Transportation Technologies Industries
February 3, 2000
Dear Stockholder:
On behalf of the Board of Directors of Transportation Technologies
Industries, Inc. (the "Company"), I am pleased to inform you that the Company
has entered into an Agreement and Plan of Merger, dated as of January 28, 2000
(the "Merger Agreement"), with Transportation Acquisition I Corp.
("Acquisition"), a company formed by an investor group led by members of senior
management of the Company, including myself and Xxxxxx X. Xxxxxx, our President
and Chief Operating Officer. The Merger Agreement provides for the acquisition
of the Company by the management investor group.
Acquisition and the Company today have commenced a joint cash tender offer
(the "Offer") for all outstanding shares of common stock, including the
associated preferred share purchase rights, of the Company (the "Shares") at a
price of $21.50 per Share, net to the seller in cash, without interest.
Following the successful completion of the Offer, upon the terms and subject
to the conditions contained in the Merger Agreement, Acquisition will be merged
with and into the Company (the "Merger"), with the Company as the surviving
corporation. At the effective time of the Merger, each remaining issued and
outstanding Share (other than shares owned by Acquisition and members of the
management investor group) will be converted into the right to receive $21.50 in
cash, subject to dissenters' rights.
YOUR BOARD OF DIRECTORS, AFTER RECEIVING THE UNANIMOUS RECOMMENDATION OF A
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS COMPRISED ENTIRELY OF INDEPENDENT
DIRECTORS (THE "SPECIAL COMMITTEE"), HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, HAS
DETERMINED THAT THE TERMS OF THE MERGER AND THE OFFER ARE ADVISABLE, FAIR TO AND
IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS (OTHER THAN ACQUISITION AND
MEMBERS OF THE MANAGEMENT INVESTOR GROUP), AND RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at their recommendations, the Special Committee and the Board of
Directors gave careful consideration to the factors described in the enclosed
Offer to Purchase, which is incorporated by reference in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9, each of which is being
filed today with the Securities and Exchange Commission. Among the factors
considered was the written opinion of Xxxxxxx Xxxxx, Xxxxxx, Xxxxxx & Xxxxx
Incorporated, the Special Committee's financial advisor, that subject to the
assumptions, factors and limitations set forth in the opinion, the $21.50 per
Share in cash consideration to be paid in the Offer and the Merger is fair to
the holders of common stock (other than Acquisition and the management investor
group) from a financial point of view. Additional information with respect to
the Special Committee's and the Board's recommendations and the background of
the transaction is contained in the enclosed Offer to Purchase.
In addition to the Offer to Purchase and the Schedule 14D-9, enclosed are
various related materials relating to the Offer, including a Letter of
Transmittal to be used for tendering Shares in the Offer if you are the record
holder of Shares. The Offer to Purchase and the related materials set forth the
terms and conditions for the Offer and provide instructions on how to tender
your Shares. If you need assistance with the tendering of your Shares, please
contact the information agent for the Offer, MacKenzie Partners, Inc., at its
address or telephone number appearing on the back cover of the Offer to
Purchase. WE URGE YOU TO READ AND CONSIDER THE ENCLOSED MATERIALS CAREFULLY
BEFORE MAKING YOUR DECISION WITH RESPECT TO TENDERING YOUR SHARES PURSUANT TO
THE OFFER.
Very truly yours,
/s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx
Chairman and
Chief Executive Officer
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Name of Subject Company)
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
479477101
(CUSIP Number of Class of Securities)
XXXXXX X. XXXXX
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
000 X. XXXXXXXX XXXXXX, XXXXX 0000
XXXXXXX, XXXXXXXX 00000
(000) 000-0000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of the Person(s) Filing
Statement)
------------------------
COPIES TO:
XXXXXX X. XXXX, ESQ. XXXXXX X. XXXXXX, ESQ.
SKADDEN, ARPS, SLATE, XXXXXXX & XXXX LLP XXXXX XXXX & XXXXXXXX
FOUR TIMES SQUARE 000 XXXXXXXXX XXXXXX
XXX XXXX, XXX XXXX 00000 XXX XXXX, XXX XXXX 00000
TELEPHONE: (000) 000-0000 TELEPHONE: (000) 000-0000
TELECOPIER: (000) 000-0000 TELECOPIER: (000) 000-0000
/ / Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ITEM 1. SUBJECT COMPANY INFORMATION
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is Transportation
Technologies Industries, Inc., a Delaware corporation (together with its
subsidiaries, where applicable, the "Company"). The address of the principal
executive offices of the Company is 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxxxxx 00000. The telephone number of the principal executive offices
of the Company is (000) 000-0000. The title of the class of equity securities to
which this Schedule 14D-9 relates is common stock, par value $0.01 per share,
including the associated preferred share purchase rights.
ITEM 2. IDENTITY AND BACKGROUND OF FILING PERSON
(a) SUBJECT COMPANY INFORMATION. The name, address and telephone number of
the Company, which is the person filing the Schedule 14D-9, are set forth in
Item 1 above.
(b) IDENTITY AND BACKGROUND OF FILING PERSON. This Statement relates to a
joint tender offer by Transportation Acquisition I Corp., a Delaware corporation
("Acquisition"), and the Company disclosed in a tender offer statement on
Schedule TO (the "Schedule TO") dated February 3, 2000, to purchase all
outstanding shares of common stock, including the associated preferred share
purchase rights, of the Company (the "Shares") at a price of $21.50 per Share,
net to the seller in cash, without interest (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase dated
February 3, 2000 (the "Offer to Purchase"), a copy of which is attached as
Exhibit (a)(1) hereto, and the related Letter of Transmittal, a copy of which is
attached as Exhibit (a)(2) hereto (which, as may be amended from time to time,
together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 28, 2000 (the "Merger Agreement"), between the Company and Acquisition.
The Merger Agreement provides that, among other things, as promptly as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction or waiver, where appropriate, of other conditions set forth in the
Merger Agreement, Acquisition will be merged with and into the Company (the
"Merger"), with the Company continuing as the surviving corporation (the
"Surviving Company"). A copy of the Merger Agreement is attached hereto as
Exhibit (e)(1) and is incorporated by reference herein.
