HAYES LEMMERZ INTERNATIONAL, INC.
15300 Centennial Drive
Northville, Michigan 48168
www.hayes-lemmerz.com

 

 

May 26, 2006

 

To Our Stockholders:

 

I am pleased to invite you to attend the 2006 Annual Meeting of Stockholders of Hayes Lemmerz International, Inc. to be held on July 18, 2006 at 8:00 a.m. Eastern Daylight Savings Time, at our world headquarters located at 15300 Centennial Drive, Northville, Michigan 48168, for the following purposes:

 

 

It is important that your shares be voted, regardless of whether you are able to attend the Annual Meeting. To be sure that your shares are represented, please sign and mail the enclosed proxy card promptly. This will not prevent you from voting your shares in person if you choose to do so. Details regarding the business to be conducted at the Annual Meeting are fully described in the accompanying Notice of Annual Meeting and Proxy Statement. We hope you will read the Proxy Statement and submit your proxy.

 

Our Board of Directors and management thank you for your ongoing support and continued interest in Hayes Lemmerz.

Sincerely,

 

/s/    Curtis J. Clawson

 

Curtis J. Clawson

President, Chief Executive Officer and

Chairman of the Board of Directors

 

The Proxy Statement and the accompanying proxy card are expected to be first mailed to stockholders on or about June 6, 2006.

HAYES LEMMERZ INTERNATIONAL, INC.
15300 Centennial Drive
Northville, Michigan 48168

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 18, 2006

By Order of the Board of Directors

 

 

Northville, Michigan 48168

May 26, 2006

2006 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT

 

HAYES LEMMERZ INTERNATIONAL, INC.
15300 Centennial Drive,
Northville, Michigan 48168

 

PROXY STATEMENT

This Proxy Statement contains information relating to the Annual Meeting of Stockholders of Hayes Lemmerz International, Inc., a Delaware corporation (the “Company”), to be held on July 18, 2006, beginning at 8:00 a.m. Eastern Daylight Savings Time, at the Company’s world headquarters at 15300 Centennial Drive, Northville, Michigan 48168, and at any adjournment of the Annual Meeting.

 

What is the purpose of the Annual Meeting?

 

At our Annual Meeting, stockholders will act upon the following proposals:

 

 

In addition, our management will report on our performance during fiscal 2005 and respond to questions from stockholders.

 

What shares can I vote?

 

All shares of our common stock owned by you as of the close of business on the record date, May 19, 2006, may be voted by you. These shares include shares held directly in your name as the stockholder of record and shares held for you as the beneficial owner through a stockbroker, bank or other nominee. Each share of common stock owned by you entitles you to cast one vote on each matter to be voted upon.

 

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

Many of our stockholders hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are different procedures for voting shares held of record and those owned beneficially.

 

 

If your shares are registered directly in your name with our transfer agent, Mellon Investor Services, LLC, you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you by us. As the stockholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the meeting. We have enclosed a proxy card for you to use.

 

 

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker, bank or nominee which is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker on how to vote and are also invited to attend the meeting. However, because you are not the stockholder of record, you may not vote these shares in person at the meeting unless you obtain a signed proxy from the record holder giving you the right to vote the shares. Your broker, bank or nominee has enclosed or provided a voting instruction card for you to use in directing the broker or nominee how to vote your

shares. If you do not provide the stockholder of record with voting instructions, your shares may constitute broker non-votes. The effect of broker non-votes is more specifically described in “What vote is required to approve each item?” below.

 

How can I vote my shares in person at the meeting?

 

Shares held directly in your name as the stockholder of record may be voted in person at the Annual Meeting. If you choose to do so, please bring the enclosed proxy card or proof of identification. Even if you currently plan to attend the Annual Meeting, we recommend that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend the meeting. Shares held beneficially in street name may be voted in person by you only if you obtain a signed proxy from the record holder giving you the right to vote the shares.

 

How can I vote my shares without attending the meeting?

 

Whether you hold shares directly as the stockholder of record or beneficially in street name, you may direct your vote without attending the meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your broker, bank or nominee. You may do this by signing your proxy card or, for shares held in street name, the voting instruction card included by your broker, bank or nominee and mailing it in the accompanying enclosed, pre-addressed envelope. If you provide specific voting instructions, your shares will be voted as you instruct. Please refer to the summary instructions below and those included on your proxy card or, for shares held in street name, the voting instruction card included by your broker, bank or nominee.

 

Can I change my vote after I submit my proxy?

 

Yes. Even after you have submitted your proxy, you may change your vote with respect to shares held of record by you at any time prior to the close of voting at the Annual Meeting by filing a notice of revocation with our Corporate Secretary at 15300 Centennial Drive, Northville, Michigan 48168, by submitting a duly executed proxy bearing a later date or by attending the meeting and voting in person. Your attendance at the Annual Meeting will not by itself revoke a proxy; you must vote your shares at the meeting.

 

If your shares are held in a stock brokerage account or by a bank or other nominee, you may revoke your proxy by following the instructions provided by your broker, bank or nominee.

 

What constitutes a quorum?

 

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of common stock issued and outstanding and entitled to vote on the record date will constitute a quorum. At the close of business on the record date, 38,159,489 shares of our common stock were issued and outstanding. Proxies received but marked as abstentions and broker non-votes (i.e., shares held of record by a broker which are not voted because the broker has not received voting instructions from the beneficial owner of the shares and either lacks or declines to exercise the authority to vote the shares in its discretion) will be included in the calculation of the number of shares considered to be present at the Annual Meeting for purposes of a quorum.

 

What are the Board of Directors’ recommendations?

 

The Board of Directors recommends a vote:

 

 

Unless you give other instructions via your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of our Board of Directors. With respect to any other matter that properly comes before the Annual Meeting, the proxy holders will vote in accordance with their judgment on such matter.

What vote is required to approve each item?

 

The election to the Board of Directors of Messrs. Wallace and Wallman will require the affirmative vote of a plurality of the votes cast by the holders of shares of common stock present in person or represented by proxy at the Annual Meeting. In tabulating the vote, abstentions and broker non-votes, if any, will not affect the outcome of the vote on the election of directors. The ratification of the appointment of auditors will require the affirmative vote of a majority of shares of common stock present in person or represented by proxy at the Annual Meeting. In determining whether this proposal receives the requisite number of affirmative votes, abstentions will be counted and will have the same effect as a vote against the proposal; broker non-votes will be disregarded and will have no effect on the outcome of the vote.

 

What does it mean if I receive more than one proxy or voting instruction card?

 

It means your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.

 

Where can I find the voting results of the meeting?

 

We will announce preliminary voting results at the meeting and publish final results in our quarterly report on Form 10-Q for the second quarter of fiscal year 2006.

