<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
DOUGLAS & LOMASON COMPANY
(NAME OF SUBJECT COMPANY)
MAGNA ACQUISITION CORPORATION
(BIDDER)
------------------------
COMMON STOCK, PAR VALUE $2.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
258777101
(CUSIP NUMBER OF CLASS OF SECURITIES)
------------------------
J. BRIAN COLBURN
EXECUTIVE VICE PRESIDENT, SPECIAL PROJECTS
AND SECRETARY
MAGNA INTERNATIONAL INC.
36 APPLE CREEK BOULEVARD
MARKHAM, ONTARIO
CANADA L3R 4Y4
(905) 477-7766
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------
COPIES TO:
SCOTT M. FREEMAN
SIDLEY & AUSTIN
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 906-2000
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION AMOUNT OF
VALUATION* FILING FEE**
- -------------------------------------------------------------------------------
<S> <C> <C>
$135,287,465 $27,058
</TABLE>
- ---------------
* Based on the offer to purchase all outstanding shares of Common Stock of the
Subject Company at $31.00 in cash per share and information furnished by the
Company to the Purchaser that at September 5, 1996, there were 4,245,127
shares of Common Stock outstanding and 228,675 shares of Common Stock
reserved for issuance pursuant to outstanding stock options with an average
exercise price of $14.87.
** 1/50 of 1% of transaction valuation.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: N/A Filing Party: N/A
Form or Registration No.: N/A Date Filed: N/A
</TABLE>
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<PAGE> 2
14D-1
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------
CUSIP NO. 258777101
- ------------------------------
- -----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Magna Acquisition Corporation, Tax ID No.: 38-3308729.
- -----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /X/
(b) / /
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3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC (from Parent)
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) / /
- -----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Michigan, U.S.A.
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
469,764 Shares of Common Stock
- -----------------------------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
- -----------------------------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
11.1%
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10 TYPE OF REPORTING PERSON
CO
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</TABLE>
2
<PAGE> 3
14D-1
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------
CUSIP NO. 258777101
- ------------------------------
- -----------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Magna International Inc., Tax ID No.: Not applicable.
- -----------------------------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) /X/
(b) / /
- -----------------------------------------------------------------------------------------------------
3 SEC USE ONLY
- -----------------------------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(e) OR 2(f) / /
- -----------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Ontario, Canada
- -----------------------------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
559,464 Shares of Common Stock
- -----------------------------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES / /
- -----------------------------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
13.2%
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10 TYPE OF REPORTING PERSON
CO
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</TABLE>
3
<PAGE> 4
1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Douglas & Lomason Company, a
Michigan corporation (the "Company"), and the address of its principal executive
offices is 24600 Hallwood Court, Farmington Hills, Michigan 48335-1671.
(b) This Schedule relates to the offer by Magna Acquisition Corporation, a
Michigan corporation (the "Purchaser"), which is a direct wholly owned
subsidiary of Magna International Inc., an Ontario corporation ("Parent"), to
purchase all outstanding shares of Common Stock, par value $2.00 per share (the
"Shares"), of the Company 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 related Letter of Transmittal,
copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
The information set forth in the Introduction and Section 1 of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d); (g) The information set forth in Section 9 of the Offer to
Purchase is incorporated herein by reference. The name, age, business address,
present principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each director
and executive officer of the Purchaser and Parent, and the name, age, principal
business and address of any corporation or other organization in which such
occupations, positions, offices and employments are or were carried on are set
forth in Schedule I to the Offer to Purchase and incorporated herein by
reference.
(e)-(f) During the last five years, none of the Purchaser or Parent or, to
the best of the Purchaser's knowledge, any of the directors or executive
officers of the Purchaser or Parent has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 11 of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in Sections 11 and 12 of the Offer to
Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Introduction and Sections 7 and 12
of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
4
<PAGE> 5
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 9, 11 and 12 of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b)-(c) The information set forth in Section 15 of the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth in Section 7 of the Offer to Purchase is
incorporated herein by reference.
(e) None.
(f) Reference is hereby made to the Offer to Purchase and the Agreement
and Plan of Merger, copies of which are attached hereto as Exhibits (a)(1) and
(c)(1), respectively, and which are incorporated in their entirety herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated September 5, 1996.
(2) Form of Letter of Transmittal with respect to the Shares.
(3) Form of letter dated September 5, 1996, from Prudential Securities
Incorporated to brokers, dealers, commercial banks, trust companies and
nominees.
(4) Form of letter to be sent by brokers, dealers, commercial banks,
trust companies and nominees to their clients.
(5) Notice of Guaranteed Delivery.
(6) IRS Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(7) Joint Press Release dated August 29, 1996.
(8) Form of summary advertisement dated September 5, 1996.
(9) Press Release dated September 5, 1996.
(c)(1) Agreement and Plan of Merger dated as of August 29, 1996, among the
Purchaser, Parent and the Company.
(2) Stock Option Agreement dated as of August 29, 1996, among the
Purchaser, Parent and certain holders of Shares listed on Schedule 1 thereto.
(3) Letter dated August 30, 1996 from Jane L. Agostinelli to the
Purchaser.
(4) Letter dated August 30, 1996 from Anne L. Bray to the Purchaser.
(5) Confidentiality Agreement dated July 3, 1996, between Bridgeford (on
behalf of the Company) and Parent.
(6) Form of Employment Agreement for Harry A. Lomason, II.
(d) None.
(e) Not applicable.
(f) None.
5
<PAGE> 6
SIGNATURES
After due 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.
Dated: September 5, 1996
MAGNA ACQUISITION CORPORATION
By: /s/ J. BRIAN COLBURN
------------------------------------
Name: J. Brian Colburn
Title: Secretary
By: /s/ GRAHAM J. ORR
------------------------------------
Name: Graham J. Orr
Title: Treasurer
MAGNA INTERNATIONAL INC.
By: /s/ J. BRIAN COLBURN
------------------------------------
Name: J. Brian Colburn
Title: Executive Vice-President,
Special Projects
and Secretary
By: /s/ GRAHAM J. ORR
------------------------------------
Name: Graham J. Orr
Title: Executive Vice-President,
Corporate Development
6
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- ------------------------------------------------------------------------------
<C> <S> <C>
(a)(1) Offer to Purchase dated September 5, 1996.....................................
(2) Form of Letter of Transmittal with respect to the Shares......................
(3) Form of letter dated September 5, 1996, from Prudential Securities
Incorporated to brokers, dealers, commercial banks, trust companies and
nominees......................................................................
(4) Form of letter to be sent by brokers, dealers, commercial banks, trust
companies and nominees to their clients.......................................
(5) Notice of Guaranteed Delivery.................................................
(6) IRS Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9...........................................................
(7) Joint Press Release dated August 29, 1996.....................................
(8) Form of summary advertisement dated September 5, 1996.........................
(9) Press Release dated September 5, 1996.........................................
(c)(1) Agreement and Plan of Merger dated as of August 29, 1996, among the Purchaser,
Parent and the Company........................................................
(2) Stock Option Agreement dated as of August 29, 1996, among the Purchaser,
Parent and certain holders of Shares listed on Schedule 1 thereto.............
(3) Letter dated August 30, 1996 from Jane L. Agostinelli to the Purchaser........
(4) Letter dated August 30, 1996 from Anne L. Bray to the Purchaser...............
(5) Confidentiality Agreement dated July 3, 1996, between Bridgeford (on behalf of
the Company) and Parent.......................................................
(6) Form of Employment Agreement for Harry A. Lomason, II.........................
(d) None..........................................................................
(e) Not applicable................................................................
(f) None..........................................................................
</TABLE>
7
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DOUGLAS & LOMASON COMPANY
AT
$31.00 NET PER SHARE
BY
MAGNA ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
MAGNA INTERNATIONAL INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 2, 1996, UNLESS EXTENDED.
THE BOARD OF DIRECTORS OF DOUGLAS & LOMASON COMPANY HAS UNANIMOUSLY ADOPTED
RESOLUTIONS APPROVING THE OFFER, DETERMINING THAT THE TERMS OF THE OFFER ARE
FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS AND
RECOMMENDING THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES
THAT WOULD REPRESENT AT LEAST 51% OF ALL OUTSTANDING SHARES ON A FULLY DILUTED
BASIS ON THE DATE OF PURCHASE.