ITEM 3. PAST CONTRACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS
For a description of certain contracts, agreements, arrangements or
understandings and any actual or potential conflicts of interests between the
Company or its affiliates and (1) the Company's executive officers, directors or
affiliates, or (2) Acquisition or its respective executive officers, directors
or affiliates, see "SPECIAL FACTORS--The Merger Agreement; Interests of Certain
Persons in the Transactions" in the Offer to Purchase, which is incorporated by
reference herein, and the Information Statement which is attached in Schedule I
to this Schedule 14D-9 and incorporated by reference herein.
A summary of the material provisions of the Merger Agreement is included in
"SPECIAL FACTORS--The Merger Agreement" in the Offer to Purchase, which is
incorporated by reference herein. The summary of the Merger Agreement contained
in the Offer to Purchase is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Exhibit (e)(1) and is
incorporated by reference herein.
In connection with the Merger Agreement, the Company and Acquisition have
entered into commitment letters providing for senior secured financing, senior
subordinated financing and preferred equity financing (the "Financing"). The
Financing will be used to consummate the Offer and the Merger and to pay related
fees and expenses. A summary of the material provisions of the Financing is
included in "SPECIAL FACTORS--Financing of the Transactions" in the Offer to
Purchase, which is incorporated by reference herein.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. At a meeting held on
January 28, 2000, the Company's Board of Directors, after receiving the
unanimous recommendation of a special committee of the Board of Directors
comprised entirely of independent directors (the "Special Committee"), approved
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, and determined that the transactions contemplated by the
Merger Agreement, including the Offer and the Merger, are advisable, fair to and
in the best interests of the Company's stockholders (other than Acquisition,
members of the management investor group and their affiliates).
The Company's Board of Directors recommends that the stockholders accept the
Offer and tender their Shares pursuant to the Offer.
A letter to the stockholders communicating the Board of Directors'
recommendation and a press release announcing the commencement of the Offer are
filed herewith as Exhibits (a)(3) and (a)(4), respectively, and are incorporated
by reference herein.
(b) REASONS. The information set forth in "SPECIAL FACTORS--Background of
the Transactions; Recommendation of the Board of Directors; Fairness of the
Transactions" in the Offer to Purchase, which is incorporated by reference
herein, sets forth the reasons for the Board of Directors' position. Xxxxxxx
Xxxxx, Xxxxxx, Xxxxxx & Xxxxx Incorporated, financial advisor to the Special
Committee ("Xxxxxxx Xxxxx"), has delivered to the Special Committee its opinion,
dated as of January 28, 2000, to the effect that, as of such date and based upon
and subject to certain assumptions and matters stated therein, the Offer Price
is fair, from a financial point of view, to the stockholders of the Company
(other than Acquisition, the members of the management investor group and their
affiliates). A copy of the Xxxxxxx Xxxxx opinion is attached hereto as
Exhibit (e)(2) and incorporated by reference herein.
(c) INTENT TO TENDER. To the Company's knowledge after reasonable inquiry,
Xx. X. Xxxxxx Xxxxxx and Xx. Xxxxxxx X. Xxxxxxx, directors of the Company,
currently intend to tender their shares pursuant to the Offer. To the Company's
knowledge after reasonable inquiry, no other executive officer, director,
affiliate or subsidiary of the Company currently intends to tender his shares
pursuant to the Offer.
Pursuant to the Merger Agreement, certain members of the Company's
management (and possibly other employees of the Company) will have the right to
retain an equity interest in the Company following the Offer and the Merger.
Such members of management (and other employees) are collectively referred to
herein as the "Continuing Stockholders." For a further description of the
Continuing Stockholders' retained interests, see "SPECIAL FACTORS--The Merger
Agreement; Interests of Certain Persons in the Transactions; Retained Interest
of Continuing Stockholders" in the Offer to Purchase, which is incorporated by
reference herein.
ITEM 5. PERSON/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED
Pursuant to the terms of an engagement letter, dated as of January 11, 2000,
the Special Committee engaged Xxxxxxx Xxxxx to act as its financial advisor in
connection with various possible transactions, including transactions
contemplated by the Merger Agreement (a "Business Combination"). As part of its
role as financial advisor, Xxxxxxx Xxxxx delivered a fairness opinion to the
Special Committee. Pursuant to the engagement letter, Xxxxxxx Xxxxx will receive
from the Company an aggregate financial advisory fee, contingent upon the
closing of a Business Combination, equal to $2,000,000 plus 5% of the aggregate
purchase price in excess of $20.00 per share paid in such Business Combination.
The Company has also agreed to reimburse Xxxxxxx Xxxxx for reasonable
out-of-pocket expenses, including, without limitation, the reasonable fees and
disbursements of its legal counsel, and to indemnify Xxxxxxx Xxxxx and related
parties against certain liabilities, including liabilities under the federal
securities laws arising out of Xxxxxxx Xxxxx'x engagement.
2
The Company and Acquisition have retained MacKenzie Partners, Inc. to act as
the information agent (the "Information Agent") in connection with the Offer.
The Information Agent may contact holders of Shares by mail, telephone,
facsimile, telegraph and personal interviews and may request brokers, dealers
and other nominee stockholders to forward materials to the beneficial owners of
Shares. The Information Agent will receive reasonable and customary compensation
for its services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
The Company and Acquisition have engaged CIBC World Markets Corp. and First
Union Securities, Inc. to act as the dealer managers (the "Dealer Managers") in
connection with the Offer. The Company and Acquisition have agreed to reimburse
the Dealer Managers for all reasonable out-of-pocket fees, expenses and costs,
including reasonable fees and expenses of legal counsel, and to indemnify the
Dealer Managers and certain related persons against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person or class of persons to
make solicitations or recommendations on its behalf with respect to the Offer.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
To the Company's knowledge, no transactions in the Shares, other than
ordinary course purchases under the Company's 401(k) savings plan, have been
effected during the past 60 days by the Company or its executive officers,
directors, affiliates or subsidiaries, or by Acquisition or its executive
officers, directors, affiliates or subsidiaries.
ITEM 7. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS
(a) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which relate
to a tender offer or other acquisition of the Company's securities by the
Company, any subsidiary of the Company or any other person.
(b) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which relate
to, or would result in, (i) an extraordinary transaction, such as a merger,
reorganization or liquidation, involving the Company or any subsidiary of the
Company, (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company, or (iii) any material change in the
present dividend rate or policy, or indebtedness or capitalization of the
Company.