 

Who will count the votes?

 

A representative of Mellon Investor Services, LLC, our transfer agent, will tabulate the votes and act as the inspector of election.

 

Who is making this solicitation and who will bear the associated costs?

 

We are making this solicitation and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. Mellon Investor Services, LLC, our transfer agent, will assist us in the distribution of proxy materials. We will reimburse Mellon Investor Services, LLC for reasonable expenses incurred in connection with these services. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to stockholders.

 

May I propose actions for consideration at next year’s annual meeting of stockholders?

 

For a stockholder’s proposal to be eligible to be included in our Proxy Statement for the 2007 annual meeting of Stockholders, the stockholder must follow the procedures of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the proposal must be received by our Corporate Secretary at 15300 Centennial Drive, Northville, Michigan 48168, not later than January 26, 2007. In order for proposals of stockholders submitted outside the process of Rule 14a-8 under the Exchange Act to be considered timely, our By-laws require that such proposals must be submitted to our Corporate Secretary no earlier than March 18, 2007 and no later than April 19, 2007. However, if the 2007 annual meeting is called for a date earlier than June 18, 2006 or later than August 17, 2006, the stockholder proposal must be received not later than the close of business on the 10th day following the day on which notice of the date of the meeting is mailed or public disclosure of the date of the meeting is made, whichever occurs first.

 

Our Certificate of Incorporation currently authorizes no fewer than three and no more than nine directors. Our Board of Directors is currently comprised of six directors. Our Certificate of Incorporation divides the Board of Directors into three classes — Class I, Class II and Class III — with members of each class serving staggered three-year terms. One class of directors is elected by the stockholders at each annual meeting to serve a three-year term and until their successors are duly elected and qualified. The Class III Directors will stand for reelection or election at the Annual Meeting. The Class I Directors will stand for reelection or election at the 2007 annual meeting and the Class II Directors will stand for reelection or election at the 2008 annual meeting.

 

As proscribed by the charter of our Nominating and Corporate Governance Committee, the nominees for election as Class III Directors were recommended to our Board of Directors by our Nominating and Corporate Governance Committee, and were approved to serve as the nominees of our Board of Directors by a majority of our directors who qualify as independent directors under the listing standards of the Nasdaq Stock Market, Inc. (“Nasdaq”). If any nominee for any reason is unable or unwilling to serve as a director or the Board of Directors determines for good cause not to have such nominee serve as a director, the proxy holders will have the discretion to vote the proxies for any substitute nominee designated by the Board of Directors. We are not aware of any nominee who will be unable or unwilling to serve, or for good cause will not serve, as a director.

 

The names of the nominees of our Board of Directors for election as Class III Directors at the Annual Meeting and certain information about them are set forth below:

 

 

The biographical information for the Class III Director nominees is as follows:

 

Henry D. G. Wallace was employed by Ford Motor Company from 1971 until his retirement in 2001. Mr. Wallace’s last position with Ford was as the Group Vice President, Mazda & Asia Pacific Operations. Before serving Ford in this capacity, Mr. Wallace occupied a number of different positions, including Group Vice President and Chief Financial Officer; Vice President, European Strategic Planning and Chief Financial Officer, Ford of Europe, Inc.; President and Chief Executive Officer, Mazda Motor Corporation; and President, Ford Venezuela. Mr. Wallace is a director of Diebold, Inc., a provider of ATM, security and electronic voting systems, Ambac Financial Group, Inc., a financial services company and Lear Corporation, an automotive components supplier. Mr. Wallace received a Bachelor of Arts degree in Economics from the University of Leicester.

 

Richard F. Wallman was employed by Honeywell International, Inc. from 1999 until his retirement in 2003. Mr. Wallman’s last position with Honeywell was as Senior Vice President and Chief Financial Officer. From 1995 to 1999, Mr. Wallman held the same position at AlliedSignal, Inc., until its merger with Honeywell. Before joining AlliedSignal, Mr. Wallman occupied a number of different positions with IBM Corporation, Chrysler Corporation and Ford Motor Company. Mr. Wallman is a director of Ariba, Inc., a software company, Avaya, Inc. a networking and telecommunications company, ExpressJet Holdings, Inc., a regional airline, and Lear Corporation, an automotive components supplier. Mr. Wallman received his Bachelor of Science degree in Electrical Engineering from Vanderbilt and a Master of Business Administration from the University of Chicago.

 

Vote Required

 

The election to the Board of Directors of Messrs. Wallace and Wallman will require the affirmative vote of a plurality of the votes cast by the holders of shares of common stock present in person or represented by proxy at the Annual Meeting. In tabulating the vote, abstentions and broker non-votes, if any, will not affect the outcome of the vote on the election of directors.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION OF

EACH NAMED NOMINEE TO SERVE AS A CLASS III DIRECTOR.

 

The Audit Committee has selected and the Board of Directors has ratified the selection of KPMG LLP as our independent auditors for the fiscal year ending January 31, 2007 and has further directed that management submit the selection of independent auditors for ratification by the stockholders at the Annual Meeting. Representatives of KPMG LLP are expected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

 

Stockholder ratification of the selection of KPMG LLP as our independent auditors is not required by our By-laws or otherwise. However, the Board of Directors is submitting the selection of KPMG LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee and the Board of Directors will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee and the Board of Directors in their discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders.

 

Vote Required

 

The ratification of the appointment of auditors will require the affirmative vote of a majority of shares of common stock present in person or represented by proxy at the Annual Meeting. In determining whether this proposal receives the requisite number of affirmative votes, abstentions will be counted and will have the same effect as a vote against the proposals; broker non-votes will be disregarded and will have no effect on the outcome of the vote.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE RATIFICATION OF

THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT AUDITORS FOR THE FISCAL

YEAR ENDING JANUARY 31, 2007.

 

Who are the current members of the Board of Directors?

 

 

 

Curtis J. Clawson serves as our President, Chief Executive Officer and Chairman of the Board and has held such positions since August 2001 (President and Chief Executive Officer) and September 2001 (Chairman). From 1999 to July 2000, Mr. Clawson was President and Chief Operating Officer of American National Can. Mr. Clawson has 14 years of experience in the automotive industry. He began his career in automotive-related businesses at Arvin

Industries where he spent 9 years, from 1986 to 1995, including a position as General Manager of the business unit that supplied Arvin exhaust products, tenures in sales and marketing and tenures in production and plant management. From 1995 until the time that he joined American National Can, Mr. Clawson worked for AlliedSignal, Inc. as President of AlliedSignal’s Filters (Fram) and Spark Plugs (Autolite) Group, a $500 million automotive components business, and then as President of AlliedSignal’s Laminate Systems Group. Mr. Clawson earned his Bachelor of Science and Bachelor of Arts degrees from Purdue University and a Master of Business Administration from Harvard Business School. He is fluent in Spanish and French.

