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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DOUGLAS & LOMASON COMPANY
(Name of Subject Company)
DOUGLAS & LOMASON COMPANY
(Name of Person Filing Statement)
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COMMON STOCK, PAR VALUE $2.00 PER SHARE
(Title of Class of Securities)
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258777101 (COMMON STOCK)
(CUSIP Number of Class of Securities)
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HARRY A. LOMASON II
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
DOUGLAS & LOMASON COMPANY
24600 HALLWOOD COURT
FARMINGTON HILLS, MICHIGAN 48335-1671
(810) 478-7800
(Name, address and telephone number of person
authorized to receive notices and communications on
behalf of the person(s) filing statement)
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With a copy to:
VERNE C. HAMPTON II
DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN
500 WOODWARD AVENUE
SUITE 4000
DETROIT, MICHIGAN 48226
(313) 223-3500
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Douglas & Lomason Company, a Michigan
corporation (the "Company"), and the address of the principal executive offices
of the Company is 24600 Hallwood Court, Farmington Hills, Michigan 48335-1671.
The title of the class of equity securities to which this statement relates is
the voting common stock, par value $2.00 per share, of the Company (the
"Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a cash tender offer by Magna International Inc.,
an Ontario corporation ("Parent"), and Magna Acquisition Corporation, a Michigan
corporation which is a direct, wholly-owned subsidiary of Parent (the
"Purchaser"), disclosed in a Tender Offer Statement on Schedule 14D-1 dated
September 5, 1996 (the "Schedule 14D-1"), to purchase all the outstanding Shares
at $31.00 per Share, net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated September 5, 1996 (the
"Offer to Purchase") and the related Letter of Transmittal (which together
constitute the "Offer").
The Offer is being made by the Purchaser pursuant to an Agreement and Plan
of Merger, dated as of August 29, 1996 (the "Merger Agreement"), among the
Company, Parent, and the Purchaser. The Merger Agreement provides, among other
things, that as soon as practicable following the consummation of the Offer,
upon the terms and subject to the conditions contained in the Merger Agreement,
including, if required, approval of the Merger by the shareholders of the
Company in accordance with the relevant provisions of the Michigan Business
Corporation Act (the "MBCA"), the Purchaser will merge into the Company (the
"Merger") and the Company will be the surviving corporation (the "Surviving
Corporation"). A copy of the Merger Agreement is attached to this statement as
Exhibit 1 and incorporated herein by reference.
Based on the information in the Schedule 14D-1, the principal executive
offices of the Purchaser and Parent are located at 36 Apple Creek Boulevard,
Markham, Ontario, Canada L3R 4Y4.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above and incorporated herein by reference.
(b) Each material contract, agreement, arrangement and understanding and
any actual or potential conflict of interest between the Company or its
affiliates and (i) the Company, its executive officers, directors or affiliates,
or (ii) Parent, the Purchaser or the executive officers, directors or affiliates
of Parent or the Purchaser, is described in Exhibit 2 attached to this statement
and incorporated herein by reference, or is described below.
(1) Arrangements with Executive Officers, Directors or Affiliates of the
Company.
OFFICER AGREEMENTS. The Company on May 17, 1996 entered into agreements
with certain officers and other key employees, including the officers named in
the Summary Compensation Table appearing on page 7 of Exhibit 2 to this
statement, which provide that in the event of a change in control of the Company
(as defined in the agreements), these persons would have specific rights and
receive certain benefits if, within three years after the change in control,
either employment was terminated by the Company without "cause" (as defined in
the agreements) or the person was to terminate employment for "good reason" (as
defined in the agreements). In these circumstances, the person would be entitled
to receive (a) full base salary through the date of termination, including
vacation, plus a severance payment in an amount equal to the person's base
monthly salary in effect at the date of termination multiplied by thirty-six,
payable at the option of the person either in a lump sum or in installments, (b)
a pro-rata payment of any bonus award earned by the person during the year of
termination under the Company's Annual Incentive Plan, (c) all legal fees and
expenses incurred by the person to enforce the person's rights under the
agreement, (d) the use of an automobile for six months, (e) reimbursement for
the cost of outplacement services, (f) continuation of medical and life
insurance coverage for a period of time and (g) the assignment to the person of
the Company's interest in any
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insurance policy on the person's life. If any amounts which the person is
entitled to receive are deemed "parachute payments" under the Internal Revenue
Code, the person will be entitled to receive certain additional payments from
the Company. The agreements are alike in all respects except the agreement with
Harry A. Lomason II also provides for the continuation of the split dollar life
insurance policy referred to in note (2) to the Summary Compensation Table in
Exhibit 2 to this statement.
(2) Arrangements with Parent, the Purchaser, their Executive Officers,
Directors or Affiliates.
MERGER AGREEMENT. The following description of the Merger Agreement is
merely a summary and is qualified in its entirety by reference to the entire
Merger Agreement, a copy of which is attached hereto as Exhibit 1 and
incorporated herein by reference. Unless otherwise noted, capitalized terms used
in the following description shall have the meaning ascribed to them in the
Merger Agreement.
The Merger Agreement provides that, at the effective time of the Merger,
the Purchaser will be merged with and into the Company, and each then
outstanding Share (other than Shares owned by the Company, any subsidiary of the
Company, Parent, the Purchaser or any other subsidiary of Parent) will be
converted into the right to receive $31.00 per Share in cash, without interest.
CONDUCT OF BUSINESS PENDING THE MERGER. Pursuant to the Merger Agreement,
the Company has agreed that, among other things, during the period from the date
of the Merger Agreement until the effective time of the Merger, except as
expressly contemplated by the Merger Agreement or to the extent that the
Purchaser shall otherwise agree in writing, the Company will and will cause each
of its subsidiaries to (i) conduct its operations only in the ordinary and usual
course of business consistent with past practice, (ii) not amend its Articles of
Incorporation or By-laws, (iii) not issue, reissue, sell or pledge, or authorize
or propose the issuance, reissuance, sale or pledge of any of its capital stock
of any class, or securities convertible or exchangeable into capital stock of
any class or any rights, warrants or options to acquire any convertible or
exchangeable securities or capital stock (other than the issuance of Shares upon
the exercise of stock options outstanding on the date of the Merger Agreement
under the Company Option Plans (as defined in the Merger Agreement) in
accordance with their present terms and the capitalization and issuance of
shares by Douglas y Lomason de Coahuila, S.A. de C.V. ("DYLCO") for the amount
of 73,670,856 pesos to the Company as consideration for the satisfaction of
intercompany debt (the "DYLCO Issuance")), (iv) not declare, set aside or pay
any dividend or other distribution (whether in cash, securities or property or
any combination thereof) on or in respect of any class or series of its capital
stock or otherwise make any payments to its shareholders in their capacity as
such (except for dividends from wholly owned subsidiaries of the Company to the
Company or to other wholly owned subsidiaries of the Company), (v) not adjust,
split, combine, subdivide, reclassify or redeem, purchase or otherwise acquire,
or propose to redeem or purchase or otherwise acquire, any shares of capital
stock of the Company or any of its subsidiaries or any other securities thereof
or any rights, options or warrants to acquire such shares or other securities,
(vi) not incur or assume any long-term or short-term indebtedness for borrowed
money, except in the ordinary course of business consistent with past practice
and under existing bank commitments as in effect on the date of the Merger
Agreement, in an aggregate amount not to exceed $10,000,000, or assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any person (other than a
wholly owned subsidiary of the Company), (vii) not make any loans, advances or
capital contributions to, or investments in, any person (other than a wholly
owned subsidiary of the Company), except in the ordinary course of business
consistent with past practice and in an amount not to exceed (i) in the case of
loans, advances or capital contributions to or investments in joint ventures of
the Company in existence on the date of the Merger Agreement, $1,000,000 in the
aggregate and (ii) in all other cases, $200,000 in the aggregate, (viii) not
settle or compromise any suit, proceeding or claim or threatened suit,
proceeding or claim in an amount not covered by insurance in excess of $200,000
in the aggregate, (ix) except for (x) increases in salary, wages and benefits of
employees of the Company or its subsidiaries (other than executive officers of
the Company) in accordance with past practice and (y) an increase, retroactive
to January 1, 1996, in salaries of officers of the Company, which increase shall
not exceed 4% in the aggregate, not increase the compensation or fringe benefits
payable or to become payable to its directors, officers or employees or pay any
benefit not required by any existing plan or arrangement or grant any severance
or termination pay to (except pursuant to existing agreements or policies), or
enter into
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any employment or severance agreement with, any director, officer or employee of
the Company or any of its subsidiaries or establish, adopt, enter into,
terminate or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, welfare,
deferred compensation, employment, termination, severance or other employee
benefit plan, agreement, trust, fund, policy or arrangement for the benefit or
welfare of any directors, officers or current or former employees, except to the
extent such termination or amendment is required by applicable law, (x) not
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets, other than transactions that are in the ordinary course of business and
not in excess of $200,000 in the aggregate, (xi) except for the sale of the
Company's Truck Body Division on terms reasonably satisfactory to Parent, not
sell, lease, mortgage or otherwise encumber or dispose of or agree to sell,
lease, mortgage or otherwise encumber or dispose of, any of its assets, other
than transactions that are in the ordinary course of business and not material
to the Company or any of its subsidiaries or enter into any contract or
agreement for the sale of manufactured parts, components or other products,
which contract or agreement would require capital expenditures by the Company in
excess of $3,000,000 in the aggregate, (xii) not alter through merger,
liquidation, reorganization, restructuring or in any other fashion the corporate
structure or ownership of any subsidiary of the Company, (xiii) not knowingly
violate or fail to perform any obligation or duty imposed upon the Company or
any subsidiary of the Company by any applicable federal, state or local law,
rule, regulation, guideline or ordinance, (xiv) except for the acquisition of
stock of DYLCO by the Company in connection with the DYLCO Issuance, not modify,
amend, terminate, waive, release, relinquish or assign any contract or prepay
any indebtedness of the Company or cancel or forgive any indebtedness owed to
the Company or any of its subsidiaries other than in a manner in the ordinary
course of business consistent with past practice and which is not material to
the business of the Company and its subsidiaries taken as a whole, (xv) not make
any tax election not required by law or settle or compromise any material tax
liability, (xvi) not change any of the accounting methods, principles or
practices used by the Company except as required by the Commission or the
Financial Accounting Standards Board, or (xvii) agree to not take any action
that would make any representation or warranty in the Merger Agreement that is
qualified as to materiality untrue or incorrect, make any representation or
warranty in the Merger Agreement that is not so qualified untrue or incorrect in
any material respect or, except as described in the next paragraph, result in
any of the conditions to the Offer or to the Merger not being satisfied.
NO SOLICITATION. The Company also agreed not to solicit, initiate, or
encourage the submission of, any takeover proposal (as defined below), enter
into any agreement with respect to any takeover proposal or participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any takeover proposal; provided, however, that prior to the acceptance for
payment of Shares pursuant to the Offer, to the extent required by the fiduciary
obligations of the Board of Directors of the Company, and as determined in good
faith by a majority of the disinterested members thereof based on the written
advice of outside counsel (a copy of which written advice shall be promptly
furnished to Parent), the Company may, in response to an unsolicited request
therefor, participate in discussions or negotiations with, or furnish
information pursuant to an appropriate confidentiality agreement approved by the
Company's Board of Directors to, any person. "Takeover proposal" means any
proposal, other than a proposal by Parent or any of its affiliates, for a
merger, consolidation, share exchange, business combination or other similar
transaction involving the Company or any of its subsidiaries or any proposal or
offer (including, without limitation, any proposal or offer to shareholders of
the Company), other than a proposal or offer by Parent or any of its affiliates,
to acquire in any manner, directly or indirectly, an equity interest in the
Company or any of its subsidiaries, any voting securities of the Company or any
of its subsidiaries or a substantial portion of the assets of the Company or any
of its subsidiaries. The Board of Directors of the Company, to the extent
required by the fiduciary obligations thereof, as determined in good faith by a
majority of the disinterested members thereof based on the written advice of
outside counsel (a copy of which written advice shall be promptly furnished to
Parent), may approve or recommend (and, in connection therewith, withdraw or
modify its approval or recommendation of the Offer, the Merger Agreement or the
Merger) a
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superior proposal. "Superior proposal" means a bona fide written proposal made
by a third party to acquire the Company pursuant to a tender or exchange offer,
a merger, a statutory share exchange, a sale of all or substantially all its
assets or otherwise on terms which a majority of the disinterested members of
the Board of Directors of the Company determines in their good faith reasonable
judgment (based on the advice of independent financial advisors) to be more
favorable to the Company and its shareholders than the Offer and Merger and for
which financing, to the extent required, is then fully committed or which, in
the reasonable good faith judgment of a majority of such disinterested members
(based on the advice of independent financial advisors), is reasonably capable
of being financed by such third party.
COMPANY OPTION PLANS. The Merger Agreement further provides that the
Company will use its best efforts to cause the holders of all outstanding
options to purchase Shares to agree in writing that such options shall be
surrendered and canceled in exchange for a cash payment by the Company on the
earlier of (i) the date of the closing of the Merger and (ii) five business days
after the payment by the Purchaser for any Shares pursuant to the Offer, to the
holder of such option in an amount equal to the excess, if any, of the price to
be paid for each Share pursuant to the Merger over the per Share exercise price
of such option, multiplied by the number of Shares subject to such option.
COMPANY BENEFIT PLANS; DIRECTOR AND OFFICER INDEMNIFICATION. In the Merger
Agreement, Parent agreed to provide, for a period of one year following the
effective time of the Merger, employees of the Company with employee benefits
that are in the aggregate substantially equivalent to those presently provided
under the Company's current benefit plans. The Merger Agreement also provides
that the surviving corporation in the Merger will expressly assume the Officer
Agreements. In addition, Parent has agreed, for six years after the Merger, to
cause the surviving corporation in the Merger to indemnify and hold harmless all
current officers and directors of the Company to the same extent such persons
are currently indemnified by the Company pursuant to the Company's Articles of
Incorporation and By-laws for acts or omissions occurring at or prior to the
effective time of the Merger. Parent has agreed at its option to (i) cause to be
maintained for a period of not less than six years from the effective time of
the Merger, the directors' and officers' insurance and indemnification policy
("D&O Insurance") currently maintained by the Company for all directors and
officers of the Company, to the extent that it provides coverage for events
occurring prior to the effective time of the Merger or (ii) cause the directors
and officers of the Company to be covered for a period of not less than six
years by Parent's D&O Insurance, if Parent's policy is, in the aggregate, no
less favorable to such directors and officers than the Company's current policy.
COMPANY SHAREHOLDERS' MEETING. The Merger is subject to approval by the
holders of a majority of the outstanding Shares. The Purchaser intends to vote
or to give written consent with respect to all Shares acquired by it in the
Offer or otherwise in favor of the Merger. Accordingly, if the Purchaser
purchases Shares in the Offer such that the Purchaser and Parent own in the
aggregate a majority of the outstanding Shares, the Purchaser and Parent will be
able to effect the Merger without the affirmative vote of any other holder of
Shares. Furthermore, if the Purchaser acquires Shares in the Offer such that the
Purchaser and Parent own in the aggregate at least 90% of the outstanding
Shares, the Purchaser and Parent would, under Michigan law, be able to effect
the Merger without any prior notice to, or vote by, the Company's other
shareholders.
CONDITIONS TO THE MERGER. The Merger is also subject to the satisfaction of
the following conditions, including (a) the acceptance for purchase and payment
for Shares by the Purchaser pursuant to the Offer; (b) the receipt of all
authorizations, consents, orders or approvals of, the filing of all declarations
with, and the termination or expiration of all waiting periods imposed by, all
courts, arbitral tribunals, administrative agencies or commissions or other
governmental or regulatory authorities or agencies, domestic or foreign
("Governmental Entities"), necessary for the consummation of the transactions
contemplated by the Merger Agreement; and (c) the absence of any temporary
restraining order, preliminary or permanent injunction or other order of any
court of competent jurisdiction or other legal restraint or prohibition
preventing or impairing the consummation of the Merger in any material respect.
In addition, the obligations of Parent and the Purchaser to effect the Merger
are subject to certain additional conditions, including (a) the performance in
all material respects by the Company of its obligations under the Merger
Agreement and the accuracy in all material respects of the representations and
warranties of the Company set forth in the Merger Agreement; (b) the receipt of
all required authorizations, consents or approvals, the failure to obtain which
would have a
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material adverse effect on Parent, the Purchaser and their subsidiaries or the
Company and its subsidiaries; (c) the delivery to Parent of a duly executed and
valid statement in the form prescribed by applicable regulation to the effect
that the common stock of the Company does not constitute a "United States real
property interest" within the meaning of the Internal Revenue Code, as amended;
(d) the Company Option Plans shall have been terminated and all Employee Options
shall have been exercised or canceled prior to the Effective Time; and (e) the
absence of any pending or threatened action, suit or proceeding by any
Governmental Entity before any court or governmental or regulatory authority
against the Company, Parent or the Purchaser or any of their subsidiaries
challenging the validity or legality of the transactions contemplated by the
Merger Agreement. The obligations of the Company to effect the Merger are
subject to the accuracy in all material respects of the representations and
warranties made by Parent and the Purchaser in the Merger Agreement and the
performance in all material respects of the agreements made by Parent and the
Purchaser in the Merger Agreement. As used in the Merger Agreement, any
reference to any event, change or effect being "material" or having a "material
adverse effect" on or with respect to an entity (or such entity and its
subsidiaries) means such event, change or effect which is or is reasonably
likely to be materially adverse to the business, assets, liabilities,
capitalization, results of operations, shareholders equity, condition (financial
or otherwise) or prospects of such entity (or, if with respect to such entity
and its subsidiaries, such group of entities taken as a whole).
TERMINATION. The Merger Agreement may be terminated at any time prior to
the effective time of the Merger, whether before or after approval by the
shareholders of the Company, (a) by mutual consent of Parent and the Company,
(b) by either Parent or the Company if: (i) any required approval of the
shareholders of the Company shall not have been obtained upon a vote held at any
duly held meeting of such shareholders; (ii) (x) as the result of the failure of
any of the conditions set forth in Section 14 of the Offer to Purchase, the
Offer shall have terminated or expired in accordance with its terms without the
Purchaser having purchased any Shares pursuant to the Offer or (y) subject to
certain exceptions, the Purchaser shall not have purchased any Shares pursuant
to the Offer within 90 days following the date of the Merger Agreement; (iii)
subject to certain exceptions, the Merger shall not have been consummated on or
before May 29, 1997; or (iv) any court of competent jurisdiction or any
governmental, administrative or regulatory authority, agency or body shall have
issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the purchase of Shares pursuant
to the Offer or the Merger and such order, decree, ruling or other action shall
have become final and nonappealable; (c) by the Company if (i) to the extent
permitted, as described above, the Board of Directors of the Company approves or
recommends a superior proposal and (ii) the Company has paid to Parent an amount
in cash equal to the sum of the "Termination Fee" plus all "Expenses", each as
defined below; or (d) by Parent if Parent or the Purchaser shall have received
notice under the HSR Act that the Federal Trade Commission or the Antitrust
Division of the Department of Justice has formally extended the applicable
waiting period under the HSR Act by requesting additional information concerning
the Offer, the Merger, any related transaction or Parent or the Purchaser.
A "Termination Fee" of $4,046,119 will be payable by the Company to Parent
upon termination of the Merger Agreement in the following circumstances: (i) the
Company enters into any agreement (other than the Merger Agreement) with respect
to any takeover proposal (as defined in the Merger Agreement), (ii) the Board of
Directors of the Company withdraws, or modifies in a manner adverse to Parent or
Purchaser, its approval or recommendation of the Offer, the Merger, the Merger
Agreement, recommends another offer, or resolves to do any of the foregoing,
(iii) it is publicly disclosed or Parent shall otherwise learn that beneficial
ownership of more than 15% of the outstanding Shares has been acquired by
another person, entity or group provided, however, the Offer shall have remained
open for at least four months and further provided, the amount payable to Parent
by the Company shall not exceed an amount equal to 50% of the Termination Fee
plus all Expenses, (iv) the Company materially breaches its covenants in the
Merger Agreement, or (v) the Company materially breaches its representations in
the Merger Agreement, both at signing and upon termination of the Merger
Agreement. In addition the Company will be obligated to reimburse Parent for its
reasonably documented out-of-pocket fees and expenses ("Expenses"), up to
$1,000,000 in the aggregate, upon termination of the Merger Agreement for any
reason other than as a result of a material breach of any representation,
warranty, covenant or agreement of Parent or the Purchaser set forth therein.
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STOCK OPTION AGREEMENT. The following description of the Stock Option
Agreement is merely a summary and is qualified in its entirety by reference to
the entire Stock Option Agreement, a copy of which is attached to this statement
as Exhibit 3 and incorporated herein by reference. Unless otherwise noted,
capitalized terms used in the following description shall have the meaning
ascribed to them in the Stock Option Agreement.
The Stock Option Agreement provides that each Seller (including Harry A.
Lomason II) grants to the Purchaser an irrevocable option (the "Option") to
purchase for $31.00 per Share (the "Per Share Price"), up to the number of
Shares set forth opposite such Seller's name on Schedule 1 thereto (the
"Optioned Shares"). The aggregate number of Optioned Shares is 469,735 Shares,
representing approximately 11.07% of the aggregate outstanding Shares at
September 5, 1996. The Option expires on the earlier of the effective time of
the Merger and March 31, 1997. The Purchaser may exercise the Option in whole or
in part at any time or from time to time prior to the expiration of the Offer.
In addition, the Sellers agree to tender, at the Purchaser's request, in the
Offer and not withdraw the Optioned Shares. Subject to the preceding sentence,
the Purchaser shall exercise the Option concurrently with any acceptance for
payment of Shares by the Purchaser in the Offer.
Pursuant to the Stock Option Agreement, each Seller agrees, until the
Option expires, not to (i) sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract, option or other arrangement with respect to the
sale, transfer, pledge, assignment or other disposition of, any of the Optioned
Shares to any person other than the Purchaser or the Purchaser's designee; (ii)
acquire any additional Shares without the prior consent of the Purchaser, unless
certificates representing such additional Shares are deposited in escrow
pursuant to the Stock Option Agreement; (iii) deposit any Optioned Shares into a
voting trust or grant a proxy or enter into a voting agreement with respect to
any Optioned Shares except as provided in the Stock Option Agreement; or (iv)
except, in the case of Harry A. Lomason, II, as otherwise legally required to
comply with his duties as an officer or director of the Company, solicit,
encourage or take any other action to facilitate (including by way of furnishing
information) any inquiries or proposals for any merger or consolidation
involving the Company, the acquisition of any Shares or the acquisition of all
or substantially all the assets of the Company by any person other than Parent
or the Purchaser.
Unless the Option has expired or the Purchaser has purchased all the
Optioned Shares each Seller will, at any annual or special meeting of the
shareholders of the Company and in any action by written consent of the
shareholders of the Company, (i) vote the Optioned Shares in favor of the Merger
and (ii) vote the Optioned Shares against any action or agreement which could
result in a breach of any representation, warranty or covenant of the Company in
the Merger Agreement or which could otherwise, in the sole judgment of the
Purchaser, impede, interfere with or attempt to discourage the Offer or the
Merger. In addition, each Seller has irrevocably appointed the Purchaser as his
proxy to vote or give consent with respect to his Optioned Shares.
If the Purchaser exercises the Option in whole or in part and the Purchaser
(or any affiliate of the Purchaser) purchases any Shares pursuant to the Offer
or pursuant to any other tender or exchange offer, merger or other business
combination (the Offer or any such other tender or exchange offer, merger or
other business combination being called a "Transaction") having an effective
date prior to, or within six months after, the last closing under the Stock
Option Agreement, for a cash purchase price per share in excess of the Per Share
Price or for consideration which is not solely cash having an aggregate fair
market value per share on such effective date in excess of the Per Share Price,
each Seller shall be entitled to receive from the Purchaser an additional cash
payment equal to the product of (i) the difference between (A) the amount of
cash per share and/or the fair market value per share on such effective date of
any consideration other than cash, as the case may be, paid to purchase Shares
in such Transaction and (B) the Per Share Price, multiplied by (ii) the number
of Optioned Shares purchased by the Purchaser from such Seller. If, within six
months after the last closing under the Stock Option Agreement, the Purchaser
sells any of the Optioned Shares at a price per Optioned Share in excess of the
higher of the Per Share Price and any price per Optioned Share paid to the
Sellers as described in the immediately preceding sentence, the Purchaser shall
pay to each Seller an amount of cash equal to, in the case of Harry A. Lomason,
II, 50% and, in the case of each other Seller, 100% of the difference between
(x) the aggregate price for which such Optioned Shares purchased from such
Seller
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were sold by the Purchaser and (y) the aggregate price paid by the Purchaser to
such Seller for such Optioned Shares.
CONFIDENTIALITY AGREEMENT. Effective July 3, 1996, Parent and The
Bridgeford Group, on behalf of the Company, entered into a letter agreement (the
"Confidentiality Agreement") whereby the Company would provide Parent with
certain confidential information about the Company in connection with a possible
business transaction with the Company in exchange for the agreement of Parent,
among other things, to hold such information confidential and to not, without
the prior written consent of the Company, acquire or agree to acquire any voting
securities of the Company. The foregoing summary of the Confidentiality
Agreement is qualified in its entirety by reference to the entire
Confidentiality Agreement, a copy of which is attached to this statement as
Exhibit 4 hereto and is incorporated herein by reference.
EMPLOYMENT AGREEMENT. The Company's Chairman, President and Chief Executive
Officer, Harry A. Lomason, II has agreed to be employed by Parent for a period
of five years after the consummation of the Merger as President of Magna-Lomason
Metals Mechanisms Group, a business unit to be formed from a combination of
certain businesses of Parent and the Company. Mr. Lomason's duties and
responsibilities would include acting as the chief executive for the
Magna-Lomason Metals Mechanisms Group and supervising certain existing joint
ventures of the Company. Parent and Mr. Lomason have agreed upon a form of
employment agreement providing for a base salary of $200,000 per year with a
guaranteed bonus of $400,000 per year for two years after the consummation of
the Merger. A copy of Mr. Lomason's form of employment agreement is attached as
Exhibit 10 to this statement and is incorporated herein by reference.
TENDER LETTERS. Two holders of Shares who are relatives of Mr. Lomason and
in the aggregate own approximately 13.3% of the Shares outstanding at September
5, 1996, have indicated in brief letters that they intend to tender their Shares
in the Offer. Copies of such letters are attached as Exhibits 11 and 12 to this
statement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
ON AUGUST 29, 1996, THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
ADOPTED RESOLUTIONS APPROVING THE OFFER, THE MERGER AND THE MERGER AGREEMENT,
DETERMINING THAT THE TERMS OF THE OFFER AND MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDING THAT THE
COMPANY'S SHAREHOLDERS ACCEPT THE OFFER. All the directors and executive
officers of the Company have advised the Company that they intend to tender
their Shares pursuant to the Offer.
(b) Background, Reasons for the Recommendation.
The reasons for the position stated in Item 4(a) above are as follows.
The Company is a supplier of seat frames to Parent's Atoma Interior Systems
Group ("Atoma") for incorporation into complete seats supplied by Atoma to
Chrysler Corporation for the Chrysler minivan. During Parent's 1993, 1994 and
1995 fiscal years, the Company had seat frame sales to Atoma of approximately
$42, $46 and $44 million, respectively. Various officers and employees of Parent
and the Company have, over the past several years, had contacts with employees
of the Company in connection with this relationship. In early 1995, Hal Ebert,
an executive then with Atoma, contacted Gary T. Walther, then a director of the
Company and inquired as to whether the Company would consider the sale of its
"seat complete" business to Parent. Mr. Walther replied that he would relay Mr.
Ebert's inquiry to Harry A. Lomason, II, Chairman of the Board, President and
Chief Executive Officer of the Company.
A few weeks later, William M. Fike, who had recently joined Parent as Vice
Chairman and Executive Vice President from Ford Motor Company ("Ford"), met with
Mr. Lomason, at Mr. Fike's request. Mr. Lomason was an acquaintance of Mr. Fike
during Mr. Fike's employment at Ford (a customer of the Company). At their
meeting, Mr. Fike described Parent's interest in expanding its seating business
and asked Mr. Lomason whether the Company would consider selling its seat
complete business to Parent. Mr. Lomason indicated that he would consider Mr.
Fike's proposal. Subsequently, Mr. Fike and Mr. Lomason had several
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phone conversations during which Mr. Fike reiterated Parent's interest in
acquiring the seat complete business of the Company.
In June 1995, Donald Walker, the President and Chief Executive Officer of
Parent, and Mr. Fike met with Mr. Lomason to discuss further Parent's interest
in the Company's seat complete business. At this meeting Mr. Fike and Mr. Walker
explained that Parent would consider acquiring either the entire seat complete
business of the Company or the Company as a whole if the Company did not want to
sell only the seat complete business to Parent. Mr. Lomason indicated that he
had been approached by other potential bidders for the Company and requested
information from Mr. Fike regarding Atoma. In the following months, Mr. Fike
forwarded to Mr. Lomason public information regarding Parent and Atoma and had
several phone conversations with Mr. Lomason during which he emphasized Parent's
desire to acquire all or part of the Company.
On September 27, 1995, Mr. Walther met with Mr. Fike and requested more
detailed information about Parent's interest in the Company. Mr. Fike reiterated
that although Parent would prefer to acquire only the seat complete business, it
would be willing to consider the acquisition of the entire seating business of
the Company or the entire Company if necessary.
On January 8, 1996, Mr. Lomason met with Mr. Fike and Richard Banfield, who
is in charge of seating and interior manufacturing at Atoma. At this meeting the
benefits of a potential combination of the Company and Parent were discussed.
Mr. Lomason indicated that he was considering the possibility of a business
combination with a large supplier of automotive components such as Parent
because he believed that the Company, which is a direct (or "Tier 1") supplier
of parts to certain major automobile original equipment manufacturers, might
have difficulty maintaining its Tier 1 status in the increasingly competitive
business environment.
Mr. Walther and Mr. Fike next met in Detroit on March 19, 1996. At this
meeting, Mr. Walther shared with Mr. Fike certain financial results of the
Company for the previous year with the intent that Parent use this information
to develop a proposal regarding Parent's purchase price for the entire Company.
Mr. Walther also indicated that the Board of Directors of the Company would not
be interested in pursuing a transaction at a price below the mid-$20's per
Share. A few weeks later, Mr. Fike telephoned Mr. Walther to inform him that,
based on Parent's evaluation of the financial information provided by Mr.
Walther, Parent would value the Company at a price per Share in the low $20's.
Mr. Fike then indicated that Parent might nonetheless be willing to pay a per
Share price in the mid-$20's and that discussions between Parent and the Company
should continue on that basis.
On May 28, 1996 the Company pursuant to a letter agreement engaged The
Bridgeford Group ("Bridgeford") as the Company's sole and exclusive agent for
the purpose of defining, developing and evaluating strategic directions and
opportunities for the Company.
In early June 1996, Mr. Walther called Mr. Fike to inform him that the
Company had retained Bridgeford as its financial advisor. On June 27, 1996, Mr.
Fike received a letter from Bridgeford on behalf of the Company (the
"Confidentiality Agreement"), offering to furnish Parent with certain
confidential information about the Company in connection with a possible
business combination transaction with the Company in exchange for the agreement
of Parent, among other things, to hold such information confidential and to not,
without the prior written consent of the Company, acquire or agree to acquire
any voting securities of the Company. This letter was accepted and agreed to by
Mr. Fike on behalf of Parent on July 3, 1996.
Also on July 3, 1996, in a meeting in Toronto attended by representatives
of Bridgeford and Parent, the Bridgeford representatives presented certain
financial and other information regarding the Company (including an estimate of
certain of the Company's projected financial results for the years 1996 through
1999 (the "Estimates")) to Parent's representatives. At this meeting the
Bridgeford representatives indicated to Mr. Fike that in their view a business
combination transaction with the Company was unlikely to be achieved at a price
less than $30 per Share. Mr. Fike replied that Parent was unlikely to pay a
price of that magnitude.
On July 15, 1996, Mr. Lomason, Mr. Fike, Mr. Banfield, Graham J. Orr,
Executive Vice President, Corporate Development of Parent, and representatives
of Bridgeford met in Detroit to discuss the structure of
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a proposed merger and related issues. The Bridgeford representatives recommended
to Mr. Fike that Parent send the Company a letter outlining Parent's proposal
for acquiring and operating the Company, including the price range that Parent
would consider paying for the Company, subject to its due diligence review of
the Company. Parent's representatives agreed to provide such a letter, provided
that the Company agreed to negotiate exclusively with Parent for the next few
weeks.
Mr. Fike next met with Mr. Lomason and representatives of Bridgeford on
July 23, 1996 to outline the management and organization of the Company's
business after the proposed acquisition and Mr. Lomason's and other key
executives' potential role in that regard. Privately Mr. Fike indicated to Mr.
Lomason that Parent might be prepared to pay a price ranging from $29.00 to
$31.00 per Share (the "Initial Price Range"). Later that day, Mr. Fike sent a
letter (the "July 23 Letter") on behalf of Parent to the Company's Board of
Directors outlining Parent's concepts for a potential strategic combination with
the Company and expressing Parent's interest in acquiring all the outstanding
Shares of the Company for a price in the Initial Price Range, the exact amount
to be determined following completion of a due diligence investigation of the
Company by Parent. The July 23 Letter also provided for a 30-day period during
which the Company would negotiate exclusively with Parent.
On July 25, 1996, Mr. Fike was invited to a meeting of the Board of
Directors of the Company. At this meeting Mr. Fike discussed the Initial Price
Range and other matters outlined in the July 23 Letter with the Board of
Directors. In response, the Board indicated that the Initial Price Range was
unacceptably low and the exclusivity period was too long. On July 29, 1996, Mr.
Fike sent a revised letter on behalf of Parent to the Company's Board of
Directors containing an increased price range of $30.00 to $32.00 per Share and
a 25-day exclusivity period (the "Exclusivity Period"). After approval of the
revised letter by the Company's Board of Directors, Mr. Lomason executed this
letter, which is set forth below:
July 29, 1996
The Board of Directors
Douglas & Lomason Company
24600 Hallwood Court
Farmington Hills, Michigan 48335-1671
Attn: Mr. H. A. Lomason II
Chairman of the Board,
President & CEO
Dear Sirs:
Re: Potential Business Combination
We are delighted to have been invited to outline our concepts for a
potential strategic combination of Magna's seating and related operations with D
& L. As the Board is aware, we have for some time indicated to D & L our belief
that a combination of our two seating businesses will result in a stronger
seating system supplier able to compete cost-effectively on a global basis and
will enhance our international participation as an interior systems integrator.
This letter outlines how we believe the combination of the businesses can
be accomplished, how the process should continue and responds to the topics
which the Board wished to be addressed.