(c) Except as indicated in Items 3 and 4 above, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the matters referred
to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION
(a) INFORMATION PROVIDED PURSUANT TO RULE 14F-1 UNDER THE EXCHANGE ACT. The
Information Statement attached as Schedule I to this Schedule 14D-9 is being
furnished to the Company's stockholders in connection with the designation by
Acquisition of persons to the Board other than at a meeting of the Company's
stockholders, and such information is incorporated by reference herein.
(b) CERTAIN LITIGATION. At various times between December 14 and 17, 1999,
six purported class action complaints, captioned XXXXXXX XXXXXX AND XXXXXX
XXXXXXXXX V. TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL., XXX X. XXXXXX
X. XXXXXX X. XXXXX ET AL., XXXX XXXXX X. XXXXXX X. XXXXX ET AL., XXXX XXXXXXX X.
XXXXXX X. XXXXX ET AL., X. XXXXXXXXX XXXXX X. XXXXXX X. XXXXX ET AL. AND XXXX
XXXXXXX X. XXXXXX X. XXXXX ET AL., were filed in the Court of Chancery of the
State of Delaware in and for New Castle County against the Company
3
and its directors. On or about January 10, 2000, an additional purported class
action complaint, captioned XXXXXXX XXXXXXXX V. TRANSPORTATION TECHNOLOGIES
INDUSTRIES, INC. ET AL., was filed in the Circuit Court of Cook County of the
State of Illinois against the Company and its directors. The foregoing actions
purport to be brought on behalf of all public stockholders of the Company in
connection with the initial proposal made by Acquisition to acquire the Company
at a price per share of $20. The actions allege, among other things, that the
price per share price offered by Acquisition is unfair and inadequate to the
Company's public stockholders and that the individual defendants have breached
their fiduciary duties. The complaints seek as relief, among other things,
preliminary and permanent injunctive relief enjoining the proposed transaction
and monetary damages in an unspecified amount. The defendants believe that they
have meritorious defenses to these actions and intend to vigorously defend
themselves.
(c) The information contained in all of the Exhibits referred to in Item 9
below is incorporated by reference herein.
ITEM 9. EXHIBITS
(a)(1) Offer to Purchase dated February 3, 2000 (incorporated
herein by reference to Exhibit (a)(1) to the Schedule TO).
(a)(2) Letter of Transmittal (incorporated herein by reference to
Exhibit (a)(2) to the Schedule TO).
(a)(3) Form of Letter to Stockholders of the Company dated
February 3, 2000.
(a)(4) Press Release of the Company dated February 3, 2000.
(e)(1) Agreement and Plan of Merger, dated as of January 28, 2000,
between Transportation Technologies Industries, Inc. and
Transportation Acquisition I Corp.
(e)(2) Opinion of Xxxxxxx Lynch, Xxxxxx, Xxxxxx & Xxxxx
Incorporated to the Special Committee of the Board of
Directors of the Company, dated January 28, 2000 (included
as Schedule II hereto).
(g) Not applicable.
(i)(1) Complaint filed in action entitled XXXXXX AND WILLISTON V.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL. (Court
of Chancery of New Castle County, Delaware) (incorporated
herein by reference to Exhibit (i)(1) to the Schedule TO).
(i)(2) Complaint filed in action entitled BRETON X. XXXXX ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(2) to the
Schedule TO).
(i)(3) Complaint filed in action entitled GRENING X. XXXXX ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(3) to the
Schedule TO).
(i)(4) Complaint filed in action entitled XXXXX X. XXXXX ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(4) to the
Schedule TO).
(i)(5) Complaint filed in action entitled XXXXX X. XXXXX ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(5) to the
Schedule TO).
(i)(6) Complaint filed in action entitled BIERACH X. XXXXX ET AL.
(Court of Chancery of New Castle County, Delaware)
(incorporated herein by reference to Exhibit (i)(6) to the
Schedule TO).
(i)(7) Complaint filed in action entitled XXXXXXXX V.
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC. ET AL. (Circuit
Court of Cook County, Illinois) (incorporated herein by
reference to Exhibit (i)(7) to the Schedule TO).
4
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: February 3, 2000
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
By: /s/ XXXXXX X. XXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Operating
Officer
5
EXHIBIT INDEX
EXHIBIT NO.
----------------------
(a)(3) Form of Letter to Stockholders of the Company dated
February 3, 2000.
(a)(4) Press Release of the Company dated February 3, 2000.
(e)(1) Agreement and Plan of Merger, dated as of January 28, 2000,
between Transportation Technologies Industries, Inc. and
Transportation Acquisition I Corp.
(e)(2) Opinion of Xxxxxxx Lynch, Xxxxxx, Xxxxxx & Xxxxx
Incorporated to the Special Committee of the Board of
Directors of the Company, dated January 28, 2000 (included
as Schedule II hereto).
6
SCHEDULE I
TRANSPORTATION TECHNOLOGIES INDUSTRIES, INC.
000 X. XXXXXXXX XXXXXX, XXXXX 0000
XXXXXXX, XXXXXXXX 00000
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
GENERAL
This information statement (the "Information Statement") is being mailed on
or about February 3, 2000 as part of the Solicitation/Recommendation Statement
on Schedule 14D-9 (the "Schedule 14D-9") to holders of record of shares of
common stock, par value $0.01 per share, of Transportation Technologies
Industries, Inc. (the "Company"). You are receiving this Information Statement
in connection with the possible election of persons designated by Transportation
Acquisition I Corp. ("Acquisition") to a majority of the seats on the Board of
Directors of the Company (the "Board" or the "Board of Directors") other than at
a meeting of the stockholders of the Company. Such election would occur pursuant
to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
January 28, 2000, between Acquisition and the Company. The Merger Agreement is
more fully described under Item 3 of the Schedule 14D-9, of which this
Schedule I is a part. Capitalized terms used and not defined in this Schedule I
have the meanings assigned to them in the Schedule 14D-9.
Pursuant to the Merger Agreement, Acquisition and the Company commenced a
joint cash tender offer (the "Offer") for all outstanding shares of common
stock, including the associated preferred share purchase rights, of the Company
(the "Shares") at a price of $21.50 per Share, net to the seller in cash,
without interest, on February 3, 2000. The Offer currently is scheduled to
expire at 12:00 Midnight, New York City time, on March 3, 2000, at which time,
if the Offer is not extended and all conditions to the Offer have been satisfied
or waived, Acquisition and the Company will be obligated to purchase all Shares
validly tendered pursuant to the Offer and not withdrawn.