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile copy thereof) in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile), or, in the case of a book-entry transfer
effected pursuant to the procedure set forth in Section 2, an Agent's Message
(as defined herein), and any other required documents to the Depositary and
either deliver the certificates for such Shares to the Depositary along with the
Letter of Transmittal (or such facsimile) or deliver such Shares pursuant to the
procedure for book-entry transfer set forth in Section 2 or (2) request such
shareholder's broker, dealer, bank, trust company or other nominee to effect the
transaction for such shareholder. A shareholder having Shares registered in the
name of a broker, dealer, bank, trust company or other nominee must contact his
broker, dealer, bank, trust company or other nominee if such shareholder desires
to tender such Shares.
If a shareholder desires to tender Shares and such shareholder's
certificates for such Shares are not immediately available or the procedure for
book-entry transfer cannot be completed on a timely basis, or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such shareholder's tender may be effected by following the procedures for
guaranteed delivery set forth in Section 2.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Information Agent.
------------------------
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
September 5, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
INTRODUCTION............................................................................. 1
THE TENDER OFFER......................................................................... 2
1. Terms of the Offer................................................................. 2
2. Procedure for Tendering Shares..................................................... 3
3. Withdrawal Rights.................................................................. 6
4. Acceptance for Payment and Payment................................................. 6
5. Certain Federal Income Tax Consequences............................................ 7
6. Price Range of the Shares; Dividends on the Shares................................. 8
7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act
Registration; Margin Regulations................................................. 9
8. Certain Information Concerning the Company......................................... 10
9. Certain Information Concerning the Purchaser and Parent............................ 12
10. Source and Amount of Funds......................................................... 15
11. Background of the Offer............................................................ 15
12. Purpose of the Offer; Merger Agreement and Stock Option Agreement.................. 22
13. Dividends and Distributions........................................................ 27
14. Certain Conditions of the Offer.................................................... 28
15. Certain Legal Matters.............................................................. 30
16. Fees and Expenses.................................................................. 32
17. Miscellaneous...................................................................... 32
SCHEDULE I............................................................................... S-1
</TABLE>
<PAGE> 3
TO ALL HOLDERS OF COMMON STOCK OF DOUGLAS & LOMASON COMPANY:
INTRODUCTION
Magna Acquisition Corporation, a Michigan corporation (the "Purchaser"),
which is a direct, wholly owned subsidiary of Magna International Inc., an
Ontario corporation ("Parent"), hereby offers to purchase all outstanding shares
of Common Stock, par value $2.00 per share (the "Shares"), of Douglas & Lomason
Company, a Michigan corporation (the "Company"), at a price of $31.00 per Share,
net to the seller in cash, without interest thereon (the "Offer Price"), upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "Offer"). Tendering
shareholders will not be obligated to pay brokerage fees or commissions or,
except as set forth in Instruction 6 to the Letter of Transmittal, transfer
taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay
all agreed fees and expenses of The Bank of Nova Scotia Trust Company of New
York (the "Depositary") and Georgeson & Company Inc. (the "Information Agent").
The Company has informed the Purchaser that at September 5, 1996, there
were 4,245,127 Shares outstanding and 228,675 Shares reserved for issuance
pursuant to outstanding stock options. Accordingly, upon the purchase of at
least 2,281,639 Shares pursuant to the Offer, the Purchaser would own more than
51% of the Shares outstanding, based on the number of Shares outstanding, and
assuming the issuance of the number of Shares reserved for issuance, at
September 5, 1996.
On August 29, 1996, the Purchaser, Parent and the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to which it is
intended that the Purchaser will be merged with and into the Company (the
"Merger"). The Merger Agreement provides that the Offer will be the first step
in Parent's proposed acquisition of the entire equity interest in the Company.
In the Merger, each outstanding Share (except those Shares that are 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 in
cash, without interest. The Merger is subject to a number of conditions,
including approval by the shareholders of the Company. See Section 12.
Certain Federal income tax consequences of the sale of Shares pursuant to
the Offer and the Merger are described in Section 5.
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.
The Bridgeford Group ("Bridgeford"), the Company's independent financial
advisor, has delivered to the Company its written opinion that the consideration
to be received by holders of the Shares pursuant to the Offer and the Merger is
fair to such shareholders from a financial point of view. A copy of the opinion
of Bridgeford is contained in the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange Commission
(the "Commission") in connection with the Offer, a copy of which is being
furnished to shareholders concurrently herewith.
<PAGE> 4
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer, the
Purchaser will accept for payment and pay for all outstanding Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New
York City Time, on Wednesday, October 2, 1996, unless and until the Purchaser,
in its sole discretion, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended by the Purchaser, will expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES
(THE "MINIMUM NUMBER OF SHARES") THAT WOULD REPRESENT AT LEAST 51% OF THE FULLY
DILUTED SHARES (AS DEFINED IN SECTION 14) ON THE DATE OF PURCHASE (THE "MINIMUM
TENDER CONDITION"). THE PURCHASER RESERVES THE RIGHT (SUBJECT TO THE APPLICABLE
RULES AND REGULATIONS OF THE COMMISSION), WHICH IT CURRENTLY HAS NO INTENTION OF
EXERCISING, TO WAIVE OR REDUCE THE MINIMUM TENDER CONDITION AND TO ELECT TO
PURCHASE, PURSUANT TO THE OFFER, LESS THAN THE MINIMUM NUMBER OF SHARES. SEE
SECTION 14.
Subject to the applicable rules and regulations of the Commission and the
terms and provisions of the Merger Agreement, the Purchaser reserves the right,
in its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events or facts set forth in Section 14 hereof shall
have occurred, to (i) extend the period of time during which the Offer is open,
and thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary or (ii) amend
the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR
ANY DELAY IN MAKING SUCH PAYMENT.
If by 12:00 Midnight, New York City time, on Wednesday, October 2, 1996 (or
any date or time then set as the Expiration Date), any or all of the conditions
to the Offer have not been satisfied or waived, the Purchaser reserves the right
(but shall not be obligated), subject to the applicable rules and regulations of
the Commission and the terms and provisions of the Merger Agreement, to (i)
terminate the Offer and not accept for payment or pay for any Shares and return
all tendered Shares to tendering shareholders, (ii) waive all the unsatisfied
conditions and accept for payment and pay for all Shares validly tendered prior
to the Expiration Date and not theretofore withdrawn, (iii) extend the Offer
and, subject to the right of shareholders to withdraw Shares until the
Expiration Date, retain the Shares that have been tendered during the period or
periods for which the Offer is extended or (iv) amend the Offer.
There can be no assurance that the Purchaser will exercise its right to
extend the Offer. Any extension, amendment or termination will be followed as
promptly as practicable by public announcement. In the case of an extension,
Rule 14e-1(d) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the announcement be issued no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that any material change in the information published, sent or given to
shareholders in connection with the Offer be promptly disseminated to
shareholders in a manner reasonably designed to inform shareholders of such
change), and without limiting the manner in which the Purchaser may choose to
make any public announcement, the Purchaser will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1 under the
Exchange Act.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment (whether before or after its acceptance for
payment of Shares) for Shares or it is unable to pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser,
and such Shares may not be withdrawn
2
<PAGE> 5
except to the extent tendering shareholders are entitled to withdrawal rights as
described in Section 3. However, the ability of the Purchaser to delay the
payment for Shares that the Purchaser has accepted for payment is limited by
Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the
consideration offered or return the securities deposited by or on behalf of
holders of securities promptly after the termination or withdrawal of such
bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to shareholders and investor response.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed by the Purchaser to record holders of Shares and will be
furnished by the Purchaser to brokers, dealers, banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
shareholder lists or, if applicable, who are listed as participants in a
clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES
VALID TENDER. For a shareholder validly to tender Shares pursuant to the
Offer, either (i) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof), together with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message (as defined below), and
any other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received by
the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in each
case prior to the Expiration Date, or (ii) the tendering shareholder must comply
with the guaranteed delivery procedures set forth below.