1. PRICE RANGE. Based solely on D & L's publicly available information,
the information you have furnished us in the last two weeks and the discussions
among our respective teams during that period, and subject to our continuing due
diligence investigation of D & L, Magna would be prepared to make a firm offer
to acquire all the outstanding shares of common stock of D & L for US$30 to
US$32 per share in cash, the exact amount to be determined immediately following
our completion of due diligence. Our offer would not be subject to any financing
condition.
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A price in the foregoing range represents a substantial premium to current
market and book values and we believe provides an excellent return on investment
for the shareholders of D & L.
2. BUSINESS STRUCTURE. Although we are still formulating our future plans
for D & L's various businesses and will not be able to finalize our approach
until due diligence is completed, our initial thoughts are to maximize the
synergies between our businesses on the following basis:
(a) Seat Complete -- The manufacturing facilities and related personnel
engaged in designing and assembling complete seats would be combined
with our Atoma/Integram seating group and then operated as a separate
business unit within our Atoma Interior Systems Group.
(b) Seat Covers -- The manufacturing facilities and related personnel
engaged in the designing and manufacture of seat covers and arm/head
rests would be maintained as a separate business unit within our Atoma
Interior Systems Group and be managed by the existing D & L management
team.
(c) Seat Hardware -- The manufacturing facilities and related personnel
engaged in the designing and manufacture of frames and other seat
hardware and mechanisms would be combined with our seat hardware group
and then operated as a separate business unit within our Atoma Interior
Systems Group. We would propose to continue to use the D & L business
name in connection with this unit. Combined, this unit would have
facilities in the US, Canada and Mexico and would have a full range of
products and technologies to supply on a Tier 2 basis to Atoma Seating
System and other seat complete suppliers.
(d) Bestop -- Since this business formerly operated independently and only
recently joined the D & L corporate family, we would propose to
continue to operate it as a separate business unit and believe that its
business could be expanded to include other related Magna businesses
which currently operate in the after-market and accessories sector.
(e) Joint Ventures -- Aside from co-ordinating these businesses on a
technological and manufacturing basis with the other seating related
units, we would propose to continue to operate each joint venture as in
the past, preferably under Mr. Lomason's direction, as we value the
relationships that have been built. Every effort would be made to build
on these relationships to expand in the seating business in Europe, the
Far East and South America.
(f) Chantland -- We understand that, while this is not an automotive
related business, it has been historically successful. Since this
business is profitable and runs on a stand-alone basis, we would
propose to consider its overall future once the automotive operations
have been combined and the management teams have settled in place.
(g) Truck Body/Trailer -- We assume that D & L will continue in its
publicly announced efforts to dispose of this business as quickly as
possible at a reasonable price.
Virtually all of these businesses complement Atoma Seating's existing
businesses and when combined will create a formidable integrated global seating
systems competitor.
3. TERMS AND CONDITIONS. The purchase price for D & L's outstanding
common shares would be payable in cash on completion of the transaction. Our
conditions, which would need to be satisfied prior to entering definitive
agreements, include the following:
(1) The Joint Venture partners are to consent to the transfer of D & L's
equity to the new business, if such consents are required.
(2) The approval of the Board of Directors of Magna to the final
contractual arrangements.
(3) Mr. Lomason is to enter into a mutually agreeable agreement to sell all
of his D & L shares to Magna at a mutually agreed upon price (which
price shall not exceed the Magna offer price recommended to D & L's
shareholders by the Board), with such outs as may be mutually agreed
upon, and use his best efforts to obtain similar family share
commitments.
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(4) The completion of due diligence reasonably satisfactory to Magna in the
next 15 business days.
4. MANAGEMENT. Without being familiar with any of the manufacturing
operations, engineering organization or staff support functions, it is nearly
impossible to be specific as to how the management teams would be affected.
Obviously it would be essential that the Seat Cover, Bestop, Joint Venture and
Chantland management teams remain intact as they would continue to operate as
separate business units. As outlined above, we would propose to combine the D &
L and Magna seat businesses into four distinct operating units as follows:
-- Just in sequence -- seat complete
-- Cut and sew, armrest and headrest operations
-- Frames, hardware, and mechanisms
-- Joint-venture relationships
with centralized sales, engineering, and service activities.
With the exception of seat complete, we propose the other three units
report directly to Mr. H. Lomason as the President of Magna -- Lomason Trim in
order to capitalize on his knowledge and experience in these businesses and
continued strong joint-venture partnership relations. This structure would allow
specific focus on global business elements that we feel could grow
substantially.
It would be unlikely that the management teams at any of the plants would
be affected. In addition, since Magna currently has minimal cut and sew and no
armrest or headrest activities, the management structure for these facilities
would remain as it is today. It is also assumed that the D & L seat hardware and
frame plants would be combined with those of Atoma into one operating unit with
little or no impact on existing structures.
It would take some time to determine the overall impact of combining these
businesses together with existing Atoma business units, although we would
anticipate substantial opportunities for people growth within the expanded
business. We of course are aware that senior management have been given
employment and "change of control" contracts which we would honour.
5. DUE DILIGENCE. Assuming D & L accepts this letter, representatives of
Magna's management team would conduct a due diligence investigation of the
business and affairs of D & L in the course of which D & L would provide us and
our representatives with access to all material, information, facilities and
senior executives of D & L reasonably required by us in order to satisfy
ourselves as to the financial, operational, environmental and general business
condition and prospects of D & L, including satisfying ourselves with respect to
the continuation of satisfactory business relationships with D & L's OEM and
other major customers following the completion of the transaction. D & L will
use every reasonable effort to assist us in this investigation, particularly in
connection with its customers.
In past discussions we have emphasized Magna's willingness and flexibility
in considering business and organizational combinations with all or part of D &
L's business units. The concepts described in this letter reflect our response
to your adviser's indication that a presentation dealing with the complete D & L
organization was desired; however, we do remain willing to consider any
combination that would make business sense.
There is no doubt in our mind that our seating businesses would be far
stronger and more competitive combined than separate. The combined businesses
would be a strong, global seat complete supplier with significant opportunity to
obtain new Ford, Chrysler, GM and Rover seat business, in addition to ensuring
replacement of existing seat programs; many current purchased parts could be
integrated into existing in-house activities i.e. soft trim, headrests and
armrests; the new combined seat hardware and mechanism business would be
positioned as the dominant Tier 2 seat component supplier to every Tier 1;
through the relationship with Kieper, a basis for establishing seating in Europe
would be facilitated; and the established D & L relationship in the Far East
could be utilized as the basis for significant expansion in seat components and
potentially for complete seats for that market.
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Assuming the foregoing is generally acceptable, we would anticipate our
discussions continuing along two tracks. Representatives of Magna's management
team would conduct a due diligence investigation as previously described.
Concurrently with that process, our outside legal counsel, Sidley & Austin, will
furnish to you and your counsel draft agreements relating to this transaction.
Such agreements would contain representations, warranties, covenants (including
a "no-shop" provision, subject to the fiduciary duties of D & L's Board) and
provisions for termination fees customary for transactions of this type. As
noted above, these agreements would not contain any financing conditions for
Magna. We would expect our respective lawyers to require two to three weeks to
negotiate these agreements and determine the precise legal structure the
transaction would take.
In consideration of the foregoing, D & L agrees that for a period of 25
days from the date hereof, it will negotiate exclusively with Magna and its
representatives. During such 25 day period, D & L will not, and will not permit
any person on its behalf to, directly or indirectly solicit or encourage the
submission of, or enter into any agreement or participate in any discussions or
negotiations regarding, or furnish to any person information with respect to,
any proposal (other than a proposal by Magna) for a merger, consolidation, share
exchange, business combination or any similar transaction involving D & L or any
of its subsidiaries, or any proposal or offer (other than a proposal or offer by
Magna) to acquire in any manner, directly or indirectly, an equity or voting
interest in D & L or any of its subsidiaries or a substantial portion of the
assets of D & L or any of its subsidiaries other than the truck body/trailer
business as previously announced.
Except as otherwise required by law or in the opinion of our respective
counsel, neither Magna nor D & L shall issue any press release or make any other
public statement with respect to this letter or the transactions contemplated
hereby.
This letter sets forth the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior and contemporaneous agreements relating thereto (other than the letter
agreement dated June 27, 1996, between Mr. W. H. Fike and Mr. Edward P. Witz of
The Bridgeford Group). Neither Magna nor D & L nor any of their respective
subsidiaries shall be under any obligation to proceed with any transaction, and
no commitment, undertaking or other obligation of any nature whatsoever shall be
implied unless and until a duly authorized agreement in detailed legal form
providing for such obligations has been executed and delivered by all parties
intending to be bound. This letter shall be non-binding and of no legal effect
except for the two next preceding paragraphs dealing with exclusivity and press
releases, which shall be binding and enforceable obligations.
In closing, we believe that Magna through its Atoma Interior Systems Group
and D & L are a natural fit, will be far stronger together than apart and will
prosper and grow together as a world-class interior systems supplier. As a
result we wish to emphasize our continued flexibility and desire to complete a
transaction that is in the best interests of D & L as well as its employees,
shareholders and customers. We are available to continue the dialogue and
proceed rapidly to formalize.
Please confirm your agreement with the foregoing by signing and returning
to us a copy of this letter. If this letter is not accepted by D & L prior to
11:59 p.m. on Monday, July 29, 1996, we will withdraw this complete proposal.
Yours truly,
William H. Fike
Vice-Chairman
Accepted and Agreed
DOUGLAS & LOMASON COMPANY
By: H.A. Lomason II
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After execution of this letter, the Company made certain records and
information available to Parent and its representatives for the purpose of
conducting its due diligence investigation of the Company. The Company further
arranged visits to its principal manufacturing facilities for representatives of
Parent.
On August 7, 1996, in response to an inquiry from officials of The NASDAQ
Stock Market, Inc., concerning volatility in the market for the Shares, the
Company issued a press release announcing that it was engaged in discussions
regarding a possible business combination and that it would not issue any
further press releases or comments concerning the discussions until they were
finalized or terminated. Thereafter, a draft of the Merger Agreement was
prepared and distributed and a draft of the Stock Option Agreement (the "Stock
Option Agreement") among Parent, the Purchaser and certain holders of the Shares
(including Mr. Lomason) set forth on Schedule 1 thereto (the "Sellers") was
prepared and distributed.
On August 12, 1996 Mr. Fike and Mr. Lomason met briefly to discuss the
progress of Parent's due diligence review of the Company and the extent of the
parties' cooperation in completing such review.
On August 20, 1996, Mr. Fike and Mr. Lomason met to discuss issues with
respect to the Estimates of the Company presented by Bridgeford on July 3. Mr.
Fike explained Parent's belief that the Estimates were overly optimistic in
certain respects. Thereafter, representatives of Parent met with representatives
of the Company and Bridgeford to continue the discussions concerning the
Estimates as revised by Parent and other issues representatives of Parent raised
in connection with Parent's due diligence review of the Company.
On August 22, 1996, legal, financial and other representatives of Parent,
the Company and Bridgeford met at the offices of Dickinson, Wright, Moon, Van
Dusen and Freeman ("Dickinson, Wright"), counsel to the Company (which also from
time to time represents Parent in various matters), to discuss the Estimates and
Parent's request to extend the Exclusivity Period and to negotiate the Merger
Agreement. At this meeting Mr. Fike stated that, based upon the Estimates as
revised by Parent and other issues discovered during Parent's due diligence
review, in Parent's view the per Share value of the Company was between $22.00
and $23.00, but that Parent was prepared to bid $30.00 per Share because of
certain synergistic opportunities presented by the business combination.
Bridgeford and the Company's representatives expressed disappointment at this
price and informed Parent that the Board would be conferring the following day
to determine whether to approve an extension of the Exclusivity Period, which
extension would likely be contingent upon, among other things, a more
satisfactory pricing proposal. That afternoon, Mr. Fike informed representatives
of Bridgeford and the Company that Parent would be prepared to raise its bid to
$31.00 per Share, pending resolution of certain non-pricing issues still
outstanding and satisfactory negotiation of the Merger Agreement.
Also on August 22, 1996, Mr. Lomason and Dickinson, Wright, as his counsel,
reviewed the major terms of an employment agreement for Mr. Lomason (the
"Lomason Employment Terms") with representatives of Parent.
Subsequently, Parent and the Company executed a letter agreement dated
August 23, 1996 extending the Exclusivity Period to August 29, 1996. Negotiation
of the Merger Agreement, the Stock Option Agreement and the Lomason Employment
Terms continued over the next several days. Verne C. Hampton, II, a director of
the Company, participated in all these negotiations as a member of Dickinson,
Wright.
The Company was advised by Parent that the Boards of Directors of the
Purchaser and Parent approved the Merger, the Merger Agreement and the Stock
Option Agreement on August 29, 1996, and August 28, 1996, respectively.
On August 29, 1996, the Company's Board of Directors held a meeting at
which all the directors were present in person or by conference telephone as
well as the Company's legal counsel and representatives of Bridgeford. At such
meeting Bridgeford delivered its oral opinion that the price of $31.00 per share
was fair to the shareholders of the Company from a financial point of view.
Representatives of Bridgeford then outlined for the Company's Board of Directors
Bridgeford's valuation analysis and the methodology employed by Bridgeford in
its analysis. Bridgeford delivered its written opinion the following day.
The Company's Board of Directors unanimously voted to approve the Offer,
the Merger and the Merger Agreement, determining that the terms of the Offer and
Merger are fair to, and in the best interests of, the
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Company and its shareholders and recommending, subject to the terms and
conditions set forth in the Merger Agreement, that the Company's shareholders
accept the Offer. The Company's Board of Directors also amended the Company's
By-Laws to provide for the Company not to be governed by the provisions of
Chapter 7B of the Michigan Business Corporation Act ("MBCA").
Later that day, the Merger Agreement was executed and delivered by Parent,
the Purchaser and the Company and the Stock Option Agreement was executed and
delivered by Parent, the Purchaser, Mr. Lomason and certain other holders of
Shares. In addition, two holders of Shares who are relatives of Mr. Lomason and
in the aggregate own approximately 13.3% of the Shares outstanding at September
5, 1996, have indicated in brief letters that they intend to tender their Shares
in the Offer. Copies of such letters are attached as Exhibits 12 and 13 to this
statement. On August 29, 1996, Parent and the Company issued a joint press
release announcing the Merger Agreement and that the Purchaser would commence
the Offer promptly.
A copy of the press release is attached hereto as Exhibit 11 and is
incorporated herein by reference. A copy of a letter to shareholders of the
Company, which accompanies this Schedule 14D-9, is attached as Exhibit 5 and is
incorporated herein by reference.
FACTORS: In reaching its conclusion and recommendation, the Company's Board
of Directors in several meetings considered various factors, including but not
limited to:
a. The Board of Director's familiarity with and review of the
Company's current condition, including but not limited to (i) results of
operations, (ii) financial condition, including contingent liabilities,
(iii) market position, (iv) operating margins, (v) operations capabilities,
and (vi) relationship with customers.
b. Matters relating to the Company's growth potential, including but
not limited to (i) North American sales, (ii) international sales, (iii)
cyclicality of the automotive industry, (iv) consolidation of suppliers in
the automotive industry, (v) increasing demands of customers on suppliers
for high level engineering, (vi) related capital and upfront costs relating
to engineering, (vii) the ability of the Company to negotiate with, and
compete with others regarding, the Company's customers in light of the
trend by customers increasingly to use larger Tier 1 suppliers, (viii) the
Company's efforts to diversify and grow through internal activities, and
(ix) the Company's efforts to make acquisitions.
c. The amount of cash offered to the Company's shareholders by the
Purchaser.
d. The past performance of the Company's common stock, and the
possible price available at a later time compared with risks involved in
the future.
e. The potential market value, liquidity and dividend yield of the
Company's common stock.
f. Other benefits of a merger with Parent, including but not limited
to access to financial, engineering and manufacturing resources which could
increase the Company's competitiveness and ability to serve its customers.
g. The equal treatment of shareholders.
h. The presentation of the Company's independent financial advisor,
Bridgeford, that included certain financial and stock market information
for the Company compared to similar information for certain other companies
whose securities are publicly traded and the financial terms of certain
recent business combinations that were deemed comparable in whole or in
part, and their opinion that the consideration to be received by the
Company's shareholders is fair from a financial point of view.
i. The fact that the Merger Agreement permits the Board of Directors
of the Company to respond to other acquisition proposals in accordance with
its fiduciary duties, including by (i) providing information to and
participating in discussions with a third party and (ii) accepting a higher
offer, if any, from any other party, and terminating the Merger Agreement
(subject to payment by the Company to the Purchaser of a reasonable and
customary fee).
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j. Other terms of the Merger Agreement, including the fact that the
Offer was for cash and that there was no financing condition or unusual due
diligence condition associated with the Offer or the Merger.
Shareholders of the Company should read the copy of the full text of
Bridgeford's written opinion filed as Exhibit 6, which is incorporated herein by
this reference, and which sets forth the assumptions made, procedures followed,
matters considered, and limits of Bridgeford's review.
In reaching its conclusions, the Board did not assign a specific weight or
priority to any specific factor. The Board viewed its position and
recommendations as being based on the totality of the information presented to
and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company engaged Bridgeford pursuant to a letter agreement dated May 28,
1996, as the Company's sole and exclusive agent for the purpose of defining,
developing and evaluating strategic directions and opportunities for the
Company, including a possible sale of the Company, and in that connection (a)
identifying opportunities for the sale of the Company, (b) advising the Company
concerning opportunities for a sale, whether or not identified by Bridgeford,
(c) participating on the Company's behalf in negotiations concerning a sale to
the extent requested by the Company and (d) if requested by the Company,
providing a written and/or verbal opinion to the Company's Board of Directors
regarding the fairness to the Company's shareholders from a financial point of
view of a sale of the Company or any substantially similar transaction. For such
services, the Company agreed to pay Bridgeford a fee of 1.5% of the total
consideration involved in the sale, plus reasonable out-of-pocket expenses,
payable upon consummation of any such sale. The Company also agreed to indemnify
Bridgeford in connection with services performed under the engagement. The
letter agreement between the Company and Bridgeford for this engagement is
attached to this Statement as Exhibit 7 and is incorporated herein by this
reference.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to shareholders on its behalf concerning the Merger or the
Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, each of the persons referred to
in Item 6(a) above presently intends to tender to the Purchaser all of the
Shares that are held of record or beneficially owned by such person.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth above, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as described above, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) of this Statement.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
15
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ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 -- Agreement and Plan of Merger, dated as of August 29, 1996, among the
Company, Parent and the Purchaser.
Exhibit 2 -- The Company's Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 thereunder.*
Exhibit 3 -- Stock Option Agreement dated as of August 29, 1996, among the Purchaser,
Parent and certain holders of Shares listed on Schedule 1 thereto.
Exhibit 4 -- Confidentiality Agreement dated June 27, 1996 between Parent and The
Bridgeford Group.
Exhibit 5 -- Form of letter addressed to Shareholders of the Company, dated September 5,
1996.*
Exhibit 6 -- Opinion of The Bridgeford Group, dated August 29, 1996.*
Exhibit 7 -- Letter agreement dated May 28, 1996, between the Company and The Bridgeford
Group.
Exhibit 8 -- Officer agreement dated May 17, 1996 between the Company and Harry A.
Lomason II.
Exhibit 9 -- Form of officer agreement dated May 17, 1996 between the Company and the
following officers and key associates of the Company: Steven C. Bruck,
Ollie V. Cheatham, A. Warren Daubenspeck, III, Martin A. DiLoreto, George
B. Flurey, James J. Hoey, Thomas G. Kish, Richard E. Lietzke, W. Keith
Lomason, II, Roger H. Morelli, Scott E. Paradise, Dan D. Smith, Robert D.
Stachura and Melynn M. Zylka.
Exhibit 10 -- Form of Employment Agreement to be entered into by Harry A. Lomason, II
with an affiliate of Parent.
Exhibit 11 -- Joint Press Release dated August 29, 1996.
Exhibit 12 -- Letter dated August 30, 1996, from Jane L. Agostinelli to Purchaser.
Exhibit 13 -- Letter dated August 30, 1996, from Anne L. Bray to Purchaser.
</TABLE>
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* Included in copies mailed to shareholders.
16
<PAGE> 18
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
DOUGLAS AND LOMASON COMPANY
By: /s/ HARRY A. LOMASON II
-----------------------------------
Name: Harry A. Lomason II
Title: Chairman of the Board,
President and Chief
Executive Officer
Dated: September 5, 1996
17
<PAGE> 1
EXHIBIT 1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
MAGNA INTERNATIONAL INC.
MAGNA ACQUISITION CORPORATION
AND
DOUGLAS & LOMASON COMPANY
DATED AS OF AUGUST 29, 1996
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
THE TENDER OFFER.......................................................... 1
Section 1.1 The Offer................................................................. 1
Section 1.2 Company Action............................................................ 2
ARTICLE II
THE MERGER................................................................ 3
Section 2.1 Effective Time of the Merger.............................................. 3
Section 2.2 Closing................................................................... 4
Section 2.3 Effects of the Merger..................................................... 4
Section 2.4 Articles of Incorporation and By-Laws..................................... 4
Section 2.5 Directors................................................................. 4
Section 2.6 Officers.................................................................. 4
ARTICLE III
CONVERSION OF SECURITIES.................................................. 4
Section 3.1 Conversion of Capital Stock............................................... 4
Section 3.2 Exchange of Certificates.................................................. 5
Section 3.3 No Further Ownership Rights in Company Common Stock....................... 6
Section 3.4 Closing of Company Transfer Books......................................... 6
Section 3.5 Withholding............................................................... 6
Section 3.6 Lost, Stolen or Destroyed Certificates.................................... 6
Section 3.7 Further Assurances........................................................ 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 6
Section 4.1 Organization.............................................................. 6
Section 4.2 Capitalization............................................................ 7
Section 4.3 Authority................................................................. 8
Section 4.4 Consents and Approvals; No Violations..................................... 8
Section 4.5 SEC Reports and Financial Statements...................................... 9
Section 4.6 Information in Disclosure Documents....................................... 9
Section 4.7 Litigation................................................................ 10
Section 4.8 No Material Adverse Change; Material Agreements........................... 10
Section 4.9 Taxes..................................................................... 10
Section 4.10 Benefit Plans; Labor Matters.............................................. 11
Section 4.11 Opinion of Financial Advisor.............................................. 13
Section 4.12 Certain Antitakeover Provisions Not Applicable............................ 13
Section 4.13 Intellectual Property..................................................... 14
Section 4.14 Votes Required............................................................ 14
Section 4.15 Brokers................................................................... 14
Section 4.16 Certain Agreements........................................................ 14
Section 4.17 Environmental Matters..................................................... 15
Section 4.18 Tangible Property; Real Property and Leases............................... 16
</TABLE>
i
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<TABLE>
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER.................... 17
Section 5.1 Organization.............................................................. 17
Section 5.2 Authority................................................................. 17
Section 5.3 Consents and Approvals; No Violations..................................... 17
Section 5.4 Information in Disclosure Documents....................................... 17
Section 5.5 Financing................................................................. 18
Section 5.6 Brokers................................................................... 18
ARTICLE VI
COVENANTS................................................................. 18
Section 6.1 Conduct of Business of the Company........................................ 18
Section 6.2 Reasonable Best Efforts................................................... 20
Section 6.3 Access to Information..................................................... 20
Section 6.4 Company Shareholders Meeting.............................................. 20
Section 6.5 Company Option Plans...................................................... 21
Section 6.6 Company Benefit Plans..................................................... 21
Section 6.7 No Solicitation........................................................... 21
Section 6.8 Fees and Expenses......................................................... 22
Section 6.9 Notification of Certain Matters........................................... 23
Section 6.10 Company Debt Agreements................................................... 23
Section 6.11 Public Announcements...................................................... 24
Section 6.12 State Takeover Laws....................................................... 24
Section 6.13 Indemnification........................................................... 24
Section 6.14 Shareholder Litigation.................................................... 24
Section 6.15 Directors................................................................. 24
ARTICLE VII
CONDITIONS................................................................ 25
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger................ 25
Section 7.2 Conditions to Obligations of Parent and Purchaser......................... 26
Section 7.3 Conditions to Obligations of the Company.................................. 26
ARTICLE VIII
TERMINATION............................................................... 26
Section 8.1 Termination............................................................... 26
Section 8.2 Effect of Termination..................................................... 27
ARTICLE IX
MISCELLANEOUS............................................................. 27
Section 9.1 Nonsurvival of Representations and Warranties............................. 27
Section 9.2 Amendment................................................................. 27
Section 9.3 Extension; Waiver......................................................... 28
Section 9.4 Notices................................................................... 28
Section 9.5 Interpretation............................................................ 29
Section 9.6 Counterparts.............................................................. 29
Section 9.7 Entire Agreement; No Third Party Beneficiaries............................ 29
Section 9.8 Governing Law............................................................. 29
Section 9.9 Specific Performance...................................................... 29
Section 9.10 Assignment................................................................ 29
Section 9.11 Validity.................................................................. 29
Annex I Conditions to the Offer
</TABLE>
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 29, 1996 (this
"Agreement"), among MAGNA INTERNATIONAL INC., an Ontario corporation ("Parent"),
MAGNA ACQUISITION CORPORATION, a Michigan corporation and an indirect,
wholly-owned subsidiary of Parent ("Purchaser"), and DOUGLAS & LOMASON COMPANY,
a Michigan corporation (the "Company"; together with Purchaser, the "Constituent
Corporations").
WITNESSETH:
WHEREAS the respective Boards of Directors of Parent, Purchaser and the
Company have determined that the acquisition of the Company by Parent upon the
terms and subject to the conditions of this Agreement would be advantageous and
beneficial to their respective corporations and that such transaction is
consistent with and in furtherance of such entities' respective long-term
business strategies;
WHEREAS, in furtherance thereof, it is proposed that Purchaser will make a
tender offer (as it may be amended from time to time as permitted hereunder, the
"Offer") to purchase all the outstanding shares of the Company's common stock,
par value $2.00 per share (the "Company Common Stock"), for $31.00 per share of
Company Common Stock (such amount, or any other amount per share offered
pursuant to the Offer, being hereinafter referred to as the "Per Share Amount"),
net to the seller in cash, in accordance with the terms and subject to the
conditions provided herein and in the Offer Documents (as defined in Section
1.1(b); and the Board of Directors of the Company has adopted resolutions
approving this Agreement, the Offer and the Merger (as defined below) and
recommending that the Company's shareholders accept the Offer and approve the
Merger;
WHEREAS it is proposed that, following the consummation of the Offer, there
be a merger (the "Merger") of Purchaser with and into the Company (the
"Surviving Corporation") upon the terms and subject to the conditions hereof;
and
WHEREAS Parent, Purchaser and certain shareholders of the Company are
concurrently herewith entering into a Stock Option Agreement (the "Stock Option
Agreement"), pursuant to which, among other things, such shareholders will, upon
the terms and subject to the conditions thereof, grant an option to Purchaser to
purchase the shares of Company Common Stock owned by such shareholders for a
cash price per share equal to the Per Share Amount.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE TENDER OFFER
SECTION 1.1 THE OFFER.
(a) Provided that this Agreement has not been terminated in accordance
with Section 8.1 and none of the events or facts set forth in Annex I
hereto shall have occurred, Purchaser will commence the Offer as promptly
as reasonably practicable after the date hereof, but in no event later than
September 6, 1996. The obligation of Purchaser to commence the Offer and
accept for payment, and pay for, any shares of Company Common Stock
tendered pursuant to the Offer will be subject to the satisfaction of the
conditions set forth in Annex I hereto (any of which may be waived by
Purchaser in its sole discretion) and to the terms and conditions of this
Agreement. Purchaser expressly reserves the right to modify the terms of
the Offer, except that, without the consent of the Company (unless the
Company takes any action permitted to be taken pursuant to the second
sentence of Section 6.7(b)), Purchaser shall not (i) reduce the number of
shares of Company Common Stock subject to the Offer, (ii) reduce the Per
Share Amount, (iii) modify or add to the conditions set forth in Annex I
(other than to waive any conditions to the extent permitted by this
Agreement), (iv) except as provided in the next sentence, extend the Offer
or (v) change the form of consideration payable in the Offer.
Notwithstanding the
1
<PAGE> 5
foregoing, Purchaser may, without the consent of the Company, (i) extend
the Offer if at the scheduled expiration date of the Offer any of the
conditions to Purchaser's obligation to purchase shares of Company Common
Stock shall not be satisfied until such time as such conditions are
satisfied or waived, (ii) extend the Offer for any period required by any
order, decree or ruling of, or any rule, regulation, interpretation or
position of, any Governmental Entity (as defined in Section 4.4(a))
applicable to the Offer and/or (iii) extend the Offer for any reason for a
period of not more than 10 business days beyond the latest expiration date
that would otherwise be permitted under clause (i) or (ii) of this
sentence. The Offer will be made by means of an offer to purchase (the
"Offer to Purchase") and related letter of transmittal containing the terms
set forth in this Agreement and the conditions set forth in Annex I hereto.
Subject to the terms of the Offer and this Agreement and the satisfaction
or waiver of all the conditions of the Offer set forth in Annex I hereto as
of the final expiration date of the Offer, Purchaser will accept for
payment and pay for all shares of Company Common Stock validly tendered and
not withdrawn pursuant to the Offer as soon as practicable after such
expiration date.
(b) On the date of commencement of the Offer, Parent and Purchaser
will file with the Securities and Exchange Commission (the "SEC") a Tender
Offer Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "Schedule 14D-1") with respect to the Offer. The
Schedule 14D-1 will contain (including as an exhibit) or will incorporate
by reference the Offer to Purchase (or portions thereof) and forms of the
related letter of transmittal and summary advertisement (which Schedule
14D-1, Offer to Purchase, and other documents pursuant to which the Offer
will be made, together with any supplements or amendments thereto, are
referred to herein collectively as the "Offer Documents"). Parent and
Purchaser will disseminate the Offer to Purchase, the related letter of
transmittal and other Offer Documents to holders of shares of the Company
Common Stock. Each of Parent, Purchaser and the Company will promptly
correct any information provided by it for use in the Offer Documents that
becomes false or misleading in any material respect, and each of Parent and
Purchaser will take all steps necessary to cause the Schedule 14D-1 as so
corrected to be filed with the SEC and the other Offer Documents as so
corrected to be disseminated to holders of shares of Company Common Stock,
in each case as and to the extent required by applicable law. Purchaser
will provide the Company and its counsel in writing with any comments
Purchaser or its counsel may receive from the SEC or its staff with respect
to the Offer Documents promptly after the receipt of such comments. Parent,
Purchaser and their counsel will provide the Company and its counsel with a
reasonable opportunity to participate in all material communications with
the SEC and its staff, including any meetings and telephone conferences
relating to the Offer Documents, the Offer, the Merger or this Agreement.
(c) Purchaser will, and Parent will cause Purchaser to, designate a
bank or trust company as the paying agent for the Offer (the "Offer Paying
Agent"). Purchaser agrees to deposit, and Parent agrees to cause Purchaser
to deposit, with the Offer Paying Agent simultaneously with the
consummation of the Offer such funds as are necessary to make the cash
payments required by the Offer. In no event shall any shareholder of the
Company who has surrendered certificates representing Company Common Stock
be entitled to receive interest on any of the funds to be received pursuant
to the Offer. If a check is to be sent to a person other than the person in
whose name a certificate for Company Common Stock surrendered in connection
with the Offer is registered, it shall be a condition of the transfer that
the person requesting such transfer shall pay to the Offer Paying Agent any
transfer or other taxes required by reason of the delivery of such check to
a person other than the registered holder of the certificate surrendered,
or shall establish to the satisfaction of the Offer Paying Agent that such
tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Offer Paying Agent nor any party hereto shall be liable to a
holder of Company Common Stock for any amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
SECTION 1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Board of Directors of the Company, at a
meeting duly called and held, has unanimously and duly adopted resolutions
approving this Agreement, the Offer and the Merger, determining that the
Merger is
2
<PAGE> 6
advisable and that the terms of the Offer and Merger are fair to, and in
the best interests of, the Company and its shareholders and recommending
that the Company's shareholders accept the Offer and approve the Merger and
approve and adopt this Agreement. The Company represents and warrants that
its Board of Directors has received the opinion of The Bridgeford Group
that the proposed consideration to be received by the Company's
shareholders pursuant to the Offer and the Merger is fair to such
shareholders from a financial point of view, and a complete and correct
copy of such opinion has been delivered by the Company to Parent and
Purchaser. The Company has been advised by each of its directors and
executive officers that, subject to any recommendation of the Board of
Directors that is adverse to the Offer, each such person intends to tender
or cause to be tendered pursuant to the Offer all shares of Company Common
Stock beneficially owned by such person, except to the extent of any
restrictions created by Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) The Company will file with the SEC, on the date of the filing by
Purchaser of the Schedule 14D-1, a Solicitation/ Recommendation Statement
on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as
amended from time to time, the "Schedule 14D-9") containing the
recommendations described in Section 1.2(a) above (subject only to the
fiduciary duties of the Board of Directors as contemplated by Section
6.7(b)) and will disseminate the Schedule 14D-9 as required by Rule 14d-9
promulgated under the Exchange Act. Each of the Company, Parent and
Purchaser will promptly correct any information provided by it for use in
the Schedule 14D-9 that becomes false or misleading in any material
respect, and the Company will further take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
the Company's shareholders, in each case as and to the extent required by
applicable law. The Company will provide Parent and Purchaser and their
counsel in writing with any comments the Company or its counsel may receive
from the SEC or its staff with respect to the Schedule 14D-9 promptly after
the receipt of such comments. The Company and its counsel will provide
Parent and Purchaser and their counsel with a reasonable opportunity to
participate in all communications with the SEC and its staff, including any
meetings and telephone conferences relating to the Schedule 14D-9, the
Offer, the Merger or this Agreement.
(c) The Company will (i) promptly furnish Parent and Purchaser with
mailing labels containing the names and addresses of all record holders of
shares of Company Common Stock as of a recent date and of those persons
becoming record holders after such date, together with copies of all
security position listings and computer files and all other information in
the Company's control regarding the beneficial owners of shares of Company
Common Stock that Parent or Purchaser may reasonably request and (ii)
furnish to Parent or Purchaser such other information and assistance as
Parent or Purchaser or their agents may reasonably request in expeditiously
communicating the Offer to holders of shares of Company Common Stock.
ARTICLE II
THE MERGER
SECTION 2.1 EFFECTIVE TIME OF THE MERGER.
(a) Upon the terms and subject to the conditions hereof, and in
accordance with the Michigan Business Corporation Act (the "MBCA"),
Purchaser shall be merged with and into the Company at the Effective Time
(as hereinafter defined), with the Company continuing as the Surviving
Corporation and succeeding to and assuming all the rights and obligations
of Purchaser in accordance with the MBCA.
