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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant
Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12
Meritor, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee paid previously with preliminary materials.

Fee computed on table in exhibit required by Item 25(b) of Schedule 14A (17 CFR 240.14a-101) per Item 1 of this Schedule and Exchange Act Rules 14c-5(g) and 0-11

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MERITOR, INC.
April 18, 2022
Dear Fellow Shareholders:
You are cordially invited to attend a special meeting of the shareholders of Meritor, Inc. (“we,” “our,” “Meritor” or the “Company”), which we will hold virtually via the Internet at www.virtualshareholdermeeting.com/MTOR2022SM on May 26, 2022, at 9:30 a.m., Eastern Time.
At the special meeting, you will be asked to consider and vote upon a proposal to approve the Agreement and Plan of Merger (as amended, modified or supplemented from time to time, the “Merger Agreement”), dated as of February 21, 2022, by and among Meritor, Cummins Inc., an Indiana corporation (“Parent”), and Rose NewCo Inc., an Indiana corporation and a wholly owned subsidiary of Parent (“Merger Sub”). Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Meritor (the “Merger”), with Meritor continuing as the surviving corporation in the Merger and a wholly owned subsidiary of Parent.
If the Merger Agreement is approved and the Merger is completed, each share of our common stock (other than certain shares specified in the Merger Agreement) will be converted into the right to receive $36.50 per share in cash, without interest and subject to any required tax withholding, representing a 48% premium to the closing price of shares of our common stock as of February 18, 2022, the last trading day prior to announcement of the Merger Agreement.
The Meritor board of directors unanimously recommends that our shareholders vote “FOR” the proposal to approve the Merger Agreement and “FOR” the other matters to be considered at the special meeting.
The enclosed proxy statement describes the Merger Agreement, the Merger and related matters, and attaches a copy of the Merger Agreement. We urge shareholders to read the entire proxy statement, including the Merger Agreement, carefully, as it sets forth the details of the Merger Agreement and other important information related to the Merger.
Your vote is very important. The Merger cannot be completed unless the holders of a majority of all the votes entitled to be cast approve the Merger Agreement. If you fail to vote, or fail to instruct your broker on how to vote, it will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.
More information about the special meeting, the Merger and the other proposals for consideration at the special meeting is contained in the accompanying proxy statement.
If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Innisfree M&A Incorporated, with respect to banks and brokers, collect at (212) 750-5833 and, with respect to shareholders and all others, toll-free at (877) 800-5192.
On behalf of Meritor’s entire board of directors, we want to thank you for your continued support.
 
Sincerely,
 
 
 
Meritor, Inc.
 
 
 
/s/ Chris Villavarayan
 
Chris Villavarayan
Chief Executive Officer and President
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Merger, passed upon the merits or fairness of the Merger Agreement, the Merger or the other transactions contemplated by the Merger Agreement or passed upon the adequacy or accuracy of the information contained in the accompanying proxy statement. Any representation to the contrary is a criminal offense.
This proxy statement is dated April 18, 2022 and is first being mailed to shareholders on or about April 18, 2022.

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MERITOR, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Date:
May 26, 2022
Time:
9:30 a.m., Eastern Time
Place:
Virtually via the Internet.

As part of our precautions regarding the coronavirus of COVID-19, the special meeting will be held solely by means of remote communication rather than in person. You will be able to attend the special meeting online and to vote your shares electronically at the special meeting by visiting www.virtualshareholdermeeting.com/MTOR2022SM.
Record Date:
April 11, 2022
Meeting Agenda:
To consider and vote upon the following proposals:
1.
to approve the Agreement and Plan of Merger, dated as of February 21, 2022 (as amended, modified or supplemented from time to time, the “Merger Agreement”), by and among Meritor, Inc., an Indiana corporation (“Meritor” or the “Company”), Cummins Inc., an Indiana corporation (“Parent”), and Rose NewCo Inc., an Indiana corporation and a wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of Parent (the “Merger”) (such proposal, the “Merger Proposal”);
2.
to approve, on an advisory (non-binding) basis, certain compensation that may be paid or become payable to the Company’s named executive officers in connection with the Merger; and
3.
to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the Merger Proposal or in the absence of a quorum.
Please vote your shares. If you are a shareholder of record, you may vote in the following ways:
We encourage shareholders to vote promptly. If you fail to vote, the effect will be the same as a vote “AGAINST” the proposal to adopt the Merger Agreement.
By Telephone

In the U.S. or Canada you can vote by calling 1-800-690-6903.
By Internet

You can vote online at www.proxyvote.com. You will need the 16-digit control number on the proxy card.
By Mail

You can vote by mail by marking, dating and signing your proxy card and returning it in the postage-paid envelope.
Special Meeting Website

You can vote electronically at the special meeting via the special meeting website. Please refer to the section of this proxy statement entitled The Special Meeting — Date, Time and Place of the Special Meeting” for further information regarding virtually attending the special meeting.
 
 
 
 
 

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If your shares of common stock are held by a broker, bank or other nominee on your behalf in “street name,” your broker, bank or other nominee will send you instructions as to how to provide voting instructions for your shares. Many brokerage firms and banks have a process for their customers to provide voting instructions by telephone or via the Internet, in addition to providing voting instructions by a voting instruction form.
Meritor’s board of directors (the “Meritor Board”) has unanimously approved, adopted and declared advisable the Merger Agreement and the transactions contemplated thereby (the “Transactions”), including the Merger, and determined that the Merger Agreement and the Transactions are fair to, and in the best interests of, the Company and its shareholders. The Meritor Board has unanimously directed that the Merger Agreement be submitted to the Company’s shareholders for their consideration at the special meeting and recommends that the Company’s shareholders vote (i) “FOR” the Merger Proposal, (ii) “FOR” the advisory (non-binding) proposal to approve certain compensation that may be paid or become payable to the named executive officers of the Company in connection with the Merger, and (iii) “FOR” the proposal to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the proposal to approve the Merger Agreement or in the absence of a quorum. If you sign, date and return your proxy card without indicating how you wish to vote on a proposal, your proxy will be voted “FOR” each of the foregoing proposals in accordance with the recommendation of the Meritor Board.
Your vote is important, regardless of the number of shares of common stock you own. The approval of the Merger Agreement requires the affirmative vote of the holders of a majority of all the votes entitled to be cast to approve the Merger Agreement and is a condition to the completion of the Merger. The approval of the advisory (non-binding) proposal to approve certain compensation that may be paid or become payable to the named executive officers of the Company in connection with the Merger and the approval of the proposal to adjourn the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the Merger Proposal or in the absence of a quorum, each requires the affirmative vote of a majority of the shares of Meritor common stock, par value $1.00 per share (“Common Stock”), present virtually or represented by proxy at the special meeting and that vote thereon, but approval of these two proposals is not a condition to the completion of the Merger. If you fail to vote, or fail to instruct your broker, bank or other nominee on how to vote, the shares of Common Stock that you own will not be counted for purposes of determining whether a quorum is present at the special meeting, which will have the same effect as a vote “AGAINST” the proposal to adopt the Merger Agreement.
You may revoke your proxy at any time before the vote at the special meeting by following the procedures outlined in the accompanying proxy statement.
Only holders of record of shares of Common Stock as of the close of business on April 11, 2022, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting.
Before voting your shares of Common Stock, we urge you to, and you should, read the entire proxy statement carefully, including its annexes and the documents incorporated by reference in the proxy statement.
 
By order of the Board of Directors,
 
 
 