The Depositary will establish an account with respect to the Shares at The
Depository Trust Company and the Philadelphia Depository Trust Company (the
"Book-Entry Transfer Facilities") for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution that is
a participant in any of the Book-Entry Transfer Facilities' systems may make
book-entry delivery of Shares by causing a Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account in accordance with that
Book-Entry Transfer Facility's procedures for such transfer. However, although
delivery of Shares may be effected through book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility, the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message, and any other required
documents, must, in any case, be transmitted to and received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date, or the tendering shareholder must comply with the
guaranteed delivery procedures described below. The confirmation of a book-entry
transfer of Shares into the Depositary's account at a Book-Entry Transfer
Facility as described above is referred to herein as a "Book-Entry
Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
3
<PAGE> 6
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instructions 1
and 5 to the Letter of Transmittal. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made or certificates for Shares not tendered
or not accepted for payment are to be returned to a person other than the
registered owner of the certificates surrendered, the tendered certificates must
be endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedure for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met: (i) such tender is made by or
through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, is received by the Depositary, as provided below, prior to the
Expiration Date; and (iii) the certificates for all tendered Shares, in proper
form for transfer (or a Book-Entry Confirmation with respect to the book-entry
transfer of such Shares), together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, are received by the Depositary within three
trading days after the date of execution of such Notice of Guaranteed Delivery.
A "trading day" is any day on which The NASDAQ Stock Market, Inc.'s National
Market (the "NASDAQ National Market") operated by the National Association of
Securities Dealers, Inc. (the "NASD") is open for business. The Notice of
Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal or
the Depositary.
Accordingly, tendering shareholders may be paid at different times
depending upon when certificates for Shares or Book-Entry Confirmations with
respect to Shares are actually received by the Depositary. UNDER NO
4
<PAGE> 7
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR THE TENDERED
SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
The valid tender of Shares pursuant to one of the procedures described
above will constitute a binding agreement between the tendering shareholder and
the Purchaser upon the terms and subject to the conditions of the Offer.
APPOINTMENT. By executing the Letter of Transmittal as set forth above,
the tendering shareholder will irrevocably appoint designees of the Purchaser as
such shareholder's attorneys-in-fact and proxies in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full extent
of such shareholder's rights with respect to the Shares tendered by such
shareholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after August 29, 1996. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such shareholder as provided herein. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
shareholder with respect to such Shares or other securities or rights will be
revoked and no subsequent powers of attorney, proxies, consents or revocations
may be given (and, if given, will not be deemed effective). The designees of the
Purchaser will thereby be empowered to exercise all voting and other rights with
respect to such Shares or other securities or rights in respect of any annual,
special or adjourned meeting of the Company's shareholders, actions by written
consent in lieu of any such meeting or otherwise, as they in their sole
discretion deem proper. The Purchaser reserves the right to require that, in
order for Shares to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting, consent and other rights with respect to such Shares and other
securities or rights, including voting at any meeting of shareholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser's
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
shareholder whether or not similar defects or irregularities are waived in the
case of other shareholders. No tender of Shares will be deemed to have been
validly made until all defects or irregularities relating thereto have been
cured or waived. None of the Purchaser, Parent, the Depositary, the Information
Agent, the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Offer, a shareholder surrendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such shareholder's correct taxpayer identification number ("TIN") on a
Substitute Form W-9 and certify under penalties of perjury that such TIN is
correct and that such shareholder is not subject to backup withholding. If a
shareholder does not provide such shareholder's correct TIN or fails to provide
the certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such shareholder and payment of cash to such shareholder
pursuant to the Offer may be subject to backup withholding of 31%. All
shareholders surrendering Shares pursuant to the Offer should complete and sign
the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding (unless an applicable exemption exists and is proved in
a manner satisfactory to the Purchaser and the Depositary). Certain shareholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
shareholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
5
<PAGE> 8
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after November 3, 1996.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer as set forth in Section 2, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be retendered by again following one of the procedures described in
Section 2 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser in its sole
discretion, which determination will be final and binding. No withdrawal of
Shares will be deemed to have been validly made until all defects or
irregularities relating thereto have been cured or waived by the Purchaser. None
of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer, promptly after
the Expiration Date the Purchaser will accept for payment and will pay for all
Shares validly tendered prior to the Expiration Date and not properly withdrawn
in accordance with Section 3. All questions as to the satisfaction of such terms
and conditions will be determined by the Purchaser in its sole discretion, which
determination will be final and binding. See Sections 1 and 14. The Purchaser
expressly reserves the right, in its sole discretion, to delay acceptance for
payment of or payment for Shares in order to comply in whole or in part with any
applicable law, including, without limitation, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"). Any such delays will be effected in
compliance with 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).
Parent, on behalf of the Stronach Trust, the ultimate parent entity of
Parent, filed a Notification and Report Form with respect to the Offer under the
HSR Act on September 5, 1996. The waiting period under the HSR Act with respect
to the Offer will expire at 11:59 P.M., New York City time, on September 20,
1996. However, the Federal Trade Commission (the "FTC") or the Antitrust
Division of the Department of Justice (the "Antitrust Division") may extend the
waiting period by requesting additional information or documentary material from
the Stronach Trust. If such a request is made, such waiting period will expire
at 11:59 P.M., New York City Time, on the 10th day after the Stronach Trust has
substantially complied with such request. See Section 15 for additional
information concerning the HSR Act and the applicability of the antitrust laws
to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates for
(or a timely Book-Entry Confirmation with respect to)
6
<PAGE> 9
such Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and (iii) any other documents
required by the Letter of Transmittal or the Depositary. The per Share
consideration paid to any shareholder pursuant to the Offer will be the highest
per Share consideration paid to any other shareholder pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering shareholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act),
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 3.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering shareholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at a Book-Entry Transfer
Facility pursuant to the procedure set forth in Section 2, such Shares will be
credited to an account maintained at the appropriate Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to
the Offer, but any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for Federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for
Federal income tax purposes, a shareholder will recognize gain or loss equal to
the difference between the amount of cash received by the shareholder pursuant
to the Offer or the Merger and the aggregate tax basis in the Shares tendered by
the shareholder and purchased pursuant to the Offer or converted in the Merger,
as the case may be. Gain or loss will be calculated separately for each block of
Shares tendered and purchased pursuant to the Offer or converted in the Merger,
as the case may be.
If Shares are held by a shareholder as capital assets, gain or loss
recognized by the shareholder will be capital gain or loss, which will be
long-term capital gain or loss if the shareholder's holding period for the
Shares exceeds one year. Under present law, long-term capital gains recognized
by an individual shareholder will generally be taxed at a maximum Federal
marginal tax rate of 28%, and long-term capital gains recognized by a corporate
shareholder will be taxed at a maximum Federal marginal tax rate of 35%.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a shareholder (a) is a corporation
or comes within certain exempt categories and, when required, demonstrates this
fact or (b) provides a correct TIN, certifies as to no loss of exemption from
backup withholding and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder who does not provide a correct TIN may
be subject to penalties imposed by the IRS. Any amount
7
<PAGE> 10
paid as backup withholding will be creditable against the shareholder's tax
liability. Each shareholder should consult with his or her own tax advisor as to
his or her qualification for exemption from backup withholding and the procedure
for obtaining such exemption. Shareholders tendering their Shares in the Offer
may prevent backup withholding by completing the Substitute Form W-9 included in
the Letter of Transmittal. See Section 2. "Procedure for Tendering
Shares -- Backup Withholding". Similarly, shareholders who convert their Shares
into cash in the Merger may prevent backup withholding by completing a
Substitute Form W-9 and submitting it to the Paying Agent.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO HOLDERS OF
SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S.
PERSONS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS AND FINANCIAL
INSTITUTIONS, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL
CIRCUMSTANCES. SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO
DETERMINE THE TAX CONSEQUENCES PARTICULAR TO THEM (INCLUDING THE APPLICATION AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER
AND THE MERGER.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded in the over-the-counter market and prices are quoted
on the NASDAQ National Market under the symbol "DOUG". The following table sets
forth, for the periods indicated, the reported high and low last reported sales
prices for the Shares as reported by the NASDAQ National Market, as well as the
amount of cash dividends paid per Share for each such period.