(b) Upon the terms and subject to the conditions hereof, a certificate
of merger or other appropriate documents (the "Certificate of Merger") will
be duly prepared and executed by the Company and Purchaser and thereafter
delivered to the Department of Consumer and Industry Services, Bureau of
Corporations, Securities and Land Development of the State of Michigan (the
"Filing Office") for filing as provided in the MBCA as soon as practicable
on the Closing Date (as defined in Section 2.2). The Merger will become
effective upon the filing of the Certificate of Merger with the Filing
Office or at such
3
<PAGE> 7
other later date or time as Purchaser and the Company shall agree and as
specified in the Certificate of Merger (the time the Merger becomes
effective being the "Effective Time").
SECTION 2.2 CLOSING. Unless this Agreement is terminated and the
transactions contemplated herein abandoned pursuant to Section 8.1, the closing
of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be
specified by the parties, which will be no later than the second business day
following the satisfaction or, if permissible, waiver of each of the conditions
set forth in Article VII (the "Closing Date"), at the offices of Sidley &
Austin, 875 Third Avenue, New York, New York 10022, unless another date or place
is agreed to by the parties hereto.
SECTION 2.3 EFFECTS OF THE MERGER. The Merger will have the effects set
forth in this Agreement and the MBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the rights,
privileges, immunities, powers and franchises of the Company and of Purchaser
and all the property (real, personal and mixed) of the Company and of Purchaser
and all debts due to either the Company or Purchaser on any account, and all
choses in action, and every other interest of or belonging to or due to either
the Company or Purchaser, will vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of the Company
and Purchaser shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation and may be enforced against
the Surviving Corporation to the same extent as if such debts, liabilities,
obligations, restrictions, disabilities and duties had been incurred or
contracted by the Surviving Corporation. The title to any real estate or any
interest therein vested, by deed or otherwise, in the Company or Purchaser shall
not revert or in any way become impaired by reason of the Merger.
SECTION 2.4 ARTICLES OF INCORPORATION AND BY-LAWS.
(a) The Articles of Incorporation of Purchaser, as in effect
immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as
provided by applicable law and such Articles of Incorporation; provided,
however, that, at the Effective Time, Article I of the Articles of
Incorporation of the Surviving Corporation shall be amended to read as
follows: "The name of the corporation is Magna Lomason Corporation."
(b) The By-Laws of Purchaser, as in effect immediately prior to the
Effective Time, will be the By-Laws of the Surviving Corporation until
amended in accordance therewith and with applicable law.
SECTION 2.5 DIRECTORS. The directors of Purchaser at the Effective Time
will be the directors of the Surviving Corporation, each to hold office from the
Effective Time in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation and until his or her successor is duly elected and
qualified.
SECTION 2.6 OFFICERS. The officers of Purchaser at the Effective Time will
be the officers of the Surviving Corporation (which will include certain of the
officers of the Company at such time), each to hold office from the Effective
Time in accordance with the Articles of Incorporation and By-Laws of the
Surviving Corporation and until his or her successor is duly appointed and
qualified.
ARTICLE III
CONVERSION OF SECURITIES
SECTION 3.1 CONVERSION OF CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part, of the holder of any
shares of capital stock of the Company or of Purchaser:
(a) Each issued and outstanding share of common stock of Purchaser
shall be converted into one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
(b) All shares of Company Common Stock that are owned, directly or
indirectly, by any Subsidiary (as hereinafter defined) of the Company, any
shares of Company Common Stock owned by Parent, Purchaser or any wholly
owned Subsidiary of Parent and any shares of Company Common Stock that have
been acquired by the Company and are subject to an outstanding pledge by
the Company
4
<PAGE> 8
immediately prior to the Effective Time to secure the future payment of the
purchase price therefor will be cancelled and will cease to exist and no
shares of capital stock of Parent or Purchaser or other consideration will
be delivered in exchange therefor. As used in this Agreement, "Subsidiary"
means, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such party or any
other Subsidiary of such party is a general partner (excluding any
partnership, the general partnership interests of which held by such party
or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions
with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party, by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
References to a wholly owned Subsidiary of an entity include a Subsidiary
all the common equity of which is owned directly or through wholly owned
Subsidiaries by such entity.
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
in accordance with Section 3.1(b)) shall be converted into the right to
receive from the Surviving Corporation in cash, without interest, the Per
Share Amount paid pursuant to the Offer (the "Merger Consideration"). All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and each holder of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented any such shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration.
SECTION 3.2 EXCHANGE OF CERTIFICATES. (a) Paying Agent. Parent shall
authorize a commercial bank (or such other person or persons as shall be
acceptable to Parent and the Company) to act as paying agent hereunder (the
"Paying Agent") for the payment of the Merger Consideration upon surrender of
the Certificates.
(b) Surviving Corporation to Provide Funds. Parent shall take all steps
necessary to enable and cause the Surviving Corporation to provide to the Paying
Agent on a timely basis, as and when needed after the Effective Time, funds
necessary to pay for the shares of Company Common Stock pursuant to Section 3.1.
(c) Exchange Procedures. As soon as practicable after the Effective Time,
the Paying Agent shall mail to each holder of record of a Certificate, other
than Parent, the Company and any Subsidiary of Parent or the Company, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual delivery
of the Certificates to the Paying Agent, and shall be in a form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by the Surviving
Corporation, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the amount of
cash into which the shares of Company Common Stock theretofore represented by
such Certificate shall have been converted pursuant to Section 3.1, and the
Certificates so surrendered shall forthwith be cancelled. No interest will be
paid or will accrue on the cash payable upon the surrender of any Certificate.
If payment is to be made to a person other than the person in whose name the
Certificate so surrendered is registered, it shall be a condition of payment
that such Certificate shall be properly endorsed or otherwise in proper form for
transfer and that the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other than the
registered holder of such Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the amount of cash, without interest, into which the
shares of Company Common Stock theretofore represented by such Certificate shall
have been converted pursuant to Section 3.1. Notwithstanding the foregoing,
neither the Paying Agent nor any party shall be liable to a former shareholder
of the Company for any cash or interest delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws. If any
5
<PAGE> 9
Certificates shall not have been surrendered prior to two years after the
Effective Time (or immediately prior to such earlier date on which any payment
pursuant to this Section 3.2 would otherwise escheat to or become the property
of any governmental body of agency), the payment in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
SECTION 3.3 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All cash
paid upon the surrender of Certificates in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares of Company Common Stock theretofore represented by such
Certificates.
SECTION 3.4 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no registration of
transfers of shares of Company Common Stock shall thereafter be made on the
stock transfer books of the Surviving Corporation. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged as provided in this Article III.
SECTION 3.5 WITHHOLDING. The Surviving Corporation or the Paying Agent will
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as the Surviving Corporation or the Paying Agent is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or any provision of state, local
or foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or the Paying Agent, such withheld amounts will be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or the Paying Agent.
SECTION 3.6 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and subject to such other conditions as the Board of
Directors of the Surviving Corporation may impose, the Surviving Corporation
shall issue in exchange for such lost, stolen or destroyed Certificate the
Merger Consideration deliverable in respect thereof as determined in accordance
herewith. When authorizing such issue of the Merger Consideration in exchange
therefor, the Board of Directors of the Surviving Corporation (or any authorized
officer thereof) may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to give the Surviving Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Surviving
Corporation with respect to the Certificate alleged to have been lost, stolen or
destroyed.
SECTION 3.7 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations in the Merger, all such deeds,
bills of sale, assignments and assurances and do, in the name and on behalf of
such Constituent Corporations, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties or
assets of such Constituent Corporation and otherwise to carry out the purposes
of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Purchaser as follows:
SECTION 4.1 ORGANIZATION.
(a) Each of the Company and each of its Subsidiaries is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
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organization and has all requisite corporate or partnership power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power and authority
would not, individually or in the aggregate, have a material adverse effect
(as such term is used in this Agreement, as provided in Section 9.5) on the
Company and its Subsidiaries or on the ability of the Company to perform
its obligations under this Agreement. Each of the Company and its
Subsidiaries is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, individually or
in the aggregate, have a material adverse effect on the Company and its
Subsidiaries or on the ability of the Company to perform its obligations
under this Agreement.
(b) The Company has heretofore made available to Parent a complete and
correct copy of the charter and by-laws or comparable organization
documents, each as amended to date, of the Company and each of its
Subsidiaries. Such charters, by-laws and comparable organizational
documents are in full force and effect. Neither the Company nor any
Subsidiary of the Company is in violation of any provision of its charter,
by-laws or comparable organizational documents.
SECTION 4.2 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of (i) 10,000,000 shares of Company Common Stock of
which, as of August 21, 1996, 4,245,127 shares were issued and outstanding
and (ii) 500,000 shares of Preferred Stock, without par value, of which, as
of the date hereof, none were issued or outstanding. No shares of capital
stock of the Company have been acquired by the Company that are subject to
outstanding pledges to secure the future payment of the purchase price
therefor. As of August 21, 1996, the Company had reserved for issuance (i)
6,375 shares and 222,300 shares of Company Common Stock upon exercise of
options then outstanding under the Company's 1982 Incentive Stock Option
Plan and under the Company's 1990 Stock Option Plan, respectively
(collectively, the "Company Option Plans"), and (ii) 98,050 shares of
Company Common Stock in respect of future grants of options which may be
made pursuant to the Company Option Plans. Since August 21, 1996, the
Company has not issued any shares of its capital stock, except for the
issuance of Company Common Stock upon the exercise of options granted under
the Company Option Plans which were outstanding on August 21, 1996 and has
not repurchased, redeemed or otherwise retired any shares of its capital
stock. All the outstanding shares of the Company's capital stock are, and
all shares which may be issued pursuant to the Company Option Plans will
be, when issued and paid for in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and nonassessable and
not subject to any preemptive rights of third parties in respect thereto.
(b) Each of the outstanding shares of capital stock of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid,
nonassessable and free of any preemptive rights in respect thereto, and,
except as described in Section 4.2(b) of the disclosure letter dated the
date hereof from the Company to Parent (the "Company Disclosure Letter"),
all such shares are owned by the Company or by a Subsidiary of the Company
free and clear of any lien, claim, option, charge, security interest,
limitation on voting rights or encumbrance of any kind (collectively,
"Liens"). Except for the capital stock of its Subsidiaries described in
Section 4.2(b) of the Company Disclosure Letter, the Company does not own,
directly or indirectly, any capital stock or other ownership interest in
any corporation, partnership, trust, limited liability company or other
entity.
(c) As of the date of this Agreement, except as described in Section
4.2(c) of the Company Disclosure Letter, (i) no bonds, debentures, notes or
other indebtedness having the right to vote under ordinary circumstances
(or convertible into securities having such right to vote) ("Voting Debt")
of the Company or any of its Subsidiaries are issued or outstanding, (ii)
except as set forth above, there are no existing options, warrants, calls,
subscriptions or other rights or other agreements or commitments of any
character (collectively, "Warrants") relating to the issued or unissued
capital stock or Voting Debt of the Company or any of its Subsidiaries or
obligating the Company or any of its Subsidiaries to issue, transfer
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or sell or cause to be issued, transferred or sold any shares of capital
stock or Voting Debt of, or other equity interests in, the Company or of
any of its Subsidiaries or securities convertible into or exchangeable for
such shares, Voting Debt or equity interests or obligating the Company or
any of its Subsidiaries to grant, extend or enter into any such Warrant and
(iii) there are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its Subsidiaries or any
Warrants.
SECTION 4.3 AUTHORITY. The Company has the requisite power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby, subject to, with respect to the Merger, the approval and
adoption of this Agreement and the Merger by the affirmative vote of the holders
of Company Common Stock entitled to cast at least a majority of the total number
of votes entitled to be cast by holders of Company Common Stock. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the Merger and of the other transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated, other than, with respect to the Merger, the approval and adoption
of this Agreement and the Merger by the Company's shareholders as described in
the preceding sentence. This Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery hereof
by Parent and Purchaser, constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
as to enforceability to bankruptcy, insolvency, reorganization, fraudulent
conveyance and similar laws relating to creditors' rights and to general
principles of equity.
SECTION 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, arbitral tribunal, administrative
agency or commission or other governmental or regulatory authority or
agency, domestic or foreign (a "Governmental Entity"), or compliance with
any law, statute, ordinance, rule or regulation that conditions, restricts,
prohibits or requires any notification or disclosure with respect to, or is
triggered by, the transfer, sale, lease or closure of any property, is
required by or with respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the Merger or the other transactions
contemplated hereby, except for (i) the filing of a premerger notification
and report form by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the filing with
the SEC of the Schedule 14D-9 and, if required by applicable law, the
Company Proxy Statement (as defined in Section 4.6), and such reports as
may be required by Section 13(a) of the Exchange Act in connection with
this Agreement and the transactions contemplated hereby and (iii) the
filing of the Certificate of Merger with the Filing Office and appropriate
documents with the relevant authorities of other states in which the
Company is qualified to do business. Except as described in Section 4.4 of
the Company Disclosure Letter, neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby will conflict with or result in any violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation
or acceleration or to loss of a material benefit) under, or result in the
creation of any Lien on any property or asset of the Company or any of its
Subsidiaries pursuant to (any such conflicts, violations, breaches,
defaults, rights, or creations of Liens are herein referred to,
collectively, as "Violations"), any of the terms, conditions or provisions
of (i) the respective certificates or articles of incorporation or by-laws
or comparable organizational documents of the Company or any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument, permit,
concession, franchise or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or affected or (iii) any judgment, order,
writ, injunction, decree, law, statute, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, except, in the case of clause (ii), for Violations
that would not prevent or impair the consummation of the Offer or the
Merger in any respect and would not,
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individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries or on the ability of the Company to perform
its obligations under this Agreement.
(b) Except as described in the Company SEC Documents (as defined in
Section 4.5) filed prior to the date of this Agreement, neither the Company
nor any of its Subsidiaries is in default under or in violation of (i) any
judgment, order, writ, injunction, decree, law, statute, ordinance, rule or
regulation applicable to the Company or any of its Subsidiaries or their
respective properties or assets or (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease, license, contract, agreement or other
instrument, permit, concession, franchise or obligation to which the
Company or any of its Subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound or affected,
except in each case for any such defaults or violations which would not,
individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries or on the ability of the Company to perform
its obligations under this Agreement.
SECTION 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1993,
the Company has filed with the SEC all forms, reports, schedules, statements and
other documents required to be filed by it under the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act"), and has heretofore
made available to Parent true and complete copies of all such forms, reports,
schedules, statements and documents (as they have been amended or supplemented
since the time of their filing and including all such forms, reports, schedules,
statements and documents filed with the SEC after the date of this Agreement,
collectively, the "Company SEC Documents"). The Company SEC Documents, including
without limitation any financial statements or schedules included or
incorporated by reference therein, (i) did not at the time they were filed, or
will not at the time they are filed, contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) complied or will be prepared in
compliance in all material respects with the applicable requirements of the
Exchange Act or the Securities Act, as the case may be, and the applicable rules
and regulations thereunder. The financial statements of the Company included or
incorporated by reference in the Company SEC Documents comply or will be
prepared in compliance in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been or will be prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, to normal year-end audit adjustments) and
fairly present or will fairly present (subject, in the case of the unaudited
statements, to normal year-end audit adjustments) the consolidated financial
position of the Company and its Subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended. Except as reflected, reserved against or otherwise disclosed in the
financial statements of the Company included in the Company SEC Documents or as
otherwise disclosed in the Company SEC Documents, in each case filed prior to
the date of this Agreement, neither the Company nor any of its Subsidiaries has
any liabilities or obligations (absolute, accrued, fixed, contingent or
otherwise) material to the Company and its Subsidiaries, other than liabilities
incurred in the ordinary course of business consistent with past practice.
Section 4.5 of the Company Disclosure Letter sets forth the amounts that would
appear on the Company's consolidated balance sheet as of the date of this
Agreement as "Long-term debt", including current portions.
SECTION 4.6 INFORMATION IN DISCLOSURE DOCUMENTS.
(a) Neither the Schedule 14D-9 nor the information statement to be
filed by the Company in connection with the Offer pursuant to Rule 14f-1
under the Exchange Act (the "Information Statement") nor any of the
information supplied by the Company or any of its Subsidiaries specifically
for inclusion in the Offer Documents will, at the respective times the
Schedule 14D-9, the Information Statement or the Offer Documents are filed
with the SEC or are first published, sent or given to shareholders, as the
case may be, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Schedule 14D-9 and the Information
Statement will comply as to form in all material respects with the
applicable requirements of the Exchange Act and the applicable rules and
regulations thereunder.
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(b) The proxy or information statement relating to any meeting of the
Company's shareholders that may be required to be held in connection with
the Merger (as it may be amended from time to time, the "Company Proxy
Statement") will not, at the date mailed to the Company's shareholders and
at the time of the meeting of shareholders to be held in connection with
the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies or
otherwise. The Company Proxy Statement will, when filed with the SEC by the
Company, comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
SECTION 4.7 LITIGATION. There is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of the Company, threatened,
against the Company or any of its Subsidiaries before any Governmental Entity
which (i) individually or in the aggregate, is reasonably likely to have a
material adverse effect on the Company and its Subsidiaries, taken as a whole or
(ii) seeks to, or is reasonably likely to, delay or prevent the consummation of
the Offer, the Merger or the other transactions contemplated by this Agreement.
Neither the Company nor any of its Subsidiaries is subject to any outstanding
order, writ, injunction or decree which (i) individually or in the aggregate, is
reasonably likely to have a material adverse effect on the Company and its
Subsidiaries, taken as a whole or (ii) seeks to, or is reasonably likely to,
delay or prevent the consummation of the Offer, the Merger or the other
transactions contemplated by this Agreement.
SECTION 4.8 NO MATERIAL ADVERSE CHANGE; MATERIAL AGREEMENTS. Except as
disclosed in the Company SEC Documents filed with the SEC prior to the date of
this Agreement and except as described in Section 4.8 of the Company Disclosure
Letter, (i) since December 31, 1995, there has not been any action which would
be prohibited under Section 6.1 were it to occur after the date of this
Agreement (except for the payment by the Company of its regular quarterly
dividend on March 29, 1996, and June 28, 1996, to holders of record of the
Company Common Stock) or any material adverse change with respect to the Company
and its Subsidiaries and (ii) as of the date of this Agreement, neither the
Company nor any of its Subsidiaries has become a party to any agreement or
amendment to an existing agreement which would be required to be filed by the
Company as an exhibit to its next Annual Report on Form 10-K. Except as
described in Section 4.8 of the Company Disclosure Letter, the transactions
contemplated by this Agreement will not constitute a "change of control" under,
require the consent from or the giving of notice to any third party pursuant to,
or accelerate the vesting or repurchase rights under, the terms, conditions or
provisions of any loan or credit agreement, note, bond, mortgage, indenture,
license, lease, contract, agreement or other instrument, permit, concession,
franchise or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound or affected. The Company has furnished to Parent all the agreements
which set forth the amounts payable to the officers of the Company and its
Subsidiaries identified in Section 4.8 of the Company Disclosure Letter as a
result of the transactions contemplated by this Agreement and/or any subsequent
employment termination.
SECTION 4.9 TAXES.
(a) Each of the Company and its Subsidiaries has duly filed all Tax
Returns (as defined in Section 4.9(b) ) required to be filed by it, all
such Tax Returns are complete and accurate and disclose all Taxes (as
defined in Section 4.9(b) ) required to be paid by the Company and its
Subsidiaries, and the Company or its Subsidiaries has duly paid or caused
to be paid all Taxes shown to be due on such Tax Returns in respect of the
periods covered by such returns and has made adequate provision in the
Company's financial statements for payment of all Taxes anticipated to be
payable in respect of all taxable periods or portions thereof ending on or
before the date hereof. Section 4.9 of the Company Disclosure Letter lists
the periods through which the Tax Returns required to be filed by the
Company or its Subsidiaries have been examined by the Internal Revenue
Service (the "IRS") or other appropriate taxing authority, or the period
during which any assessments may be made by the IRS or other appropriate
taxing authority has expired. All deficiencies and assessments asserted as
a result of such examinations or other audits by federal, state, local or
foreign taxing authorities have been paid, fully settled or adequately
provided for in the Company's financial statements, and no issue or claim
has been
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asserted in writing for Taxes by any taxing authority for any prior period
(and to the best of the Company's knowledge no basis exists therefor), the
adverse determination of which would result in a deficiency which would
have a material adverse effect on the Company and its Subsidiaries, taken
as a whole, other than those heretofore paid or provided for in the
Company's financial statements. There are no outstanding agreements or
waivers extending the statutory period of limitation applicable to any Tax
Return of the Company or its Subsidiaries. There are no liens for Taxes
upon the assets of the Company or of any of its Subsidiaries except liens
relating to current Taxes not yet due. No transaction contemplated by this
Agreement is subject to withholding under Section 1445 of the Code and to
the knowledge of the Company, no stock transfer Taxes, sales Taxes, use
Taxes, real estate transfer Taxes, or other similar Taxes will be imposed
on the transactions contemplated by this Agreement. All Taxes which the
Company or any of its Subsidiaries have been required by law to withhold or
to collect for payment have been duly withheld or collected and paid to the
appropriate taxing authority. Except as described in Section 4.9(a) of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries
is a party to any agreement, contract or arrangement that could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code. Except as
described in Section 4.9 of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries (i) has been a member of a group filing
consolidated returns for federal income tax purposes, or (ii) is a party to
a tax sharing or tax indemnity agreement or any other agreement of a
similar nature that remains in effect.
(b) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, use, transfer, license,
payroll, employment, withholding, environmental, capital stock, ad valorem,
alternate or add-on minimum and franchise taxes, imposed by the United
States or any state, local or foreign government or subdivision or agency
thereof, including any interest, penalties or additions thereto. For
purposes of this Agreement, the term "Tax Return" means any report, return
or other information or document required to be supplied to a taxing
authority in connection with Taxes.
SECTION 4.10 BENEFIT PLANS; LABOR MATTERS. (a) With respect to each
"employee benefit plan" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), maintained or contributed to
by the Company, or any entity treated as a single employer under Section 414 of
the Code ("ERISA Affiliates") with the Company, or with respect to which the
Company or any of its ERISA Affiliates is or will be required to make any
payment ("ERISA Benefit Plans"), and any retirement, savings, profit sharing,
deferred compensation, severance, stock ownership, stock purchase, stock option,
performance, bonus, incentive, vacation or holiday pay, hospitalization or other
medical, disability, life or other insurance, or other welfare benefit or fringe
benefit plan, policy, trust, understanding or arrangement of any kind, whether
written or oral, or agreement, understanding or arrangement of any kind, whether
written or oral, with or for the benefit of any present or prior officer,
director, employee, agent or consultant (including, without limitation, each
employment, compensation, deferred compensation, severance or consulting
agreement or arrangement, and any agreement or arrangement associated with a
change in ownership or control of the Company, but excluding employment
agreements terminable by the Company without premium or penalty on notice of 30
days or less under which the only monetary obligation of the Company is to make
current wage or salary payments and provide current fringe benefits), with
respect to which the Company is or will be required to make any payment
(together with the ERISA Benefit Plans, collectively referred to as the "Company
Benefit Plans"), the Company has delivered to Purchaser a true and correct copy
of (i) the annual reports (Form 5500) filed with the IRS for the most recent
three plan years, (ii) the plan document and all amendments thereto for such
Company Benefit Plan, (iii) each trust agreement, group annuity contract and
insurance policy, if any, relating to such Company Benefit Plan and (iv) each
actuarial report or valuation relating to such Company Benefit Plan subject to
Title IV of ERISA. Each Company Benefit Plan (i) has been administered in
accordance with its terms and (ii) complies in form and has been administered in
accordance with any and all applicable state and federal laws, including ERISA
and the Code, so as not to give rise to any liability that would have a material
adverse effect on the Company and its Subsidiaries and that would result from
failure to so comply in form or so administer such Company Benefit Plans. Each
Company Benefit Plan and each trust that is intended to qualify under Section
401(a) and 501(a) of the Code
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is so qualified or, if not so qualified, the failure to be so qualified would
not give rise to any liability that would have a material adverse effect on the
Company and its Subsidiaries. Section 4.10(a) of the Company Disclosure Letter
sets forth a true and complete list of each Company Benefit Plan.
(b) All contributions and premiums required by law or by the terms of any
Company Benefit Plan or any agreement relating thereto have been timely made
(without regard to any waiver granted with respect thereto).
(c) With respect to the Company Benefit Plans, individually and in the
aggregate, no event has occurred, and neither the Company nor any of its ERISA
Affiliates has knowledge of any condition or set of circumstances in connection
with which the Company or any of its ERISA Affiliates could be subject to any
liability that would have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, under ERISA, the Code or any other applicable
law, including of any "reportable event" (as defined in Section 4043(b) of
ERISA) or any "prohibited transaction" (as defined in Section 406 of ERISA and
Section 4975(c) of the Code).
(d) With respect to the Company Benefit Plans, individually and in the
aggregate, there has not occurred any "accumulated funding deficiency" (within
the meaning of Section 412 of the Code), neither the Company nor any of its
ERISA Affiliates has failed to make a payment required under Section 412 of the
Code before the applicable due date, and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
financial statements of the Company or any of its ERISA Affiliates, which would
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole.
(e) Except as described in Section 4.10(e) of the Company Disclosure
Letter, there have been no violations of ERISA with respect to the filing of
applicable returns, reports, documents or notices regarding any of the Company
Benefit Plans with the Secretary of Labor or the Secretary of Treasury or the
furnishing of such notices or documents to the participants or beneficiaries of
the Company Benefit Plans that have not subsequently been resolved or corrected
which would have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
(f) There are no pending legal proceedings that have been asserted or
instituted against any Company Benefit Plan, the assets of any such plan or the
Company, or the plan administrator or fiduciary of any Company Benefit Plan with
respect to the operation of any such plan (other than routine, uncontested
benefit claims), and there are no facts or circumstances which could form the
basis for any such legal proceedings. Neither the Company nor any fiduciary of
any plan which is not a multiemployer plan has engaged in a nonexempt prohibited
transaction described in Section 406 of ERISA or 4975 of the Code.
(g) Each Company Benefit Plan complies in all material respects with all
applicable requirements of (i) the Age Discrimination in Employment Act of 1967,
as amended, and the regulations thereunder and (ii) Title VII of the Civil
Rights Act of 1964, as amended, and the regulations thereunder. Each group
medical plan sponsored by the Company materially complies with the health care
continuation provisions of Part 6 of Title I of ERISA ("COBRA") and the Medicare
Secondary Payor Provisions of Section 1826(b) of the Social Security Act, and
the regulations promulgated thereunder.
(h) There are no Company Benefit Plans that are multiemployer plans (as
described in Section 3(37) of ERISA).
(i) The Company has no potential liability under Sections 4063, 4064 or
4069 of ERISA.
(j) Except as described in Section 4.10(j) of the Company Disclosure
Letter, the Company has no obligations under any of the Company Benefit Plans to
provide health or life insurance benefits to its prior employees (or their
beneficiaries or dependents) for periods after termination of employment, except
as specifically required by COBRA.
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(k) Except as described in Section 4.10(a) or (k) of the Company Disclosure
Letter or in the Company SEC Documents filed prior to the date of this
Agreement, neither the Company nor any of its Subsidiaries is a party to or
bound by any oral or written:
(i) employee collective bargaining agreement, employment agreement
(other than employment agreements terminable by the Company or any of its
Subsidiaries without premium or penalty on notice of 30 days or less under
which the only monetary obligation of the Company or any of its
Subsidiaries is to make current wage or salary payments and provide current
fringe benefits), consulting, advisory or service agreement or deferred
compensation agreement;
(ii) contract or agreement with any officer, director or employee
(other than employment agreements disclosed in response to clause (i) or
excluded from the scope of clause (i)), agent, or attorney-in-fact of the
Company or any of its Subsidiaries; or
(iii) stock option, stock purchase, bonus or other incentive plan or
agreement.
(1) Except as described in Section 4.10(l) of the Company Disclosure
Letter, the Company and each of its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations which relate to wages,
hours, discrimination in employment and collective bargaining and to its
operations and none of them is liable in any material respect for any arrears of
wages or any taxes or penalties for failure to comply with any of the foregoing.
The Company believes that its and its Subsidiaries' relations with their
employees are satisfactory. Neither the Company nor any of its Subsidiaries are
a party to, and none of such parties are affected by or threatened with, any
dispute or controversy with a union or with respect to unionization or
collective bargaining or other labor matters involving its employees. Neither
the Company nor any of its Subsidiaries are materially affected by any dispute
or controversy with a union or with respect to unionization or collective
bargaining involving any supplier or customer. Section 4.10(l) of the Company
Disclosure Letter sets forth a description of any union organizing or election
activities involving any non-union employees of the Company and its Subsidiaries
which have occurred since December 31, 1995 or, to the knowledge of the Company,
are threatened as of the date hereof.
(m) Except as described in Section 4.10(m) of the Company Disclosure
Letter, none of the Offer, the Merger or any other transaction contemplated by
this Agreement will, whether by itself or as a result of any subsequent
termination of employment, result in the acceleration of entitlement to, or the
payment of, any benefit or compensation.
(n) Except as described in Section 4.10(n) of the Company Disclosure
Letter, neither the Company nor any of its ERISA Affiliates has during the
six-year period prior to the Closing Date maintained, contributed to or been
required to make any payment with respect to any employee pension benefit plan
(as defined in Section 3(2) of ERISA).
SECTION 4.11 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of The Bridgeford Group, its financial advisor, to the effect that, as
of August 29, 1996, the consideration to be received in the Offer and the
Merger, taken as a whole, by the Company's shareholders is fair to the Company's
shareholders from a financial point of view, a copy of which opinion has been
delivered to Parent.
SECTION 4.12 CERTAIN ANTITAKEOVER PROVISIONS NOT APPLICABLE. The Board of
Directors of the Company has unanimously approved the Offer, the Merger and this
Agreement; this Agreement constitutes a "memorandum of understanding" within the
meaning of paragraph (B) (1) of the Article VI of the Restated Articles of
Incorporation of the Company and, accordingly, the provisions of paragraph (A)
of such Article do not apply to the Offer, the Merger, this Agreement or any of
the transactions contemplated hereby. In addition, the provisions of such
paragraph (A) do not apply to the execution and delivery of the Stock Option
Agreement by the parties thereto or any of the transactions contemplated
thereby. The requirements of Section 780 of the MBCA do not apply to the Offer,
the Merger, this Agreement or any of the transactions contemplated hereby
(including the execution and delivery of the Stock Option Agreement by the
parties thereto or any of the transactions contemplated thereby), pursuant to
Section 783 of the MBCA. On August 29, 1996, the Company amended its By-laws
such that Chapter 7B of the MBCA does not apply to any "control share
acquisition" (as such term is used in such Chapter 7B) of shares of the Company,
pursuant
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to Section 794 of the MBCA; accordingly, none of the Offer, the Merger, this
Agreement or any of the transactions contemplated hereby (including the
execution of the Stock Option Agreement by the parties thereto or any of the
transactions contemplated thereby) is subject to such Chapter 7B. No takeover
statute or similar statute or regulation in the State of Michigan or, to the
knowledge of the Company, any other state or other jurisdiction, applies or
purports to apply to the Offer, the Merger or to this Agreement, or any of the
transactions contemplated hereby (including the execution and delivery of the
Stock Option Agreement by the parties thereto or any of the transactions
contemplated thereby).
SECTION 4.13 INTELLECTUAL PROPERTY. Section 4.13 of the Company Disclosure
Letter contains a correct and complete list of all patents, trademarks, trade
names, copyright registrations, mask work registrations and applications
therefor now or heretofore used or presently proposed to be used in the conduct
of the businesses of the Company and its Subsidiaries, excluding computer
software which is widely available. Except as described in Section 4.13 of the
Company Disclosure Letter, (i) the Company and its Subsidiaries own or possess
adequate licenses or other valid rights to use (without the making of any
payment to others or the obligation to grant rights to others in exchange) all
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyright registrations, knowhow and other proprietary information
("Rights") necessary to the conduct of their businesses as presently being
conducted, except where the failure to have such licenses or rights would not
have a material adverse effect on the Company; (ii) neither the Company nor any
of its Subsidiaries has licensed any Rights to any third party; (iii) the
validity of such Rights and the title thereto of the Company and its
Subsidiaries has not been questioned in any litigation to which the Company or
any of its Subsidiaries is a party, nor, to the knowledge of the Company, is any
such litigation threatened; nor have any claims to such effect been made to the
Company or any of its Subsidiaries; (iv) the conduct of the businesses of the
Company and its Subsidiaries as now conducted does not and will not conflict
with Rights of others in any way which could have a material adverse effect on
the Company and (v) no proceedings are pending against the Company or any of its
Subsidiaries nor, to the Company's knowledge, are any proceedings threatened
against the Company or any of its Subsidiaries alleging any violation of Rights
of any third party. The Company does not know of (x) any use that has heretofore
been or is now being made of any Rights owned by the Company or any of its
Subsidiaries, except by the Company or any of its Subsidiaries or by an entity
duly licensed by it to use the same under an agreement described in Section 4.13
of the Company Disclosure Letter or (y) any material infringement of any Right
owned by or licensed by or to the Company. All Rights heretofore owned or held
by any employee or officer of the Company or any of its Subsidiaries and used in
any business of the Company or any of its Subsidiaries in any manner have been
duly and effectively transferred to the Company or such Subsidiary. The
consummation of the Offer and the Merger and the transactions contemplated
hereby will not alter or impair the rights and interests of the Company in any
of the items listed in Section 4.13 of the Company Disclosure Letter, and the
Surviving Corporation will have the same rights and interests in such items as
the Company will have immediately prior to the Effective Time.
SECTION 4.14 VOTES REQUIRED. The affirmative vote of the holders of at
least a majority of the outstanding shares of Company Common Stock entitled to
vote with respect to the Merger, is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve the Merger, this
Agreement and the transactions contemplated hereby.
SECTION 4.15 BROKERS. No broker, investment banker or other person, other
than The Bridgeford Group, the fees and expenses of which are described in the
engagement letter between the Company and The Bridgeford Group dated May 20,
1996, a true, correct and complete copy of which has been provided by the
Company to Parent, and will be paid by the Company, is entitled to any broker's,
finder's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
SECTION 4.16 CERTAIN AGREEMENTS. Except as described in Section 4.16 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the
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occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement.
SECTION 4.17 ENVIRONMENTAL MATTERS. Except as described in Section 4.17 of
the Company Disclosure Letter:
(i) the operations of the Company and its Subsidiaries comply in all
material respects with all applicable federal, state and local laws or
regulations relating to or addressing the environment, health or safety
("Environmental Laws"), including but not limited to the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. sec.sec.