/s/ Scott M. Confer
 
Scott M. Confer
Vice President and Interim Corporate Secretary
 
Troy, Michigan

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SUMMARY
This summary highlights selected information contained in this proxy statement, including with respect to the Merger Agreement and the Merger. We encourage you to, and you should, carefully read this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement, as this summary may not contain all of the information that may be important to you in determining how to vote. We have included page references to direct you to a more complete description of the topics presented in this summary. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions under the section of this proxy statement entitled “Where You Can Find Additional Information.”
The Companies (page 17)
Meritor, Inc.
Meritor, Inc. (“we,” “our,” “Meritor” or the “Company”) is a premier global supplier of a broad range of integrated systems, modules and components to original equipment manufacturer (“OEMs”) and the aftermarket for the commercial vehicle, transportation and industrial sectors. With more than a 110-year legacy of providing innovative products that offer superior performance, efficiency and reliability, Meritor serves commercial truck, trailer, off-highway, defense, specialty and aftermarket customers around the world. Meritor is publicly listed on the New York Stock Exchange (the “NYSE”) under the symbol “MTOR” and is headquartered in Troy, Michigan.
Meritor’s principal executive offices are located at 2135 West Maple Road, Troy, Michigan 48084 and our telephone number is (248) 435-1000.
Additional information about Meritor is contained in our public filings, certain of which are incorporated by reference herein. For more information, see the sections of this proxy statement entitled “Where You Can Find Additional Information” and “The Companies — Meritor, Inc.
Cummins Inc.
Cummins Inc. (“Parent” or “Cummins”) is a global power leader that designs, manufactures, distributes and services diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, control systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen production and fuel cell products. Cummins sells products to OEMs, distributors, dealers and other customers worldwide. Cummins has a service network of approximately 500 wholly-owned, joint venture and independent distributor locations and more than 10,000 Cummins certified dealer locations in approximately 190 countries and territories. Cummins is publicly listed on the NYSE under the symbol “CMI” and is headquartered in Columbus, Indiana.
Cummins’s principal executive offices are located at 500 Jackson Street, Columbus, Indiana 47201 and its telephone number is (812) 377-5000.
Rose NewCo Inc.
Rose NewCo Inc. (“Merger Sub”) is a wholly owned subsidiary of Parent that will function as the merger subsidiary in the Merger. Merger Sub was formed solely for the purpose of entering into the Merger Agreement and consummating the transactions contemplated by the Merger Agreement (the “Transactions”) and it has not carried on any activities on or prior to the date of this proxy statement, except for activities incidental to its formation and activities in connection with Parent’s acquisition of the Company. Upon completion of the Merger, Merger Sub will merge with and into Meritor, with Meritor continuing as the surviving corporation in the Merger, and Merger Sub will cease to exist. For more information, see the section of this proxy statement entitled “The Companies — Rose NewCo Inc.
Merger Sub’s principal executive offices are located at 500 Jackson Street, Columbus, Indiana 47201 and its telephone number is (812) 377-5000.
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The Special Meeting (page 18)
Date, Time and Place of the Special Meeting
The special meeting of Meritor’s shareholders (the “special meeting”) will be held virtually via the Internet at www.virtualshareholdermeeting.com/MTOR2022SM on May 26, 2022, at 9:30 a.m., Eastern Time.
As part of our precautions regarding the coronavirus or COVID-19, the special meeting will be held solely by means of remote communication rather than in person. You will be able to attend the special meeting online and to vote your shares electronically at the special meeting by visiting the special meeting website.
Purposes of the Special Meeting
At the special meeting, Meritor shareholders will be asked to consider and vote on the following proposals:
to approve the Agreement and Plan of Merger, dated as of February 21, 2022 (as amended, modified or supplemented from time to time, the “Merger Agreement”), by and among the Company, Parent and Merger Sub (the “Merger Proposal”);
to approve, on an advisory (non-binding) basis, certain compensation that may be paid or become payable to the Company’s named executive officers in connection with the Merger, the value of which is disclosed in the table in the section of this proxy statement entitled “The Merger — Interests of Meritor’s Directors and Executive Officers in the Merger — Quantification of Potential Payments and Benefits to Meritor’s Named Executive Officers in Connection with the Transaction” (the “Compensation Proposal”); and
to approve the adjournment of the special meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the Merger Proposal or in the absence of a quorum (the “Adjournment Proposal”).
Meritor shareholders must approve the Merger Proposal for the Merger to occur. If our shareholders fail to approve the Merger Proposal, the Merger will not occur. For more information, see the sections of this proxy statement entitled “The Special Meeting” and “The Merger Agreement.”
No matters other than the proposals set forth above will be brought before the special meeting.
Meritor’s board of directors (the “Meritor Board”) has unanimously approved, adopted and declared advisable the Merger Agreement and the Transactions, including the Merger, and determined that the Merger Agreement and the Transactions are fair to, and in the best interests of, the Company and its shareholders. The Meritor Board has unanimously directed that the Merger Agreement be submitted to the Company’s shareholders for their consideration at the special meeting and recommends that the Company’s shareholders vote “FOR” the Merger Proposal and “FOR” the other proposals to be considered at the special meeting.
Record Date, Notice and Quorum
The holders of record of outstanding shares of Meritor common stock, par value $1.00 per share (“Common Stock”), as of the close of business on April 11, 2022, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. As of the close of business on the record date, 70,852,942 shares of Common Stock were outstanding and entitled to vote at the special meeting.
The presence at the special meeting, virtually or represented by proxy, of the holders of at least a majority of the shares of Common Stock entitled to be cast on any matter to be acted on at the special meeting will constitute a quorum for purposes of the special meeting. A quorum is necessary to transact business at the special meeting. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned to a later date.
An abstention occurs when a shareholder attends a meeting, either virtually or by proxy, but abstains from voting. Abstentions will be counted as shares present for purposes of determining the presence of a quorum. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, your broker, bank or other nominee will not vote on your behalf with respect to any of the proposals, and your shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the special meeting.
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Required Vote
Each share of Common Stock outstanding as of the close of business on the record date is entitled to one vote on each of the proposals to be considered at the special meeting.
For the Company to complete the Merger, a majority of all the votes entitled to be cast to approve the Merger Agreement must vote “FOR” the Merger Proposal. An abstention with respect to the Merger Proposal, or a failure to vote your shares of Common Stock (including a failure to instruct your broker, bank or other nominee to vote shares held on your behalf), will have the same effect as a vote “AGAINST” this proposal.
Approval of each of (i) the Compensation Proposal and (ii) the Adjournment Proposal requires the affirmative vote of a majority of the shares of Common Stock present virtually or represented by proxy at the special meeting and that vote thereon, but is not a condition to the completion of the Merger. An abstention with respect to either proposal or a failure to return your proxy card or otherwise vote your shares of Common Stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf) will have no effect on these proposals, assuming a quorum is present.
As of the record date, our directors and executive officers owned and were entitled to vote, in the aggregate, approximately 1,193,331 shares of Common Stock, or approximately 1.7% of the outstanding shares of Common Stock entitled to vote at the special meeting.
Proxies; Revocation
Any Meritor shareholder of record entitled to vote at the special meeting may submit a proxy by telephone or over the Internet, by returning the enclosed proxy card, or by attending the special meeting virtually and voting electronically. If your shares of Common Stock are held in “street name” by your broker, bank or other nominee, you should instruct your broker, bank or other nominee on how to vote your shares using the instructions provided by your broker, bank or other nominee.
Any proxy may be revoked at any time prior to its exercise by submitting a properly executed, later-dated proxy through any of the methods available to you, by giving written notice of revocation to our Corporate Secretary at our headquarters, 2135 West Maple Road, Troy, Michigan 48084-7186, or by attending the special meeting virtually and voting electronically.
The Merger (page 22)
You will be asked to consider and vote upon the Merger Proposal. A copy of the Merger Agreement is attached as Annex A to this proxy statement and incorporated by reference herein in its entirety. The Merger Agreement provides, among other things, that at the effective time of the Merger (the “Effective Time”), Merger Sub will be merged with and into the Company, with the Company surviving the Merger.
In the Merger, each share of Common Stock (excluding Canceled Shares and Converted Shares) will cease to be outstanding and will automatically be canceled and converted into the right to receive $36.50 per share in cash, without interest, subject to applicable withholding taxes (the “Merger Consideration”), upon surrender of certificates or book-entry shares.
Upon completion of the Merger, the Company will be a wholly owned subsidiary of Parent, the Common Stock will no longer be publicly traded and the Company’s existing shareholders will cease to have any ownership interest in the Company. The Company will therefore become a privately held company, wholly owned by Parent.
Treatment of Outstanding Equity Awards (page 45)
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, outstanding Meritor equity-based awards will be treated as follows, subject to all required withholding taxes:
each share of Meritor restricted common stock that is outstanding immediately prior to the Effective Time will be fully vested immediately prior to the Effective Time, with each holder of such shares receiving the same Merger Consideration as all other outstanding shareholders of Common Stock at the Effective Time;
each Meritor restricted stock unit award (a “Meritor RSU Award”) will be converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share
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of Common Stock subject to such Meritor RSU Award immediately prior to the Effective Time (a “Converted RSU Award”), subject to the same terms and conditions as applied to the corresponding Meritor RSU Award immediately prior to the Effective Time, including all service-based vesting conditions; provided that any accelerated vesting applicable to such Meritor RSU Award in the event of a qualifying termination of employment occurring after the closing date shall apply for the remaining term of such Converted RSU Award; and
each Meritor performance-based restricted stock unit award (a “Meritor PSU Award”) that is outstanding immediately prior to the Effective Time and (i) scheduled to vest on or prior to September 30, 2024 will fully vest and be canceled and converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Meritor PSU Award immediately prior to the Effective Time, less any applicable taxes and (ii) scheduled to vest after September 30, 2024 will be converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Meritor PSU Award immediately prior to the Effective Time (a “Converted PSU Award”), subject to the same terms and conditions as applied to the corresponding Meritor PSU Award immediately prior to the Effective Time, including all service-based vesting conditions; provided that any accelerated vesting applicable to such Meritor PSU Award in the event of a qualifying termination of employment occurring after the closing date shall apply for the remaining term of such Converted PSU Award. Notwithstanding the foregoing, the number of shares of Common Stock subject to a Meritor PSU Award with a performance period that is incomplete (or that is complete but for which performance is not determinable due to the unavailability of the required data for relative measures) as of the Effective Time will be determined by deeming the performance goals applicable to such Meritor PSU Award to be achieved at the target level of performance.
In the case of any share of Meritor restricted common stock, Meritor RSU Award or Meritor PSU Award (collectively, the “Meritor Equity Awards”) that is subject to Section 409A of the Code, all payments with respect to such Meritor Equity Award shall be made in accordance with and at the earliest time as is consistent with the requirements of Section 409A of the Code, and may otherwise be treated in an alternate method to the extent required by law or agreed by the parties.
Conditions to Completion of the Merger (page 59)
Each party’s obligation to complete the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of the following conditions:
no law, order or injunction having been enacted, issued or promulgated by a governmental authority of competent jurisdiction that is in effect and that restrains, enjoins or prohibits the consummation of the Merger (the “Prohibition Condition”);
the approval of the Merger Proposal by the holders of a majority of all the votes entitled to be cast to approve the Merger Agreement (the “Company Shareholder Approval”);
the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), and the receipt of certain approvals under the competition laws of certain specified jurisdictions (the “Antitrust Condition”); and
receipt of certain approvals under the investment laws of certain specified jurisdictions (the “Other Regulatory Matters Condition”).
The respective obligations of Parent and Merger Sub to complete the Merger are subject to the satisfaction or waiver by Parent and Merger Sub on or before the Effective Time of certain additional conditions, including:
the accuracy of the representations and warranties of the Company as of the date of the Merger Agreement and the closing date (except to the extent such representation and warranty speaks as of any earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), subject to certain materiality standards described in the section of this proxy statement entitled “The Merger Agreement — Conditions to Completion of the Merger”;
the performance by the Company in all material respects of the covenants, obligations and agreements required to be performed or complied with under the Merger Agreement at or prior to the closing;
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the absence of any Effect or Effects that, individually or in the aggregate, (i) have had a Company Material Adverse Effect that is continuing or (ii) that would reasonably be expected to have a Company Material Adverse Effect within a reasonable period following the closing; and
no law, order or injunction having been enacted, issued or promulgated by a governmental authority of competent jurisdiction in connection with any transaction approvals that is in effect and that requires Parent, the Company or any of their respective subsidiaries to take or commit to take any action that constitutes or would reasonably be expected to result in a Burdensome Condition (as defined below) (the “No Burdensome Condition”).
The obligation of the Company to complete the Merger is subject to the satisfaction or waiver by the Company on or before the Effective Time of certain additional conditions, including:
the accuracy of the representations and warranties of Parent and Merger Sub as of date of the Merger Agreement and the closing date (except to the extent such representation and warranty speaks as of any earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), subject to certain materiality standards described in the section of this proxy statement entitled “The Merger Agreement — Conditions to Completion of the Merger”; and
the performance by each of Parent and Merger Sub in all material respects of the covenants, obligations and agreements required to be performed or complied with under the Merger Agreement at or prior to the closing.
Recommendation of the Meritor Board (page 25)
The Meritor Board has unanimously approved, adopted and declared advisable the Merger Agreement and the Transactions, including the Merger, and determined that the Merger Agreement and the Transactions are fair to, and in the best interests of, the Company and its shareholders. The Meritor Board has unanimously directed that the Merger Agreement be submitted to the Company’s shareholders for their consideration at the special meeting and recommends that the Company’s shareholders vote “FOR” the Merger Proposal and “FOR” the other proposals to be considered at the special meeting.
Reasons for the Merger (page 25)
For a description of the reasons considered by the Meritor Board in resolving to recommend in favor of the approval of the Merger Proposal, see the section of this proxy statement entitled “The Merger — Reasons for the Merger; Recommendation of the Meritor Board.”
Opinion of Meritor’s Financial Advisor (page 29)
Pursuant to an engagement letter dated December 17, 2021, Meritor retained J.P. Morgan as its financial advisor in connection with the proposed Merger and to deliver a fairness opinion in connection with the proposed Merger. Meritor decided to engage J.P. Morgan due to, among other things, its extensive experience in Meritor’s industry, its qualifications and its deep expertise in the matters that were to be considered by the Meritor Board.
At the meeting of the Meritor Board on February 21, 2022, J.P. Morgan rendered its oral opinion to the Meritor Board that, as of such date and based upon and subject to the various factors, assumptions, limitations and qualifications set forth in its written opinion, the Merger Consideration to be paid to the holders of Common Stock in the proposed Merger was fair, from a financial point of view, to such shareholders. J.P. Morgan confirmed its February 21, 2022 oral opinion by delivering its written opinion to the Meritor Board, dated February 21, 2022, that, as of such date, the Merger Consideration to be paid to the holders of Common Stock in the proposed Merger was fair, from a financial point of view, to such shareholders.
The full text of the written opinion of J.P. Morgan dated February 21, 2022, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Meritor’s shareholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Meritor Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the consideration to be paid to the holders of Common Stock in the Merger and did
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not address any other aspect of the Merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any shareholder of Meritor as to how such shareholder should vote with respect to the proposed Merger or any other matter.
For additional information, see the section entitled “The Merger (Proposal 1)—Opinion of Meritor’s Financial Advisor” and Annex B to this proxy statement.
Interests of Meritor’s Directors and Executive Officers in the Merger (page 36)
In considering the recommendation of the Meritor Board to vote in favor of the approval of the Merger Proposal, Meritor shareholders should be aware that Meritor’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of Meritor shareholders generally. The Meritor Board was aware of these interests and considered them, among other matters, in evaluating and negotiating the Merger Agreement, in reaching its decision to approve and adopt the Merger Agreement and the Transactions, including the Merger, and in recommending to Meritor shareholders that the Merger Proposal be approved.
Financing Cooperation (page 55)
The Company has agreed to use its reasonable best efforts, and to use its reasonable efforts to cause each of its subsidiaries and its and their respective representatives to use their reasonable best efforts, to provide all customary cooperation reasonably requested by Parent in connection with the arrangement of any debt financing obtained or to be obtained by Parent for the purpose of financing the Transactions or any transaction undertaken in connection therewith, subject to the terms set forth in the Merger Agreement.
In no event shall the receipt or availability of any funds or financing by Parent, Merger Sub or any of their respective affiliates or any other financing or other transactions be a condition to any of Parent’s or Merger Sub’s obligations under the Merger Agreement.
Material U.S. Federal Income Tax Consequences of the Merger (page 41)
The receipt of cash in exchange for shares of Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. You should consult your own tax advisor regarding the particular tax consequences to you of the exchange of shares of Common Stock for cash pursuant to the Merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws). For more information, see the section of this proxy statement entitled “The Merger — Material U.S. Federal Income Tax Consequences of the Merger.”
Regulatory Approvals (page 42)
Antitrust Clearance. Completion of the Merger is conditioned on the expiration or early termination of the applicable waiting period under the HSR Act, and the receipt of certain approvals under the competition laws of certain specified jurisdictions and the investment laws of certain specified jurisdictions. The Company and Parent filed their respective Notification and Report Forms with the Antitrust Division and the FTC on March 7, 2022. The applicable waiting period under the HSR Act expired on April 6, 2022.
Commitments to Obtain Antitrust Approval. The Company, Parent, and Merger Sub are each required to, and to cause their respective affiliates to, use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the Transactions, subject to certain limitations, and to cause the conditions to the transactions to be satisfied as promptly as practicable. For more information, see the section of this proxy statement entitled “The Merger Agreement — Efforts to Complete the Merger — Antitrust Matters.”
Filing Fees. Parent has agreed to bear the cost of any filing fee payable to a governmental authority in connection with any filings made to obtain regulatory approval.
No Dissenters’ Rights (page 67)
Under Indiana law, holders of Common Stock are not entitled to dissenters’ rights in connection with the Merger.
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Delisting and Deregistration of the Common Stock (page 43)
If the Merger is completed, the Common Stock will be delisted from the NYSE and deregistered under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Litigation Relating to the Merger (page 43)
As of April 18, 2022, three lawsuits have been filed by purported Meritor shareholders in connection with the Merger and one demand letter has been sent. The complaints and demand letter generally allege that the preliminary proxy statement filed by Meritor in connection with the Merger fails to disclose allegedly material information in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. Plaintiffs generally seek, among other things, to enjoin Meritor from consummating the Merger, or in the alternative, rescission of the Merger and/or compensatory damages, as well as attorney’s fees. For a more detailed description of such litigation relating to the Merger, see the section of this proxy statement entitled “The Merger — Litigation Relating to the Merger.” Meritor believes that the allegations in the complaints and demand letter are without merit. Additional lawsuits and demand letters arising out of the Merger may also be filed or sent in the future.
Company Takeover Proposal; Non-Solicitation (page 52)
From the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement, the Company shall not, and shall cause each of its subsidiaries and their respective officers and directors, and shall instruct and use its reasonable best efforts to cause its and its subsidiaries’ respective representatives not to, directly or indirectly, (i) solicit, initiate or knowingly encourage or facilitate any inquiry, proposal or offer or the making, submission or announcement of any inquiry, proposal or offer that constitutes or could reasonably be expected to lead to a Company Takeover Proposal; or (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any information for the purpose of encouraging or facilitating, any inquiry, proposal or offer that constitutes, or could reasonably be expected to lead to a Company Takeover Proposal (other than in response to an unsolicited bona fide inquiry that did not arise from a material breach of the Company’s non-solicitation obligations, solely for the purpose of obtaining clarification from the person making such Company Takeover Proposal of the terms of such Company Takeover Proposal and facts about the person that made it and only if failing to do so would be inconsistent with the Meritor Board’s fiduciary duties, and to refer the inquiring person to the non-solicitation provisions of the Merger Agreement).
However, at any time prior to the time the Company Shareholder Approval is obtained, if the Company receives an unsolicited Company Takeover Proposal that is not withdrawn and did not result from a breach of the Company’s non-solicitation obligations and that the Meritor Board determines in good faith, after consultation with its outside legal counsel and financial advisor, (i) constitutes or would reasonably be expected to lead to a Company Superior Proposal and (ii) that failure to take action under clauses (x) and (y) below would be inconsistent with its fiduciary duties under applicable law, then the Company and its representatives may, in response to such Company Takeover Proposal (x) furnish information to such persons and their representatives pursuant to an acceptable confidentiality agreement and afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Company or any of its subsidiaries to such person and its representatives, prospective debt and equity financing sources and/or their respective representatives and (y) engage in or otherwise participate in discussions or negotiations with such person and its representatives, prospective debt and equity financing sources and/or their respective representatives (provided that the Company and its representatives may contact any person in writing with respect to a Company Takeover Proposal solely to clarify any ambiguous terms and conditions thereof which are necessary to determine whether the Company Takeover Proposal constitutes a Company Superior Proposal, without the Meritor Board being required to make the determination in clauses (i) and (ii) above), in each case, subject to the requirement that the Company must give Parent written notice of such determination promptly (and in any event within 36 hours) after the Meritor Board makes such determination and make available to Parent and Merger Sub any information or data concerning the Company or its subsidiaries that is provided to any such person, or its representatives, prospective debt and equity financing sources and/or their respective representatives, prior to or substantially concurrently with such deliveries, which was not previously made available to Parent or Merger Sub.
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Change in the Meritor Board Recommendation (page 53)
The Meritor Board has unanimously recommended that Meritor shareholders vote “FOR” the Merger Proposal. Generally, the Meritor Board may not effect a Change of Recommendation.
However, prior to obtaining the Company Shareholder Approval, the Merger Agreement permits the Meritor Board to, in response to an unsolicited Company Takeover Proposal received by the Company after the date of the Merger Agreement that did not result from a breach of the Company’s non-solicitation obligations, effect a Change of Recommendation or cause the Company to terminate the Merger Agreement in order to enter into an acquisition agreement providing for such Company Superior Proposal, subject to the requirements that:
the Meritor Board determines in good faith, after consultation with its outside legal counsel and financial advisor, that such Company Takeover Proposal constitutes a Company Superior Proposal, but only if the Meritor Board has determined in good faith, after consultation with its outside legal counsel and financial advisor, that failure to take such action would be inconsistent with its fiduciary duties under applicable law;
the Company provides prior written notice to Parent, at least four business days in advance, that it intends to effect a Change of Recommendation and/or terminate the Merger Agreement to enter into a Company Superior Proposal, which notice specifies the identity of the person making such proposal and a summary of the material terms thereof and includes a copy of the proposed Company Superior Proposal and the proposed acquisition agreement with respect thereto;
during the four business day period following the date on which notice was received (or with an additional two business day extension, in the event of any change to (i) the financial terms or (ii) other material terms of such Company Superior Proposal), the Company and its representatives negotiate with Parent in good faith to make such adjustments to the terms and conditions of the Merger Agreement as Parent may propose; and
upon the conclusion of the applicable notice and negotiation period, the Meritor Board consider in good faith any revisions to the terms of the Merger Agreement proposed in writing by Parent and determine, after consultation with the Company’s outside legal counsel and financial advisor, that the Company Takeover Proposal continues to constitute a Company Superior Proposal and that a failure to take the contemplated actions would continue to be inconsistent with its fiduciary duties under applicable law.
In addition, the Meritor Board may also effect a Change of Recommendation (prior to obtaining the Company Shareholder Approval) in response to an Intervening Event if the Meritor Board determines in good faith after consultation with its outside legal counsel and financial advisor that the failure to effect a Change of Recommendation would be inconsistent with its fiduciary duties under applicable law, subject to a four business day negotiation period with Parent.
Termination and Termination Fees (page 60)
The Merger Agreement may be terminated by either party and the Merger may be abandoned in certain circumstances, including if (i) the Merger is not completed on or before 11:59 p.m. Eastern Time on December 21, 2022 (the “Termination Date”), subject to certain extensions and limitations, (ii) Meritor’s shareholders fail to approve the Merger Proposal, (iii) a governmental authority of competent jurisdiction has issued a final non-appealable governmental order prohibiting the Merger (the “Legal Restraint Right”) and (iv) the other party breaches its representations, warranties or covenants in the Merger Agreement which causes the failure of a closing condition, subject in certain cases to the right of the breaching party to cure the breach. Parent and the Company may also terminate the Merger Agreement by mutual written consent. The Company may also terminate the Merger Agreement prior to obtaining the Company Shareholder Approval in order to enter into an acquisition agreement providing for a Company Superior Proposal, in compliance with the Company’s non-solicitation obligations. Parent may also terminate the Merger Agreement if (i) the Meritor Board has made a Change of Recommendation, (ii) the Company has willfully breached its non-solicitation obligations or (iii) a law or order has been enacted, issued or promulgated by a governmental authority of competent jurisdiction in connection with any transaction approvals that is in effect, has become final and non-appealable and that requires Parent, the Company or any of their respective subsidiaries to take or commit to take any action that constitutes a Burdensome Condition (the “Burdensome Condition Right”).
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Meritor will pay Parent a termination fee in an amount equal to $73.5 million (the “Company Termination Fee”) if:
the Company terminates the Merger Agreement prior to obtaining the Company Shareholder Approval in order to enter into an acquisition agreement providing for a Company Superior Proposal;
Parent terminates the Merger Agreement because the Meritor Board has made a Change of Recommendation;
Parent terminates the Merger Agreement because of the Company’s willful breach of its non-solicitation obligations; or
if all of the following conditions are satisfied:
(i) Parent or the Company terminates the Merger Agreement as a result of the closing having not occurred on or before the Termination Date as extended, if applicable, or the Company Shareholder Approval having not been obtained or (ii) Parent terminates the Merger Agreement because of the Company’s breach of its representations, warranties or covenants in the Merger Agreement which causes the failure of a closing condition, subject in certain cases to the right of the Company to cure the breach;
after the date of the Merger Agreement and prior to the special meeting, a Company Takeover Proposal has been made to the Meritor Board or the Company’s management, or publicly made, proposed or communicated and not withdrawn prior to the time of the termination (or at least two business days prior to the special meeting in the case of a termination as a result of the Company Shareholder Approval having not been obtained); and
within 12 months of termination of the Merger Agreement, Meritor or its subsidiaries completes or enters into a definitive agreement with respect to a Company Takeover Proposal.
Parent will pay Meritor a termination fee in an amount equal to $160 million (the “Parent Termination Fee”) if:
Parent or the Company terminates the Merger Agreement because the Merger is not consummated on or before the Termination Date as extended, if applicable, and at such time (i) one or more of the Prohibition Condition (only as the result of an order or injunction in connection with the transaction approvals), the Antitrust Condition, the Other Regulatory Matters Condition or the No Burdensome Condition (only as the result of an order or injunction in connection with the transaction approvals) have not been satisfied or waived, (ii) the Company Shareholder Approval has been obtained, (iii) all of the other closing conditions have been satisfied or waived (other than any such conditions that by their nature are to be satisfied at the closing), and (iv) no breach by the Company of its interim-operating covenants or its efforts obligations under the Merger Agreement has been the principal cause of the failure to be satisfied of all or any of the conditions in clause (i) above; or
Parent or the Company terminates the Merger Agreement pursuant to the Legal Restraint Right or Parent terminates the Merger Agreement pursuant to the Burdensome Condition Right, in each case only as the result of an order or injunction in connection with the transaction approvals and at the time of such termination, no breach by the Company of its interim-operating covenants or its efforts obligations has been the principal cause of the imposition of such order or injunction.
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers address briefly some questions you may have regarding the special meeting and the proposals to be voted on at the special meeting. These questions and answers may not address all of the questions that may be important to you as a shareholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully and in their entirety. You may obtain the documents incorporated by reference into this proxy statement without charge by following the instructions under the section of this proxy statement entitled “Where You Can Find Additional Information.”
Q:
Why am I receiving this proxy statement?
A:
On February 21, 2022, the Company entered into the Merger Agreement, providing for the acquisition of the Company by Parent for a price of $36.50 per share in cash, without interest and subject to any required tax withholding. You are receiving this proxy statement in connection with the solicitation of proxies by the Meritor Board in favor of the Merger Proposal and to approve the other related proposals to be voted on at the special meeting.
Q:
As a shareholder of Meritor, what will I receive in the Merger?
A:
If the Merger is completed, you will receive $36.50 in cash, without interest and subject to any required tax withholding, for each outstanding share of Common Stock that you own immediately prior to the Effective Time.
Q:
When and where is the special meeting?
A:
The special meeting will be held virtually via the Internet at www.virtualshareholdermeeting.com/MTOR2022SM on May 26, 2022, at 9:30 a.m., Eastern Time.
Q:
Who is entitled to vote at the special meeting?
A:
Only holders of record of Common Stock as of the close of business on April 11, 2022, the record date for the special meeting, are entitled to receive these proxy materials and to vote their shares at the special meeting. Each share of Common Stock issued and outstanding as of the record date will be entitled to one vote on each matter submitted to a vote at the special meeting.
Q:
What matters will be voted on at the special meeting?
A:
At the special meeting, you will be asked to consider and approve the following proposals:
the Merger Proposal;
the Compensation Proposal; and
the Adjournment Proposal.
Q:
How do I attend the special meeting?
A:
As part of our precautions regarding the coronavirus or COVID-19, the special meeting will be held solely by means of remote communication rather than in person. You will be able to attend the special meeting online and to vote your shares electronically at the special meeting by visiting www.virtualshareholdermeeting.com/MTOR2022SM. If you hold your shares in “street name,” and you also wish to be able to vote at the meeting, you must obtain a legal proxy, executed in your favor, from your bank or broker.
Q:
How many shares are needed to constitute a quorum?
A:
The presence, virtually or by proxy, of the holders of at least a majority of the shares of Common Stock entitled to be cast on any matter to be acted on at the special meeting is necessary to have a quorum. If a quorum is not present at the special meeting, the special meeting may be adjourned or postponed from time to time until a quorum is obtained.
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As of the close of business on April 11, 2022, the record date for the special meeting, there were 70,852,942 shares of Common Stock outstanding.
If you submit a proxy but fail to provide voting instructions or abstain on any of the proposals listed on the proxy card, your shares will be counted for the purpose of determining whether a quorum is present at the special meeting.
If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct the nominee how to vote your shares, your broker, bank or other nominee will not vote on your behalf with respect to any of the proposals, and your shares will not be counted for purposes of determining whether a quorum is present for the transaction of business at the special meeting.
Q:
What vote of Meritor shareholders is required to approve the Merger Proposal?
A:
Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of all the votes entitled to be cast to approve the Merger Agreement.
An abstention with respect to the Merger Proposal, or a failure to vote your shares of Common Stock (including a failure to instruct your broker, bank or other nominee to vote shares held on your behalf), will have the same effect as a vote “AGAINST” this proposal.
Q:
What vote of Meritor shareholders is required to approve the other proposals to be voted upon at the special meeting?
A:
Each of the Compensation Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the shares of Common Stock present virtually or represented by proxy at the special meeting and that vote thereon.
An abstention with respect to either proposal or a failure to return your proxy card or otherwise vote your shares of Common Stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf), will have no effect on these proposals, assuming a quorum is present.
Q:
How does the Meritor Board recommend that I vote?
A:
The Meritor Board unanimously recommends that Meritor shareholders vote:
FOR” the Merger Proposal;
FOR” the Compensation Proposal; and
FOR” the Adjournment Proposal.
For a discussion of the factors that the Meritor Board considered in determining to recommend in favor of the approval of the Merger Proposal, see the section of this proxy statement entitled “The Merger — Reasons for the Merger; Recommendation of the Meritor Board.” In addition, in considering the recommendation of the Meritor Board with respect to the Merger Agreement, you should be aware that some of our directors and executive officers have interests that may be different from, or in addition to, the interests of Meritor shareholders generally. For a discussion of these interests, see the section of this proxy statement entitled “The Merger — Interests of Meritor’s Directors and Executive Officers in the Merger.”
Q:
How many shares of Common Stock may Meritor’s directors and officers vote?
A:
As of the record date, our directors and executive officers owned and were entitled to vote, in the aggregate, approximately 1,193,331 shares of Common Stock, or approximately 1.7% of the outstanding shares of Common Stock entitled to vote at the special meeting.
Q:
Am I entitled to dissenters’ rights under the IBCL?
A:
No, under Indiana law, holders of Common Stock are not entitled to dissenters’ rights in connection with the Merger.
Q:
When is the Merger expected to be completed?
A:
As of the date of this proxy statement, we expect to complete the Merger by the end of calendar year 2022. However, completion of the Merger is subject to the satisfaction or waiver of the conditions to the
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completion of the Merger, including the receipt of regulatory approvals and the approval of Meritor’s shareholders, which are described in this proxy statement, and we cannot be certain when or if the conditions to the Merger will be satisfied or, to the extent permitted, waived.
Q:
What happens if the Merger is not completed?
A:
If the Merger Agreement is not approved by the Company’s shareholders, or if the Merger is not completed for any other reason, the Company’s shareholders will not receive any payment for their shares of Common Stock in connection with the Merger. Instead, the Company will remain a public company, and shares of Common Stock will continue to be registered under the Exchange Act, as well as listed and traded on the NYSE. In the event that either Meritor or Parent terminates the Merger Agreement, then, in certain specified circumstances, Meritor may be required to pay Parent the Company Termination Fee, or Parent may be required to pay Meritor the Parent Termination Fee, as applicable. For more information, see the sections of this proxy statement entitled “The Merger Agreement — Company Termination Fee” and “The Merger Agreement — Parent Termination Fee.”
Q:
Why am I being asked to consider and cast a vote on the Compensation Proposal? What will happen if shareholders do not approve this proposal?
A:
The inclusion of the Compensation Proposal is required by the rules of the Securities and Exchange Commission (the “SEC”); however, the approval of the Compensation Proposal is not a condition to the completion of the Merger and the vote on the Compensation Proposal is an advisory vote by shareholders and will not be binding on the Company or Parent. If the Merger Proposal is approved by the Company’s shareholders and the Merger is completed, the Merger-related compensation will be paid to the Company’s named executive officers in accordance with the terms of their compensation agreements and arrangements even if the Company’s shareholders fail to approve this Compensation Proposal.
Q:
How does the Merger Consideration compare to the market price of shares of Common Stock?
A:
The Merger Consideration of $36.50 per share represents a 48% premium to the closing price of the Common Stock as of February 18, 2022, the last trading day prior to the announcement of the Merger Agreement.
Q:
What do I need to do now? How do I vote my shares of Common Stock?
A:
We urge you to read this entire proxy statement carefully, including its annexes and the documents incorporated by reference in this proxy statement, and to consider how the Merger affects you. Your vote is important, regardless of the number of shares of Common Stock you own.
Voting at the Special Meeting
Shareholders of record will be able to attend the special meeting virtually and vote electronically via the special meeting website. If you are not a shareholder of record but instead hold your shares of Common Stock in “street name” through a broker, bank or other nominee, you must provide a legal proxy executed in your favor from your broker, bank or other nominee in order to be able to vote at the special meeting. You will be able to attend the special meeting online and to vote your shares electronically at the special meeting by visiting www.virtualshareholdermeeting.com/MTOR2022SM.
It is not necessary to attend the special meeting in order to vote your shares of Common Stock. To ensure that your shares of Common Stock are voted at the special meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the special meeting virtually.
Attending the special meeting virtually does not itself constitute a vote on any proposal.
Shares of Common Stock Held by Record Holder
You can ensure that your shares of Common Stock are voted at the special meeting by submitting your proxy via:
mail, by completing, signing and dating the enclosed proxy card and returning it in the enclosed postage-paid envelope;
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telephone, by using the toll-free number 1-800-690-6903; or
the Internet, at www.proxyvote.com.
The telephone and Internet voting facilities for shareholders of record will close at 11:59 p.m. Eastern Time on May 25, 2022.
If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” (i) the Merger Proposal, (ii) the Compensation Proposal and (iii) the Adjournment Proposal.
We encourage you to vote by proxy even if you plan on attending the special meeting.
A failure to vote or an abstention will have the same effect as a vote “AGAINST” the approval of the Merger Proposal.
Shares of Common Stock Held in “Street Name”
If you hold your shares in “street name” through a broker, bank or other nominee, you should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your shares. Without those instructions, your shares will not be voted, which will have the same effect as a vote “AGAINST” the Merger Proposal.
Shares of Common Stock Held in 401(k) Plan Account
If you hold shares in a Meritor 401(k) plan account, you should follow the directions provided by the plan administrator or plan trustee regarding how to instruct the plan trustee how to vote your shares.
Q:
Can I revoke my proxy?
A:
Yes. You can revoke your proxy before the vote is taken at the special meeting. If you are a shareholder of record, you may revoke your proxy by notifying the Company in writing, in care of the Corporate Secretary, at our headquarters, 2135 West Maple Road, Troy, Michigan 48084-7186, or by submitting a new proxy with a later date, by using the telephone or Internet proxy submission procedures described above at any time up to 11:59 p.m. Eastern Time on May 25, 2022, or by completing, signing, dating and returning a new proxy card by mail to the Company. In addition, you may revoke your proxy by attending the special meeting virtually and voting electronically at the special meeting; however, simply attending the special meeting will not cause your proxy to be revoked. Please note that if you want to revoke your proxy by mailing a new proxy card to the Company or by sending a written notice of revocation to the Company, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by the Company before the special meeting.
If you hold your shares in “street name” and you have instructed a broker, bank or other nominee to vote your shares, you should instead follow the instructions received from your broker, bank or other nominee to revoke your prior voting instructions. If you hold your shares in “street name,” you may also revoke a prior proxy by voting electronically at the special meeting if you obtain a legal proxy executed in your favor from your broker, bank or other nominee in order to be able to vote at the special meeting.
Q:
What happens if I do not vote or if I abstain from voting on the proposals?
A:
The requisite number of shares to approve the Merger Proposal is based on the total number of shares of Common Stock outstanding on April 11, 2022, the record date, not just the shares that are voted. If you do not vote, or abstain from voting, on the Merger Proposal, or if you hold your shares in “street name” and fail to give voting instructions to your broker, bank or other nominee, it will have the same effect as a vote “AGAINST” the Merger Proposal.
The requisite number of shares to approve the other two proposals is based on the total number of shares of Common Stock present virtually or represented by proxy at the special meeting and that vote thereon. If you abstain from voting on (i) the Compensation Proposal and (ii) the Adjournment Proposal or if you do not return your proxy card or otherwise fail to vote your shares of Common Stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf), it will have no effect on these proposals, assuming a quorum is present.
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Q:
Will my shares of Common Stock held in “street name” or held in another form of record ownership be combined for voting purposes with shares I hold of record?
A:
No. Because any shares of Common Stock you may hold in “street name” will be deemed to be held by a different shareholder (that is, your broker, bank, or other nominee) than any shares of Common Stock you hold of record, any shares of Common Stock held in “street name” will not be combined for voting purposes with shares of Common Stock held of record. Similarly, if you own shares of Common Stock in various registered forms, such as jointly with your spouse, as trustee of a trust or as custodian for a minor, you will receive, and will need to sign and return, a separate proxy card for those shares of Common Stock because they are held in a different form of record ownership. Shares of Common Stock held by a corporation or business entity must be voted by an authorized officer of the entity. Please indicate title or authority when completing and signing the proxy card.
Q:
What does it mean if I get more than one proxy card or voting instruction card?
A:
If your shares of Common Stock are registered differently or are held in more than one account, you will receive more than one proxy card or voting instruction card. Please complete and return all of the proxy cards and voting instruction cards you receive (or submit each of your proxies by telephone or the Internet) to ensure that all of your shares of Common Stock are voted.
Q:
What happens if I sell my shares of Common Stock before completion of the Merger?
A:
In order to receive the Merger Consideration, you must hold your shares of Common Stock through completion of the Merger. Consequently, if you transfer your shares of Common Stock before completion of the Merger, you will have transferred your right to receive the Merger Consideration.
The record date for shareholders entitled to vote at the special meeting is earlier than the completion of the Merger. If you transfer your shares of Common Stock after the record date but before the closing of the Merger, you will have the right to vote at the special meeting but not the right to receive the Merger Consideration.
Q:
If the Merger is completed, how do I obtain the Merger Consideration for my shares of Common Stock?
A:
Following the completion of the Merger, your shares of Common Stock will automatically be converted into the right to receive your portion of the Merger Consideration. After the Merger is completed, if your shares of Common Stock are evidenced by stock certificates, you will receive a letter of transmittal and related materials from the paying agent for the Merger with detailed written instructions for exchanging your shares of Common Stock evidenced by stock certificates for the Merger Consideration (without interest and subject to any required tax withholding). If your shares of Common Stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your “street name” shares in exchange for the Merger Consideration (without interest and subject to any required tax withholding).
Q:
Should I send in my stock certificates or other evidence of ownership now?
A:
No. You should not return your stock certificates or send in other documents evidencing ownership of Common Stock with the proxy card. If the Merger is completed and if your shares of Common Stock are evidenced by stock certificates, the paying agent for the Merger will send you a letter of transmittal and related materials and instructions for exchanging your shares of Common Stock for the Merger Consideration (without interest and subject to any required tax withholding).
Q:
What is householding and how does it affect me?
A:
The SEC permits companies to send a single set of proxy materials to any household at which two or more shareholders reside, unless contrary instructions have been received, but only if the company provides advance notice and follows certain procedures. In such cases, each shareholder continues to receive a separate notice of the meeting and proxy card. Certain brokerage firms may have instituted householding for beneficial owners of common stock held through brokerage firms. If your family has multiple accounts holding common stock, you may have already received a householding notification from your broker. Please
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contact your broker directly if you have any questions or require additional copies of this proxy statement. The broker will arrange for delivery of a separate copy of this proxy statement promptly upon your written or oral request. You may decide at any time to revoke your decision to household, and thereby receive multiple copies.
Q:
Where can I find more information about Meritor?
A:
You can find more information about us from various sources described in the section of this proxy statement entitled “Where You Can Find Additional Information.”
Q:
Who will solicit and pay the costs of soliciting proxies?
A:
The Meritor Board is soliciting your proxy, and we will bear the cost of soliciting proxies. This includes the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of our outstanding common stock. Meritor has retained Innisfree M&A Incorporated (which we refer to as “Innisfree”), a proxy solicitation firm, to assist the Meritor Board in the solicitation of proxies for the special meeting, and we expect to pay Innisfree approximately $25,000, plus reimbursement of reasonable and documented out-of-pocket expenses. Proxies may be solicited by mail, personal interview, email, telephone, or via the Internet by Innisfree or, without additional compensation, by certain of Meritor’s directors, officers and employees.
Q:
Who can help answer my other questions?
A:
If you have more questions about the Merger or any of the other matters set forth in this proxy statement, or require assistance in submitting your proxy or voting your shares or need additional copies of this document or the enclosed proxy card, please contact Innisfree, which is acting as the proxy solicitation agent and information agent for Meritor in connection with the special meeting. Meritor shareholders can contact Innisfree, with respect to banks and brokers, collect (212) 750-5833 and, with respect to shareholders and all others, toll-free at (877) 800-5192.

