PRELIMINARY PROXY MATERIALS
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14A INFORMATION
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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /--/
Filed by a Party other than the Registrant /x/
Check the appropriate box:
/x/ Preliminary Proxy Statement
/--/ Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/--/ Definitive Proxy Statement
/--/ Definitive Additional Materials
/--/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule
14a-12
CAPCO Automotive Products Corporation
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(Name of Registrant as Specified In Its Charter)
Eaton Corporation
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/--/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
/x/ $500 per each party to the controversy pursuant to Ex-
change Act Rule 14a-6(i)(3).
/--/ 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 transac-
tion applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transac-
tion computed pursuant to Exchange Act Rule 0-11 (Set
forth the amount on which the filing fee is calcu-
lated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/--/ Fee paid previously with preliminary materials.
/--/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify
the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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1996 ANNUAL MEETING OF SHAREHOLDERS
OF
CAPCO AUTOMOTIVE PRODUCTS CORPORATION
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PROXY STATEMENT
OF
EATON CORPORATION
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This Proxy Statement and the accompanying WHITE An-
nual Meeting proxy card are furnished in connection with the
solicitation of proxies by Eaton Corporation ("Eaton"), to be
used at the 1996 Annual Meeting of Shareholders of CAPCO Auto-
motive Products Corporation (the "Company") to be held at [--],
local time, on May 14, 1996 at [-----------------------------],
and at any adjournments or postponements thereof (the "Annual
Meeting").
At the Annual Meeting, seven Directors of the Company
will be elected for a one-year term expiring at the 1997 Annual
Meeting of Shareholders. Eaton is soliciting your proxy in
support of the election of Eaton's seven nominees for Directors
of the Company named below (the "Eaton Nominees").
ALL EATON NOMINEES ARE COMMITTED TO A SALE OR MERGER
OF THE COMPANY AT A PRICE OF NOT LESS THAN $11.00 PER SHARE OF
THE COMPANY COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE
"SHARES").
The record date for determining shareholders entitled
to notice of and to vote at the Annual Meeting is March 20,
1996 (the "Record Date"). Shareholders of record at the close
of business on the Record Date will be entitled to one vote at
the Annual Meeting for each Share held on the Record Date. As
set forth in the proxy statement of the Company filed with the
Securities and Exchange Commission (the "Commission") on March
[ ], 1996 (the "Company Proxy Statement"), as of the close of
business on the Record Date, there were 11,061,350 Shares is-
sued and outstanding. The Company Proxy Statement indicates
that the Company has no other voting securities. As of the
Record Date, Eaton beneficially owned an aggregate of 805,000
Shares, which represented approximately 7.3% of the Shares re-
ported by the Company to be outstanding as of the Record Date.
Eaton intends to vote such Shares for the election of the Eaton
Nominees.
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This Proxy Statement and the WHITE Annual Meeting
proxy card are first being furnished to the Company's share-
holders on or about March --, 1996. According to the Company's
filings with the Commission, the principal executive offices of
the Company are located at 300 S. St. Louis Boulevard, South
Bend, Indiana 46624.
IMPORTANT
At the Annual Meeting, Eaton seeks to elect the seven
Eaton Nominees as the Directors of the Company.
The election of the Eaton Nominees requires the af-
firmative vote of a plurality of the votes cast by holders of
Shares represented in person or by proxy at the meeting and
entitled to vote on the election of Directors, assuming a quo-
rum is present or otherwise represented at the Annual Meeting.
Consequently, only Shares that are voted in favor of a particu-
lar nominee will be counted toward such nominee's attaining a
plurality of votes. Shares present at the meeting that are not
voted for a particular nominee (including broker non-votes) and
Shares present by proxy where the shareholder properly withheld
authority to vote for such nominee will not be counted toward
such nominee's attainment of a plurality.
EATON URGES YOU TO MARK, SIGN, DATE AND RETURN THE
ENCLOSED WHITE ANNUAL MEETING PROXY CARD TO VOTE FOR ELECTION
OF THE EATON NOMINEES.
A VOTE FOR THE EATON NOMINEES WILL PROVIDE YOU--AS
THE OWNERS OF THE COMPANY--WITH REPRESENTATIVES ON THE COM-
PANY'S BOARD WHO ARE COMMITTED TO A SALE OR MERGER OF THE COM-
PANY AT A PRICE OF NOT LESS THAN THE PRICE TO BE PAID IN THE
OFFER.
EATON URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO
YOU BY THE COMPANY. IF YOU HAVE ALREADY DONE SO, YOU MAY REVOKE
YOUR PROXY BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR A
LATER DATED PROXY FOR THE ANNUAL MEETING TO EATON, C/O GEORGE-
SON & COMPANY INC. ("GEORGESON"), OR TO THE SECRETARY OF
THE COMPANY, OR BY VOTING IN PERSON AT THE ANNUAL MEETING. SEE
"PROXY PROCEDURES" BELOW.
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THE EATON NOMINEES SUPPORT THE SALE OF THE COMPANY
All Eaton Nominees are committed to a sale or merger
of the Company at a price of not less than $11.00 per Share.
Eaton Acquisition Corporation, a Delaware corporation
and a wholly owned subsidiary of Eaton (the "Purchaser"), has
commenced an offer to purchase all outstanding Shares and the
associated preferred stock purchase rights issued pursuant to
the Rights Agreement between the Company and Harris Trust and
Savings Company (the "Rights") at a purchase price of $11.00
per Share (and associated Right) net to the seller in cash
without interest thereon, upon the terms and subject to the
conditions set forth in the offer to purchase dated March 19,
1996 (as amended or supplemented from time to time, the "Offer
to Purchase") and related letter of transmittal (which together
with any amendments or supplements thereto and the Offer to
Purchase constitute the "Offer"). The purpose of the Offer is
to acquire control of and the entire equity interest in the
Company. Eaton intends to propose, and to seek to have the
Company consummate as soon as practicable after consummation of
the Offer, a merger or similar business combination (the
"Merger") with the Purchaser, pursuant to which each then out-
standing Share (other than Shares owned by Eaton or any of its
wholly owned subsidiaries and Shares held in the treasury of
the Company) would be converted into the right to receive in
cash the same amount as is received per Share in the Offer.
The Offer is conditioned upon, among other things (i)
there having been validly tendered and not properly withdrawn
prior to the expiration date of the Offer that number of shares
(the "Minimum Number of Shares") which, together with the
805,000 Shares owned by Eaton, would represent a majority of
all outstanding Shares on a fully diluted basis on the date of
purchase, without giving effect to any dilution that might
arise from exercise of the Rights (the "Minimum Tender Condi-
tion"); (ii) the Rights having been redeemed by the Board of
Directors of the Company or the Purchaser being satisfied, in
its sole discretion, that the Rights have been invalidated or
are otherwise inapplicable to the Offer and the Merger (the
"Rights Condition"); (iii) the Purchaser being satisfied, in
its sole discretion, that the provisions of Chapter 7A ("Chap-
ter 7A") of the Michigan Business Corporation Act (the "MBCA")
are inapplicable to the Merger and the acquisition of Shares
pursuant to the Offer, or the Merger having been approved pur-
suant to Chapter 7A (the "Business Combination Condition"); and
(iv) the Purchaser being satisfied, in its sole discretion,
that the provisions of Chapter 7B of the MBCA are inapplicable
to the acquisition of Shares pursuant to the Offer (the "Con-
trol Share Condition"). In addition, the MBCA requires any
plan of merger which is to be submitted to a Michigan
corporation's shareholders for a vote to be first adopted by
such corporation's directors.
All Eaton Nominees support the Offer and the Merger
and if elected will, subject to their fiduciary responsibili-
ties as Directors of the Company, seek to cause the Company to
take all steps necessary to permit the Offer and the Merger to
proceed, including without limitation redeeming or otherwise
making inapplicable to the Offer and the Merger the Rights for
the purpose of satisfying the Rights Condition; if necessary,
adopting a resolution approving the Offer and the Merger under
Chapter 7A of the MBCA for purposes of the Business Combination
Condition; and, if necessary, adopting a by-law to provide that
Chapter 7B of the MBCA will not apply to the acquisition of
Shares pursuant to the Offer for the purpose of satisfying the
Control Share Condition. However, all Eaton Nominees recognize
the fiduciary responsibilities they would have as Directors of
the Company if they are elected and therefore they would give
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due consideration to any bona fide acquisition proposals sub-
mitted to the Company at a price higher than Eaton's proposal.
For information about the Rights Condition, the Busi-
ness Combination Condition and the Control Share Condition, see
"Terms and Conditions of the Offer" below.
As indicated under "Background of Proposed Acquisi-
tion" below, the incumbent Company Directors have rejected
Eaton's acquisition proposal, have determined that acquisition
discussions with Eaton should cease and have advised Eaton that
the Company is not for sale.
IF, LIKE US, YOU BELIEVE THAT YOU SHOULD HAVE THE
OPPORTUNITY TO DECIDE THE FUTURE OF YOUR COMPANY AND THAT YOU
SHOULD HAVE THE CHANCE TO RECEIVE NOT LESS THAN $11.00 PER
SHARE FOR ALL OF YOUR SHARES, EATON URGES YOU TO VOTE YOUR
WHITE ANNUAL MEETING PROXY CARD FOR EACH OF THE EATON NOMINEES.
ALL OF THE EATON NOMINEES WILL SEEK TO GIVE ALL SHAREHOLDERS
THE OPPORTUNITY TO SELL THEIR SHARES AT A PRICE OF NOT LESS
THAN $11.00 PER SHARE.
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ELECTION OF DIRECTORS
According to publicly available information, the Com-
pany currently has seven Directors, Francisco Edmir Bertolac-
cini, Harold L. Bowman, David A. Brockway, C.E. Cheesbrough,
Thomas C. Clarke, William N. Harper and Jose Roberto Morato,
who serve for the term of one year. The term of each such Di-
rector will expire at the Annual Meeting.
Eaton proposes that the Company's shareholders elect
the Eaton Nominees as the Directors of the Company at the An-
nual Meeting. The seven Eaton Nominees are listed below and
have furnished the following information concerning their prin-
cipal occupations or employment and certain other matters.