<TABLE>
<CAPTION>
SALES PRICE
----------------
HIGH LOW
------ ------ DIVIDENDS
---------
<S> <C> <C> <C> <C>
1994:
First Quarter............................................... $20.50 $15.00 $ .10
Second Quarter.............................................. $19.50 $17.75 $ .10
Third Quarter............................................... $20.50 $14.75 $ .10
Fourth Quarter.............................................. $18.00 $14.50 $ .10
1995:
First Quarter............................................... $19.00 $15.50 $ .10
Second Quarter.............................................. $18.00 $14.00 $ .10
Third Quarter............................................... $15.75 $11.50 $ .10
Fourth Quarter.............................................. $12.75 $ 8.75 $ .10
1996:
First Quarter............................................... $13.75 $10.75 $ .10
Second Quarter.............................................. $15.25 $10.75 $ .10
Third Quarter............................................... $30.75 $13.50 $ --
(through September 4, 1996)
</TABLE>
On July 26, 1996, the last full day of trading prior to the execution by
the Company and Parent of a letter agreement dated July 29, 1996, setting forth,
among other things, the Company's obligation to negotiate exclusively with
Parent and its representatives for a period of 25 days from July 29, 1996 (see
Section 11), the last sale quotation of the Shares as reported by the NASDAQ
National Market was $17.25 per Share. On August 6, 1996, the last full day of
trading prior to the announcement by the Company that it was engaged in
discussions regarding a possible business combination, the last sale quotation
of the Shares as reported by the NASDAQ National Market was $22.25 per Share.
On August 29, 1996, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement and the commencement of
the Offer, the last sale quotation of the Shares as reported by the NASDAQ
National Market was $26.125 per Share. On September 4, 1996, the last sale
quotation of the
8
<PAGE> 11
Shares as so reported was $30.625 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE SHARES.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "Form 10-K"), the Company has paid a cash dividend
on the Shares each year since 1957. Subject to approval of the Board of
Directors, dividends are customarily paid on the Company's common stock on or
about March 31, June 30, September 30 and December 31. In 1995 the Company paid
dividends aggregating $.40 per Share, and as of September 5, 1996 has paid
dividends aggregating $.20 per share in 1996.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and, depending upon the number of Shares so purchased,
could adversely affect the liquidity and market value of the remaining Shares
held by the public.
STOCK QUOTATION. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements of the NASD for
continued inclusion in the NASDAQ National Market, which require that an issuer
have at least 200,000 publicly held shares, held by at least 400 shareholders or
300 shareholders of round lots, with a market value of at least $1,000,000, and
have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000,
depending on profitability levels during the issuer's four most recent fiscal
years. If these standards are not met, the Shares might nevertheless continue to
be included in the NASD's NASDAQ Stock Market(TM) (the "NASDAQ Stock Market")
with quotations published in the NASDAQ "additional list" or in one of the
"local lists", but if the number of holders of the Shares were to fall below
300, or if the number of publicly held Shares were to fall below 100,000 or
there were not at least two registered and active market makers for the Shares,
the NASD's rules provide that the Shares would no longer be "qualified" for
NASDAQ Stock Market reporting and the NASDAQ Stock Market would cease to provide
any quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. According to the Form 10-K, as of December 31,
1995, there were 726 holders of record of Shares and, according to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 (the "Second
Quarter Form 10-Q"), at August 15, 1996 there were 4,245,127 Shares outstanding.
If as a result of the purchase of Shares pursuant to the Offer or otherwise, the
Shares no longer meet the requirements of the NASD for continued listing in the
NASDAQ National Market or in any other tier of the NASDAQ Stock Market and the
listing of the Shares is discontinued, the market for the Shares could be
adversely affected.
If the NASD were to delist the Shares, it is possible that the Shares would
continue to trade in the over-the-counter market and that price quotations would
be reported by other sources. The extent of the public market for the Shares and
the availability of such quotations would, however, depend upon such factors as
the number of shareholders remaining at such time, the interest in maintaining a
market in the Shares on the part of securities firms, the possible termination
of registration under the Exchange Act as described below, and other factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act
would substantially reduce the information required to be furnished by the
Company to its shareholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the
requirement of furnishing a proxy statement pursuant to Section 14(a) of the
Exchange Act in connection with shareholders' meetings and the related
requirement of an annual report to shareholders and the requirements of Rule
13e-3 under the Exchange Act with respect to "going private" transactions.
Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of such
9
<PAGE> 12
securities pursuant to Rule 144 or 144A promulgated under the Securities Act of
1933, as amended. The Purchaser intends to seek to cause the Company to apply
for termination of registration of the Shares under the Exchange Act as soon
after the completion of the Offer as the requirements for such termination are
met.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending on factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and, therefore, could no longer be used as collateral for loans
made by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Michigan corporation with its principal executive offices
at 24600 Hallwood Court, Farmington Hills, Michigan 48335-1671. According to the
Form 10-K, the Company is engaged in the business of manufacturing and
assembling (i) automotive products, including fully trimmed seating, seat frame
assemblies and mechanisms, soft tops and accessories and decorative moldings
(which products accounted for approximately 94% of the Company's total sales
during each of the last three years) and (ii) material handling systems and
custom truck bodies and trailers.
HISTORICAL SUMMARY FINANCIAL STATEMENTS. Set forth below is certain
summary consolidated financial information with respect to the Company derived
from the information contained or incorporated by reference in the Form 10-K and
the Second Quarter Form 10-Q. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
Commission and the following summary is qualified in its entirety by reference
to such reports and other documents and all the financial information (including
any related notes) contained therein. Such reports and other documents may be
examined and copies may be obtained in the manner set forth below under
"Available Information".
10
<PAGE> 13
DOUGLAS & LOMASON COMPANY
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR THE YEAR ENDED
------------------- ----------------------------------------
JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 1994 1993
-------- -------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................... $298,986 $285,660 $561,187 $566,819 $424,843
Gross profit................ 26,472 16,770 33,598 43,242 30,908
Net earnings (loss)......... 7,356 2,925 4,191 12,486 (7,168)
Net earnings (loss) per
share(1)................. 1.73 .69 .99 2.95 (1.70)
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31, AT DECEMBER 31,
1996 1995 1994
----------- --------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital....................... $ 60,430 $ 46,054 $ 49,866
Total assets.......................... 267,545 268,889 211,564
Long-term debt, less current
maturities......................... 78,849 69,113 31,888
Shareholder's equity.................. 92,752 86,347 85,729
</TABLE>
- ---------------
(1) The weighted average number of shares outstanding during the six months
ended June 30, 1996 and June 30, 1995 was 4,243,021 and 4,239,365,
respectively, and such average during 1995, 1994 and 1993 was 4,241,216,
4,228,120 and 4,214,372, respectively.
ESTIMATE OF RESULTS FOR 1996, 1997, 1998 AND 1999. Parent has conducted a
review of the Company and has received certain non-public information from the
Company pursuant to the terms of the Confidentiality Agreement (as defined in
Section 11). In connection with this review, the Company provided Parent with an
estimate of certain of the Company's results for 1996, 1997, 1998 and 1999 (the
"Estimates"), which included the information set forth below (but did not
include estimates of net income or earnings per share). As discussed under
Section 11, Parent believes these Estimates to be overly optimistic in certain
respects.
DOUGLAS & LOMASON COMPANY
MANAGEMENT'S ESTIMATED RESULTS
(IN MILLIONS)
<TABLE>
<CAPTION>
1996 1997 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales............................................... $ 578.7 $ 624.0 $ 588.4 $ 655.4
Operating income.................................... 21.7 29.6 26.1 37.2
Net income before income taxes...................... 13.1 21.3 18.6 30.4
</TABLE>
The Estimates were prepared based on numerous assumptions, including price
and volume assumptions, the ability to achieve generally improved gross profit
margins and specific capital expenditures and the disposal of the Company's
custom truck body division. The Company does not as a matter of course publicly
disclose projections as to future revenues or earnings. The Estimates were not
prepared with a view to public disclosure or compliance with the published
guidelines of the Commission or the guidelines established by the American
Institute of Certified Public Accountants regarding projections, and are
included in this Offer to Purchase only because such information was made
available to Parent. The Estimates were prepared for internal use and
11
<PAGE> 14
capital budgeting and other management decision-making purposes and are
subjective in many respects and thus susceptible to various interpretations and
periodic revision based on actual experience and business developments. NONE OF
THE PURCHASER, PARENT, THE COMPANY OR ANY OF THEIR RESPECTIVE FINANCIAL ADVISORS
OR ANY OF THEIR RESPECTIVE DIRECTORS OR OFFICERS ASSUMES ANY RESPONSIBILITY FOR
THE ACCURACY OF THE ESTIMATES. The Company's independent auditors have not
examined or compiled the Estimates presented herein and, accordingly, assume no
responsibility therefor. In addition, because the estimates and assumptions,
many of which are not set forth herein, underlying the Estimates are inherently
subject to significant economic and competitive uncertainties and contingencies
which are difficult or impossible to predict accurately and are beyond the
Purchaser's and the Company's control, there can be no assurance that the
Estimates would be realized (and Parent believes they might not). Accordingly,
it is expected that there will be differences between actual and projected
results, and actual results may be materially higher or lower than those set
forth above.