9601 et seq., any amendments thereto, any successor statutes, and any
regulations promulgated thereunder ("CERCLA"); the Occupational Safety and
Health Act, 29 U.S.C. sec.sec. 651 et seq., any amendments thereto, any
successor statutes, and any regulations promulgated thereunder ("OSHA");
and the Resource Conservation and Recovery Act, 42 U.S.C. sec.sec. 6901 et
seq., any amendments thereto, any successor statutes, and any regulations
promulgated thereunder ("RCRA"); and any state equivalents thereof;
(ii) the Company and each of its Subsidiaries have obtained, or, as
described in Section 4.17 of the Company Disclosure Letter, are in the
process of obtaining environmental, health and safety licenses, permits,
approvals and other authorizations from a Governmental Entity which are
necessary to entitle it to own or lease, operate and use its assets and to
carry on and conduct its business substantially as currently conducted
("Governmental Permits"), and all such Governmental Permits and
applications are listed in Section 4.17 of the Company Disclosure Letter
and, to the knowledge of the Company, the Company and each of its
Subsidiaries are in compliance in all material respects with all terms and
conditions of such permits;
(iii) neither the Company nor any of its Subsidiaries nor any of the
Company's or such Subsidiaries' past or present property (whether owned or
leased) or operations is subject to any agreement with, or, to the
knowledge of the Company, any investigation by, any individual,
corporation, partnership, joint venture, limited liability company,
association, joint-stock company, trust, or unincorporated organization
("Person") or Governmental Entity respecting: (1) the investigation,
cleanup, removal, treatment or disposal of any waste, pollutant, hazardous
or toxic substance or waste, petroleum, petroleum-based substance or waste,
special waste or any constituent of any such substance or waste
("Contaminants"); (2) the prevention of a release, spill, emission, leak,
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration of Contaminants into the indoor or outdoor environment
("Release") or threatened Release or minimization of a further Release of
Contaminants; (3) any claim of losses, costs, obligations, liabilities,
settlement payments, awards, judgments, fines, penalties, damages,
expenses, deficiencies or other charges incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
arising from the Release or threatened Release of a Contaminant; or (4) any
Environmental Law;
(iv) neither the Company nor any of its Subsidiaries are subject to
any notice, claim or judicial or administrative proceeding, order,
judgment, decree or settlement alleging or addressing (i) a violation of,
or liability under, any Environmental Law or (ii) liability or damage in
connection with a Release or threatened Release of a Contaminant;
(v) the Company and its Subsidiaries have not:
(a) reported a Release pursuant to any Environmental Law;
(b) filed a notice pursuant to Section 103(c) of CERCLA;
(c) filed a notice pursuant to Section 3010 of RCRA, indicating the
generation of any hazardous waste, as that term is defined under CFR
Part 261 or any state equivalent; or
(d) filed any notice under any applicable Environmental Law
reporting a substantial violation of any applicable Environmental Law;
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(vi) there is not now, nor to the best knowledge of the Company has
there ever been, on or in any property owned or leased by the Company or
any of its Subsidiaries ("Company Property"):
(a) any treatment, recycling, storage or disposal of any hazardous
waste, as that term is defined under 40 CFR Part 261 or any state
equivalent, that requires or required a Governmental Permit pursuant to
Section 3005 of RCRA; or
(b) any underground storage tank regulated under RCRA or surface
impoundment or landfill or waste pile (as each such term is defined
under RCRA).
(vii) polycholorinated biphenyls (PCBs), as that term is defined under
40 C.F.R. 761, are not currently purchased for use by the Company or any of
its Subsidiaries in pigments, hydraulic oils, electrical transformers or
other equipment;
(viii) no lien, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, covenant or other
restrictions of any kind in favor of any Governmental Entity for (i) any
liability under any Environmental Law or (ii) damages arising from, or
costs incurred by such Governmental Entity in response to, a Release or
threatened Release of a Contaminant into the environment, has (in either
case (i) or (ii)) attached to any Company Property;
(ix) any known asbestos-containing material which is on or part of any
Company Property is in good repair and its presence or condition does not
violate any currently applicable Environmental Law;
(x) none of the products which the Company or any of its Subsidiaries
manufacture, distribute or sell, now or in the past, contains asbestos or
asbestos-containing material; and
(xi) the cost to the Company and its Subsidiaries during the next five
years of complying with Environmental Laws currently in effect (including,
but not limited to, the Clean Air Act Amendments of 1990) is not reasonably
expected to have a material adverse effect on the Company or any of its
Subsidiaries, taken as a whole.
SECTION 4.18 TANGIBLE PROPERTY; REAL PROPERTY AND LEASES. (a) The Company
and its Subsidiaries have sufficient title to all their tangible properties and
assets to conduct their respective businesses as currently conducted or as
contemplated to be conducted, with only such exceptions as, individually or in
the aggregate, would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
(b) Except as described in Section 4.18(b) of the Company Disclosure
Letter, each parcel of real property owned or leased by the Company or any of
its Subsidiaries (i) is owned or leased free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind
(collectively, "Encumbrances"), other than (A) Encumbrances for current taxes
and assessments not yet past due, (B) inchoate mechanics' and materialmen's
Encumbrances for construction in progress, (C) workmen's, repairmen's,
warehousemen's and carriers' Encumbrances arising in the ordinary course of
business of the Company or such Subsidiary consistent with past practice, and
(D) all matters of record, Encumbrances and other imperfections of title which,
individually or in the aggregate, would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole and (ii) is neither subject
to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment
of compensation therefor, nor, to the best knowledge of the Company, has any
such condemnation, expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of the
Company or any of its Subsidiaries to which the Company or any such Subsidiary
is a party requiring rental payments in excess of $50,000 during the period of
the lease and all amendments and modifications thereto are in full force and
effect and have not been further modified or amended, and there exists no
default under any such lease by the Company or any such Subsidiary, nor any
event which with notice or lapse of time or both would constitute a default
thereunder by the Company or any such Subsidiary, except as, individually or in
the aggregate, would not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser represent and warrant to the Company as follows:
SECTION 5.1 ORGANIZATION. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failure to be so organized, existing or
in good standing or to have such power and authority would not, individually or
in the aggregate, have a material adverse effect on Parent and its Subsidiaries.
SECTION 5.2 AUTHORITY. Each of Parent and Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement by each of Parent (as a party hereto and as the
sole shareholder of Purchaser) and Purchaser and the consummation of the Merger
and of the other transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of each of Parent and Purchaser. This
Agreement has been duly executed and delivered by each of Parent and Purchaser
and, assuming the due authorization, execution and delivery hereof by the
Company, constitutes a valid and binding obligation of Parent and Purchaser,
enforceable against Parent and Purchaser in accordance with its terms, subject
as to enforceability to bankruptcy, insolvency, reorganization, fraudulent
conveyance and similar laws relating to creditors' rights and to general
principles of equity.
SECTION 5.3 CONSENTS AND APPROVALS; NO VIOLATIONS. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent and Purchaser or the consummation by Parent and Purchaser of the Merger
or the other transactions contemplated hereby, except for (i) the filing of a
premerger notification and report form by Parent under the HSR Act, (ii) the
filing with the SEC by Parent and Purchaser of the Offer Documents and of such
reports as may be required by Sections 13 and 16(a) of the Exchange Act in
connection with this Agreement and the transactions contemplated hereby, (iii)
the filing of the Certificate of Merger with the Filing Office and appropriate
documents with the relevant authorities of states in which the Company is
qualified to do business and (iv) such filings, approvals, orders, notices,
registrations, declarations and consents as may be required under any applicable
state takeover, Canadian provincial securities or similar laws, and any
applicable state environmental laws or laws with respect to the ownership by a
foreign entity of real property. Neither the execution, delivery or performance
of this Agreement nor the consummation of the transactions contemplated hereby
will result in any Violations of any of the terms, conditions or provisions of
(i) the respective certificates or articles of incorporation or bylaws or
comparable organizational documents of Parent or Purchaser, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument, permit concession, franchise or obligation to
which Parent or any of its Subsidiaries is a party or by which any of them or
any of their respective properties or assets may be bound or affected or (iii)
any judgment, order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or any of its Subsidiaries or their respective properties
or assets except, in the case of clause (ii), for Violations that would not
prevent or impair the consummation of the Offer or the Merger in any respect and
would not, individually or in the aggregate, have a material adverse effect on
Parent and its Subsidiaries or on the ability of Parent and Purchaser to perform
their obligations under this Agreement.
SECTION 5.4 INFORMATION IN DISCLOSURE DOCUMENTS.
(a) None of the Offer Documents or the information supplied by Parent
or Purchaser specifically for inclusion in the Schedule 14D-9 will, at the
respective times the Offer Documents (including any amendments or
supplements thereto) or the Schedule 14D-9 are filed with the SEC or are
first published, sent or given to shareholders, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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(b) None of the information supplied by Parent or Purchaser
specifically for inclusion or incorporation by reference in the Company
Proxy Statement will, at the date mailed to the Company's shareholders and
at the time of the meeting of shareholders, if required by applicable law
to be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
SECTION 5.5 FINANCING. Parent and Purchaser collectively have, or has
commitments to obtain on a timely basis, all the funds necessary to consummate
the Offer and the Merger.
SECTION 5.6 BROKERS. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent and Purchaser.
ARTICLE VI
COVENANTS
SECTION 6.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement or with the prior written consent of Purchaser, during the period
from the date of this Agreement to the Effective Time, the Company will, and
will cause each of its Subsidiaries to, conduct its operations only in the
ordinary and usual course of business consistent with past practice and will use
its best efforts, and will cause each of its Subsidiaries to use its best
efforts, to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its
relationships with licensors, licensees, customers, suppliers, employees and any
others having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, the Company will not, and will not permit any of its Subsidiaries to,
prior to the Effective Time, without the prior written consent of Purchaser:
(a) adopt any amendment to its articles or certificate of
incorporation or by-laws or comparable organizational documents;
(b) issue, reissue, sell or pledge or authorize or propose the
issuance, reissuance, sale or pledge of any of its capital stock of any
class, or securities convertible or exchangeable into capital stock of any
class, or any rights, warrants or options to acquire any convertible or
exchangeable securities or capital stock, other than the issuance of shares
of Company Common Stock upon the exercise of stock options outstanding on
the date of this Agreement under the Company Option Plans in accordance
with their present terms and the capitalization and issuance of shares by
Douglas y Lomason de Coahuila, S.A. de C.V. ("DYLCO") for the amount of
73,670,856 pesos to the Company as consideration for the satisfaction of
intercompany debt (the "DYLCO Issuance");
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) on or
in respect of any class or series of its capital stock or otherwise make
any payments to its shareholders in their capacity as such, except that any
wholly owned Subsidiary of the Company may pay dividends and make
distributions to the Company or any of the Company's wholly owned
Subsidiaries;
(d) (i) adjust, split, combine, subdivide or reclassify any of its
capital stock or (ii) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any shares of capital stock of the
Company or of any of its Subsidiaries or any other securities thereof or
any rights, options or warrants to acquire such shares or other securities;
(e) incur or assume any long-term or short-term indebtedness for
borrowed money, except in the ordinary course of business consistent with
past practice and under existing bank commitments as in effect on the date
hereof, in an aggregate amount not to exceed $10,000,000, or assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any person
(other than a wholly owned Subsidiary);
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(f) make any loans, advances or capital contributions to, or
investments in, any person (other than a wholly owned Subsidiary), except
in the ordinary course of business consistent with past practice and in an
amount not to exceed (i) in the case of loans, advances or capital
contributions to or investments in joint ventures of the Company in
existence on the date hereof $1,000,000 in the aggregate and (ii) in all
other cases, $200,000 in the aggregate;
(g) settle or compromise any suit, proceeding or claim or threatened
suit, proceeding or claim in an amount not covered by insurance in excess
of $200,000 in the aggregate;
(h) except for increases in salary, wages and benefits of employees of
the Company or its Subsidiaries (other than executive officers of the
Company) in accordance with past practice and an increase, retroactive to
January 1, 1996, in salaries of officers of the Company, which increase
shall not exceed 4% in the aggregate, increase the compensation or fringe
benefits payable or to become payable to its directors, officers or
employees (whether from the Company or any of its Subsidiaries), or pay any
benefit not required by any existing plan or arrangement (including the
granting of, or waiver of performance or other vesting criteria under,
stock options, stock appreciation rights, shares of restricted stock or
deferred stock or performance units) or grant any severance or termination
pay to (except pursuant to existing agreements or policies), or enter into
any employment or severance agreement with, any director, officer or
employee of the Company or any of its Subsidiaries or establish, adopt,
enter into, terminate or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, welfare, deferred compensation, employment, termination,
severance or other employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers or
current or former employees, except to the extent such termination or
amendment is required by applicable law;
(i) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than transactions that are in the
ordinary course of business and not in excess of $200,000 in the aggregate;
(j) except for the sale of the Company's Truck Body Division on terms
reasonably satisfactory to Parent, sell, lease, mortgage or otherwise
encumber or dispose of or agree to sell, lease, mortgage or otherwise
encumber or dispose of, any of its assets, other than transactions that are
in the ordinary course of business and not material to the Company or any
of its Subsidiaries or (ii) enter into any contract or agreement for the
sale of manufactured parts, components or other products, which contract or
agreement would require capital expenditures by the Company in excess of
$3,000,000 in the aggregate;
(k) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any
Subsidiary;
(1) knowingly violate or fail to perform any obligation or duty
imposed upon it or any Subsidiary by any applicable federal, state or local
law, rule, regulation, guideline or ordinance;
(m) except for the acquisition of stock of DYLCO by the Company in
connection with the DYLCO Issuance, (i) modify, amend or terminate any
contract, (ii) waive, release, relinquish or assign any contract (including
any insurance policy) or other right or claim, (iii) prepay any
indebtedness of the Company or any of its Subsidiaries or (iv) cancel or
forgive any indebtedness owed to the Company or its Subsidiaries, other
than, in each case specified in clause (i), (ii), (iii) or (iv), in a
manner in the ordinary course of business consistent with past practice and
which is not material to the business of the Company and its Subsidiaries,
taken as a whole;
(n) make any tax election not required by law or settle or compromise
any material tax liability;
(o) change any of the accounting methods, principles or practices used
by it except as required by the SEC or the Financial Accounting Standards
Board; or
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(p) authorize, recommend, announce, propose or agree to take any of
the foregoing actions or any action which would (i) make any representation
or warranty in this Agreement that is qualified as to materiality untrue or
incorrect, (ii) make any representation or warranty in this Agreement that
is not so qualified untrue or incorrect in any material respect or (iii)
except as otherwise permitted by Section 6.7(b), result in any of the
conditions to the Offer set forth in Annex I or to the Merger set forth in
Article VII not being satisfied.
SECTION 6.2 REASONABLE BEST EFFORTS. Upon the terms and subject to the
conditions of this Agreement, unless, to the extent permitted by Section 6.7
(b), the Board of Directors of the Company approves or recommends a superior
proposal, each of the parties hereto will use its 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 and regulations to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement, including (i) the obtaining of all
necessary actions or non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by any Governmental Entity (including those in connection
with the HSR Act), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any claims, investigations,
actions, lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any additional
instruments (including any required supplemental indentures) necessary to
consummate the transactions contemplated by this Agreement. Each party will
promptly consult with the other with respect to, provide any necessary
information with respect to and provide the other (or its counsel) copies of,
all filings made by such party with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby. In addition, if at any
time prior to the Effective Time any event or circumstance relating to any of
the Company, Parent or Purchaser or any of their respective Subsidiaries, or any
of their respective officers or directors, should be discovered by the Company,
Parent or Purchaser, as the case may be, and which should be set forth in an
amendment or supplement to the Offer Documents, the discovering party will
promptly inform the other party of such event or circumstance.
SECTION 6.3 ACCESS TO INFORMATION. Upon reasonable notice, the Company will
afford to the officers, employees, accountants, counsel and other
representatives of Parent and Purchaser, access, at all reasonable times during
the period prior to the Effective Time, to all its properties, facilities,
books, contracts, commitments and records and other information as reasonably
requested by such party and, during such period, the Company will (and will
cause each of its Subsidiaries to) furnish promptly to Parent and Purchaser (a)
a copy of each report, schedule, registration statement and other document filed
or received by it during such period pursuant to the requirements of United
States federal securities laws or regulations and (b) all other information
concerning its business, properties and personnel as Parent or Purchaser may
reasonably request. The parties will hold any such information which is
nonpublic in confidence in accordance with the terms of the letter agreement
dated as of June 27, 1996, between Parent and The Bridgeford Group (the
"Confidentiality Agreement"), and in the event of termination of this Agreement
for any reason each party will promptly comply with the terms of the
Confidentiality Agreement.
SECTION 6.4 COMPANY SHAREHOLDERS MEETING. (a) If approval of this Agreement
and the Merger by the shareholders of the Company is required by law, the
Company will, at Parent's request, duly call a meeting of its shareholders for
the purpose of voting upon this Agreement (insofar as it relates to the Merger),
the Merger and related matters and use its best efforts duly to give notice of,
convene and hold such meeting as soon as practicable following consummation of
the Offer. The Company will, through its Board of Directors, recommend to its
shareholders approval and adoption of this Agreement and approval of the Merger,
except to the extent that the Board of Directors of the Company shall have
withdrawn its approval or recommendation of this Agreement or the Merger as
permitted by Section 6.7(b). Notwithstanding the foregoing, if Purchaser or any
other Subsidiary of Parent shall acquire at least 90% of the outstanding shares
of Company Common Stock, the parties shall, at the request of Parent, take all
necessary and appropriate action to cause the Merger
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to become effective as soon as practicable after the expiration of the Offer
without a meeting of shareholders in accordance with Section 711 of the MBCA.
(b) If approval of this Agreement and the Merger by the shareholders of the
Company is required by law, the Company will, at Parent's request, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement with the SEC and will use its best efforts to
respond to any comments of the SEC or its staff and to cause the Proxy Statement
to be mailed to the Company's shareholders. The Company will notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and will supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the approval of this Agreement
by the Company's shareholders there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company will
promptly notify Parent thereof and prepare and mail to its shareholders such an
amendment or supplement. The Company will not mail any Proxy Statement, or any
amendment or supplement thereto, to which Parent reasonably objects.
SECTION 6.5 COMPANY OPTION PLANS. (a) Subject to the next sentence, the
Company shall use its best efforts to cause each holder of an outstanding option
(collectively, the "Employee Options") to purchase shares of Company Common
Stock granted under either Company Option Plan, whether or not then exercisable,
to agree in writing prior to the Effective Time that (i) such holder shall be
entitled to receive from the Company on the earlier of the Closing Date or five
business days after the payment by the Purchaser for any shares of Company
Common Stock pursuant to the Offer, in lieu of such Employee Option, an amount
in cash in respect of each share of Company Common Stock subject to such
Employee Option equal to the excess, if any, of the Merger Consideration over
the per share exercise price of such Employee Option (it being understood that
if there is no such excess with respect to any such Employee Option, such holder
will not be entitled to receive any cash, securities or other consideration with
respect thereto); and (ii) such Employee Option shall be canceled immediately
prior to the Effective Time. All amounts payable pursuant to this Section 6.5(a)
shall be subject to any applicable withholding taxes and shall be paid without
interest.
(b) The Company shall use its best efforts to ensure that from and after
the Effective Time neither the Surviving Corporation nor any of its Subsidiaries
is or will be bound by any options, warrants, rights or agreements which would
entitle any person, other than Parent, Purchaser or their wholly owned
Subsidiaries, to beneficially own, or receive any payments (other than as
otherwise contemplated by Sections 3.1 and 3.6 and this Section 6.5) in respect
of, any capital stock of the Company or the Surviving Corporation.
(c) The Company shall take all actions necessary to terminate the Company
Option Plans effective as of the Effective Time.
SECTION 6.6 COMPANY BENEFIT PLANS. Parent agrees that, for a period of one
year following the Effective Time, the employees of the Company will continue to
be provided with employee benefits that are in the aggregate substantially
equivalent to those presently provided under the Company's current benefit
plans. At the Effective Time, the Company shall cause the Surviving Corporation
expressly to assume the Officer Agreements listed in Section 4.8 of the Company
Disclosure Letter. Nothing in this Section 6.6 shall be deemed to in any way
restrict the ability of the Surviving Corporation to terminate any employee of
the Surviving Corporation.
SECTION 6.7 NO SOLICITATION. (a) The Company shall not, nor shall it permit
any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee of or any investment banker, attorney or other advisor or
representative of the Company or any of its Subsidiaries to, (i) solicit,
initiate, or encourage the submission of, any takeover proposal, (ii) enter into
any agreement with respect to any takeover proposal or (iii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any takeover proposal; provided, however, that prior to the acceptance for
payment of shares of Company Common Stock pursuant to the Offer, to the extent
required by the fiduciary obligations of the Board of Directors of the Company,
as determined in good faith by a majority of
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the disinterested members thereof based on the written advice of outside counsel
(a copy of which written advice shall be promptly furnished to Parent), the
Company may, in response to unsolicited requests therefor, participate in
discussions or negotiations with, or furnish information pursuant to an
appropriate confidentiality agreement approved by the Company's Board of
Directors to, any person. Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding sentence by any
officer, director or employee of the Company or any of its Subsidiaries or any
investment banker, attorney or other advisor or representative of the Company or
any of its Subsidiaries, whether or not such person is purporting to act on
behalf of the Company or otherwise, shall be deemed to be a breach of this
paragraph by the Company. For purposes of this Agreement, "takeover proposal"
means any proposal, other than a proposal by Parent or any of its affiliates,
for a merger, consolidation, share exchange, business combination or other
similar transaction involving the Company or any of its Subsidiaries or any
proposal or offer (including, without limitation, any proposal or offer to
shareholders of the Company), other than a proposal or offer by Parent or any of
its affiliates, to acquire in any manner, directly or indirectly, an equity
interest in the Company or any of its Subsidiaries, any voting securities of the
Company or any of its Subsidiaries or a substantial portion of the assets of the
Company or any of its Subsidiaries. The Company agrees not to release any third
party from, or waive any provision of, any confidentiality or standstill
agreement to which the Company is a party. The Company immediately shall cease
and cause to be terminated all existing discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or Purchaser, the approval or recommendation by the Board of
Directors of the Company or any such committee of the Offer, this Agreement or
the Merger or (ii) approve or recommend, or propose to approve or recommend, any
takeover proposal. Notwithstanding the foregoing, the Board of Directors of the
Company, to the extent required by the fiduciary obligations thereof, as
determined in good faith by a majority of the disinterested members thereof
based on the written advice of outside counsel (a copy of which written advice
shall be promptly furnished to Parent), may approve or recommend (and, in
connection therewith, withdraw or modify its approval or recommendation of the
Offer, this Agreement or the Merger) a superior proposal and the Company may
take such actions as are contemplated by Rule 14e-2(a) and Rule 14d-9
promulgated under the Exchange Act. For purposes of this Agreement, "superior
proposal" means a bona fide written proposal made by a third party to acquire
the Company pursuant to a tender or exchange offer, a merger, a statutory share
exchange, a sale of all or substantially all its assets or otherwise on terms
which a majority of the disinterested members of the Board of Directors of the
Company determines in their good faith reasonable judgment (based on the advice
of independent financial advisors) to be more favorable to the Company and its
shareholders than the Offer and the Merger and for which financing, to the
extent required, is then fully committed or which, in the reasonable good faith
judgment of a majority of such disinterested members (based on the advice of
independent financial advisors), is reasonably capable of being financed by such
third party.
(c) The Company promptly shall advise Parent orally and in writing of any
takeover proposal or any inquiry with respect to or which could lead to any
takeover proposal and the identity of the person making any such takeover
proposal or inquiry. The Company will keep Parent fully informed of the status
and details of any such takeover proposal or inquiry.
SECTION 6.8 FEES AND EXPENSES. (a) Except as provided in paragraphs (b) and
(c) of this Section 6.8, all fees and expenses incurred in connection with the
Offer, the Merger, this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such fees or expenses, whether or not the Offer
or the Merger is consummated.
(b) The Company shall pay to Parent upon demand a fee of $4,046,119 (the
"Termination Fee"), payable in same day funds, plus all Expenses (as defined
below), if:
(i) this Agreement is terminated by Parent as a result of the failure
of any condition set forth in paragraph (f), (g) or (h) of Annex I;
provided, however, that in the case of any such termination solely as a
result of the failure of the condition set forth in clause (i) of paragraph
(f) of Annex I, such fee (x) shall be payable by the Company only if the
Offer has remained open for at least four months and
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(y) shall not exceed an amount equal to 50% of the Termination Fee plus all
Expenses (as defined below);
(ii) (w) after the date of this Agreement, any person or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) shall have
made a takeover proposal, (x) the Offer shall have remained open until the
scheduled expiration date immediately following the date such takeover
proposal is made, (y) the Minimum Tender Condition (as defined in Annex I)
shall not have been satisfied at such expiration date and (z) this
Agreement is terminated pursuant to Section 8.1(b); or
(iii) this Agreement is terminated pursuant to Section 8.1(c).
(c) If this Agreement is terminated for any reason, other than as a result
of a material breach of any representation, warranty, covenant or agreement of
Parent or Purchaser set forth in this Agreement, the Company shall, whether or
not the Termination Fee shall have been paid or shall be payable, reimburse each
of Parent and its affiliates upon demand for all reasonably documented
out-of-pocket fees and expenses, but not in excess of $1,000,000 in the
aggregate, incurred or paid by or on behalf of Parent or any of its affiliates
in connection with the Offer, the Merger or the consummation of any of the
transactions contemplated by this Agreement (including any currency or interest
rate hedging activities in connection with the transactions contemplated
hereby), including all fees and expenses of counsel, investment banking firms,
accountants, experts and consultants to Parent or any of its affiliates and all
fees and expenses payable of banks, investment banking firms and other financial
institutions and their respective counsel, accountants or agents in connection
with arranging or providing financing (collectively, and not in excess of such
$1,000,000 limitation, the "Expenses").
(d) The Company acknowledges that the agreements contained in paragraphs
(b) and (c) of this Section 6.8 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, Parent and
Purchaser would not enter into this Agreement; accordingly, if the Company fails
to pay promptly any amount due pursuant to this Section 6.8 and, in order to
obtain such payment, Parent or Purchaser commences a suit that results in a
judgment against the Company for any such amount, the Company shall pay to
Parent or Purchaser its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount of the fee at
the base rate of Citibank, N.A, from the date such payment was due under this
Agreement.
SECTION 6.9 NOTIFICATION OF CERTAIN MATTERS. The Company will give prompt
notice to Parent and Purchaser, and Parent (or Purchaser, as the case may be)
will give prompt notice to the Company, of (a) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which would
be reasonably likely to cause (i) any representation or warranty contained in
this Agreement that is qualified as to materiality to be untrue or incorrect or
any representation or warranty that is not so qualified to be untrue or
incorrect in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in any material
respect, (b) any failure of the Company, Parent or Purchaser, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder in any material respect and (c) any
change or event which has or is reasonably likely to have a material adverse
effect on the Company and its Subsidiaries, taken as a whole or Parent and its
Subsidiaries, taken as a whole as the case may be; provided, however, that the
delivery of any notice pursuant to this Section 6.9 will not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
SECTION 6.10 COMPANY DEBT AGREEMENTS. The Company will, if required by
Parent, (a) promptly seek agreement, on terms reasonably acceptable to
Purchaser, of the banks party to the credit agreements of the Company or any of
its Subsidiaries and the holders of debt instruments of the Company or any of
its Subsidiaries (collectively, the "Company Debt") to amend such agreements and
instruments to permit the purchase of shares of Company Common Stock pursuant to
the Offer, and the consummation of the Merger, and to provide that such actions
do not constitute an event permitting the banks or lenders that are parties
thereto to accelerate the amounts outstanding under such agreements and
instruments and (b) in the event that such acceleration occurs prior to the
Merger, cooperate with Parent and Purchaser in arranging financing
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on terms reasonably acceptable to Parent and Purchaser to finance any required
repurchase or prepayment of Company Debt.
SECTION 6.11 PUBLIC ANNOUNCEMENTS. The Company, Parent and Purchaser will
consult with each other before issuing any press releases or otherwise making
any public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press releases or make any such public
statements prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with The NASDAQ Stock
Market, Inc.
SECTION 6.12 STATE TAKEOVER LAWS. If any "fair price", "control share
acquisition" or "business combination" statute or other takeover or tender offer
statute or regulation shall become applicable to the transactions contemplated
by this Agreement, Parent, Purchaser and the Company and their respective Boards
of Directors shall use their best efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to minimize the effects of such statute or regulation on the
transactions contemplated hereby.
SECTION 6.13 INDEMNIFICATION. For six years from and after the Effective
Time, Parent agrees, to the extent permitted by law, to cause the Surviving
Corporation to indemnify and hold harmless all current officers and directors of
the Company and of its Subsidiaries to the same extent such persons are
currently indemnified by the Company pursuant to the Company's Articles of
Incorporation and By-Laws for acts or omissions occurring at or prior to the
Effective Time. Furthermore, the Bylaws of the Surviving Corporation shall
contain provisions no less favorable with respect to indemnification than are
set forth in Section 3 of Article VI of the Bylaws of the Company. At its
option, Parent will either (a) cause to be maintained for a period of not less
than six years from the Effective Time the Company's current directors' and
officers, insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time (the "D&O Insurance")
for all directors and officers of the Company on the date hereof or (b) cause
the directors and officers of the Company on the date hereof to be covered, for
a period of not less than six years, by Parent's directors' and officers'
insurance and indemnification policy for events occurring prior to the Effective
Time (but only if Parent's policy is, in the aggregate, no less favorable to
such directors and officers than the Company's current policy). In the event
Parent or the Surviving Corporation or any of their respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then the obligations of Parent set forth in this Section 6.13
shall survive such consolidation, merger or transfer.
SECTION 6.14 SHAREHOLDER LITIGATION. Each of Parent and the Company shall
use their best efforts to settle, and the Company shall give Parent the
opportunity to direct the defense of, any shareholder litigation against the
Company and its directors relating to the transactions contemplated by this
Agreement; provided, however, that no such settlement shall be agreed to without
Parent's consent, which shall not be unreasonably withheld; and provided further
that no settlement requiring a payment by a director shall be agreed to without
such director's consent.
SECTION 6.15 DIRECTORS. (a) Promptly upon the acceptance for payment of,
and payment by Purchaser for, any shares of Company Common Stock pursuant to the
Offer (the "Closing of the Offer"), and at all times thereafter, Purchaser shall
be entitled to designate such number of directors on the Board of Directors of
the Company as will give Purchaser, subject to compliance with Section 14(f) of
the Exchange Act, representation on such Board of Directors equal to at least
that number of directors, rounded up to the next whole number, which is the
product of (i) the total number of directors on such Board of Directors (giving
effect to the directors elected pursuant to this sentence) multiplied by (ii)
the percentage (the "Purchaser Percentage") that (x) such number of shares of
Company Common Stock so accepted for payment and paid for by Purchaser plus the
number of shares of Company Common Stock otherwise owned by Purchaser, Parent or
any other subsidiary of Parent bears to (y) the number of such shares
outstanding, and the Company shall, at such time, cause Purchaser's designees to
be so elected; provided, however, that in the event that Purchaser's designees
are appointed or elected to the Board of Directors of the Company, until the
Effective
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Time such Board of Directors shall have at least three directors who are
directors on the date hereof and who are not officers of the Company (the
"Independent Directors") and provided further that, in such event, if the number
of Independent Directors shall be reduced below three for any reason whatsoever,
any remaining Independent Directors (or Independent Director, if there shall be
only one remaining) shall be entitled to designate persons to fill such
vacancies who shall be deemed to be Independent Directors for purposes of this
Agreement or, if no Independent Directors then remain, the other directors shall
designate three persons to fill such vacancies who shall not be officers,
stockholders or affiliates of the Company, Parent or Purchaser, and such persons
shall be deemed to be Independent Directors for purposes of this Agreement.
Subject to applicable law, the Company shall take all action requested by Parent
necessary to effect any such appointment or election, including mailing to its
stockholders the Information Statement containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the
Company agrees to make such mailing with the mailing of the Schedule 14D-9
(provided that Purchaser shall have provided to the Company on a timely basis
all information required to be included in the Information Statement with
respect to Purchaser's designees). In connection with the foregoing, the Company
will promptly, at the option of Purchaser, either increase the size of the
Company's Board of Directors or obtain the resignation of such number of its
current directors as is necessary to enable Purchaser's designees to be elected
to the Company's Board of Directors as provided above. Concurrently with the
foregoing, the Company shall use its best efforts to cause persons designated by
Purchaser to constitute at least the Purchaser Percentage of (i) each committee
of the Company's Board of Directors, (ii) each board of directors of each
domestic Subsidiary of the Company and (iii) each committee of such board, in
each case to the extent required by applicable law.
(b) Following the election or appointment of designees of Purchaser
pursuant to Section 6.15(a) prior to the Effective Time, any amendment of this
Agreement or the Articles of Incorporation or Bylaws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of Parent
or Purchaser or waiver of any of the Company's rights hereunder shall require
the concurrence of a majority of the Independent Directors.
ARTICLE VII
CONDITIONS
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of the parties to effect the Merger are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions:
(a) Offer. Purchaser shall have accepted for purchase and paid for
shares of Company Common Stock pursuant to the Offer.
(b) Shareholder Approval. If required by applicable law, this
Agreement (insofar as it relates to the Merger) and the Merger shall have
been approved and adopted by the requisite affirmative vote or consent of
the holders of the Company Common Stock in accordance with applicable law
and the Company's Articles of Incorporation.
(c) Other Approvals. All authorizations, consents, orders or approvals
of, or declarations or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement shall have
been filed, shall have occurred or shall have been obtained.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
or impairing the consummation of the Merger in any material respect shall
be in effect on the Closing Date.
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SECTION 7.2 CONDITIONS TO OBLIGATIONS OF PARENT AND PURCHASER. The
respective obligations of Parent and Purchaser to effect the Merger are subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior
to the Effective Time, and each of the representations and warranties of
the Company contained in this Agreement that are qualified by materiality
shall be true and correct and each of the representations and warranties
that is not so qualified shall be true and correct in all material
respects, in each case, on and as of the Effective Time as if made on and
as of such date, and Parent and Purchaser shall have received a certificate
of the Company, signed by the President of the Company, to that effect.
(b) Third Party Consents. All required authorizations, consents or
approvals of any third party, the failure to obtain which would have a
material adverse effect on Parent, Purchaser and their Subsidiaries or the
Company and its Subsidiaries (assuming the Merger had taken place) shall
have been obtained.
(c) Tax Statement. The Company shall have delivered to Parent a duly
executed and valid statement in the form prescribed by Treasury Regulation
sec. 1.897-2(h) to the effect that the Company Common Stock does not
constitute a "United States real property interest" within the meaning of
Section 897(c)(1) of the Code.
(d) Company Option Plans. The Company Option Plans shall have been
terminated and all Employee Options shall have been exercised or canceled
prior to the Effective Time as contemplated by Section 6.5.