Innisfree M&A Incorporated
501 Madison Avenue, 20th floor
New York, New York 10022
Shareholders may call toll free: (877) 800-5192
Banks and Brokers may call collect: (212) 750-5833

or

Meritor, Inc.
2135 West Maple Road
Troy, Michigan 48084
Attn: Scott M. Confer
(248) 435-1470
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbor created by such sections and other applicable laws. Forward-looking statements are typically identified by words or phrases such as “expects,” “anticipates,” “believes,” “estimates,” “intends,” “plans to,” “ought,” “could,” “will,” “should,” “likely,” “appears,” “projects,” “forecasts,” “outlook” and similar expressions. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including, but not limited to, the duration and severity of the COVID-19 pandemic and its effects on public health, the global economy, and financial markets, as well as our industries, customers, operations, workforce, supply chains, distribution systems and demand for its products; reliance on major OEM customers and possible negative outcomes from contract negotiations with major customers, including failure to negotiate acceptable terms in contract renewal negotiations and the ability to obtain new customers; the outcome of actual and potential product liability, warranty and recall claims; the ability to successfully manage rapidly changing volumes in the commercial truck markets and work with customers to manage demand expectations in view of rapid changes in production levels; global economic and market cycles and conditions; availability and sharply rising costs of raw materials, including steel, transportation and labor, and the ability to manage or recover such costs; technological changes in our industry as a result of the trends toward electrified drivetrains and the integration of advanced electronics and the impact on the demand for products and services; the ability to manage possible adverse effects on European markets or European operations, or financing arrangements related thereto in the event one or more countries exit the European monetary union; risks inherent in operating abroad (including foreign currency exchange rates, restrictive government actions regarding trade, implications of foreign regulations relating to pensions and potential disruption of production and supply due to terrorist attacks or acts of aggression); risks related to joint ventures; the ability to achieve the expected benefits of strategic initiatives and restructuring actions; the demand for commercial and specialty vehicles for which products are supplied; whether liquidity will be affected by declining vehicle production in the future; OEM program delays; demand for and market acceptance of new and existing products; successful development and launch of new products; labor relations of the respective companies, suppliers and customers, including potential disruptions in supply of parts to facilities or demand for products due to work stoppages; the financial condition of suppliers and customers, including potential bankruptcies; possible adverse effects of any future suspension of normal trade credit terms by suppliers; potential impairment of long-lived assets, including goodwill; potential adjustment of the value of deferred tax assets; competitive product and pricing pressures; the amount of our debt; the ability to continue to comply with covenants in our financing agreements; our ability to access capital markets; credit ratings of our debt; the outcome of existing and any future legal proceedings, including any proceedings or related liabilities with respect to environmental, asbestos-related, or other matters; rising costs of pension benefits; possible changes in accounting rules; the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement between the parties to the Merger; the failure to obtain the Company Shareholder Approval, the failure to obtain certain required regulatory approvals or the failure to satisfy any of the other closing conditions to the completion of the Merger within the expected timeframes or at all; risks related to disruption of management’s attention from ongoing business operations due to the Merger; the effect of the announcement of the Merger on the ability to retain and hire key personnel and maintain relationships with customers, suppliers and others with whom we do business, or on operating results and business generally; the ability to meet expectations regarding the timing and completion of the Merger; and the other risks listed from time to time in our filings with the SEC and other substantial costs, risks and uncertainties, including, but not limited to, those detailed in our Annual Report on Form 10-K for the year ended October 3, 2021 and from time to time in our other filings with the SEC. These forward-looking statements are made only as of the date hereof, and we do not undertake any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. Investors should not assume that any lack of update to a previously issued “forward-looking statement” constitutes a reaffirmation of that statement. Continued reliance on “forward-looking statements” is at investors’ own risk.
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THE COMPANIES
Meritor, Inc.
Meritor is a premier global supplier of a broad range of integrated systems, modules and components to OEMs and the aftermarket for the commercial vehicle, transportation and industrial sectors. With more than a 110-year legacy of providing innovative products that offer superior performance, efficiency and reliability, Meritor serves commercial truck, trailer, off-highway, defense, specialty and aftermarket customers around the world. Meritor is publicly listed on the NYSE under the symbol “MTOR” and is headquartered in Troy, Michigan.
Meritor’s principal executive offices are located at 2135 West Maple Road, Troy, Michigan 48084-7186 and its telephone number is (248) 435-1000.
A detailed description of the Company’s business is contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2021, filed with the SEC on November 17, 2021, which is incorporated by reference into this proxy statement. For more information, see the section of this proxy statement entitled “Where You Can Find Additional Information.
Cummins Inc.
Cummins is a global power leader that designs, manufactures, distributes and services diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, control systems, air handling systems, automated transmissions, electric power generation systems, batteries, electrified power systems, hydrogen production and fuel cell products. Cummins sells products to OEMs, distributors, dealers and other customers worldwide. Cummins has a service network of approximately 500 wholly-owned, joint venture and independent distributor locations and more than 10,000 Cummins certified dealer locations in approximately 190 countries and territories. Cummins is publicly listed on the NYSE under the symbol “CMI” and is headquartered in Columbus, Indiana.
Cummins’s principal executive offices are located at 500 Jackson Street, Columbus, Indiana 47201 and its telephone number is (812) 377-5000.
Rose NewCo Inc.
Merger Sub is a wholly owned subsidiary of Parent that will function as the merger subsidiary in the Merger. Merger Sub was formed solely for the purpose of entering into the Merger Agreement and consummating the Transactions and it has not carried on any activities on or prior to the date of this proxy statement, except for activities incidental to its formation and activities in connection with Parent’s acquisition of the Company. Upon completion of the Merger, Merger Sub will merge with and into Meritor, with Meritor continuing as the surviving corporation in the Merger, and Merger Sub will cease to exist.
Merger Sub’s principal executive offices are located at 500 Jackson Street, Columbus, IN 47201 and its telephone number is (812) 377-5000.
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THE SPECIAL MEETING
We are furnishing this proxy statement to the Company’s shareholders as part of the solicitation of proxies by the Meritor Board for use at the special meeting or any adjournment or postponement thereof. This proxy statement provides the Company’s shareholders with the information they need to know to be able to vote or instruct their vote to be cast at the special meeting or any adjournment or postponement thereof.
Date, Time and Place of the Special Meeting
This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by the Meritor Board for use at the special meeting to be held virtually via the Internet at www.virtualshareholdermeeting.com/MTOR2022SM on May 26, 2022, at 9:30 a.m., Eastern Time, or at any adjournment or postponement thereof.
As part of our precautions regarding the coronavirus or COVID-19, the special meeting will be held solely by means of remote communication rather than in person. You will be able to attend the special meeting online and to vote your shares electronically at the special meeting by visiting the special meeting website. You will need the 16-digit control number located on your proxy card in order to access special meeting website and to vote.
For information regarding attending the special meeting, see “The Special Meeting — Voting; Proxies; Revocation — Attendance.”
Purposes of the Special Meeting
At the special meeting, Meritor shareholders will be asked to consider and approve the following proposals:
the Merger Proposal;
the Compensation Proposal, the value of which is disclosed in the table in the section of this proxy statement entitled “The Merger — Interests of Meritor’s Directors and Executive Officers in the Merger — Quantification of Potential Payments and Benefits to Meritor’s Named Executive Officers in Connection with the Transaction”; and
the Adjournment Proposal.
Our shareholders must approve the Merger Proposal for the Merger to occur. If our shareholders fail to approve the Merger Proposal, the Merger will not occur. A copy of the Merger Agreement is attached as Annex A to this proxy statement and is incorporated by reference herein in its entirety, and certain provisions of the Merger Agreement are described in the section of this proxy statement entitled “The Merger Agreement.”
The vote on the Compensation Proposal is a vote separate and apart from the vote on the Merger Proposal. Accordingly, you may vote to approve the Merger Proposal and vote not to approve the Compensation Proposal and vice versa. Because the vote on the Compensation Proposal is advisory only, it will not be binding on either Meritor or Parent. Accordingly, if the Merger Proposal is approved and the Merger is completed, the compensation will be payable, subject only to the conditions applicable thereto under the applicable compensation agreements and arrangements, regardless of the outcome of the non-binding, advisory vote of Meritor shareholders.
No matters other than the proposals set forth above will be brought before the special meeting.
This proxy statement and the enclosed form of proxy are first being mailed to our shareholders on or about April 18, 2022.
Record Date, Notice and Quorum
The holders of record of Common Stock as of the close of business on April 11, 2022, the record date for the special meeting, are entitled to receive notice of and to vote at the special meeting. As of the close of business on the record date, 70,852,942 shares of Common Stock were outstanding and entitled to vote at the special meeting.
The presence at the special meeting, virtually or represented by proxy, of the holders of at least a majority of the shares of Common Stock entitled to be cast on any matter to be acted on at the special meeting will
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constitute a quorum for purposes of the special meeting. Once a share is represented at the special meeting, it will be counted for purposes of determining whether a quorum is present at the special meeting. However, if a new record date is set for an adjourned special meeting, a new quorum will have to be established. Proxies received but marked as abstentions will be included in the calculation of the number of shares considered to be present at the special meeting.
Required Vote
Each share of Common Stock outstanding as of the close of business on the record date is entitled to one vote on each of the proposals to be considered at the special meeting.
For the Company to complete the Merger, Meritor shareholders holding a majority of all the votes entitled to be cast to approve the Merger Agreement must vote “FOR” the Merger Proposal. An abstention with respect to the Merger Proposal, or a failure to vote your shares of Common Stock (including a failure to instruct your broker, bank or other nominee to vote shares held on your behalf), will have the same effect as a vote “AGAINST” the Merger Proposal.
Approval of each of (i) the Compensation Proposal and (ii) the Adjournment Proposal requires the affirmative vote of a majority of the shares of Common Stock present virtually or represented by proxy at the special meeting and that vote thereon, but is not a condition to the completion of the Merger. An abstention with respect to either proposal or as failure to return your proxy card or otherwise vote your shares of Common Stock (including a failure to instruct your broker, bank or other nominee to vote shares held on your behalf), will have no effect on these proposals, assuming a quorum is present.
Stock Ownership and Interests of Certain Persons
Voting by the Company’s Directors and Executive Officers
As of the close of business on the record date, directors and executive officers of the Company were entitled to vote approximately 1,193,331 shares of Common Stock, or approximately 1.7% of the shares of Common Stock issued and outstanding on that date and entitled to vote at the special meeting.
Voting; Proxies; Revocation
Attendance
All holders of shares of Common Stock as of the close of business on April 11, 2022, the record date, including shareholders of record and beneficial owners of Common Stock registered in the “street name” of a broker, bank or other nominee, are invited to attend the special meeting virtually.
If you hold your shares in “street name,” and you also wish to be able to vote at the meeting, you must obtain a legal proxy, executed in your favor, from your bank, broker or other nominee.
Voting at the Special Meeting
Shareholders of record will be able to attend the special meeting virtually and vote electronically via the special meeting website. If you are not a shareholder of record, but instead hold your shares of Common Stock in “street name” through a broker, bank or other nominee, you must provide a legal proxy executed in your favor from your broker, bank or other nominee in order to be able to vote at the special meeting. Attending the special meeting virtually does not itself constitute a vote on any proposal.
Providing Voting Instructions by Proxy
To ensure that your shares of Common Stock are voted at the special meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the special meeting virtually.
Shares of Common Stock Held by Record Holder
If you are a shareholder of record, you may provide voting instructions by proxy using one of the methods described below.
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Submit a Proxy by Telephone or via the Internet. This proxy statement is accompanied by a proxy card with instructions for submitting voting instructions. You may vote by telephone by calling the toll-free number or via the Internet by accessing the Internet address specified on the enclosed proxy card. Your shares of Common Stock will be voted as you direct in the same manner as if you had completed, signed, dated and returned your proxy card, as described below.
Submit a Proxy Card by Mail. If you complete, sign, date and return the enclosed proxy card by mail so that it is received in time for the special meeting, your shares of Common Stock will be voted in the manner directed by you on your proxy card.
If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of each of the Merger Proposal, the Compensation Proposal and the Adjournment Proposal. If you fail to return your proxy card or vote by telephone or via the Internet, and you are a holder of record on the record date, unless you attend the special meeting virtually and vote electronically, your shares of Common Stock will not be considered present at the special meeting for purposes of determining whether a quorum is present at the special meeting, which will have the same effect as a vote “AGAINST” the Merger Proposal and, assuming a quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal.
Shares of Common Stock Held in “Street Name”
If your shares of Common Stock are held by a broker, bank or other nominee on your behalf in “street name,” your broker, bank or other nominee will send you instructions as to how to provide voting instructions for your shares. Many brokerage firms and banks have a process for their customers to provide voting instructions by telephone or via the Internet, in addition to providing voting instructions by a voting instruction form.
In accordance with applicable stock exchange rules, brokers, banks and other nominees that hold shares of Common Stock in “street name” for their customers do not have discretionary authority to vote the shares with respect to (i) the Merger Proposal, (ii) the Compensation Proposal or (iii) the Adjournment Proposal. Accordingly, if brokers, banks or other nominees do not receive specific voting instructions from the beneficial owner of such shares, they cannot vote such shares with respect to these proposals. Therefore, unless you attend the special meeting virtually with a properly executed legal proxy from your broker, bank or other nominee, your failure to provide instructions to your broker, bank or other nominee will result in your shares of Common Stock not being present at the meeting and not being voted on any of the proposals. As a result, a failure to vote your shares of Common Stock (including a failure to instruct your broker, bank or other nominee to vote shares held on your behalf) will have the same effect as a vote “AGAINST” the Merger Proposal, but it will have no effect on the other proposals, assuming a quorum is present.
Revocation of Proxies
Any person giving a proxy pursuant to this solicitation has the power to revoke and change it before it is voted. If you are a shareholder of record, you may revoke your proxy before the vote is taken at the special meeting by:
submitting a new proxy with a later date, by using the telephone or Internet proxy submission procedures described above at any time up to 11:59 p.m. Eastern Time on May 25, 2022, or by completing, signing, dating and returning a new proxy card by mail to the Company;
attending the special meeting virtually and voting electronically at the special meeting; or
delivering a written notice of revocation by mail to the Company, in care of the Corporate Secretary, at our headquarters, 2135 West Maple Road, Troy, Michigan 48084-7186.
Please note, however, that only your last-dated proxy will count. Virtually attending the special meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card to the Company or by sending a written notice of revocation to the Company, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by the Company before the special meeting.
If you hold your shares in “street name” through a broker, bank or other nominee, you will need to follow the instructions provided to you by your broker, bank or other nominee in order to revoke your proxy or submit
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new voting instructions. If you hold your shares in “street name,” you may also revoke a prior proxy by voting electronically at the special meeting if you obtain a legal proxy executed in your favor from your broker, bank or other nominee in order to be able to vote at the special meeting.
Abstentions
An abstention occurs when a shareholder attends the special meeting, either virtually or represented by proxy, but abstains from voting. Abstentions will be included in the calculation of the number of shares of Common Stock present or represented at the special meeting for purposes of determining whether a quorum has been achieved.
Abstaining from voting will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the Compensation Proposal or the Adjournment Proposal.
Solicitation of Proxies
The Meritor Board is soliciting your proxy, and we will bear the cost of soliciting proxies. This includes the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of our outstanding Common Stock. The Company has retained Innisfree, a proxy solicitation firm, to assist the Meritor Board in the solicitation of proxies for the special meeting, and we expect to pay Innisfree approximately $25,000, plus reimbursement of reasonable and documented out-of-pocket expenses. Proxies may be solicited by mail, personal interview, email, telephone, or via the Internet by Innisfree or, without additional compensation, by certain of Meritor’s directors, officers and employees.
Adjournments and Postponements
Although it is not currently expected, the special meeting may be adjourned or postponed if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the Merger Proposal or in the absence of a quorum.
The Chairman of the special meeting or the holders of a majority of shares present virtually or represented by proxy at the special meeting, whether or not constituting a quorum, may adjourn the special meeting. Adjournments and postponements are also subject to certain restrictions in the Merger Agreement. Meritor may not postpone or adjourn the special meeting without Parent’s prior written consent (not to be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, (i) if Meritor reasonably determines in good faith, after consulting with its outside legal counsel, that the Company Shareholder Approval is unlikely to be obtained at the special meeting, including due to an absence of quorum, the Company may adjourn or postpone the special meeting, for a period no longer than 30 calendar days, to solicit additional proxies in favor of the Merger Proposal or (ii) if Parent reasonably determines in good faith, after consulting with its outside legal counsel, that the Company Shareholder Approval is unlikely to be obtained at the special meeting, Parent may request that Meritor adjourn, delay or postpone the special meeting.
Other Information
You should not return your stock certificates or send in other documents evidencing ownership of Common Stock with the proxy card. If the Merger is completed and your shares of Common Stock are evidenced by stock certificates, the paying agent for the Merger will send you a letter of transmittal and related materials and instructions for exchanging your shares of Common Stock evidenced by stock certificates for the Merger Consideration (without interest and subject to any required tax withholding).
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THE MERGER
The description of the Merger in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the Merger that is important to you. You are encouraged to read the Merger Agreement carefully and in its entirety.
Certain Effects of the Merger
Pursuant to the terms of the Merger Agreement, if the Merger Proposal is approved by the Company’s shareholders and the other conditions to the closing of the Merger are satisfied or waived, Merger Sub will be merged with and into the Company, with the Company surviving the Merger as a wholly owned subsidiary of Parent.
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each share of Common Stock issued and outstanding immediately before the Effective Time (excluding (i) shares held by the Company as treasury stock or held by Parent or Merger Sub (such shares, “Canceled Shares”) and (ii) shares held by any direct or indirect subsidiary of Parent (other than Merger Sub) or the Company (other than any such shares of Common Stock held on behalf of third parties) (the “Converted Shares”)), and all rights in respect thereof, shall, by virtue of the Merger, be converted into the right to receive the Merger Consideration.
The Common Stock is currently registered under the Exchange Act and is listed on the NYSE under the symbol “MTOR”. Upon completion of the Merger, the Company will cease to be a publicly traded company and will be a wholly owned subsidiary of Parent. Following the completion of the Merger, the Common Stock will be delisted from the NYSE and deregistered under the Exchange Act, following which the Company will no longer be required to file periodic reports with the SEC with respect to its Common Stock in accordance with applicable law, rules and regulations. The Company will therefore become a privately held company, wholly owned by Parent.
Background of the Merger
As part of Meritor’s ongoing consideration and evaluation of its long-term strategic goals and plans, the Meritor Board and Meritor’s senior management periodically review, consider and assess Meritor’s capabilities, operations, financial performance and business plans, as well as overall industry conditions, opportunities and risks for the company as they may affect those strategic goals and plans. This review includes, among other matters, the consideration of potential opportunities for business combinations, acquisitions, divestitures, strategic partnerships and other financial and strategic alternatives.
From the summer of 2019 to March 2020, representatives of Parent and the Company engaged in preliminary, exploratory discussions regarding a potential strategic transaction, following discussions with, and authorization by, the Meritor Board with the Meritor Board receiving advice and analysis from Meritor’s outside financial and legal advisors at J.P. Morgan and Wachtell, Lipton, Rosen, & Katz (“Wachtell Lipton”) and the Parent Board with the Parent Board receiving advice and analysis from Parent’s outside financial and legal advisors at Morgan Stanley and Mayer Brown LLP (“Mayer Brown”). While Parent ultimately conveyed possible interest in pursuing a transaction at a proposed valuation of $33.00 per share in cash (which interest was formalized in a non-binding letter setting forth such proposal that was provided by Parent on February 13, 2020), and Parent had the opportunity to engage in preliminary confidential business, financial and strategic diligence discussions that affirmed the strategic logic of a combination pursuant to a confidentiality and standstill agreement that Parent had entered into with Meritor (the “Original Confidentiality Agreement”), Parent withdrew and terminated transaction discussions in March 2020 after the onset of the COVID-19 pandemic. Later in March 2020, Meritor sent Parent a letter requesting that it return or destroy the diligence information that had been shared by Meritor and in April 2020, Parent sent a letter to Meritor confirming the destruction of such diligence information.
Through 2020 and 2021, Meritor continued to evaluate regularly its business and strategic plans, industry dynamics, Meritor’s positioning with investors and other stakeholders, opportunities and risks before the Company and potential strategic and financial alternatives, including Meritor’s periodic discussions with Parent regarding various strategic collaboration opportunities other than a business combination or merger.
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In November 2020, as part of the Company’s planned succession planning processes, Meritor announced that Jay Craig, Chief Executive Officer and President of Meritor, would transition to the role of Executive Chairman of the Meritor Board on February 28, 2021, and that Chris Villavarayan, Executive Vice President and Chief Operating Officer, would succeed Mr. Craig as Chief Executive Officer and President at that time and would join the Meritor Board. Meritor’s then-current independent Chairman, William R. Newlin, became lead independent director of the Meritor Board as part of this transition plan. On November 12, 2021, Meritor announced that Mr. Newlin had been elected Non-Executive Chairman, effective December 31, 2021, with Mr. Craig stepping down from his Executive Chairman role and departing the Company.
In mid-November 2021, Tom Linebarger, Chairman and Chief Executive Officer of Parent, conveyed to Mr. Craig that Parent was interested in re-engaging in discussions to acquire Meritor. Mr. Craig indicated that he would apprise the Meritor Board. The Meritor Board was then alerted of the development, the Company’s financial and legal advisors at J.P. Morgan and Wachtell Lipton were also apprised, with future meetings of the Meritor Board to be scheduled at which the Meritor Board would deliberate and receive the advice of J.P. Morgan and Wachtell Lipton, including in the event that Parent were to provide a specific proposal and indicative valuation that could warrant further investigation, potential negotiation and consideration.
Throughout November and December 2021, and continuing into 2022, members of Meritor’s senior management regularly consulted with Mr. Newlin in his capacity as lead independent director and Non-Executive Chairman of the Meritor Board, in between the scheduled meetings of the Meritor Board to obtain his input and direction as to next steps. Meritor Board members were also kept apprised of developments.
On November 18, 2021, Parent and Meritor entered into a confidentiality and standstill agreement (the “New Confidentiality Agreement”) with substantially similar terms as those of the Original Confidentiality Agreement.
Following further discussion, Parent was advised that Meritor would require receipt of a specific proposed valuation in order to assess potential next steps and that, since Meritor planned to disclose to investors at Meritor’s December 7, 2021 Strategy Day meaningful amounts of new business and financial information regarding Meritor’s plans and prospects, Meritor would share with Parent in advance of such public disclosure, pursuant to the New Confidentiality Agreement, the information that Meritor would be making public so that such materials could be considered in any proposal that Parent might make.
On November 22, 2021, Meritor provided Parent with an advance copy of materials it planned to publicly disclose at its December 7, 2021 Strategy Day, pursuant to the New Confidentiality Agreement. Meritor responded to certain follow-up questions from Parent on December 8, 2021.
On December 14, 2021, Mr. Linebarger conveyed to Meritor that Parent was interested in acquiring Meritor and sent a letter to Messrs. Villavarayan and Craig setting forth a non-binding proposal (the “December Proposal”) for Parent to acquire all of the outstanding common stock of Meritor for $33.50 per share in cash. The December Proposal noted that the proposal would not be contingent on financing. The December Proposal also indicated that Parent expected to be able to complete its due diligence of Meritor within a period of weeks.
On December 20, 2021, the Meritor Board held a meeting during which members of Meritor’s senior management and representatives of Wachtell Lipton and J.P. Morgan were present. At the meeting, the Meritor Board reviewed the December Proposal and discussed the interactions with Parent. The Meritor Board discussed the December Proposal, including in the context of financial analyses and alternatives presented by J.P. Morgan to the Meritor Board. A representative of Wachtell Lipton provided an overview of the Meritor Board’s fiduciary duties in the context of the consideration of a proposal to acquire Meritor. The Meritor Board discussed potential options and next steps, and directed Meritor to provide Parent with a short period of limited due diligence in order to seek an increase in the $33.50 per share offer price, which the Meritor Board believed undervalued Meritor, its prospects and its plans.
On December 21, 2021, Mr. Villavarayan, at the direction of the Meritor Board, provided a letter to Mr. Linebarger to convey the Meritor Board’s position.
Between December 24, 2021 and January 13, 2022, J.P. Morgan, at the direction of the Meritor Board and management, and Meritor personnel provided limited due diligence information to representatives of Parent, and representatives of Parent had several due diligence calls with members of senior management of Meritor, including a management presentation by Meritor.
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On January 14, 2022, Mr. Linebarger submitted a letter to Messrs. Villavarayan and Newlin containing a non-binding proposal (the “First January Proposal”) for Parent to acquire all of the outstanding common stock of Meritor for $35.00 per share in cash. The First January Proposal noted the transaction would not be contingent on financing. The First January Proposal also indicated that Parent expected to be able to complete its remaining due diligence of Meritor within approximately three weeks.
On January 18, 2022, the Meritor Board held a meeting during which members of Meritor’s senior management and representatives of Wachtell Lipton and J.P. Morgan were present. At the meeting, representatives of J.P. Morgan described the due diligence process with Parent, as well as the financial terms of the First January Proposal and J.P. Morgan’s financial analysis of the proposed merger consideration set forth in the First January Proposal. A representative of Wachtell Lipton discussed legal matters, including an overview of the Meritor Board’s fiduciary duties in the context of the Meritor Board’s consideration of the First January Proposal. The Meritor Board discussed various options and next steps, and directed Meritor to provide Parent with additional due diligence information in order to seek an increase in the offer price, which the Meritor Board believed continued to undervalue Meritor. The Meritor Board also considered whether to solicit indications of interest from other potential financial sponsors or strategic buyers and concluded, with the benefit of advice from J.P. Morgan and Wachtell Lipton, not to do so at this time, while reserving ultimate judgment on the matter, taking into account the risk of leaks, the damage and disruption to Meritor and its stakeholders, including employees and customer relationships, were a leak to occur in the absence of a definitive transaction announcement, the uncertainty as to whether alternative compelling third-party bids would emerge (and the Meritor Board’s believed low likelihood of such bids emerging) and the benefits from continuing to see if Parent could present a compelling proposal.
On January 21, 2022, Mr. Villavarayan, at the direction of the Meritor Board, met with Mr. Linebarger to convey the Meritor Board’s position at its January 18 meeting and to discuss the need for Parent to submit an improved proposal if Parent wished to have the opportunity to have the Meritor Board consider a potential transaction with Parent.
Over the next few days, Meritor provided Parent with additional due diligence information, and an additional meeting was held between senior management of Meritor and senior management of Parent regarding areas of additional value in the transaction that would justify Parent increasing its offer price.
On January 26, 2022, Mr. Linebarger submitted a letter to Messrs. Villavarayan and Newlin containing a non-binding proposal (the “Second January Proposal”) for Parent to acquire all of the outstanding common stock of Meritor for $36.50 per share in cash, which Parent characterized as its last and final offer. The Second January Proposal requested that Parent be provided a three week exclusivity period to complete confirmatory due diligence and negotiate definitive transaction documentation.
On January 27, 2022, the Meritor Board held a meeting during which members of Meritor’s senior management and representatives of Wachtell Lipton and J.P. Morgan were present. At the meeting, representatives of J.P. Morgan described the interactions with Parent since the January 18, 2022 Meritor Board meeting and the financial terms of the Second January Proposal, as well as J.P. Morgan’s financial analysis of the proposed merger consideration set forth in the Second January Proposal. A representative of Wachtell Lipton discussed legal matters, including the Meritor Board’s fiduciary duties in the context of the Meritor Board’s consideration of the Second January Proposal. The Meritor Board next discussed the Second January Proposal, including in comparison to Meritor’s standalone prospects, as well as whether other potential bidders would be capable of and willing to offer a more attractive value than Parent’s $36.50 per share all-cash proposal. The Meritor Board determined not to solicit alternative third-party interest at this time due to, among other things, potential impact on Parent’s proposal and the risk of a leak, as well as management’s assessment of the low likelihood of obtaining a superior offer for Meritor. The Meritor Board authorized management to continue to explore a transaction with Parent by moving forward with due diligence and negotiation of definitive documentation so that the Meritor Board would have the opportunity to consider a complete proposal inclusive of all material terms and to do so without entering into an exclusivity agreement with Parent.
After the meeting, Mr. Villavarayan called Mr. Linebarger to provide a summary of the Meritor Board’s position at its meeting that day. A representative of J.P. Morgan then sent, at the direction of the Meritor Board, a draft merger agreement to representatives of Morgan Stanley that had been prepared by Wachtell Lipton.
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At the end of January into February 2022, Meritor made available to Parent and Parent’s representatives certain due diligence information in a confidential data room. Thereafter, Parent, with the assistance of its advisors, conducted additional due diligence on Meritor, including through telephone calls with Meritor management and exchange of materials.
On February 5, 2022, a representative of Parent’s outside legal counsel from Mayer Brown sent a revised draft of the merger agreement to representatives of Wachtell Lipton.
On February 10, 2022, a representative of Wachtell Lipton sent a revised draft of the merger agreement to representatives of Mayer Brown. Through the course of negotiations, Wachtell Lipton and Mayer Brown discussed various items in the merger agreement, including regulatory provisions, termination fee amounts, interim operating covenants and fiduciary matters.
Between February 10, 2022 and February 21, 2022, representatives of Wachtell Lipton and Mayer Brown, with input from Meritor and Parent, continued to exchange and negotiate drafts of the merger agreement.
Also on February 10, 2021, Messrs. Villavarayan and Linebarger discussed certain key issues in the merger agreement.
On February 14, 2022, the Meritor Board held a meeting during which members of Meritor’s senior management and representatives of Wachtell Lipton and J.P. Morgan were present. At the meeting, representatives of J.P. Morgan presented an update on the diligence process to date and representatives of Wachtell Lipton presented an update on merger agreement negotiations with Parent and a range of potential approaches to finalizing the merger agreement. After discussing, the Meritor Board determined that Meritor should continue the current course of negotiations with Parent.
Also on February 14, 2021, Messrs. Villavarayan and Linebarger discussed the key issues in the merger agreement.
Between February 14, 2022 and February 21, 2022, the parties and their respective advisors worked to finalize the definitive transaction documents, with all remaining open points having been substantially resolved by the afternoon of February 21, 2022.
On February 21, 2022, the Meritor Board held a meeting during which members of Meritor’s senior management and representatives of Wachtell Lipton and J.P. Morgan were present. Representatives of Wachtell Lipton again reviewed the fiduciary duties of the directors and provided a summary of the proposed terms of the merger agreement. A representative of J.P. Morgan then reviewed J.P. Morgan’s financial analysis of the proposed Merger Consideration in the proposed transaction with Parent. After discussion among the Meritor Board and representatives of Wachtell Lipton and J.P. Morgan, a representative of J.P. Morgan tendered to the Board J.P. Morgan’s oral opinion, which was subsequently confirmed by the delivery of J.P. Morgan’s written opinion, dated February 21, 2022, to the Meritor Board to the effect that, as of such date and based upon and subject to the various factors, assumptions, limitations and qualifications set forth therein, the Merger Consideration to be paid to holders of Common Stock in the proposed Merger was fair, from a financial point of view, to such shareholders. After additional discussions of the proposed transaction and the matters summarized for the Meritor Board at the meeting, the Meritor Board unanimously (1) approved, adopted and declared advisable the Merger Agreement and the Transactions, including the Merger, (2) determined that the Merger Agreement and the Transactions are fair to, and in the best interests of, the Company and its shareholders, (3) directed that the Merger Agreement be submitted to the Company’s shareholders for their approval and (4) resolved, subject to the terms and conditions of the Merger Agreement, to recommend that the Company’s shareholders approve the Merger Agreement.
Later in the evening on February 21, 2022, the parties executed and delivered the merger agreement.
Early in the morning on February 22, 2022, the parties issued a joint press release announcing the transaction.
Reasons for the Merger; Recommendation of the Meritor Board
The Meritor Board evaluated, with the assistance of its legal and financial advisors, the Merger Agreement and the Transactions, including the Merger, and, on February 21, 2022, unanimously determined that the Merger Agreement and the Transactions are fair to, and in the best interests of, the Company and its shareholders and approved, adopted and declared advisable the Merger Agreement and the Transactions, including the Merger.
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In the course of making the unanimous recommendation, the Meritor Board considered a range of factors, including those below (which are not necessarily in order of relative importance) relating to the Merger Agreement and the Transactions, including the Merger, each of which the Meritor Board believed supported its decision:
the Meritor Board’s assessment of Meritor’s business, assets, current and projected financial performance and condition, earnings, prospects and outlook, including taking into account Meritor’s potential for, and risks and uncertainties to, future growth and value creation;
the fact that the Merger Consideration is all cash, which provides the Company’s shareholders immediate certainty of value and liquidity for their shares of Common Stock and enables the Company’s shareholders to realize value that has been created at the Company while eliminating long-term business and execution risk;
the information provided by Meritor’s financial advisor;
the current and historical market prices of the shares of Common Stock, including the market performance of the shares of Common Stock relative to those of other participants in the Company’s industry and general market indices and the fact that the Merger Consideration of $36.50 per share represented a premium of approximately 48% to the closing price on the last trading day before the Merger Agreement was executed and reflected an implied transaction multiple above the select precedent transaction multiples used in the Company’s financial advisor’s analysis;
the Meritor Board’s view of industry trends, the substantially increasing levels of capital investment needed to navigate the evolving electrification environment and the increasing number and size of traditional and emerging competitors, including those with substantially enhanced scale relative to the Company and the various risks and considerations with respect to continuing to execute the Company’s standalone plans and operating as an independent public company;
the belief that the Company’s customers will benefit from the combined company’s enhanced capabilities in product offerings for internal combustion and electrified powertrain application, and in technology and the ability to accelerate investment in axle and brake development and electric vehicle refinements with increased adoption in the markets as a result of the Transactions;
the belief that Meritor and Parent have complementary portfolios that will help the combined company develop economically viable zero carbon solutions for commercial and industrial applications and the belief that Meritor and Parent share a similar customer-first focus and commitment to excellence, innovation, collaboration and technology leadership;
the belief that the Merger provides a unique opportunity to better serve and innovate for Meritor’s customers, and to access new customers around the world, enhance overall community value through increased investment and provide new and expanded career and growth opportunities for Meritor employees;
the belief that the Company’s employees should benefit from the greater stability and opportunities provided by the combined company’s enhanced ability to invest in new product offerings and advanced technology;
the Meritor Board’s concern regarding the potential impact of any potential economic downturn on the price of shares of Common Stock (and on the potential valuation that counterparties would be willing to pay);
the course and history of the negotiations between Meritor and Parent, as described under “— Background of the Merger,” including the Meritor Board’s success in having Parent raise its offer several times for the benefit of Meritor’s shareholders through constructive engagement and achieve a level reflecting a substantial premium and a favorable valuation relative to various metrics and methodologies and the Meritor Board’s belief that Parent’s offer of $36.50 per share was Parent’s best and final offer, which best and final status was affirmed by Parent and Parent’s representatives;
the belief of the Meritor Board that the terms of the Merger Agreement include the most favorable terms for the Company, in the aggregate, to which Parent was willing to agree;
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the belief, based on the advice of Meritor’s financial advisor and its knowledge of the industry and the operations of Meritor, that it was unlikely that any other financial sponsors or strategic buyers would be willing to acquire Meritor at a price in excess of $36.50 per share in cash (and no such party had submitted such a bid) and agree to and ultimately consummate the Merger on the terms set forth in the Merger Agreement, and that if Meritor were to conduct an auction process or other active solicitation of alternative acquisition proposals, doing so would create risk and possible loss or destruction of value;
the Meritor Board’s belief that Parent may have pursued business combinations, acquisitions or partnerships with other third parties in the event the Merger was not consummated, creating potential long term risks and potentially adverse impacts to the Company, including if such developments were to occur and strengthen other companies to Meritor’s detriment;
the high degree of certainty that the closing will be achieved in a timely manner, in view of the terms of the Merger Agreement, including, among other things, that the effects of COVID-19 were excepted from the definition of a Company Material Adverse Effect, and other provisions and protections increasing the level of certainty afforded to the Merger ultimately being consummated;
the oral opinion of J.P. Morgan rendered to the Meritor Board on February 21, 2022, which was subsequently confirmed by delivery of a written opinion dated February 21, 2022, that, as of such date and based upon and subject to the various factors, assumptions, limitations and qualifications set forth therein, the Merger Consideration to be paid to holders of Common Stock in the proposed Merger was fair, from a financial point of view, to such shareholders, as more fully described in the section of this proxy statement entitled “— Opinion of Meritor’s Financial Advisor”;
the terms and conditions of the Merger Agreement and the other transaction documents, including:
the requirement that the Merger Agreement be approved by the holders of a majority of all the votes entitled to be cast to approve the Merger Agreement;
the conditions to closing contained in the Merger Agreement, which the Meritor Board believed are reasonable and customary in number and scope;
the fact that the terms and conditions of the Merger Agreement minimize, to the extent reasonably practical, the risk that a condition to closing would not be satisfied and also provide reasonable flexibility to operate Meritor’s business during the pendency of the Merger, including with respect to actions in response to the COVID-19 pandemic and otherwise;
the provision of the Merger Agreement allowing the Meritor Board, subject to certain conditions, to provide information to and engage in discussions or negotiations with a third party that makes an unsolicited Company Takeover Proposal;
the provision of the Merger Agreement allowing the Meritor Board to withdraw or change its recommendation of the Merger Agreement and to terminate the Merger Agreement, in certain circumstances relating to the presence of a Company Superior Proposal (or to effect a Change of Recommendation in response to an Intervening Event) subject, in certain cases, to paying the Company Termination Fee;
the absence of a financing condition in the Merger Agreement and Parent’s ability to finance the Merger without difficulty;
the customary nature of the representations, warranties and covenants of Meritor in the Merger Agreement;
the ability of Meritor to specifically enforce Parent’s obligations under the Merger Agreement, including Parent’s obligations to complete the Merger;
the belief that the Termination Date, as it may be extended, if applicable, allows for sufficient time to complete the Merger;
the fact that Parent agreed to use its reasonable best efforts to obtain all necessary governmental approvals with respect to the Merger, including agreeing to remedies as necessary to obtain any
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such approval, subject to certain limitations as to the remedies and actions that Parent would be required to take, which limitations and other relevant provisions are further described under the section of this proxy statement entitled “The Merger Agreement – Efforts to Complete the Merger”;
the requirement that, in the event of a failure of the Merger to be consummated under certain circumstances, Parent will pay the Company the Parent Termination Fee as more fully described under the section of this proxy statement entitled “The Merger Agreement — Parent Termination Fees”; and
the Meritor Board’s view that the terms of the Merger Agreement would be unlikely to deter interested third parties from making a Company Superior Proposal, including the Merger Agreement’s terms and conditions related to a Change of Recommendation, the Company’s right to terminate the Merger Agreement in favor of an alternative Company Superior Proposal if certain provisions were satisfied, the payment by the Company of a relatively low Company Termination Fee in connection with the termination of the Merger Agreement under certain circumstances, and the Board’s belief that the overall terms relating to the foregoing were appropriate and favorable to the Company and its shareholders taking into account the specific circumstances involved (see the section of this proxy statement entitled “The Merger Agreement — Company Takeover Proposal; Non-Solicitation”).
In addition, the Meritor Board also weighed the advantages and benefits against a variety of risks and other potentially negative factors (which are not necessarily in order of relative importance), including the following:
the fact that the Company’s shareholders generally will have no ongoing equity participation in the Company following the Merger, and that such shareholders will cease to participate in the Company’s future earnings or growth, if any, or to benefit from increases, if any, in the value of shares of Common Stock, and will not participate in any potential future sale of the Company to a third party;
the risk of incurring substantial expenses related to the Merger, including in connection with any litigation that may result from the announcement or pendency of the Merger;
the risk that there can be no assurance that all conditions to the parties’ obligations to complete the Merger will be satisfied, and as a result, it is possible that the Merger may not be completed even if the Merger Agreement is approved by the Company’s shareholders;
the risk that certain regulatory approvals required to consummate the Merger may not be obtained;
the Merger Agreement’s restrictions on the conduct of the Company’s business prior to the completion of the Merger, generally requiring the Company to conduct its business in the ordinary course , subject to specific limitations and certain exceptions, which may nevertheless delay or prevent the Company from pursuing otherwise attractive business opportunities and taking other actions with respect to its business that the Company may consider advantageous pending completion of the Merger;
the risks and costs to the Company if the Merger does not close, including the diversion of management and employee attention, potential effects on the ability to retain employees and the potential effect on business and customer and supplier relationships;
the fact that the receipt of cash in exchange for shares of Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes;
the fact that certain of the Company’s directors and executive officers may have interests in the Merger that may be different from, or in addition to, those of the Company’s shareholders, as further described in the section of this proxy statement entitled “— Interests of Meritor’s Directors and Executive Officers in the Merger”;
the covenants in the Merger Agreement prohibiting Parent from soliciting other potential acquisition proposals, and restricting its ability to entertain other potential acquisition proposals, unless certain conditions are satisfied;
the fact that Parent is required to pay the Parent Termination Fee only if certain conditions are met, as further described in the section of this proxy statement entitled “The Merger Agreement Parent Termination Fee”;
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the requirement that the Company pay the Company Termination Fee, under certain circumstances following termination of the Merger Agreement, including if Meritor terminates the Merger Agreement to accept a Company Superior Proposal, as further described in the section of this proxy statement entitled “The Merger Agreement Company Termination Fee”; and
the fact that the announcement of the Merger Agreement and pendency of the Merger, or the failure to complete the Merger, may cause substantial harm to the Company’s relationships with its employees (including making it more difficult to attract and retain key personnel and the possible loss of key management, technical, sales and other personnel), suppliers and customers and may divert employees’ attention away from the Company’s day-to-day business operations.
After considering the foregoing factors, the Meritor Board concluded that, overall, the potentially beneficial factors relating to the Merger Agreement and the Transactions, including the Merger, outweighed the risks and potentially negative factors.
The foregoing discussion of the information and factors considered by the Meritor Board is not exhaustive but is intended to reflect the material factors considered by the Meritor Board in its consideration of the Merger Agreement and the Transactions, including the Merger. In view of the complexity and the large number of factors considered, the Meritor Board, individually and collectively, did not quantify or assign any relative or specific weight to the various factors. Rather, the Meritor Board based its recommendation on the totality of the information presented to and considered by it. In addition, individual members of the Meritor Board may have given different weights to different factors.
The foregoing discussion of the information and factors considered by the Meritor Board is forward-looking in nature. This information should be read in light of the factors described under the caption “Cautionary Statement Concerning Forward-Looking Statements.”
THE MERITOR BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE MERGER PROPOSAL.
Opinion of Meritor’s Financial Advisor
Pursuant to an engagement letter, Meritor retained J.P. Morgan as its financial advisor in connection with the proposed Merger and to deliver a fairness opinion in connection with the proposed Merger. Meritor decided to engage J.P. Morgan due to, among other things, its extensive experience in Meritor’s industry, its qualifications and its deep expertise in the matters that were to be considered by the Meritor Board.
At the meeting of the Meritor Board on February 21, 2022, J.P. Morgan rendered its oral opinion to the Board of Directors of Meritor that, as of such date and based upon and subject to the various factors, assumptions, limitations and qualifications set forth in its written opinion, the Merger Consideration to be paid to the holders of Common Stock in the proposed Merger was fair, from a financial point of view, to such shareholders. J.P. Morgan confirmed its February 21, 2022 oral opinion by delivering its written opinion to the Meritor Board, dated February 21, 2022, that, as of such date, the Merger Consideration to be paid to the holders of Common Stock in the proposed Merger was fair, from a financial point of view, to such shareholders.
The full text of the written opinion of J.P. Morgan dated February 21, 2022, which sets forth, among other things, the assumptions made, matters considered and limits on the review undertaken, is attached as Annex B to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Meritor’s shareholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Meritor Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the consideration to be paid to the holders of Common Stock in the Merger and did not address any other aspect of the Merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any shareholder of Meritor as to how such shareholder should vote with respect to the proposed Merger or any other matter.
In arriving at its opinion, J.P. Morgan, among other things:
reviewed a draft dated February 20, 2022 of the Merger Agreement;
reviewed certain publicly available business and financial information concerning Meritor and the industries in which it operates;
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compared the proposed financial terms of the Merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;
compared the financial and operating performance of Meritor with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Meritor common stock and certain publicly traded securities of such other companies;
reviewed certain internal financial analyses and forecasts prepared by the management of Meritor relating to its business, including the Projections; and
performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
In addition, J.P. Morgan held discussions with certain members of the management of Meritor with respect to certain aspects of the Merger, and the past and current business operations of Meritor, the financial condition and future prospects and operations of Meritor, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Meritor or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to J.P. Morgan’s engagement letter with Meritor, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Meritor under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Meritor to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan also assumed that the Merger and the other Transactions will be consummated as described in the Merger Agreement, and that the definitive Merger Agreement would not differ in any material respect from the draft thereof furnished to J.P. Morgan. J.P. Morgan also assumed that the representations and warranties made by Meritor and Parent in the Merger Agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Meritor with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Merger will be obtained without any adverse effect on Meritor or on the contemplated benefits of the Merger.
J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the Merger Consideration to be paid to holders of Common Stock in the proposed Merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration paid in connection with the Merger to the holders of any other class of securities, creditors or other constituencies of Meritor or as to the underlying decision by Meritor to engage in the Merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed Merger, or any class of such persons relative to the consideration to be paid to holders of Common Stock in the proposed Merger or with respect to the fairness of any such compensation.
J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of Meritor or any other alternative transaction. The terms of the Merger Agreement were determined through arm’s length negotiations between Meritor and Parent, and the decision to enter into the Merger Agreement was solely that of the Meritor Board. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Meritor Board in its evaluation of the proposed Merger and should not be viewed as determinative of the views of the Meritor Board or management with respect to the proposed Merger or the Merger Consideration.
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In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the Meritor Board on February 21, 2022 and in the financial analyses contained in the presentation delivered to the Meritor Board on such date in connection with the rendering of such opinion. The following is a summary of the material financial analyses undertaken by J.P. Morgan in connection with rendering such opinion and contained in such presentation, and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.
Public Trading Multiples
Using publicly available information, J.P. Morgan compared selected financial data of Meritor with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be analogous to Meritor. The companies selected by J.P. Morgan (the “Selected Companies”) were:
Allison Transmission Holdings, Inc.
Dana Inc.
SAF-HOLLAND SE
Modine Manufacturing Co.
Commercial Vehicle Group, Inc.
Haldex AB
The Selected Companies were chosen because they are publicly traded companies with operations and businesses that, for the purposes of J.P. Morgan’s analysis, may be considered sufficiently similar in certain respects to those of Meritor and/or one or more of its businesses. The Selected Companies may be considered similar to Meritor or such businesses based on the nature of their assets and operations; however, none of the companies selected is identical or directly comparable to Meritor or such businesses, and certain of these companies may have characteristics that are materially different from those of Meritor or such businesses. J.P. Morgan’s analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect Meritor or such businesses.
Using information obtained from the Selected Companies’ public filings and FactSet Research Systems as of February 18, 2022, J.P. Morgan calculated for each Selected Company the ratio of such company’s firm value (calculated as the market value of the company’s common stock on a fully diluted basis, plus any debt and minority interest, less cash and cash equivalents) to the equity research analyst estimate for such company’s adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), for each of 2022 and 2023, calendarized based on a September 30 fiscal year end, which we refer to as FV / 2022E Adjusted EBITDA and FV / 2023E Adjusted EBITDA, respectively. For ease of presentation, September 30 is used to represent the Company’s fiscal year end, as the Company’s fiscal year ends on the Sunday nearest to September 30. The following table represents the results of this analysis for each of the Selected Companies:
 