Each Eaton Nominee, if elected, would hold office until the
1997 Annual Meeting of Shareholders and until a successor has
been elected and qualified or until his earlier death, resigna-
tion or removal. Although Eaton has no reason to believe that
any of the Eaton Nominees will be unable to serve as Directors,
if any one or more of the Eaton Nominees should not be avail-
able for election, the persons named on the WHITE Annual Meet-
ing proxy card have agreed to vote for the election of such
other nominees as may be proposed by Eaton. Each Eaton Nominee
has consented to being named in the proxy statement as a nomi-
nee and has agreed to serve as a Director if elected. Unless
otherwise indicated, the principal business address of the
Eaton Nominees is c/o Eaton Corporation, Eaton Center, 1111
Superior Avenue, Cleveland, Ohio 44114.
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The Eaton Nominees for Directors of the Company are:
Principal Occupation or
Employment During Last Five
Years and Other Directorships;
Name, Age Business Address
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Alan E. Best Vice President - Truck
Age 55 Components Operations/North America of
Eaton, since January 1, 1995.
Vice President - Truck
Components Operations/Europe of Eaton from
September, 1990 until January 1, 1995.
Business Address:
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Eaton Corporation
P. O. Box 4013
Kalamazoo, Michigan 49003
William E. Butler Chairman of the Board of Eaton from
Age 65 September 1, 1995 to December 31, 1995.
Chairman and Chief Executive Officer of
Eaton from January 1, 1992 to September 1,
1995.
President and Chief Executive Officer of
Eaton from September 4, 1991 to January 1,
1992.
President and Chief Operating Officer of
Eaton from February 22, 1989 to September
4, 1991.
Mr. Butler is a director of Bearings, Inc.,
Ferro Corporation, Goodyear Tire & Rubber
Company, Pitney Bowes Inc. and Zurn Indus-
tries, Inc.
John M. Carmont Vice President and Treasurer of Eaton since
Age 57 December 1, 1981.
Archie M. Frame Retired since June, 1994.
Age 71 Advisor to the Board of Directors of Trans-
misiones y Equipos Mecanicos, S.A. de C.V.,
a manufacturer of truck transmissions, from
May, 1990 to June, 1994.
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Prior to May, 1990, Mr. Frame was an Eaton
executive officer.
LeMoyne G. Loseke Retired since March, 1991. Prior to his
Age 64 retirement, Mr. Loseke was an executive
officer of Eaton.
Thomas W. O'Boyle Senior Vice President - Truck Components of
Age 53 Eaton since September 1, 1995.
Vice President - Truck Components
Operations/Worldwide of Eaton from Septem-
ber, 1991 to September 1, 1995.
Vice President - Truck Components
Operations/North America of Eaton from
January, 1991 to September, 1991.
John S. Rodewig Retired since December 31, 1995.
Age 62 Executive of Eaton from August 31, 1995 to
December 31, 1995.
President and Chief Operating Officer -
Vehicle Components of Eaton from September
22, 1993 to August 31, 1995.
President and Chief Operating Officer of
Eaton from January 1, 1992 to September 22,
1993.
President-Elect and Chief Operating Officer
of Eaton from September 4, 1991 to January
1, 1992.
Group Vice President of Eaton from January
1, 1991 to September 4, 1991.
Mr. Rodewig is a director of Hayes Wheels
International, Inc.
Election of the Eaton Nominees as Directors of the
Company requires the affirmative vote of a plurality of the
votes cast by holders of Shares represented in person or by
proxy at the meeting and entitled to vote on the election of
Directors, assuming a quorum is present or otherwise repre-
sented at the Annual Meeting. Thus, only Shares that are voted
in favor of a particular nominee will be counted toward such
nominee's attaining a plurality of votes. Shares present at
the meeting that are not voted for a particular nominee (in-
cluding broker non-votes) and Shares present by proxy where the
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shareholder properly withheld authority to vote for such nomi-
nee will not be counted toward such nominee's attainment of a
plurality.
Eaton has agreed to pay each of the Eaton Nominees
who is not presently an Eaton executive a one-time fee of
$10,000 to stand for election to the Board of Directors of the
Company. Eaton has agreed to indemnify each of the Eaton Nomi-
nees against any expenses (including legal fees) arising out of
participation in the proxy solicitation and, if elected, ser-
vice on the Board of Directors of the Company.
According to the Company's public filings, if elected
as Directors of the Company, the Eaton Nominees who are not
employees of the Company would receive annual compensation of
$14,000, plus $1,000 for each meeting of the Board attended,
$500 for each committee meeting attended ($1,000 for the chair-
man of a committee) and $300 for each telephonic meeting at-
tended, plus reimbursement of reasonable out-of-pocket expenses
incurred in connection with such meetings. In addition, Eaton
believes that upon election the Eaton Nominees will be covered
by any officer and director indemnification and liability in-
surance the Company may have. Eaton disclaims any responsibil-
ity for the accuracy of the foregoing information.
The accompanying WHITE Annual Meeting proxy card will
be voted at the Annual Meeting in accordance with your instruc-
tions on such card. You may vote FOR the election of the Eaton
Nominees as the Directors of the Company or withhold authority
to vote for the election of the Eaton Nominees by marking the
proper box on the WHITE Annual Meeting proxy card. You may
also withhold your vote from any of the Eaton Nominees by writ-
ing the name of such nominee in the space provided on the WHITE
Annual Meeting proxy card. IF NO MARKING IS MADE, YOU WILL BE
DEEMED TO HAVE GIVEN A DIRECTION TO VOTE THE SHARES REPRESENTED
BY THE WHITE ANNUAL MEETING PROXY CARD FOR THE ELECTION OF ALL
OF THE EATON NOMINEES PROVIDED THAT YOU HAVE SIGNED AND DATED
THE PROXY CARD.
Eaton believes that it is in your best interest to
elect the Eaton Nominees at the Annual Meeting. All Eaton
Nominees are committed to giving each Company shareholder the
opportunity to receive not less than $11.00 per Share for all
of his or her Shares.
EATON STRONGLY RECOMMENDS A VOTE FOR THE ELECTION OF
THE EATON NOMINEES.
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6
OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
[As set forth in the Company Proxy Statement,] at the
Annual Meeting, the shareholders will be asked to ratify the
appointment by the Company's Board of Price Waterhouse LLP as
the Company's independent auditors for the fiscal year ending
December 31, 1996. Eaton intends to vote its Shares in favor
of the proposal, but is making no recommendation to sharehold-
ers as to how their Shares should be voted with respect to this
proposal.
With respect to the ratification of the appointment
of Price Waterhouse LLP as the Company's independent auditors,
Eaton has no reason to believe that the failure to ratify such
appointment will have any effect on the appointment of Price
Waterhouse LLP by the Company's Board.
The accompanying WHITE Annual Meeting proxy card will
be voted in accordance with your instruction on such card. You
may vote for the ratification of the appointment of Price Wa-
terhouse LLP or vote against, or abstain from voting on, the
ratification of the appointment of Price Waterhouse LLP by
marking the proper box on the WHITE Annual Meeting proxy card.
IF NO MARKING IS MADE, YOU WILL BE DEEMED TO HAVE GIVEN A DI-
RECTION TO VOTE THE SHARES REPRESENTED BY THE WHITE ANNUAL
MEETING PROXY CARD FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICE WATERHOUSE LLP PROVIDED THAT YOU HAVE SIGNED AND DATED
THE PROXY CARD.
OTHER PROPOSALS
Except as set forth above, Eaton is not aware of any
proposals to be brought before the Annual Meeting. Should
other proposals be brought before the Annual Meeting, the per-
sons named on the WHITE Annual Meeting proxy card will abstain
from voting on such proposals unless such proposals adversely
affect the interests of Eaton as determined by Eaton in its
sole discretion, in which event such persons will vote on such
proposals at their discretion.
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VOTING PROCEDURES
With respect to each of the matters other than elec-
tion of Directors described above that will be submitted to the
shareholders for a vote, the affirmative vote of the holders of
at least a majority of the votes cast by holders of the Shares
represented in person or by proxy at the Annual Meeting and
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entitled to vote on the particular matter is required, assuming
the presence of a quorum at the Annual Meeting. With respect
to abstentions, the Shares are considered present at the Annual
Meeting for the particular matter. Since abstentions are not
votes cast for the matter, they will have no effect on the out-
come of the vote. With respect to broker non-votes, the Shares
are not considered present at the Annual Meeting for the par-
ticular matter as to which the broker withheld authority. Con-
sequently, broker non-votes are not counted in respect of the
matter.
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PROXY PROCEDURES
IN ORDER FOR YOUR VIEWS ON THE ABOVE-DESCRIBED PRO-
POSALS (INCLUDING THE ELECTION OF THE EATON NOMINEES) TO BE
REPRESENTED AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THE ENCLOSED WHITE ANNUAL MEETING PROXY CARD AND RETURN IT TO
EATON, C/O GEORGESON & COMPANY INC., WALL STREET PLAZA, 88 PINE
STREET, NEW YORK, NEW YORK 10005. IN THE ENCLOSED ENVELOPE IN
TIME TO BE VOTED AT THE ANNUAL MEETING. EXECUTION OF THE WHITE
ANNUAL MEETING PROXY CARD WILL NOT AFFECT YOUR RIGHT TO ATTEND
THE ANNUAL MEETING AND TO VOTE IN PERSON. ANY PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO THE ANNUAL MEETING BY DELIVERING A
WRITTEN NOTICE OF REVOCATION OR A LATER DATED PROXY FOR THE
ANNUAL MEETING TO EATON C/O GEORGESON, OR TO THE SECRETARY OF
THE COMPANY, OR BY VOTING IN PERSON AT THE PARTICULAR MEETING.
ONLY YOUR LATEST DATED PROXY FOR THE ANNUAL MEETING WILL COUNT.
Only holders of record as of the close of business on
the Record Date will be entitled to vote. If you were a share-
holder of record on the Record Date, you will retain your vot-
ing rights for the Annual Meeting even if you sell such Shares
after the Record Date. Accordingly, it is important that you
vote the Shares held by you on the Record Date, or grant a
proxy to vote such Shares on the WHITE Annual Meeting proxy
card, even if you sell such Shares after the Record Date.