If the Merger Agreement is terminated or if Acquisition does not accept
Shares tendered for payment, then Acquisition will not have any right to
designate directors for election to the Board of Directors.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and Rule 14f-1 promulgated
thereunder. You are urged to read this Information Statement carefully. You are
not, however, required to take any action.
THE ACQUISITION DESIGNEES
Effective upon the acceptance for payment pursuant to the Offer of a number
of Shares that satisfies the Minimum Condition (as defined in the Merger
Agreement), Acquisition shall be entitled to designate for election to the Board
such number of persons as will cause a majority of directors of the Company to
consist of persons designated by Acquisition, and the Company shall, upon
written request by Acquisition, promptly, at the Company's election, either
increase the size of the Board or take such other actions as may be necessary so
as to include on, and cause to be elected to the Board, the individual or
individuals designated by Acquisition.
The Company's obligations to appoint Acquisition's designees to the Board of
Directors shall be subject to Section 14(f) of the 1934 Act and Rule 14f-1
promulgated thereunder. The Company shall
I-1
promptly take all actions, as Section 14(f) and Rule 14f-1 require, in order to
fulfill its obligations under the Merger Agreement. Acquisition has supplied to
the Company in writing information with respect to itself and its nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
Following the election or appointment of Acquisition's designees pursuant to
the Merger Agreement and prior to the Effective Time, any amendment or
termination of the Merger Agreement, extension of the time for the performance
of any of the obligations or other acts of Acquisition, waiver of any of the
Company's rights under the Merger Agreement, action in connection with the
Merger Agreement required to be taken by the Board of Directors of the Company,
amendment to the Company's Certificate of Incorporation, Bylaws or Rights
Agreement, or actions that would be reasonably likely to adversely affect the
interests of stockholders of the Company (other than Acquisition, the Continuing
Stockholders or their respective affiliates) in any material respect, shall
require the concurrence of a majority of the directors of the Company then in
office who are neither designated by Acquisition nor employees of the Company.
Pursuant to the provisions of the Merger Agreement described in the
Schedule 14D-9, Acquisition may designate from among the persons identified
below the persons to be elected to the Board of Directors (the "Acquisition
Designees"). It is expected that the Acquisition Designees will assume office
promptly upon the acceptance for payment pursuant to the Offer of a number of
Shares that satisfies the Minimum Condition, which the Company expects will be
promptly thereafter, and that they will thereafter constitute at least a
majority of the Board of Directors. Acquisition has informed the Company that
each of the Acquisition Designees has consented to act as a director, if so
designated.
Set forth in the table below are the name and principal occupation or
employment and five year employment history for each of the persons who may be
designated by Acquisition as the Acquisition Designees.
DIRECTOR DESIGNEES OF TRANSPORTATION ACQUISITION I CORP.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- ------------------------------------------------------------
Xxxxxx X. Xxxxx............... Chairman of the Board and President of Acquisition. Xx.
Xxxxx also serves as Chairman of the Board and Chief
Executive Officer of the Company. He is also Chairman of,
and a partner in, TMB Industries, and a director of Silgan
Holdings, Inc.
Xxxxxxx X. Xxxxxxxxx XXX...... Xx. Xxxxxxxxx serves as a Director of the Company. From
January 1992 to the present, Xx. Xxxxxxxxx has been a
private investor and a Senior Consultant to Chase Capital
Partners (formerly Chemical Venture Partners). From October
1988 to January 1992, he was a General Partner of Chase
Capital Partners.
Xxxxxx X. Xxxxxx.............. Vice President, Chief Financial Officer and Treasurer of
Acquisition. Xx. Xxxxxx also serves as Director, Vice
President and Chief Operating Officer of the Company. He is
also Executive Vice President of, and a partner in, TMB
Industries, and is a director or officer of certain TMB
companies. From September 1994 to January 2000, he served as
Executive Vice President and Chief Financial Officer of the
Company and from March 1995 to November 1995, he served as
Secretary of the Company. From April 1988 to September 1994,
he was Vice President and Treasurer of Bethlehem Steel
Corporation.
I-2
CERTAIN INFORMATION CONCERNING THE COMPANY
The Shares constitute the only class of voting securities of the Company.
The holders of common stock are entitled to one vote per Share. As of
January 28, 2000, there were 10,322,280 shares of common stock (including
restricted stock) issued and outstanding and 660,168 Shares subject to
outstanding stock options under the Company's stock option plans. Currently, the
Board consists of five members. The Board is divided into three classes and each
director serves a term of three years and until his successor is duly elected
and qualified or until his earlier death, resignation or removal.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for the
past five years, of each director and executive officer of the Company. Unless
otherwise indicated, each such person is a citizen of the United States and the
business address of each such person is c/o Transportation Technologies
Industries, Inc., 000 X. Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- ------------------------------------------------------------
Xxxxxx X. Xxxxx............... Chairman of the Board and Chief Executive Officer. He served
as President from October 1991 to January 2000. He is also
Chairman of, and a partner in, TMB Industries, and a
director of Silgan Holdings, Inc.
Xxxxxx X. Xxxxxx.............. Director, President and Chief Operating Officer. He is also
Executive Vice President of, and a partner in, TMB
Industries, and is a director or officer of certain TMB
companies. From September 1994 to January 2000, he served as
Executive Vice President and Chief Financial Officer of the
Company, and from March 1995 to November 1995, he served as
Secretary of the Company. From April 1988 to September 1994,
he was Vice President and Treasurer of Bethlehem Steel
Corporation.
Xxxxx X. Xxxxx................ President and Chief Executive Officer of Gunite Corporation
since January 2000. He was Chairman of Johnstown America
Corporation and Freight Car Services, Inc. from September
1998 to June 1999 and Senior Vice President of the Company
from July 1997 to June 1999. From September 1995 to August
1998, he was President and Chief Executive Officer of
Johnstown America Corporation and from March 1998 to August
1998 he was President and Chief Executive Officer of Freight
Car Services, Inc. Prior to September 1995, he was the Plant
Manager of the Truck and Bus Assembly Group of General
Motors Corporation.
Xxxx X. Xxxxxxxxx............. Chairman of Imperial Group, L.P. He has held various other
titles with Imperial Group, L.P. since being one of its
primary founders in 1962.