FV/2022E
Adjusted
EBITDA
FV/2023E
Adjusted
EBITDA
Allison Transmission Holdings, Inc.
6.9x
6.3x
Dana Inc.
5.8x
4.9x
SAF-HOLLAND SE
5.1x
4.7x
Modine Manufacturing Co.
5.4x
4.8x
Commercial Vehicle Group, Inc.
5.2x
4.8x
Haldex AB
4.5x
4.0x
Cummins (for reference only)
8.6x
7.8x
Based on the results of this analysis and other factors which J.P. Morgan considered appropriate based on its experience and professional judgment, J.P. Morgan selected a multiple reference range of 4.50x to 7.00x for FV / 2022E Adjusted EBITDA and a multiple reference range of 4.00x to 6.50x for FV / 2023E Adjusted EBITDA.
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J.P. Morgan applied these ranges to Meritor’s estimated Adjusted EBITDA for the fiscal years 2022 and 2023 based on the Projections, as more fully described in the section of this proxy statement entitled Certain Meritor Unaudited Prospective Financial Information, to derive a range of firm values for Meritor, which was then adjusted to take into account Meritor’s net debt and non-controlling interest balance totaling $1,029 million in the aggregate as of December 31, 2021 to derive a range of implied equity values for Meritor. The analysis indicated the following ranges of implied per share equity value for the Common Stock, rounded to the nearest $0.25:
 
Implied Per Share
Equity Value
(rounded to the
nearest $0.25)
 
Low
High
FV/2022E Adj. EBITDA
$18.50
$36.75
FV/2023E Adj. EBITDA
$17.25
$36.75
The ranges of implied per share equity value were compared to (i) the closing price per share of Common Stock on February 18, 2022 of $24.67, and (ii) the Merger Consideration of $36.50 per share of Common Stock.
Selected Transaction Analysis
Using publicly available information, J.P. Morgan reviewed selected transactions (the “Selected Transactions”) involving businesses that, for purposes of J.P. Morgan’s analysis and based on its experience and professional judgment, were considered by J.P. Morgan to be similar to Meritor’s business. Specifically, J.P. Morgan reviewed the Selected Transactions set forth in the below table.
Using publicly available information, J.P. Morgan calculated, for each Selected Transaction, the ratio of the target company’s firm value implied by the consideration paid in such transaction to the target company’s Adjusted EBITDA for the twelve calendar-month period (“LTM”) prior to announcement of the applicable transaction (“FV/LTM Adjusted EBITDA”). The following table represents the results of this analysis for each of the Selected Transactions:
Target
Acquiror
Month/Year
Announced
FV/LTM
Adjusted
EBITDA
Delphi Technologies PLC
BorgWarner Inc.
January 2020
5.7x
OC Oerlikon Corporation AG’s Drive Systems segment
Dana International Luxembourg S.à r.l.
July 2018
6.7x
Grammer AG(1)
Jiye Auto Parts GmbH
May 2018
7.7x
GKN plc(2)
Melrose Industries plc
January 2018
8.7x
Accuride Corporation
Crestview Advisors L.L.C.
September 2016
5.7x
Getrag Group of Companies
Magna International Inc.
July 2015
8.8x
Waupaca Foundry Holdings Inc.
Hitachi Metals Ltd.
August 2014
5.9x
WABCO Holdings Inc. (for reference only)
ZF Friedrichshafen AG
February 2019
12.7x
(1)
Reflects the multiple of Jiye’s acquisition of 84% of Grammer.
(2)
Includes receivables factoring balance as of December 31, 2017.
Based on the results of this analysis and other factors which J.P. Morgan considered appropriate based on its experience and professional judgment, J.P. Morgan selected a multiple reference range of 5.75x to 8.75x for FV/LTM Adjusted EBITDA and applied it to Meritor’s Adjusted EBITDA for the twelve months ended December 31, 2021, to derive a range of firm values for Meritor, which was then adjusted to take into account Meritor’s net debt, non-controlling interest and receivables factoring balance totaling $1,349 million in the aggregate as of December 31, 2021 to derive a range of implied equity values for Meritor. This analysis indicated a range of implied equity values per share of Common Stock, rounded to the nearest $0.25, of $14.75 to $32.00, which was compared to (a) the closing price per share of Common Stock of $24.67 as of February 18, 2022, and (b) the Merger Consideration of $36.50 per share of Common Stock.
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Discounted Cash Flow Analysis
J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per share for the Common Stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flows generated by the asset and taking into consideration the time value of money with respect to those future cash flows by calculating their “present value.” The “unlevered free cash flows,” for purposes of the discounted cash flow analysis, refers to a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs. “Present value” refers to the current value of the future cash flows generated by the asset, and is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the cost of capital and other appropriate factors. “Terminal value” refers to the present value of all future cash flows generated by the asset for periods beyond the projections period.
J.P. Morgan calculated the present value of the future standalone unlevered after-tax free cash flows for the three fiscal quarters ending October 2, 2022 and for fiscal year 2023 through fiscal year 2025 based upon the Projections (the “DCF Projection Period”). J.P. Morgan also calculated a range of terminal values for Meritor by applying a range of perpetuity growth rates, as provided by management of Meritor, ranging from 1.0% to 2.0% of the unlevered free cash flows of Meritor during the final year of the DCF Projection Period. The unlevered free cash flows and the range of terminal values were then discounted from September 30 of each year to present values as of December 31, 2021 using a mid-year convention and a range of discount rates from 9.75% to 10.75%. The discount rate range was selected by J.P. Morgan based on J.P. Morgan’s analysis of the weighted average cost of capital for Meritor.
In addition, as directed by management of Meritor, J.P. Morgan calculated the present value of certain tax credits expected to be utilized by Meritor through fiscal year 2029, which were discounted from September 30 of each year to present values as of December 31, 2021 using the same mid-year convention and a discount range of 9.75% to 10.75%. The total tax credit utilization amounts provided by management of Meritor were $28 million for the three fiscal quarters ending October 2, 2022, and $32 million, $28 million, $31 million, $29 million, $11 million, $15 million and $15 million, for each of fiscal years 2023 through 2029, respectively. The present values were then added together with the present values derived based on the unlevered free cash flows to derive a range of firm values for Meritor, which was then adjusted to take into account Meritor’s net debt, non-controlling interest and receivables factoring balance totaling $1,349 million in the aggregate as of December 31, 2021 to derive a range of implied equity values for Meritor.
Based on the foregoing, these analyses indicated a range of implied equity values per share of Common Stock, rounded to the nearest $0.25, of $28.75 to $38.25. The range of implied equity values per share of Common Stock were compared to (a) the closing price per share of Common Stock of $24.67 as of February 18, 2022, and (b) the Merger Consideration of $36.50 per share of Common Stock.
Other Information
52-Week Historical Trading Range. For reference only and not as a component of its fairness analysis, J.P. Morgan reviewed the trading range for the Common Stock for the 52-week period ended February 18, 2022, which was $20.50 per share to $32.93 per share, and compared that range to (a) the closing price per share of Common Stock of $24.67 as of February 18, 2022, and (b) the proposed Merger Consideration of $36.50 per share of Common Stock.
Analyst Price Targets. For reference only and not as a component of its fairness analysis, J.P. Morgan reviewed the publicly available equity research analyst price target range for the Common Stock available as of February 18, 2022, and noted that such price target range was $26.00 per share to $34.00 per share, and compared that price target range to (a) the closing price per share of Common Stock of $24.67 as of February 18, 2022, and (b) the proposed Merger Consideration of $36.50 per share of Common Stock.
Miscellaneous
The foregoing summary of the material financial analyses undertaken by J.P. Morgan does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan
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believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Meritor. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.
Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the Selected Companies reviewed as described in the above summary is identical to Meritor, and none of the Selected Transactions reviewed was identical to the Merger. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Meritor. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the Merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Meritor and the transactions compared to the Merger.
As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Meritor with respect to the Merger and deliver an opinion to the Meritor Board with respect to the Merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Meritor and the industries in which it operates.
J.P. Morgan received a fee from Meritor of $5.0 million for delivery of its opinion. Meritor has agreed to pay J.P. Morgan a transaction fee equal to 1.0% of the Merger Consideration upon the closing of the transaction, against which the opinion fee will be credited. In addition, Meritor has agreed to reimburse J.P. Morgan for its reasonable, documented and out-of-pocket expenses incurred in connection with its services, including the reasonable fees and disbursements of external counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with Meritor and Parent for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as joint lead arranger on Parent’s credit facilities, which closed in August 2021, joint lead bookrunner on Meritor’s offerings of debt securities, which closed in June 2020 and November 2020, and joint lead active bookrunner on Parent’s offering of debt securities, which closed in August 2020. During the two year period preceding the delivery of its opinion ending on February 21, 2022, the aggregate fees recognized by J.P. Morgan from Meritor were approximately $2.0 million and from Parent were approximately $9.5 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of Meritor or Parent for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.
Certain Meritor Unaudited Prospective Financial Information
While Meritor has from time to time provided limited financial guidance to investors, Meritor has not, as a matter of course, otherwise publicly disclosed internal projections by year as to future performance, earnings or other results beyond the then current annual period, and is especially wary of making projections for extended periods, due to, among other reasons, the inherent difficulty of accurately predicting financial performance for future periods and the uncertainty of underlying assumptions and estimates. However, Meritor is including in this
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proxy statement a summary of certain limited unaudited prospective financial information of Meritor on a standalone basis, without giving effect to the Merger (the “Projections”), prepared by Meritor’s management, solely because such financial information was given to the Meritor Board and J.P. Morgan as described below. Meritor advised the recipients of the Projections that its internal financial forecasts are subjective in many respects, and the inclusion of the Projections in this proxy statement should not be regarded as an indication of future results or an accurate prediction of future results, and should not be relied on as such.
The Projections were not prepared with a view toward public disclosure, nor were they prepared with a view toward compliance with published guidelines established by the American Institute of Certified Public Accountants for preparation and presentations of financial projections. This information is prospective and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement are cautioned not to place undue reliance on the Projections. The Projections have been prepared by, and are the responsibility of, the Company’s management. Neither the Company’s independent registered public accounting firm, nor any independent accountants, have examined, compiled or performed any procedures with respect to the Projections and, accordingly, the Company’s independent registered accounting firm does not express an opinion or any other form of assurance on the Projections or their achievability, and assumes no responsibility for, and disclaims any association with, the Projections. Meritor’s independent registered public accounting firm’s report, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended October 3, 2021, which is incorporated by reference into this proxy statement, relates to Meritor’s historical financial information and does not extend to the Projections and should not be read to do so. Furthermore, the Projections do not take into account any circumstances or events occurring after the date they were prepared.
While presented with numeric specificity, the Projections reflect numerous assumptions with respect to company performance, industry performance, general business, economic, regulatory, market and financial conditions and other matters, many of which are difficult to predict, subject to significant economic and competitive uncertainties and beyond Meritor’s control. Multiple factors, including those described in the section “Cautionary Statement Concerning Forward-Looking Statements,” could cause the Projections or the underlying assumptions to be inaccurate. As a result, actual results may differ materially from those contained in the Projections, and accordingly, there can be no assurance that the projected results summarized below will be realized. Meritor’s shareholders are urged to review Meritor’s most recent SEC filings for a description of the reported and anticipated results of operations and financial condition and capital resources, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Meritor’s Annual Report on Form 10-K for the fiscal year ended October 3, 2021, and any subsequent quarterly reports on Form 10-Q, which are incorporated by reference into this proxy statement.
The inclusion of a summary of the Projections in this proxy statement should not be regarded as an indication that any of Meritor, Parent or their respective officers, directors, affiliates, advisors or other representatives considered the Projections to necessarily be predictive of actual future events, and the Projections should not be relied upon as such nor should the information contained in the Projections be considered appropriate for other purposes. None of Meritor, Parent or their respective officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from the Projections. Meritor undertakes no obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing after the date the Projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Projections are shown to be in error.
The Company has not made and makes no representation to Parent, Merger Sub or any other person, in the Merger Agreement or otherwise, concerning the Projections or regarding Meritor’s ultimate performance compared to the information contained in the Projections or that the projected results will be achieved. Meritor urges all of its shareholders to review Meritor’s most recent SEC filings for a description of the Company’s reported financial results.
Projections
The following is a summary of the unaudited Meritor prospective financial information for fiscal years 2022 through 2025 that was prepared by the Company’s management. The Projections were prepared by Meritor’s management in December 2021 and were provided to the Meritor Board in connection with its consideration and evaluation of a potential transaction with Parent. The Projections were also provided to J.P Morgan in connection with its financial analysis and opinion, as discussed in the section entitled “— Opinion of Meritor’s Financial
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Advisor.” The Projections are based solely on the information available to Meritor’s management at those times, and do not give effect to the Merger. The summary of the Projections included in this proxy statement are presented to give Meritor shareholders access to the financial projections that were made available to the Meritor Board and J.P Morgan. Such information may not be appropriate for other purposes, and is not included to influence your decision, if you are a Meritor shareholder, to vote for the Merger Proposal, the Compensation Proposal or the Adjournment Proposal.
The following table presents a summary of the Projections, with dollars in millions:
 