(e) No Action. No action, suit or proceeding by any Governmental
Entity before any court or governmental or regulatory authority shall be
pending or threatened on the Closing Date against the Company, Parent or
Purchaser or any of their Subsidiaries challenging the validity or legality
of the transactions contemplated by this Agreement.
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to effect the Merger is subject to the satisfaction, on or prior to the
Closing Date, of the following condition:
(a) Performance of Obligations; Representations and Warranties. Each
of Parent and Purchaser shall have performed in all material respects each
of its agreements contained in this Agreement required to be performed on
or prior to the Effective Time, and each of the representations and
warranties of Parent and Purchaser contained in this Agreement that is
qualified by materiality shall be true and correct and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects, in each case, on and as of the Effective
Time as if made on and as of such date, and the Company shall have received
a certificate of Purchaser, signed by the President of Purchaser, to that
effect.
ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of any matters presented
in connection with the Merger by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if:
(i) any required approval of the Merger by the shareholders of the
Company shall not have been obtained by reason of the failure to obtain
the required vote upon a vote held at a duly held meeting of such
shareholders or at any adjournment thereof;
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(ii) (x) as the result of the failure of any of the conditions set
forth in Annex I hereto, (A) Purchaser shall have failed to commence the
Offer within 30 days following the date hereof or (B) the Offer shall
have terminated or expired in accordance with its terms without
Purchaser having purchased any shares of Company Common Stock pursuant
to the Offer or (y) Purchaser shall not have purchased any shares of
Company Common Stock pursuant to the Offer within 90 days following the
date hereof; provided, however, that the passage of the period referred
to in clause (y) shall be tolled (but not for longer than nine months)
for any part thereof during which any party shall be subject to a
nonfinal order, decree or ruling or action restraining, enjoining or
otherwise prohibiting the purchase of shares of Company Common Stock
pursuant to the Offer or the consummation of the Merger; and provided
further that the right to terminate this Agreement pursuant to this
Section 8.1(b)(ii) shall not be available to (i) the Company in
connection with the failure of the condition set forth in paragraph (f)
of Annex I or (ii) any party whose breach of a representation or
warranty or failure to fulfill any of its obligations under this
Agreement results in the failure of any such condition;
(iii) the Merger shall not have been consummated on or before the
date nine months following the date hereof, unless the failure to
consummate the Merger is the result of a material breach of this
Agreement by the party seeking to terminate this Agreement; provided,
however, that the passage of such period shall be tolled (but not for
longer than an additional six months) for any part thereof during which
any party shall be subject to a nonfinal order, decree or ruling or
action restraining, enjoining or otherwise prohibiting the Merger or the
calling or holding of a meeting of the shareholders of the Company
called to approve, inter alia, the Merger; or
(iv) any court of competent jurisdiction or any governmental,
administrative or regulatory authority, agency or body shall have issued
an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the purchase of shares
of Company Common Stock pursuant to the Offer or the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable;
(c) by the Company if (i) to the extent permitted by Section 6.7(b),
the Board of Directors of the Company approves or recommends a superior
proposal and (ii) the Company has paid to Parent an amount in cash equal to
the sum of the Termination Fee plus all Expenses as provided by Section
6.8(b); or
(d) by Parent if Parent or Purchaser shall have received notice under
the HSR Act that the Federal Trade Commission or the Antitrust Division of
the Department of Justice has formally extended the applicable waiting
period under the HSR Act by requesting additional information concerning
the Offer, the Merger, any related transaction, or Parent or Purchaser.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Purchaser or the Company, except for the
provisions of Section 4.15, Section 5.6, the last sentence of Section 6.3,
Section 6.8, this Section 8.2 and Article IX, and except to the extent that such
termination results from the material breach by a party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement; provided that in the event the Company has paid to Parent the
Termination Fee and all Expenses as contemplated by Section 6.8, the Company
shall have no further liability or obligation in connection with any such
termination.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement will survive the Effective Time.
SECTION 9.2 AMENDMENT. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters
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presented in connection with the Merger by the shareholders of the Company, but,
after any such approval, no amendment will be made which by law requires further
approval by such shareholders without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
SECTION 9.3 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by the respective Boards of
Directors, may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver will be valid only if set
forth in a written instrument signed on behalf of such party.
SECTION 9.4 NOTICES. All notices and other communications hereunder will be
in writing and will be deemed given if delivered personally, telecopied (which
is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as is specified by like notice):
(a) if to Purchaser to:
Magna Acquisition Corporation
In care of Magna International Inc.
36 Apple Creek Boulevard
Markham, Ontario L3R 4Y4
Canada
Attention: J. Brian Colburn
Executive Vice President, Special Projects and Secretary
Telecopy No.: (905) 477-7739
with copies to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: Scott M. Freeman
Telecopy No.: (212) 906-2021
(b) if to Parent to:
Magna International Inc.
36 Apple Creek Boulevard
Markham, Ontario L3R 4Y4
Attention: J. Brian Colburn
Executive Vice President, Special Projects and Secretary
Telecopy No.: (905) 477-7739
with copies to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Attention: Scott M. Freeman
Telecopy No.: (212) 906-2021
28
<PAGE> 32
(c) if to the Company, to:
Douglas & Lomason Company
24600 Hallwood Court,
Farmington Hills, Michigan 48335-1671
Attention: Chief Executive Officer
Telecopy No.: 810-478-5189
with copies to:
Dickinson, Wright, Moon, Van Dusen & Freeman
500 Woodward Avenue
Suite 4000
Detroit, Michigan 48226
Attention: Verne C. Hampton, II
Telecopy No.: 313-223-3598
SECTION 9.5 INTERPRETATION. When a reference is made in this Agreement to a
Section, such reference will be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and will not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement they will be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, will be deemed
to refer to August 29, 1996. As used in this Agreement, any reference to any
event, change or effect being material or having a material adverse effect on or
with respect to an entity (or such entity and its Subsidiaries) means such
event, change or effect which is or is reasonably likely to be materially
adverse to the business, assets, liabilities, capitalization, results of
operations' shareholders' equity, condition (financial or otherwise) or
prospects of such entity (or, if with respect to such entity and its
Subsidiaries, such group of entities taken as a whole).
SECTION 9.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which will be considered one and the same agreement and
will become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 9.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof, and (b) other than
Section 6.13, are not intended to confer upon any person other than the parties
hereto and thereto any rights or remedies hereunder or thereunder.
SECTION 9.8 GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of Michigan applicable to contracts made,
executed, delivered and performed wholly within the State of Michigan, without
regard to any applicable conflicts of law.
SECTION 9.9 SPECIFIC PERFORMANCE. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties will be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
SECTION 9.10 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder will be assigned by any of the parties hereto
(whether by operation of law or otherwise) without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 9.11 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement will not affect the validity or enforceability of any other
provisions hereof, which will remain in full force and effect.
29
<PAGE> 33
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
MAGNA INTERNATIONAL INC.
By: /s/ WILLIAM H. FIKE
----------------------------------
Name: William H. Fike
Title: Vice Chairman and
Executive Vice President
By: /s/ J. BRIAN COLBURN
----------------------------------
Name: J. Brian Colburn
Title: Executive Vice President,
Special Projects and
Secretary
MAGNA ACQUISITION CORPORATION
By: /s/ WILLIAM H. FIKE
----------------------------------
Name: William H. Fike
Title: President
By: /s/ J. BRIAN COLBURN
----------------------------------
Name: J. Brian Colburn
Title: Secretary
DOUGLAS & LOMASON COMPANY
By: /s/ HARRY A. LOMASON, II
----------------------------------
Name: Harry A. Lomason, II
Title: Chairman, President and
Chief Executive Officer
30
<PAGE> 34
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other term or provision of the Offer or this Agreement,
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to a bidder's obligation to pay for or return tendered
securities promptly after the termination or withdrawal of such bidder's offer),
to pay for any Company Common Stock tendered pursuant to the Offer and not
theretofore accepted for payment or paid for unless (1) there shall have been
validly tendered and not withdrawn prior to the expiration of the Offer that
number of shares of Company Common Stock that would represent at least 51% of
the Fully Diluted Shares (the "Minimum Tender Condition") and (2) any waiting
period under the HSR Act applicable to the purchase of Company Common Stock
pursuant to the Offer shall have expired or been terminated. As used herein, the
term "Fully Diluted Shares" shall mean all outstanding securities entitled
generally to vote in the election of directors of the Company on a fully diluted
basis, after giving effect to the exercise or conversion of all options, rights
and securities exercisable or convertible into such voting securities.
Furthermore, notwithstanding any other term or provision of the Offer or this
Agreement, Purchaser will not be required to accept for payment or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act, to pay for any Company Common Stock not theretofore accepted
for payment or paid for, and may terminate or amend the Offer if, at any time on
or after the date of this Agreement, and before the acceptance of such Company
Common Stock for payment or the payment therefor, any of the following events or
facts shall have occurred:
a) there shall have been threatened, instituted or pending any action,
proceeding or application by any Governmental Entity, or by any other
person, domestic or foreign, before any court or Governmental Entity
(which, if brought by such other person, in the good faith judgment of
Parent after consultation with legal counsel has a reasonable likelihood of
success), (i)(A) challenging or seeking to, or which is reasonably likely
to, make illegal, materially delay or otherwise directly or indirectly
restrain or prohibit, or seeking to, or which is reasonably likely to,
impose voting, procedural, price or other requirements, in addition to
those required by Federal securities laws and the MBCA each as in effect on
the date of the Offer, in connection with the making of the Offer, the
acceptance for payment of, or payment for, some of or all the shares of
Company Common Stock by Parent, Purchaser or any other affiliate of Parent
or the consummation by Parent, Purchaser or any other affiliate of Parent
of the Merger, (B) seeking to obtain material damages in connection with
the transactions contemplated by the Offer or the Merger, (ii) seeking to
prohibit or materially limit the ownership or operation by Parent,
Purchaser or any other affiliate of Parent of all or any material portion
of the business or assets of the Company and its Subsidiaries or of Parent,
Purchaser or any other affiliate of Parent or to compel Parent, Purchaser
or any other affiliate of Parent to dispose of or hold separate all or any
material portion of the business or assets of the Company or any of its
Subsidiaries or of Parent, Purchaser or any other affiliate of Parent or
seeking to impose any limitation on the ability of Parent, Purchaser or any
other affiliate of Parent to conduct such business or own such assets,
(iii) seeking to impose or confirm limitations on the ability of Parent,
Purchaser or any other affiliate of Parent to exercise effectively full
rights of ownership of the Company Common Stock, including, without
limitation, the right to vote any Company Common Stock acquired or owned by
Parent, Purchaser or any other affiliate of Parent on all matters properly
presented to the Company's shareholders, (iv) seeking to require
divestiture by Parent, Purchaser or any other affiliate of Parent of any
Company Common Stock, (v) otherwise relating to the Offer or the Offer
Documents or which otherwise, in the sole good faith judgment of Purchaser,
might materially adversely affect the Company or any of its Subsidiaries or
Parent, Purchaser or any other affiliate of Parent or (vi) materially
adversely affecting the business, assets, liabilities, capitalization,
results of operations, shareholders' equity, condition (financial or
otherwise) or prospects of the Company and its Subsidiaries, taken as a
whole;
(b) there shall be any action taken, or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, entered, enforced, promulgated, amended or issued with
<PAGE> 35
respect to, or deemed applicable to, (i) Parent, Purchaser or any other
affiliate of Parent or the Company or any of its Subsidiaries or (ii) the
Offer or the Merger by any government, legislative body or court, domestic,
foreign or supranational, or Governmental Entity, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (vi) of paragraph (a) above;
(c) there shall have occurred any material and adverse change, or any
condition, event or development that is reasonably likely to result in a
material adverse change, in the business, assets, liabilities,
capitalization, results of operations, shareholders' equity, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries,
taken as a whole;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) any
extraordinary or material and adverse change in the financial markets or
major stock exchange indices in the United States or abroad, (iii) any
change in the general political, market, economic or financial conditions
in the United States that is reasonably likely to have a material adverse
effect upon the business, properties, assets, liabilities, capitalization,
shareholders' equity, condition (financial or otherwise), operations,
licenses or franchises, results of operations or prospects of the Company
or any of its Subsidiaries or of Parent or the trading in, or value of, the
Company Common Stock, (iv) any material and adverse change in United States
currency exchange rates or a suspension of, or limitation on, the markets
therefor, (v) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (vi) a commencement of a
war or armed hostilities or other national or international calamity
directly or indirectly involving the United States or (vii) in the case of
any of the foregoing existing at the time of the commencement of the Offer,
a material acceleration or worsening thereof;
(e) any required material approval, permit, authorization, favorable
review or consent of any Governmental Entity shall not have been obtained
on terms reasonably satisfactory to Purchaser;
(f) (i) it shall have been publicly disclosed or Parent shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of more than 15% of the outstanding shares of Company Common Stock has
been acquired by another person, entity or "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) or (ii) (x) the Board of Directors of
the Company or any committee thereof shall have withdrawn or modified in a
manner adverse to Parent or Purchaser its approval or recommendation of the
Offer, the Merger or this Agreement, or approved or recommended any
takeover proposal, (y) the Company shall have entered into any agreement
with respect to any takeover proposal (other than this Agreement) or (z)
the Board of Directors of the Company or any committee thereof shall have
resolved to do any of the foregoing;
(g) any of the representations and warranties of the Company set forth
in this Agreement that are qualified as to materiality shall not be true
and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made as of such time;
(h) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement; or
(i) this Agreement shall have been terminated in accordance with its
terms or the Offer shall have been amended or terminated with the prior
written consent of the Company;
which, in the good faith judgment of Purchaser, in any such case, and regardless
of the circumstances (including any action or inaction by Parent or any of its
affiliates) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser regardless of the circumstances giving rise to
any such condition or may be waived by Purchaser in
2
<PAGE> 36
whole or in part at any time and from time to time in its sole discretion. The
failure by Purchaser at any time to exercise any of the foregoing rights will
not be deemed a waiver of any such right, the waiver of any such right with
respect to particular facts and circumstances will not be deemed a waiver with
respect to any other facts and circumstances and each such right will be deemed
an ongoing right that may be asserted at any time and from time to time. Any
good faith determination by Purchaser concerning the events described in this
Annex I will be final and binding upon all parties.
3
<PAGE> 1
EXHIBIT 2
DOUGLAS & LOMASON COMPANY
24600 HALLWOOD COURT
FARMINGTON HILLS, MICHIGAN 48335-1671
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about September 5, 1996,
as part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Douglas & Lomason Company (the "Company") with respect to
the Offer by Magna Acquisition Corporation (the "Purchaser") to the holders of
the Company's common stock, par value $2.00 per share ("Common Stock"),
commenced on September 5, 1996. Capitalized terms used and not otherwise defined
herein shall have the meaning set forth in the Schedule 14D-9. You are receiving
this Information Statement in connection with the possible election of persons
designated by the Purchaser to a majority of the seats on the Board of Directors
of the Company. The Merger Agreement requires the Company promptly after
purchase by the Purchaser of Common Stock pursuant to the Offer to cause the
designees to be elected to the Board of Directors of the Company (the
"Designees") under circumstances described therein. This Information Statement
is required by Section 14(f) of the Securities Exchange Act of 1934 (the
"Exchange Act") and Rule 14f-1 thereunder. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
September 5, 1996. The Offer is scheduled to expire at 12:00 midnight, New York
City Time, on October 2, 1996, unless the Offer is extended.
The terms of the Merger Agreement, a summary of certain events leading up
to the execution of the Merger Agreement and the commencement of the Offer and
certain other information concerning the Offer and the Merger are contained in
the Offer to Purchase, the related Letter of Transmittal and the Schedule 14D-9,
copies of which are being delivered to the Company's shareholders
contemporaneously herewith.
The information contained in this Information Statement (including
information listed in Schedule I attached hereto) concerning Parent, the
Purchaser and the Designees has been furnished to the Company by Parent and the
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
The Common Stock is the only class of voting securities of the Company
outstanding. Each share of Common Stock has one vote and as of September 5,
1996, there were 4,245,127 shares of Common Stock outstanding.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Board currently consists of five (5) members. Members of the Board are
divided into three classes, each class to be as nearly equal in number as
possible, with each class to serve a three year term, and until his successor is
elected and qualified or until his earlier death, resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acquisition by the
Purchaser of shares pursuant to the Offer and at all times thereafter, the
Purchaser is entitled to designate such number of directors, rounded
<PAGE> 2
up to the next whole number as will give the Purchaser representation on the
Board equal to the product of the total number of directors on the Board (giving
effect to the number of directors elected pursuant to the Merger Agreement)
multiplied by the percentage that the aggregate number of shares of Common Stock
owned by the Purchaser, the Parent or any other subsidiary of the Parent
following such purchase bears to the total number of Shares then outstanding
(such number being the "Board Percentage"). The Company has agreed to cause such
designees to be so elected. In this connection, the Company will promptly, at
the option of the Purchaser, either increase the size of the Board or obtain the
resignations of such number of directors as is necessary to enable the
Purchaser's Designees to be elected to the Board and to cause the Purchaser's
Designees promptly to be so elected.
The Purchaser has informed the Company that it will choose the Designees
from the Purchaser's directors and executive officers listed in Schedule I
attached hereto and that each of the directors and executive officers listed in
Schedule I has consented to act as a director. The business address of Parent is
36 Apple Creek Boulevard, Markham, Ontario, Canada L3R 4Y4 and the business
address of the Purchaser is 26200 Lahser Road, Suite 300, Southfield, Michigan
48034.
It is expected that the Designees may assume office at any time following
the purchase by the Purchaser pursuant to the Offer of a majority of the Shares,
which purchase cannot be earlier than October 2, 1996, and that, upon assuming
office, the Designees will thereafter constitute at least a majority of the
Board.
DIRECTORS
The names of the current directors of the Company are set forth below.
Except as noted below, each of the directors has held the same principal
occupation during the past five years.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND
DIRECTORSHIPS IN OTHER
NAME AGE PUBLICLY OWNED COMPANIES
- ---------------------------- --- ----------------------------------------------------------
<S> <C> <C>
James E. George............. 67 General Partner, JDX Ltd. From 1963 to 1993 Mr. George
held various executive positions with Becton Dickinson &
Co. and from 1994 to 1995 he served as President and Chief
Executive Officer of Lumex, Inc. Mr. George has served as
a director since 1993.
Verne C. Hampton II......... 62 Senior Partner in the law firm of Dickinson, Wright, Moon,
Van Dusen & Freeman. He also serves as Corporate Secretary
of the Company and has served as a director since 1994.
Dale A. Johnson............. 58 Retired, Former Chairman and Chief Executive Officer, SPX
Corporation. He has served as a director since 1990. Mr.
Johnson also serves as a director of MCN Corporation.
Harry A. Lomason II......... 61 Chairman of the Board, President and Chief Executive
Officer of the Company. He has served as a director of the
Company since 1974. Mr. Lomason is also a director of The
Amerisure Companies.
James B. Nicholson.......... 52 President and Chief Executive Officer, PVS Chemicals, Inc.
and Vice Chairman of the Board of Directors of the
Company. He has served as a director of the Company since
1985. Mr. Nicholson is also a director of The Amerisure
Companies, Handleman Company and North American Mortgage
Company.
</TABLE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held five meetings during 1995.
The Company has standing Audit and Compensation Committees of the Board of
Directors. The Company has no Nominating Committee and the functions of a
Nominating Committee are performed by the Board of Directors.
2
<PAGE> 3
The members of the Audit Committee are James B. Nicholson, Chairman, and
Dale A. Johnson. The Audit Committee, which met two times during 1995, reviews,
acts, and reports to the Board of Directors with respect to various auditing and
accounting matters, including the selection of the Company's independent public
accountants, the scope of audit procedures, the nature of services to be
performed for the Company, and the fees to be paid to the independent public
accountants.
The members of the Compensation Committee are James B. Nicholson, Chairman,
and James E. George. This Committee, which met two times during 1995, reviews
and recommends to the Board of Directors the compensation of officers of the
Company.
COMPENSATION OF DIRECTORS
Non-employee directors received in 1995 a retainer at the annual rate of
$16,000 until April 1, 1995 and at the annual rate of $20,000 thereafter plus
reimbursement for travel expenses to attend meetings of the Board of Directors.
Members of the Audit and Compensation Committees received $500 for each meeting
of the Committee attended.
Commencing on July 1, 1995, non-employee directors receive 25% (and at the
election of the director, up to 50%) of their annual retainer in Company Common
Stock in lieu of cash pursuant to the Directors Stock Plan. Directors may elect
to defer the delivery of shares under the Plan.
Under the Company's Deferred Compensation Plan for Non-Employee Directors,
a director may elect to defer all or any portion of his retainer fee or
committee fees, which are payable in cash. Deferred amounts under this Plan earn
interest at a rate equivalent to eighty percent of prime.
During 1995, all directors of the Company attended at least 75 percent of
the aggregate number of meetings of the Board of Directors and of the committees
to which they were elected or appointed.
EXECUTIVE OFFICERS
In addition to Messrs. Lomason, Nicholson and Hampton, the following
individuals are also executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------- --- --------------------------------------------------
<S> <C> <C>
James J. Hoey............... 59 Senior Vice President and Chief Financial Officer
Roger H. Morelli............ 51 Senior Vice President -- Manufacturing
Steven C. Bruck............. 40 Vice President -- Product and Manufacturing
Engineering
Ollie V. Cheatham........... 51 Vice President -- Human Resources
A. Warren Daubenspeck III... 44 Vice President -- Safety, Environmental and Loss
Control
Martin A. DiLoreto.......... 60 Vice President -- Procurement and International
Business Development
Scott E. Paradise........... 41 Vice President -- Automotive Sales
Dan D. Smith................ 47 Vice President -- Cost Analysis and Information
Technology
Robert D. Stachura.......... 53 Vice President and Executive Manager --
Manufacturing
Melynn M. Zylka............. 35 Treasurer
</TABLE>
James J. Hoey was hired in 1966 as the Company's Controller. In 1970, he
was promoted to Assistant Treasurer -- Controller, in 1971 to Treasurer and in
1977 to Vice President -- Finance. In 1992, Mr. Hoey was elected to his current
position.
Roger H. Morelli joined the Company in 1965 as a Corporate Tool Engineer.
He has served in such positions as Industrial Engineer, Corporate Quality
Engineer, Manager -- Manufacturing Engineering, Director -- Product Quality and
Manufacturing Services, Plant Manager, Assistant Vice President -- Quality
3
<PAGE> 4
Assurance, Vice President -- Quality Assurance and JIT Operations, Vice
President -- Quality Assurance and Material, and Executive Manager -- Decorative
Plants. In 1994, he was elected to his current position where he is responsible
for all automotive manufacturing plants and corporate purchasing.
Stephen C. Bruck prior to joining the Company in 1993 as Executive Manager,
Design Services was employed by RCO, a product engineering and design company.
He was elected in 1994 to his present position.
Ollie V. Cheatham joined the Company in 1970 as a Personnel Administrator.
In 1984, he was elected to his present position.
A. Warren Daubenspeck III was hired by the Company as Corporate Safety
Engineer in 1982 and was elected to his present position in 1988.
Martin A. DiLoreto who joined the Company in 1988, has served as Sales
Manager -- Ford Motor Account, Marketing Manager of Business Development, Vice
President of Marketing and Business Planning until elected to his present
position in 1995.
Scott E. Paradise joined the Company in 1986. In 1990, he was appointed
Sales Manager -- General Motors and in 1993 was elected to his present position.
Dan D. Smith, in addition to his present position held since 1994, has held
numerous other positions with the Company including Cost Analyst, Manufacturing
Engineer, Manager of Cost Accounting, Cost Reduction and Customer Service and
Assistant Vice President.
Robert D. Stachura joined the Company in 1974 as Material/Standards/Time
Study Manager at the Columbus, Nebraska plant. In 1982, he was named Plant
Manager and in 1990 was elected Vice President and Executive Manager.
Melynn M. Zylka joined the Company as Assistant Treasurer in 1987. In 1990,
she was elected to Treasurer.
Officers of the Company are elected each year at the meeting of the Board
of Directors immediately following the Annual Meeting of Shareholders to serve
for the ensuing year or until their successors are elected and qualified. The
Company is a party to certain officer agreements with the executive officers.
See "Executive Compensation -- Company Officer Agreements." There are no family
relationships among any of the directors or executive officers of the Company.
4
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the persons known by the Company to own of
record or beneficially, as of August 26, 1996, five percent or more of the
outstanding Common Stock of the Company:
<TABLE>
<CAPTION>
NAME AND NUMBER PERCENT
ADDRESS OF PERSON OF SHARES OF CLASS
-------------------------------------------------------------- --------- --------
<S> <C> <C>
Harry A. Lomason II........................................... 636,192(1) 15.0
24600 Hallwood Court
Farmington Hills, Michigan 48335
Pioneer Management Corporation................................ 400,000(2) 9.4
60 State Street
Boston, Massachusetts 02109
Wanger Asset Management, L.P.................................. 373,000(2)(3) 8.8
227 West Monroe Street, Suite 3000
Chicago, Illinois 60606
Jane L. Agostinelli........................................... 286,677(4) 6.8
3800 Camp Creek Parkway
Atlanta, Georgia 30331
Namba Press Works Co., Ltd.................................... 285,000 6.7
8-3-8 Kojima-Ogawa
Kurashiki, Okayama 711 Japan
Anne L. Bray.................................................. 275,840(5) 6.5
3800 Camp Creek Parkway
Atlanta, Georgia 30331
</TABLE>
- ---------------
(1) Includes 299,551 shares held in various trusts of which Mr. Lomason serves
as Trustee, in several custody accounts in which he serves as Custodian, and
in an estate of which he serves as Co-Executor. Also includes 20,000 shares
which Mr. Lomason has the right to acquire upon the exercise of stock
options.
(2) Based on information as of December 31, 1995 set forth in a Schedule 13G
filed with the Securities and Exchange Commission.
(3) Includes 300,000 shares held by Wanger Asset Management, L.P. as investment
advisor to Acorn Investment Trust, Series Designated Acorn Fund.
(4) Includes 18,681 shares held in various trusts of which Mrs. Agostinelli
serves as Trustee and in several custody accounts in which she serves as
Custodian.
(5) Includes seven shares held in a custody account of which Mrs. Bray serves as
Custodian.
5
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of August 26, 1996, the number of shares
of the Company's Common Stock beneficially owned by each director, each
executive officer and all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME OF NUMBER PERCENT
INDIVIDUAL OR GROUP OF SHARES(1) OF CLASS
------------------------------------------------------------ ------------ --------
<S> <C> <C>
Stephen C. Bruck............................................ 8,715 *
Ollie V. Cheatham........................................... 13,593 *
A. Warren Daubenspeck III................................... 10,603 *
Martin A. DiLoreto.......................................... 10,008 *
James E. George............................................. 1,869 *
Verne C. Hampton II......................................... 1,500(2) *
James J. Hoey............................................... 31,709 *
Dale A. Johnson............................................. 2,569 *
Harry A. Lomason II......................................... 636,192(3) 15.0
Roger H. Morelli............................................ 14,129 *
James B. Nicholson.......................................... 2,569 *
Scott E. Paradise........................................... 11,022 *
Dan D. Smith................................................ 12,173 *
Robert D. Stachura.......................................... 11,514 *
Melynn M. Zylka............................................. 8,008 *
All Directors and Executive Officers as a Group
(15 persons named above).................................. 776,173 18.3
</TABLE>
- ---------------
* Less than one percent
(1) Includes shares which the following executive officers have the right to
acquire upon the exercise of stock options as of August 26, 1996, or at any
time within 90 days thereafter: Stephen C. Bruck -- 8,000 shares; Ollie V.
Cheatham -- 11,500 shares; A. Warren Daubenspeck III -- 8,000 shares; Martin
A. DiLoreto -- 9,000 shares; James J. Hoey -- 16,500 shares; Harry A.
Lomason II -- 20,000 shares; Roger H. Morelli -- 12,000 shares; Scott E.
Paradise -- 10,000 shares; Dan D. Smith -- 9,000 shares; Robert D. Stachura
-- 10,000 shares; and Melynn M. Zylka -- 8,000 shares. Also includes shares
held in the officers' accounts in the Company's 401(k) Plan.
(2) Excludes 1,387 shares deferred under the terms of the Directors Stock Plan.
(3) Includes 299,551 shares held in various trusts of which Mr. Lomason serves
as Trustee, in several custody accounts in which he serves as Custodian, and
in an estate of which he serves as Co-Executor.
6
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the Chief
Executive Officer and the four most highly compensated executive officers of the
Company whose total compensation exceeded $100,000 during 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
-----------------------------------------------
ALL OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- -------------------------------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Harry A. Lomason II(2)............................ 1995 $358,000 $ 0 $ 25,614
Chairman of the Board, President and 1994 333,333 122,500 9,843
Chief Executive Officer 1993 283,333 0 7,338
James J. Hoey..................................... 1995 230,667 0 10,185
Senior Vice President and 1994 219,333 78,400 6,985
Chief Financial Officer 1993 203,333 0 6,050
Roger H. Morelli.................................. 1995 171,667 0 5,587
Senior Vice President -- Manufacturing 1994 148,333 57,750 4,032
1993 111,000 0 2,776
Gary A. Pniewski(3)............................... 1995 145,666 0 3,205
Vice President -- Seating and 1994 137,042 35,750 4,756
Decorative Trim Engineering 1993 -- -- --
Dan D. Smith...................................... 1995 145,333 0 5,319
Vice President -- Cost Analysis and 1994 130,000 42,000 2,272
Information Technology 1993 105,000 0 1,692
</TABLE>
- ---------------
(1) The aggregate amount of perquisites and other personal benefits for any
named executive did not exceed $50,000 or 10% of the total of annual salary
and bonus for any such named executive, and is, therefore, not reflected in
the table.
(2) In December 1992, a trust established by Mr. Lomason and his wife entered
into an agreement with the Company whereby the Company, with the approval of
the Compensation Committee of the Board of Directors, agreed to make
advances of a portion of the premiums payable on a split dollar life
insurance policy purchased by the trust on the joint lives of Mr. and Mrs.
Lomason. The Company is entitled to reimbursement of the amounts advanced,
without interest, and the advances are secured by a collateral assignment of
the policy to the Company. During 1995, the Company advanced $118,352 toward
the trust's payment of premiums.
(3) Mr. Pniewski joined the Company on January 11, 1994 and terminated his full
time employment with the Company on August 1, 1996.
7
<PAGE> 8
OPTION GRANTS DURING 1995
During 1995 there were no stock options granted under the Company's 1990
Stock Option Plan.
AGGREGATED OPTION EXERCISES DURING 1995 AND 1995 YEAR-ENDED OPTION VALUES
The following table sets forth certain information on stock options
exercised during 1995 by the executive officers named in the Summary
Compensation Table along with the number and dollar value of options remaining
unexercised at December 31, 1995 and the value of such options at December 31,
1995.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
SHARES VALUE UNEXERCISED OPTIONS STOCK OPTIONS
ACQUIRED REALIZED AT DECEMBER 31, 1995 AT DECEMBER 31, 1995
ON AT ---------------------------- ----------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harry A. Lomason II........... 7,500 $ 67,598 8,000 0 0 0
James J. Hoey................. 6,000 52,998 7,500 0 0 0
Roger H. Morelli.............. 0 0 3,000 0 0 0
Gary A. Pniewski.............. 0 0 2,000 0 0 0
Dan D. Smith.................. 0 0 3,000 0 0 0
</TABLE>
RETIREMENT PLAN
The Retirement Plan for Salaried Employees of the Company, a defined
benefit actuarial plan, provides generally for benefits upon retirement at age
65. Remuneration covered by the Plan is base salary paid to the associate,
exclusive of overtime, commissions and bonuses. Benefits are integrated with
federal social security benefits. The following tabulation illustrates the
maximum annual benefits payable under the Plan in 1995 to associates in various
earnings classifications upon retirement at age 65 and reflects the integration
with federal social security benefits in accordance with the terms of the Plan.
<TABLE>
<CAPTION>
AVERAGE YEARS OF SERVICE AT AGE 65
ANNUAL SALARY -------------------------------------------------------------------------
AT AGE 65 10 15 20 25 30 35 40
- ------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 25,000......................... $ 3,625 $ 5,438 $ 7,250 $ 9,063 $10,875 $12,688 $14,500
50,000.......................... 7,852 11,778 15,704 19,630 23,556 27,482 31,408
75,000.......................... 12,102 18,153 24,204 30,255 36,306 42,357 48,408
100,000.......................... 16,352 24,528 32,704 40,880 49,056 57,232 65,408
125,000.......................... 20,602 30,903 41,204 51,505 61,806 72,107 82,408
150,000.......................... 24,852 37,278 49,704 62,130 74,556 86,982 99,408
250,000.......................... 24,852 37,278 49,704 62,130 74,556 86,982 99,408
350,000.......................... 24,852 37,278 49,704 62,130 74,556 86,982 99,408
400,000.......................... 24,852 37,278 49,704 62,130 74,556 86,982 99,408
</TABLE>
The amounts shown reflect the $150,000 Internal Revenue Service
compensation limit effective January 1, 1995.
As of December 31, 1995, the number of years of service under the
Retirement Plan for the officers named in the Summary Compensation Table was as
follows: Harry A. Lomason II -- 34; James J. Hoey -- 28; Roger H. Morelli -- 29;
Gary A. Pniewski -- 1; and Dan D. Smith -- 23. As of December 31, 1995, the
estimated annual payment under the Plan for service accrued prior to 1994 would
be based on an average base salary of $202,140 for Mr. Lomason and $177,000 for
Mr. Hoey. For service accrued after 1994, the payment would be based on an
average of $150,000 for both Messrs. Lomason and Hoey. The payment under the
Plan for Mr. Morelli, Mr. Smith and Mr. Pniewski would be based on an average
base salary of $122,600, $116,600 and $147,000, respectively.
Supplemental Retirement Plan
The Company adopted a Supplemental Executive Retirement Plan in April 1996
which will provide eligible officers of the Company (currently three) with
benefits not available under the Company's Retirement Plan due to certain
limitations on compensation and benefits imposed by the Internal Revenue Code.
8
<PAGE> 9
ANNUAL INCENTIVE PLAN
In 1995, the Company adopted an Annual Incentive Plan for Corporate and
Chantland salaried employees. This Plan is administered by the Compensation
Committee, which determines each participant's target incentive award as a
percentage of annual base salary. Each target incentive award is based on the
participant's ability to have an impact on the Company and the facility at which
the participant is employed and the participant's performance, but payment of
the award is subject to the Company achieving threshold results based
principally on a 12% return on equity. Approximately 210 associates are eligible
to participate in this Plan. In addition, certain manufacturing locations have
incentive pay programs based on the plant's performance compared to specific
goals. No awards were granted for Corporate salaried employees under the Plan in
1995.
