relating to the transactions contemplated by this Agreement
in the event that (i) this Agreement is terminated by Parent or the Company
pursuant to Section 7.1(d) as the result of the failure to receive the
requisite vote for approval and adoption of this Agreement and the Merger by
the shareholders of the Company at the Shareholder Meeting, and (ii) the
Parent is not entitled to terminate this Agreement pursuant to Section
7.1(f).
(d) The Fee and expenses payable pursuant to Sections 7.3(b) or
7.3(c) shall be paid within one business day after the first to occur of any
of such events, except to the extent otherwise provided in Section 4.2(e).
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc.
(a) Except as otherwise provided in this Section 8.1, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made
by or on behalf of any other party hereto, any person controlling any such
party or any of their officers or directors, whether prior to or after the
execution of this Agreement. The representations, warranties and agreements
in this Agreement shall terminate at the Effective Time or upon the
termination of this Agreement pursuant to Section 7.1, as the case may be,
except that the agreements set forth in this Section 8.1 shall survive
independently; those set forth in Article I and in Section 5.5 shall survive
the Effective Time indefinitely; those set forth in Section 5.10 shall
survive such termination for so long as the Shareholder Agreement is in full
force and effect; and those set forth in Section 7.3 shall survive such
termination indefinitely. The Confidentiality Agreement shall survive
termination of this Agreement as provided therein.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Company Disclosure Schedule or the Parent Disclosure Schedule,
any information disclosed in one section of this Agreement, the Company
Disclosure Schedule or the Parent Disclosure Schedule shall be deemed to be
disclosed with respect to this Agreement, and all sections of the Company
Disclosure Schedule or the Parent Disclosure Schedule, as the case may be,
into which they are specifically incorporated by reference.
SECTION 8.2 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been
duly given or made if and when delivered personally or by overnight courier
to the parties at the following addresses or
A-37
sent by electronic transmission, with confirmation received, to the telecopy
numbers specified below (or at such other address or telecopy number for a
party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
Oxford Automotive, Inc.
2000 North Woodward Avenue, Suite 130
Bloomfield Hills, Michigan 48304
Telecopier No.: (810) 540-7280
Telephone No.: (810) 540-0031
Attention: President
With a copy to:
Rex E. Schlaybaugh, Jr., Secretary
Oxford Automotive, Inc.
2000 North Woodward Avenue, Suite 130
Bloomfield Hills, Michigan 48304
Telecopier No.: (810) 540-7280
Telephone No.: (810) 540-0031
(b) If to the Company:
Howell Industries, Inc.
Suite 650
17515 West Nine Mile Road
Southfield, Michigan 48075
Telecopier No.: (810) 424-8131
Telephone No.: (810) 424-8220
Attention: President
With a copy to:
Cyril Moscow, Esq.
Honigman Miller Schwartz and Cohn
First National Building
Detroit, Michigan 48286
A-38
Telecopier No.: (313) 962-0176
Telephone No.: (313) 256-7718
SECTION 8.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation, any
partnership or joint venture in which the first mentioned person (either
alone, or through or together with any other subsidiary) has, directly or
indirectly, an interest of 5% or more;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement or
understanding, or (iii) which are beneficially owned, directly or indirectly,
by any other persons with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a day on which banks in
the State of Michigan are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(f) "subsidiary" or "subsidiaries" of the Company, Parent or any
other person means any corporation, partnership, joint venture or other legal
entity of which the Company, the Surviving Corporation, Parent or such other
person, as the case may be (either alone or through or together with any
other subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests the holders of which are generally entitled to vote
for the election of the board of directors or other governing body of such
corporation or other legal entity.
A-39
SECTION 8.4 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the shareholders of the Company, no amendment
may be made which by law requires further approval by such shareholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.5 Waiver. At any time prior to the Effective Time, any
party hereto may with respect to any other party hereto (a) extend the time
for the performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall
be valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
SECTION 8.6 Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.
SECTION 8.8 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than
the Confidentiality Agreement), both written and oral, among the parties, or
any of them, with respect to the subject matter hereof.
SECTION 8.9 Assignment; Guarantee of Merger Sub Obligations. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Merger Sub may assign all or any of their rights hereunder to any
subsidiary thereof provided that no such assignment shall relieve the
assigning party of its obligations hereunder. Parent guarantees the full and
punctual performance by Merger Sub of all the obligations hereunder of Merger
Sub or any such assignees.
SECTION 8.10 Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in
this Agreement, express or implied,
A-40
is intended to or shall confer upon any other person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement,
including, without limitation, by way of subrogation, other than Section 5.5
(which is intended to be for the benefit of the Indemnified Parties and may
be enforced by such Indemnified Parties).
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative.
No failure or delay on the part of any party hereto in the exercise of any
right hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
any other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 8.12 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Michigan
applicable to contracts executed and fully performed within the State of
Michigan.
SECTION 8.13 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
[This space intentionally left blank.]
A-41
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
OXFORD AUTOMOTIVE, INC.
By: /s/ Selwyn Isakow
................................
Name: Selwyn Isakow
Title: Chairman
HI ACQUISITION, INC.
By: /s/ Patrick T. Flynn
................................
Name: Patrick T. Flynn
Title: President
HOWELL INDUSTRIES, INC.
By: /s/ Morton I. Schiff
..................................
Name: Morton I. Schiff
Title: President
A-42
APPENDIX B
[RONEY & CO LETTERHEAD]
May 20, 1997
The Board of Directors
Howell Industries, Inc.