2022E
2023E
2024E
2025E
Revenue
$4,237
$4,496
$4,580
$4,950
Adj. EBITDA(1)
$530
$572
$594
$673
Capex
$125
$135
$137
$149
Unlevered free cash flow
$226
$188
$223
$219
Note:
Meritor’s fiscal year ends on the Sunday nearest to September 30.
(1)
Adjusted EBITDA is defined as income (loss) from continuing operations before interest, income taxes, depreciation and amortization, non-controlling interests in consolidated joint ventures, loss on sale of receivables, restructuring expenses, asset impairment charges and other special items as determined by management.
General
Important factors that may affect actual results and cause the Projections not to be achieved include risks and uncertainties relating to Meritor’s business and other factors described under “Cautionary Statement Concerning Forward-Looking Statements,” as well as the risk factors with respect to the Company’s business contained in its most recent SEC filings, which shareholders are urged to review, which may be found as described under “Where You Can Find More Information.” In addition, the Projections cover multiple future years, and such information by its nature is less reliable in predicting each successive year. The Projections also do not take into account any circumstances or events occurring after the date on which they were prepared and do not give effect to the Transactions, including the Merger, and also do not take into account the effect of any failure of the Merger to be completed. The Projections also reflect assumptions as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the Projections. Accordingly, there can be no assurance that the Projections will be realized or that actual results will not be significantly lower than projected.
The inclusion of the Projections in this proxy statement should not be regarded as an indication that any of Meritor or its affiliates, advisors or representatives considered the Projections to be predictive of actual future events, and the Projections should not be relied on as such. None of Meritor or its affiliates, advisors, officers, employees, directors or representatives can give you any assurance that actual results will not differ from the Projections, and none of those persons undertakes any obligation to update or otherwise revise or reconcile the Projections to reflect circumstances existing after the date the Projections were prepared or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Projections are shown to be in error. The Company does not intend to publicly update or make any other revision to the Projections. None of Meritor or any of its affiliates, advisors, officers, employees, directors or representatives has made or makes any representation to Parent, Merger Sub or any other person regarding Meritor’s ultimate performance compared to the Projections or that the results reflected therein will be achieved. For the reasons described above, readers of this proxy statement are cautioned not to place undue, if any, reliance on the Projections.
Interests of Meritor’s Directors and Executive Officers in the Merger
In considering the recommendation of the Meritor Board to vote in favor of the Merger Proposal, Meritor shareholders should be aware that Meritor’s directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of Meritor shareholders generally. The Meritor Board was aware of these interests and considered them, among other matters, in evaluating and negotiating the Merger Agreement, in reaching its decision to approve and adopt the Merger Agreement and the Transactions, including the Merger, and in recommending to Meritor shareholders that the Merger Agreement be approved. Such interests are described below. The Merger will be a “change in control” for purposes of certain Meritor executive compensation and benefit plans and agreements described below.
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Meritor’s executive officers who are named executive officers for purposes of the discussion below are Chris Villavarayan (President and Chief Executive Officer), Carl D. Anderson II (Senior Vice President and Chief Financial Officer), Timothy Bowes (Senior Vice President and President, Electrification, Industrial and North America Aftermarket), and John Nelligan (Senior Vice President and President, Truck, Americas). Jeffrey A. Craig (former Executive Chairman of the Meritor Board) is not included in the discussion below because his employment with Meritor terminated upon his retirement on December 31, 2021 and as such he is not entitled to any of the payments or benefits described below. Likewise, Hannah S. Lim-Johnson (former Senior Vice President, Chief Legal Officer and Corporate Secretary) is not included in the discussion below because her employment with Meritor terminated on October 25, 2021 and as such she is not entitled to any of the payments or benefits described below. Meritor’s executive officer who is not a named executive officers for purposes of the discussion below is Ken Hogan (Senior Vice President and President, Truck, Europe and Asia Pacific).
Certain Assumptions
Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:
the relevant price per share of Meritor common stock is $36.50, which is the per share merger consideration;
the Effective Time as referenced in this section occurs on April 11, 2022, which is the assumed date of the Effective Time solely for purposes of the disclosure in this section; and
the employment of each executive officer of Meritor was terminated by the surviving corporation without “cause” or due to the executive officer’s resignation for “good reason” (as such terms are defined in the relevant plans and agreements), in either case immediately following the Merger and on the assumed date of the Effective Time of April 11, 2022.
The amounts indicated below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described above, and do not reflect certain compensation actions that may occur before completion of the Merger.
Treatment of Outstanding Equity Awards
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, outstanding Meritor equity-based awards will be treated as follows, subject to all required withholding taxes:
each share of Meritor restricted common stock that is outstanding immediately prior to the Effective Time will be fully vested immediately prior to the Effective Time, with each holder of such shares receiving the same Merger Consideration as all other outstanding shareholders of Meritor common stock at the Effective Time;
each Meritor RSU Award will be converted into a Converted RSU Award immediately prior to the Effective Time, subject to the same terms and conditions as applied to the corresponding Meritor RSU Award immediately prior to the Effective Time, including all service-based vesting conditions; provided that any accelerated vesting applicable to such Meritor RSU Award in the event of a “qualifying termination of employment” (as such term is defined in the applicable Meritor long-term incentive plan, and set forth below) occurring after the closing date shall apply for the remaining term of such Converted RSU Award; and
each Meritor PSU Award that is outstanding immediately prior to the Effective Time and (i) scheduled to vest on or prior to September 30, 2024 will fully vest and be canceled and converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Meritor PSU Award immediately prior to the Effective Time, less any applicable taxes and (ii) scheduled to vest after September 30, 2024 will be converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Meritor PSU Award immediately prior to the Effective Time, subject to the same terms and conditions as applied to the corresponding Meritor PSU Award immediately prior to the Effective Time, including all service-based vesting conditions; provided that any accelerated vesting applicable to such Meritor PSU Award in the event of a qualifying termination
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of employment occurring after the closing date shall apply for the remaining term of such Converted PSU Award. Notwithstanding the foregoing, the number of shares of Common Stock subject to a Meritor PSU Award with a performance period that is incomplete (or that is complete but for which performance is not determinable due to the unavailability of the required data for relative measures) as of the Effective Time will be determined by deeming the performance goals applicable to such Meritor PSU Award to be achieved at the target level of performance.
In the case of any Meritor Equity Award that is subject to Section 409A of the Code, all payments with respect to such Meritor Equity Award shall be made in accordance with and at the earliest time as is consistent with the requirements of Section 409A of the Code, and Meritor Equity Awards may be treated in an alternate method to the extent required by law or agreed by the Parties.
For purposes of the Meritor Equity Awards and the officer employment agreements described below, the term “qualifying termination of employment” means a termination of the employee's employment by Meritor without “cause” (defined as any act of fraud or intentional misrepresentation or embezzlement, misappropriation or conversion of assets of Meritor or any affiliate, or the intentional and repeated violation of the written policies or procedures of Meritor), due to the employee's death, retirement or disability, or by the employee for “good reason” (defined as the occurrence of any of the following events without the employee’s written consent: (i) a material diminution in the employee’s base salary; (ii) a relocation of the employee’s principal place of employment by more than 50 miles; (iii) any material breach by Meritor of any material provision of the applicable Meritor long-term incentive plan; or (iv) a material diminution in the employee’s authority, duties or responsibilities).
See the section of this proxy statement entitled “Quantification of Potential Payments and Benefits to Meritor’s Named Executive Officers in Connection with the Transaction” for an estimate of the value of each of Meritor’s named executive officer’s unvested Meritor equity awards. Based on the assumptions described above under “—Certain Assumptions”, the estimated aggregate amounts that would become payable at the Effective Time to Meritor’s executive officer who is not a named executive officer in respect of his unvested Meritor equity awards granted prior to the date of the Merger Agreement is as follows: unvested Meritor RSU Awards—$1,158,729.00; unvested Meritor PSU Awards scheduled to vest on or prior to September 30, 2024—$592,833.00; and unvested Meritor PSU Awards scheduled to vest after September 30, 2024—$597,651.00 (based on the achievement of target performance). As of the assumed effective date of April 11, 2022, 16,374 Meritor PSU Awards scheduled to vest after September 30, 2024 were held by such executive officers. Shares of Meritor restricted common stock held by Meritor’s non-employee directors vest on the earlier to occur of the third anniversary of their grant date or the date the director resigns or ceases to serve on the board in accordance with the director compensation policy.
Officer Employment Agreements
Each Meritor executive officer has entered into an employment agreement with Meritor that provides that, in the event that the officer’s employment with Meritor is terminated within two years following a change in control of Meritor by Meritor as a result of a qualifying termination of employment (as defined above), then Meritor will be obligated to pay the officer (a) any accrued and unpaid salary and vacation through the executive’s date of separation from service (as such term is defined in the applicable agreement) paid in lump sum within thirty calendar days of said separation or earlier as may be required by law, (b) the officer’s then-current annual base salary, payable ratably in equal semi-monthly installments over a period of 18 months (the “Severance Period”), (c) the full target amount of the officer’s annual bonus under the Meritor annual incentive compensation plan for the year in which the termination occurs, paid out in a lump sum within 30 days after the qualifying termination of employment, (d) continuation of health coverage (other than accidental death and dismemberment and long-term and short-term disability coverage) throughout the Severance Period (or until the executive becomes subsequently employed and covered by the health plan of the new employer), (e) continued life insurance coverage through the end of the Severance Period, and (f) reasonable outplacement services for twelve months, the cost of which may not exceed $10,000. Pursuant to the terms of the merger agreement, prior to the Effective Time, the employment agreements of (i) Meritor’s named executive officers, and (ii) Meritor’s executive officer who is not a named executive officer for purposes of this section, may be extended on the same terms and conditions for an additional one-year period from December 1, 2022 to December 1, 2023, consistent with past practice but in any event before closing.
The executive officer employment agreements provide that, if the compensation and benefits payable to the officer would be subject to an excise tax under Section 4999 of the Code, such amounts will either be paid in
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full or reduced to the level that would avoid application of the excise tax, whichever would place the executive officer in a better after-tax position.
Pursuant to the terms of each executive officer employment agreement, each executive officer is subject to a noncompetition covenant that applies during employment and for a period of 18 months following termination of employment for any reason, and a nonsolicitation covenant that applies during employment and for a period of 12 months following termination of employment for any reason.
See the section of this proxy statement entitled “Quantification of Potential Payments and Benefits to Meritor’s Named Executive Officers in Connection with the Transaction” for the estimated amounts that each of Meritor’s named executive officers would receive under their employment agreements upon a qualifying termination of employment following a change in control of Meritor. Based on the assumptions described above under “—Certain Assumptions,” the estimated aggregate amount of the cash severance payments (including a target annual cash incentive award) that Meritor’s executive officer who is not a named executive officer would receive under his employment agreement upon a qualifying termination of employment following a change in control of Meritor is $1,037,484.
Transaction Bonus Awards
In connection with the Merger, Meritor intends to establish a cash transaction bonus program for executive officers not to exceed $13 million in the aggregate, to be allocated by the Compensation Committee of the Board. Bonuses under this program will be paid 50% on the closing date and the remaining 50% will be paid on the first paycheck after the 90th day following the closing date (the “Retention Date”). If the executive officer experiences a qualifying termination of employment after the closing date and before the Retention Date, the remaining 50% of the transaction bonus will be paid to such executive officer. The executive officer forfeits the right to any and all unpaid portions of the transaction bonus if their employment is terminated prior to the closing date. The transaction bonus program is intended to reward certain executives of Meritor for the focus and resources they provided with respect to the Merger, driving operational excellence and results and assist in retaining key employees through the closing of the Merger. Each executive officer is eligible to receive awards under such program, but the recipients of such awards and their respective award amounts, if any, have not yet been determined.
Treatment of Cash Incentive Compensation Plan Awards
Under the terms of the Meritor Incentive Compensation Plan and its sub-plans (the “ICP”) and the Merger Agreement: (a) if the closing occurs before the end of fiscal year 2022, Meritor may provide to each Meritor employee who is eligible to participate in the ICP, including each executive officer, the full incentive amounts payable for fiscal year 2022 with such amounts determined based on the greater of actual or target performance; (b) if the closing occurs after the end of fiscal year 2022 but before the date incentive amounts would otherwise be paid under the ICP in the ordinary course, Meritor may provide to each Meritor employee who is eligible to participate in the ICP, including each executive officer, accelerated payment of such bonus amounts based on actual performance; and (c) if the closing occurs during fiscal year 2023, Meritor may provide to each Meritor employee who is eligible to participate in the ICP, including each executive officer, a prorated portion of the annual incentive under the ICP with respect to the portion of the year of the closing that occurs prior to the closing, which bonus will be determined based on target performance (provided that any executive officer who is entitled to a full target bonus upon a qualifying termination pursuant to an employment agreement will not receive a duplicate payment under the ICP).
See the section of this proxy statement entitled “Quantification of Potential Payments and Benefits to Meritor’s Named Executive Officers in Connection with the Transaction” for the estimated amount of the ICP payment that each of Meritor’s named executive officers would receive under the terms of the merger agreement.
Based on the assumptions described above under “—Certain Assumptions”, the estimated aggregate “single trigger” amount of the ICP payments (for purposes of this quantification assuming target performance and that the closing occurs on or prior to the last day of fiscal year 2022) that Meritor’s executive officer who is not a named executive officer would receive under the ICP is $301,275.
2023 Annual Equity Award Grants
Meritor and Parent have agreed that, if the closing occurs after November 15, 2022, Meritor may grant 2023 annual equity awards to Meritor’s executive officers under the 2020 Long-Term Incentive Plan in the ordinary course of business with the grant date fair value of such awards not to exceed $16 million, provided that such
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awards cannot provide for vesting at closing and will be converted into restricted cash awards at closing (with PSUs converting into time-vesting awards based on target performance), but can provide for accelerated vesting on a qualifying termination of employment any time after the closing.
Indemnification; Directors’ and Officers’ Insurance
Pursuant to the terms of the Merger Agreement, Meritor’s non-employee directors and executive officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies following the merger. Such indemnification and insurance coverage is further described in the section of this proxy statement entitled “The Merger Agreement—Indemnification and Insurance.”
Quantification Of Potential Payments And Benefits To Meritor’s Named Executive Officers In Connection With The Transaction
The information set forth in the table below is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about certain compensation for each named executive officer of Meritor that is based on, or otherwise relates to, the Merger. For additional details regarding the terms of the payments and benefits described below, see the discussion under the caption “Interests of Meritor’s Directors and Executive Officers in the Merger” above.
The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table, and do not reflect certain compensation actions that may occur before completion of the Merger. The ultimate values to be received by a named executive officer in connection with the Merger may differ from the amounts set forth below. For purposes of calculating such amounts, the following assumptions were used:
The relevant price per share of Meritor common stock is $36.50, which is the per share merger consideration;
The effective time as referenced in this section occurs on April 11, 2022, which is the assumed date of the effective time solely for purposes of the disclosure in this section; and
The employment of each named executive officer of Meritor was terminated by the surviving corporation without “cause” or due to the officer’s resignation for “good reason” (as such terms are defined in the relevant plans and agreements), in either case immediately following the effective time and on the assumed date of the effective time of April 11, 2022.
Named Executive Officer(1)
Cash
($)(1)
Equity
($)(2)
Perquisites /
Benefits
($)(3)
Tax
Reimbursement
($)
Total ($)
Chris Villavarayan
2,503,930
15,766,649
16,194
18,286,774
Carl D. Anderson II
1,460,025
5,935,667
28,163
7,423,855
Timothy Bowes
1,096,177
2,145,032
28,163
3,269,372
John Nelligan
1,096,177
2,210,805
28,163
3,335,145
(1)
Cash. Consists of a cash severance equal to (i) the executive officer’s annual base salary in effect immediately before the date of termination payable ratably in equal semi-monthly installments over a period of 18 months, and (ii) full target amount of the annual bonus under the Meritor annual incentive compensation plan, paid out in a lump sum within 30 days after a qualifying termination of employment. The cash severance described in clause (i) and bonus payment described in clause (ii) are “double trigger” and become payable only upon a qualifying termination of employment within two years following a change in control of Meritor under the terms of the applicable employment agreement. The annual bonus payment described in clause (ii) and shown in the Annual Bonus column below is also the “single trigger” amount that would be paid under the ICP as described above at the closing (for purposes of this quantification assuming target performance and that the closing occurs on or prior to the last day of fiscal year 2022). The amounts shown in this column are based on compensation and target annual bonus levels assumed to be in effect on April 11, 2022, which are the same as those in effect on the date of this proxy statement; therefore, if compensation and benefit levels are changed after the date of this proxy statement, actual payments to a named executive officer may be different than those provided for above. The estimated amount of each such payment is shown in the following table:
Named Executive Officer
Severance ($)
Annual Bonus ($)
Total ($)
Chris Villavarayan
1,444,575
1,059,355
2,503,930
Carl D. Anderson II
973,350
486,675
1,460,025
Timothy Bowes
764,775
331,403
1,096,177
John Nelligan
764,775
331,403
1,096,177
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(2)
Equity. Reflects the accelerated vesting at the Effective Time of certain Meritor PSU Awards, which is a “single trigger” benefit provided to all holders of outstanding Company PSU awards pursuant to the Merger Agreement, and assumed vesting of Meritor RSU Awards and remaining Meritor PSU awards, which is a “double trigger” benefit provided that becomes vested and payable upon a qualifying termination of employment following a change in control of Meritor. The value of Meritor PSU Awards is estimated by deeming the applicable performance goals achieved at the target level of performance. For further details regarding the treatment of Meritor equity awards in connection with the Merger, see “Interests of Meritor’s Directors and Executive Officers in the Merger—Treatment of Outstanding Equity Awards.” The estimated value of such awards are shown in the following table:
Named Executive Officer
Meritor RSU
Awards ($)
Meritor PSU
Awards ($)
Total ($)
Chris Villavarayan
6,306,725
9,459,924
15,766,649
Carl D. Anderson II
2,859,629
3,076,038
5,935,667
Timothy Bowes
858,042
1,286,990
2,145,032
John Nelligan
884,359
1,326,447
2,210,805
(3)
Perquisites/Benefits. Consists of the estimated value of continuation of health and medical insurance coverage and group term life insurance program for 18 months for each named executive officer and reasonable outplacement services with a value of up to $10,000. Such benefits are “double trigger” and are provided only upon a qualifying termination of employment within two years following a change in control of Meritor (see “Interests of Meritor’s Directors and Executive Officers in the Merger—Officer Change in Control Agreements”). The estimated value of such benefits is shown in the following table:
Named Executive Officer
Welfare Benefits ($)
Chris Villavarayan
16,194
Carl D. Anderson II
28,162
Timothy Bowes
28,162
John Nelligan
28,162
Material U.S. Federal Income Tax Consequences of the Merger
The following is a general discussion of the material U.S. federal income tax consequences of the Merger to U.S. holders (as defined below) of Common Stock whose shares are exchanged for cash pursuant to the Merger. This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (referred to as the “Code”), applicable U.S. Treasury Regulations promulgated thereunder, judicial opinions and administrative rulings and published positions of the Internal Revenue Service (referred to as the “IRS”), each as in effect as of the date hereof. These authorities are subject to change or differing interpretations, possibly on a retroactive basis, and any such change or interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion is for general information purposes only and does not purport to be a complete analysis of all potential tax consequences. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 or the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into pursuant thereto or in connection therewith), nor does it address any considerations under state, local or foreign tax laws or U.S. federal tax laws other than those pertaining to U.S. federal income tax. This discussion is not binding on the IRS or the courts and, therefore, the conclusions set forth in this discussion could be subject to challenge, which challenge could be sustained.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Common Stock that is for U.S. federal income tax purposes:
a citizen or resident individual of the United States;
a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
a trust if (i) a court within the United States is able to exercise primary supervision over the trust’s administration, and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) such trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or
an estate the income of which is subject to U.S. federal income tax regardless of its source.
This discussion applies only to U.S. holders of shares of Common Stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this
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discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular circumstances, or that may apply to U.S. holders subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or foreign currencies, traders in securities who elect to apply the mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, tax-qualified retirement plans, banks and other financial institutions, mutual funds, certain former citizens or former long-term residents of the United States, partnerships (or other entities or arrangements treated as partnerships for U.S. federal income tax purposes), S corporations or other pass-through entities or investors in such partnerships, S corporations or other pass-through entities, real estate investment trusts, regulated investment companies, U.S. holders who hold shares of Common Stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction, a holder required to accelerate the recognition of any item of gross income with respect to shares of Common Stock as a result of such income being recognized on an applicable financial statement, and U.S. holders who acquired their shares of Common Stock through the exercise of employee stock options or other compensation arrangements).
If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Common Stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. If you are, for U.S. federal income tax purposes, a partner in a partnership holding shares of Common Stock, you should consult your tax advisor.
This discussion of material U.S. federal tax consequences is for general information purposes only and is not tax advice. Holders of Common Stock are urged to consult their own tax advisors to determine the particular tax consequences to them of the Merger, including the applicability and effect of the alternative minimum tax, the unearned income Medicare contribution tax and any other U.S. federal, state, local, foreign income or other tax laws.
The receipt of cash by U.S. holders in exchange for shares of Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of Common Stock pursuant to the Merger will recognize gain or loss in an amount equal to the difference, if any, between (i) the amount of cash received and (ii) the U.S. holder’s adjusted tax basis in its shares of Common Stock.
Any such gain or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the shares of Common Stock surrendered in the Merger is greater than one year as of the date of the Merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of Common Stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of Common Stock.
Information Reporting and Backup Withholding
Payments made in exchange for shares of Common Stock pursuant to the Merger may be subject, under certain circumstances, to information reporting and backup withholding (currently at a rate of 24%). To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should complete and return to the applicable withholding agent a properly completed and executed IRS Form W-9, certifying under penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the Code), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded by the IRS or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the IRS in a timely manner.
Regulatory Approvals
Antitrust Clearance. Under the HSR Act and related rules and regulations, certain transactions, including the Merger, may not be completed until certain waiting period requirements have expired or been terminated. The HSR Act requires that each party must file a pre-merger notification with the Antitrust Division of the United States Department of Justice (the “Antitrust Division”) and the United States Federal Trade Commission (the
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“FTC”). A transaction notifiable under the HSR Act may not be completed until the expiration of a 30-calendar waiting period following the parties’ filings of their respective HSR Act notification forms or the early termination of that waiting period. In certain circumstances the review period may be extended by either the parties or the Antitrust Division or FTC. Completion of the Merger is conditioned on the expiration or early termination of the applicable waiting period under the HSR Act, and the receipt of certain approvals under the competition laws of certain specified jurisdictions and the investment laws of certain specified jurisdictions. The Company and Parent filed their respective Notification and Report Forms with the Antitrust Division and the FTC on March 7, 2022. The applicable waiting period under the HSR Act expired on April 6, 2022.
At any time before or after the expiration of the statutory waiting periods under the HSR Act, the Antitrust Division or the FTC may take action under the antitrust laws, including seeking to enjoin the completion of the Merger, to rescind the Merger or to conditionally permit completion of the Merger subject to regulatory conditions or other remedies. In addition, non-U.S. regulatory bodies and U.S. state attorneys general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the Merger or permitting completion subject to regulatory conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. There can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.
Commitments to Obtain Antitrust Approval. The Company, Parent, and Merger Sub are each required to, and to cause their respective affiliates to, use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the Transactions, subject to certain limitations, and to cause the conditions to the transactions to be satisfied as promptly as practicable. See the section of this proxy statement entitled “The Merger Agreement — Efforts to Complete the Merger — Antitrust Matters.”
Filing Fees. Parent has agreed to bear the cost of all filing fees payable to any governmental authority in connection with any filings made to obtain regulatory approval.
Delisting and Deregistration of the Common Stock
If the Merger is completed, the Common Stock will be delisted from the NYSE and deregistered under the Exchange Act.
Litigation Relating to the Merger
As of April 18, 2022, three lawsuits have been filed by purported Meritor shareholders in connection with the Merger and one demand letter has been sent. On March 22, 2022, a purported Meritor shareholder filed a lawsuit against Meritor and the current members of the Meritor Board alleging that the preliminary proxy statement filed by Meritor in connection with the Merger contained alleged material misstatements and/or omissions in violation of federal law. The lawsuit is captioned O’Dell v. Meritor, Inc., et al., No. 1:22-cv-02322, and is pending in the U.S. District Court for the Southern District of New York. On March 24, 2022, another lawsuit was filed against the same defendants asserting similar claims. The lawsuit is captioned Whitfield v. Meritor, Inc., et al., No. 1:22-cv-01636, and is pending in the U.S. District Court for the Eastern District of New York. In addition, on March 31, 2022, another lawsuit was filed against the same defendants, also asserting similar claims. The lawsuit is captioned Fitzurka v. Meritor, Inc., et al., No. 1:22-cv-011793, and is pending in the U.S. District Court for the Eastern District of New York. Also on March 31, 2022, counsel for Shiva Stein, a purported Meritor shareholder, sent a demand letter including similar allegations against Meritor and the current members of the Meritor Board.
The complaints and demand letter generally allege that the preliminary proxy statement filed by Meritor in connection with the Merger fails to disclose allegedly material information in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The alleged omissions relate to (i) certain financial projections of Meritor, (ii) certain financial analyses of Meritor’s financial advisor, (iii) the financial benefits to Meritor executives and members of the Meritor Board from the Merger, and (iv) certain statements concerning the sale process. Plaintiffs generally seek, among other things, to enjoin Meritor from consummating the Merger, or in the alternative, rescission of the Merger and/or compensatory damages, as well as attorney’s fees.
Meritor believes that the allegations in the complaints and demand letter are without merit. Additional lawsuits and demand letters arising out of the Merger may also be filed or sent in the future.
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THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger Agreement, a copy of which is attached as Annex A to this proxy statement. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. We encourage you to read carefully the Merger Agreement in its entirety, as the rights and obligations of the parties thereto are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.
Explanatory Note Regarding the Merger Agreement
The following summary of the Merger Agreement, and the copy of the Merger Agreement attached as Annex A to this proxy statement, are intended to provide information regarding the terms of the Merger Agreement and are not intended to provide any factual information about Meritor or modify or supplement any factual disclosures about Meritor in its public reports filed with the SEC. In particular, the Merger Agreement and the related summary are not intended to be, and should not be relied upon as, disclosures regarding the actual state of any facts and circumstances relating to Meritor. The Merger Agreement contains representations and warranties by, and covenants of, Meritor, Parent and Merger Sub, and they were made only for purposes of the Merger Agreement and as of specified dates. The representations, warranties and covenants in the Merger Agreement were made solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in Meritor’s public disclosures. The representations, warranties and covenants in the Merger Agreement and any descriptions thereof should be read in conjunction with the disclosures in Meritor’s periodic and current reports, proxy statements and other documents filed with the SEC. See the section of this proxy statement entitled “Where You Can Find Additional Information.” Moreover, the description of the Merger Agreement below does not purport to describe all of the terms of such agreement and is qualified in its entirety by reference to the full text of such agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated by reference herein in its entirety.
Additional information about Meritor may be found elsewhere in this proxy statement and Meritor’s other public filings. See the section of this proxy statement entitled “Where You Can Find Additional Information.”
Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers
At the Effective Time, Merger Sub will merge with and into Meritor, and the separate corporate existence of Merger Sub will cease. Meritor will be the surviving corporation in the Merger and will continue its corporate existence as an Indiana corporation and a wholly owned subsidiary of Parent. At the Effective Time, the articles of incorporation and bylaws of Merger Sub, each in effect immediately prior to the Effective Time, will be the articles of incorporation and bylaws, respectively, of the surviving corporation in the Merger, in each case until amended in accordance with applicable law, except that (i) the name of the surviving corporation in the articles of incorporation shall be “Meritor, Inc.”, (ii) the provisions in Merger Sub’s articles of incorporation naming an incorporator will be omitted and (iii) references to Merger Sub’s name in the bylaws will be replaced by references to “Meritor, Inc.”
The directors and officers of Merger Sub immediately prior to the Effective Time will become the initial directors and officers of the surviving corporation.
When the Merger Becomes Effective
The closing of the Merger will take place via the exchange of electronic documents and executed signature pages and the electronic transfer of funds on the third business day following the satisfaction or waiver of all of the conditions set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at the closing of the Merger, but subject to the satisfaction or waiver of those conditions at such time),
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unless another date is agreed to in writing by the parties. For purposes of the Merger Agreement, “business day” refers to any day except a Saturday, a Sunday or any other day on which banking institutions are required or authorized to close in the State of Indiana or New York.
On the closing date, Meritor and Parent will file articles of merger with the Secretary of State of the State of Indiana. The Merger will become effective at the time when the articles of merger have been duly filed with the Secretary of State of the State of Indiana, or at such later time as may be agreed by the parties in writing and specified in the articles of merger.
Effect of the Merger on the Common Stock
At the Effective Time, each share of Common Stock (excluding Canceled Shares and Converted Shares) will cease to be outstanding and automatically be canceled and retired and cease to exist, and converted into the right to receive the Merger Consideration, upon surrender of certificates or book-entry shares. The Merger Consideration will be paid without interest and is subject to any required tax withholdings.
At the Effective Time, each of the Canceled Shares will automatically be canceled and retired without payment of any consideration and will cease to exist. In addition, at the Effective Time, each of the Converted Shares will automatically be converted into shares of Common Stock, par value $1.00 per share, of the surviving corporation, such that each such subsidiary’s ownership percentage of the surviving corporation immediately after the Effective Time will equal its ownership percentage in Meritor immediately prior to the Effective Time.
Treatment of Outstanding Equity Awards
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, outstanding Meritor equity-based awards will be treated as follows, subject to all required withholding taxes:
each share of Meritor restricted common stock that is outstanding immediately prior to the Effective Time will be fully vested immediately prior to the Effective Time, with each holder of such shares receiving the same Merger Consideration as all other outstanding shareholders of Common Stock at the Effective Time;
each Meritor RSU Award will be converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Meritor RSU Award immediately prior to the Effective Time, subject to the same terms and conditions as applied to the corresponding Meritor RSU Award immediately prior to the Effective Time, including all service-based vesting conditions; provided that any accelerated vesting applicable to such Meritor RSU Award in the event of a qualifying termination of employment occurring after the closing date shall apply for the remaining term of such Converted RSU Award; and
each Meritor PSU Award that is outstanding immediately prior to the Effective Time and (A) scheduled to vest on or prior to September 30, 2024 will fully vest and be canceled and converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Meritor PSU Award immediately prior to the Effective Time, less any applicable taxes and (B) scheduled to vest after September 30, 2024 will be converted into the right to receive an amount in cash, without interest, equal to the Merger Consideration in respect of each share of Common Stock subject to such Meritor PSU Award immediately prior to the Effective Time (a “Converted PSU Award”), subject to the same terms and conditions as applied to the corresponding Meritor PSU Award immediately prior to the Effective Time, including all service-based vesting conditions; provided that any accelerated vesting applicable to such Meritor PSU Award in the event of a qualifying termination of employment occurring after the closing date shall apply for the remaining term of such Converted PSU Award. Notwithstanding the foregoing, the number of shares of Common Stock subject to a Meritor PSU Award with a performance period that is incomplete (or that is complete but for which performance is not determinable due to the unavailability of the required data for relative measures) as of the Effective Time will be determined by deeming the performance goals applicable to such Meritor PSU Award to be achieved at the target level of performance.
In the case of any Meritor Equity Award that is subject to Section 409A of the Code, all payments with respect to such Meritor Equity Award shall be made in accordance with and at the earliest time as is consistent with the requirements of Section 409A of the Code, and may otherwise be treated in an alternate method to the extent required by law or agreed by the parties.
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Payment for Common Stock in the Merger
At or prior to the Effective Time, Parent will deposit, or cause to be deposited, with a paying agent in trust for the benefit of holders of shares of Common Stock, cash sufficient to pay the aggregate Merger Consideration.