If any of your Shares are held in the name of a bro-
kerage firm, bank, bank nominee or other institution on the
Record Date, only it can vote such Shares and only upon receipt
of your specific instructions. Accordingly, please contact the
person responsible for your account and instruct that person to
execute on your behalf the WHITE Annual Meeting proxy card.
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BACKGROUND OF ACQUISITION PROPOSAL
Prior to becoming a public company in 1994 pursuant
to an initial public offering, the Company was a wholly owned
8
subsidiary of Clark Equipment Company ("Clark"). In 1993,
Clark approached Eaton to determine its interest in acquiring
the Company. At that time, Eaton had a right of first refusal
to purchase the common equity of the Company (as well as quotas
of Equipamentos Clark Ltda., a Brazilian subsidiary of Clark).
At that time Eaton decided it did not wish to pursue an
acquisition of the Company on the terms offered by Clark and so
informed Clark.
In November 1995, a senior executive of Eaton con-
tacted F. Edmir Bertolaccini, Chairman and Chief Executive
Officer of the Company, to schedule a meeting for the purpose
of discussing the possibility of Eaton acquiring the Company.
The meeting was scheduled for early December. The Company's
legal and financial advisors then contacted Eaton and requested
that Eaton and the Company enter into a confidentiality and
standstill agreement as a prerequisite to the acquisition dis-
cussions. Eaton and the Company were not able to reach an
agreement with respect to the standstill provisions, which
would have restricted Eaton's ability to make an unsolicited
offer for the Company for a period of three years. Although
Eaton was willing to accept standstill provisions, the Company
refused to agree to Eaton's request for 20 days' advance notice
and waiver of those provisions if the Company took certain ac-
tions indicating that the Board of Directors of the Company was
proceeding to sell the Company to a purchaser other than Eaton.
As a result, the confidentiality and standstill agreement was
not entered into and the scheduled meeting did not occur.
In early December 1995, two senior executives of
Eaton contacted Mr. Bertolaccini. During the course of that
conversation, the Eaton executives and Mr. Bertolaccini ex-
pressed disappointment that the scheduled meeting had not oc-
curred and agreed that representatives of Eaton should visit
the Company's plant in Brazil and meet with the Company's op-
erational management. In January 1996, representatives of
Eaton visited the Company's plant in Brazil and met with mem-
bers of the Company's management team and discussed various
aspects of the Company's business.
In late January 1996, a senior executive of Eaton
contacted Mr. Bertolaccini to schedule a meeting in the United
States for the purpose of making an acquisition proposal to the
Company. During the meeting, which took place on February 3,
1996 in Orlando, Florida, Mr. Bertolaccini and the Eaton exec-
utive discussed various terms regarding the possible acquisi-
tion, including the developments in the worldwide motor vehicle
industry which made an acquisition by Eaton desirable and the
importance of retaining the Company's management following such
an acquisition. The Eaton executive indicated that Eaton was
prepared to offer $10 per Share in cash for all Shares of the
Company and also indicated that Eaton was prepared to consider
improving the terms of its proposal once negotiations were com-
menced. The Eaton executive requested that Mr. Bertolaccini
9
present the proposal to the Company's Board of Directors. Mr.-
Bertolaccini indicated that the Company's Board of Directors
was unlikely to accept an offer at that price, but that he
would nevertheless present the proposal to the Company's Board
as requested.
On February 14, 1996, representatives of the Com-
pany's legal and financial advisors telephoned the Eaton exec-
utive who had met with Mr. Bertolaccini and indicated that the
Company's Board of Directors was disappointed with the progress
of the discussions and that the $10 per Share offer price was
not a basis for further discussions. Also on February 14,
1996, two senior executives of Eaton telephoned Mr.
Bertolaccini to express disappointment with respect to the
telephone call one of them had received that day from repre-
sentatives of the Company's legal and financial advisors.
On February 28, 1996, two senior executives of Eaton
telephoned Mr. Bertolaccini and again expressed Eaton's inter-
est in negotiating an acquisition of the Company by Eaton at
$10 per Share, informed Mr. Bertolaccini that Eaton's board of
directors had authorized such transaction at a meeting held
earlier that day and requested that Eaton's proposal be pre-
sented to the Company's Board. Mr. Bertolaccini indicated that
he would present the proposal to the Company's Board as re-
quested.
On March 8, 1996, a representative of the Company's
financial advisor telephoned a representative of Eaton's finan-
cial advisor and stated that the Board of Directors of the Com-
pany had met and had determined to reject pursuing an acquisi-
tion by Eaton at $10 per Share, and had determined that the
Company was not for sale and that acquisition discussions
should cease.
On March 13, 1996, Eaton sent the following letter
(the "March 13 Letter") to the Company and Eaton also issued a
press release publicly disclosing such letter:
March 13, 1996
Mr. F. Edmir Bertolaccini
Chairman and Chief Executive Officer
CAPCO Automotive Products Corporation
Rua Clark, 2061
P.O. Box 304
13279-400 Valinhos
Sao Paulo, Brazil
Dear Mr. Bertolaccini:
As you are aware, we have expressed to you on a num-
ber of occasions over the past several months Eaton Corpo-
ration's strong interest in acquiring CAPCO Automotive
10
Products Corporation. The logic of such a business combi-
nation is compelling.
First, Eaton and CAPCO present an excellent business
fit from the standpoint of product lines, manufacturing
capability, geographic coverage, and developments in the
worldwide motor vehicle industry. Vehicle manufacturers
are increasingly seeking Tier 1 suppliers capable of part-
nering with the OEMs to provide products and services on a
worldwide basis. Even suppliers such as CAPCO, with your
excellent regional manufacturing base and talented manage-
ment, will be at a serious and increasing disadvantage as
the trend to global consolidation continues. Combined
with Eaton, however, CAPCO would have access to the re-
sources, scale and global automotive presence necessary to
succeed in an era of increasingly pervasive global com-
petition. Together, we could realize significant opportu-
nities for expansion within Brazil, in the rest of the
Mercosul trade area, and throughout the world.
Second, our companies have had a long history of wor-
king together successfully. CAPCO's sales to Eaton as
contract manufacturer of medium duty mechanical transmis-
sions under our sales and technology licensing arrange-
ments represent approximately 40% of CAPCO's revenues.
CAPCO has been an excellent supplier to Eaton and, we
trust, it has been a successful relationship for you as
well. The relationship has been well-suited to address
the marketplace of the past ten years.
Moving forward, Eaton believes there are significant
advantages to our having control of all of the elements
required for competitive success in this important product
line. We believe that the best approach to take full ad-
vantage of the new opportunities for the business in the
industrializing world is to combine our technological and
manufacturing capabilities and focus our joint resources
on the worldwide market potential.
Third, Eaton and CAPCO are an extraordinarily good
fit from the perspectives of management and business phi-
losophy. We share a common heritage of operating excel-
lence. Your management has performed extremely well in
meeting the varied and difficult challenges facing your
business -- whether due to the cyclicality of the automo-
tive business, the special circumstances of operating in
Brazil, or the loss of revenues associated with cessation
of Chevette production. You and your management team have
shown resourcefulness and creativity in meeting these and
other challenges, and have compiled a track record of per-
formance of which you can be justifiably proud. As we
have tried to make clear, the quality of CAPCO's manage-
ment and employees is a major part of Eaton's interest in
the company.
11
Our sales in Brazil last year reached about $200 mil-
lion. Brazil is a market of strategic importance to
Eaton, both as a production source to satisfy worldwide
demand and as a growing market for our products. Togeth-
er, sales of Eaton and CAPCO this year could reach well
over $300 million. Combined, our businesses would provide
an extraordinary foundation for profitable growth in Bra-
zil and Latin America.
As you know, Eaton strongly desires to complete a
negotiated merger with CAPCO. Such a merger will provide
great benefits for both of our businesses, our employees,
our customers and suppliers, and the communities that we
serve.
Therefore, I am making the following proposal which
has been approved by the Board of Directors of Eaton and
is hereby submitted to the Board of Directors of CAPCO.
1. Price. We propose to acquire CAPCO in a trans-
action in which all shareholders will receive
$11 per share in cash. We believe that $11 per
share is a compelling price, representing about
a 55% premium above the average closing price of
the past 30 trading days. It fairly reflects
the benefits we envision from the combination of
our businesses, and will be financed from avail-
able internal cash sources. The transaction we
are proposing has no significant contingencies
and can be completed very quickly.
2. Continuity of Management. We propose to offer
all of CAPCO's management the opportunity to
continue in their current positions, consistent
with the discussions between our companies.
We strongly desire the support of CAPCO's management
in this matter and hope that our proposal will receive the
prompt approval of CAPCO's Board of Directors. Of course,
we would expect CAPCO to remain exempt from Michigan's
anti-takeover statutes and to render its "Shareholder
Rights Plan" inapplicable to this transaction.
After several months of cordial discussions concern-
ing a negotiated acquisition, we are extremely disappoint-
ed by the recent refusal of your Board to allow Eaton to
continue these discussions with you. This is particularly
so in light of our repeatedly expressed willingness to
negotiate terms of a business combination which are mutu-
ally beneficial to your shareholders and ours.
Thus, we have been left without any reasonable option
other than to proceed as we are now doing. Accordingly,
we are today announcing our proposal publicly so that all
12
shareholders of CAPCO are made aware of it. In addition,
we will shortly be providing you notice nominating a full
slate for election as CAPCO directors at CAPCO's May 14,
1996 annual meeting of shareholders. You should also know
that Eaton now owns approximately 7.3% of the outstanding
common stock of CAPCO Automotive Products Corporation.
While we would very much prefer to negotiate a merger sup-
ported by your Board, we reserve the right to go directly
to your shareholders with a cash offer for CAPCO.
Our objective is to work with you in a professional
and constructive manner to complete this transaction so
that its full potential can be realized and the best in-
terests of all of our shareholders can be served. I am
available to discuss these important matters with you at
any time. Clearly, this situation has the highest prior-
ity for all of us at Eaton, and we look forward to hearing
from you soon.