AVAILABLE INFORMATION. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file reports with the Commission relating to its business, financial condition
and other matters. Information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options and other matters, the
principal holders of the Company's securities and any material interest of such
persons in transactions with the Company is required to be disclosed in proxy
statements distributed to the Company's shareholders and filed with the
Commission. Such reports, proxy statements and other information should be
available for inspection at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission at Seven World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained, by mail, upon
payment of the Commission's customary charges, by writing to the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
material should also be available for inspection at the offices of The NASDAQ
Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although the Purchaser and Parent do not have any
knowledge that any such information is untrue, neither the Purchaser nor Parent
takes any responsibility for the accuracy or completeness of such information or
for any failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
GENERAL. The Purchaser, a Michigan corporation, was incorporated on August
26, 1996, for the purpose of acquiring the Company. The Purchaser has not
conducted any other business. The principal office of the Purchaser is located
at 26200 Lahser Road, Suite 300, Southfield, Michigan 48034. The Purchaser is a
direct wholly owned subsidiary of Parent.
Parent, an Ontario corporation, has principal executive offices located at
36 Apple Creek Boulevard, Markham, Ontario, Canada L3R 4Y4. The principal
businesses of Parent and its subsidiaries are the design, development and
manufacture of original equipment components, assemblies, modules and systems
and related tooling for cars and light trucks. Parent, together with its
subsidiaries, is the largest Canadian, and one of the largest North American,
independent suppliers of such products.
The name, age, business address, present principal occupation or employment
and citizenship of each of the directors and executive officers of the Purchaser
and Parent are set forth in Schedule I hereto.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION. Set forth below is certain
summary consolidated financial information with respect to Parent and its
subsidiaries excerpted or derived from the information contained in the Audited
Comparative Consolidated Financial Statements of Parent and the Auditor's Report
thereon, for the fiscal year ended July 31, 1995 (the "Consolidated Financial
Statements") and the Unaudited Comparative Consolidated Financial Statements of
Parent for the fiscal quarters ended October 31, 1995,
12
<PAGE> 15
January 31, 1996 and April 30, 1996 (the "Unaudited Financial Statements", and,
together with the Consolidated Financial Statements, the "Parent Financial
Statements") which have been filed with the Commission as part of a Registration
Statement on Form F-10 (No. 333-4876) relating to Class A Subordinate Voting
Shares of Parent (the "Registration Statement"), and which are incorporated
herein by reference. Such summary information is qualified in its entirety by
reference to the Parent Financial Statements and all the financial information
and related notes contained therein. The Parent Financial Statements have been
prepared in accordance with accounting principles generally accepted in Canada
("Canadian GAAP"), which conforms in all material respects with accounting
principles generally accepted in the United States ("U.S. GAAP") during the
periods presented except as set forth in Note 2 to the Consolidated Financial
Statements and the U.S. GAAP Reconciliation section of the Registration
Statement relating to the Unaudited Financial Statements.
13
<PAGE> 16
MAGNA INTERNATIONAL INC.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION(1)
(IN MILLIONS OF CANADIAN DOLLARS)(2)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED APRIL 30 YEARS ENDED JULY 31
------------------- ------------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Amounts under Canadian GAAP
Sales............................................................ $4,197.2 $3,593.1 $4,512.7 $3,568.5 $2,606.7
Operating income................................................. 349.6 367.1 452.5 381.1 219.9
Net income....................................................... 222.9 234.0 317.0 234.4 140.4
Amounts under U.S. GAAP
Net income....................................................... 217.6 215.3 298.3 215.5 136.9
BALANCE SHEET DATA
Cash............................................................... $ 491.6 $ 212.9 $ 404.1 $ 205.0 $ 105.0
Total assets....................................................... 3,754.1 2,835.9 3,029.6 2,310.6 1,551.1
Total debt......................................................... 771.5 124.2 294.9 87.8 102.4
Shareholders' equity (3)........................................... 1,726.5 1,509.8 1,591.6 1,319.8 844.4
</TABLE>
- ---------------
(1) The Canadian Institute of Chartered Accountants recently issued accounting
recommendations for investments in jointly controlled entities, which
require investments in jointly controlled entities to be proportionately
consolidated rather than accounted for under the equity method previously
used by Parent. Accordingly, the interim unaudited results for fiscal 1996
and comparative interim unaudited amounts for fiscal 1995 include Parent's
proportionate share of the assets, liabilities, sales, expenses and cash
flows of its jointly controlled entities. Unless otherwise expressly stated,
the Parent Financial Statements for fiscal years prior to fiscal 1996
(including the summary consolidated financial data set forth herein with
respect to fiscal 1995, 1994 and 1993) have not been restated to reflect the
proportionate consolidation of Parent's jointly controlled entities. The
proportionate consolidation of Parent's jointly controlled entities does not
and will not affect Parent's consolidated net income or shareholders'
equity.
(2) Parent publishes its financial statements in Canadian dollars. The United
States dollar exchange rate for Canadian dollars, based on the noon buying
rate in New York City for cable transfers payable in Canadian dollars as
certified for customs purposes by the Federal Reserve Bank of New York (the
"Noon Buying Rate") on April 30, 1996, was U.S. $0.7345 = Cdn. $1.00 and on
September 4, 1996 was U.S. $0.7300 = Cdn. $1.00. The following table sets
forth, for the fiscal years, periods and dates indicated, certain
information concerning the Noon Buying Rate.
<TABLE>
<CAPTION>
AT PERIOD
END AVERAGE* HIGH LOW
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(U.S.$ PER CDN.$1.00)
Fiscal 1993.......................................... 0.7778 0.8063 0.8460 0.7729
Fiscal 1994.......................................... 0.7212 0.7394 0.7777 0.7148
Fiscal 1995.......................................... 0.7329 0.7256 0.7457 0.7023
Fiscal 1996.......................................... 0.7274 0.7342 0.7529 0.7215
Fiscal 1997 (August 1, 1996 to September 4, 1996).... 0.7300 0.7289 0.7320 0.7261
</TABLE>
- ---------------
(*) The average of the exchange rates based upon Noon Buying Rates on the last
business day of each month during the period, except for the average for
Fiscal 1997, which is based upon the Noon Buying Rates on each day during
such period.
(3) As computed under U.S. GAAP, shareholders' equity was Cdn. $1,734.8, Cdn.
$1,523.4, Cdn. $1,605.2, Cdn. $1,332.6 and Cdn. $839.5 as at April 30, 1996
and 1995 and July 31, 1995, 1994 and 1993, respectively.
AVAILABLE INFORMATION. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is required to
file reports and other information with the Commission. Under a
multijurisdictional disclosure system adopted by the United States, such reports
and other information may be prepared in accordance with the disclosure
requirements of Canada, which requirements are different from those of the
United States. Such reports and information filed with the Commission should be
available for inspection at the Commission and copies thereof should be
obtainable from the Commission in the same manner as is set forth with respect
to the Company in Section 8. The following documents are incorporated herein by
reference: the Annual Report of the Company on Form 40-F for the fiscal year
ended July 31, 1995, and the Report on Form 6-K, dated June 21, 1996.
14
<PAGE> 17
Except as otherwise stated below, none of the Purchaser, Parent or, to the
best knowledge of the Purchaser, any of the persons listed in Schedule I hereto,
or any associate or majority-owned subsidiary of the Purchaser, Parent or any of
the persons so listed, beneficially owns any equity security of the Company, and
none of the Purchaser, Parent or, to the best knowledge of the Purchaser, any of
the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days. A
wholly owned subsidiary of Parent owns 89,700 Shares, representing approximately
2% of the outstanding Shares at September 5, 1996, which it acquired through
open market purchases from November 24, 1995 through April 17, 1996. See Section
11.
Except as otherwise stated in this Offer to Purchase, (i) there have not
been any contacts, transactions or negotiations between the Purchaser, Parent,
any of their respective subsidiaries or, to the best knowledge of the Purchaser,
any of the persons listed in Schedule I hereto, on the one hand, and the Company
or any of its directors, officers or affiliates, on the other hand, that are
required to be disclosed pursuant to the rules and regulations of the
Commission, (ii) there are no present or proposed material contracts,
arrangements, understandings or relationships between the Purchaser, Parent,
their respective controlling persons or subsidiaries or, to the best knowledge
of the Purchaser, any of the persons listed in Schedule I hereto, on the one
hand, and the Company or any of its controlling persons, subsidiaries, executive
officers or directors, on the other hand, and (iii) none of the Purchaser,
Parent or, to the best knowledge of the Purchaser, any of the persons listed in
Schedule I hereto has any contract, arrangement, understanding or relationship
with any person with respect to any securities of the Company.
10. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned upon any financing arrangements. If all the
Shares outstanding (and all Shares issuable upon exercise of options or warrants
outstanding) at August 21, 1996, are purchased pursuant to the Offer, the
maximum amount required by the Purchaser to purchase such Shares and to pay
related fees and expenses will be approximately $136 million. Purchaser expects
to obtain the necessary funds directly or indirectly from Parent as loans or a
capital contribution. Parent will obtain the funds from its cash on hand.
11. BACKGROUND OF THE OFFER
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, Parent
determined that it should consider expanding its seating business; for that
purpose, Hal Ebert, an executive then with Atoma, contacted Gary T. Walther,
then a director of the Company. Mr. Ebert asked Mr. Walther 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 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
15
<PAGE> 18
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
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.
From November 24, 1995 through April 17, 1996, a wholly owned subsidiary of
Parent acquired, through open market purchases, 89,700 Shares at prices ranging
from $10.50 to $12.13 per Share.
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.
In early June 1996, Mr. Walther called Mr. Fike to inform him that the
Company had retained a financial advisor to assist its Board of Directors with
any inquiries about potential business combinations with the Company. 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 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.
Beginning in early July and continuing through August, business, financial,
legal and technical representatives of Parent conducted a due diligence review
of the Company, including visits to the Company's principal manufacturing
facilities in August.
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 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
16
<PAGE> 19
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 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.
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.
17
<PAGE> 20
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.
(4) The completion of due diligence reasonably satisfactory to Magna in the
next 15 business days.
18
<PAGE> 21
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.
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
19
<PAGE> 22
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
After execution of this letter, Parent broadened and accelerated its due
diligence investigation of the Company.
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
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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, which issues
Parent believed could affect the value 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 Agreement") with representatives of Parent. See Section 12
for a summary of the Lomason Employment Agreement.
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
Agreement 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 Boards of Directors of Parent and the Purchaser approved the Merger,
the Merger Agreement and the Stock Option Agreement on August 28, 1996 and
August 29, 1996, respectively.
The Company has advised Parent that 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 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"). See Section 15.
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. See Section 12 for a description of the Merger Agreement
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<PAGE> 24
and the Stock Option Agreement. 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, and who had been requested by Parent to
execute the Stock Option Agreement and had declined to do so, indicated in brief
letters that they intend to tender their Shares in the Offer. Copies of such
letters are attached as exhibits to the Tender Offer Statement on Schedule 14D-1
filed with the Commission by the Purchaser and Parent with respect to the Offer.
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.
12. PURPOSE OF THE OFFER; MERGER AGREEMENT AND STOCK OPTION AGREEMENT
Purpose of the Offer. The purpose of the Offer is to acquire as many
outstanding Shares as possible as a step in acquiring the entire equity interest
in the Company. Following the Offer, the Purchaser and Parent intend, subject to
the conditions set forth in the Merger Agreement, to acquire the remaining
equity interest in the Company by consummating the Merger. Upon consummation of
the Merger, Parent intends to combine the Company and Parent's seat businesses
into four distinct operating units: (i) seat complete; (ii) seat covers, armrest
and headrest operations; (iii) frames, hardware and mechanisms; and (iv) joint
venture relationships. Sales and engineering activities of the two companies
would be divided among three operating units. In addition, after the Merger,
Parent intends to (i) continue to operate Bestop, Inc., a wholly owned
subsidiary of the Company that designs and manufactures soft tops and
accessories for sport utility vehicles, (ii) continue to operate Chantland, the
Company's industrial and commercial products business and (iii) continue the
Company's publicly announced efforts to dispose of the Company's truck body and
trailer business.
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 the form of Lomason
Employment Agreement is attached as an exhibit to the Tender Offer Statement on
Schedule 14D-1 filed with the Commission by the Purchaser and Parent with
respect to the Offer.
Parent and the Purchaser have been advised by the Company that, pursuant to
Section 762 of the MBCA, holders of Shares will not have dissenter's rights in
connection with the Merger because such Shares would be converted into the right
to receive in cash the price per Share paid by the Purchaser pursuant to the
Offer.
The Merger will have to comply with any applicable Federal law. In
particular, unless registration of the Shares under the Exchange Act is
terminated prior to such transaction, if the Purchaser acquired Shares pursuant
to the Offer and a business combination with the Company were consummated more
than one year after termination of the Offer or did not provide for shareholders
to receive cash for their Shares in an amount at least equal to the price per
Share paid pursuant to the Offer, the Purchaser may be required to comply with
Rule 13e-3 promulgated by the Commission under the Exchange Act. If applicable,
Rule 13e-3 would require, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of such
business combination and the consideration offered to minority shareholders be
filed with the Commission and distributed to minority shareholders prior to the
consummation of any such transaction.
If for any reason the Merger is not consummated, Parent and the Purchaser
will evaluate their other alternatives. Such alternatives could include
purchasing additional Shares in the open market, in privately negotiated
transactions, in another tender or exchange offer or otherwise, or taking no
further action to acquire additional Shares. Any additional purchases of Shares
could be at a price greater or less than the price to be paid for Shares in the
Offer and could be for cash or other consideration. Alternatively, the Purchaser
may sell or otherwise dispose of any or all Shares acquired pursuant to the
Offer or otherwise. Such transactions may be
22
<PAGE> 25
effected on terms and at prices then determined by Parent or the Purchaser,
which may vary from the price paid for Shares in the Offer.
Except as described above, the Purchaser and Parent have no present plans
or proposals that would relate to or result in any extraordinary corporate
transaction prior to the effectiveness of the Merger, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries,
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries, any change in the Company's Board of Directors or management, any
material change in the Company's capitalization or dividend policy or any other
material change in the Company's corporate structure or business.
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 as an exhibit to the Tender Offer
Statement on Schedule 14D-1 filed with the Commission by the Purchaser and
Parent with respect to the Offer.
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.
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 of 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
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 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 hereof, $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
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<PAGE> 26
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, (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 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 or might result in any of the representations of the Company set
forth in the Merger Agreement becoming untrue or, except as described in the
next paragraph, the conditions to the Offer or to the Merger not being
satisfied.
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, 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 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. "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 superior proposal (as defined below). "Superior proposal" means a bona
fide written proposal made by a third party to acquire the
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<PAGE> 27
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.
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.
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.
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 and Parent has the same intention with respect to the 89,700 Shares
(approximately 2% of the outstanding Shares at September 5, 1996) acquired by a
wholly owned subsidiary of Parent. 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.
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 material adverse
effect on Parent, the
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<PAGE> 28
Purchaser and their subsidiaries or the Company and its subsidiaries; and (c)
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).
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 this 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
Board of Directors of the Company withdraws its recommendation of the Offer or
recommends another offer, (ii) the Company materially breaches its covenants in
the Merger Agreement or (iii) the Company materially breaches its
representations in the Merger Agreement or (iv) any person or group shall have
made a takeover proposal, the Offer shall have remained open until the scheduled
expiration date immediately following the date such takeover proposal is made
and the Minimum Tender Condition shall not have been satisfied at such
expiration date. In addition a Termination Fee of $2,023,060 will be so payable
upon such termination in the event 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 and the Offer shall
have remained open for at least four months and expired without the Purchaser
purchasing any Shares pursuant thereto. 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.
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 as an exhibit to
the Tender Offer Statement on Schedule 14D-1 filed with the Commission by the
Purchaser and Parent with respect to the Offer.
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<PAGE> 29
The Stock Option Agreement provides that each Seller (including Mr.
Lomason) 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 469,764 Shares,
representing approximately 11.1% 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 thereof. 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 were sold by the Purchaser and (y) the aggregate price paid by the
Purchaser to such Seller for such Optioned Shares.
13. DIVIDENDS AND DISTRIBUTIONS
If on or after August 29, 1996, the Company should (i) split, combine or
otherwise change the Shares or its capitalization, (ii) acquire or otherwise
cause a reduction in the number of outstanding Shares or other
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<PAGE> 30
securities or (iii) issue or sell additional Shares, shares of any other class
of capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing, then, subject to the provisions of Section 14, the Purchaser, in its
sole discretion, may make such adjustments as it deems appropriate in the Offer
Price and other terms of the Offer, including, without limitation, the number or
type of securities offered to be purchased.