COMPANY OFFICER AGREEMENTS
The Company on May 17, 1996 entered into agreements with certain officers
and other key employees, including the officers named in the Summary
Compensation Table, which provide that in the event of a change in control of
the Company (as defined in the agreements), these persons would have specific
rights and receive certain benefits if, within three years after the change in
control, either employment was terminated by the Company without "cause" (as
defined in the agreements) or the person was to terminate employment for "good
reason" (as defined in the agreements). In these circumstances, the person would
be entitled to receive (a) full base salary through the date of termination,
including vacation, plus a severance payment in an amount equal to the person's
base monthly salary in effect at the date of termination multiplied by
thirty-six, payable at the option of the person either in a lump sum or in
installments, (b) a pro-rata payment of any bonus award earned by the person
during the year of termination under the Company's Annual Incentive Plan, (c)
all legal fees and expenses incurred by the person to enforce the person's
rights under the agreement, (d) the use of an automobile for six months, (e)
reimbursement for the cost of outplacement services, (f) continuation of medical
and life insurance coverage for a period of time and (g) the assignment to the
person of the Company's interest in any insurance policy on the person's life.
If any amounts which the person is entitled to receive are deemed "parachute
payments" under the Internal Revenue Code, the person will be entitled to
receive certain additional payments from the Company. The agreement as to Harry
A. Lomason II also provides for the continuation of the split dollar life
insurance policy referred to in note (2) to the Summary Compensation Table.
9
<PAGE> 10
COMPENSATION COMMITTEE REPORT
The Company's compensation program for officers is administered by the
Compensation Committee of the Board of Directors, which is composed of two
non-employee directors.
OVERALL OFFICER COMPENSATION POLICY
The Company's compensation policy for officers is designed to support the
overall objective of enhancing value for shareholders by attracting, developing,
rewarding, and retaining highly qualified and productive individuals; relating
compensation to both Company and individual performance; ensuring compensation
levels that are externally competitive and internally equitable; and encouraging
management stock ownership to enhance growth in shareholder value.
The key elements of the Company's officer compensation consist of base
salary, bonus award and stock options. The Compensation Committee's policies
with respect to each of these elements, including the basis for the compensation
awarded to Mr. Lomason, the Company's chief executive officer, are discussed
below. In addition, while the elements of compensation described below are
considered separately, the Compensation Committee takes into account the full
compensation package afforded by the Company to the individual, including
pension benefits, supplemental retirement benefits, severance plans, insurance
and other benefits.
In 1994, an independent compensation and benefits consulting firm
("Consulting Firm") was retained by the Compensation Committee to determine the
competitiveness of the Company's compensation levels for its officer positions
relative to marketplace base salary and total cash compensation (salary plus
annual bonus) practices and to assist the Compensation Committee to develop a
market-driven salary structure for Company officer positions.
STOCK OWNERSHIP REQUIREMENTS
As a means to develop more director, officer and management ownership in
the Company, the Board of Directors adopted Stock Ownership Guidelines for
directors, officers and designated executive and division managers in 1994. As a
part thereof, the Board also adopted a Stock Purchase Loan Plan to assist
officers and designated executive and division managers in acquiring stock to
meet the Stock Ownership Guidelines. The Guidelines establish various target
stock ownership levels, depending upon the person's position in the Company,
which the person is expected to achieve within five years from the adoption of
the Guidelines.
BASE SALARY
The Compensation Committee reviews each officer's salary annually. In
determining appropriate salary levels, consideration is given to scope of
responsibility, experience, Company and individual performance as well as pay
practices of other companies relating to executives with similar responsibility.
The Company endeavors to pay officer salaries in line with competitive
market levels. In assisting the Compensation Committee as to base salary, the
Consulting Firm provided the Compensation Committee information as to median and
seventy-fifth percentile marketplace data for positions at comparably-sized
manufacturing companies similar to those at the Company.
With respect to the base salary of Mr. Lomason in 1995, the Compensation
Committee took into account a comparison of base salaries of chief executive
officers of peer companies, the Company's financial position, the performance of
the Company's Common Stock and the assessment by the Compensation Committee of
Mr. Lomason's individual performance. The Compensation Committee also took into
account the longevity of Mr. Lomason's service to the Company and its belief
that Mr. Lomason is an excellent representative of the Company to the public by
virtue of his stature in the community and the industry. Mr. Lomason was granted
a base salary of $358,000 for 1995, an increase of 7.4% over his $333,333 base
salary for 1994.
10
<PAGE> 11
BONUS AWARDS
The Compensation Committee administers the Company's Annual Incentive Plan
for Corporate and Chantland salaried employees. The Compensation Committee
determines each participant's target incentive award as a percentage of annual
base salary. Each target incentive award is based on the participant's ability
to have an impact on the Company and the facility at which the participant is
employed and the participant's performance, but payment of the award is subject
to the Company achieving threshold results based principally on a 12% return on
equity. Approximately 210 associates are eligible to participate in this Plan.
In addition, certain manufacturing locations have incentive pay programs based
on the plant's performance compared to specific goals. No awards were granted
for Corporate salaried employees under the Plan in 1995.
STOCK OPTIONS
Under the Company's 1990 Stock Option Plan, which was approved by
shareholders, stock options are granted from time to time to the Company's
officers and key associates. The number of options granted is determined by the
subjective evaluation of the person's ability to influence the Company's
long-term growth and profitability. During 1995 there were no options granted
under the 1990 Stock Option Plan.
Compensation Committee
JAMES B. NICHOLSON,
Chairman
JAMES E. GEORGE
PERFORMANCE GRAPH
The following graph compares the change in the Company's cumulative total
shareholder return on its Common Stock with the Dow Jones Industrial Average and
the Dow Jones Auto Parts Sub-Index.
<TABLE>
<CAPTION>
Douglas & Dow Jones Dow Jones
Measurement Period Lomason Industrial Auto Parts
(Fiscal Year Covered) Company Average Sub-Index
<S> <C> <C> <C>
1990 100.0 100.0 100.0
1991 168.90 124.33 122.81
1992 334.08 133.44 157.54
1993 265.48 156.05 206.16
1994 243.30 163.91 181.01
1995 178.57 224.47 220.90
</TABLE>
11
<PAGE> 12
SCHEDULE I
INFORMATION WITH RESPECT TO PURCHASER DESIGNEES
Set forth below is the name, business address, principal occupation or
employment and five year employment history of the persons who will be Purchaser
Designees. Unless otherwise indicated, each such person has held the occupation
listed opposite his name for at least the past five years and each occupation
listed opposite his name for at least the past five years and each occupation
refers to employment with the Parent. None of the persons listed below owns any
shares of Common Stock of the Company.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
NAME AND CURRENT OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS AGE EMPLOYMENT HISTORY
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
*Donald Walker............................ 40 Director of Magna Acquisition Corporation.
36 Apple Creek Boulevard President (since November 1992), Chief
Markham, Ontario Executive Officer (since November 1994)
Canada L3R 4Y4 and Director of Magna International Inc.
since October 1994. Mr. Walker is a
citizen of both Canada and the United
Kingdom.
William M. Fike........................... 60 Chairman, President and Director of Magna
26200 Lahser Road, Acquisition Corporation. Vice-Chairman
Suite 300 since December 1994 and Executive
Southfield, Michigan 48034 Vice-President since October 1994 of Magna
International Inc., prior to which he
worked as consultant for Magna
International Inc. Prior to that time, Mr.
Fike was employed by Ford Motor Company,
The American Road, Dearborn, Michigan
48121, for over 28 years in various
engineering, manufacturing and management
positions, including as a Ford corporate
vice-president, President, Ford Europe and
President, Ford Brazil. Mr. Fike has been
a director of Magna International Inc.
since June 1995. Mr. Fike is a citizen of
the United States of America.
*J. Brian Colburn......................... 53 Secretary and Director of Magna
36 Apple Creek Boulevard Acquisition Corporation. Executive
Markham, Ontario Vice-President, Special Projects of Magna
Canada L3R 4Y4 International Inc. since May 1992 and
Secretary since January 1994. Mr. Colburn
is a citizen of Canada.
*Graham J. Orr............................ 50 Treasurer and Director of Magna
36 Apple Creek Boulevard Acquisition Corporation. Executive
Markham, Ontario Vice-President, Corporate Development of
Canada L3R 4Y4 Magna International Inc. since October
1994. Mr. Orr is a citizen of Canada.
</TABLE>
- ---------------
* Has held various positions with Magna International Inc. during the last five
years.
12
<PAGE> 1
EXHIBIT 3
EXECUTION COPY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of August 29, 1996, among
MAGNA INTERNATIONAL INC., an Ontario corporation ("Parent"), MAGNA ACQUISITION
CORPORATION, a Michigan corporation (the "Purchaser"), and the persons listed on
Schedule 1 hereto (each a "Stockholder", and, collectively, the "Stockholders").
WHEREAS Parent, the Purchaser and Douglas & Lomason Company, a
Michigan corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger of even date herewith (the "Merger Agreement") providing for the
making of a cash tender offer (the "Offer") by the Purchaser for shares of
Common Stock, par value $2.00 per share, of the Company (the "Common Stock") and
the merger of the Company and the Purchaser (the "Merger"); and
WHEREAS the Stockholders own in the aggregate 469,735 shares
(the "Optioned Shares") of Common Stock; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and the Purchaser have requested that the Stockholders
agree to grant the Purchaser an irrevocable option, as set forth herein, to
purchase up to all the Optioned Shares;
NOW, THEREFORE, to induce Parent and the Purchaser to enter
into, and in consideration of their entering into, the Merger Agreement, and in
consideration of the premises and the representations, warranties and agreements
herein contained, the parties agree as follows:
<PAGE> 2
1. Grant of Option. Each Stockholder hereby grants the
Purchaser an irrevocable option (the "Option") to purchase for $31.00 per share
in cash (the "Per Share Price") up to the number of Optioned Shares set forth
opposite such Stockholder's name on Schedule 1 hereto. The Option shall expire
upon the earlier of (a) the Effective Time (as defined in the Merger Agreement)
and (b) March 31, 1997, provided that if the Option cannot be exercised on such
date because of any injunction, order or similar restraint by a court of
competent jurisdiction, the Option shall expire on the earlier of (a) nine
months after such date or (b) the tenth business day after such injunction,
order or restraint shall have been dissolved or when such injunction, order or
restraint shall have become permanent and no longer subject to appeal, as the
case may be.
2. Exercise of Option. Provided that the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") with
respect to the exercise of the Option shall have expired or been terminated, the
Purchaser may exercise the Option in whole or in part at any time or from time
to time prior to the expiration of the Option. In the event that the Purchaser
wishes to exercise the Option, the Purchaser shall give written notice (the date
of such notice being herein called the "Notice Date") to the applicable
Stockholders and to NBD Bank, as escrow agent (the "Escrow Agent"), specifying
the number of Optioned Shares the Purchaser will purchase pursuant to such
exercise and a place, time and date not later than 10 business days from the
Notice Date for the closing of such purchase. Notwithstanding the foregoing and
subject to Section 6, the Purchaser shall exercise the Option concurrently with
any acceptance for payment of shares of Common Stock by the Purchaser in the
Offer and shall pay or cause to be paid the purchase price for
-2-
<PAGE> 3
the Optioned Shares concurrently with the payment of all shares of common stock
validly tendered and not properly withdrawn pursuant to the terms of the Offer.
3. Payment of Purchase Price and Delivery of Certificates for
Optioned Shares. At each closing, if any, hereunder, (a) the Purchaser will
deliver to the Escrow Agent a certified or official bank check payable to the
order of each Stockholder in New York Clearing House funds in each case in an
amount equal to the product of the Per Share Price and the number of Optioned
Shares of such Stockholder being purchased at such closing plus any amount to
which such Stockholder may be entitled pursuant to Section 9(a) hereof and (b)
each Stockholder shall deliver or cause the Escrow Agent to deliver to the
Purchaser (i) certificates representing the number of Optioned Shares sold by
such Stockholder to the Purchaser at such closing, duly endorsed in blank or
accompanied by stock powers duly executed by such Stockholder in blank, in
proper form for transfer and (ii) an irrevocable proxy, in the form of Exhibit A
hereto, duly executed by such Stockholder.
4. Representations and Warranties of the Stockholder. Each of
the Stockholders hereby severally represents and warrants to Parent and the
Purchaser as follows:
(a) Authority. Each Stockholder has all requisite power and
authority to enter into this Agreement and the Escrow Agreement (as defined in
Section 8(d)) and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Escrow Agreement
by such Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of such Stockholder. This Agreement and the Escrow Agreement have been duly
executed and delivered by such Stockholder and each constitutes a
-3-
<PAGE> 4
valid and binding obligation of such Stockholder enforceable in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency, and
other similar laws affecting the enforcement of creditors' right generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought. The execution and delivery of this Agreement
and the Escrow Agreement do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and thereof
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of any trust
agreement, loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to such
Stockholder or to such Stockholder's property or assets. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, is required by or with respect to such
Stockholder in connection with the execution and delivery of this Agreement or
the Escrow Agreement or the consummation by such Stockholder of the transactions
contemplated hereby or thereby.
(b) The Optioned Shares. Such Stockholder has, and the
transfer by each Stockholder of his or her Optioned Shares hereunder will pass
to the Purchaser, good and marketable title to the number of Optioned Shares set
forth opposite such Stockholder's name in Schedule 1, free and clear of any
claims, liens, encumbrances and security interests
-4-
<PAGE> 5
whatsoever. Such Stockholder owns of record no shares of Common Stock other than
the Optioned Shares.
5. Representations and Warranties of Parent and the Purchaser.
Parent and the Purchaser hereby represent and warrant to each Stockholder as
follows:
(a) Authority. Each of Parent and the Purchaser has all
requisite corporate power and authority to enter into this Agreement and the
Escrow Agreement and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Escrow Agreement
by Parent and the Purchaser and the consummation by Parent and the Purchaser of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Parent and the Purchaser. This
Agreement and the Escrow Agreement have been duly executed and delivered by
Parent and the Purchaser and each constitutes a valid and binding obligation of
Parent and the Purchaser enforceable in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought.
(b) Securities Act. Any Optioned Shares purchased by the
Purchaser pursuant to this Agreement will be acquired for investment only and
not with a view to any public distribution thereof and the Purchaser will not
offer to sell or otherwise dispose of any Optioned Shares so acquired by it in
violation of any of the registration requirements of the Securities Act of 1933.
-5-
<PAGE> 6
6. Tender of Optioned Shares. If the Purchaser shall so
request by giving two business days' prior written notice to the Stockholders
and the Escrow Agent at any time prior to the expiration of the Option, the
Stockholders agree to tender and sell, or to cause the Escrow Agent to tender
and sell (and not withdraw), pursuant to and in accordance with the terms of the
Offer, all the Optioned Shares not theretofore purchased by the Purchaser,
provided that the price per Optioned Share pursuant to the Offer shall be no
less than the Per Share Price adjusted in accordance with Section 9(a). If any
of the Optioned Shares so tendered are not accepted for payment in accordance
with the terms of the Offer, such Optioned Shares shall remain subject to this
Agreement and the Escrow Agreement until the Option expires.
7. Distributions; Adjustment upon Changes in Capitalization.
(a) Any dividends or other distributions (whether payable in cash, stock or
otherwise) by the Company with respect to any Optioned Shares purchased
hereunder with a record date on or after the date of the closing of such
purchase will belong to the Purchaser, except any such dividends which
stockholders whose shares of Common Stock are purchased in the Offer are
entitled to receive and retain pursuant to the terms of the Offer. If any such
dividend or distribution belonging to the Purchaser is paid by the Company to
the Stockholders, the Stockholders shall hold such dividend or distribution in
trust for the benefit of the Purchaser and shall promptly remit such dividend or
distribution to the Purchaser in exactly the form received, accompanied by
appropriate instruments of transfer.
(b) If on or after the date of this Agreement there shall
occur any dividend, distribution, stock split, recapitalization, combination or
exchange of shares, merger,
-6-
<PAGE> 7
consolidation, reorganization or other change or transaction of or by the
Company (other than the payment of regular quarterly cash dividends on the
Optioned Shares with customary record and payment dates in accordance with the
Company's past dividend practices), as a result of which shares of any class of
stock, other securities, cash or other property shall be issued in respect of
any Optioned Shares or if any Optioned Shares shall be changed into the same or
a different number of shares of the same or another class of stock or other
securities, then, upon exercise of the Option in whole or in part the Purchaser
shall receive for the aggregate price payable upon exercise of the Option with
respect to the Optioned Shares, in addition to the Optioned Shares, if any,
still outstanding, all such shares of stock, other securities, cash or other
property issued, delivered or received with respect to such Optioned Shares.
8. Covenants of the Stockholder. (a) Each Stockholder
severally agrees, until the Option has expired, not to:
(i) sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract, option or other
arrangement with respect to the sale, transfer,
pledge, assignment or other disposition of, any of
the Optioned Shares to any person other than the
Purchaser or the Purchaser's designee;
(ii) acquire any additional shares of Common Stock without
the prior consent of the Purchaser, unless
certificates representing such additional shares are
deposited in escrow pursuant to Section 8(d) hereof,
with all such additional shares being deemed to be
Optioned Shares;
-7-
<PAGE> 8
(iii) deposit any Optioned Shares into a voting trust or
grant a proxy or enter into a voting agreement with
respect to any Optioned Shares except as provided in
this Agreement; or
(iv) except, in the case of Harry A. Lomason, II, as
otherwise legally required to comply with his duties
as an officer or director of the Company, solicit,
encourage or take any other action to facilitate
(including by way of furnishing information) any
inquiries or proposals for any merger or
consolidation involving the Company, the acquisition
of any shares of Common Stock or the acquisition of
all or substantially all the assets of the Company by
any person other than Parent or the Purchaser.
(b) Each Stockholder agrees to notify the Purchaser promptly
and to provide all details requested by the Purchaser if such Stockholder shall
be approached or solicited, directly or indirectly, by any person with respect
to any matter described in Section 8(a)(iv).
(c) Each Stockholder agrees that, unless the Option has
expired or the Purchaser has purchased all the Optioned Shares, at any annual or
special meeting of the stockholders of the Company and in any action by written
consent of the stockholders of the Company, such Stockholder will (i) vote the
Optioned Shares in favor of the Merger and (ii) vote the Optioned Shares against
any action or agreement which could result in a breach of any representation,
warranty or covenant of the Company in the Merger Agreement or which
-8-
<PAGE> 9
could otherwise, in the sole judgment of the Purchaser, impede, interfere with
or attempt to discourage the Offer or the Merger.
(d) Each Stockholder agrees to deposit in escrow with the
Escrow Agent certificates representing the Optioned Shares duly endorsed in
blank or accompanied by stock powers duly executed by the Stockholder in blank,
in proper form for transfer, and, at the request of the Purchaser, together with
an irrevocable proxy duly executed by such Stockholder, and to execute an Escrow
Agreement substantially in the form of Exhibit A hereto, among the Stockholders,
Parent, the Purchaser and the Escrow Agent (the "Escrow Agreement"), as promptly
as practicable, and in any event within two business days following the
execution of this Agreement. Notwithstanding the deposit of such certificates in
escrow, prior to the closing with respect to any Optioned Shares or the
acceptance for payment of such Optioned Shares in accordance with the terms of
the Offer, such certificates shall continue to be registered in the name of such
Stockholder or such Stockholder's nominee and such Stockholder shall retain the
right to vote such Optioned Shares on all matters which may come before the
Company's stockholders, consistent with the terms of this Agreement, and to
receive any regular quarterly cash dividends paid on the Optioned Shares with
customary record and payment dates in accordance with the Company's past
dividend practices. If on or after the date of this Agreement and prior to the
expiration of the Option there shall occur any dividend, distribution, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the
Company (other than the payment of regular quarterly cash dividends on the
Optioned Shares with customary record and payment dates in accordance with the
-9-
<PAGE> 10
Company's past dividend practices) as a result of which shares of any class of
stock, other securities, cash or other property shall be issued in respect of
any Optioned Shares or if any Optioned Shares shall be changed into the same or
a different number of shares of the same or another class of stock or other
securities, each Stockholder further agrees to deposit in escrow with the Escrow
Agent all such shares, other securities, cash or other property (and any
securities that become Optioned Shares as contemplated by Section 8(a)(ii)
hereof) together with appropriate instruments of transfer duly executed by such
Stockholder, as promptly as practicable and in any event within two business
days after the receipt of any such shares, securities, cash or other property by
such Stockholder, to be held by the Escrow Agent in accordance with the terms of
the Escrow Agreement.
9. Adjustments to Purchase Price. (a) Notwithstanding Section
1 hereof, if the Purchaser shall exercise the Option in whole or in part and the
Purchaser (or any affiliate of the Purchaser) shall purchase any shares of
Common Stock pursuant to the Offer or pursuant to any other tender or exchange
offer, merger or other business combination (the Offer or any such other tender
or exchange offer, merger or other business combination being hereinafter called
a "Transaction") having an Effective Date (as hereinafter defined) prior to, or
within six months after, the last closing hereunder, for a cash purchase price
per share in excess of the Per Share Price or for consideration which is not
solely cash having an aggregate fair market value per share on the Effective
Date in excess of the Per Share Price, each Stockholder shall be entitled to
receive from the Purchaser, in addition to the payment described in Section 1, a
cash payment equal to the product of (i) the difference between (A) the amount
of cash per share and/or the fair market value per share on the Effective Date
of
-10-
<PAGE> 11
any consideration other than cash, as the case may be, paid to purchase shares
of Common Stock in such Transaction and (B) the Per Share Price, multiplied by
(ii) the number of Optioned Shares purchased by the Purchaser. For purposes of
this Section 9(a), the term "Effective Date" means the day of the consummation
of the Transaction in question, which in the case of the Offer or any other
tender or exchange offer shall be the expiration thereof or in the case of any
merger or other business combination, shall be the date of the effectiveness
thereof. If the Stockholders shall become entitled to additional payments
pursuant to this Section 9(a) prior to the time of a scheduled closing
hereunder, such additional payments shall be made at the time of such closing.
If the Stockholders shall become entitled to additional payments pursuant to
this Section 9(a) subsequent to a closing hereunder, the additional payment to
the Stockholders shall be made by a certified or official bank check payable to
the order of each Stockholder in New York Clearing House funds delivered to the
address of such Stockholder set forth in Section 14(d) no later than five
business days after the Effective Date.
(b) The Purchaser further agrees that if, within six months
after the last closing hereunder, it shall sell any of the Optioned Shares at a
price per Optioned Share in excess of the higher of the Per Share Price and any
price per Optioned Share paid to the Stockholders pursuant to the provisions of
Section 9(a), the Purchaser shall pay to each Stockholder an amount of cash
equal to, in the case of Harry A. Lomason, II, 50% and, in the case of each
other Stockholder, 100% of the difference between (x) the aggregate price for
which such Optioned Shares purchased from such Stockholder were sold by the
Purchaser and (y) the aggregate price paid by the Purchaser to such Stockholder
for such Optioned
-11-
<PAGE> 12
Shares. Such payment shall be made by certified or official bank check payable
to the order of such Stockholder in New York Clearing House funds delivered to
the address of such Stockholder set forth in Section 14(d) not later than five
business days after any such sale by the Purchaser. For purposes of this
Section 9(b), any price paid to the Purchaser in respect of a sale covered by
this Section 9(b) shall be deemed to be the sum of any cash paid plus the fair
market value of any other consideration paid. For purposes of this Section 9(b),
the fair market value of any consideration other than cash paid to the Purchaser
in respect of a sale covered by this Section 9(b), shall be determined as of the
date of such sale.
10. Irrevocable Proxy. Each Stockholder hereby irrevocably
appoints the Purchaser as the attorney and proxy of such Stockholder, with full
power of substitution, to vote, and otherwise act (by written consent or
otherwise) with respect to all Optioned Shares that such Stockholder is entitled
to vote at any meeting of stockholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of any
such meeting or otherwise, to vote such shares as set forth in Section 8(c)
hereof; provided that in any such vote or other action pursuant to such proxy,
the Purchaser shall not have the right (and such proxy shall not confer the
right) to vote to reduce the Per Share Price or the Merger Consideration (as
defined in the Merger Agreement) or to otherwise modify or amend the Merger
Agreement to reduce the rights or benefits of the Company or any stockholders of
the Company (including the Stockholders) under the Offer or the Merger Agreement
or to reduce the obligations of Purchaser thereunder; and provided further, that
this proxy shall irrevocably cease to be in effect at any time that (x) the
Offer shall have expired or terminated without any share of Common Stock being
purchased
-12-
<PAGE> 13
thereunder in violation of the terms of the Offer or (y) the Purchaser shall be
in violation of the terms of this Agreement. THIS PROXY AND POWER OF ATTORNEY IS
IRREVOCABLE AND COUPLED WITH AN INTEREST. Each Stockholder hereby revokes,
effective upon the execution and delivery of the Merger Agreement by the parties
hereto all other proxies and powers of attorney with respect to the Optioned
Shares that such Stockholder may have heretofore appointed or granted, and no
subsequent proxy or power of attorney (except in furtherance of such
Stockholder's obligations under Section 8(c) hereof) shall be given or written
consent executed (and if given or executed, shall not be effective) by such
Stockholder with respect thereto so long as this Agreement remains in effect.
Each Stockholder shall forward to the Purchaser any proxy cards that such
Stockholder receives with respect to the Offer or the Merger Agreement.
11. No Brokers. Each of the Stockholders, Parent and the
Purchaser represents, as to itself and its affiliates, that no agent, broker,
investment banker or other firm or person is or will be entitled to any broker's
or finder's fees or any other commission or similar fee in connection with any
of the transactions contemplated by this Agreement and respectively agrees to
indemnify and hold the others harmless from and against any and all claims,
liabilities or obligations with respect to any such fees, commissions or
expenses asserted by any person on the basis of any act or statement alleged to
have occurred or been made by such party or its affiliates.
12. Survival of Representations. All representations,
warranties and agreements made by the parties to this Agreement shall survive
the closing hereunder notwithstanding any investigation at any time made by or
on behalf of any party hereto.
-13-
<PAGE> 14
13. Further Assurances. If the Purchaser shall exercise the
Option in whole or in part in accordance with the terms of this Agreement, from
time to time and without additional consideration each Stockholder will execute
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as the
Purchaser may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement, including the transfer of the
Optioned Shares to the Purchaser and the release of any and all claims, liens,
encumbrances and security interests with respect thereto.
14. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that the
Purchaser may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to Parent or to any direct or indirect
wholly-owned subsidiary of Parent. This Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and permitted assigns.
15. General Provisions.
(a) Specific Performance. The parties hereto acknowledge that
damages would be an inadequate remedy for any breach of the provisions of this
Agreement and agree that the obligations of the parties hereunder shall be
specifically enforceable.
(b) Expenses. Whether or not the Option is exercised, all
costs and expenses incurred in connection with the Option, this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense.
-14-
<PAGE> 15
(c) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(d) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
reputable overnight courier or mailed by registered or certified mail (return
receipt requested) or sent by confirmed telecopy to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent or the Purchaser, to
Magna International Inc.
36 Apple Creek Boulevard
Markham, Ontario L3R 4Y4
Attention: J. Brian Colburn,
Executive Vice
President, Special
Projects and Secretary
Telecopier No.: (905) 477-7739
(ii) if to the Stockholders, to the addresses
set forth opposite their names on Schedule 1 hereto.
(e) Interpretation. When a reference is made in this Agreement
to Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
(f) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become
-15-
<PAGE> 16
effective when one or more of the counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all parties
need not sign the same counterpart.
(g) Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan, without regard
to principles of conflicts of laws.
-16-
<PAGE> 17
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholders
have signed or caused their respective officers thereunto duly authorized, to
sign this Agreement, all as of the date first written above.
MAGNA INTERNATIONAL INC.,
By /s/ William H. Fike
-----------------------------------------------
Name: William H. Fike
Title: Vice Chairman and Executive
Vice President
By /s/ J. Brian Colburn
-----------------------------------------------
Name: J. Brian Colburn
Title: Executive Vice President,
Special Projects and Secretary
MAGNA ACQUISITION CORPORATION,
By /s/ William H. Fike
-----------------------------------------------
Name: William H. Fike
Title: President
HARRY A. LOMASON, II
/s/ Harry A. Lomason, II
-----------------------------------------------
HARRY A. LOMASON, II CHILDREN'S
TRUST NO. 2
By Harry A. Lomason, II, as Trustee
/s/ Harry A. Lomason, II
-----------------------------------------------
-17-
<PAGE> 18
HARRY A. LOMASON, II CHILDREN'S
TRUST NO. 3
By Harry A. Lomason, II, as Trustee
/s/ Harry A. Lomason, II
------------------------------------
HARRY A. LOMASON, II,
as Custodian for Heather Lomason
/s/ Harry A. Lomason, II
------------------------------------
HARRY A. LOMASON, II,
as Custodian for Harry Lomason
/s/ Harry A. Lomason, II
------------------------------------
-18-
<PAGE> 19
SCHEDULE 1
<TABLE>
<CAPTION>
Number of
Name of Stockholder Address Optioned Shares
------------------- ------- ---------------
<S> <C> <C>
Harry A. Lomason, II 24600 Hallwood Court 316,612
Farmington Hills,
Michigan 48335
Harry A. Lomason, II 24600 Hallwood Court 116,040
Children's Trust No. 2 Farmington Hills,
Michigan 48335
Harry A. Lomason, II 24600 Hallwood Court 34,083
Children's Trust No. 3 Farmington Hills,
Michigan 48335
Harry A. Lomason, II, as 24600 Hallwood Court 1,500
Custodian for Heather Farmington Hills,
Lomason Michigan 48335
Harry A. Lomason, II, as 24600 Hallwood Court 1,500
Custodian for Harry Farmington Hills,
Lomason Michigan 48335
</TABLE>
-19-
<PAGE> 1
EXHIBIT 4
June 27, 1996
THE
BRIDGEFORD
GROUP
EDWARD P. WITZ
Director
PERSONAL & CONFIDENTIAL
Mr. William H. Fike
Vice Chairman & Executive Vice President
Magna International Inc.
36 Apple Creek Boulevard
Markham, Ontario, Canada L3R 4YR
Dear Mr. Fike:
The Bridgeford Group ("Bridgeford"), on behalf of Douglas & Lomason Company
("D&L" or the "Company"), is prepared to furnish you, upon your execution and
delivery to us of this agreement, certain business information which D&L regards
as confidential, in connection with your evaluation of a possible business
transaction with the Company.
As used herein, "Confidential Information" means information about D&L,
including information in written form, information learned from plant visits or
discussions with D&L employees or agents, and all other information furnished to
you, or to your directors, officers, employees, agents or other representatives
(including outside attorneys, accountants and consultants) (collectively, your
"Representatives"), by or on behalf of D&L, whether before or after the date
hereof, but in any event does not include information which (a) was available to
you or the public prior to the time of such disclosure, (b) becomes available to
you or the public through independent development or otherwise, through no act
or omission of yours or your Representatives not permitted hereunder, or (c) has
been given to you prior to such disclosure, or is given to you thereafter, in
either case by a third party not known by you to be under any obligation of
confidentiality to D&L or its affiliates with respect thereto.
Except to the extent otherwise contemplated by this agreement, you shall
hold the Confidential Information in confidence, shall use it only for purposes
of evaluating a possible business transaction with D&L, shall not use it in any
way knowingly detrimental to D&L, and shall only disclose it to your
Representatives who need such information for the purpose of evaluating the
proposed transaction (such persons shall be informed by you of the confidential
nature of the material and shall be subject to all the terms of this agreement;
you shall be responsible for any breach of such terms by any of your
Representatives). You hereby acknowledge that you are aware, and that you will
advise your Representatives who are informed as to the matters which are the
subject of this letter, that United States securities laws prohibit any person
who has received from an issuer material, non-public information concerning the
matters which are the subject of this letter from purchasing or selling
securities of such issuer or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities.
At D&L's request at any time, or upon termination of your evaluation of
D&L, you shall return to D&L all copies of documents furnished to you or your
Representatives by or on behalf of D&L containing Confidential Information. At
the request of D&L all notes and other materials prepared by you or your
Representatives containing or based upon any Confidential Information shall be
destroyed and such destruction shall be certified in writing to D&L by an
authorized officer supervising such destruction. Provided however that your
outside independent legal counsel shall be entitled to retain one copy of any
such Confidential Information for purposes of confirming your compliance with
the provisions of this Agreement.
<PAGE> 2
Without the prior written consent of D&L, unless required by law in the
reasonable judgment of your counsel, you shall not disclose to any person the
fact that a proposed transaction is being contemplated, or any terms of a
proposed transaction with D&L, including any details thereof or the status of
any negotiations. In addition, without the prior written consent of D&L, you
shall not consult with any person regarding a joint transaction with D&L. The
term "person" as used in this agreement shall be broadly interpreted to include
without limitation any corporation, company, group, partnership or individual,
but shall not include your Representatives.
Without D&L's prior written consent, for a period of three years from the
date of this agreement, neither you nor any of your affiliates shall directly or
indirectly solicit for employment, or for consulting, any employee of D&L who
comes to your attention as a result of your investigation of D&L, and neither
you nor any of your Representatives shall, in connection with your evaluation of
D&L, contact any employee of D&L or its affiliates, or any customer or supplier
of D&L, except to the extent contact is initiated directly by any such employee,
customer or supplier. Provided however that this paragraph will not prevent you
or your affiliates from employing any employee of D&L who contacts you on his or
her own initiative without any direct or indirect solicitation or encouragement
from you. For purposes of this paragraph, "solicit for employment" shall not be
deemed to include any general solicitations of employment not specifically
directed towards particular employees of D&L.
In the event that you or anyone to whom you transmit the Confidential
Information becomes legally compelled (by oral questions, interrogatories,
requests for information or documents in legal proceedings, subpoena, criminal
or civil investigative demand or similar process) to disclose any of the
Confidential Information, you will provide D&L with prompt notice so it may seek
a protective order or other appropriate remedy and/or waive compliance with the
provisions of this agreement. In the event that such protective order or other
remedy is not obtained, or that D&L does not waive compliance with the
provisions of this agreement, you will furnish only that portion of the
Confidential Information which you are advised by opinion of your counsel is
legally required and will exercise your reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the Confidential
Information.
Although Bridgeford and D&L will endeavor to include in the Confidential
Information certain information which they consider to be relevant for the
purpose of your investigation, you understand that neither Bridgeford nor D&L
makes any representations or warranties as to the accuracy or completeness of
the Confidential Information. Neither Bridgeford nor D&L, nor any of their
respective affiliates, nor any directors, officers, employees, agents or
controlling persons of any such entity, shall have any liability to you or any
of your Representatives resulting from your or their use of the Confidential
Information, except as may be specifically provided in a formal agreement with
D&L.