 

William H. Cunningham has been a Professor of Marketing at the University of Texas at Austin since 1979. Dr. Cunningham has occupied the James L. Bayless Chair for Free Enterprise at the University of Texas since 1985. Dr. Cunningham was the Dean of the University of Texas’ College of Business Administration/Graduate School of Business from 1982 to 1985, and President of the University of Texas at Austin from 1985 to 1992. Dr. Cunningham was also the Chancellor (chief executive officer) of the University of Texas from 1992 to 2000. In addition, Dr. Cunningham is also a director of Lincoln National Corporation, an insurance company, Southwest Airlines, a national air carrier, John Hancock Advisors, Inc., a mutual fund, Introgen Therapeutics, a gene therapy company, and Lin Television, an operator of television stations. Dr. Cunningham received a Ph.D., a Master of Business Administration and a Bachelor of Business Administration from Michigan State University.

 

George T. Haymaker, Jr. serves as our Lead Director. Mr. Haymaker has been non-executive Chairman of the Board of Kaiser Aluminum Corporation since October 2001. Mr. Haymaker served as Chairman of the Board and Chief Executive Officer of Kaiser Aluminum Corporation from January 1994 until January 2000, and as non-executive Chairman of the Board of Kaiser Aluminum Corporation from January 2000 through May 2001. From May 1993 to December 1993, Mr. Haymaker served as President and Chief Operating Officer of Kaiser Aluminum Corporation. Mr. Haymaker is a director of Flowserve Corporation, a provider of valves, pumps and seals, and SCP Pool Corporation, a distributor of swimming pool products. Mr. Haymaker received his Bachelor of Science degree and Master of Science degree in Industrial Management from the Massachusetts Institute of Technology and a Master of Business Administration from the University of Southern California.

 

Mohsen Sohi is the President and CEO of Freudenberg-NOK. Prior to joining Freudenberg, Mr. Sohi was employed by NCR Corporation from 2001 until 2003. Mr. Sohi’s last position with NCR was as the Senior Vice President, Retail Solutions Division. Before serving NCR in this position, Mr. Sohi spent more than 14 years at AlliedSignal, Inc. and its post-merger successor, Honeywell International Inc. From July 2000 to January 2001, he served as President, Honeywell Electronic Materials. From August 1999 to July 2000, Mr. Sohi was President, Commercial Vehicle Systems, at AlliedSignal. Prior to that, from 1997 to August 1999, he was Vice President and General Manager, Turbocharging Systems, and from 1995 to 1997, he was Director of Product Development and Technical Excellence at AlliedSignal. Mr. Sohi is a director of STERIS Corporation, a developer of products and services to prevent infection and contamination. Mr. Sohi received his Bachelor of Science degree in Mechanical and Aerospace Engineering from the University of Missouri, a Doctor of Science degree in Mechanical Engineering from Washington University and a Master of Business Administration from the University of Pennsylvania’s Wharton School of Business.

 

Biographical information for Messrs. Wallace and Wallman is provided on page 4 in the section identifying them as nominees for election as Class III Directors.

 

Which of the directors have been deemed to be independent by our Board of Directors?

 

Our Board of Directors has determined that each of Messrs. Cunningham, Haymaker, Sohi, Wallace and Wallman meet the independence requirements of the Nasdaq listing standards. It is the practice of the independent members of our Board of Directors to meet on a regular basis.

 

How often did the Board of Directors meet during the fiscal year ending January 31, 2006?

 

During the fiscal year ending January 31, 2006, the Board of Directors held 16 meetings. Each of the current directors attended at least 75% of the aggregate meetings of the Board of Directors and the respective committees of the Board of Directors on which the director served that were held during the period for which the director was a director or a committee member.

It is our policy that directors are invited and encouraged to attend our annual meetings. All of our current directors attended our 2005 annual meeting.

 

Does the Board of Directors have a Lead Director?

 

Yes. George T. Haymaker, Jr. currently serves as our Lead Director, whose duties and authority include, among others, the following:

 

 

Does the Company have a Code of Conduct?

 

Yes. In January 2004 our Board of Directors adopted a code of business conduct and ethics which sets forth the standards of behavior expected of our employees, officers and directors. A copy of this code of business conduct is available at our corporate website at http://www.hayes-lemmerz.com/investorkit/html/codeofethicsbusiness.html. This code of business conduct is designed to deter wrongdoing and to promote, among other things:

 

 

Does the Company have a Code of Ethics for Chief Executive and Senior Financial Officers?

 

Yes. In January 2004 our Board of Directors adopted a code of ethics for our chief executive and senior financial officers. A copy of this code of ethics is available on our corporate website at http://www.hayes-lemmerz.com/investorkit/html/codeofethicssenior.html. Any material change to, or waiver from, this code of

ethics will be disclosed on our website within five business days after such change or waiver. This code of ethics requires each of these officers to, among other things:

 

 

How do stockholders communicate with the Board of Directors?

 

The Board of Directors has established a process to receive communications from stockholders. Stockholders may contact any member (or all members) of the Board of Directors (or the non-management directors as a group) or any committee of the Board of Directors by mail or electronically. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent “c/o Corporate Secretary” at 15300 Centennial Drive, Northville, Michigan 48168. To communicate with any of our directors electronically, stockholders should send an email message to directors@hayes-lemmerz.com or go to our corporate website www.hayes-lemmerz.com. Under the heading “Investor Kit/Communication with our Board” you will find an on-line form that may be used for writing an electronic message to any member (or all members) of the Board of Directors or any committee of the Board of Directors. Please follow the instructions on our website to send your message.

 

All communications received as set forth in the preceding paragraph will be opened by the office of our General Counsel for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board of Directors or any group or committee of directors, the General Counsel’s office will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the correspondence or e-mail is addressed.

 

What are the standing committees of the Board of Directors?

 

The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.

 

 

The Audit Committee is responsible for providing assistance to our Board of Directors in fulfilling its legal and fiduciary obligations with respect to matters involving the accounting, auditing, financial reporting, internal control and legal compliance functions of the Company and our subsidiaries. These responsibilities include overseeing the following:

 

 

The Audit Committee is also responsible for producing an annual report required by the SEC to be included in our annual proxy statement.

 

The current members of our Audit Committee are Richard F. Wallman (Chairman), George T. Haymaker, Jr. and Mohsen Sohi. During the fiscal year ended January 31, 2006, the members of our Audit Committee were

Richard F. Wallman (Chairman), Laurie Siegel (who resigned from the Board of Directors on April 21, 2006) and Mohsen Sohi. Each such person is an independent director under Nasdaq listing standards. The Audit Committee held nine meetings during the fiscal year ending January 31, 2006.