Sincerely,
/s/ Stephen R. Hardis
Stephen R. Hardis
Chairman and Chief Executive Officer
xc: Board of Directors of CAPCO
Automotive Products Corporation
Also on March 13, 1996, a senior executive of Eaton
telephoned Mr. Bertolaccini to inform him of Eaton's proposal.
On March 13, 1996, Eaton commenced litigation against
the Company and its Directors in the federal district court in
the Eastern District of Michigan in connection with Eaton's
proposal set forth in the March 13 Letter. Eaton's litigation
seeks both declaratory and injunctive relief. Eaton's com-
plaint seeks to require the Company to redeem the Rights and to
prevent the Company from changing the May 14, 1996 date for its
annual meeting of shareholders or the March 20 record date for
that meeting, and requests the court to declare that the Compa-
ny is not subject to the provisions of certain Michigan anti-
takeover statutes. The Eaton complaint also seeks to prevent
the Company from acting to become covered by these statutes.
The foregoing description of the litigation and the press re-
lease is qualified in its entirety by reference to Exhibits
(a)(8) and (g) to the Schedule 14D-1 filed by Eaton and the
Purchaser on March 19, 1996 with the Commission (the
"Schedule 14D-1")
On March 13, 1996, Eaton delivered a notice to the
Company nominating seven individuals for election as Directors
at the Company's annual meeting of shareholders scheduled for
May 14, 1996. On March 14, 1996, Cede & Co., at the request of
Eaton, delivered a similar notice to the Company (the Eaton
13
notice and the Cede & Co. notice, collectively, the "Nomination
Notices"). In the Nomination Notices, Eaton stated that all of
its nominees were committed to supporting the proposal made by
Eaton to acquire the Company in a transaction pursuant to which
the Company's shareholders will receive $11.00 per share in
cash. Following the filing of these preliminary solicitation
materials with the Commission, Eaton intends to solicit proxies
from the Company's shareholders for the purpose of electing to
the Board of Directors of the Company the director candidates
nominated by Eaton in order to insure that the Company's Board
of Directors will take all such actions necessary or appropri-
ate (subject to such Directors' fiduciary duties) to approve
and effectuate the consummation of a business combination be-
tween Eaton and the Company, including, among other things,
taking action to execute an agreement and plan of merger.
On March 14, 1996, Eaton's Chairman and Chief
Executive Officer telephoned Mr. Bertolaccini, and during the
course of such call he referred to the proposal set forth in
the March 13 Letter and expressed Eaton's preference for a
friendly negotiated acquisition of the Company. Mr.
Bertolaccini expressed the belief that the present was not the
best time to sell the Company in light of his view of the Com-
pany's future prospects.
On March 14, 1996, the Company issued a press re-
lease, the text of which is as follows:
South Bend, IN. -- March 14, 1996 -- CAPCO Automotive
Products Corporation (CAB) announced today that its Board
of Directors will meet late next week to consider the pro-
posal to acquire the company made by Eaton Corporation in
the March 13th letter from Eaton's Chairman to Mr. Berto-
laccini. CS First Boston has been retained by CAPCO to
review the proposal. Harold Bowman, a member of the Board
and Chairman of CAPCO's Governance Committee (a committee
of independent directors) stated, "We understand why the
proposal is attractive to Eaton. It appears Eaton is act-
ing opportunistically to acquire CAPCO while the Brazilian
market is in a temporary downturn and the Company is in a
period of transition."
On March 18, 1996, Eaton announced that it would be
commencing the Offer. In addition, Eaton also said that it in-
tends to acquire in the Merger any Shares not purchased in the
Offer. A copy of the press release issued by Eaton is filed as
Exhibit (a)(9) to the Schedule 14D-1 and is incorporated herein
by reference. Also on March 18, 1996, concurrently with the
issuance of Eaton's announcement, a senior executive of Eaton
contacted Mr. Bertolaccini to apprise him of the announcement.
On March 19, 1996, the Purchaser commenced the Offer.
Also on that date Eaton sent a letter to the Company requesting
that the Board make the Rights inapplicable to the Offer and
14
sent separate letters requesting the Company's shareholder list
and security position listings and other information pursuant
to the federal securities laws and Michigan law.
On March 21, 1996, Eaton filed preliminary proxy
materials with the Commission.
Eaton currently beneficially owns an aggregate of
805,000 Shares, representing approximately 7.3% of the
11,061,350 Shares reported by the Company as outstanding at
November 1, 1995. Such Shares were acquired by Eaton in the
transactions described in Schedule II.
See Schedule II for a description of the existing
business relationship between Eaton and the Company.
Eaton intends to continue to seek the opportunity to
negotiate with the Company with respect to its acquisition pro-
posal. If such negotiations result in a definitive merger
agreement between the Company and Eaton, such negotiations
could result in termination of this proxy solicitation. As
indicated elsewhere in this Proxy Statement, if elected, the
Eaton Nominees will, subject to their fiduciary responsibili-
ties as Directors of the Company, seek to cause the Company to
take all steps necessary to permit the Offer and the Merger to
be consummated, including without limitation redeeming or oth-
erwise making inapplicable to the Offer and the Merger the
Rights; if necessary, adopting a resolution approving the Offer
and the Merger for purposes of satisfying the Business Combina-
tion Condition; and, if necessary, adopting a by-law to provide
that Chapter 7B of the MBCA does not apply to the acquisition
of Shares pursuant to the Offer for purposes of satisfying the
Control Share Condition. However, all Eaton Nominees recognize
the fiduciary responsibilities they would have as Directors of
the Company if they are elected and therefore they would give
due consideration to any bona fide acquisition proposals sub-
mitted to the Company at a price higher than the price to be
paid in the Offer.
Although Eaton and the Purchaser do not presently
intend, in the event the Eaton Nominees are elected, to alter
the terms of the Offer, it is possible that, depending on the
facts and circumstances existing at the time, the terms of the
Offer might be altered in one or more respects. If Eaton and
the Purchaser should withdraw or materially amend the terms of
the Offer prior to the Annual Meeting, the Purchaser will dis-
seminate such information regarding such changes to the Company
shareholders as soon as practicable prior to the Annual
Meeting.
--------------------
15
TERMS AND CONDITIONS OF THE OFFER
On March 19, 1996, the Purchaser commenced the Offer.
As stated in the Offer to Purchase, the purpose of the Offer is
to acquire control of, and the entire equity interest in, the
Company and the Purchaser currently intends, as soon as practi-
cable following consummation of the Offer, to seek to have the
Company consummate the Merger.
The Offer is conditioned, among other things, upon
the following:
(1) The Minimum Condition. There must be validly
tendered and not properly withdrawn prior to the expira-
tion date of the Offer the Minimum Number of Shares.
(2) The Rights Condition. Under the Rights Condi-
tion, the Offer is conditioned upon the Rights having been
redeemed by the Company's Board, or the Purchaser must be
satisfied, in its sole discretion, that the Rights have
been invalidated or otherwise are inapplicable to the Of-
fer and the Merger.
According to the Rights Agreement as filed by the
Company as an exhibit to the Company's registration state-
ment on Form S-1 filed in connection with the Company's
initial public offering (the "Company's S-1"), in the event
that a person becomes the beneficial owner of 20% or more of
the then outstanding Shares (the "Flip-In Event"), each holder
of a Right will thereafter have the right to purchase, upon
exercise thereof at a price subject to adjustment of
$77.50 per Right (the "Purchase Price"), a number of
Shares which have a market value of two times the Purchase
Price or, with the permission of the Company, to surrender
such Rights in exchange for Shares having a market value
of half of the Purchase Price. In the event that at any
time following the Stock Acquisition Date (as hereinafter
defined) of a public announcement that a person, entity or
group of affiliated or associated persons, has become an
Acquiring Person (as hereinafter defined), the Company is
involved in a merger or other business combination trans-
action in which it is not the continuing or surviving cor-
poration, or the Company is the surviving entity and all
or part of the Shares are exchanged for stock or other
securities of another entity or for cash, or 50% or more
of the Company's assets or earning power is sold or trans-
ferred, each holder of a Right will thereafter have the
right to purchase, upon the exercise thereof at the Pur-
chase Price, common stock of the acquiring company which
has a market value of two times the Purchase Price (the
"Flip-Over"). Following a Flip-In Event or Flip-Over, any
16
Rights beneficially owned by an Acquiring Person or af-
filiates or associates of any Acquiring Person will im-
mediately become null and void. However, the Flip-In
Event would not be triggered if the acquisition of Shares
which would cause an Acquiring Person to become such was
pursuant to a tender or exchange offer for all outstanding
Shares at a price and on terms which, after receiving ad-
vice from one or more investment banking firms, the major-
ity of the non-officer Directors of the Company who are
not affiliated with an Acquiring Person determines to be
fair to its shareholder and otherwise in the best inter-
ests of the Company and its shareholders.
At any time prior to the Stock Acquisition Date, the
Company may redeem the Rights in whole but not in part at
a price (the "Redemption Price") of $0.01 per Right, sub-
ject to adjustment. The concurrence of a majority of the
Continuing Directors (as defined below) is required to
redeem the Rights if authorization for such redemption
occurs (i) on or after a time a person becomes an Acquir-
ing Person or (ii) on or after the date of a change (re-
sulting from a proxy or consent solicitation) in a major-
ity of the directors in office at the commencement of such
solicitation if any person who is a participant in such
solicitation, or any of its affiliates or associates, is
or might become an Acquiring Person or which would cause a
Flip-in Event or a Flip-Over unless, concurrent with such
solicitation, such person (or one or more of its affili-
ates or associates) is making a cash tender offer for all
Shares not beneficially owned by such person (or by its
affiliates and associates) (the "Cash Tender Offer Excep-
tion"). The term "Continuing Director" means any member
of the Company's Board of Directors who was a member of
the Board prior to the date of the Rights Agreement or has
been subsequently elected to the Board if such person was
recommended or approved by a majority of the Continuing
Directors, but does not include an Acquiring Person, any
affiliate or associate thereof or any representative of
any of the foregoing persons. Because the Purchaser is
making a cash tender offer for all outstanding Shares, the
Purchaser believes that the Cash Tender Offer Exception
applies to the Offer and thus the redemption of the Rights
following the election of the Eaton Nominees to the Board
of Directors of the Company will not require the
concurrence of a majority of the Continuing Directors.