Certificates. As soon as reasonably practicable (and no later than three business days) after the Effective Time, the surviving corporation shall cause the paying agent to mail to each holder of record of a certificate that immediately prior to the Effective Time represented shares of Common Stock (other than Canceled Shares and Converted Shares) (i) a letter of transmittal and (ii) instructions for effecting the surrender of such certificates to the paying agent in exchange for payment of the Merger Consideration. Upon surrender to the paying agent of certificates, together with the letter of transmittal, duly completed and validly executed, and such other customary documents as may be reasonably required, the holder of such certificates will be entitled to receive in exchange therefor the amount of Merger Consideration to which the holder is entitled to pursuant to the Merger Agreement (without interest and after giving effect to any required tax withholding).
Book-Entry. As soon as reasonably practicable (and no later than three business days) after the Effective Time, the surviving corporation shall cause the paying agent to mail to each holder of record of book-entry shares whose shares of Common Stock were converted into the right to receive the Merger Consideration instructions for effecting the surrender of such book-entry shares to the paying agent in exchange for payment of the Merger Consideration. Upon surrender to the paying agent of such book-entry shares, the holder of such book-entry shares will be entitled to receive in exchange therefor the amount of Merger Consideration to which the holder is entitled to pursuant to the Merger Agreement (without interest and after giving effect to any required tax withholding).
Representations and Warranties
The Merger Agreement contains representations and warranties of Meritor, subject to certain exceptions in the Merger Agreement, in the Company’s confidential disclosure letter delivered in connection with the Merger Agreement and in Meritor’s public filings, as to, among other things:
due incorporation, capitalization and indebtedness;
corporate power and authority relating to the execution, delivery and performance of the Merger Agreement and the Transactions;
consents and approvals relating to the execution, delivery and performance of the Merger Agreement and consummation of the Merger and the Transactions, and the absence of certain violations related thereto;
the forms, documents and reports required to be filed or furnished with the SEC, accuracy of the consolidated financial statements of the Company included in such documents, the establishment and maintenance of certain disclosure controls and procedures and internal control over financial reporting, the absence of material unresolved complaints, allegations, assertions or claims regarding the Company’s accounting or auditing practices, compliance in all material respects with applicable listing and corporate governance rules and regulations of the NYSE and absence of certain off-balance sheet arrangements;
compliance in all material respects with the Exchange Act requirements applicable to the documents filed by Meritor with the SEC in connection with the Merger;
the absence of undisclosed liabilities;
intellectual property and information technology;
privacy and security;
material contracts;
insurance policies;
employee benefit plans and other agreements, plans and policies with or concerning employees;
tax returns and other tax matters;
the absence of certain actions, proceedings or orders;
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compliance with applicable laws and the Company’s permits;
the absence of certain liabilities relating to, and violations of, environmental laws;
the absence of certain changes or events;
real property matters;
broker’s fees;
the opinion of the Company’s financial advisor; and
related-party transactions.
The Merger Agreement also contains representations and warranties of Parent and Merger Sub, subject to certain exceptions in the Merger Agreement and Parent’s confidential disclosure letter delivered in connection with the Merger Agreement and in Parent’s public filings, as to, among other things:
due incorporation and capitalization;
corporate power and authority relating to the execution, delivery and performance of the Merger Agreement and the Transactions;
consents and approvals relating to the execution, delivery and performance of the Merger Agreement and consummation of the Merger and the Transactions, and the absence of certain violations with respect thereto;
the operations of Merger Sub;
the absence of certain actions, proceedings or orders;
compliance with applicable laws;
the accuracy of the information supplied for the purposes of this proxy statement;
access to funds to consummate the Transactions and make required payments, including payment of the Merger Consideration;
the absence of beneficial ownership of shares of Common Stock by Parent and its subsidiaries; and
broker’s fees.
Some of the representations and warranties in the Merger Agreement are qualified by materiality qualifications or a “Company Material Adverse Effect” or “Parent Material Adverse Effect” qualification, as discussed below.
For purposes of the Merger Agreement, a “Company Material Adverse Effect” means any change, condition, effect, development, circumstance, state of facts, event or occurrence (each, an “Effect”) that, individually or in the aggregate, is materially adverse to the business, financial condition, operations or results of operations of the Company and its subsidiaries taken as a whole. However, none of the following will constitute or be taken into account in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur:
changes or developments in or affecting domestic, foreign or global markets or domestic, foreign or global economic conditions generally;
changes, proposed changes, pending changes or changes in the interpretation of GAAP or any law;
any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shutdown, closure, vaccination, sequester or any other applicable law, order or guideline or recommendation of a governmental authority, in each case in connection with or in response to COVID-19 or any other global or regional health event, including the CARES Act quarantine (“COVID-19 Measures”);
changes in domestic, foreign or global political conditions, including any material worsening of such conditions threatened or existing on the date of the Merger Agreement;
changes or developments in the industries in which the Company or its subsidiaries operate;
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the announcement or the execution and delivery of the Merger Agreement or the pendency or consummation of the Transactions (except with respect to Meritor’s representations and warranties concerning the execution and delivery of the Merger Agreement, or the pendency or consummation of the Transactions);
any weather event, flood, hurricane, tornado, volcanic eruption, earthquake, nuclear incident, epidemic, pandemic, outbreak of illness or other public health event (including COVID-19), quarantine restriction or other natural or man-made disaster or act of God or the escalation or worsening of any of the foregoing;
any matter set forth in the Company’s confidential disclosure letter or the Company’s public filings available at least two business days prior to the date of the Merger Agreement;
any change in the trading price or trading volume of the shares of Common Stock or any change in the credit rating or ratings outlook for the Company and its subsidiaries;
the failure to meet any internal, published, analyst or other third party’s projections, guidance, budgets, milestones, expectations, forecasts or estimates;
actions required to be taken or omitted by the Company and its subsidiaries at the written request of Parent or actions taken by the Company and its subsidiaries pursuant to the requirements of the Merger Agreement, including any action consented to in writing by Parent;
actions or claims made or brought by any of the current of former shareholders of Meritor (on their behalf or on behalf of the Meritor) against Meritor or any of its directors, officers or employees arising out of the Merger Agreement or the Merger;
the identity of, or facts specific to, Parent or any of its affiliates as the acquiror of Meritor; and
any breach by Parent or any of its affiliates of the Merger Agreement.
However, with respect to the matters described in the first, second, fourth, fifth, and seventh (other than COVID-19) bullets above, such effects may be taken into account to the extent that they have a disproportionately adverse impact on Meritor and its subsidiaries, taken as a whole, relative to other companies operating in the industries and in the geographic markets in which Meritor and its subsidiaries operate, in which case only the incremental disproportionate adverse impact on Meritor and its subsidiaries may be taken into account.
For purposes of the Merger Agreement, a “Parent Material Adverse Effect” means any effect that has a material adverse effect on Parent’s or Merger Sub’s ability to timely consummate the Transactions, including the payment of the Merger Consideration.
Conduct of Business Pending the Merger
The Merger Agreement provides that, from and after the date of the Merger Agreement and prior to the earlier of the Effective Time or termination of the Merger Agreement, except (i) with Parent’s prior written consent (which consent may not be unreasonably withheld, delayed or conditioned), (ii) as required, contemplated or permitted by the Merger Agreement, (iii) as required by a governmental authority of competent jurisdiction or by applicable law, (iv) actions taken reasonably and in good faith in response to or as a result of COVID-19 or in response to or to comply with COVID-19 Measures or (v) as set forth in the Company’s confidential disclosure letter, Meritor will, and will cause its subsidiaries to, use commercially reasonable efforts to (x) conduct its business in all material respects in the ordinary course of business consistent with past practice and (y) maintain and preserve intact, in all material respects, its business organization, goodwill and ongoing business.
In addition, the Company will not, and will cause its subsidiaries not to, other than pursuant to the exceptions above (other than clause (iv) above), take any of the following actions:
amend, modify, waive, rescind, change or otherwise restate their respective organizational documents (other than immaterial or ministerial amendments);
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split, combine, subdivide, reduce or reclassify any capital stock, voting securities or other equity interests of the Company or any of its subsidiaries (other than (i) to satisfy applicable tax withholding and/or exercise prices upon vesting, settlement or exercise of any Company equity award outstanding as of the date of the Merger Agreement or granted in accordance with the Merger Agreement or (ii) in connection with intercompany transactions);
authorize, declare, set aside, make or pay any dividend or distribution, or redeem, purchase or otherwise acquire any of its capital stock, voting securities or other equity interests or interest convertible into its capital stock other than: (i) in connection with intercompany transactions with its subsidiaries, (ii) the acceptance of Common Stock, or withholding of Common Stock otherwise deliverable, to satisfy withholding taxes incurred in connection with the vesting and/or settlement of Company equity awards, and (iii) any settlements in cash (in whole or in part) or conversion of any of the convertible senior notes in accordance with and pursuant to the terms of the convertible notes indenture;
grant any Company equity awards or other equity-based awards or interests, or grant any individual, corporation or other entity any right to acquire any shares of capital stock, voting securities or other equity interests, except for (i) Company equity awards to new hires and promoted employees in the ordinary course with total target grant date fair value not to exceed $1.5 million and (ii) if the closing occurs after November 15, 2022, annual Company equity awards in the form of time-vesting restricted stock units and performance stock units, with the total target grant date fair value not to exceed $16 million;
issue, purchase, sell or otherwise permit to become outstanding, deliver, grant, pledge, dispose of or encumber any additional shares of capital stock, voting securities or other equity interest in the Company or any of its subsidiaries, or any securities convertible, exchangeable into or exercisable for any shares of capital stock, voting securities or any other equity interests of the Company of any of its subsidiaries, or any Company options, warrants or other rights to acquire shares of capital stock, voting securities or other equity interests in the Company or any of its subsidiaries, other than: (i) due to the vesting and/or settlement of Company equity awards granted prior to the entry into the Merger Agreement and in accordance with their terms, (ii) in connection with intercompany transactions or (iii) upon conversation of the convertible senior notes;
adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, recapitalization or other reorganization other than such plans in connection with intercompany transactions or involving less than $5 million individually or $15 million in the aggregate;
incur, assume, endorse, guarantee or otherwise become liable for certain indebtedness or issue or sell any debt securities or any rights to acquire any debt securities other than: (i) intercompany indebtedness, (ii) guarantees of intercompany indebtedness obtained in accordance with the Merger Agreement, (iii) indebtedness incurred in the ordinary course of business consistent with past practice pursuant to the Company’s existing credit facilities or existing securitization facility, (iv) indebtedness incurred in the ordinary course of business consistent with past practice pursuant to certain existing factoring facilities of the Company and its subsidiaries, (v) swaps, options, derivatives and other hedging agreements or arrangements incurred in the ordinary course of business consistent with past practice, (vi) one or more cross currency swaps incurred to replace certain existing cross currency swaps, (vii) indebtedness not to exceed $25 million in aggregate principal amount other than pursuant to the foregoing clauses (i) through (vi) and in and for use in China and (viii) indebtedness incurred to replace, renew, extend or refinance such indebtedness (if any such replacement, renewal, extension or refinancing does not trigger payment of a premium or a prepayment penalty) up to an amount equal to the indebtedness being replaced, renewed, extended or refinanced (plus any related fees, expenses and accrued interest) and only if such indebtedness is repayable in full at any time without payment of penalty or premium;
sell, transfer, exchange, swap, mortgage, lease, grant, license, assign, abandon, permit to lapse, subject to a lien (subject to certain exceptions) or otherwise dispose of any assets (including material intellectual property and shares of capital stock, voting securities or other equity interests of the Company or its subsidiaries) having a value in excess of $10 million individually or $20 million in the
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aggregate, except in connection with: (i) intercompany transactions, (ii) sales of inventory in the ordinary course of business consistent with past practice, (iii) sales of rental equipment in the ordinary course of business consistent with past practice, or obsolete or worthless equipment, (iv) the sale, lease or licensing of material embodying the Company’s intellectual property in the ordinary course of business consistent with past practice, (v) the non-exclusive licensing of the Company’s intellectual property in the ordinary course of business consistent with past practice, (vi) the transfer or abandonment of immaterial intellectual property in the ordinary course of business consistent with past practice, or (vii) the expiration or abandonment of the Company’s intellectual property at the end of its statutory term and not eligible for renewal;
(i) acquire any assets (including material intellectual property) or any other person or entity, or the business of any other person or entity (whether by merger or consolidation, acquisition of stock or assets or by formation of a joint venture or otherwise) or (ii) make investments in any person or entity, in each case other than (w) transactions involving a purchase price less than $10 million individually or $20 million in the aggregate, (x) in connection with intercompany transactions, (y) acquisitions of inventory or other goods in the ordinary course of business or (z) the acquisition of immaterial intellectual property in the ordinary course of business;
except as required by applicable law, any collective bargaining agreement or Company Benefit Plan (as defined in the Merger Agreement) in effect as of the date of the Merger Agreement: (i) establish, adopt, amend or terminate any Company Benefit Plan or create or enter into any plan, agreement, program, policy, trust fund or other arrangement that would be a Company Benefit Plan if it were in existence as of the date of the Merger Agreement, and other than immaterial amendments to any Company Benefit Plan that do not materially increase benefits, do not materially increase the annual cost to the Company of maintaining, and do not materially extend the Company’s commitment with respect to such Company Benefit Plan, (ii) increase compensation, including paying or committing to pay a bonus or incentive compensation (whether cash, equity or equity-based) or benefits of, or grant or pay any increase in severance, retention or termination pay to, any current or former director, officer or employee (except that the Company may establish a cash-based retention and transaction bonus pool in the aggregate amount of $35 million (with no more than $13 million permitted to be granted to members of the Company’s executive committee)), (iii) enter into any new, or modify any existing, employment or consulting agreement with any current or former director or officer (except that the Company may extend the term of the employment agreements currently in effect with each of the executive officers referenced in this proxy statement, from December 1, 2022 to December 1, 2023), (iv) accelerate the time of vesting or payment of any benefit or award under any Company Benefit Plan or otherwise, (v) hire or promote any employee at or above Grade 19 (other than filling two open positions), or (vi) terminate other than for cause any executive officer;
implement, adopt or materially change any of its financial accounting policies, practices, principles or methods, except as required by changes to GAAP or other applicable law;
fail to use commercially reasonable efforts to maintain in effect any of its material existing insurance policies or comparable replacement policies;
make any capital expenditure or expenditures other than (i) in accordance with its capital budget for fiscal year 2022, (ii) to the extent reasonably necessary to protect human health and safety or (iii) for any unbudgeted capital expenditures not to exceed $5 million individually or $10 million in the aggregate per annum;
(i) terminate or amend in a material manner any lease or material contract, or waive, release or assign any material rights or claims thereunder, (ii) enter into any lease or contract that would have been a material contract or lease had it been entered into prior to the Merger Agreement or (iii) waive any material right under or release, sell or compromise any material claim under such lease or material contract;
(i) make any loan, advance or capital contributions to, or investments in, any person (other than the Company or its wholly owned subsidiaries) in excess of $10 million individually or $20 million in the
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aggregate, other than expense advancements in the ordinary course of business consistent with past practice to Meritor directors, officers and employees or (ii) forgive, cancel or compromise any debts or claims, or waive, release or assign any rights or claim against any Meritor director, officer or employee;
commence (other than a collection action in the ordinary course of business), waive, release, assign, compromise, pay, discharge, settle or satisfy any pending or threatened litigation, other than settlements with respect to any litigation that (i) are solely for monetary damages of less than $10 million individually and $20 million in the aggregate, (ii) do not impose any injunctive relief on the Company and its subsidiaries and do not involve the admission of wrongdoing by the Company, any of its subsidiaries or any of their respective officers or directors and (iii) do not provide for the license of any intellectual property or the termination, modification or amendment of any license of the Company’s intellectual property;
other than in the ordinary course of business (i) change or revoke any material tax election, (ii) adopt or change any annual accounting period for tax purposes, (iii) change any material method of accounting for tax purposes, (iv) amend any material tax returns, (v) surrender any right to claim a material refund of taxes, (vi) settle or compromise any tax proceeding for an amount materially in excess of the amount reserved for taxes on the financial statements of the Company or (vii) agree to an extension or waiver of the statute of limitations with respect to a material amount of taxes (except for automatic or automatically granted extensions or waivers), in each case, if such action would result in a material increase in the tax liability of the Company and its subsidiaries;
enter into any transactions or contracts with any affiliate or other person that would be required to be disclosed by the Company under Item 404 of Regulation S-K of the SEC; or
authorize any of, or agree or commit to do any of, the foregoing actions.
Access
Subject to certain exceptions and limitations, from the date of the Merger Agreement until the earlier of the Effective Time or termination of the Merger Agreement, upon reasonable notice (i) Meritor shall, and shall cause its subsidiaries to, give to Parent and its representatives reasonable access, during normal business hours, to Meritor’s and its subsidiaries’ books and records, real property, offices and facilities and (ii) Meritor shall make available, and shall cause its subsidiaries to make available, during normal business hours, the officers and employees of the Company and its subsidiaries to reasonably promptly furnish Parent and its representatives with all financial, operating and other data and information request, in each case (x) as Parent reasonably requests from time to time solely for the purpose of furthering the Transactions and for integration planning purposes and (y) to the extent that such access and disclosure do not obligate the Company and its subsidiaries to take actions that would unreasonably interfere with the normal course of their businesses. The foregoing does not authorize (i) any environmental testing or sampling of any real property or (ii) Parent to negotiate with the Company’s employees without the Company’s prior written consent and subject to the Company being provided an opportunity to review any such proposed arrangements.
The foregoing will not require Meritor or its subsidiaries to permit access or disclose any information if such access or disclosure (i) in light of COVID-19 or COVID-19 Measures, jeopardizes the health and safety of any officer or employee of the Company or any of its subsidiaries (provided that, at Parent’s written request, the Company will use commercially reasonable efforts to make appropriate substitute arrangements to permit reasonable access or disclosure in a manner that does not jeopardize the health and safety of any such officer or employee), (ii) constitutes a violation of applicable laws (including COVID-19 Measures) (provided that, at Parent’s written request, the Company will use commercially reasonable efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of such laws), (iii) causes a breach of, or material default pursuant to, any binding agreement entered into by the Company or its subsidiaries prior to the date of the Merger Agreement (provided that, at Parent’s written request, the Company will use commercially reasonable efforts to make appropriate substitute arrangements to permit reasonable access or disclosure not in violation of such agreement), (iv) would reasonably be expected to result in a loss or impairment of attorney-client or work product privilege (provided that the Company must allow for such access or disclosure to the maximum extent that such access or disclosure would not jeopardize any such attorney-client or work product privilege), (v) would result in the disclosure of trade secrets of any third parties (provided that, at Parent’s written request,
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the Company must use commercially reasonable efforts to make alternative arrangements that would allow Parent access to such information in a manner that does not disclose such trade secrets) or (vi) would result in the disclosure of information or access that is reasonably pertinent or likely to be reasonably pertinent to a litigation where the Company or any of its affiliates, on the one hand, and Parent or any of its affiliates, on the other hand, are adverse parties or reasonably likely to become adverse parties.
All information provided by the Company must be held in confidence in accordance with the confidentiality agreement between Parent and the Company, which will remain in full force and effect until the closing (and terminate upon closing).
Company Takeover Proposal; Non-Solicitation
From the date of the Merger Agreement until the earlier of the Effective Time or the termination of the Merger Agreement, the Company shall not, and shall cause each of its subsidiaries and their respective officers and directors and shall instruct and use its reasonable best efforts to cause its and its subsidiaries’ respective representatives not to, directly or indirectly:
solicit, initiate or knowingly encourage or facilitate any inquiry, proposal or offer or the making, submission or announcement of any inquiry, proposal or offer that constitutes or could reasonably be expected to lead to a Company Takeover Proposal; or
engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person any information for the purpose of encouraging or facilitating, any inquiry, proposal or offer that constitutes, or could reasonably be expected to lead to, a Company Takeover Proposal (other than in response to an unsolicited bona fide inquiry that did not arise from a material breach of the Company’s non-solicitation or negotiation obligations, solely for the purpose of obtaining clarification from the person making such Company Takeover Proposal of the terms of such Company Takeover Proposal and facts about the person that made it and only if failing to do so would be inconsistent with the Meritor Board’s fiduciary duties, and to refer the inquiring person to the non-solicitation or negotiation provisions of the Merger Agreement).
Within three business days following the date of the Merger Agreement, the Company shall request in writing that each person that has executed a confidentiality agreement in connection with its consideration of a Company Takeover Proposal or potential Company Takeover Proposal promptly destroy or return any of the Company’s non-public information and terminate access to any physical or electronic data rooms.
The Company must enforce, and not waive, terminate or modify without Parent’s prior written consent, any confidentiality, standstill or similar provision in any confidentiality, standstill or other agreement (if any) to which the Company is a party, in each case, that prohibits or purports to prohibit a proposal being made to the Meritor Board.
However, at any time prior to the time the Company Shareholder Approval is obtained, if the Company receives an unsolicited Company Takeover Proposal that is not withdrawn and did not result from a breach of the Company’s non-solicitation obligations and that the Meritor Board determines in good faith, after consultation with its outside legal counsel and financial advisor, (i) constitutes or would reasonably be expected to lead to a Company Superior Proposal and (ii) that failure to take action under clauses (x) and (y) below would be inconsistent with its fiduciary duties under applicable law, then the Company and its representatives may, in response to such Company Takeover Proposal (x) furnish information to such persons and their representatives pursuant to an acceptable confidentiality agreement and afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of the Company or any of its subsidiaries to such person and its representatives, prospective debt and equity financing sources and/or their respective representatives and (y) engage in or otherwise participate in discussions or negotiations with such person and its representatives, prospective debt and equity financing sources and/or their respective representatives (provided that the Company and its representatives may contact any person in writing with respect to a Company Takeover
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Proposal solely to clarify any ambiguous terms and conditions thereof which are necessary to determine whether the Company Takeover Proposal constitutes a Company Superior Proposal, without the Meritor Board being required to make the determination in clauses (i) and (ii) above), in each case, subject to the requirement that the Company must:
give Parent written notice of such determination promptly (and in any event within 36 hours) after the Meritor Board makes such determination; and
make available to Parent and Merger Sub any information or data concerning the Company or its subsidiaries that is provided to any such person, or its representatives, prospective debt and equity financing sources and/or their respective representatives, prior to or substantially concurrently with such deliveries, which was not previously made available to Parent or Merger Sub.
A “Company Takeover Proposal” means any bona fide written offer, proposal or indication of interest that is not withdrawn from a person or group of persons (other than Parent or its subsidiaries), made after the date of the Merger Agreement relating to, in a single transaction or series of related transactions:
any acquisition or purchase, directly or indirectly, of more than 15% of any class of outstanding voting or equity securities of Meritor;
any tender or exchange offer that, if consummated, would result in any person or group of persons beneficially owning more than 15% (on a non-diluted basis) of any class of outstanding voting or equity securities of Meritor;
any merger, consolidation, share exchange, business combination, recapitalization, reorganization or other similar transaction involving Meritor pursuant to which the shareholders of Meritor immediately prior to such transaction would hold less than 85% of the equity interests in the surviving or resulting entity of such transaction; or
any sale, lease exchange, transfer, license or other disposition to a person or group of persons of (i) any business constituting more than 15% of the net revenues or net income of the Company and its subsidiaries, taken as a whole or (ii) more than 15% of the consolidated assets of the Company and its subsidiaries, taken as a whole (measured by the fair market value).
A “Company Superior Proposal” means a bona fide, written Company Takeover Proposal which the Meritor Board determines in good faith, after consultation with its outside legal counsel and financial advisor, after taking into account (i) the timing and likelihood that such Company Takeover Proposal will be consummated (including whether such Company Takeover Proposal is contingent on receipt of third party financing), (ii) all legal, financial, regulatory and other aspects of such Company Takeover Proposal and (iii) the persons making such Company Takeover Proposal, to be more favorable, from a financial point of view, to the Company’s shareholders than the Transactions; provided that, for the purposes of the definition of “Company Superior Proposal,” the references to “15%” and “85%” in the definition of Company Takeover Proposal will be replaced with references to “50%” respectively.
Change in the Meritor Board Recommendation
The Meritor Board has unanimously recommended that Meritor shareholders vote “FOR” the Merger Proposal. Generally, the Meritor Board may not:
change, qualify, withhold, withdraw or modify, or authorize or resolve to or publicly propose or announce its intention to change, qualify, withhold, withdraw or modify, in each case in any manner adverse to Parent in any respect, the recommendation of the Meritor Board that the Company’s shareholders adopt the Merger Proposal, or resolve, publicly propose or agree to take any such action;
adopt, approve, endorse or recommend to Meritor shareholders, or resolve to or publicly propose or announce its intention to or agree to adopt, approve, endorse or recommend to Meritor shareholders, a Company Takeover Proposal;
fail to make or reaffirm the Meritor Board’s recommendation following the date on which any Company Takeover Proposal or any material modification thereto is first published or sent or given to
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Meritor shareholders within 10 business days of Parent’s written request (or, if earlier, by the second business day prior to the special meeting); provided that Parent may not make a request on more than one occasion for each Company Takeover Proposal; or
fail to recommend on Schedule 14D-9 against any Company Takeover Proposal that is a tender offer or exchange subject to Regulation 14D within 10 business days after the commencement of such tender offer or exchange.
Each of the actions described in the bullet points above, a “Change of Recommendation.”
Prior to obtaining the Company Shareholder Approval, the Meritor Board may, in response to an unsolicited Company Takeover Proposal received by the Company after the date of the Merger Agreement that did not result from a breach of the Company’s non-solicitation obligations, effect a Change of Recommendation or cause the Company to terminate the Merger Agreement in order to enter into an acquisition agreement providing for such Company Superior Proposal, subject to the requirements that:
the Meritor Board determines in good faith, after consultation with its outside legal counsel and financial advisor, that such Company Takeover Proposal constitutes a Company Superior Proposal, but only if the Meritor Board has determined in good faith, after consultation with its outside legal counsel and financial advisor, that failure to take such action would be inconsistent with its fiduciary duties under applicable law;
the Company provides prior written notice to Parent, at least four business days in advance, that it intends to effect a Change of Recommendation and/or terminate the Merger Agreement to enter into a Company Superior Proposal, which notice specifies the identity of the person making such proposal and a summary of the material terms thereof and includes a copy of the proposed Company Superior Proposal and the proposed acquisition agreement with respect thereto;
during the four business day period following the date on which notice was received (or with an additional two business day extension, in the event of any change to (i) the financial terms or (ii) other material terms of such Company Superior Proposal), the Company and its representatives negotiate with Parent in good faith to make such adjustments to the terms and conditions of the Merger Agreement as Parent may propose; and
upon the conclusion of the applicable notice and negotiation period, the Meritor Board consider in good faith any revisions to the terms of the Merger Agreement proposed in writing by Parent and determine, after consultation with the Company’s outside legal counsel and financial advisor, that the Company Takeover Proposal continues to continues to constitute a Company Superior Proposal and that a failure to take the contemplated actions would continue to be inconsistent with its fiduciary duties under applicable law.
The Meritor Board may also effect a Change of Recommendation (prior to obtaining the Company Shareholder Approval) in response to an Intervening Event if the Meritor Board determines in good faith after consultation with its outside legal counsel and financial advisor that the failure to effect a Change of Recommendation would be inconsistent with its fiduciary duties under applicable law, subject to the requirements that:
the Company provides prior written notice to Parent, at least four business days in advance, that it intends to effect a Change of Recommendation specifying the reasons therefore and including a description of the Intervening Event;
during the four business day period following the date on which notice was received, the Company and its representatives negotiate with Parent in good faith to make such adjustments to the terms and conditions of the Merger Agreement as Parent may propose; and
upon the conclusion of the applicable negotiation period, the Meritor Board after taking into account any revisions to the terms of the Merger Agreement proposed by Parent, determine in good faith, after consultation with its outside legal counsel and financial advisor, that the failure of the Meritor Board to make such a Change of Recommendation would be inconsistent with its fiduciary duties under applicable law.
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An “Intervening Event” means a fact or Effect that is material to the Company and its subsidiaries, taken as a whole, that is not actually known or reasonably foreseeable by the Meritor Board as of the date of the Merger Agreement (or if known or reasonably foreseeable, the material consequences of which were not known or reasonably foreseeable by the Company Board as of the date of the Merger Agreement) and does not relate to (i) a Company Takeover Proposal or any inquiry that constitutes, or would reasonably be expected to lead to, a Company Takeover Proposal, (ii) changes in the market price or trading volume of the shares of Common Stock in and of themselves, (iii) the fact, in and of itself, that Meritor meets, exceeds, or fails to meet any internal or external projections, guidance, expectations, forecasts or estimates for any period, or that the Company’s credit rating has changed, (iv) changes in general economic, political or financial conditions or markets, (v) changes in GAAP, other applicable accounting rules or applicable law or, in any such case, changes in the interpretation thereof or (vi) natural disasters, epidemics or pandemics (including the existence and impact of COVID-19).
Company Shareholders Meeting
Meritor has agreed to take all action required under the Indiana Business Corporation Law (“IBCL”) and the Company’s articles of incorporation and bylaws to duly call, give notice of and convene the special meeting as promptly as reasonably practicable following the mailing of this proxy statement to consider and vote upon the approval of the Merger Proposal; provided that Meritor may postpone or adjourn the special meeting with Parent’s consent. Notwithstanding the foregoing:
if the Company reasonably determines in good faith, after consulting with its outside legal counsel, that the Company Shareholder Approval is unlikely to be obtained at the special meeting, including due to an absence of quorum, the Company may adjourn or postpone the special meeting, for a period no longer than 30 calendar days, to solicit additional proxies in favor of the Merger Proposal; and
if Parent reasonably determines in good faith, after consulting with its outside legal counsel, that Company Shareholder Approval is unlikely to be obtained at the special meeting, Parent may request that Meritor adjourn, delay or postpone the special meeting.
Subject to the Meritor Board’s right to make a Change of Recommendation, as described in the section of this proxy statement entitled “— Company Takeover Proposal; Non-Solicitation — Change in the Meritor Board Recommendation,” the Meritor Board must include its recommendation regarding the Merger Proposal in this proxy statement.
Financing Cooperation
Prior to the closing of the Merger, the Company shall use its reasonable best efforts, and shall use its reasonable efforts to cause each of its subsidiaries and its and their respective representatives to use their reasonable best efforts, to provide all customary cooperation reasonably requested by Parent in connection with the arrangement of any debt financing obtained or to be obtained by Parent for the purpose of financing the Transactions or any transaction undertaken in connection therewith, which cooperation shall include causing the management team of the Company, with appropriate seniority and expertise, to participate in a reasonable number of meetings, presentations, due diligence sessions and sessions with lenders, investors, rating agencies and accountants, in each case in connection with the debt financing and at times and locations mutually agreed and reasonably coordinated in advance.
The foregoing notwithstanding, none of the Company, any of its subsidiaries or any of their respective representatives shall be required to take or permit the taking of any action pursuant to the immediately preceding paragraph that: (i) would require the Company, its subsidiaries or any persons who are officers or directors of the Company or its subsidiaries to pass resolutions or consents to approve or authorize the execution of the debt financing or enter into, execute or deliver any certificate, document, opinion, instrument or agreement or agree to any change or modification of any existing certificate, document, opinion, instrument or agreement, in each case that is effective prior to the Effective Time or that would be effective if the closing of the Merger does not occur, (ii) would cause any representation or warranty in the Merger Agreement to be breached by the Company or any of its subsidiaries, (iii) would require the Company or any of its subsidiaries to pay any commitment or other similar fee or incur any other expense, liability or obligation in connection with the debt financing prior to the closing of the Merger or have any obligation of the Company or any of its subsidiaries under any agreement, certificate, document or instrument be effective until the closing of the Merger, (iv) would cause any director, officer or employee or stockholder of the Company or any of its subsidiaries to incur any personal liability,