 

Our Board of Directors has determined that Mr. Wallman is qualified as an “audit committee financial expert” as that term is defined in the applicable SEC rules and in satisfaction of the applicable Nasdaq audit committee requirements.

 

The Audit Committee operates under a written charter, which was attached as Exhibit A to the Proxy Statement for our annual meeting held on July 13, 2004, and which is also available on our corporate website at http://www.hayes-lemmerz.com/investorkit/html/auditcommittee.html.

 

 

The responsibilities of the Compensation Committee include the following:

 

 

The current members of our Compensation Committee are William H. Cunningham (Chairman), Henry D. G. Wallace and Richard F. Wallman. During the fiscal year ended January 31, 2006, the members of our Compensation Committee were William H. Cunningham (Chairman), Laurence M. Berg (until his resignation from the Board of Directors on December 9, 2005), Laurie Siegel (who resigned from the Board of Directors on April 21, 2006) and Henry D. G. Wallace. Each such person is an independent director under the Nasdaq listing standards. The Compensation Committee held eight meetings during the fiscal year ending January 31, 2006.

 

The Compensation Committee operates under a written charter, which is available on our corporate website at http://www.hayes-lemmerz.com/investorkit/html/compensationcommittee.html.

 

 

The responsibilities of the Nominating and Corporate Governance Committee include the following:

 

 

The current members of our Nominating and Corporate Governance Committee are Henry D. G. Wallace (Chairman), William H. Cunningham and Richard F. Wallman. During the fiscal year ended January 31, 2006, Laurence M. Berg also served on the Nominating and Corporate Governance Committee (until his resignation from the Board of Directors on December 9, 2005). Each such person is an independent director under the Nasdaq listing

standards. The Nominating and Corporate Governance Committee held two meetings during the fiscal year ending January 31, 2006.

 

The Nominating and Corporate Governance Committee operates under a written charter, which is available on our corporate website at http://www.hayes-lemmerz.com/investorkit/html/nominatinggovcommittee.html.

 

The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders. In considering candidates submitted by stockholders, the Nominating and Corporate Governance Committee will take into consideration the needs of the Board of Directors and the qualifications of the candidate. The Nominating and Corporate Governance Committee may also take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held. To propose a candidate to be considered by the Nominating and Corporate Governance Committee, a stockholder must submit the recommendation in writing and must include the following information:

 

 

The stockholder recommendation and information described above must be addressed to our Corporate Secretary at 15300 Centennial Drive, Northville, Michigan 48168, and must be received by our Corporate Secretary not less than 120 days prior to the anniversary date of our most recent annual meeting of stockholders. If, however, we did not hold an annual meeting the previous year, or if the date of the annual meeting to which the recommendation applies has been changed by more than 30 days from the anniversary date of our most recent annual meeting of stockholders, then the recommendation and information must be received not later than the close of business on the 10th day following the day on which notice of the date of the meeting is mailed or public disclosure of the date of the meeting is made, whichever occurs first.

 

All director candidates recommended by the Nominating and Corporate Governance Committee must be consistent with the Board of Directors’ criteria for selecting directors. These criteria include the possession of such knowledge, experience, skills, expertise and diversity so as to enhance the Board of Directors’ ability to manage and direct the affairs and business of the Company, including, when applicable, to enhance the ability of committees of the Board of Directors to fulfill their duties and/or to satisfy any independence requirements imposed by law, regulation or Nasdaq listing requirement. In addition, the Nominating and Corporate Governance Committee examines, among other things, a candidate’s ability to make independent analytical inquiries, understanding of our business environment, potential conflicts of interest, independence from management and the Company, integrity and willingness to devote adequate time and effort to responsibilities associated with serving on the Board of Directors.

 

The Nominating and Corporate Governance Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who have had a change in circumstances that might make them available to serve on the Board of Directors — for example, retirement as a senior executive of a public company — especially business experience in the automotive or other manufacturing industries. The Nominating and Corporate Governance Committee also, from time to time, may engage firms that specialize in identifying director candidates. As described above, the Committee will also consider candidates recommended by stockholders.

 

Once a person has been identified by the Nominating and Corporate Governance Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Nominating and Corporate Governance Committee determines that the candidate warrants further consideration, the Chairman or another member of the Committee contacts the person. Generally, if the person expresses a willingness to be considered and to serve on the Board of Directors, the Nominating and Corporate Governance Committee requests information from the candidate, reviews the person’s accomplishments and qualifications, including in light of any other candidates that the Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee

members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate’s accomplishments. The Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder, although, as stated above, the Board of Directors may take into consideration the number of shares held by the recommending stockholder and the length of time that such shares have been held.

 

Who are the current executive officers?

 

The following table contains the names and ages of our current executive officers and their positions, followed by a description of their business experience during the past five years. All positions shown are with us or our subsidiaries unless otherwise indicated. All executive officers are appointed by the Board of Directors and serve at its pleasure. There are no family relationships among any of the executive officers, and there is no arrangement or understanding between any of the executive officers and any other person pursuant to which he was selected as an officer. Each individual below is a U.S. citizen and the business address of each individual is 15300 Centennial Drive, Northville, Michigan 48168.

 

 

Biographical information for Mr. Clawson is provided on page 5 in the section identifying him as a Class I Director.

 

Fred Bentley, Vice President — Chief Operating Officer and President, Global Wheel Group, has held this position since January 2006 when the group was formed by combining the Company’s North American and International Wheel Groups. Mr. Bentley joined the Company in October of 2001 as President of the Commercial Highway and Aftermarket business and was appointed President of the International Wheel Group in June 2003. He is a Six Sigma Black Belt, has a solid background of operations strategy, lean manufacturing, leadership of global businesses and business repositioning. Prior to joining the Company, he was Managing Director for Honeywell’s Holts European and South Africa automotive after-market operations. In addition, while at Honeywell, Mr. Bentley also served as Heavy Duty Filter (Fram) General Manager and Plant Manager for operations in Greenville, Ohio and Clearfield, Utah. Before joining Honeywell in 1995, Mr. Bentley worked in various capacities at Frito Lay, Inc. (PepsiCo) for a total of eight years. Mr. Bentley earned his Bachelor of Science degree in Industrial Engineering from the University of Cincinnati, Ohio, and a Master’s of Business Administration from the University of Phoenix. He also attended the Harvard Business School Advanced Management Program.