Initially, Rights are attached to all certificates
representing Shares outstanding and no separate certifi-
cates representing Rights are distributed. The Rights
will separate from the Shares and a "Distribution Date"
for the Rights will occur upon the earlier of (i) the 10th
day after the public announcement (the date of such public
announcement being referred to as, the "Stock Acquisition
Date") that a person or group of affiliated or associated
17
persons (other than the Company, any subsidiary of the
Company, any employee benefit plan of the Company or any
of its subsidiaries or any of the specified exempt per-
sons) has acquired beneficial ownership of 20% or more of
the outstanding Shares (an "Acquiring Person") and (ii)
the 10th business day after (or such later date as may be
determined by the Board) the commencement of a tender of-
fer or exchange offer that would result in a person ben-
eficially owning 20% or more of the outstanding Shares.
Until the Distribution Date, the Rights will be trans-
ferred with and only with the Shares. Until the Distribu-
tion Date, the surrender for transfer of any of the cer-
tificates representing Shares (the "Share Certificates")
will also constitute the surrender for transfer of the
Rights associated with the Shares represented by such
Share Certificates. As soon as practicable following the
Distribution Date, separate certificates evidencing the
Rights ("Rights Certificates") will be mailed to holders
of record of Shares as of the close of business on the
Distribution Date. As of and after the Distribution Date,
such separate Rights Certificates alone will evidence the
Rights.
The foregoing description of the Rights Agreement is
qualified in its entirety by reference to the Rights
Agreement filed as an exhibit to the Company's S-1.
Eaton believes that currently the Rights are not ex-
ercisable, Rights Certificates have not been issued and
the Rights are evidenced by the Share Certificates. Eaton
believes that under the Rights Agreement, as a result of
the commencement of the Offer, the Distribution Date will
be as early as April 2, 1996, unless prior to that date
the Company's Board of Directors defers the Distribution
Date, redeems the Rights or amends the Rights Agreement to
make the Rights inapplicable to the Offer and the Merger.
Eaton and the Purchaser by letter dated March 19, 1996,
requested that the Board of Directors of the Company (i)
cause the Company to redeem all but not less than all of
the outstanding Rights pursuant to the terms of the Rights
Agreement or (ii) take all actions under the Rights Agree-
ment necessary to make the Rights inapplicable to the Of-
fer and the Merger.
If elected, the Eaton Nominees will, subject to their
fiduciary responsibilities, take action to redeem the
Rights or take such other action to invalidate the Rights
or otherwise make the Rights inapplicable to the Offer and
the Merger.
Eaton has commenced litigation against the Company
and its Directors in the United States District Court for
the Eastern District of Michigan, Southern Division,
18
seeking, among other things, an order requiring the Board
of Directors of the Company to redeem the Rights.
(3) The Business Combination Condition. The Offer
is conditioned upon the Purchaser being satisfied, in its
sole discretion, that the provisions of Chapter 7A are
inapplicable to the Merger and the acquisition of Shares
pursuant to the Offer, or the Merger having been approved
pursuant to Chapter 7A.
Chapter 7A provides, in general, that in order for a
Michigan corporation to enter into a Business Combination
(defined as a variety of transactions, including merger)
with an "Interested Shareholder" (as defined below) there
must be an advisory statement from the board of directors
and the Business Combination must be approved by a vote of
at least 90% of the votes of each class of the corpora-
tion's shares entitled to vote and by at least two-thirds
of the votes of each class entitled to vote, excluding the
shares beneficially owned by the Interested Shareholder
(the "Chapter 7A Voting Requirements"). The Chapter 7A
Voting Requirements will not apply to a Business Combina-
tion if, among other things, prior to the date any person
becomes an Interested Shareholder, the board of directors
of the corporation approves the Business Combination
(either specifically, generally, or by type). Except as
specified in Chapter 7A, an "Interested Shareholder" is
defined therein to mean any person who: (a) is the bene-
ficial owner of 10% of more of the voting power of the
outstanding voting stock of the corporation, or (b) is an
affiliate of the corporation and was the beneficial owner
of 10% or more of the voting power of the outstanding vot-
ing stock of the corporation at any time within two years
immediately prior to the relevant date.
The Chapter 7A Voting Requirements do not apply to
any Business Combination of a corporation, such as the
Company, which had an Interested Shareholder on the effec-
tive date of the chapter, whether or not such Business
Combination is with such Interested Shareholder. The
board of directors of any such corporation may, however,
elect, in whole or in part, to subject a Business Combina-
tion to the Chapter 7A Voting Requirements. Any such
election can be altered or repealed only by an amendment
to the corporation's articles of incorporation adopted by
the shareholders in accordance with the Chapter 7A Voting
Requirements.
In addition, the Chapter 7A Voting Requirements will
not apply to a Business Combination if five years have
passed from the date the Interested Shareholder became
such, and if, among other things, certain fair price tests
are satisfied and the consideration received by the share-
holders in connection with such Business Combination is
19
either cash or in the form paid by the Interested Share-
holder for shares of the same class or series of stock.
The Purchaser and Eaton believe that Chapter 7A does
not apply to the Company because the Company had an Inter-
ested Shareholder on the effective date of the chapter.
The Company's prospectus dated May 6, 1994 for the initial
public offering of the Shares (the "IPO Prospectus")
states that the Company has not elected to be subject to
Chapter 7A (or Chapter 7B, discussed below) and indicates
that the Company's Board of Directors may elect to be sub-
ject to such Chapters at any time without further share-
holder approval, although the Company has no current in-
tention to do so.
Eaton has commenced litigation against the Company
and its Directors in the United States District Court for
the Eastern District of Michigan, Southern Division, seek-
ing, among other things, an order that any action by the
Board of Directors of the Company to cause the Company to
become subject to Chapter 7A would constitute a breach of
fiduciary duty to the Company's shareholders and an in-
junction against enforcement by the defendants of Chapter
7A.
If elected, the Eaton Nominees will, subject to their
fiduciary responsibilities, take action to approve the
Offer and the Merger if necessary in order to satisfy the
Business Combination Condition.
(4) The Control Share Condition. The Offer is con-
ditioned upon the Purchaser being satisfied, in its sole
discretion, that the provisions of Chapter 7B are inap-
plicable to the acquisition of Shares pursuant to the Of-
fer.
Chapter 7B provides, in general, that shares of an
Issuing Public Corporation (which is defined as any corpo-
ration organized under the laws of Michigan which has (a)
at least 100 shareholders of record; (b) its principal
place of business, principal office or substantial assets
in Michigan; and (c) at least one of the following: (1)
more than 10% of its shareholders resident in Michigan,
(2) more than 10% of its shares owned of record by
Michigan residents, or (3) at least 10,000 shareholders
resident in Michigan) acquired in a Control Share Acquisi-
tion will only have such voting rights as are conferred in
a resolution approved by both (x) a majority of the votes
cast by holders of shares entitled to vote and a majority
of the votes cast by holders of shares of each class or
series entitled to vote and a majority of the votes cast
by the holders of shares of each class or series entitled
to vote, excluding the "Interested Shares." The Issuing
20
Public Corporation may, before any such control share
acquisition, elect not to be governed by this chapter by
adopting an amendment to the Issuing Public Corporation's
articles of incorporation or by-laws.
"Control Share Acquisition" means, in general, the
acquisition (other than pursuant to a merger or share exchange
agreement to which the Issuing Public Corporation is a party),
directly or indirectly, by any person of ownership of or the
power to direct the voting with respect to, issued and out-
standing "Control Shares" of an Issuing Public Corporation, and
all acquisitions of shares or the power to direct the voting of
shares within a 90-day period are considered to be the same
acquisition. "Control Shares" are shares which (but for the
provisions of the statute) would have voting rights and which,
when added to all other shares of such Issuing Public Corpora-
tion owned by such person or in respect of which that person
may direct the voting, would entitle such person, upon acquisi-
tion of such shares, to vote or direct the voting power of the
corporation in the election of directors within any of the
following ranges of such voting powers: (i) one-fifth or more
but less than one-third of all voting power; (ii) one-third or
more but less than a majority of all voting power; or (iii) a
majority of all voting power. "Interested Shares" means shares
of an Issuing Public Corporation that are entitled to vote upon
the grant of voting rights to Control Shares and the voting
power of which may be exercised by an acquiring person or
member of a group with respect to a Control Share Acquisition,
any officer of the Issuing Public Corporation or any employee
of the Issuing Public Corporation who is also a director of
such corporation.
The Purchaser and Parent do not believe that the Company
is an Issuing Public Corporation since neither its principal
place of business or its principal office nor, based on the
Company's publicly available information, are substantial as-
sets located in Michigan. Further, the Company may not satisfy
the eligibility requirements of Chapter 7B relating to share
ownership by Michigan residents; the Purchaser does not as of
the date hereof have information sufficient to determine
whether such eligibility requirements would be satisfied.
Parent has commenced litigation against the Company
and its Directors in the United States District Court for the
Eastern District of Michigan, Southern Division, seeking, among
other things, an order that Chapter 7B does not apply to the
Company or that its application to the Company would be uncon-
stitutional, and seeking an injunction against enforcing Chap-
ter 7B.
21
The foregoing summaries of Chapter 7A and Chapter 7B
do not purport to be complete and are qualified in their
entirety by reference to the provisions of Chapter 7A and
Chapter 7B.
The Offer is also subject to the other terms and con-
ditions which are described in the Offer to Purchase and the
related letter of transmittal, copies of which are available
from Georgeson at the addresses and telephone numbers set forth
on the back cover of this Proxy Statement. Eaton urges you to
obtain a copy of the Offer to Purchase, the letter of transmit-
tal and other Offer documents. This Proxy Statement is neither
a request for the tender of Shares nor an offer with respect
thereto. The Offer is being made only by means of the Offer to
Purchase and the related letter of transmittal.