I-3
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---- ------------------------------------------------------------
Xxxxxx X. Xxxxx............... Chief Executive Officer of Imperial Group, L.P. He served as
President of Imperial Group, L.P. from January 1995 to
November 1997 and, prior thereto, he was President of Eagle
Associates, a private management firm.
Xxxxxx X. Xxxxxxx............. President and Chief Executive Officer of Xxxxxxx Seating,
Inc. From August 1996 to January 2000, he was Executive Vice
President of Xxxxxxx Seating, Inc. Prior thereto, he held
various positions with Bethlehem Steel Corporation.
Xxxxxxx X. Xxxxx.............. Executive Vice President--Sales and Marketing. He served as
Vice President--Corporate Development from December 1995 to
January 2000 and President of Xxxxxxx Seating, Inc. from
June 1996 to January 2000. Prior thereto, he performed
marketing and corporate functions for the Company.
Xxxx X. XxXxxxx............... President of Brillion Iron Works, Inc.
Xxxxxx X. Xxxxxxx............. Vice President and Treasurer. Prior to July 1998, he held
various financial positions with Xxxxxx Scientific
International.
X. Xxxxxx Xxxxxx.............. Director. In addition, he is currently Co-Chief Executive
Officer of Silgan Holdings, Inc., and has been either
Chairman of the Board or President and a Director of Silgan
Holdings, Inc. since 1988.
Xxxxxxx X. Xxxxxxx............ Director. From 1982 to 1994, he was the Senior Vice
President and Chief Financial Officer of Monsanto Company.
He is also a Director of Mercantile Bancorporation, Inc.
Xxxxxxx X. Xxxxxxxxx XXX...... Director. He has been a private investor and a Senior
Consultant to Chase Capital Partners (formerly Chemical
Venture Partners) since January 1992. In addition, from
October 1988 to January 1992, he was a General Partner of
Chase Capital Partners.
Xxxxx X. Xxxxxxxxxx........... President of Fabco Automotive Corporation since
December 1999. He joined Fabco Automotive Corporation in
1995 as Vice President of Sales and Engineering.
Xxxxxxx X. Xxxxxxxxx.......... Vice President, General Counsel and Secretary. Prior to
November 1995, he was an attorney with the law firm of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP.
Xxxx X. Xxxxxxxxx............. President and Chief Operating Officer of Imperial Group,
L.P. Prior to November 1997, he was General Manager of
Imperial Group, L.P.
Xxxxx Xxxxxxxx................ Controller. He has served in various financial capacities at
TCI and Gunite Corporation for the past five years.
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COMMITTEES OF THE COMPANY BOARD; MEETINGS
The Company has a Compensation Committee, an Audit Committee and an
Executive Committee.
The Compensation Committee, comprised of Messrs. Xxxxx and Xxxxxxxxx,
reviews and makes recommendations to the Board of Directors regarding salaries,
compensation and benefits of executive officers and key employees of the
Company, and grants options to purchase shares of Common Stock.
The Audit Committee, which is comprised of Messrs. Silver and Xxxxxxx,
reviews the internal and external financial reporting of the Company, reviews
the scope of the independent audit and considers comments by the auditors
regarding internal controls and accounting procedures, and management's response
to these comments.
The Executive Committee, which is comprised of Messrs. Xxxxx and Xxxxxx,
exercises the powers of the Board of Directors during intervals between Board
meetings and acts as an advisory body to the Board by reviewing various matters
prior to their submission to the Board.
During 1999, the Board of Directors met four times. Each director attended
75% or more of the meetings. The Compensation Committee held one meeting in
1999, which was attended by both of the committee members. The Audit Committee
held two meetings in 1999, each of which were attended by both of the committee
members. The Executive Committee held no meetings during 1999. The Board of
Directors does not have a Nominating Committee.
COMPENSATION OF DIRECTORS
The directors of the Company receive a retainer of $20,000 per annum in
addition to an attendance fee of $500 for each committee meeting attended, and
reasonable expenses in connection with each Board or committee meeting attended.
Board members who are also employees of the Company do not receive directors'
fees. In addition, options to purchase 5,000 shares of Common Stock are granted
to each new non-employee director upon such director's initial election and
qualification for the Board. On the date of each annual meeting of shareholders
subsequent to a director's initial election and qualification for the Board,
each continuing non-employee director will be granted additional options to
purchase 3,000 shares of Common Stock.
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SECURITY OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information, based on reports filed by such
persons with the Commission, with respect to ownership of the shares of Common
Stock held by the directors and executive officers of the Company, and with
respect to ownership by persons believed by the Company to be the beneficial
owners of more than 5% of its outstanding Common Stock.
NUMBER OF SHARES OF PERCENT OF OUTSTANDING
NAME COMMON STOCK COMMON STOCK
---- ------------------- ----------------------
Dimensional Fund Advisors Inc. (1)...................... 632,200 6.1%
Xxxxxx X. Xxxxx (2)..................................... 404,402 3.9%
Xxxxx X. Xxxxx (3)...................................... 135,398 1.3%
Xxxx X. Xxxxxxxxx....................................... 106,756 *
Xxxxxx X. Xxxxx......................................... 49,984 *
Xxxxxx X. Xxxxxxx (4)................................... 15,105 *
Xxxxxxx X. Xxxxx (5).................................... 43,428 *
Xxxx X. XxXxxxx......................................... 0 --
Xxxxxx X. Xxxxxxx (6)................................... 7,142 *
Xxxxxxx X. Xxxxxxxxx XXX (7)............................ 173,000 1.7%
X. Xxxxxx Xxxxxx (8).................................... 20,000 *
Xxxxxxx X. Xxxxxxx (8).................................. 22,000 *
Xxxxxxx X. Xxxxxxxxx (9)................................ 62,096 *
Xxxxxx X. Xxxxxx (10)................................... 151,933 1.5%
Xxxx X. Xxxxxxxxx (11).................................. 30,000 *
Xxxxx Xxxxxxxx (12)..................................... 7,500 *
Directors and Executive Officers as a group (15
persons) (13)......................................... 1,228,744 11.9%
------------------------
* Less than 1%.
(1) The number of shares beneficially held by Dimensional Fund Advisors Inc. is
based upon the Schedule 13G filed by Dimensional Fund Advisors Inc. on
February 12, 1999. The address of Dimensional Fund Advisors Inc. is 00000
Xxxxx Xxxxxx, Xxxxx Xxxxxx, XX 00000.