If, on or after August 29, 1996, the Company should declare or pay any cash
dividend on the Shares or other distribution on the Shares, or issue with
respect to the Shares any additional Shares, shares of any other class of
capital stock, other voting securities or any securities convertible into, or
rights, warrants or options, conditional or otherwise, to acquire any of the
foregoing, payable or distributable to shareholders of record on a date prior to
the transfer of the Shares purchased pursuant to the Offer to the Purchaser or
its nominee or transferee on the Company's stock transfer records, then, subject
to the provisions of Section 14, (i) the Offer Price may, in the sole discretion
of the Purchaser, be reduced by the amount of any such cash dividend or cash
distribution and (ii) the whole of any such noncash dividend, distribution or
issuance to be received by the tendering shareholders will (a) be received and
held by the tendering shareholders for the account of the Purchaser and will be
required to be promptly remitted and transferred by each tendering shareholder
to the Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer or (b) at the direction of the Purchaser, be exercised
for the benefit of the Purchaser, in which case the proceeds of such exercise
will promptly be remitted to the Purchaser. Pending such remittance and subject
to applicable law, the Purchaser will be entitled to all rights and privileges
as owner of any such noncash dividend, distribution, issuance or proceeds and
may withhold the entire Offer Price or deduct from the Offer Price the amount or
value thereof, as determined by the Purchaser in its sole discretion.
The Company is prohibited from declaring or paying any dividends or making
any other distribution on or with respect to the Shares without Parent's
consent.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provision of the Offer, and in addition to the
conditions that (i) the Minimum Tender Condition is satisfied and (ii) any
applicable waiting period under the HSR Act shall have expired or been
terminated, the Purchaser will not be required to accept for payment or, subject
to any applicable rules and regulations of the Commission, 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 Shares tendered pursuant to the Offer and not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer as provided in Sections 1 and 17 if, at any time on or after August 29,
1996, and before the acceptance of such Shares 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 hereof, in connection with the making of the Offer,
the acceptance for payment of, or payment for, some of or all the Shares by
Parent, the Purchaser or any other affiliate of Parent or the consummation
by Parent, the 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, the 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, the Purchaser or
any other affiliate of Parent or to compel Parent, the 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, the Purchaser or any other affiliate of Parent
or seeking to impose any limitation on the ability of Parent, the Purchaser
or any other affiliate of Parent to conduct such
28
<PAGE> 31
business or own such assets, (iii) seeking to impose or confirm limitations
on the ability of Parent, the Purchaser or any other affiliate of Parent to
exercise effectively full rights of ownership of the Shares, including,
without limitation, the right to vote any Shares acquired or owned by
Parent, the Purchaser or any other affiliate of Parent on all matters
properly presented to the Company's shareholders, (iv) seeking to require
divestiture by Parent, the Purchaser or any other affiliate of Parent of
any Shares, (v) otherwise relating to the Offer, the Shares or which
otherwise, in the sole good faith judgment of the Purchaser, might
materially adversely affect the Company or any of its subsidiaries or
Parent, the 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 respect to,
or deemed applicable to, (i) Parent, the 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, shareholder's equity, condition
(financial or otherwise) or prospects of the Company and its subsidiaries,
taken as a whole;
(d) there shall have occurred or been threatened (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 Shares, (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 the 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 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 the Purchaser its approval or recommendation of the Offer, the
Merger or the Merger 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 the Merger 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 the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties
29
<PAGE> 32
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 the
Merger Agreement; or
(i) the Merger 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 the 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 the Purchaser and
Parent and may be asserted by the Purchaser regardless of the circumstances
giving rise to any such condition or may be waived by the Purchaser in whole or
in part at any time and from time to time in its sole discretion. The failure by
the 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 the Purchaser concerning the events described in this Section
14 will be final and binding upon all parties.
For purposes of the Minimum Tender Condition, "Fully Diluted Shares" means
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.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on information provided by
the Company, neither the Purchaser nor Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company and
its subsidiaries, taken as a whole, that might be adversely affected by the
Purchaser's acquisition of Shares (and the indirect acquisition of the stock of
the Company's subsidiaries) as contemplated herein or of any approval or other
action by any governmental, administrative or regulatory agency or authority
that would be required or desirable for the acquisition or ownership of Shares
by the Purchaser as contemplated herein. Should any such approval or other
action be required or desirable, Parent and the Purchaser currently contemplate
that such approval or other action will be sought, except as described below
under "State Takeover Laws". While the Purchaser does not presently intend to
delay the acceptance for payment of or payment for Shares tendered pursuant to
the Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, the Purchaser could decline to accept for payment or pay for any Shares
tendered. See Section 14 for certain conditions to the Offer.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in such states. In
Edgar v. MITE Corp., 457 U.S. 624 (1982), the Supreme Court of the United States
held that the Illinois Business Takeover Act, which involved state securities
laws that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional. In
CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987), however, the Supreme
Court of the United States held that a state may, as a matter of corporate law
and, in particular, those laws concerning corporate
30
<PAGE> 33
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without prior approval of the remaining
shareholders, provided that such laws were applicable only under certain
conditions. Subsequently, a number of Federal courts ruled that various state
takeover statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
Except as described herein, neither Parent nor the Purchaser has attempted
to comply with any state takeover statutes in connection with the Offer. The
Purchaser reserves the right to challenge the validity or applicability of any
state law allegedly applicable to the Offer and nothing in this Offer to
Purchase nor any action taken in connection herewith is intended as a waiver of
that right. In the event that any state takeover statute is found applicable to
the Offer, the Purchaser might be unable to accept for payment or pay for Shares
tendered pursuant to the Offer or be delayed in continuing or consummating the
Offer. In such case, the Purchaser may not be obligated to accept for payment or
pay for any Shares tendered. See Section 14.
MICHIGAN TAKEOVER LAWS. Chapter 7A of the MBCA, in general, provides that
in order for a Michigan corporation to enter into a "Business Combination"
(defined as a variety of transactions, including mergers such as the Merger)
with an "Interested Shareholder" (defined, in general, as a person that is the
beneficial owner of 10% or more of a corporation's outstanding voting power)
there must be an advisory statement from the board of directors and the Business
Combination must be approved by a vote of (i) at least 90% of the votes of each
class of stock entitled to be cast and (ii) at least two-thirds of the votes
entitled to be cast by each class of stock entitled to vote (other than the
voting shares beneficially owned by the Interested Shareholder and management)
(the "Chapter 7A Voting Requirements"). The Chapter 7A Voting Requirements do
not apply to a Business Combination with an Interested Shareholder approved by
the board of directors prior to the date an Interested Shareholder becomes an
Interested Shareholder. The Company has advised the Purchaser and Parent that
the Board of Directors of the Company has so approved the Merger and, therefore,
the Chapter 7A Voting Requirements do not apply to the Merger.
Chapter 7B of the MBCA provides, in general, that shares of an Issuing
Public Corporation (which as defined in Chapter 7B includes the Company)
acquired in a Control Share Acquisition (which as defined in Chapter 7B includes
the acquisition of Shares pursuant to the Offer) will have only such voting
rights as are conferred by resolution approved by both (x) a majority of the
votes cast by holders of shares entitled to vote and a majority of the votes
cast by holders of shares of each class or series entitled to vote and (y) a
majority of the votes cast by holders of shares entitled to vote and a majority
of the votes cast by holders of shares of each class or series entitled to vote,
excluding the Purchaser, Parent, any officer of the Company and any employee of
the Company who is also a director of the Company. The Company has elected not
to be governed by this Chapter by adopting an amendment to its By-laws to that
effect immediately prior to executing the Merger Agreement. See Section 11.
Accordingly, Chapter 7B of the MBCA does not apply to the Offer or the Merger.
The foregoing summary of Chapter 7A and 7B does not purport to be complete
and is qualified in its entirety by reference to the provisions of Chapters 7A
and 7B.