IF ELECTED, THE EATON NOMINEES WILL SEEK TO CAUSE THE
COMPANY TO TAKE ALL STEPS NECESSARY, INCLUDING THE ACTIONS
SPECIFIED ABOVE, TO PERMIT THE OFFER AND THE MERGER TO PROCEED,
SUBJECT TO THEIR FIDUCIARY RESPONSIBILITIES AS DIRECTORS OF THE
COMPANY TO GIVE DUE CONSIDERATION TO ANY BONA FIDE ACQUISITION
PROPOSAL AT A PRICE HIGHER THAN THE PRICE TO BE PAID IN THE
OFFER.
--------------------
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement,
telephone or telecopier and in person. Solicitations may be
made by directors, officers, investor relations personnel and
other employees of Eaton, none of whom will receive additional
compensation for such solicitations, and by the Eaton Nominees.
Eaton will request banks, brokerage houses and other custodi-
ans, nominees and fiduciaries to forward all of its solicita-
tion materials to the beneficial owners of the Shares they hold
of record. Eaton will reimburse these record holders for cus-
tomary clerical and mailing expenses incurred by them in for-
warding these materials to their customers.
Eaton has retained Georgeson for solicitation and
advisory services in connection with the solicitation, for
which Georgeson is to receive a fee not to exceed $100,000,
together with reimbursement for its reasonable out-of-pocket
expenses. Georgeson will solicit proxies for the Annual Meet-
ing from individuals, brokers, banks, bank nominees and other
institutional holders. It is anticipated that Georgeson will
employ approximately 75 persons to solicit shareholders for the
Annual Meeting. Georgeson is also acting as Information Agent
in connection with the Offer, and in such capacity will receive
a reasonable and customary fee as well as reimbursement of
reasonable out-of-pocket expenses.
22
Smith Barney Inc. ("Smith Barney") is acting as
dealer manager in connection with the Offer and as Eaton's fi-
nancial advisor in connection with the proposed acquisition of
the Company. Eaton has agreed to pay Smith Barney a retainer
fee of $150,000 (the "Retainer Fee"), and an additional fee
(the "Transaction Fee") payable upon consummation of an acqui-
sition transaction between the Company and Eaton, including
without limitation consummation of the Offer. The Retainer Fee
will be credited against the Transaction Fee. The terms of
Smith Barney's engagement provide for certain expense reim-
bursement and the indemnification of Smith Barney and certain
related persons and entities against certain liabilities in
connection with its engagement including certain liabilities
under the federal securities laws. Smith Barney may from time
to time render various financial advisory, and investment bank-
ing services to Eaton and its affiliates for which it would be
paid customary fees. In connection with Smith Barney's engage-
ment as financial advisor, Eaton anticipates that employees of
Smith Barney may communicate in person, by telephone or other-
wise with a limited number of institutions, brokers or other
persons who are Company shareholders for the purpose of assist-
ing in the solicitation of proxies for the Annual Meeting.
Smith Barney will not receive any additional fee for or in con-
nection with such activities apart from the fees which it is
otherwise entitled to receive as described above.
The entire expense of soliciting proxies for the An-
nual Meeting is being borne by Eaton. Eaton will not seek re-
imbursement for such expenses from the Company. Costs inci-
dental to these solicitations of proxies include expenditures
for printing, postage, legal, public relations, soliciting,
advertising and related expenses and are expected to be ap-
proximately $[ ] in addition to the fees of Smith Barney
described above. Total costs incurred to date in furtherance
of or in connection with these solicitations of proxies are
approximately $[ ].
--------------------
OTHER INFORMATION
The Purchaser was organized in connection with the
Offer and has not carried on any activities to date other than
those incident to its formation and the commencement of the
Offer.
Eaton is an Ohio corporation. Eaton is a global
manufacturer of highly engineered products which serve vehicle,
industrial, construction, commercial and aerospace markets.
Principal products include truck transmissions and axles, en-
gine components, hydraulic products, electrical power distribu-
tion and control equipment, ion implanters and a wide variety
of controls.
23
Certain information about the directors and executive
officers of Eaton and certain employees and other representa-
tives of Eaton and the Purchaser who may also assist Georgeson
in soliciting proxies is set forth in the attached Schedule I.
Schedule II sets forth certain information relating to Shares
owned by Eaton, such individuals and the Eaton Nominees and
certain transactions between any of them or Eaton and the Com-
pany. Certain information regarding Shares held by the
Company's Directors, nominees, management and 5% shareholders
is contained in the Company Proxy Statement and is incorporated
herein by reference.
Eaton assumes no responsibility for the accuracy or
completeness of any information contained herein which is based
on, or incorporated by reference to, the Company's Proxy State-
ment.
PLEASE INDICATE YOUR SUPPORT OF THE EATON NOMINEES BY
COMPLETING, SIGNING AND DATING THE ENCLOSED WHITE ANNUAL MEET-
ING PROXY CARD AND RETURNING IT PROMPTLY TO EATON, C/O GEORGE-
SON & COMPANY INC., WALL STREET PLAZA, 88 PINE STREET, NEW
YORK, NEW YORK 10005 IN THE ENCLOSED ENVELOPE. NO POSTAGE IS
NECESSARY IF THE ENVELOPE IS MAILED IN THE UNITED STATES.
EATON CORPORATION
March [--], 1996
24
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
EATON AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF EATON. The name,
business address, present principal occupation or employment
and five-year employment history of each of the directors and
executive officers of Eaton are set forth below. Unless other-
wise indicated, the business address of each such director and
each such executive officer is 1111 Superior Avenue, Cleveland,
Ohio 44114. Unless otherwise indicated below, each occupation
set forth opposite an individual's name refers to employment
with Eaton. Except as indicated below, all directors and ex-
ecutive officers listed below are citizens of the United
States. The information below is as of March 20, 1996.
DIRECTORS
POSITION WITH EATON; PRINCIPAL
OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME; AGE EMPLOYMENT HISTORY; BUSINESS ADDRESS
--------- -------------------------------------
NEIL A. ARMSTRONG, 65 DIRECTOR SINCE 1981. Former Chairman
of Computing Technologies for Avia-
tion, Inc., a computer systems com-
pany, a position he held from 1982
until 1992. He is a director of Cin-
cinnati Milacron, Inc., Cinergy
Corp., RMI Titanium Co., Thiokol Cor-
poration and USX Corporation.
ERNIE GREEN, 57 DIRECTOR SINCE 1995. Founder, Presi-
dent and Chief Executive Officer of
EGI, Inc., a manufacturer of auto-
motive components. The business ad-
dress of EGI, Inc. is 1785 Big Hill
Road, Dayton, Ohio 45439. He is also
President of Florida Production Engi-
neering, Inc., a subsidiary of EGI.
He is a director of Acordia, Inc.,
Bank One, Dayton, N.A., DPL Inc. and
Duriron Company, Inc.
A. WILLIAM REYNOLDS, 62 DIRECTOR SINCE 1987. Chief Executive
Officer of Old Mill Group, a private
investment firm. The business ad-
dress of Old Mill Group is 1696 Geor-
getown Road, Unit E, Hudson, Ohio
44236. Former Chairman of GenCorp
Inc., a technology-based company with
positions in aerospace, automotive
and polymer products. Mr. Reynolds'
association with GenCorp began in
September, 1984, as President and
I-1
Chief Operating Officer. He was
Chief Executive Officer from August,
1985 to July, 1994 and served as
Chairman from January, 1987 through
March, 1995. Mr. Reynolds is a di-
rector of Boise Cascade Corporation,
Boise Cascade Office Products Corp.
and Stant Corp. and Chairman of the
Federal Reserve Bank of Cleveland.
CHARLES E. HUGEL, 67 DIRECTOR SINCE 1978. Former Chairman
and Chief Executive Officer of Com-
bustion Engineering, Inc., a provider
of products and services for the
power, process, automation, envi-
ronmental control and other markets.
Mr. Hugel became President and Chief
Executive Officer of Combustion Engi-
neering, Inc., in April, 1984 and
Chairman and Chief Executive Officer
in July, 1988. He was Chairman of
Asea Brown Boveri Inc. from January,
1990 to February, 1991 and, until his
retirement in December, 1991, was
advisor to the Chief Executive Of-
ficer. Mr. Hugel is a director of
Pitney Bowes Inc.
JOHN R. MILLER, 58 DIRECTOR SINCE 1985. President and
Chief Executive Officer of TBN Hold-
ings Inc., an environmental company
engaged primarily in the resource re-
covery and recycling business. The
business address of TBN Holdings Inc.
is Lander Center, Suite 110, 3550
Lander Road, Pepper Pike, Ohio 44124.
He was President, Chief Operating
Officer and a director of The Stan-
dard Oil Company from August, 1980
through March, 1986. Mr. Miller for-
merly served as Chairman of the Fed-
eral Reserve Bank of Cleveland and is
a director of American Waste Ser-
vices, Inc.
FURMAN C. MOSELEY, 61 DIRECTOR SINCE 1975. Chairman of
Sasquatch Publishing Company. The
business address of Sasquatch Pub-
lishing Company is c/o Simpson In-
vestment Company, 1201 Third Avenue,
Suite 4900, Seattle, Washington
98101. Former president of Simpson
Investment Company, holding company
for Simpson Paper Company and Simpson
I-2
Timber Company. He was Chairman of
Simpson Paper from 1969 to January,
1995 and retired as President of Sim-
pson Investment Company in July,
1995. Mr. Moseley is a director of
Owens-Corning Fiberglas Corporation.
VICTOR A. PELSON, 58 DIRECTOR SINCE 1994. Executive Vice
President of AT&T and Chairman of
AT&T's Global Operations Team. The
business address of AT&T is 295 North
Maple Avenue, Basking Ridge, New Jer-
sey 07920. Mr. Pelson began his ca-
reer with AT&T in 1959 and has served
in many executive positions, most
recently as Group Executive and
President responsible for AT&T's Com-
munications Services Group. He is a
director of AT&T, as well as a member
of its Management Executive Commit-
tee, and a director of United Parcel
Service. Mr. Pelson will retire from
AT&T at the end of March, 1996.
ALEXANDER M. CUTLER, 44 DIRECTOR SINCE 1993. President and
Chief Operating Officer of Eaton.
Mr. Cutler joined Cutler-Hammer, Inc.
in 1975, which was subsequently ac-
quired by Eaton, and became President
of Eaton's Industrial Group in 1986.