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(v) would conflict with the organizational documents of the Company or its subsidiaries or any laws, (vi) would reasonably be expected to result in a material violation or breach of (with or without notice, lapse of time, or both) under, any material contract to which the Company or any of its subsidiaries is a party, (vii) would require the Company, its subsidiaries or any of their respective representatives to provide access to or disclose information that the Company or any of its subsidiaries determines would jeopardize any attorney-client privilege, work product doctrine or other applicable privilege of the Company or any of its subsidiaries, (viii) would require the Company or any of its subsidiaries or any of their respective representatives to prepare any financial statements that are not available to the Company and prepared in the ordinary course of its financial reporting practice or (ix) would unreasonably interfere, in any material respect, with the ongoing operations of the Company or any of its subsidiaries. Nothing contained in the immediately preceding paragraph or otherwise shall require the Company or any of its subsidiaries, prior to the closing of the Merger, to be an issuer or other obligor with respect to the debt financing.
Parent shall (i) promptly, upon request by the Company, reimburse the Company for all reasonable out-of-pocket costs incurred by the Company or its subsidiaries or their respective representatives in connection with such cooperation and (ii) indemnify and hold harmless the Company and its subsidiaries and their respective representatives from and against any and all losses suffered or incurred by them in connection with the arrangement of the debt financing, any action taken by them at the request of Parent pursuant to the second preceding paragraph and any information used in connection therewith; except in the case of the foregoing clauses (i) and (ii), to the extent such costs or losses arise out of or result from (x) the willful misconduct, gross negligence or bad faith of the Company or the Company’s subsidiaries or their respective representatives or (y) the willful breach by the Company of its obligations under the Merger Agreement.
Employee Matters
For one year following the Effective Time (or, if shorter, for the period of employment of the relevant Company employee), Parent will provide each continuing Meritor employee with (i) at least the same annual base salary or base wage rate as in effect immediately prior to the Effective Time, (ii) at least the same level of cash-based short-term incentive target opportunity provided to such continuing Meritor employee in respect of the fiscal year in which the Effective Time occurs, (iii) if no equity-based awards are issued by Meritor prior to the Effective Time as permitted under the merger agreement, then at least the same level of equity-based long-term incentive target opportunity provided to similarly situated employees of Parent, (iv) other employee benefits that are substantially comparable in the aggregate to either those provided under the Meritor benefit plans in which the continuing Meritor employee participated immediately prior to the Effective Time or those provided by Parent to similarly situated employees of Parent (excluding plans closed to new enrollees as of the Effective Time) and (v) severance benefits equal to the severance benefits provided under the Meritor severance benefit plan as in effect immediately prior to the date of the Merger Agreement.
Parent will credit continuing Meritor employees with their service with Meritor and its current and former affiliates to the same extent and for the same purposes as recognized under any comparable Meritor benefit plan, which period of service will be taken into account for purposes of (i) eligibility for participation, (ii) vesting and (iii) determining the level of benefits of the corresponding employee benefit plan (excluding any defined benefit pension, nonqualified deferred compensation, equity or equity-based compensation, or post-termination or retiree health or welfare benefit plan) offered by Parent or its subsidiaries to the Meritor employees during the calendar year in which the Effective Time occurs. Parent will not be required to recognize such period of service if it would result in a duplication of benefits or compensation.
During the plan year in which the Effective Time occurs, Parent will also use commercially reasonable efforts to (i) waive any pre-existing condition limitations under any applicable U.S. group health care plans of Parent and its subsidiaries if such condition was satisfied or waived under the comparable Meritor benefit plan prior to the Effective Time and (ii) credit continuing Meritor employees and their eligible dependents with all payments credited against out-of-pocket maximums and deductible payments and co-payments paid by such individual, in each case, under the applicable Meritor health insurance benefit plan during the portion of the plan year prior to the Effective Time for the purpose of determining the extent to which any such individual has satisfied his or her deductible and whether he or she has reached the out-of-pocket maximum under any U.S. health insurance plans of Parent and its subsidiaries.
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Efforts to Complete the Merger
The Company, Parent, and Merger Sub are each required to, and to cause their respective affiliates to, use reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the Transactions and to cause the conditions to the Merger to be satisfied as soon as practicable, including to (i) prepare and file all forms, registrations and notifications to or with any governmental authority required to be filed to consummate the Transactions, (ii) satisfy the conditions to consummating the Transactions, (iii) obtain (and to cooperate with each other in obtaining) any consent, authorization, expiration or termination of a waiting period permit, order or approval of, waiver or any exemption by, any governmental authority (including furnishing all information and documentary material required under the HSR Act or other applicable competition and investment laws) required to be obtained or made by Parent, Merger Sub, the Company or any of their respective subsidiaries in connection with the transactions or the taking of any action contemplated by the Merger Agreement and (iv) defend any lawsuits or other legal proceedings, whether judicial or administrative, challenging the Merger Agreement or the consummation of the Transactions.
The Company and Parent shall (i) keep the other apprised of the status of matters relating to the completion of the Transactions and work cooperatively in connection with obtaining all required consents, authorizations, orders or approvals of, or any exemptions by, any governmental authority reviewing the Transactions, (ii) promptly consult with the other with respect to and provide any necessary information and assistance as the other may reasonably request with respect to (and, in the case of correspondence, provide the other (or their counsel) with copies of) all notices, submissions or filings (other than any Notification and Report Form submitted under the HSR Act) made by or on behalf of such party or any of its affiliates with any governmental authority or any other information supplied by or on behalf of such party to, or correspondence with, any person in connection with the Merger Agreement or the Transactions, (iii) promptly inform the other, and if in writing, furnish the other with copies of (or, in the case of oral communications, advise the other parties orally of) any communication from or to any governmental authority regarding the Transactions, and permit the other to review and discuss in advance, and consider in good faith the timely views of the other parties in connection with, any proposed communication or submission with any such governmental authority and (iv) to the extent permitted by applicable law, ensure the other party is given the opportunity to attend any meetings, teleconferences or videoconferences with or other appearances before any governmental authority with respect to the Merger Agreement or the Transactions, and prior to any such meeting, teleconference, or videoconference, reasonably consult with the other with respect thereto. Parent must reasonably consult with the Company as to the strategy relating to the seeking of approvals under any applicable competition law or investment law, but Parent has the sole right to determine and control such strategy, including for the final content of any substantive communications with any applicable governmental authority with respect to any investigation under any competition law or investment law. Materials required to be provided pursuant to the foregoing may be redacted to remove references concerning the valuation or future plans of Parent or the Company and the Transactions, as necessary to comply with existing contractual obligations, and as necessary to address reasonable privilege concerns, provided that a party redacting materials must use its reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure of such information not in violation of any applicable law, existing contractual obligation, or privilege. In addition, any party may, as it deems advisable and necessary, reasonably designate competitively sensitive materials as “outside counsel only material.”
Antitrust Matters. The Company and Parent have agreed to (i) make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transaction contemplated by the Merger Agreement as promptly as practicable (and in any event no later than 10 business days) after the date of the Merger Agreement and to (ii) make or file, as promptly as practicable, with the appropriate governmental authority, all other filings, registrations and notifications required to be filed to consummate the Merger under specified competition laws and investment laws. Neither the Company nor Parent will withdraw any such filings or applications, nor extend the timing for any review period by any governmental authority in connection with obtaining transaction approvals, without the prior written consent of the other party. Parent’s reasonable best efforts under the efforts provision of the Merger Agreement include (x) proposing, negotiating, committing to, effecting and agreeing to, by consent decree, hold separate order, or otherwise, the sale, divestiture, license, holding separate, and other disposition of and restriction on the businesses, assets, properties, product lines, and equity interest of, or changes to the conduct of business of, the Company, Parent, and their respective affiliates (including the surviving corporation and its affiliates) (y) creating, terminating, or divesting relationships,
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ventures, contractual rights or obligations of the Company or Parent or their respective affiliates, and (z) taking or committing to take any action that would limit Parent’s freedom of action with respect to, or its ability to retain or hold, directly or indirectly, any businesses, assets, equity interests, product lines or properties of Parent or the Company (including any of their respective affiliates) (each, a “Regulatory Remedy”), in each case, if such Regulatory Remedy should be reasonably necessary, proper, or advisable, so as to permit the consummation of the Merger to occur under applicable competition or investment laws no later than the Termination Date, as extended, if applicable. The Company, however, will not propose, negotiate, effect or agree to any such actions without the prior written consent of Parent. The “reasonable best efforts” standard will not require, nor be construed to require, Parent to waive any of the closing conditions as they apply to Parent, or Parent or any of its subsidiaries or affiliates to propose, negotiate, commit to, effect, agree to, or otherwise take or commit to take any action that constitutes or would reasonably be expected to result in a Burdensome Condition. In addition, Parent agrees to use reasonable best efforts to contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the Transactions.
“Burdensome Condition” means any Regulatory Remedy that, individually or in the aggregate with any other Regulatory Remedy, would reasonably be expected to (i) substantially and materially impair the benefits expected by Parent, as of the date of the Merger Agreement, to be realized from the consummation of the Merger or (ii) have more than an immaterial impact on Parent or any of its subsidiaries (other than, following the Effective Time, Meritor or any of its subsidiaries) or any of the assets, licenses, product lines, operations or businesses of Parent or any of its subsidiaries in existence as of the date of the Merger Agreement (other than, following the Effective Time, Meritor or any of its subsidiaries).
Indemnification and Insurance
From and after the Effective Time, Parent shall cause the surviving corporation to, to the full extent permitted under applicable law and consistent with the rights and obligations set forth in the Company’s articles of incorporation and bylaws, (i) indemnify and hold harmless each present and former (or future, but prior to the Effective Time), director, officer employee or agent of Meritor or any of its subsidiaries and any person who is, presently or formerly (or will be prior to the Effective Time), serving at the request of the Company or any of its subsidiaries as a director, officer, employee, agent, partner, trustee or in another authorized capacity of or for another corporation, unincorporated association, business trust, estate, partnership, joint venture, individual trust, employee benefit plan or other legal entity, whether or not organized or formed for profit (collectively, the “Covered Persons”) in connection with any “D&O Claim” (as defined in the Merger Agreement), any losses, claims, damages, liabilities, claim expenses, judgments, fines, penalties and amounts paid in settlement relating to or resulting from such D&O Claim and (ii) promptly advance claim expenses as incurred by the Covered Persons in connection with any D&O Claim, provided that any Covered Person to whom expenses are advanced provides an undertaking to repay the advance if it is ultimately determined that such Covered Person is not entitled to indemnification from the surviving corporation.
In addition, prior to the Effective Time, Meritor will obtain, and prepay the premium for, a six year “tail” insurance policy for D&O Claims arising from facts, acts, events or omissions that occurred on or prior to the Effective Time. Any such tail policy must have at least the same coverage and amounts and contain terms and conditions that are no less favorable to the covered individuals as the Company’s and its subsidiaries’ existing directors’ and officers’ insurance policy with a claims period of six years from the Effective Time. Notwithstanding the foregoing, in no event will such tail policy have a total premium amount greater than 275% of the annual premium most recently paid by the Company for its existing directors’ and officers’ insurance policy as of the date of the Merger Agreement (such amount, the “Maximum Annual Premium”). If such tail policy is not reasonably available or the premium of such tail policy exceeds the Maximum Annual Premium, the Company will obtain a tail policy with the greatest coverage available for a total premium not exceeding the Maximum Annual Premium. If the Company fails to obtain such tail policy prior to the Effective Time, Parent or the surviving corporation will obtain such a tail policy.
Coordination on Transaction Litigation
Meritor has agreed to provide Parent with prompt notice (and in any event within 48 hours) of, and keep Parent informed on a reasonably prompt basis of the status of, any transaction litigation or books and records demand brought by any shareholder or purported shareholder of the Company against the Company, its
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subsidiaries or any of their respective directors or officers. Meritor has agreed to give Parent the opportunity to participate in the defense or settlement of any such litigation or demand, provided that no settlement or disclosure in connection therewith may be agreed without Parent’s consent (such consent not to be unreasonably withheld or delayed), except that Parent may, in its sole discretion, withhold such consent with respect to any settlement that (i) grants equitable or injunctive relief as part of such settlement or (ii) does not include an express, complete and unconditional release of the Company, Parent, its subsidiaries (including, following the Effective Time, the surviving corporation) and their respective directors, officers, employees and agents with respect to all claims asserted in such litigation to the extent applicable.
Conduct of Parent and Merger Sub Pending the Merger
Except as required by applicable law or required by the Merger Agreement, Parent has agreed that it will not, and that it will not permit any of its subsidiaries (including Merger Sub) to, until the Effective Time (or such earlier date on which the Merger Agreement may be terminated), acquire or agree to acquire whether by merging, consolidating with, purchasing a material portion of the assets of or equity in, a person or entity, to the extent such acquisition is of a business set forth in Parent’s confidential disclosure letter (a “Specified Acquisition”), if entering into a definitive agreement relating to the consummation of such a Specified Acquisition would be reasonably expected to (i) prevent, materially delay or materially impede the obtaining of or otherwise adversely affect in any material respect Parent’s ability to procure the required authorizations, consents, orders, declarations or approvals of any governmental authority or the expiration or termination of any applicable waiting period necessary to consummate the Transactions or (ii) materially increase the risk of a government order, ruling, judgment or injunction prohibiting the consummation of the Transactions.
In addition, Parent has agreed to cause Merger Sub to perform its obligations under the Merger Agreement.
Other Covenants and Agreements
The Merger Agreement also contains additional covenants, including covenants concerning (i) the filing of this proxy statement, (ii) public announcements with respect to the Transactions, (iii) the termination of affiliate contracts, (iv) resignation of existing directors, (v) the approval of Parent as the sole shareholder of Merger Sub, (vi) the control of operations of the Company prior to the Effective Time, (vii) notices of certain events, (viii) other actions related to takeover statutes, delisting, and reporting requirements under Section 16 of the Exchange Act and (ix) treatment of certain indebtedness.
Conditions to Completion of the Merger
Each party’s obligation to complete the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of the following conditions (all of the conditions below, collectively, the “Mutual Conditions”):
the Prohibition Condition;
receipt of Company Shareholder Approval;
the Antitrust Condition; and
the Other Regulatory Matters Condition.
The respective obligations of Parent and Merger Sub to complete the Merger are subject to the satisfaction or waiver by Parent and Merger Sub on or before the Effective Time of the following additional conditions:
the accuracy, except for any de minimis inaccuracies, of certain representations and warranties of the Company regarding capitalization as of the date of the Merger Agreement and the closing date (except to the extent that any such representation and warranty speaks as of any earlier date, in which case such representation and warranty shall be true and correct as of such earlier date);
the accuracy in all material respects of certain representations and warranties of the Company regarding capitalization and the opinion of the Company’s financial advisor, and the representations and warranties of the Company regarding due incorporation, indebtedness, share ownership, due authorization, and violations of the Company’s certificate of incorporation or bylaws, and broker fees, in each case as of the date of the Merger Agreement and the closing date (without giving effect to any “materiality” or “Company Material Adverse Effect” qualifiers and except to the extent that any such representation and warranty speaks as of any earlier date, in which case such representation and warranty shall be true and correct as of such earlier date);
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the accuracy in all respects of the representations and warranties of the Company with respect to the absence any Company Material Adverse Effect since September 30, 2021 as of the date of the Merger Agreement and the closing date;
the accuracy of the other representations and warranties of the Company as of date of the Merger Agreement and the closing date (without giving effect to any “materiality” or “Company Material Adverse Effect” qualifiers and except to the extent that any such representation and warranty speaks as of any earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except for such failures to be true and correct as have not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect;
the performance by the Company in all material respects of the covenants, obligations and agreements required to be performed or complied with under the Merger Agreement at or prior to the closing;
the absence of any Effect or Effects that, individually or in the aggregate, (i) have had a Company Material Adverse Effect that is continuing or (ii) that would reasonable be expected to have a Company Material Adverse Effect within a reasonable period following the closing;
No Burdensome Condition; and
the receipt by Parent and Merger Sub of a certificate signed by the Company’s Chief Executive Officer or Chief Financial Officer, confirming that the conditions set forth in the first six bullet points have been satisfied.
The obligation of the Company to complete the Merger is subject to the satisfaction or waiver by the Company on or before the Effective Time of the following additional conditions:
the accuracy of the representations and warranties of Parent and Merger Sub as of date of the Merger Agreement and the closing date (without giving effect to any “materiality” or “Parent Material Adverse Effect” qualifiers and except to the extent that any such representation and warranty speaks as of any earlier date, in which case such representation and warranty shall be true and correct as of such earlier date), except for such failures to be true and correct as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse Effect;
the performance by each of Parent and Merger Sub in all material respects of the covenants, obligations and agreements required to be performed or complied with under the Merger Agreement at or prior to the closing; and
the receipt by the Company of a certificate signed by the Chief Executive Officer or Chief Financial Officer of Parent, confirming that the conditions set forth in the two preceding bullet points have been satisfied.
Termination
The Merger Agreement may be terminated and the Merger may be abandoned in the following circumstances:
at any time prior to the Effective Time by the mutual written consent of Meritor and Parent;
at any time prior to the Closing by either Meritor or Parent:
if the Merger has not been consummated on or before the Termination Date, provided that (i) if, on the Termination Date, one or more of the Prohibition Condition (to the extent related to the transaction approvals), the Antitrust Condition, the Other Regulatory Matters Condition or the No Burdensome Condition have not been satisfied but all the other closing conditions have been satisfied or waived or would be satisfied if the closing occurred on such date, then the Termination Date will be automatically extended, without any action on the part of the parties to the Merger Agreement, to March 21, 2023 and (ii) if, on such extended Termination Date, one or more of the Prohibition Condition (to the extent related to the transaction approvals), the Antitrust Condition, the Other Regulatory Matters Condition or the No Burdensome Condition have not been satisfied but all the other closing conditions have been satisfied or waived or would be satisfied if the closing occurred on such date, then the extended Termination Date will be automatically extended, without any action on the part of the parties to the
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merger agreement, to June 21, 2023. The foregoing termination right will not be available to a party if such party has breached in any material respect any provision of the Merger Agreement in any manner that was the primary cause of the failure of the consummation of the Merger to occur on or before the Termination Date, as extended, if applicable (it being understood that a breach of the Merger Agreement by Merger Sub will be deemed a breach by Parent);
if (i) any permanent injunction, judgment or order issued by a court or other governmental authority of competent jurisdiction permanently prohibiting, making illegal or enjoining the completion of the Transactions becomes final and nonappealable or (ii) any statute, rule, regulation or order is enacted, entered, enforced or deemed applicable and is in effect that prohibits, makes illegal or enjoins the consummation of the Transactions, provided that the foregoing termination right will not be available (x) to the Company or Parent unless such party has used its reasonable best efforts to remove such injunction (subject, in the case of Parent, to certain exceptions) and (y) to any party if such party has breached in any material respect any provision of the Merger Agreement in any manner that was the primary cause of the issuance of such order (the “Legal Restraint Right”); or
if the Meritor shareholders’ meeting has been held and completed and Company Shareholder Approval has not been obtained at the Meritor shareholders’ meeting (or any adjournment or postponement thereof) at which a vote on the Merger Proposal is taken;
by Meritor:
at any time prior to the Effective Time, if Parent or Merger Sub breaches or fails to perform any representation, warranty, covenant or other agreement, which breach or failure to perform (i) would give rise to the failure of any of the Mutual Conditions or a condition to the obligation of Meritor to complete the Merger relating to Parent or Merger Sub’s representations, warranties, covenants and agreements in the Merger Agreement and (ii) is either incapable of being cured by Parent or Merger Sub, or if capable of being cured, has not been cured by the earlier of the Termination Date or 30 business days following receipt of written notice from the Company of such breach, provided that the Company shall not have the foregoing termination right to the extent the Company has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement so as to give rise to the failure of any of the Mutual Conditions or a condition to the obligation of Parent or Merger Sub to complete the Merger relating to the Company’s representations, warranties, covenants and agreements in the Merger Agreement; or
at any time prior to the time the Company Shareholder Approval is obtained, in order to enter into an acquisition agreement providing for a Company Superior Proposal in accordance with the Merger Agreement, provided that concurrently with (and as a condition to) such termination, the Company pays the termination fee, as described below;
by Parent:
at any time prior to the Effective Time, if the Company breaches or fails to perform any representation, warranty, covenant or other agreement, which breach or failure to perform (i) would give rise to the failure of any of the Mutual Conditions or a condition to the obligation of Parent or Merger Sub to complete the Merger relating to the Company’s representations, warranties, covenants and agreements in the Merger Agreement and (ii) is either incapable of being cured by the Company, or if capable of being cured, has not been cured by the earlier of the Termination Date or 30 business days following receipt of written notice from Parent of such breach, provided that Parent shall not have the foregoing termination right to the extent Parent or Merger Sub has breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the Merger Agreement so as to give rise to the failure of any of the Mutual Conditions or a condition to the obligation of the Company to complete the Merger relating to Parent or Merger Sub’s representations, warranties, covenants and agreements in the Merger Agreement;
at any time prior to the time the Company Shareholder Approval is obtained if the Company has effected a Change of Recommendation; at any time prior to the time Company Shareholder Approval is obtained if the Company willfully breaches its non-solicitation obligations; or
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at any time prior to the Effective Time, if a law, order or injunction has been enacted, issued, promulgated, or granted, as applicable, by a governmental authority of competent jurisdiction in connection with any transaction approvals, and such law, order or injunction (i) is in effect and has become final and non-appealable and (ii) requires Parent, the Company or any of their respective subsidiaries to take or commit to take any action that constitutes a Burdensome Condition; provided that the foregoing termination right will only be available to Parent if it has complied in all material respects with its efforts obligations under the Merger Agreement (the “Burdensome Condition Right”).
Company Termination Fee
Meritor will pay Parent the Company Termination Fee if:
the Company terminates the Merger Agreement prior to obtaining the Company Shareholder Approval in order to enter into an acquisition agreement providing for a Company Superior Proposal;
Parent terminates the Merger Agreement because the Meritor Board has made a Change of Recommendation;
Parent terminates the Merger Agreement because of the Company’s willful breach of its non-solicitation obligations; or
if all of the following conditions are satisfied:
(i) Parent or the Company terminates the Merger Agreement as a result of the closing having not occurred on or before the Termination Date as extended, if applicable, or the Company Shareholder Approval having not been obtained or (ii) Parent terminates the Merger Agreement because of the Company’s breach of its representations, warranties or covenants in the Merger Agreement which causes the failure of a closing condition, subject in certain cases to the right of the Company to cure the breach;
after the date of the Merger Agreement and prior to the special meeting, a Company Takeover Proposal has been made to the Meritor Board or the Company’s management, or publicly made, proposed or communicated and not withdrawn prior to the time of the termination (or at least two business days prior to the special meeting in the case of a termination as a result of the Company Shareholder Approval having not been obtained); and
within 12 months of termination of the Merger Agreement, Meritor or its subsidiaries completes or enters into a definitive agreement with respect to a Company Takeover Proposal.
In no event will the Company be required to pay a termination fee on more than one occasion.
Parent Termination Fee
Parent will pay Meritor the Parent Termination Fee if:
Parent or the Company terminates the Merger Agreement because the Merger is not consummated on or before the Termination Date as extended, if applicable, and at such time (i) one or more of the Prohibition Condition (only as the result of an order or injunction in connection with the transaction approvals), the Antitrust Condition, the Other Regulatory Matters Condition or the No Burdensome Condition (only as the result of an order or injunction in connection with the transaction approvals) have not been satisfied or waived, (ii) the Company Shareholder Approval has been obtained, (iii) all of the other closing conditions have been satisfied or waived (other than any such conditions that by their nature are to be satisfied at the closing), and (iv) no breach by the Company of its interim-operating covenants or its efforts obligations under the Merger Agreement has been the principal cause of the failure to be satisfied of all or any of the conditions in clause (i) above; or
Parent or the Company terminates the Merger Agreement pursuant to the Legal Restraint Right or Parent terminates the Merger Agreement pursuant to the Burdensome Condition Right, in each case only as the result of an order or injunction in connection with the transaction approvals and at the time of such termination, no breach by the Company of its interim-operating covenants or its efforts obligations has been the principal cause of the imposition of such order or injunction.
In no event will Parent be required to pay Parent’s termination fee on more than one occasion.
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Limitation on Remedies
In the event the Merger Agreement is terminated in accordance with the provisions described in the section of this proxy statement entitled “The Merger Agreement Termination,” the Merger Agreement will become void and have no further force or effect, with no liability to any person on the part of Parent, Merger Sub or the Company or their respective subsidiaries, except that no such termination will relieve (i) Meritor of any liability to pay the Company Termination Fee or Parent to pay the Parent Termination Fee as required pursuant to the Merger Agreement or (ii) Parent, Merger Sub or the Company of any liability for damages arising out of fraud or willful breach; provided that the payment of the Company Termination Fee or the Parent Termination Fee, as applicable, and, if applicable, termination expenses and interest, will be the sole and exclusive remedy of Parent against the Company or the Company against Parent, as applicable. In addition, certain sections of the Merger Agreement, including, among others, sections relating to the confidentiality obligations of Meritor, Parent and Merger Sub, expenses and public announcements will survive termination.
Expenses
Except as otherwise provided in the Merger Agreement, all costs and expenses incurred in connection with the Merger Agreement and the Transactions will be paid by the party incurring the expense, except that all filing fees payable to any governmental authority in connection with any filings made to obtain any required regulatory approval will be borne by Parent. Except as otherwise provided in the Merger Agreement, all transfer, documentary, sales, use, stamp, property, conveyancing, value added, goods and services, registration and other such taxes and related fees or costs on or payable in connection with the Transactions will be borne and paid by Parent, the Company, Merger Sub or the surviving corporation and not by holders of the Common Stock.
Amendment and Modification
Subject to the provisions of applicable law, at any time prior to the Effective Time, the Merger Agreement may be amended or waived if the amendment or waiver is in writing and signed by the Company, Parent and Merger Sub; provided that, following receipt of the Company Shareholder Approval, any amendment or waiver that requires the further approval of the shareholders of the Company under the IBCL will not be effective unless and until such further approval is obtained.
Governing Law and Venue, Waiver of Jury Trial; Specific Performance
The parties agreed that the Merger Agreement will be governed by Delaware law, without giving effect to any conflict of law provision, rule or principles (whether of the State of Delaware or any other jurisdiction), except to the extent the provisions of the IBCL are mandatorily applicable to the Merger. Each party agreed to irrevocably and unconditionally submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware or if such court finds it lacks subject matter jurisdiction, the Superior Court of the State of Delaware (Complex Commercial Division) for purposes of any suit, action or other proceeding arising out of the Merger Agreement or the Transactions, provided that if subject matter jurisdiction over such suit, action or other proceeding is vested exclusively in the U.S. federal courts, such suit, action or other proceeding will be heard in the U.S. District Court for the District of Delaware. Each party further irrevocably and unconditionally waived any right such party may have to a trial by jury with respect to any action, suit or proceeding directly or indirectly arising out of or relating to the Merger Agreement or the Transactions.
The Company, Parent and Merger Sub have agreed that irreparable damage would occur in the event that the parties do not perform or otherwise breach the provisions of the Merger Agreement (including failing to take such actions as are required of them in order to consummate the Merger and effect the closing) in accordance with its specified terms. The Company, Parent and Merger Sub have acknowledged and agreed that: (i) they are entitled, in addition to any other remedy to which they are entitled at law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms and provisions of the Merger Agreement; (ii) neither the Company Termination Fee nor the Parent Termination Fee will be constructed to diminish or impair any party’s right to specific enforcement; and (iii) the right of specific enforcement is an integral part of transactions contemplated under the Merger Agreement and without that right neither the Company nor Parent would have entered into the Merger Agreement. Any party seeking an order or injunction to prevent and to enforce specifically the terms and provisions of the Merger Agreement will not be required to provide any bond or other security in connection with any such order or injunction.
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ADVISORY VOTE ON NAMED EXECUTIVE OFFICER MERGER-RELATED COMPENSATION
As required by Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, Meritor is providing its shareholders with a separate advisory (non-binding) vote to approve the Compensation Proposal, as described in the table in the section of this proxy statement entitled “The Merger — Interests of Meritor’s Directors and Executive Officers in the Merger — Quantification of Potential Payments and Benefits to Meritor’s Named Executive Officers in Connection with the Transaction,” including the footnotes to the table and related narrative discussion.
The Meritor Board unanimously recommends that the shareholders of Meritor approve the following resolution:
“RESOLVED, that the compensation that may be paid or become payable to Meritor’s named executive officers in connection with the Merger, and the agreements or understandings pursuant to which such compensation may be paid or become payable, in each case, as disclosed pursuant to Item 402(t) of Regulation S-K in the table in the section of this proxy statement entitled “The Merger — Interests of Meritor’s Directors and Executive Officers in the Merger — Quantification of Potential Payments and Benefits to Meritor’s Named Executive Officers in Connection with the Transaction,” including the footnotes to the table and the related narrative discussion, is hereby APPROVED.”
The vote on the Compensation Proposal is a vote separate and apart from the vote on the Merger Proposal. Accordingly, you may vote to adopt the Merger Agreement and vote not to approve the Compensation Proposal and vice versa. Because the vote on the Compensation Proposal is advisory only, it will not be binding on either Meritor or Parent. Accordingly, if the Merger Proposal is approved and the Merger is completed, the compensation may be payable, subject only to the conditions applicable thereto under the applicable compensation agreements and arrangements, regardless of the outcome of the non-binding, advisory vote of Meritor shareholders.
The above resolution approving the Merger-related compensation of Meritor’s named executive officers on an advisory (non-binding) basis requires the affirmative vote of a majority of the shares of Common Stock present virtually or represented by proxy at the special meeting and that vote thereon.
The Meritor Board unanimously recommends that the shareholders of Meritor vote “FOR” the Compensation Proposal.
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VOTE ON ADJOURNMENT
The Company’s shareholders are being asked to approve the Adjournment Proposal. If the Adjournment Proposal is approved, the special meeting could be adjourned by the Meritor Board to any date (subject to certain limitations in the Merger Agreement). Meritor may not postpone or adjourn the special meeting without Parent’s prior written consent (not to be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, (i) if Meritor reasonably determines in good faith, after consulting with its outside legal counsel, that the Company Shareholder Approval is unlikely to be obtained at the special meeting, including due to an absence of quorum, the Company may adjourn or postpone the special meeting, for a period no longer than 30 calendar days, to solicit additional proxies in favor of the Merger Proposal or (ii) if Parent reasonably determines in good faith, after consulting with its outside legal counsel, that the Company Shareholder Approval is unlikely to be obtained at the special meeting, Parent may request that Meritor adjourn, delay or postpone the special meeting. If the special meeting is adjourned for the purpose of soliciting additional proxies, shareholders who have already submitted their proxies will be able to revoke them at any time before their use. If you sign and return a proxy and do not indicate how you wish to vote on any proposal, or if you sign and return a proxy and you indicate that you wish to vote in favor of the Merger Proposal but do not indicate a choice on the Adjournment Proposal, your shares of Common Stock will be voted in favor of the Adjournment Proposal.
The Company does not anticipate calling a vote on this proposal if the Merger Proposal is approved by the requisite number of shares of Common Stock at the special meeting.
The vote on the Adjournment Proposal is a vote separate and apart from the vote on Merger Proposal. Accordingly, you may vote to approve the Merger Proposal and vote not to approve the Adjournment Proposal and vice versa.
Approval of the Adjournment Proposal requires the affirmative vote of a majority of the shares of Common Stock present virtually or represented by proxy at the special meeting and that vote thereon.
The Meritor Board unanimously recommends that the shareholders of Meritor vote “FOR” the Adjournment Proposal, if a vote on the Adjournment Proposal is called.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 11, 2022, regarding the beneficial ownership of shares of Common Stock with respect to:
each person that is a beneficial owner of more than 5% of the outstanding Common Stock;
each director;
each named executive officer; and
all directors and executive officers as a group.
The amounts and percentages of Common Stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power, which includes the power to vote or direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person’s ownership percentage, but not for purposes of computing any other person’s percentage. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Except as otherwise indicated, each of the beneficial owners has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock. In addition, except as otherwise indicated, the address of each of the directors and executive officers of the Company is c/o Meritor, Inc., 2135 West Maple Road, Troy, Michigan 48084-7186. The below beneficial ownership information includes shares of Common Stock issuable upon the exercise of options within 60 days of April 11, 2022.
Name of Beneficial Owner
Number of Shares
Beneficially Owned
Percentage of
Common Stock
Outstanding
5% Shareholders
 