You agree that, for a period of two years from the date of this agreement,
neither you nor any of your affiliates will, without the prior consent of D&L:
(a) acquire, offer to acquire or agree to acquire, directly or indirectly, by
merger, tender offer, open market purchases or otherwise, any voting securities
or direct or indirect rights to acquire any voting securities of D&L or any
subsidiary thereof, or of any successor to or person in control of D&L, or any
substantial portion of the assets of D&L or any subsidiary or division thereof
or of any such successor or controlling person (other than purchases of assets
in the ordinary course of business consistent with past practice); (b) make, or
in any way participate, directly or indirectly, in any "solicitation" of
"proxies" (as such terms are defined by the rules of the Securities and Exchange
Commission) with respect to voting securities of D&L, or seek to advise or
influence any person with respect to the voting of such voting securities; (c)
form, join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) with respect to any
voting securities of D&L; (d) make, or in any way participate in, directly or
indirectly, any other effort to seek or influence control over the Board of
Directors, or management or policies, of D&L or seek to advise or influence any
person or entity with respect thereto; (e) make any public announcement or
disclose any plan, intention, proposal or arrangement inconsistent with the
foregoing; except to the extent required by applicable law; (f) take any action
which might require D&L to make a public announcement regarding the possibility
of a business transaction; (g) advise, assist or encourage any other person in
connection with the foregoing; or (h) request that D&L amend or waive any
provision of this paragraph. Provided however that the foregoing
2
<PAGE> 3
paragraph shall not be applicable in the event that a third party takes any
action of the type described in subparagraphs (a) to (d) inclusive in respect of
D&L.
You understand and agree that (a) D&L and Bridgeford shall be free to
conduct the process relating to a business transaction with D&L as they in their
sole discretion may determine (including, without limitation, negotiating or
entering into a formal agreement with any party without prior notice to you or
any other person), (b) any procedures relating to such a transaction may be
changed at any time without notice to you or any other person, (c) D&L reserves
the right to reject any and all proposals made by you and to terminate
discussions with you at any time, and (d) you shall not have any rights or
claims whatsoever against D&L, Bridgeford or any of their respective officers,
directors, stockholders, affiliates or agents arising out of or relating to a
proposed business transaction with D&L (except as may be provided in a formal
agreement with D&L).
Notwithstanding anything herein contained to the contrary, the parties
acknowledge and agree that you and your affiliates are now and will continue to
be direct competitors of D&L and that the receipt and possession of the
Confidential Information by you will not in and of itself prevent or restrict
you or your affiliates in any way from carrying on your businesses in the
ordinary course including, without limitation, where applicable, making bids or
quotes in direct competition with D&L, provided that in so doing you do not use
or disclose any of the Confidential Information to any unauthorized third
parties.
No failure or delay by Bridgeford or D&L in exercising any right hereunder
shall operate as a waiver thereof, nor shall any single or partial waiver
thereof preclude any other or further exercise thereof or the exercise of any
other right hereunder.
This agreement shall be governed by and construed in accordance with the
laws of the State of Michigan. In addition to any remedies available at law,
Bridgeford and D&L shall also be entitled to equitable relief, including
injunction and specific performance, in the event of any actual or threatened
breach of this agreement, without the necessity of proof of damages.
Your confidentiality and other obligations under this agreement shall
extend for a period of three years from the date of this agreement.
No party to any proposed transaction (or any related party) will be under
any obligation to proceed, and no commitment, undertaking or other obligation of
any nature whatever (except the obligations set forth in this agreement) shall
be implied, unless and until a duly authorized agreement in detailed legal form
providing for such obligation has been executed and delivered by all parties
intended to be bound, notwithstanding the results of any negotiations, or any
offer or bid, or any management or board of directors approvals, or other
indications of assent.
This agreement sets forth the entire understanding and agreement of the
parties and related persons with regard to the subject matter hereof and
supersedes all prior and contemporaneous agreements, arrangements and
understandings related thereto. In the event of any inconsistency between this
agreement and any statement contained in or transmitted with the Confidential
Information, this agreement shall control. This agreement may be amended,
superseded or canceled only by a written instrument which specifically states
that it amends, supersedes or cancels this agreement, signed and delivered by a
duly authorized officer of each entity to be bound thereby.
3
<PAGE> 4
Please confirm you agreement with the foregoing by signing and returning to
us a copy of this agreement.
Very truly yours,
THE BRIDGEFORD GROUP
For Itself and as Representative
of Douglas & Lomason Company
By: /s/ EDWARD P. WITZ
----------------------------------
Edward P. Witz
Director
/s/ William H. Fike
Accepted and agreed
this 3rd day of July, 1996:
By: /s/ WILLIAM H. FIKE
--------------------------------------------------------
Title: Vice-Chairman
------------------------------------------------------
280 Park Avenue
New York, NY 10017
212-476-8652
Fax 212-476-8650
An IBJ Company
4
<PAGE> 1
EXHIBIT 5
DOUGLAS & LOMASON COMPANY LETTERHEAD
September 5, 1996
To Our Shareholders:
On behalf of the Board of Directors, I am pleased to inform you that on
August 29, 1996, Douglas & Lomason Company (the "Company") entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Magna International
Inc. ("Magna") and Magna Acquisition Corporation ("Purchaser"), a direct
wholly-owned subsidiary of Magna, pursuant to which Purchaser has commenced
today a tender offer for all outstanding shares of the Company's Common Stock
for $31.00 in cash per share. Following the completion of the tender offer, upon
the terms and subject to the conditions of the Merger Agreement, Purchaser will
be merged into the Company (the "Merger"), and each share of the Company's
Common Stock, other than shares owned by Magna or Purchaser immediately prior to
the effective time of the Merger, will be canceled and converted into the right
to receive $31.00 in cash, the same price per share paid pursuant to the tender
offer.
Your Board of Directors has unanimously approved the tender offer and the
Merger, and recommends that shareholders accept the tender offer and tender all
their shares of the Company's Common Stock pursuant to the tender offer.
In arriving at its decision, your Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the process undertaken to maximize the
consideration received by the Company's shareholders and the opinion of The
Bridgeford Group, the Company's financial advisor, to the effect that, as of the
date of its opinion, the $31.00 per share in cash to be received by the
shareholders of the Company in the tender offer and the Merger is fair to such
shareholders from a financial point of view.
I urge you to read carefully the enclosed Schedule 14D-9 which describes
the Board of Director's decision and contains other important information
relating to that decision. Accompanying this letter is the Offer to Purchase,
together with related materials, including a Letter of Transmittal for use in
tendering shares. These documents set forth the terms and conditions of the
tender offer and provide instructions as to how you can tender your shares. I
urge you to read the enclosed materials carefully and consider all the factors
set forth therein before making your decision with respect to the tender offer.
On behalf of the Board of Directors and the Company's management, we thank you
for your support.
Sincerely,
HARRY A. LOMASON II
Harry A. Lomason II
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 6
August 29, 1996
THE
BRIDGEFORD
GROUP
Board of Directors
Douglas & Lomason Company
24600 Hallwood Court
Farmington Hills, MI 48335-1671
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding shares of Common Stock, par value
$2.00 per share (the "Shares"), of Douglas & Lomason Company (the "Company") of
the $31.00 per Share in cash proposed to be paid in the Tender Offer and the
Merger (as defined below) pursuant to an Agreement and Plan of Merger to be
dated as of August 29, 1996 among Magna International Inc. ("Magna"), Magna
Acquisition Corporation ("Sub"), a wholly-owned subsidiary of Magna, and the
Company (the "Agreement"). The Agreement provides for a tender offer for all of
the Shares (the "Tender Offer") pursuant to which Magna or Sub will pay $31.00
per Share in cash for each Share accepted. The Agreement further provides that
following completion of the Tender Offer, Sub will be merged with and into the
Company (the "Merger") and each outstanding Share (other than Shares already
tendered to Magna or Sub) will be converted into the right to receive $31.00 in
cash.
The Bridgeford Group is an independent U.S. financial advisory firm, whose
shareholder is The Industrial Bank of Japan, Ltd., the largest long-term credit
bank in Japan. We advise U.S. and multinational clients on financial and
financing strategies and valuations with respect to mergers, acquisitions and
divestitures in public and private transactions. We have substantial experience
in valuations of debt and equity securities used in merger and acquisition
transactions and valuations for corporate, tax and other purposes. The
Bridgeford Group is a registered member of the National Association of
Securities Dealers. We are familiar with the Company, having acted as its
financial advisor in connection with, and having participated in certain of the
negotiations leading to, the Agreement.
In connection with the requested opinion, we have reviewed, among other
things, the Agreement in the form in which it was presented to you; Annual
Reports to Stockholders and Annual Reports on Form 10-K of the Company for the
three fiscal years ended December 31, 1995; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q; certain other communications
from the Company to its stockholders; and certain internal financial analyses
and forecasts concerning the Company prepared by its management, including
financial projections for the Company for the period 1996-2000. We also have
held discussions with members of the management of the Company regarding its
past and current business operations, financial condition and future prospects.
In addition, we have reviewed the reported price and trading activity for the
Shares, compared certain financial and stock market information for the Company
with similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the automotive components and other industries and performed
such other studies and analyses as we considered appropriate. We also conducted
a limited physical inspection of certain of the Company's facilities.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives or that was otherwise reviewed by us. With respect to the
financial projections furnished to us by the Company, we have assumed that they
have been reasonably prepared on a basis which reflects the best current
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company and relevant economic
conditions. We have not assumed
<PAGE> 2
any responsibility for making an independent evaluation of the Company's assets
or liabilities or for making any independent verification of any of the
information and projections reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of our opinion. It should be understood that although subsequent
developments may affect our opinion, we do not have any obligation to update,
revise or reaffirm our opinion. Our opinion does not constitute a recommendation
to any holder of Shares as to how such holder should respond to the Tender Offer
or vote on the Merger. Except as required by applicable law, our opinion shall
not be disclosed publicly or made available to third parties except parties in
interest and advisors with respect to the Tender Offer and Merger without our
prior approval.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the $31.00
in cash to be received by the holders of the Shares in the Tender Offer and the
Merger is fair to such holders from a financial point of view.
Sincerely,
THE BRIDGEFORD GROUP
/s/ JOHN A. HERRMANN, JR.
--------------------------------------
John A. Herrmann, Jr.
President and Chief Executive Officer
280 Park Avenue
New York, NY 10017
212-476-8600
Fax 212-476-8650
An IBJ Company
2
<PAGE> 1
EXHIBIT 7
THE
BRIDGEFORD
GROUP
JOHN A. HERRMANN,
JR.
President
Chief Executive
Officer PERSONAL AND CONFIDENTIAL
May 28, 1996
Mr. Harry A. Lomason II
Chairman, President and Chief Executive Officer
Douglas & Lomason Company
24600 Hallwood Court
Farmington Hills, MI 48335-1671
Dear Mr. Lomason:
This will confirm the understanding and agreement between The Bridgeford
Group ("Bridgeford") and Douglas & Lomason Company (the "Company") as follows:
1. The Company engages Bridgeford as the Company's sole and exclusive
agent for the purpose of defining, developing and evaluating strategic
directions and opportunities for the Company, including a possible sale of
the Company, and in that connection (a) identifying opportunities for the
sale of the Company, (b) advising the Company concerning opportunities for
a sale, whether or not identified by Bridgeford, (c) participating on the
Company's behalf in negotiations concerning a sale to the extent requested
by the Company and (d) if requested by the Company providing a written
and/or verbal opinion to the Company's Board of Directors regarding the
fairness to the Company's shareholders from a financial point of view of a
sale of the Company or any substantially similar transaction.
2. Bridgeford accepts the engagement described in paragraph 1 and in
that connection agrees to:
(a) assist in the preparation of descriptive material concerning
the Company, which material shall not be made available to or used in
discussions with prospective acquirors of the Company until both it and
its use for that purpose have been approved by the Company;
(b) develop, update and review with the Company on an ongoing basis
a list of parties which might be interested in acquiring the Company and
contact only parties on that list which are approved by the Company
(such list is referred to herein as the "List");
(c) consult with and advise the Company concerning opportunities
for a sale of the Company which have been identified by Bridgeford or
others and, if so requested by the Company, participate on the Company's
behalf in negotiations for a sale of the Company; and
(d) if requested by the Company provide to the Company's Board of
Directors a written and/or verbal opinion regarding the fairness to the
Company's shareholders from a financial point of view of a sale of the
Company or any substantially similar transaction.
3. For the purpose of this Agreement:
(a) A "sale" of the Company shall mean any transaction or series or
combination of transactions, other than in the ordinary course of trade
or business, whereby, directly or indirectly, control of or a material
interest in the Company or any of its businesses (a "Business") or any
of their respective assets is transferred for consideration, including
without limitation a sale or exchange of capital stock or assets, a
lease of assets with or without a purchase option, a merger or
<PAGE> 2
consolidation, a tender or exchange offer, a leveraged buyout, the
formation of a joint venture or partnership, a minority investment or
any similar transaction.
(b) Except as provided in subparagraph 3(c), "consideration" shall
mean the value of all cash, securities and other property paid by an
acquiring party for the common stock of the Company. The value of such
securities (whether debt or equity) or other property shall be
determined as follows: (i) the value of securities that are freely
tradable in an established public market shall be determined on the
basis of the last market closing price prior to the public announcement
of the sale, and (ii) the value of securities that are not freely
tradable or have no established public market, or if the consideration
utilized consists of property other than securities, the value of such
other property, shall be the fair market value thereof. If the
consideration to be paid is computed in a foreign currency, the value of
foreign currency shall, for purposes hereof, be converted into U.S.
Dollars at the prevailing exchange rate on the date or dates on which
the consideration is paid.
(c) If a sale of the Company is structured to provide for the
transfer of part of the assets of the Company or a Business and the
retention of other assets, including but not limited to cash, cash
equivalents, investments, inventories and receivables, the retained
assets shall nevertheless be deemed to be part of the consideration
received in connection with the sale of the Company in the following
manner: (i) with respect to investments, in an amount equal to the
market value thereof, (ii) with respect to inventories and receivables,
in an amount equal to the book value thereof, and (iii) with respect to
any other assets, in an amount reasonably determined by the parties.
4. The Company shall:
(a) furnish to Bridgeford the names of all parties with which the
Company has had discussions or contacts prior to the date hereof
concerning a sale of the Company and
(b) make available to Bridgeford all information concerning the
business, assets, operations and financial condition of the Company
which Bridgeford reasonably requests in connection with the performance
of its obligations hereunder. Bridgeford may rely upon the accuracy and
completeness of all such information without independent verification.
5. The Company may refuse to discuss or negotiate the sale of the
Company with any party for any reason whatsoever and may terminate
negotiations with any party at any time.
6. As compensation for the services rendered by Bridgeford hereunder,
the Company shall pay Bridgeford as follows:
(a) If a sale of the Company occurs either:
(i) during the term of Bridgeford's engagement hereunder,
regardless of whether the party or parties to the sale were
identified by Bridgeford or whether Bridgeford rendered advice
concerning the sale, or
(ii) at any time during a period of 18 months following the
effective date of termination of Bridgeford's engagement hereunder
and the sale involves a party named on the List,
the Company shall pay Bridgeford an amount equal to 1.5% of the
consideration involved in the sale.
(b) Compensation which is payable to Bridgeford pursuant to
subparagraph 6(a) shall be paid by the Company to Bridgeford at the
closing of a sale of the Company, provided that compensation
attributable to that part of consideration which is contingent upon the
occurrence of some future event (e.g., the realization of earnings
projections but not scheduled interest or principal payments on
indebtedness) shall be paid by the Company to Bridgeford upon the
earlier of (i) the receipt of such consideration or (ii) the time that
the amount of such consideration can be determined.
7. The Company shall reimburse Bridgeford for its reasonable
out-of-pocket expenses incurred during the period of its engagement
hereunder with respect to the services to be rendered by it hereunder.
2
<PAGE> 3
Out-of-pocket expenses shall include, but not be limited to, professional
fees and disbursements incurred by Bridgeford.
8. The Company shall:
(a) indemnify Bridgeford and hold it harmless against any losses,
claims, damages or liabilities to which Bridgeford may become subject
arising in any manner out of or in connection with the rendering of
services by Bridgeford hereunder, unless it is finally judicially
determined that such losses, claims, damages or liabilities arose out of
the gross negligence or bad faith of Bridgeford, and
(b) reimburse Bridgeford immediately for any legal or other
expenses reasonably incurred by it in connection with investigating,
preparing to defend or defending any lawsuits, claims or other
proceedings arising in any manner out of or in connection with the
rendering of services by Bridgeford hereunder, provided that in the
event a final judicial determination is made to the effect specified in
subparagraph 8(a) above, Bridgeford shall remit to the Company any
amounts reimbursed under this subparagraph 8(b),
The Company agrees that the indemnification and reimbursement
commitments set forth in this paragraph shall apply whether or not
Bridgeford is a formal party to any such lawsuits, claims or other
proceedings, that Bridgeford is entitled to retain separate counsel of
its choice in connection with any of the matters to which such
commitments relate (provided that such counsel shall be reasonably
acceptable to the Company) and that such commitments shall extend upon
the terms set forth in this paragraph to any controlling person,
director, officer, employee, representative or agent of Bridgeford.
9. The Company and Bridgeford agree that if any indemnification or
reimbursement sought pursuant to paragraph 8 is finally judicially
determined to be unavailable (except by reason of the gross negligence or
bad faith of Bridgeford or any of its controlling persons, directors,
officers, employees, representatives or agents, as the case may be),
whether or not Bridgeford is the person entitled to indemnification or
reimbursement, the Company and Bridgeford shall contribute to the losses,
claims, damages, liabilities and expenses for which such indemnification or
reimbursement is held unavailable in such proportion as is appropriate to
reflect the relative benefits to the Company on the one hand and Bridgeford
on the other in connection with the transaction to which such
indemnification or reimbursement relates and other equitable
considerations, provided that in no event shall the amount to be
contributed by Bridgeford exceed the amount of the fee actually received by
Bridgeford hereunder.
10. Except as contemplated by the terms hereof or as required by
applicable law, Bridgeford shall keep confidential all material non-public
information provided to it by the Company and shall not disclose such
information to any third party other than its employees and advisors whom
Bridgeford determines have a need to know such information.
11. Except as required by applicable law, any advice provided by
Bridgeford hereunder shall not be disclosed publicly or made available to
third parties without the prior approval of Bridgeford.
12. Bridgeford has the right to place advertisements in financial and
other newspapers and journals at its own expense describing its services to
the Company hereunder, provided that Bridgeford shall submit a copy of such
advertisements to the Company for its approval, which approval shall not be
unreasonably withheld or delayed.
13. The term of Bridgeford's engagement hereunder shall extend from
the date hereof until terminated. Subject to the provisions of paragraphs 6
through 11, which shall survive any termination of this Agreement, either
party may terminate Bridgeford's engagement hereunder at any time by giving
the other party at least 10 days' prior written notice. Within 10 days
after the effective date of termination, Bridgeford shall deliver to the
Company a copy of the List as then constituted.
14. The Company and Bridgeford acknowledge and agree that there are no
brokers, representatives or other persons which have an interest in
compensation payable to Bridgeford with respect to any transaction
contemplated hereby.
3
<PAGE> 4
15. This Agreement may not be amended or modified except in writing
and shall be governed by and construed in accordance with the laws of the
State of New York.
If the foregoing correctly sets forth the understanding and agreement
between Bridgeford and the Company, please so indicate in the space provided for
that purpose below, whereupon this letter shall constitute a binding agreement
as of the date first above written.
THE BRIDGEFORD GROUP
BY: /s/ JOHN A. HERRMANN, JR.
------------------------------------
John A. Herrmann, Jr.
President and Chief Executive
Officer
AGREED:
Douglas & Lomason Company
BY: /s/ HARRY A. LOMASON II
-------------------------------------------------------
Harry A. Lomason II
Chairman, President and Chief Executive Officer
4
<PAGE> 1
EXHIBIT 8
AGREEMENT
This Agreement (the "Agreement") is made as of the 17th day of May, 1996,
between Douglas & Lomason Company, a Michigan corporation (hereinafter called
the "Company") and Harry A. Lomason II (hereinafter called "Employee").
WHEREAS, should the Company receive any proposal for a Change in Control,
as defined in Section I hereof, the Board of Directors of the Company (the
"Board") believes it imperative that the Company and the Board be able to rely
upon Employee to continue in his or her position, and that they be able to
receive and rely upon Employee's advice, if they request it, as to the best
interests of the Company and its shareholders, without concern that Employee
might be distracted or his or her advice affected by the personal uncertainties
and risks created by such a proposal;
NOW, THEREFORE, to induce Employee to remain in the employ of the Company,
and for other good and valuable consideration, the Company and Employee agree as
follows:
1. Definitions.
(i) "Change in Control" shall mean the occurrence of any of the
following events:
(a) a third "person," including a "group," becomes the "beneficial
owner" (as these terms are defined in or for the purposes of Section
13(d) of the Securities Exchange Act of 1934, as in effect on the date
hereof) of shares of the Company having more than 50% of the total
number of votes that may be cast for the election of Directors of the
Company;
(b) the merger or consolidation of the Company with or into any
other corporation or entity or the merger or consolidation of any other
corporation or entity into or with the Company, in which merger or
consolidation those persons who are shareholders of the Company
immediately prior to such merger or consolidation do not receive, as a
result of such merger or consolidation, more than 50% in voting power of
the outstanding capital stock of the surviving corporation;
(c) any sale or transfer in a single transaction or series of
related transactions (other than a public offering of securities) of
more than 50% of fair market value of the Company's assets; or
(d) the Board determines in its sole and absolute discretion that
there has been a change in control of the Company.
(ii) "Controlling portion of the Company's stock" shall mean shares of
the Company having more than 50% of the total number of votes that may be
cast for the election of Directors of the Company.
(iii) "Company" shall mean Douglas & Lomason Company and any successor
(whether such succession is direct or indirect, by purchase, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
business and/or assets of the Company.
(iv) "Good Reason," when used with reference to a voluntary
termination by Employee of Employee's employment with the Company, shall
mean:
(a) the assignment to Employee of any duties substantially
inconsistent with, or the reduction of powers or functions associated
with, Employee's positions, duties, responsibilities and status with the
Company as they existed immediately prior to a Change in Control;
(b) a reduction by Company in Employee's base salary as in effect
on the date hereof or as the same may be increased from time to time;
(c) a change in Employee's principal work location outside of the
Farmington Hills, Michigan metropolitan area, except for required travel
on the Company's business to an extent substantially consistent with
Employee's business travel obligations immediately prior to a Change in
Control;
<PAGE> 2
(d) the failure by the Company to obtain an agreement to expressly
assume this Agreement from any successor (whether such succession is
direct or indirect by purchase, merger, consolidation, liquidation or
otherwise) to substantially all of the business and/or assets of the
Company or from a person or group (as these terms are defined in or for
the purposes of Section 13(d) of the Securities Exchange Act of 1934, as
in effect on the date hereof) acquiring a controlling portion of the
Company's stock; or
(e) any purported termination of Employee's employment by the
Company during the Contract Period which is not effected pursuant to the
requirements of this Agreement.
(v) "Contract Period" shall mean the period commencing on the day a
Change in Control takes place and continuing for three (3) years. A
Contract Period shall only exist for the first Change in Control which
takes place after the date hereof
(vi) "Disability" shall mean a physical or mental incapacity of
Employee which entitles Employee to benefits under the long term disability
plan applicable to Employee and maintained by the Company as in effect
immediately prior to the Change in Control. However, if the Company has no
such plan at that time, "Disability" shall mean any physical or mental
condition that renders Employee unable to substantially perform Employee's
duties with the Company for a period exceeding six (6) consecutive months
or for a period exceeding four (4) months if a physician selected by the
Company, and reasonably satisfactory to Employee, specializing in the area
of the disability in question determines in good faith that Employee will
be permanently unable to substantially perform Employee's duties with the
Company.
(vii) "Cause," when used in connection with the termination of
Employee's employment by the Company, shall mean (a) the willful and
continued failure by Employee substantially to perform Employee's duties
and obligations to the Company (other than any such failure resulting from
Employee's Disability), (b) the willful engaging by Employee in misconduct
which is materially injurious to the Company, monetarily or otherwise, or
(c) a conviction for or plea of nolo contendere to a felony under the laws
of any state within the United States or of the United States. For purposes
of this definition, no act, or failure to act, on Employee's part shall be
considered "willful" unless done, or omitted to be done, by Employee in bad
faith and without reasonable belief that Employee's action or omission was
in the best interests of the Company.
(viii) "Without Cause," when used in connection with the termination
of Employee's employment by the Company, shall mean any termination of
employment of Employee by the Company which is not a termination of
employment for Cause or for Disability.
(ix) "Termination Date" shall mean the effective date as provided
hereunder of the termination of Employee's employment.
2. Application of this Agreement: Term of Agreement. This Agreement shall
apply with respect to any termination of employment of Employee which occurs
during the Contract Period. It shall not apply to any termination of employment
of Employee which occurs other than during the Contract Period. As provided in
the definition of Contract Period, a Contract Period shall only exist for the
first Change in Control after the date hereof. This Agreement shall terminate
automatically upon termination of employment of Employee by reason of Employee's
death. Continuation of employment with a successor to the Company, as described
in Section I (iii), shall not alone constitute termination of Employee's
employment. This Agreement shall also terminate upon the expiration of five (5)
years from the date hereof unless the Contract Period has commenced on or prior
to the expiration of such five (5) years, in which case this Agreement will
terminate upon the expiration of the Contract Period. Any such termination shall
not affect obligations incurred prior to the date of termination, including any
obligation to provide benefits under Section 5.
3. Termination of Employment of Employee By the Company During the Contract
Period.
(i) During the Contract Period, the Company shall have the right to
terminate Employee's employment hereunder for Cause, for Disability or
Without Cause upon compliance with the procedures hereinafter specified.
2
<PAGE> 3
(ii) Termination of Employee's employment for Disability shall become
effective no sooner than thirty (30) days after a notice of intent to
terminate Employee's employment, specifying Disability as the basis for
such termination, is given to Employee by the Board or by a Committee of
the Board.
(iii) Termination of Employee's employment for Cause shall not be
deemed effective unless and until there shall have been delivered to
Employee a copy of a notice of termination from the Chief Executive Officer
of the Company, after reasonable notice to Employee and an opportunity for
Employee, together with Employee's counsel, to be heard before the Chief
Executive Officer, finding that in the good faith opinion of the Chief
Executive Officer Cause existed and specifying the particulars thereof in
detail.
(iv) The Company shall have the absolute right to terminate Employee's
employment Without Cause at any time by vote of a majority of the whole
Board. Termination of Employee's employment Without Cause shall be
effective five (5) business days after the date of the Company's giving to
Employee a notice of termination, specifying that such termination is
Without Cause.
(v) Upon a termination of Employee's employment for Cause or for
Disability, Employee shall have no right to receive any compensation or
benefits hereunder. Upon a termination of Employee's employment Without
Cause, Employee shall be entitled to receive the benefits provided in
Section 5 hereof.
4. Termination of Employment By Employee During Contract Period. During the
Contract Period, Employee shall be entitled to terminate employment with the
Company for any reason and, if such termination is for Good Reason, to receive
the benefits provided in Section 5 hereof. Employee shall give the Company
notice of voluntary termination of employment, which notice need specify only
Employee's desire to terminate employment and, if such termination is for Good
Reason, also set forth in reasonable detail the facts and circumstances claimed
by Employee to constitute Good Reason. Any notice by Employee pursuant to this
Section shall be effective five (5) business days after the date it is given by
Employee.
5. Benefits Upon Termination in Certain Circumstances. Upon the termination
of the employment of Employee by the Company pursuant to Section 3(iv) or by
Employee for Good Reason pursuant to Section 4 hereof, Employee shall be
entitled to receive the following benefits:
(i) The Company shall pay to Employee, not later than the Termination
Date, a lump sum cash amount equal to the sum of (a) the full base salary
earned by Employee through the Termination Date and unpaid at the
Termination Date, (b) the amount of any base salary attributable to
vacation earned by Employee but not taken before the Termination Date, and
(c) all other amounts earned by Employee and unpaid at the Termination
Date.
(ii) The Company shall pay to Employee a cash amount equal to
thirty-six (36) times the Employee's base monthly salary at the rate in
effect immediately prior to the Termination Date. Such sum shall be paid at
the option of Employee either (i) in a lump sum, (ii) in monthly
installments over a period of 36 months, or (iii) in monthly installments
with a lump sum payable upon request from Employee.
(iii) The Company shall further pay to Employee a pro-rata amount of
any bonus Award earned by the Employee during the year of the Termination
Date under the Company's Annual Incentive Plan.
(iv) The Company shall also pay to Employee all legal fees and
expenses incurred by Employee as a result of successfully enforcing any
right or benefit provided to Employee by this Agreement.
(v) The Company shall pay, when due, for outplacement services as
requested by Employee to assist in locating new employment, up to a maximum
amount of $30,000.
(vi) The Company will continue to provide Employee with an automobile
for a period of six months after the Termination Date.
(vii) The Company shall maintain in full force and effect for
Employee's continued benefit until the earlier of (a) the end of the
Contract Period or (b) Employee's commencement of employment with a new
employer, any medical insurance plans or medical insurance arrangements in
which Employee was
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<PAGE> 4
entitled to participate upon the Termination Date, provided that Employee's
continued participation is possible under the general terms and provisions
of such plans or arrangements. In the event that Employee's participation
in any such plans or arrangements is barred, the Company shall arrange to
provide Employee with benefits substantially similar to those which
Employee is entitled to receive under such plans or arrangements. Should
the medical insurance plans or arrangements provided by Employee's new
employer not entitle Employee or Employee's dependents (a) to any coverage
during an initial qualification period or (b) to coverage for any condition
which is considered a pre-existing condition under the new employer's plan
and which was covered under the Company's medical insurance plans or
arrangements at the Termination Date, then notwithstanding Employee's
employment, the Company shall continue to provide medical benefits as
stated above in this Section 5(v) during such qualification period (if
clause (a) of this sentence is applicable) and at least for such
pre-existing condition (if clause (b) of this sentence is applicable).
(viii) The Company shall assign to Employee without any cost to
Employee the Company's interest in any insurance policies issued on the
life of Employee.
6. Excess Parachute Payment. In the event that it is determined that the
payments and benefits to Employee provided for in Section 5 hereof shall
constitute an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Internal Revenue Code of 1986, as amended and any successors
thereto (the "Code"), and would be subject to an excise tax pursuant to Section
4999 of the Code, Employee shall be entitled to receive additional payments from
the Company in an amount equal to that gross amount which when all additional
income or excise taxes payable by Employee by reason of the imposition of such
excise tax pursuant to Section 4999 of the Code are deducted therefrom is equal
to the net amount which Employee was intended to receive pursuant to Section 5
of this Agreement.
7. Other Employment. Employee shall not be required to mitigate the amount
of any payment or benefit provided for in Section 5 by seeking other employment
or otherwise. The amount of any such payment or benefit shall not be reduced by
any compensation earned or benefit received by Employee as the result of other
employment.
8. Life Insurance. During the Contract Period the Company will continue to
maintain in effect and pay the premiums on any insurance policies on the life of
Employee which are in effect on the effective date of a Change in Control.
9. Split Dollar Life Insurance. The Company will pay all premiums on the
split dollar life insurance policy with Transamerica Occidental Life Insurance
Company insuring Employee and his spouse until the first to occur of the
following: (i) the last day of the tenth year of the policy's existence, or (ii)
the death of Employee and his spouse.
If the policy continues in effect until the last day of the tenth year of
its existence, the policy shall continue to remain in effect thereafter with the
Company maintaining an interest in the policy equal to the amount of premiums
paid until the first to occur of the following: (i) reimbursement to the Company
of the premiums paid through withdrawal of cash value or (ii) the death of
Employee and his spouse. During the foregoing period the premiums each year
shall be paid from the cash surrender value of the policy and interest earned
thereon.
If the policy continues in effect, no later than the 20th year of its
existence, there shall be paid to the Company from the cash surrender value of
the policy the amounts accrued on the books of the Company by reason of
advancing funds for premium payment in full satisfaction of all interest of the
Company in the policy and the Company shall assign to the owner of the policy
all interest of the Company in the policy.
If the policy terminates by reason of the death of Employee and his spouse
prior to the repayment to the Company of premiums through cash value, there
shall be paid to the Company in full satisfaction of all its interest in the
policy from the death proceeds payable the amounts accrued on the books of the
Company by reason of advancing funds for premium payment and the balance of the
death proceeds shall be paid to the beneficiaries designated under the policy by
Employee and his spouse.
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<PAGE> 5
10. Successors: Binding Agreement.
(i) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, liquidation or otherwise) to
all or substantially all of the business and/or assets of the Company, or
any person or group (as these terms are defined in or for the purposes of
Section 13(d) of the Securities Exchange Act of 1934, as in effect on the
date hereof acquiring a controlling portion of the Company's stock, to
agree to expressly assume the obligation of the Company to perform this
Agreement upon or prior to such succession taking place. A copy of such
assumption and agreement shall be delivered to Employee promptly after its
execution by the successor or such person or group. Failure of the Company
to obtain such agreement upon or prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee
to benefits as set forth above in Sections 4 and 5. Further, if the Company
fails to obtain such agreement upon or prior to the effectiveness of any
such succession, the Company shall place in trust or escrow, with an
independent third party as trustee or escrow agent, for the benefit of
Employee cash in an amount equal to the total of the following: the maximum
amounts which are or may become payable to Employee by reason of Section
5(i), (ii), (iv) and (v). This amount shall not be discounted to any
present value. All or any portion of such amount held in trust or escrow
shall be paid to Employee at the times required by Section 5 hereof, and
any remaining balance shall be returned to the Company only after there are
no obligations of the Company under Section 5 that may be required to be
performed in the future.
(ii) This Agreement is personal to Employee and Employee may not
assign or transfer any part of Employee's rights or duties hereunder, or
any compensation due to Employee hereunder, to any other person, except
that this Agreement shall inure to the benefit of and be enforceable by
Employee's personal or legal representatives, executors, administrators,
heirs, distributees, devisees, legatees or beneficiaries.
11. Modification: Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in a writing signed by Employee and by the Company. Waiver by any party of any
breach of or failure to comply with any provision of this Agreement by the other
party shall not be construed as, or constitute, a continuing waiver of such
provision, or a waiver of any other breach of, or failure to comply with, any
other provision of this Agreement.
12. Arbitration of Disputes.
(i) Any disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the interpretation or validity hereof shall
be settled exclusively and finally by arbitration. It is specifically
understood and agreed that any disagreement, dispute or controversy which
cannot be resolved between the parties, including without limitation any
matter relating to the interpretation of this Agreement, may be submitted
to arbitration irrespective of the magnitude thereof, the amount in
controversy or whether such disagreement, dispute or controversy would
otherwise be considered justiciable or ripe for resolution by a court or
arbitral tribunal.