(2) Includes 50,000 shares of common stock subject to currently exercisable
options, 3,390 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 29,500 shares of restricted common stock.
(3) Includes 100,000 shares of common stock subject to currently exercisable
options and 13,398 shares of common stock held in a self-directed IRA.
(4) Includes 13,333 shares of common stock subject to currently exercisable
options and 1,772 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999.
(5) Includes 18,800 shares of common stock subject to currently exercisable
options, 2,228 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 19,500 shares of restricted common stock.
(6) Includes 6,667 shares of common stock subject to currently exercisable
options and 475 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999.
(7) Xx. Xxxxxxxxx is a private investor and Senior Consultant to Chase Capital
Partners (formerly Chemical Venture Partners), which beneficially owns
shares of common stock, but Xx. Xxxxxxxxx disclaims beneficial ownership of
such shares. Xx. Xxxxxxxxx, however, has an interest in a pool of
securities, including shares of common stock of the Company, acquired by
Chemical Equity Associates
I-6
at the time he was a General Partner of Chemical Venture Partners (now Chase
Capital Partners). Xx. Xxxxxxxxx holds options to purchase 23,000 shares of
common stock, of which 20,000 are currently exercisable.
(8) Messrs. Silver and Xxxxxxx each hold options to purchase 23,000 shares of
common stock, of which 20,000 are currently exercisable.
(9) Includes 37,500 shares of common stock subject to currently exercisable
options, 3,796 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 19,500 shares of restricted common stock.
(10) Includes 105,000 shares of common stock subject to currently exercisable
options, 3,433 shares of common stock held through the Company's 401(k) plan
as of December 31, 1999 and 29,500 shares of restricted common stock.
(11) Includes 30,000 shares of restricted common stock.
(12) Includes 7,500 shares of common stock subject to currently exercisable
options.
(13) Includes 398,800 shares of common stock subject to currently exercisable
options, 15,694 shares of common stock held through the Company's 401(k)
plan as of December 31, 1999 and 128,000 shares of restricted common stock.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act and regulations of the Commission thereunder
require the Company's officers and directors and persons who own more than ten
percent of the Company's Common Stock, as well as certain affiliates of such
persons, to file initial reports of ownership and changes in ownership with the
Commission. Officers, directors and persons owning more than ten percent of the
Company's Common Stock are additionally required to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it and written representations that no other
reports were required for those persons, the Company believes that all filing
requirements applicable to its officers, directors and owners of more than ten
percent of the Company's Common Stock have been made as required with respect to
fiscal year 1999.
I-7
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation for
services in all capacities to the Company for 1999, 1998 and 1997 of (i) the
Chief Executive Officer of the Company and (ii) the Company's four most highly
compensated executive officers other than the Chief Executive Officer who were
serving as executive officers as of December 31, 1999 (the "Named Officers").
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------------------- ------------------------
FISCAL OTHER ANNUAL RESTRICTED OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) STOCK($)(3) SARS(#)(4) COMPENSATION(5)
--------------------------- -------- -------- ---------- --------------- ----------- ---------- ---------------
Xxxxxx X. Xxxxx......... 1999 $750,000 $1,250,000 $113,112 $473,844 -- $241,964
Chairman of the Board and 1998 350,000 750,000 -- -- -- 221,004
Chief Executive Officer 1997 300,000 350,000 -- -- 25,000 222,066
Xxxxxx X. Xxxx.......... 1999 $350,000 $ 470,702 -- -- -- $ 8,621
Former Senior Vice 1998 300,000 485,608 -- -- -- 8,647
President and President 1997 275,016 457,900 -- -- 25,000 8,092
and Chief Executive
Officer of Truck
Components Inc.
Xxxxxx X. Xxxxxxx....... 1999 $160,000 $ 220,000 -- -- 10,000 $ 17,135
Vice President and Chief 1998 70,000 70,000 -- -- 20,000 2,950
Financial Officer
Xxxxxxx X. Xxxxxxxxx.... 1999 $200,000 $ 750,000 -- $313,219 -- $ 16,272
Vice President, General 1998 150,000 200,000 -- -- -- 15,861
Counsel and Secretary 1997 125,000 75,000 -- -- 10,000 11,386
Xxxxxx X. Xxxxxx........ 1999 $500,000 $1,000,000 -- $473,844 -- $ 87,257
President, Chief 1998 300,000 500,000 -- -- -- 74,032
Operating Officer and 1997 260,000 350,000 -- -- 25,000 58,211
Director
------------------------
(1) In 1999, includes bonus of $500,000 to Messrs. Xxxxx, Xxxxxx and Tallering
and $50,000 to Xx. Xxxxxxx following consummation of the sale of the
Company's freight car operations and includes bonus of $20,000 to Xx.
Xxxxxxx following relocation of his residence. For Messrs. Xxxxx and Cook
includes a portion of 1998 bonus voluntarily deferred by them under the
Company's Deferred Compensation Plan and for Messrs. Cook and XxXxxxx
includes a portion of 1997 bonus voluntarily deferred by them under the
Company's Deferred Compensation Plan. The Deferred Compensation Plan was
terminated in 1999.
(2) For the reimbursement of travel, club dues and other expenses to Xx. Xxxxx.
The value of the perquisites received by Xx. Xxxxx in 1997 and 1998 and by
the other Named Officers in each year was below the threshold requiring
disclosure thereof.
(3) On February 1, 1999, Messrs. Xxxxx and Xxxxxx were issued 29,500 shares of
restricted common stock and Xx. Xxxxxxxxx was issued 19,500 shares of
restricted common stock. All such restricted stock vests
I-8
on the third anniversary of the date of grant, or earlier in certain
circumstances such as a change in control. The value of such restricted
stock for Messrs. Xxxxx, Xxxxxx and Tallering was $473,844, $473,844 and
$313,219, respectively, as of February 1, 1999 and $532,844, $532,844 and
$352,219, respectively, as of December 31, 1999.
(4) The options granted to Messrs. Xxxxx, Xxxx, Tallering and Xxxxxx in 1997 are
vested. One-third of the options granted to Xx. Xxxxxxx in 1998 are vested.