 
BlackRock, Inc.
11,630,040
16.4
The Vanguard Group
9,204,825
13.0
T. Rowe Price Associates, Inc.
3,587,859
5.1
Glenview Capital Management, LLC
3,544,333
5.0
Named Executive Officers and Directors
 
 
Steven Beringhause(1)
15,710
*
Jan A. Bertsch(1)(2)
65,133
*
Rodger L. Boehm(1)
44,614
*
Ivor J. Evans(1)
335,057
*
Elizabeth A. Fessenden(1)
8,662
*
Fazal Merchant(1)
11,371
*
William R. Newlin(1)(3)
210,378
*
Thomas L. Pajonas(1)
68,978
*
Lloyd G. Trotter(1)
84,647
*
Chris Villavarayan(4)
85,930
*
Carl D. Anderson II(4)
41,639
*
Timothy Bowes(4)
474
*
John Nelligan
12,616
*
Jeffrey A. Craig
186,314
*
Hannah S. Lim-Johnson
0
*
All Directors and Executive Officers as a group (14 persons)
1,193,331
1.7
*
Less than 1%.
(1)
Includes restricted shares awarded under the Company’s long-term incentive plans. Restricted shares are held by the Company until certain conditions are satisfied.
(2)
Includes 37,462 shares of Common Stock held by a trust for which Ms. Bertsch is the trustee.
(3)
Includes 6,860 shares of Common Stock held by a trust of which Mr. Newlin’s spouse is the beneficiary.
(4)
Includes shares beneficially owned under the Company’s Savings Plans.
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NO DISSENTERS’ RIGHTS
Under Indiana law, holders of Common Stock are not entitled to dissenters’ rights in connection with the Merger.
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MULTIPLE SHAREHOLDERS SHARING ONE ADDRESS
In accordance with Rule 14a-3(e)(1) under the Exchange Act, one proxy statement will be delivered to two or more shareholders who share an address, unless the Company has received contrary instructions from one or more of the shareholders. Each shareholder will receive a separate proxy card. The Company will deliver promptly upon written or oral request a separate copy of the proxy statement to a shareholder at a shared address to which a single copy of the proxy statement was delivered. Requests for additional copies of the proxy statement should be directed to the Company, in care of the Corporate Secretary, at Meritor, Inc., 2135 West Maple Road, Troy, Michigan 48084-7186, or by calling us at (248) 435-1000. In addition, shareholders who share a single address, but receive multiple copies of the proxy statement, may request that in the future they receive a single copy by contacting the Company at the address and phone number set forth in the prior sentence.
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SUBMISSION OF SHAREHOLDER PROPOSALS
If the Merger is completed, the Company does not expect to hold a 2023 annual meeting of shareholders. However, if the Merger is not completed, the Company will hold a 2023 annual meeting of shareholders.
As described in the Company’s annual meeting proxy statement for the 2022 annual meeting of shareholders filed on December 17, 2021, any shareholder proposals that are intended to be presented at our annual meeting of shareholders to be held in 2023 must have been received by us on or before August 19, 2022, at the Office of the Corporate Secretary at our headquarters, 2135 West Maple Road, Troy, Michigan 48084-7186, in order to be eligible for inclusion in our proxy materials.
In addition, under the Company’s bylaws, any proposal for consideration at the annual meeting of shareholders to be held in 2023 submitted by a shareholder other than pursuant to Rule 14a-8 will be considered timely if it was received by Meritor’s Corporate Secretary in writing at the above address on or after September 29, 2022 and on or before October 29, 2022, and is otherwise in compliance with the requirements set forth in the Company’s bylaws.
Additional information regarding the procedures to submit a shareholder proposal at the 2023 annual meeting, if one will be held, is included in the Company’s proxy statement for its 2022 annual meeting of shareholders, filed on December 17, 2021.
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
Meritor is subject to the reporting requirements of the Exchange Act. Accordingly, Meritor files annual, quarterly and current reports, proxy statements and other information with the SEC. Meritor’s SEC filings are available to the public at the Internet website maintained by the SEC at www.sec.gov. Meritor also makes available free of charge through its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, its definitive proxy statements and Section 16 reports on Forms 3, 4 and 5, as soon as reasonably practicable after it electronically files such reports or amendments with, or furnishes them to, the SEC. Meritor’s Internet website address is www.meritor.com. The information located on, or hyperlinked or otherwise connected to, Meritor’s website is not, and shall not be deemed to be, a part of this proxy statement or incorporated into any other filings that we make with the SEC.
The SEC allows us to “incorporate by reference” into this proxy statement documents we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this proxy statement, and later information that we file with the SEC will update and supersede that information. Information in documents that is deemed, in accordance with SEC rules, to be furnished and not filed will not be deemed to be incorporated by reference into this proxy statement. We incorporate by reference the documents listed below and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement, and before the date of the special meeting (provided that we are not incorporating by reference any information furnished to, but not filed with, the SEC):
Meritor’s Annual Report on Form 10-K for the fiscal year ended October 3, 2021, filed with the SEC on November 17, 2021;
Meritor’s Quarterly Report on Form 10-Q for the fiscal quarter ended January 2, 2022, filed with the SEC on February 3, 2022; and
Meritor’s Current Reports on Form 8-K, in each case to the extent filed and not furnished with the SEC on October 25, 2021, November 12, 2021, January 28, 2022 and February 22, 2022.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION IN THAT JURISDICTION. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS ABOUT THE MERGER OR THE SPECIAL MEETING OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US OR ANY OTHER PERSON. THIS PROXY STATEMENT IS DATED APRIL 18, 2022. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT TO SHAREHOLDERS DOES NOT AND WILL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
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Annex A
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER

by and among

MERITOR, INC.,

CUMMINS INC.

and

ROSE NEWCO INC.
Dated as of February 21, 2022

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