Mr. Cutler was named President of the
Controls Group in 1989, Executive
Vice President - Operations in 1991,
and was elected Executive Vice Presi-
dent and Chief Operating Officer -
Controls in September, 1993 and as-
sumed his current position in Septem-
ber, 1995.
PHYLLIS B. DAVIS, 64 DIRECTOR SINCE 1991. Former Senior
Vice President, Corporate Affairs of
Avon Products, Inc., a manufacturer
and marketer of cosmetics, toiletries
and jewelry. Mrs. Davis joined Avon
in 1968, advanced to Group Vice
President (U.S.) in 1977 and was head
of its sales and distribution from
1985 to 1988. She became Corporate
Senior Vice President of Business
Development in 1989 and served as
Senior Vice President, Corporate Af-
fairs from 1990 until her retirement
in September, 1991. Mrs. Davis is a
director of BellSouth Corporation and
I-3
The TJX Companies, Inc., and a trust-
ee of various open-end mutual funds
in the Fidelity Group.
STEPHEN R. HARDIS, 60 DIRECTOR SINCE 1983. Chairman and
Chief Executive Officer of Eaton.
Mr. Hardis served as Executive Vice
President - Finance and Administra-
tion prior to April, 1986, was
elected Vice Chairman in 1986 and
designated Chief Financial and Admin-
istrative Officer in and became Chief
Executive Officer in September, 1995
and Chairman in January, 1996. He
joined Eaton in 1979. Mr. Hardis is
a director of First Union Real Estate
Investments Trust, KeyCorp, Nordson
Corporation and Progressive Corpora-
tion.
GARY L. TOOKER, 56 DIRECTOR SINCE 1992. Vice Chairman
and Chief Executive Officer of Mo-
torola, Inc., a manufacturer of elec-
tronics equipment. The business ad-
dress of Motorola, Inc. is 1303 East
Algonquin Road, Schaumburg, Illinois
60196. Mr. Tooker joined Motorola in
1962 and advanced to the position of
Senior Executive Vice President and
Chief Corporate Staff Officer in
1986. He became Chief Operating Of-
ficer in 1988, President in 1990 and
Vice Chairman and Chief Executive
Officer in December, 1993.
EXECUTIVE OFFICERS
Stephen R. Hardis Chairman (January 1, 1996) and Chief
Executive Officer (September 1,
1995); Director.
Alexander M. Cutler President and Chief Operating Officer
(September 1, 1995); Director.
Gerald L. Gherlein Executive Vice President and General
Counsel (September 4, 1991).
Brian R. Bachman Senior Vice President--Semiconductor
and Specialty Systems (January 1,
1996).
Joseph L. Becherer Senior Vice President--Cutler-Hammer
(September 1, 1995). The business
I-4
address of Mr. Becherer is Five
Parkway Center, 875 Greentree Road,
Pittsburgh, PA 15220.
Robert J. McCloskey Senior Vice President--Controls and
Hydraulics (September 1, 1995).
Thomas W. O'Boyle Senior Vice President--Truck
Components (September 1, 1995).
Larry M. Oman Senior Vice President--Automotive
Components (September 1, 1995). The
business address of Mr. Oman is 26101
Northwestern Highway, Southfield,
Michigan 48076.
John M. Carmont Vice President and Treasurer (Decem-
ber 1, 1981). (Citizen of the United
Kingdom.)
Susan J. Cook Vice President - Human Resources
(January 16, 1995).
Adrian T. Dillon Vice President - Chief Financial and
Planning Officer (September 1, 1995).
Patrick X. Donovan Vice President - International (April
27, 1988).
Earl R. Franklin Secretary and Associate General Coun-
sel (September 1, 1991).
John W. Hushen Vice President - Corporate Affairs
(August 1, 1991).
Stanley V. Jaskolski Vice President - Technical Management
(October 1, 1990).
Ronald L. Leach Vice President - Accounting (December
1, 1981).
William T. Muir Vice President - Manufacturing Tech-
nologies (April 1, 1989).
Derek R. Mumford Vice President - Information Tech-
nologies (April 1, 1992). (Citizen
of the United Kingdom.)
Billie K. Rawot Vice President and Controller (March
1, 1991).
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER.
The name, business address, present principal occupation or
I-5
employment and five-year employment history of the director and
each of the executive officers of the Purchaser are set forth
below. The business address of the director and each of the
executive officers is 1111 Superior Avenue, Cleveland, Ohio
44114. Unless otherwise indicated below, each occupation set
forth opposite an individual's name refers to employment with
the Purchaser. Except as indicated below, the director and
each of the executive officers listed below are citizens of the
United States.
DIRECTORS
POSITION WITH PURCHASER;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME; BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
---------------------- --------- -------------------------
EARL R. FRANKLIN, 52 DIRECTOR SINCE 1996. Vice President
and Secretary since March 14, 1996.
He is also Secretary and Associate
General Counsel of Eaton Corporation
(since September 1, 1991).
EXECUTIVE OFFICERS
Thomas W. O'Boyle President and Assistant Secretary
(March 14, 1996). He is also Senior
Vice President - Truck Components of
Eaton Corporation (since September 1,
1995). Mr. O'Boyle served as Vice
President - Truck Components, North
America of Eaton Corporation from
January, 1991 to September, 1991 and
Vice President - Truck Components
Operations/Worldwide of Eaton Corpo-
ration from September, 1991 to Sep-
tember 1, 1995.
John M. Carmont Vice President-Finance, Assistant
Secretary and Treasurer (March 14,
1996. He is also Vice President and
Treasurer of Eaton Corporation (since
December 1, 1981). (Citizen of the
United Kingdom.)
Earl R. Franklin Vice President and Secretary (March
14, 1996). He is also Secretary and
Associate General Counsel of Eaton
Corporation (since September 1,
1991). Director.
I-6
SCHEDULE II
SHARES HELD BY EATON, ITS DIRECTORS AND EXECUTIVE OFFICERS,
OTHER REPRESENTATIVES OF EATON AND THE EATON NOMINEES AND CER-
TAIN TRANSACTIONS BETWEEN ANY OF THEM AND THE COMPANY.
Eaton beneficially owns an aggregate of 805,000 Shares. The
funds to purchase such Shares were provided by sales of com-
mercial paper in the amount of the purchase price of the Shares
plus commission and were purchased by Eaton for cash in open-
market transactions on the New York Stock Exchange, as follows:
DATE NUMBER OF SHARES PRICE PER SHARE
---- ---------------- ---------------
February 5, 1996 200,000 $7.25
March 5, 1996 20,000 $7.25
March 6, 1996 100 $7.25
March 6, 1996 49,900 $7.375
March 7, 1996 31,400 $7.375
March 7, 1996 18,600 $7.25
March 7, 1996 95,500 $7.125
March 7, 1996 34,500 $7.00
March 8, 1996 37,800 $6.875
March 8, 1996 16,000 $7.00
March 8, 1996 10,000 $7.125
March 8, 1996 165,900 $7.25
March 8, 1996 100 $7.25
March 11, 1996 50,000 $7.125
March 12, 1996 53,200 $7.25
March 12, 1996 2,500 $7.125
March 12, 1996 11,500 $7.375
March 13, 1996 8,000 $7.50
[ ] and [ ] have agreed to serve as the prox-
ies on the WHITE Annual Meeting proxy card.
Except as disclosed in this Schedule, none of Eaton,
the Purchaser, or the Eaton Nominees owns any securities of the
Company or any subsidiary of the Company, beneficially or of record,
has purchased or sold any of such securities within the past two
years or is or was within the past year a party to any contract,
arrangement or understanding with any person with respect to any
such securities. Except as disclosed in this Schedule, to the best
knowledge of Eaton, its directors and executive officers, the
employees and other representatives of Eaton named in Schedule
I and the Eaton Nominees, none of their associates beneficially
owns, directly or indirectly, any securities of the Company.
Smith Barney and its affiliates, in the ordinary
course of business, may actively trade the securities of Eaton
and the Company, for their own account and for the account of
II-1
customers and, accordingly, may at any time have a long or
short position in such securities.
Other than as disclosed in this Schedule and in the
other parts of the Proxy Statement, to the best knowledge of
Eaton, none of Eaton, any of its directors or executive
officers, the Purchaser, its directors or any of its executive
officers, the employees or other representatives of Eaton named
in Schedule I or the Eaton Nominees has any substantial inter-
est, direct or indirect, by security holdings or otherwise, in
any matter to be acted upon at the Annual Meeting. The Eaton
Nominees may be deemed to have an interest in any business
which may be proposed by Eaton at the Annual Meeting by virtue
of ownership, if any, of common shares of Eaton with a par
value of $.50 each (the "Eaton Shares"). As of the date
hereof, their beneficial ownership of Eaton Shares is as
follows:
Eaton Shares
Name of Nominee Beneficially Owned
--------------- ------------------
Alan E. Best 24,461
William E. Butler 267,865
John M. Carmont 31,673
Archie M. Frame 100
LeMoyne G. Loseke -0-
Thomas W. O'Boyle 42,466
John S. Rodewig 175,788
Other than as disclosed in this Schedule and in the
other parts of the Proxy Statement, to the knowledge of Eaton,
none of Eaton, any of its directors or executive officers, the
Purchaser, its directors or any of its executive officers, the
employees or other representatives of Eaton named in Schedule I
or the Eaton Nominees is, or has been within the past year, a
party to any contract, arrangement or understanding with any
person with respect to any class of securities of the Company,
including but not limited to joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or guaran-
tees of profit, division of losses or profits, or the giving or
withholding of proxies.
Other than as set forth in this Schedule or other
parts of the Proxy Statement and except for the Offer, to the
knowledge of Eaton, none of Eaton, any of its directors or its
executive officers, the Purchaser, its directors or any of its
executive officers, the employees or other representatives of
Eaton named in Schedule I or the Eaton Nominees or any of their
associates have had or will have a direct or indirect material
interest in any transaction or series of similar transactions
since the beginning of Eaton's last fiscal year or any cur-
rently proposed transactions, or series of similar transac-
tions, to which the Company or any of its subsidiaries was or
is to be a party in which the amount involved exceeds $60,000.