(5) 1999 includes the following amounts: for Xx. Xxxxx, $235,964 for life
insurance and supplemental pension premium and $6,000 Company contribution
to the Company's 401(k) plan; for Xx. Xxxx, $621 for life insurance premium
and $8,000 Company profit sharing contribution; for Xx. Xxxxxxx, $11,135 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan; for Xx. Xxxxxxxxx, $10,272 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan; and for Xx. Xxxxxx, $81,257 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan. 1998 includes the following
amounts: for Xx. Xxxxx, $215,004 for life insurance and supplemental pension
premium and $6,000 Company contribution to the Company's 401(k) plan; for
Xx. Xxxx, $647 for life insurance premium and $8,000 Company profit sharing
contribution; for Xx. Xxxxxxx, $150 for life insurance and $2,800 Company
contribution to the Company's 401(k) Plan; for Xx. Xxxxxxxxx, $9,861 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan; and for Xx. Xxxxxx, $68,032 for
life insurance and supplemental pension premium and $6,000 Company
contribution to the Company's 401(k) plan. 1997 includes the following
amounts: for Xx. Xxxxx, $216,066 for life insurance and supplemental pension
premium and $6,000 Company contribution to the Company's 401(k) plan; for
Xx. Xxxx, $592 for life insurance premium and $7,500 Company profit sharing
contribution; for Xx. Xxxxxxxxx, $5,386 for life insurance and supplemental
pension premium and $6,000 Company contribution to the Company's 401(k)
plan; and for Xx. Xxxxxx, $52,211 for life insurance and supplemental
pension premium and $6,000 Company contribution to the Company's 401(k)
plan. Each executive's right to receive their respective supplemental
pensions upon termination of employment are generally subject to a
three-year cliff vesting requirement (other than in the event of termination
of employment due to a change in control). In the event any such person is
not entitled to receive his supplemental pension, the value of such pension
funds would revert to the Company.
OPTION GRANTS
During the 1999 fiscal year, options were not granted to the Named Officers,
except that Xx. Xxxxxxx was granted 10,000 options with an exercise price of
$17.50, which options would have a potential realizable value of $110,057 based
on a 5% appreciation during the option term and $278,905 based on a 10%
appreciation during the option term.
OPTION EXERCISES
The table below sets forth information with respect to the value of options
held by the Named Officers as of December 31, 1999.
I-9
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND OPTION VALUE AS OF DECEMBER 31,
1999
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------ ----------- ------------- ----------- -------------
Xxxxxx X. Xxxxx................ -- -- 50,000 -- $ 362,550 --
Xxxxxx X. Xxxx................. -- -- 100,000 -- 1,165,625 --
Xxxxxx X. Xxxxxxx.............. -- -- 6,667 23,333 30,418 $66,457
Xxxxxxx X. Xxxxxxxxx........... -- -- 37,500 -- 382,964 --
Xxxxxx X. Xxxxxx............... -- -- 105,000 -- 454,363 --
PENSION PLANS
The Company, maintains a tax-qualified defined benefit pension plan in which
Messrs. Xxxxx, Xxxxxxx, Tallering and Xxxxxx are eligible to participate.
Benefits under the plan are based primarily upon the participant's average
monthly earnings and his years of continuous service. Benefits under the plan
are not subject to reduction for social security benefits but are reduced by
certain other amounts received under certain public pension programs, and
certain disability and severance payments. The following table sets forth the
benefits payable under the plan at age 65 on a straight line annuity basis for
participants with the indicated levels of compensation and service.
ESTIMATED ANNUAL RETIREMENT BENEFITS
YEARS OF CONTINUOUS SERVICE
---------------------------------------------------------------
AVERAGE EARNINGS 15 20 25 30 35 40
---------------- -------- -------- -------- -------- -------- --------
$ 75,000..................... $15,390 $20,520 $25,650 $30,780 $35,910 $41,816
100,000..................... 21,296 28,395 35,494 42,592 49,691 57,566
125,000..................... 27,202 36,270 45,337 54,405 63,472 73,316
150,000..................... 33,109 44,145 55,181 66,217 77,254 89,066
200,000..................... 35,471 47,295 59,119 70,942 82,766 95,366
250,000..................... 35,471 47,295 59,119 70,942 82,766 95,366
300,000..................... 35,471 47,295 59,119 70,942 82,766 95,366
The compensation and years of service under the plan for Messrs. Xxxxx,
Xxxxxxx, Tallering and Xxxxxx are as follows.
HIGHEST FIVE-YEAR
AVERAGE ANNUAL
COMPENSATION YEARS OF SERVICE
----------------- ----------------
Xxxxxx X. Xxxxx................................. $720,000 6.25
Xxxxxx X. Xxxxxxx............................... 185,000 1.50
Xxxxxxx X. Xxxxxxxxx............................ 345,000 4.16
Xxxxxx X. Xxxxxx................................ 479,400 5.33
Xx. Xxxx was eligible to participate in a tax-qualified defined benefit plan
formerly maintained by a subsidiary of Truck Components Inc. ("TCI") (the
"Pension Plan"). The Pension Plan provided a pension benefit at normal
retirement age of 65, based on average monthly pay through December 31, 1991, or
if service is less than five years, the average monthly earnings of the years
worked up to December 31, 1991, and credited service for the years and months
employed by TCI and its subsidiaries up to August 31, 1995. The salary component
for persons hired subsequent to December 31, 1991, was the participant's initial
monthly salary at employment date. At age 65, based on Xx. Xxxx'x covered
compensation and years of service of $150,000 and 4.6 years, respectively, he
would have been entitled to receive an annual pension of
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$9,080 under the Pension Plan. The Pension Plan was terminated during 1998 and
Xx. Xxxx rolled his allocated pension proceeds into an individual retirement
account. Xx. Xxxx also participates in the Gunite Corporation Salaried Employees
Profit Sharing Plan pursuant to which Gunite Corporation, a subsidiary of the
Company, contributes 5% of Xx. Xxxx'x xxxxx earnings up to a maximum
contribution of $8,000.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company is a party to substantially identical employment contracts with
Messrs. Xxxxx, Xxxxxxx, Tallering and Xxxxxx which became effective on July 1,
1999 and continue for a rolling three-year period (a rolling two-year period for
Xx. Xxxxxxx) unless terminated as provided in the agreement. Pursuant to their
respective agreements, each will receive annual base salaries, plus bonuses as
determined by the Board of Directors. Each of these agreements contains
customary employment terms and provides that upon termination of employment by
the Company other than for "Cause" or by the employee for "Good Reason" (each as
defined in the agreements) during the term, the Company will pay a severance
payment to the employee, in addition to other benefits, equal to three times
(two times for Xx. Xxxxxxx) the sum of (i) the employee's base salary as of his
date of termination and (ii) the greatest of (w) the employee's guaranteed
bonus, if any, for the year during which the termination occurs, (x) the
employee's target bonus, if any, for the year during which the termination
occurs, (y) the employee's bonus received with respect to the year immediately
preceding the date of termination and (z) the employee's average bonus received
during the three years immediately preceding the date of termination, plus
certain additional amounts.