 

Patrick C. Cauley, Vice President, General Counsel and Secretary, has held this position since January 2004. He previously served as Interim General Counsel and before that as Assistant General Counsel. Prior to joining the Company in 1999, Mr. Cauley was a partner at the Detroit based law firm of Bodman LLP, where he engaged in all aspects of corporate practice, including mergers and acquisitions, commercial lending and financing, tax and real estate transactions. Mr. Cauley earned his Bachelor of Science degree in Business Administration, with a major in Accounting and his Juris Doctor degree from the University of Michigan. Mr. Cauley is also a Certified Public Accountant.

 

Scott T. Harrison, Vice President — President, European Components, has held this position since April 2006. Prior to that he served as Vice President — President, Suspension Components from the time he joined the

Company in 2001. Prior to joining the Company, Mr. Harrison was with Fisher Scientific, Inc. where he was most recently a Vice President and General Manager of the Lab Equipment Group. Prior to joining Fisher Scientific, Mr. Harrison held various positions of increasing responsibility at General Motor’s Delco Chassis Division, at Arvin Industries and at AlliedSignal. At AlliedSignal, Mr. Harrison directed the Six Sigma program in the Filters and Spark Plugs Strategic Business Unit and was later responsible for global spark plug (Autolite) manufacturing. Mr. Harrison has a strong record of lean implementation, productivity improvement and team building. He holds a Bachelor of Science degree in Electrical Engineering from Ohio State University and a Master’s of Science degree in Electrical Engineering from the University of Dayton, Ohio. Mr. Harrison has 14 years of experience in the automotive industry.

 

John A. Salvette, Vice President, Business Development, has held this position since August 2001. After serving in various financial positions with Rockwell International’s Automotive Operations and serving as Vice President and Chief Financial Officer of Stahl Manufacturing, an automotive supplier in Redford, Michigan, Mr. Salvette joined Kelsey-Hayes in 1990 as Controller for the North American Aluminum Wheel Business Unit. From May 1993 to January 1995, Mr. Salvette served as Director of Investor Relations and Business Planning and, from February 1995 to June 1997, as Corporate Treasurer to the Company. From July 1997 to January 1999, Mr. Salvette was Group Vice President of Finance of Hayes Lemmerz Europe. Following the acquisition of CMI International in February 1999, Mr. Salvette was appointed Vice President of Finance, Cast Components Group. Mr. Salvette received a Bachelor of Arts degree in Economics from the University of Michigan in 1977 and a Master of Business Administration from the University of Chicago in 1979.

 

Daniel M. Sandberg, Vice President — President, Automotive Components Group and Vice President, Global Materials and Logistics, was appointed as Vice President, Global Materials and Logistics in June 2005 and as President of the Automotive Components Group in April 2006, when that group was formed by combining the Company’s Automotive Brake, Powertrain and Suspension Components businesses. Mr. Sandberg served as President of Automotive Brake Components from February 1999 to April 2006 and as President of Powertrain Components from October 2001 through April 2006. From 1996 to 1999, he served as Vice President of International Operations, General Counsel and Secretary. Mr. Sandberg joined the Company in April 1994 as Vice President, General Counsel and Secretary. He received his Bachelor of Arts degree in Economics and his Juris Doctor degree from the University of Michigan. Mr. Sandberg has over 12 years of experience in the automotive industry.

 

James A. Yost, Vice President, Finance and Chief Financial Officer, has held this position since he joined the Company in July 2002. Mr. Yost retired from Ford Motor Company in 2001, where he most recently served as Vice President of Corporate Strategy. He also held positions as Vice President and Chief Information Officer, Executive Director of Corporate Finance, General Auditor and Executive Director of Finance Process and Systems Development, Finance Director of Ford Europe and Controller of Autolatina (South America) during his 27-year career. Mr. Yost graduated with a Bachelor of Engineering Science degree in Computer Science from the Johns Hopkins University in Baltimore, Maryland. He also received a Masters of Business Administration in Finance from the University of Chicago.

 

On December 5, 2001, our predecessor company, Hayes Lemmerz International, Inc., 30 of our wholly owned domestic subsidiaries and one of our wholly owned Mexican subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code with the U.S. Bankruptcy Court in the District of Delaware. Each of the executives named above other than James A. Yost was an officer of some or all these entities at the time of these filings. Pursuant to our plan of reorganization, we emerged from bankruptcy on June 3, 2003.

 

How many shares of common stock do our directors, executive officers, and largest stockholders own?

 

Based on the most recent information made available to us, the following table sets forth certain information regarding the ownership of our common stock as of May 25, 2006 by: (a) each director and nominee for director named in “Proposal 1 — Election of Directors”; (b) each of the executive officers and individuals named in the Summary Compensation Table; (c) all of our executive officers and directors as a group; and (d) each person, or group of affiliated persons, known to us to be beneficial owners of 5% or more of our common stock as of such date. A person generally “beneficially owns” shares if he has either the right to vote those shares or dispose of them. More than one person may be considered to beneficially own the same shares. In the table below, unless otherwise noted, and subject to community property laws where applicable, a person has sole voting and dispositive power for those shares shown as beneficially owned by such person.

 

 

 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

 

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended January 31, 2006, our officers, directors and greater than ten percent beneficial owners complied with all applicable Section 16(a) filing requirements.

 

How are our top executives compensated?

 

Compensation of Named Executive Officers

 

The following tables set forth information regarding the compensation with respect to fiscal 2005 of our Chief Executive Officer and our four other most highly compensated officers as of January 31, 2006 (our “Named Executive Officers”). The following summary compensation table sets forth certain information concerning compensation for services in all capacities awarded to, earned by or paid to our Named Executive Officers for fiscal 2005, 2004 and 2003.

 

Summary Compensation Table

 

 

 

 

 

 

If declared by the Company, dividends would be paid on shares of restricted stock but would not be paid on restricted stock units. However, the Compensation Committee may in its discretion determine that cash, common stock or other property equal in value to the amount of any dividends on common stock will be paid with respect to any restricted stock units. No dividends on common stock have been paid during the last three fiscal years and no such determination has been made by the Compensation Committee to date.

 

 

 

 

Stock Options and Stock Appreciation Rights

 

No stock options or stock appreciation rights were granted to any of our Named Executive Officers during the last fiscal year. None of our Named Executive Officers exercised any options or stock appreciation rights during the last fiscal year and at the end of the last fiscal year none of our Named Executive Officers had any in-the-money options or stock appreciation rights based on the closing price of our shares on January 31, 2006 of $3.73. On January 17, 2006, the Compensation Committee of the Board of Directors accelerated vesting of all stock options held by employees, including those held by the Named Executive Officers, and at the end of the last fiscal year none of our Named Executive Officers had any unexercisable options or stock appreciation rights. The Compensation Committee’s decision to accelerate the vesting of options was made primarily to avoid recognizing compensation expense associated with these options in future financial statements based upon our adoption Statement of Financial Accounting Standards No. 123R, “Share Based Payment.” Additionally, the Compensation Committee believes these options, virtually all of which have strike prices that are significantly above the current trading price for our common stock, may not be offering the affected employees sufficient incentive when compared to the potential future compensation expense that would have been attributable to these options. The following table sets forth the number of shares of our common stock underlying unexercised options held by the Named Executive Officers at the end of the last fiscal year.