II-2
In 1987, Eaton acquired certain United States based business
and related assets from the Company and entered into a long
term manufacturing agreement (the "Manufacturing Agreement")
with the Company. Under the terms of the Manufacturing
Agreement the Company agreed to supply Eaton with its worldwide
requirements for certain manual transmissions for medium duty
trucks for a minimum term of ten years. As part of this ar-
rangement, (i) Clark and the Company sold to Eaton all of the
technical rights and tooling designs for the medium duty truck
transmissions then being produced by the Company including the
related service parts ("Manufactured Products"), (ii) the Com-
pany agreed to supply Eaton with its worldwide requirements for
the Manufactured Products, (iii) Eaton agreed to license to the
Company the technical rights and tooling design for the Manu-
factured Products for the duration of the Manufacturing Agree-
ment, (iv) for the duration of the Manufacturing Agreement (and
for three years after the termination of the Manufacturing
Agreement if termination is the result of a breach by the Com-
pany), the Company agreed not to design, manufacture or sell
manual transmissions for medium duty trucks that compete with
the Manufactured Products, and (v) the Company agreed to assist
Eaton with the marketing of the Manufactured Products in Bra-
zil, in return for which Eaton agreed to pay the Company a com-
mission of two percent of the net sales price for the Manufac-
tured Products sold in Brazil. That commission has since been
reduced to 1.5%.
The Manufacturing Agreement provides that it may be
terminated by either party upon three-years' prior written no-
tice. In February 1994, the Company and Eaton executed an
amendment to the Manufacturing Agreement which provides, among
other things, that the earliest possible notice date would be
March 1997 and the earliest possible termination date would be
March 2000. The Manufacturing Agreement may also be terminated
upon a default by any party or upon the occurrence of certain
bankruptcy, force majeure and government expropriation events.
The Company's right to use the technical rights and tooling
design for the Manufactured Products will cease at the time the
Manufacturing Agreement is terminated. Upon termination of the
Manufacturing Agreement by Eaton upon such three-years' notice
or as a result of certain events relating to Eaton, the Company
will have the right to cause Eaton to purchase the equipment
owned and used by the Company solely to manufacture the
Manufactured Products. If the Company exercises this right,
Eaton will be required to purchase such equipment at the lesser
of the book value and the fair market value of the equipment.
Upon termination of the Manufacturing Agreement by the Company
upon such three years' notice or as a result of certain events
relating to the Company, Eaton will have the right (but not the
obligation) to purchase such equipment at a purchase price
equal to the book value of the equipment.
As a result of the contractual arrangements between
Eaton and the Company described above, Eaton has made payments
II-3
to the Company during the past three years as follows: 1995 -
$77.6 million, 1994 - $73.2 million and 1993 - $58.1 million.
The amount of the payments proposed to be made in 1996 by Eaton
and its subsidiaries to the Company and its subsidiaries will
depend upon business conditions, will be made for products pro-
vided pursuant to the Manufacturing Agreement and for assis-
tance with marketing efforts in Brazil as described above, and
should be slightly less than in 1995. As a result of purchases
of products and services by Eaton and its subsidiaries from the
Company and its subsidiaries in the ordinary course of business
pursuant to the arrangements described above, Eaton and its
subsidiaries have been indebted to the Company and its subsid-
iaries in varying amounts. This indebtedness is subject to
usual trade terms, and, except for a small portion (estimated
to be about $400,000) of the Brazilian indebtedness which bears
interest at the rate of 1.5% per month, does not bear interest.
The maximum amount of this indebtedness at any time since the
beginning of 1995 was approximately $4,379,000 in Brazil and
approximately $4,556,000 in the United States. The amount of
this indebtedness as of the most recent practical date was ap-
proximately $2.3 million in Brazil and $3.74 million in the
United States.
Eaton and its subsidiaries made payments for property
and services to the Company and its subsidiaries in 1995, and
propose to make further payments in 1996. These payments are
described above. The amount of these payments in 1995 was
$77.6 million. The amount of these payments proposed to be
made in 1996 will depend upon business conditions, will be made
for products provided pursuant to the Manufacturing Agreement
and for assistance with marketing efforts in Brazil as de-
scribed above, and should be slightly less than in 1995. As a
result of purchases of products and services by Eaton and its
subsidiaries from the Company and its subsidiaries in the ordi-
nary course of business pursuant to the arrangements described
above, Eaton and its subsidiaries have been indebted to the
Company and its subsidiaries in varying amounts. This indebt-
edness is subject to usual trade terms, and, except for a small
portion (estimated to be about $400,000) of the Brazilian in-
debtedness which bears interest at the rate of 1.5% per month,
does not bear interest. The maximum amount of this indebted-
ness at any time since the beginning of 1995 was approximately
$4,379,000 in Brazil and approximately $4,556,000 in the United
States. The amount of this indebtedness as of the most recent
practical date was approximately $2.3 million in Brazil and
$3.74 million in the United States.
Other than as set forth in this Schedule and in the
other parts of the Proxy Statement, to the knowledge of Eaton,
none of Eaton, any of its directors or executive officers, the
Purchaser, its director or any of its executive officers, the
employees or other representatives of Eaton named in Schedule I
or the Eaton Nominees, or any of their associates, has any ar-
rangements or understandings with any person or persons with
II-4
respect to any future employment by the Company or its affili-
ates or with respect to any future transactions to which the
Company or any of its affiliates will or may be a party.
To the knowledge of Eaton, no occupation or employ-
ment was carried on by any of the Eaton Nominees with the Com-
pany or any corporation or organization which is or was a sub-
sidiary or other affiliate of the Company and none of the Eaton
Nominees has ever served on the Company Board.
II-5
IMPORTANT
Your proxy is important. No matter how many Shares
you own, please give Eaton your proxy FOR the election of the
Eaton Nominees by:
MARKING the enclosed WHITE Annual Meeting proxy card,
SIGNING the enclosed WHITE Annual Meeting proxy card,
DATING the enclosed WHITE Annual Meeting proxy card and
MAILING the enclosed WHITE Annual Meeting proxy card TODAY
in the envelope provided (no postage is required if mailed
in the United States).
If you have already submitted a proxy to the Company
for the Annual Meeting, you may change your vote to a vote FOR
the election of the Eaton Nominees by marking, signing, dating
and returning the enclosed WHITE proxy card for the Annual
Meeting, which must be dated after any proxy you may have sub-
mitted to the Company. Only your latest dated proxy for the
Annual Meeting will count at such meeting.
If you have any questions or require any additional
information concerning this Proxy Statement, the Offer or the
proposal by Eaton to acquire the Company, please contact
Georgeson & Company Inc. at the address set forth below.
Additional copies of this Proxy Statement, the proxy card, the
Offer to Purchase and related documents may be obtained by con-
tacting Georgeson at the numbers below. IF ANY OF YOUR SHARES
ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK NOMINEE OR
OTHER INSTITUTION, ONLY IT CAN VOTE SUCH SHARES AND ONLY UPON
RECEIPT OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE
CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT
THAT PERSON TO EXECUTE THE WHITE ANNUAL MEETING PROXY CARD.
GEORGESON & COMPANY INC.
WALL STREET PLAZA
88 PINE STREET
NEW YORK, NEW YORK 10005
(212) 440-9800 (CALL COLLECT)
OR
CALL TOLL FREE (800) 223-2064
PRELIMINARY COPIES
CAPCO AUTOMOTIVE PRODUCTS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY EATON CORPORATION
The undersigned shareholder of CAPCO Automotive Prod-
ucts Corporation hereby appoints each of [ ] and [ ]
and each of them with full power of substitution, for and in
the name of the undersigned, to represent and to vote, as des-
ignated below, all shares of common stock of CAPCO Automotive
Products Corporation that the undersigned is entitled to vote
if personally present at the 1996 Annual Meeting of Sharehold-
ers of CAPCO Automotive Products Corporation, and at any ad-
journment or postponement thereof. The undersigned hereby re-
vokes any previous proxies with respect to the 1996 Annual
Meeting of Shareholders of CAPCO Automotive Products
Corporation, including any adjournment or postponement thereof.
EATON RECOMMENDS A VOTE FOR PROPOSAL 1.
(Please mark each proposal with an "X" in the appropriate box)
1. ELECTION OF DIRECTORS:
Election of Alan E. Best, William E. Butler, John M. Carmont,
LeMoyne G. Loseke, Thomas W. O'Boyle, and John S. Rodewig as
Directors each of whose term expires in 1997.
FOR ALL NOMINEES WITHHOLD AUTHORITY
(EXCEPT AS MARKED BELOW) / / FOR ALL NOMINEES / /
(INSTRUCTION: To withhold authority to vote for one or more
nominees, mark FOR above and print the name(s) of the person(s)
with respect to whom you wish to withhold authority to vote in
the space provided below.)
---------------------------------------------------------------
2. APPOINTMENT OF PRICE WATERHOUSE LLP AS 1996 INDEPENDENT AC-
COUNTANTS
FOR / / AGAINST / / ABSTAIN / /
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEET-
ING OR ANY ADJOURNMENT THEREOF, IF SUCH OTHER BUSINESS AD-
VERSELY AFFECTS EATON.
(Continued on other side)
(Continued from other side)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN
THE ENCLOSED ENVELOPE PROVIDED.
This Proxy, when properly executed, will be voted in the manner
marked herein by the undersigned shareholder.
IF NO MARKING IS MADE, THIS PROXY WILL BE DEEMED TO BE A DIREC-
TION TO VOTE FOR PROPOSAL 1 AND FOR PROPOSAL 2.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS
HEREON.
--------------------------------
(Signature)
--------------------------------
(Signature if jointly held)
--------------------------------
(Title)
Dated---------------------------
TO VOTE IN ACCORDANCE WITH When shares are held by joint
EATON'S RECOMMENDATION, JUST tenants, both should sign.
SIGN AND DATE THIS PROXY; NO When signing as attorney-in-
BOXES NEED TO BE CHECKED. fact, executor, administrator,
trustee, guardian, corporate
officer or partner, please
give full title as such. If a
corporation, please sign in
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.