In connection with the Company's acquisition of TCI in August 1995, the
Company assumed the existing employment agreement between TCI and Xx. Xxxx. Such
agreement was terminated as of January 11, 2000 upon Xx. Xxxx'x retirement.
Pursuant to the termination, Xx. Xxxx will receive one year's salary, plus a
bonus equal to Xx. Xxxx'x average bonus for 1998 and 1999.
The Company is a party to employment contracts with certain other officers
and key employees generally with two or three year terms.
COMPENSATION COMMITTEE REPORT
Under the supervision of the Compensation Committee of the Board of
Directors (the "Committee"), the Company has attempted to develop and implement
compensation policies, plans and programs which seek to enhance the
profitability of the Company and to maximize shareholder value by closely
aligning the financial interests of the Company's executive officers with those
of its shareholders. The Committee is currently comprised of Messrs. Xxxxx and
Xxxxxxxxx.
The Company's general compensation philosophy, which is determined by the
Committee, is to offer compensation so as to enable the Company to attract and
retain talented and experienced executive officers who are able to assist the
Company in accomplishing its strategic and performance goals and to allow such
executive officers to participate in the increase in value of the Company upon
attaining such goals. Such compensation consists of salary, performance-based
bonus and stock options/restricted stock. In determining the salary, bonus and
stock option/restricted stock awards for the Company's executive officers, the
Committee takes into account the overall performance of the Company as well as
its subjective determination of the contribution of each executive officer to
that performance. The Committee does not limit its evaluation of Company
performance to any particular performance measure, nor does it apply any
specific formula in relating Company performance to salary, bonus or stock
option/restricted stock award levels.
Four of the five Named Officers are parties to employment agreements with
the Company, which are described herein in the section entitled "Employment and
Severance Agreements." The Committee believes that the compensation offered
pursuant to such agreements is consistent with the Company's compensation
philosophy. In 1999, Xx. Xxxxx'x salary was $750,000 and, given the Company's
significant
I-11
improvement in results of operations and financial condition during 1999,
received a $750,000 bonus for 1999. He also received a bonus of $500,000
following completion of the successful sale of the Company's freight car
operations. Xx. Xxxxx'x economic interests are further aligned with the
shareholders of the Company due to his significant ownership interest in the
Company (see "Principal Shareholders and Security Ownership of Management").
The Committee has not developed a formal policy on the rules regarding
deductability of executive compensation because the Company's compensation of
its executive officers is considerably less than the applicable threshholds, but
rather will make such determinations as appropriate.
I-12
SCHEDULE II
[Xxxxxxx Xxxxx Letterhead]
January 28, 2000
Special Committee of the Board of Directors
Transportation Technologies Industries, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Members of the Special Committee:
Transportation Technologies Industries, Inc. (the "Company"), and
Transportation Acquisition I Corp. (the "Acquiror"), propose to enter into the
Agreement and Plan of Merger dated as of January 28, 2000 (the "Agreement")
pursuant to which (i) the Acquiror would commence a tender offer and the Company
would commence a tender offer (collectively, the "Tender Offer") for all
outstanding shares of the Company's common stock, par value $0.01 per share (the
"Company Shares") for $21.50 per share, net to the seller in cash (the
"Consideration"), and (ii) Acquiror would be merged with the Company in a merger
(the "Merger"), at which time each Company Share, other than Company Shares held
in treasury, held by the Acquiror or by a Participant (as defined in the
Agreement), would be converted into the right to receive the Consideration. The
Tender Offer and the Merger, taken together, are referred to as the
"Transaction".
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares in the Transaction pursuant to the
Agreement is fair from a financial point of view to such holders, other than the
Acquiror or any Participant.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company that we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Company furnished to us by the Company;
(3) Conducted discussions with members of senior management of the
Company (which includes Participants) concerning the matters described in
clauses 1 and 2 above;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and compared them
with those of certain publicly traded companies that we deemed to be
relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations between members
of the special committee of the board of directors of the Company (the
"Special Committee") and its legal advisors on the one hand, and the
Acquiror and its financial and legal advisors, on the other hand; and
(8) Reviewed a draft dated January 28, 2000 of the Agreement.
II-1
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or been furnished with any such evaluation or
appraisal. We have not assumed any obligation to conduct any physical inspection
of the properties or facilities of the Company. With respect to the financial
forecast information furnished to or discussed with us by the Company, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of members of management of the Company (which
includes Participants) as to the expected future financial performance of the
Company. We have also assumed that the final form of the Agreement will be
substantially similar to the draft reviewed by us dated January 28, 2000.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof.
We are acting as financial advisor to the Special Committee in connection
with the Transaction and will receive a fee from the Company for our services,
which is contingent upon the consummation of the Transaction. In addition, the
Company has agreed to indemnify us for certain liabilities arising out of our
engagement. In the ordinary course of our business, we may actively trade the
Company Shares and other securities of the Company for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Special Committee. This
opinion relates to the fairness, from a financial point of view, of the
Consideration. This opinion does not constitute an opinion, nor do we assume any
responsibility, with respect to (i) the ability of the Acquiror to obtain
financing, or (ii) the solvency or prudence of the capital structure of the
Company or the Acquiror following the consummation of the Tender Offer or the
Merger. This opinion does not address the merits of the underlying decision by
the Company to engage in the Transaction and does not constitute a
recommendation to any shareholder as to whether such shareholder should tender
any Company Shares pursuant to the Tender Offer, vote in favor of the Merger, or
take any action with respect to the Transaction.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Consideration to be received by the holders of the
Company Shares in the Transaction pursuant to the Agreement is fair from a
financial point of view to the holders of such shares, other than the Acquiror
or any Participant.
Very truly yours,
XXXXXXX LYNCH, XXXXXX, XXXXXX & XXXXX
INCORPORATED
/s/ Xxxxxxx Lynch, Xxxxxx, Xxxxxx &
Xxxxx
Incorporated
II-2