(ii) The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA").
(iii) The arbitral tribunal shall consist of one arbitrator. The
parties to the arbitration jointly shall directly appoint such arbitrator
within 30 days of initiation of the arbitration. If the parties shall fail
to appoint such arbitrator as provided above, such arbitrator shall be
appointed by the AAA as provided in the Arbitration Rules and shall be a
person who has had substantial experience in mergers and acquisitions. The
Company shall pay all of the fees, if any, and expenses of such arbitrator.
(iv) The arbitration shall be conducted in the metropolitan Detroit,
Michigan area or in such other city in the United States of America as the
parties to the dispute may designate by mutual written consent.
(v) At any oral hearing of evidence in connection with the
arbitration, each party thereto or its legal counsel shall have the right
to examine its witnesses and to cross-examine the witnesses of any opposing
5
<PAGE> 6
party. No evidence of any witness shall be presented in form unless the
opposing party or parties shall have the opportunity to cross-examine such
witness, except as the parties to the dispute otherwise agree in writing or
except under extraordinary circumstances where the interests of justice
require a different procedure.
(vi) Any decision or award of the arbitral tribunal shall be final and
binding upon the parties to the arbitration proceeding. The parties hereto
agree that the arbitral award may be enforced against the parties to the
arbitration proceeding or their assets wherever they may be found and that
a judgment upon the arbitral award may be entered in any court having
jurisdiction.
(vii) Nothing herein contained shall be deemed to give the arbitral
tribunal any authority, power, or right to alter, change, amend, modify,
add to, or subtract from any of the provisions of this Agreement.
13. Notice. All notices, requests, demands and other communications
required or permitted to be given by either party to the other party by this
Agreement (including, without limitation, any notice of termination of
employment and any notice under the Arbitration Rules of an intention to
arbitrate) shall be in writing and shall be deemed to have been duly given when
delivered personally or received by certified or registered mail, return receipt
requested, postage prepaid, at the address of the other party, as follows:
If to the Company, to:
Douglas & Lomason Company
24600 Hallwood Court
Farmington Hills, MI 48335-1671
Attention: Chairman of the Board of Directors
If to Employee, to:
Harry A. Lomason II
2900 Pine Lake Road
Orchard Lake, MI 48324
Either party hereto may change its address for purposes of this Section 10 by
giving fifteen (15) days' prior notice to the other party hereto.
14. Severability. If any term or provision of this Agreement or the
application hereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
15. Headings. The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning of
this Agreement.
16. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original.
17. Governing Law. This Agreement shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan,
without regard to the conflicts of laws principles of such state.
18. Payroll and Withholding Taxes. All payments to be made or benefits to
be provided hereunder by the Company shall be subject to reduction for any
applicable payroll-related or withholding taxes.
6
<PAGE> 7
19. Entire Agreement. This Agreement supersedes any and all other oral or
written agreements heretofore made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Douglas & Lomason Company
<TABLE>
<S> <C>
/s/ HARRY A. LOMASON II By: /s/ VERNE C. HAMPTON II
- ------------------------------------------- ---------------------------------------
(Employee Signature) Secretary
HARRY A. LOMASON II
- -------------------------------------------
(Employee)
</TABLE>
7
<PAGE> 1
EXHIBIT 9
AGREEMENT
This Agreement (the "Agreement") is made as of the 17th day of May, 1996,
between Douglas & Lomason Company, a Michigan corporation (hereinafter called
the "Company") and
(hereinafter called "Employee").
WHEREAS, should the Company receive any proposal for a Change in Control,
as defined in Section 1 hereof, the Board of Directors of the Company (the
"Board") believes it imperative that the Company and the Board be able to rely
upon Employee to continue in his or her position, and that they be able to
receive and rely upon Employee's advice, if they request it, as to the best
interests of the Company and its shareholders, without concern that Employee
might be distracted or his or her advice affected by the personal uncertainties
and risks created by such a proposal;
NOW, THEREFORE, to induce Employee to remain in the employ of the Company,
and for other good and valuable consideration, the Company and Employee agree as
follows:
1. Definitions.
(i) "Change in Control" shall mean the occurrence of any of the
following events:
(a) a third "person," including a "group," becomes the "beneficial
owner" (as these terms are defined in or for the purposes of Section
13(d) of the Securities Exchange Act of 1934, as in effect on the date
hereof) of shares of the Company having more than 50% of the total
number of votes that may be cast for the election of Directors of the
Company;
(b) the merger or consolidation of the Company with or into any
other corporation or entity or the merger or consolidation of any other
corporation or entity into or with the Company, in which merger or
consolidation those persons who are shareholders of the Company
immediately prior to such merger or consolidation do not receive, as a
result of such merger or consolidation, more than 50% in voting power of
the outstanding capital stock of the surviving corporation;
(c) any sale or transfer in a single transaction or series of
related transactions (other than a public offering of securities) of
more than 50% of fair market value of the Company's assets; or
(d) the Board determines in its sole and absolute discretion that
there has been a change in control of the Company.
(ii) "Controlling portion of the Company's stock" shall mean shares of
the Company having more than 50% of the total number of votes that may be
cast for the election of Directors of the Company.
(iii) "Company" shall mean Douglas & Lomason Company and any successor
(whether such succession is direct or indirect, by purchase, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
business and/or assets of the Company.
(iv) "Good Reason," when used with reference to a voluntary
termination by Employee of Employee's employment with the Company, shall
mean:
(a) the assignment to Employee of any duties substantially
inconsistent with, or the reduction of powers or functions associated
with, Employee's positions, duties, responsibilities and status with the
Company as they existed immediately prior to a Change in Control;
(b) a reduction by Company in Employee's base salary as in effect
on the date hereof or as the same may be increased from time to time;
(c) a change in Employee's principal work location outside of the
Farmington Hills, Michigan metropolitan area, except for required travel
on the Company's business to an extent substantially consistent with
Employee's business travel obligations immediately prior to a Change in
Control;
<PAGE> 2
(d) the failure by the Company to obtain an agreement to expressly
assume this Agreement from any successor (whether such succession is
direct or indirect by purchase, merger, consolidation, liquidation or
otherwise) to substantially all of the business and/or assets of the
Company or from a person or group (as these terms are defined in or for
the purposes of Section 13(d) of the Securities Exchange Act of 1934, as
in effect on the date hereof) acquiring a controlling portion of the
Company's stock; or
(e) any purported termination of Employee's employment by the
Company during the Contract Period which is not effected pursuant to the
requirements of this Agreement.
(v) "Contract Period" shall mean the period commencing on the day a
Change in Control takes place and continuing for three (3) years. A
Contract Period shall only exist for the first Change in Control which
takes place after the date hereof.
(vi) "Disability" shall mean a physical or mental incapacity of
Employee which entitles Employee to benefits under the long term disability
plan applicable to Employee and maintained by the Company as in effect
immediately prior to the Change in Control. However, if the Company has no
such plan at that time, "Disability" shall mean any physical or mental
condition that renders Employee unable to substantially perform Employee's
duties with the Company for a period exceeding six (6) consecutive months
or for a period exceeding four (4) months if a physician selected by the
Company, and reasonably satisfactory to Employee, specializing in the area
of the disability in question determines in good faith that Employee will
be permanently unable to substantially perform Employee's duties with the
Company.
(vii) "Cause," when used in connection with the termination of
Employee's employment by the Company, shall mean (a) the willful and
continued failure by Employee substantially to perform Employee's duties
and obligations to the Company (other than any such failure resulting from
Employee's Disability), (b) the willful engaging by Employee in misconduct
which is materially injurious to the Company, monetarily or otherwise, or
(c) a conviction for or plea of nolo contendere to a felony under the laws
of any state within the United States or of the United States. For purposes
of this definition, no act, or failure to act, on Employee's part shall be
considered "willful" unless done, or omitted to be done, by Employee in bad
faith and without reasonable belief that Employee's action or omission was
in the best interests of the Company.
(viii) "Without Cause," when used in connection with the termination
of Employee's employment by the Company, shall mean any termination of
employment of Employee by the Company which is not a termination of
employment for Cause or for Disability.
(ix) "Termination Date" shall mean the effective date as provided
hereunder of the termination of Employee's employment.
2. Application of this Agreement: Term of Agreement. This Agreement shall
apply with respect to any termination of employment of Employee which occurs
during the Contract Period. It shall not apply to any termination of employment
of Employee which occurs other than during the Contract Period. As provided in
the definition of Contract Period, a Contract Period shall only exist for the
first Change in Control after the date hereof. This Agreement shall terminate
automatically upon termination of employment of Employee by reason of Employee's
death. Continuation of employment with a successor to the Company, as described
in Section 1 (iii), shall not alone constitute termination of Employee's
employment. This Agreement shall also terminate upon the expiration of five (5)
years from the date hereof unless the Contract Period has commenced on or prior
to the expiration of such five (5) years, in which case this Agreement will
terminate upon the expiration of the Contract Period. Any such termination shall
not affect obligations incurred prior to the date of termination, including any
obligation to provide benefits under Section 5.
3. Termination of Employment of Employee By the Company During the Contract
Period.
(i) During the Contract Period, the Company shall have the right to
terminate Employee's employment hereunder for Cause, for Disability or
Without Cause upon compliance with the procedures hereinafter specified.
2
<PAGE> 3
(ii) Termination of Employee's employment for Disability shall become
effective no sooner than thirty (30) days after a notice of intent to
terminate Employee's employment, specifying Disability as the basis for
such termination, is given to Employee by the Board or by a Committee of
the Board.
(iii) Termination of Employee's employment for Cause shall not be
deemed effective unless and until there shall have been delivered to
Employee a copy of a notice of termination from the Chief Executive Officer
of the Company, after reasonable notice to Employee and an opportunity for
Employee, together with Employee's counsel, to be heard before the Chief
Executive Officer, finding that in the good faith opinion of the Chief
Executive Officer Cause existed and specifying the particulars thereof in
detail.
(iv) The Company shall have the absolute right to terminate Employee's
employment Without Cause at any time by vote of a majority of the whole
Board. Termination of Employee's employment Without Cause shall be
effective five (5) business days after the date of the Company's giving to
Employee a notice of termination, specifying that such termination is
Without Cause.
(v) Upon a termination of Employee's employment for Cause or for
Disability, Employee shall have no right to receive any compensation or
benefits hereunder. Upon a termination of Employee's employment Without
Cause, Employee shall be entitled to receive the benefits provided in
Section 5 hereof.
4. Termination of Employment By Employee During Contract Period. During the
Contract Period, Employee shall be entitled to terminate employment with the
Company for any reason and, if such termination is for Good Reason, to receive
the benefits provided in Section 5 hereof. Employee shall give the Company
notice of voluntary termination of employment, which notice need specify only
Employee's desire to terminate employment and, if such termination is for Good
Reason, also set forth in reasonable detail the facts and circumstances claimed
by Employee to constitute Good Reason. Any notice by Employee pursuant to this
Section shall be effective five (5) business days after the date it is given by
Employee.
5. Benefits Upon Termination in Certain Circumstances. Upon the termination
of the employment of Employee by the Company pursuant to Section 3(iv) or by
Employee for Good Reason pursuant to Section 4 hereof, Employee shall be
entitled to receive the following benefits:
(i) The Company shall pay to Employee, not later than the Termination
Date, a lump sum cash amount equal to the sum of (a) the full base salary
earned by Employee through the Termination Date and unpaid at the
Termination Date, (b) the amount of any base salary attributable to
vacation earned by Employee but not taken before the Termination Date, and
(c) all other amounts earned by Employee and unpaid at the Termination
Date.
(ii) The Company shall pay to Employee a cash amount equal to
thirty-six (36) times the Employee's base monthly salary at the rate in
effect immediately prior to the Termination Date. Such sum shall be paid at
the option of Employee either (i) in a lump sum, (ii) in monthly
installments over a period of 36 months, or (iii) in monthly installments
with a lump sum payable upon request from Employee.
(iii) The Company shall further pay to Employee a pro-rata amount of
any bonus award earned by the Employee during the year of the Termination
Date under the Company's Annual Incentive Plan.
(iv) The Company shall also pay to Employee all legal fees and
expenses incurred by Employee as a result of successfully enforcing any
right or benefit provided to Employee by this Agreement.
(v) The Company shall pay, when due, for outplacement services as
requested by Employee to assist in locating new employment, up to a maximum
amount of $30,000.
(vi) The Company will continue to provide Employee with an automobile
for a period of six months after the Termination Date.
(vii) The Company shall maintain in full force and effect for
Employee's continued benefit until the earlier of (a) the end of the
Contract Period or (b) Employee's commencement of employment with a new
employer, any medical insurance plans or medical insurance arrangements in
which Employee was
3
<PAGE> 4
entitled to participate upon the Termination Date, provided that Employee's
continued participation is possible under the general terms and provisions
of such plans or arrangements. In the event that Employee's participation
in any such plans or arrangements is barred, the Company shall arrange to
provide Employee with benefits substantially similar to those which
Employee is entitled to receive under such plans or arrangements. Should
the medical insurance plans or arrangements provided by Employee's new
employer not entitle Employee or Employee's dependents (a) to any coverage
during an initial qualification period or (b) to coverage for any condition
which is considered a pre-existing condition under the new employer's plan
and which was covered under the Company's medical insurance plans or
arrangements at the Termination Date, then notwithstanding Employee's
employment, the Corn any shall continue to provide medical benefits as
stated above in this Section 5(v) during such qualification period (if
clause (a) of this sentence is applicable) and at least for such
pre-existing condition (if clause (b) of this sentence is applicable).
(viii) The Company shall assign to Employee without any cost to
Employee the Company's interest in any insurance policies issued on the
life of Employee.
6. Excess Parachute Payment. In the event that it is determined that the
payments and benefits to Employee provided for in Section 5 hereof shall
constitute an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Internal Revenue Code of 1986, as amended and any successors
thereto (the "Code"), and would be subject to an excise tax pursuant to Section
4999 of the Code, Employee shall be entitled to receive additional payments from
the Company in an amount equal to that gross amount which when all additional
income or excise taxes payable by Employee by reason of the imposition of such
excise tax pursuant to Section 4999 of the Code are deducted therefrom is equal
to the net amount which Employee was intended to receive pursuant to Section 5
of this Agreement.
7. Other Employment. Employee shall not be required to mitigate the amount
of any payment or benefit provided for in Section 5 by seeking other employment
or otherwise. The amount of any such payment or benefit shall not be reduced by
any compensation earned or benefit received by Employee as the result of other
employment.
8. Life Insurance. During the Contract Period the Company will continue to
maintain in effect and pay the premiums on any insurance policies on the life of
Employee which are in effect on the effective date of a Change in Control.
9. Successors: Binding Agreement.
(i) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, liquidation or otherwise) to
all or substantially all of the business and/or assets of the Company, or
any person or group (as these terms are defined in or for the purposes of
Section 13(d) of the Securities Exchange Act of 1934, as in effect on the
date hereof acquiring a controlling portion of the Company's stock, to
agree to expressly assume the obligation of the Company to perform this
Agreement upon or prior to such succession taking place. A copy of such
assumption and agreement shall be delivered to Employee promptly after its
execution by the successor or such person or group. Failure of the Company
to obtain such agreement upon or prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle Employee
to benefits as set forth above in Sections 4 and 5. Further, if the Company
fails to obtain such agreement upon or prior to the effectiveness of any
such succession, the Company shall place in trust or escrow, with an
independent third party as trustee or escrow agent, for the benefit of
Employee cash in an amount equal to the total of the following: the maximum
amounts which are or may become payable to Employee by reason of Section
5(i), (ii), (iv) and (v). This amount shall not be discounted to any
present value. All or any portion of such amount held in trust or escrow
shall be paid to Employee at the times required by Section 5 hereof, and
any remaining balance shall be returned to the Company only after there are
no obligations of the Company under Section 5 that may be required to be
performed in the future.
(ii) This Agreement is personal to Employee and Employee may not
assign or transfer any part of Employee's rights or duties hereunder, or
any compensation due to Employee hereunder, to any other
4
<PAGE> 5
person, except that this Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees or beneficiaries.
10. Modification: Waiver. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in a writing signed by Employee and by the Company. Waiver by any party of any
breach of or failure to comply with any provision of this Agreement by the other
party shall not be construed as, or constitute, a continuing waiver of such
provision, or a waiver of any other breach of, or failure to comply with, any
other provision of this Agreement.
11. Arbitration of Disputes.
(i) Any disagreement, dispute, controversy or claim arising out of or
relating to this Agreement or the interpretation or validity hereof shall
be settled exclusively and finally by arbitration. It is specifically
understood and agreed that any disagreement, dispute or controversy which
cannot be resolved between the parties, including without limitation any
matter relating to the interpretation of this Agreement, may be submitted
to arbitration irrespective of the magnitude thereof, the amount in
controversy or whether such disagreement, dispute or controversy would
otherwise be considered justiciable or ripe for resolution by a court or
arbitral tribunal.
(ii) The arbitration shall be conducted in accordance with the
Commercial Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA").
(iii) The arbitral tribunal shall consist of one arbitrator. The
parties to the arbitration jointly shall directly appoint such arbitrator
within 30 days of initiation of the arbitration. If the parties shall fail
to appoint such arbitrator as provided above, such arbitrator shall be
appointed by the AAA as provided in the Arbitration Rules and shall be a
person who has had substantial experience in mergers and acquisitions. The
Company shall pay all of the fees, if any, and expenses of such arbitrator.
(iv) The arbitration shall be conducted in the metropolitan Detroit,
Michigan area or in such other city in the United States of America as the
parties to the dispute may designate by mutual written consent.
(v) At any oral hearing of evidence in connection with the
arbitration, each party thereto or its legal counsel shall have the right
to examine its witnesses and to cross-examine the witnesses of any opposing
party. No evidence of any witness shall be presented in form unless the
opposing party or parties shall have the opportunity to cross-examine such
witness, except as the parties to the dispute otherwise agree in writing or
except under extraordinary circumstances where the interests of justice
require a different procedure.
(vi) Any decision or award of the arbitral tribunal shall be final and
binding upon the parties to the arbitration proceeding. The parties hereto
agree that the arbitral award may be enforced against the parties to the
arbitration proceeding or their assets wherever they may be found and that
a judgment upon the arbitral award may be entered in any court having
jurisdiction.
(vii) Nothing herein contained shall be deemed to give the arbitral
tribunal any authority, power, or right to alter, change, amend, modify,
add to, or subtract from any of the provisions of this Agreement.
12. Notice. All notices, requests, demands and other communications
required or permitted to be given by either party to the other party by this
Agreement (including, without limitation, any notice of termination of
employment and any notice under the Arbitration Rules of an intention to
arbitrate) shall be in writing and
5
<PAGE> 6
shall be deemed to have been duly given when delivered personally or received by
certified or registered mail, return receipt requested, postage prepaid, at the
address of the other party, as follows:
If to the Company, to:
Douglas & Lomason Company
24600 Hallwood Court
Farmington Hills, MI 48335-1671
Attention: Chairman of the Board of Directors
If to Employee, to:
Either party hereto may change its address for purposes of this Section by
giving fifteen (15) days' prior notice to the other party hereto.
13. Severability. If any term or provision of this Agreement or the
application hereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
14. Headings. The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning of
this Agreement.
15. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original.
16. Governing Law. This Agreement shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan,
without regard to the conflicts of laws principles of such state.
17. Payroll and Withholding Taxes. All payments to be made or benefits to
be provided hereunder by the Company shall be subject to reduction for any
applicable payroll-related or withholding taxes.
18. Entire Agreement. This Agreement supersedes any and all other oral or
written agreements heretofore made relating to the subject matter hereof and
constitutes the entire agreement of the parties relating to the subject matter
hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Douglas & Lomason Company
<TABLE>
<S> <C>
- --------------------------------------------- By:
(Employee Signature) -----------------------------------------------
Chairman of the Board
- --------------------------------------------- and President
(Employee)
</TABLE>
6
<PAGE> 1
EXHIBIT 10
[MAGNA LETTERHEAD]
September 3, 1996
Mr. Harry A. Lomason II
2900 Pine Lake Road
Orchard Lake, MI 48324
Dear Harry:
Re: Employment with Magna Lomason Corporation
As discussed, the form of employment contract which we have agreed upon is
enclosed. Immediately following the Commencement Date described in paragraph 8
of the employment contract, Magna will cause Magna Lomason Corporation to
execute and deliver to you the employment contract in the form attached for
your execution.
For purposes of clarification, it is further understood and agreed that Magna
Lomason Corporation will, notwithstanding the termination of the employment
contract by reason of your death, continue to pay the premiums for the split
dollar life insurance policy described in paragraph 4(b)(ii) of such employment
contract until the earlier to occur of the death of your wife (the co-insured
under such policy) or payment of all insurance premiums currently required to
be paid by D&L under the policy of insurance.
Please sign both copies of this letter and initial the form of employment
contract if you are in agreement and return one copy to me.
Yours very truly,
William H. Fike
Vice-Chairman
Agreed and accepted this day of September, 1996.
--------------------------------
Harry A. Lomason II
<PAGE> 2
October , 1996
PRIVATE & CONFIDENTIAL
Mr. Harry A. Lomason II
2900 Pine Lake Road
Orchard Lake, MI 48324
Dear Harry:
Re: Employment with Magna Lomason Corporation
In accordance with our recent discussions, this letter will confirm that the
following shall be the terms and conditions of your employment with Magna
Lomason Corporation (the "Corporation") as follows:
1. POSITION: Effective with the Commencement Date, you are appointed
President, Magna Lomason Metals - Mechanisms group of the Corporation
reporting to the Vice-Chairman of Magna International Inc. ("Magna") or
his designees. In this position, you are to (i) act as chief executive
responsible for Magna Lomason Metals - Mechanisms group (including
Atoma Mechanisms group); and (ii) supervise and act as a director of
the Shanghai Lomason, Euro-American and Namba joint ventures.
2. BASE SALARY: Your Base Salary shall be U.S. $200,000 per annum (less
statutorily required deductions), payable in accordance with the
Corporation's standard payroll practices.
3. ANNUAL BONUS: In addition to your Base Salary, you shall receive an
Annual Bonus (inclusive of all entitlement to vacation pay and less
statutorily required deductions) in an amount equal to:
(a) a guaranteed Annual Bonus in the amount of U.S. $400,000 per
annum, payable quarterly in arrears at the end of each fiscal
quarter of Magna for a period of twenty-four (24) months from
the Commencement Date; and
(b) for the fiscal year ending July 31, 1999 and for each fiscal
year thereafter, your Annual Bonus will be determined based on a
mutually agreed-upon formula providing for participation in
profits of the Group, such agreement to be reached on or before
August 1, 1998. For the period from August 1, 1998 to the
second anniversary date of the Commencement Date such profit
participation shall not be less on a pro-rata basis than U.S.
$400,000 per annum and for the period from the second
anniversary date of the Commencement Date to the date of
expiration or termination of this agreement shall not be less on
a pro-rata basis than U.S. $200,000 per annum.
For the purposes of this agreement the profit participation shall be
determined and paid in accordance with the stated policies prescribed by
Magna, from time to time, in its sole discretion.
4. BENEFITS:
(a) During the first twelve (12) months following the Commencement
Date you will continue to participate in group insurance and
benefit programs at least equivalent to those currently provided
to you by Douglas & Lomason Company, including without
limitation your split dollar life insurance and pension
benefits.
(b) During the remainder of the term of this agreement you will be
entitled to:
(i) participate in all group insurance and benefit
programs generally applicable to salaried employees of
the Corporation from time to time, with the exception
of the Magna Employee Equity Participation and Profit
Sharing Plan or any equivalent or related plans in
effect from time to time;
<PAGE> 3
Mr. Harry A. Lomason II -2- October , 1996
(ii) continuation of your split dollar life insurance policy and
related arrangements (including payment by the Corporation of
the premiums) all as contemplated in paragraph 9 of the
Agreement dated May 17, 1996 between you and Douglas & Lomason
Company;
(iii) continuation of current Douglas & Lomason retirement benefits
other than the Douglas & Lomason pension plan;
(iv) Douglas & Lomason pension benefits to be maintained, but further
pension plan participation to be terminated effective upon
termination of the current Douglas & Lomason pension plan;
(v) Not less than four (4) weeks vacation in respect of each
completed twelve (12) month period, to be taken at such time or
times as are mutually convenient to you and Mr. Fike, but not
payment in lieu thereof;
(vi) receive an automobile allowance of $650 per month; and
(vii) reimbursement for all reasonable and documented business
expenses incurred on behalf of the Corporation in carrying out
your duties, in accordance with the Corporation's policies from
time to time.
5. CONDITIONS FOR CONTINUED EMPLOYMENT: It is acknowledged by you that as
a condition of your continued employment you will comply in every
respect with the Corporation's Capital Expenditure Guidelines,
Employee's Charter of Rights, Corporate Constitution and Health, Safety
and Environmental Policy, together with such other Magna corporate
policies as may be put into effect from time to time.
6. TERMINATION: Your employment and this agreement, including all benefits
provided for under this agreement, will terminate on: (a) your death;
(b) the acceptance by the Corporation of your voluntary resignation; (c)
at the Corporation's option, your physical or mental disability such
that you are unable in any material respect to perform your duties and
responsibilities under this agreement for an aggregate of six (6) months
or more in any twenty-four (24) month period; or (d) your dismissal for
just cause or by reason of your material breach of the terms of this
agreement. On termination of this agreement other than for dismissal
for just cause (as subsequently defined) or for material breach under
sub-paragraph 6(d), the Corporation will also pay your Annual Bonus on a
prorated basis. In the event that you breach the provisions of
paragraph 7, the payment of all compensation will immediately cease.
For purposes of this agreement, "just cause" shall mean (a) the wilful
or repeated failure by you to perform your duties and obligations to the
Corporation in any material respect (other than any such failure
resulting from a disability as contemplated by this agreement), (b) the
wilful engaging by you in misconduct which is materially injurious to
the Corporation, monetarily or otherwise, (c) the wilful or repeated
failure by you to follow in any material respect the lawful instructions
of the person to whom you report, or (d) a conviction for or plea of
nolo contendere to a felony under the laws of the United States or of
any state therein. To be "wilful", an act or failure to act by you must
be done or omitted to be done by you in bad faith and without
reasonable belief that your action or omission was in compliance with
the Corporation's policies or lawful instructions and was in the best
interests of the Corporation.
The termination provisions set forth above include all severance pay
entitlement, notice of termination or pay in lieu thereof, salary,
bonuses, automobile allowances, vacation and/or vacation pay and other
remuneration and benefits payable or otherwise provided to you in
relation to your employment by the Corporation (including, specifically,
any preceding employment by Magna, or its affiliated or associated
companies as the case may be (all of the foregoing are hereinafter
collectively referred to as the "Magna Group")), and the termination of
your employment and this agreement.
<PAGE> 4
Mr. Harry A. Lomason II -3- October , 1996
7. You hereby acknowledge as reasonable and agree that you shall abide by
the following terms and conditions:
i) TECHNOLOGY, KNOW-HOW, INVENTIONS, PATENTS: That all designs,
devices, improvements, inventions and ideas made or conceived by
you resulting from your access to the business of the Magna
Group shall be exclusive property of the Magna Group and you and
your estate agree to take all necessary steps to ensure that
such property rights are protected.
ii) CONFIDENTIALITY: You shall keep confidential at any time during
or after your employment, any information (including proprietary
or confidential information) about the business and affairs of,
or belonging to, the Corporation or any member of the Magna
Group or their respective customers or suppliers, including
information which, though technically not trade secrets, the
dissemination or knowledge whereof might prove prejudicial to
any of them.
iii) NON-COMPETITION: During the term of your employment with the
Corporation and for a period of twelve (12) months after the
termination of your employment, you shall not, directly or
indirectly, in any capacity compete with the business of the
Corporation or of any member of the Magna Group in respect of
which you have had access to proprietary or confidential
information or solicit the employees thereof; provided, however,
that this provision shall not apply after the termination of
your employment if the Corporation terminates your employment
without just cause or as a result of your material breach of
this agreement.
8. TERM: This agreement shall commence on the date the merger between
Douglas & Lomason Company and Magna Acquisition Corporation is completed
(the "Commencement Date") and shall expire five (5) years after such
Commencement Date, subject to earlier termination in accordance with the
terms of this agreement. Upon expiry or other termination of this
agreement, paragraph 7 shall continue in full force and effect.
If the terms of employment as set out in this agreement are acceptable to you,
please sign and date three copies in the places indicated and return two fully
signed copies to the attention of Bill Fike. Upon execution by you, this
agreement replaces any prior written or oral employment contract or other
agreement concerning remuneration between you and the Corporation or any member
of the Magna Group.
Yours very truly,
Don Walker William H. Fike
President and Chief Executive Officer Vice Chairman
/jm ------
I hereby accept the terms and conditions set out above and acknowledge that this
agreement contains all of the terms and conditions of my employment with Magna
Lomason Corporation and that no other terms, conditions or representations other
than those within this letter form part of this agreement.
- ------------------------------- --------------------------------
Date , 1996 Harry A. Lomason II
<PAGE> 1
EXHIBIT 11
JOINT PRESS RELEASE
MAGNA INTERNATIONAL TO ACQUIRE DOUGLAS & LOMASON COMPANY
AUGUST 29, 1996, Detroit, Michigan -- MAGNA INTERNATIONAL INC. (NYSE: MGA; TSE:
MG.A, MG.B; ME: MG.A) and DOUGLAS & LOMASON COMPANY (NASDAQ: DOUG) today
announced that they have signed a definitive merger agreement providing for
Magna to acquire Douglas & Lomason for U.S. $31.00 in cash per Douglas & Lomason
common share. Under this agreement, which has been approved by the boards of
each company, a wholly owned U.S. subsidiary of Magna will be merged into
Douglas & Lomason. In connection with the merger, Magna intends promptly to
commence a cash tender offer for all the outstanding shares of common stock of
Douglas & Lomason. Based upon approximately 4.45 million Douglas & Lomason
common shares currently outstanding, the aggregate consideration to be paid in
the tender offer and the merger, including payment in respect of outstanding
stock options, will amount to approximately U.S. $135 million. The acquisition
is not subject to a financing condition but is subject to clearance under the
Hart-Scott-Rodino Antitrust Improvements Act and certain other standard
conditions.
Douglas & Lomason Company is a worldwide supplier to the automotive industry of
seating systems, frames, covers, foam and mechanisms. In the automotive OEM and
aftermarket, its Bestop, Inc. subsidiary is a recognized leader in supplying
soft tops and accessories. The Chantland Company division is a major supplier of
pulleys and rollers to conveyor manufacturers and of conveyors, bag filling
scales and automatic palletizers for customers worldwide. Douglas & Lomason
Company currently employs 5,900 associates in facilities throughout the United
States, Canada, Mexico, Europe and China. In 1995 and the six months ended June
30, 1996, Douglas & Lomason had net sales of U.S. $561 million and U.S. $299
million, respectively, and net income of U.S. $4.2 million and U.S. $7.4
million, respectively.
Magna International Inc., one of the most diversified automotive suppliers in
the world, designs, develops and manufactures automotive systems, assemblies and
components primarily for sale to original equipment manufacturers of cars and
light trucks in North America (including Mexico) and Europe. Magna's products
include exterior decorative systems, interior products including seating
systems, instrument, door and other panels, airbags and steering wheels, stamped
and welded metal parts and assemblies, sunroofs, electro-mechanical devices and
assemblies, various engine, powertrain and fueling and cooling components, and a
variety of plastic parts, including body panels and fascias. Magna employs over
25,000 people in 100 manufacturing operations in 10 countries. In its fiscal
year ended July 31, 1995 and the nine-month period ended April 30, 1996, Magna's
sales totalled approximately Cdn. $4.5 billion and Cdn. $4.2 billion,
respectively, and net income was Cdn. $317.0 million and Cdn. $222.9 million,
respectively.
<PAGE> 2
Commenting on this news, Donald Walker, President and Chief Executive Officer of
Magna said: "We're extremely pleased to announce this transaction. We believe
that the combination of the seating businesses of Magna's Atoma Interior Systems
Group and Douglas & Lomason will capitalize on the capabilities of both groups,
and will result in a stronger seating system supplier able to compete
cost-effectively on a global basis and will continue to enhance Magna's
international participation as an interior systems integrator."
Harry A. Lomason II, Chairman and Chief Executive Officer of Douglas & Lomason,
said: "This merger will allow the D & L team to realize the many possibilities
they have developed over the years. The strength of the new corporation with its
extensive interior systems and components manufacturing capability will present
quite a formidable competitor to the global marketplace."
Prudential Securities Incorporated will be acting as dealer manager for the
tender offer. The Bridgeford Group, acting as financial advisor to Douglas &
Lomason, has rendered a fairness opinion with respect to the transaction.
For further information, please contact:
MAGNA INTERNATIONAL INC. DOUGLAS & LOMASON COMPANY
36 Apple Creek Boulevard 24600 Hallwood Court
Markham, Ontario L3R 4Y4 Farmington Hills, MI 48335-1671
Contact: Graham J. Orr, Executive Contact: James J. Hoey
Vice President, Corporate Senior Vice-President &
Development Chief Financial Officer
(905) 477-7766 (810) 442-4256
<PAGE> 1
EXHIBIT 12
August 30, 1996
Magna Acquisition Corporation
c/o Magna International Inc.
36 Apple Creek Boulevard
Markham, Ontario L3R 4Y4
The undersigned, as the lawful owner of the number of shares of Douglas &
Lomason Company Common Stock, par value $2.00 per share, (the "Stock") set forth
below, hereby agrees to tender, and not withdraw except if a superior offer is
recommended by the Board of Directors of Douglas & Lomason Company, the Stock
into a cash tender offer to be commenced by you for the Stock on September 5,
1996 upon the terms and conditions as set forth in the offering documents
relating to such tender offer.
Witness:
/s/ MYRON J. HALLOCK /s/ JANE L. AGOSTINELLI
- ------------------------------ ------------------------------
Jane L. Agostinelli
/s/ PEGGY A. KLIEGE
- ------------------------------
Number of Shares: 267,996
<PAGE> 1
EXHIBIT 13
August 30, 1996
Magna Acquisition Corporation
c/o Magna International Inc.
36 Apple Creek Boulevard
Markham, Ontario L3R 4Y4
The undersigned, as the lawful owner of the number of shares of Douglas &
Lomason Company Common Stock, par value $2.00 per share, (the "Stock") set forth
below, hereby agrees to tender, and not withdraw except if a superior offer is
recommended by the Board of Directors of Douglas & Lomason Company, the Stock
into a cash tender offer to be commenced by you for the Stock on September 5,
1996 upon the terms and conditions as set forth in the offering documents
relating to such tender offer.
Witness:
/s/ JERI CRUMLEY /s/ ANNE L. BRAY
- ---------------------------- ----------------------------
Anne L. Bray
/s/ DONNA HOOD
- ----------------------------
Number of Shares: 275,833