17515 West 9 Mile Road
Suite 650
Southfield, MI 48075
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, of the proposed consideration to be received by the shareholders of
Howell Industries, Inc. ("Company") in connection with the sale of all the
outstanding common stock of the Company. Under the proposed terms of the
acquisition agreement, the shareholders of the Company would receive $37 per
share in cash ("Consideration") in exchange for each share of the Company
owned. The Consideration would be paid in cash at the transaction closing
date.
Roney & Co. ("Roney") is a regional investment banking firm of recognized
standing. As part of our investment banking services, we are regularly
engaged in the valuation of corporate entities in connection with public
offerings, valuations and merger and acquisition transactions. Our research
analysts publish regular reports on individual automotive supplier companies.
Our firm makes principal markets in various automotive industry supplier
stocks, and we have managed public offerings for automotive supplier
companies.
In arriving at the opinion as set forth below, we have, among other things:
For the Company:
I. Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the fiscal years ending July 31, 1994,
1995, and 1996;
II. Reviewed the historical stock price and trading activity for the
common stock of the Company;
III. Reviewed certain internal historical and financial forecasts
relating to the business, earnings, cashflow, assets and
prospects for the Company furnished to us by the Company;
IV. Conducted discussions with members of senior management of the
Company concerning its business and prospects;
V. Visited the Company's main operating facility in Masury, OH;
VI. Reviewed certain asset appraisal information prepared on the
Company's behalf;
The Board of Directors
Howell Industries, Inc.
Page 2 of 3
VII. Discussed with the Company's operating executives the prospects
of the Company, identifying areas of potential concern relating
to the current and projected financial performance and the
preliminary responses from certain customers;
VIII. Reviewed the proposed Agreement and Plan of Merger (the "Merger
Agreement") to be signed by the Company;
IX. Discussed with the Company's management and advisors the legal,
financial and practical ramifications of the Merger Agreement;
X. Performed various valuation models including discounted cashflow,
comparable companies, leveraged buyout and merger and acquisition
comparison;
XI. Compared certain financial characteristics of the Company to
other publicly held companies in the industry that we deemed to
be relevant;
XII. Researched current industry conditions and trends concerning the
valuation of recent mergers and acquisitions; and
XIII. Reviewed such other financial and industry data and performed
such other analysis and took into account such other matters as
we deemed necessary.
In preparing our opinion, we have relied on and assumed the accuracy and
completeness of all financial and other information supplied or otherwise
made available to us by the Company. We have not assumed any responsibility
for independent verification of such information or any independent appraisal
of the Company's assets. With respect to the financial forecasts furnished to
us by the Company, we have assumed, without any further independent
investigations and analysis by Roney, that they have been reasonably prepared
and reflect the best currently available estimates and judgment of the
Company's management as to the expected future financial performance of the
Company.
In our analyses, we have made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of
which are beyond the control of the Company. Any estimates contained in our
analyses are not necessarily indicative of future results or value, which may
be significantly more or less favorable than such estimates. Estimates of
values of companies do no purport to be appraisals or necessarily reflect the
price at which companies or their securities actually may be sold. No company
or transaction utilized in our analyses was identical to the Company or the
Merger Agreement. Accordingly, such analyses are not based solely on
arithmetic calculations, rather, they involve complex considerations and
judgments concerning differences in financial and operating characteristics
of the relevant companies, the timing of the relevant transactions and
prospective buyer interests, as well as other factors that could affect the
public trading markets of the Company or companies to which they are being
compared. None of the analyses performed by us was assigned a greater
significance than any other.
It should be noted that this opinion is based on economic and market
conditions and other circumstance existing on, and information made available
as of, the date hereof. In addition, our opinion is, in any event, limited to
the fairness, from a financial point of view, of the Consideration being
offered to the Company pursuant to the Agreement and does not address the
Company's underlying business decision to effect the Merger Agreement or any
other terms of the Merger Agreement.
B-2
The Board of Directors
Howell Industries, Inc.
Page 3 of 3
In the ordinary course of our business, we may actively trade securities of
the Company for our own account and for the accounts of customers and,
accordingly, we may at any time hold a long or short position in such
securities.
On the basis of, and subject to, the foregoing, we are of the opinion that,
as of the date hereof, the Consideration received by the shareholders of the
Company, as proposed in the Merger Agreement, is fair, from a financial point
of view.
Sincerely,
/s/ Roney & Co.
[GRAPHIC OMITTED]
B-3
HOWELL INDUSTRIES, INC.
Special Meeting of Shareholders
August 13, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Morton Schiff and Cyril Moscow, and each
of them, with power of substitution, the proxies of the undersigned to vote
all stock of the undersigned at the Special Meeting of Shareholders of
HOWELL INDUSTRIES, INC. (the "Company"), to be held on Wednesday, August
13, 1997, and at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED IN FAVOR OF THE MERGER.
PLEASE VOTE, DATE, AND SIGN ON REVERSE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
Please date this proxy and sign exactly as your name appears hereon. If the
shares are registered in more than one name, each joint owner should sign.
When signing as attorney, administrator, personal representative, executor,
guardian or trustee, add your title to the signature.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_______________________________________ __________________________________
_______________________________________ __________________________________
_______________________________________ __________________________________
/x/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
FOR AGAINST ABSTAIN
_______________________ 1. Approval of Agreement / / / / / /
and Plan of Merger
HOWELL dated as of May 21, 1997.
INDUSTRIES, INC.
_______________________ 2. In their discretion with respect to any other
matters that may properly come before the
meeting.
RECORD DATE SHARES:
-------------
Please be sure to sign and date this Proxy. Date
- ----------------------------------------------------------
- ---Shareholder sign here------------Co-owner sign here----
Mark box at right if an address change has been noted on
the reverse side of this card. / /
DETACH CARD DETACH CARD