 

 

Long Term Incentive Compensation

 

In fiscal 2005, our Board of Directors adopted the Hayes Lemmerz International, Inc. Officer Bonus Plan (the “Plan”) to provide financial incentives for certain of our officers to achieve strategic performance objectives and to attract and retain key personnel. The Plan is administered by the Compensation Committee, which determines in its sole discretion, subject to the terms of the Plan, the persons who are to receive awards, the terms and conditions of each award and the amount payable under any award. Each of our Named Executive Officers received awards under the Plan during fiscal 2005. The Compensation Committee has established performance goals for the current performance period, which runs from January 1, 2005 through June 30, 2006. The performance goals relate to the achievement of confidential business objectives, the disclosure of which would adversely affect our competitive position. The extent to which each participant’s performance goals are achieved or exceeded and the amount of the payout under the award will be determined by the Compensation Committee at the end of the performance period.

 

The awards under the Plan to our Named Executive Officers during fiscal 2005 are described in the following table:

 

Long Term Incentive Plans — Awards in Last Fiscal Year

 

 

Equity Compensation Plan Information

 

The following table sets forth certain information regarding our equity compensation plans as of January 31, 2006:

 

 

 

Other Compensation and Benefits

 

Our Named Executive Officers receive medical, group life insurance and other benefits that are available generally to all of our salaried employees. Our Named Executive Officers participate in our salaried employees defined contribution retirement plans, which are qualified under Section 401(a) of the Code, and receive certain other perquisites. Our Named Executive Officers also participate in our supplemental defined contribution Executive Retirement Plan (which is not qualified under Section 401(a) of the Code). Effective May 1, 2006, with the approval of the Compensation Committee of the Board of Directors, we have suspended all Company contributions to our defined contribution retirement plans, including 401(k) matching and other 401(k) contributions and all contributions to the Executive Retirement Plan. This action affected all of our employees participating in those plans, including the Named Executive Officers. We may reinstate such contributions in the future with the approval of the Compensation Committee of the Board of Directors.

 

Employment Contracts, Termination of Employment and Change-of-Control Arrangements

 

We entered into separate employment agreements with Messrs. Clawson, Bentley, Yost, Sandberg and O’Loughlin in connection with their appointment as officers. Each employment agreement is for a continuous term of two years, extending one additional day for each day that the Named Executive Officer is employed by us. Mr. O’Loughlin resigned as Vice President, Information Technology and Chief Information Officer effective April 28, 2006. The annual salaries for Messrs. Clawson, Bentley, Yost and Sandberg are currently set at $799,245, $380,000, $450,000 and $350,000, respectively, to be reviewed annually, and may be increased, but not decreased, by the Compensation Committee of our Board of Directors. In connection with the reductions to employee compensation in the United States, Mr. Clawson has agreed to voluntarily reduce his base salary by 10% from the amount set forth above and each of the other Named Executive Officers still employed by us has agreed to voluntarily reduce his base salary by 7.5% from the amounts set forth above. These reductions will not impact the calculation of bonus or other incentive compensation determined as a percentage of base salary or any amounts payable in connection with a termination for good reason or upon a change of control, all of which will be calculated using the amounts set forth above. Because the reductions are voluntary, they can be terminated at any time at the election of the Named Executive

Officer. Our Named Executive Officers are entitled to be reimbursed for their reasonable out-of-pocket expenses, participate in our benefit plans and receive customary perquisites. Mr. Clawson’s employment agreement provides that he will be nominated to serve on our board of directors.

 

Upon a change of control (as defined in the employment agreements), each Named Executive Officer is entitled to an immediate payment of all earned but unpaid compensation and a pro rata bonus payment for the current fiscal year under any bonus plan for which he is then eligible.

 

The employment agreements provide that each Named Executive Officer whose employment with us is terminated during the term of the employment agreements (i) by us without cause, or (ii) by the Named Executive Officer with good reason, is entitled to receive: (a) earned but unpaid compensation, less any payment previously made in respect of such amount; (b) the product of the individual’s base salary, his bonus percentage and the fraction of the current fiscal year expired at the time of such termination, less any payments previously made in respect of such amounts; and (c) one year’s base salary (two years’ salary and bonus, at 60% of base salary, in the case of Mr. Clawson). The employment agreements also provide that our Named Executive Officers are entitled to have us: (i) continue for up to one year (two years, in the case of Mr. Clawson) all welfare benefit programs, such as medical and life, provided by us and our affiliated companies; (ii) pay or provide any other amounts incurred prior to the date of termination, or benefits required or permitted under any of our programs or agreements; (iii) provide key executive level outplacement services; and (iv) transfer title to vehicles used by the Named Executive Officers.

 

In addition, the employment agreements provide that each Named Executive Officer whose employment with us is terminated on or following a change in control and during the term of the employment agreements, other than: (i) by us for cause; (ii) by reason of death or disability; or (iii) by the Named Executive Officer without good reason, is entitled to receive: (a) earned but unpaid compensation, less any payment previously made in respect of such amount; (b) the product of the individual’s base salary, his bonus percentage and the fraction of the current fiscal year expired at the time of such termination, less any payments previously made in respect of such amounts upon such change of control; (c) two times the sum of (x) the individual’s base salary and (y) the product of his base salary and his bonus percentage (60% bonus percentage, in the case of Mr. Clawson); and (d) $100,000 (except in the case of Mr. Clawson). The employment agreements also provide that the Named Executive Officers are entitled to have us: (i) continue for up to two years all welfare benefit programs, such as medical and life, provided by us and our affiliated companies; (ii) pay or provide any other amounts incurred prior to the date of termination, or benefits required or permitted under any of our programs or agreements; (iii) provide key executive level outplacement services; and (iv) pay the Named Executive Officers’ legal expenses relating to a dispute under the employment agreements.

 

The employment agreements also contain provisions regarding termination of employment upon disability, death, and other certain circumstances. In addition, if any payments or benefits paid to our Named Executive Officers under the employment agreements or any other plan, arrangement or agreement with us are subject to the federal excise tax on excess parachute payments or any similar state or local tax, or any interest or penalties are incurred with respect thereto, we will pay to the Named Executive Officer an additional amount so that the net amount retained by the Named Executive Officer after deduction or payment of those taxes will be as if no such tax, interest or penalty was imposed.

 

Director Compensation

 

Each of our non-employee directors currently receives an annual cash retainer of $32,000, paid in quarterly installments, as compensation for his or her service as a director. The annual cash retainer of the lead director, currently Mr. Haymaker, is $64,000. Our non-employee directors receive additional cash compensation for their service on committees of the Board of Directors in the annual amount of $4,000 for members of the Compensation Committee and the Nominating and Corporate Governance Committee and $8,000 for members of the Audit Committee. The chairperson of each committee receives twice the standard amount per committee chaired, in lieu of the standard amount. Further, all non-employee directors receive an additional $800 per Board of Directors meeting and committee meeting that he or she attends. These amounts reflect a 20% reduction in our non-employee

directors’ cash compensation from that paid in fiscal 2005, which became effective May 1, 2006. This reduction was approved by the Compensation Committee and the Board of Directors in connection with reductions to employee compensation in the United States. In addition, if any of our non-employee directors is asked to perform services for the Company in his or her capacity as a director, such director will be paid $5,000 per day for such services. To date, no such services have been requested by the Company.

 

Each of our non-employee directors is eligible to receive grants of restricted stock units and options to purchase shares of our common stock under our Long Term Incentive Plan. The stock options and restricted stock units granted to our non-employee directors vested one-third on the date of grant, one-third after one year and one-third after two years. None of our non-employee directors received grants of options or restricted stock units during fiscal 2005.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION^*

 

Our executive compensation program presently is administered by the Compensation Committee of the Board of Directors set forth below. None of the Compensation Committee members are employed by us, and each is an independent director under the Nasdaq listing standards.

 

Executive Compensation Policies

 

The objectives of our executive compensation policies are to attract, retain and reward executive officers who contribute to our success, to align the financial interests of executive officers with our performance, to strengthen the relationship between executive pay and stockholder value, to motivate executive officers to achieve our business objectives and to reward individual performance. Our executive compensation package consists of three components: base salary and related benefits; short term incentive program; and long term incentive program in the form of stock options, awards of restricted stock units, which units, at our option, are convertible into cash or shares of common stock on the date of conversion, and cash awards payable over several fiscal years.

 

The first component of our executive compensation package is base salary and related benefits. Each executive officer receives a base salary and benefits based on competitive compensation information and his responsibilities and performance. The second component of our executive compensation package is a bonus program. Generally, the Compensation Committee, together with our management, establishes objectives at the beginning of the year. At the end of each year, the Compensation Committee reviews management’s and the Company’s achievement against those objectives and recommends a bonus based on the achievement of those objectives. The third component of our executive compensation package is long-term incentives in the form of stock options and awards of restricted stock units, which we believe are important as an incentive tool designed to more closely align the interests of our executive officers with the long-term interests of our stockholders and to encourage our executive officers to remain with the Company. We did not grant any awards of stock options or restricted stock units to any of our executive officers in fiscal 2005.

 

During fiscal 2005, our Board of Directors adopted an Officer Bonus Plan to provide long-term financial incentives for certain of our officers to achieve strategic performance objectives and to attract and retain key personnel. This plan provides for cash awards determined as a percentage of base salary based on the achievement of strategic objectives over a defined performance period. The current performance period under the plan runs from January 1, 2005 through June 30, 2006. All of our executive officers received awards under this plan in fiscal 2005. In July 2006 we will evaluate each executive officer’s performance relative to the established goals and determine

 

^*  The material in this report is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.

whether and to what extent the goals were achieved and the amount of the cash award actually payable, if any. If cash awards are paid under this plan, payment will be generally be made, subject to acceleration in certain circumstances, in three equal installments in July 2006, July 2007 and July 2008, provided that the officer remains employed with the Company on each payment date.

 

In April 2005, the Compensation Committee approved suspending contributions to our defined contribution retirement plans for United States employees, including our executive officers, effective May 1, 2006. In addition, each of our executive officers voluntarily reduced his base salary by 7.5% effective May 1, 2006 (other than the Chief Executive Officer, who voluntarily reduced his base salary by 10%). The reductions in base salary will not affect bonus or incentive compensation determined as a percentage of base salary, which will continue to be determined by reference to base salary prior to the reductions.

 

Section 162(m) Policy

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally provides that publicly held companies may not deduct compensation paid to certain of its top executive officers to the extent such compensation exceeds $1 million per officer in any year. However, pursuant to regulations issued by the Treasury Department, certain limited exceptions to Section 162(m) apply with respect to “performance-based compensation.” Awards granted under our Long Term Incentive Plan are intended to constitute qualified performance-based compensation eligible for such exceptions, and we will continue to monitor the applicability of Section 162(m) to our ongoing compensation arrangements. The Compensation Committee will, in general, seek to qualify compensation paid to our executive officers for deductibility under Section 162(m), although the Compensation Committee believes it is appropriate to retain the flexibility to authorize payments of compensation that may not qualify for deductibility if, in the Compensation Committee’s judgment, it is in the Company’s best interest to do so. Awards under the Officer Bonus Plan adopted in fiscal 2005 do not qualify for deductibility under Section 162(m).

 

Chief Executive Officer Compensation

 

The Compensation Committee determines the compensation level of Curtis J. Clawson, our President, Chief Executive Officer and Chairman of the Board. Such compensation is set by the Compensation Committee with due regard to industry practice, competitive salary information, executive performance and current market conditions. In addition, Mr. Clawson participates in the same executive compensation programs available to other of our executive officers.

 

During fiscal 2005 Mr. Clawson’s base salary was $799,245. No adjustments were made to Mr. Clawson’s base salary during the fiscal year. In addition to his base salary, Mr. Clawson is eligible to receive an annual cash bonus in connection with our Short Term Incentive Plan. In 2005, payments of bonuses under this plan were linked to our Adjusted EBIT, operating cash flows and achievement of individual goals and objectives. Based on these measures, Mr. Clawson was paid a cash bonus of $511,517 for fiscal 2005. Mr. Clawson also received an award under the Officer Bonus Plan in 2005. The award sets a target bonus of 200% of Mr. Clawson’s base salary over the performance period. We will determine the extent to which Mr. Clawson’s performance objectives were received and the actual amount of the award payment, if any, in July 2006.

 

In connection with the other United States compensation reductions, Mr. Clawson voluntarily reduced his base salary by 10% effective May 1, 2006. The reduction in base salary will not affect bonus or incentive compensation determined as a percentage of base salary, which will continue to be determined by reference to base salary prior to the reductions.

 

Compensation Committee

 

William H. Cunningham (Chairman)

Henry D. G. Wallace

Richard F. Wallman

 

Compensation Committee Interlocks and Insider Participation

 

The members of the Compensation Committee during fiscal 2005 were William H. Cunningham (Chairman), Laurence M. Berg (until his resignation on December  9, 2005), Laurie Siegel and Henry D. G. Wallace. None of the members of the Compensation Committee during fiscal 2005: (i) was an officer or employee of the Company or any of our subsidiaries, (ii) was formerly an officer of the Company or any of our subsidiaries or (iii) had any relationship requiring disclosure by us under the SEC’s rules requiring disclosure of related party transactions. During fiscal 2005, no officer of the Company served as a director or member of the compensation committee (or other board committee performing similar functions) of any other entity.

REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS^*

 

The Audit Committee is comprised of three outside directors, all of whom are independent under Rule 4200(a)(14) of the Nasdaq listing standards.

 

The Audit Committee has reviewed and discussed our audited financial statements for the fiscal year ending January 31, 2006 with management and with our independent auditors, KPMG LLP. The Audit Committee has discussed with KPMG LLP the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit. The Audit Committee has received the written disclosures and the letter from KPMG LLP required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and has discussed with KPMG LLP their independence. The Audit Committee has considered the compatibility of the provision of non-audit services with maintaining the auditor’s independence.

 

Based on the Audit Committee’s review of the audited financial statements and the review and discussions described in the foregoing paragraph, the Audit Committee recommended to the Board of Directors that the audited financial statements for the fiscal year ended January 31, 2006 be included in our Annual Report on Form 10-K for the fiscal year ended January 31, 2006 for filing with the SEC.

 

Audit Committee

 

Richard Wallman (Chairman)

George T. Haymaker, Jr.

Mohsen Sohi

 

^*  The material in this report is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.

 

The following table presents fees for professional services rendered by KPMG LLP for the audit of our annual financial statements for fiscal 2005 and fiscal 2004 and fees billed for audit-related services, tax services and all other services rendered by KPMG LLP for fiscal 2005 and fiscal 2004.

 

 

 

The Audit Committee reviews, and in its sole discretion pre-approves, our independent auditors’ annual engagement letter including proposed fees and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under “Audit Related Fees,” “Tax Fees” and “All Other Fees” were pre-approved by our Audit Committee. The Audit Committee may not engage the independent auditors to perform the non-audit services proscribed by law or regulation. The Audit Committee may delegate pre-approval authority to a member of the Audit Committee, and authority delegated in such manner must be reported at the next scheduled meeting of the Audit Committee.

PERFORMANCE MEASUREMENT COMPARISON¹

 

The following graph shows the change in our cumulative total stockholder return for the period from June 9, 2003, the date upon which market data for shares of our common stock became available following our emergence from bankruptcy on June 3, 2003, through the end of our fiscal year ending January  31, 2006, based upon the market price of our common stock, compared with the cumulative total return on the Nasdaq National Market and publicly traded peer group companies in the automotive industry². The graph assumes a total initial investment of $100 as of June 9, 2003, and shows a “Total Return” that assumes reinvestment of dividends, if any, and is based on market capitalization at the beginning of each period. The performance on the following graph is not necessarily indicative of future stock price performance.

 

 

¹  The material in this performance measurement comparison is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filing.

²  The peer group consists of the following companies: American Axle & Manufacturing Holdings, Inc., ArvinMeritor, Inc., Dana Corp., Superior Industries International, Inc., Tenneco Automotive, Inc., and Tower Automotive, Inc. The performance of this group is shown as “Peer Group A.” In the proxy statement for fiscal 2004, the peer group used for the performance graph also included Amcast Industrial Corp., INTERMET Corp. and Wescast Industries Inc. each of which was in Chapter 11 bankruptcy proceedings during fiscal 2005 and the shares of which are no longer listed on a securities exchange. The performance of the peer group including these companies is shown as “Peer Group B.”

 

AP Wheels, LLC Registration Rights.  In connection with our February 2004 primary offering of approximately 7.7 million shares of common stock, including approximately 1.3 million shares to cover over-allotments, and a secondary offering of 2.0 million shares of our common stock by a selling stockholder, AP Wheels, LLC, we granted AP Wheels, LLC certain additional registration rights with respect to shares of our common stock owned by AP Wheels, LLC. Specifically, AP Wheels, LLC is entitled to two demand registrations, each of which requires us to register under the Securities Act at least one million shares of our common stock owned by AP Wheels, LLC. On March 24, 2005, AP Wheels, LLC exercised its demand rights for a “shelf registration” under the Securities Act. Pursuant to this demand, we filed a registration statement on Form S-3 with U.S. Securities and Exchange Commission with respect to 3,469,567 shares of common stock held by AP Wheels, LLC or issuable upon the exercise of our Series A Warrants or conversion of Series A Preferred Stock of our subsidiary, HLI Operating Company, Inc., held by AP Wheels, LLC. The registration statement became effective on May 20, 2005. In addition, AP Wheels, LLC will be entitled to unlimited “piggyback” registration rights, which will allow it to register its shares of our common stock in connection with any registration statement filed with respect to other shares of our common stock. Subject to certain exceptions, we have agreed to pay for certain reasonable expenses incurred in connection with such registrations in an amount up to $750,000.

 

Other than those transactions described above, since February 1, 2005, there has not been, nor is there currently proposed, any other transaction or series of similar transactions to which we were or are to be a party in which the amount involved exceeds $60,000 and in which any director, executive officer or holder of more than 5% of our common stock, or an immediate family member of any of the foregoing, had or will have a direct or indirect interest other than compensation arrangements, which are described above.

 

The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.

 

No person is authorized to give any information or to make any representation not contained in this Proxy Statement, and, if given or made, such information or representation should not be relied upon as having been authorized. This Proxy Statement does not constitute the solicitation of a proxy, in any jurisdiction, from any person to whom it is unlawful to make such proxy solicitation in such jurisdiction. The delivery of this Proxy Statement shall not, under any circumstances, imply that there has not been any change in the information set forth herein since the date of the Proxy Statement.

 

The Securities and Exchange Commission has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to multiple stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process of “householding” potentially provides extra convenience for stockholders and cost savings for companies. The Company and some brokers household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares. You can notify us by sending a written request to 15300 Centennial Drive, Northville, Michigan 48168 or by calling Investor Relations at 734-737-5162.

 

By Order of the Board of Directors

 

Patrick C. Cauley

 

Patrick C. Cauley

Vice President,

General Counsel and Secretary

 

May 26, 2006

 

A copy of our Annual Report to the SEC on Form 10-K for the fiscal year ended January 31, 2006 has been included within the package of materials sent to you. We will furnish any exhibit to the Annual Report on Form 10-K upon the request of a stockholder of record for a fee limited to the Company’s reasonable expenses in furnishing such exhibit. Request for exhibits to the Annual Report on Form 10-K should be directed to the Corporate Secretary at 15300 Centennial Drive, Northville, Michigan 48168.