ANTITRUST. Under the provisions of the HSR Act applicable to the Offer,
the acquisition of Shares under the Offer may be consummated following the
expiration of a 15-calendar day waiting period following the filing by Parent on
behalf of the Stronach Trust, the ultimate parent entity of Parent, of a
Notification and Report Form with respect to the Offer, unless the Stronach
Trust receives a request for additional information or documentary material from
the Antitrust Division or the FTC or unless early termination of the waiting
period is granted. Parent made such filing on September 5, 1996. If, within the
initial 15-day waiting period, either the Antitrust Division or the FTC requests
additional information or material from the Stronach Trust concerning the Offer,
the waiting period will be extended and would expire at 11:59 p.m., New York
City time, on the tenth calendar day after the date of substantial compliance by
the Stronach Trust with such request. Only one extension of the waiting period
pursuant to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of the Stronach Trust. In practice, complying with a request for
additional information or material can take a significant amount of time. In
addition, if the Antitrust Division or the FTC raises substantive issues in
connection with a proposed transaction, the parties frequently engage in
negotiations with the relevant
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<PAGE> 34
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of the
Company or its subsidiaries or Parent or its subsidiaries. Private parties may
also bring legal action under the antitrust laws under certain circumstances.
There can be no assurance that a challenge to the Offer on antitrust grounds
will not be made or, if such a challenge is made, of the result thereof.
FOREIGN LAWS. The Company has informed the Purchaser that the Company and
certain of its subsidiaries conduct business in certain foreign countries where
regulatory filings or approvals may be required in connection with the
consummation of the Offer. Certain of such filings, if required, may not be
completed and certain of such approvals, if required, may not be obtained, prior
to the expiration of the Offer. However, there is no present intention to delay
the acceptance for payment of or the payment for Shares pursuant to the Offer
pending the completion of such filings and the obtaining of such approvals.
There is no assurance that any such approvals would be obtained or that adverse
consequences to Parent's or the Company's business might not result from a
failure to obtain such approvals or conditions that might be imposed in
connection therewith.
16. FEES AND EXPENSES
Prudential Securities Incorporated is acting as Dealer Manager for the
Offer. The Purchaser and Parent have agreed to pay the Dealer Manager for its
services in cash a fee of $50,000 upon commencement of the Offer, whether or not
any Shares are purchased, and an additional fee of $200,000 to be paid upon the
acquisition by the Purchaser or any of its affiliates of 51% or more of the
outstanding shares. The Dealer Manager will also be reimbursed for its
reasonable out-of-pocket expenses relating to the Offer. The Purchaser and
Parent have agreed to indemnify the Dealer Manager and certain related persons
against certain liabilities and expenses in connection with their services,
including certain liabilities under the Federal securities laws.
Georgeson & Company Inc. has been retained by the Purchaser to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, telex, telegraph and personal
interview and may request brokers, dealers, banks, trust companies and other
nominee shareholders to forward this Offer to Purchase and related materials to
beneficial owners.
The Information Agent and the Depositary each will receive reasonable and
customary compensation for their services, will be reimbursed for certain
reasonable out-of-pocket expenses and will be indemnified against certain
liabilities and expenses in connection therewith, including certain liabilities
under the Federal securities laws.
Neither Parent nor the Purchaser will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and the
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither the Purchaser nor Parent is aware of any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. To the extent the Purchaser or
Parent becomes aware of any state law that would limit the class of offerees in
the Offer, the Purchaser will amend the Offer and, depending on the timing of
such amendment, if any, will extend the Offer to provide adequate dissemination
of such information to holders of Shares prior to the
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expiration of the Offer. In any jurisdiction the securities, blue sky or other
laws of which require the Offer to be made by a licensed broker or dealer, the
Offer is being made on behalf of the Purchaser by the Dealer Manager or one or
more registered brokers or dealers which are licensed under the laws of such
jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser or Parent not contained herein or in
the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Purchaser has filed with the Commission a Tender Offer Statement on
Schedule 14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange
Act, furnishing certain additional information with respect to the Offer, and
may file amendments thereto. Among the exhibits so filed are copies of the
Merger Agreement and the Stock Option Agreement referred to in Section 12. In
addition, the Company has filed with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9 (including exhibits)
pursuant to Rule 14d-9 under the Exchange Act. Such Statements and any
amendments thereto, including exhibits, should be obtainable in the manner set
forth in Section 8 of this Offer to Purchase (except that such material may not
be available at the regional offices of the Commission).
Magna Acquisition Corporation
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
MAGNA INTERNATIONAL INC.
AND MAGNA ACQUISITION CORPORATION
I. Directors and Executive Officers of Magna International Inc.
The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers of
Magna International Inc. are set forth below.
<TABLE>
<CAPTION>
POSITION WITH MAGNA INTERNATIONAL INC.;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, AGE AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
--------------------------------- --------------------------------------------------------
<S> <C> <C>
* Frank Stronach (63).............. Chairman of the Board since November 1971 and Director
Vorstadt 2 of Magna International Inc. since December 10, 1968. Mr.
SCH-6300 Stronach is a partner in Frank Stronach & Co., Vorstadt
Zug, Switzerland 2, SCH-6300, Zug, Switzerland. Mr. Stronach is a citizen
of both Canada and Austria.
* Donald Walker (40)............... President (since November 1992), Chief Executive Officer
36 Apple Creek Boulevard (since November 1994) and Director of Magna
Markham, Ontario International Inc. since October 20, 1994. Mr. Walker is
Canada L3R 4Y4 a citizen of both Canada and the United Kingdom.
William H. Fike (60)............. Vice-Chairman since December 1994 and Executive Vice-
26200 Lahser Road, President since October 1994, prior to which he worked
Suite 300 as consultant for Magna International Inc. Prior to that
Southfield, Michigan 48034 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 5, 1995. Mr. Fike is a
citizen of the United States of America.
* Donald Amos (52)................. Executive Vice-President, Administrative and Human
36 Apple Creek Boulevard Resources of Magna International Inc. since October
Markham, Ontario 1994. Mr. Amos is a citizen of Canada.
Canada L3R 4Y4
* C. Dennis Bausch (43)............ Executive Vice-President, Marketing and Planning of
36 Apple Creek Boulevard Magna International Inc. since October 1994. Mr. Bausch
Markham, Ontario is a citizen of Canada.
Canada L3R 4Y4
* Gary Benninger (55).............. Executive Vice-President, Engineering, Research and
26200 Lahser Rd. Development of Magna International Inc. since October
Suite 300, 1994. Mr. Benninger is a citizen of the United States of
Southfield, Michigan 48034 America.
* J. Brian Colburn (53)............ Executive Vice-President, Special Projects of Magna
36 Apple Creek Boulevard International Inc. since May 1992 and Secretary since
Markham, Ontario January 1994. Mr. Colburn is a citizen of Canada.
Canada L3R 4Y4
* Graham J. Orr (50)............... Executive Vice-President, Corporate Development of Magna
36 Apple Creek Boulevard International Inc. since October 1994. Mr. Orr is a
Markham, Ontario citizen of Canada.
Canada L3R 4Y4
</TABLE>
S-1
<PAGE> 37
<TABLE>
<CAPTION>
POSITION WITH MAGNA INTERNATIONAL INC.;
PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, AGE AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY
--------------------------------- --------------------------------------------------------
<S> <C> <C>
* Vincent J. Galifi (36)........... Vice-President, Finance of Magna International Inc.
65 Valleywood Drive since July 1995 and Controller since March 1993. Mr.
Markham, Ontario Galifi is a citizen of Canada.
Canada L3R SL9
* Frank Burke (43)................. Treasurer of Magna International Inc. since July 1995.
65 Valleywood Drive Mr. Burke is a citizen of Canada.
Markham, Ontario
Canada L3R SL9
* Belinda Stronach (30)............ Vice-President, Diversa Group since October 1995 and
36 Apple Creek Boulevard Director of Magna International Inc. since December 8,
Markham, Ontario 1988. Ms. Stronach was an employee of the Company until
Canada L3R 4Y4 October 1991 and has been an employee since returning
from maternity leave. Ms. Stronach is a citizen of
Canada.
* The Honourable William G. Davis
(67)............................. Director of Magna International Inc. since June 6, 1985.
Suite 3000, Aetna Tower Counsel, Tory Tory DesLauriers & Binnington. Mr. Davis
P.O. Box 270 is a citizen of Canada.
Toronto-Dominion Centre
Toronto, Ontario
Canada M5K 1N2
* George C. Hitchman (82).......... Director of Magna International Inc. since December 10,
44 King Street West 1981. Mr. Hitchman is a citizen of Canada and is
Toronto, Ontario retired.
Canada M5H 1H1
* The Honourable Edward C. Lumley
(55)............................. Director of Magna International Inc. since December 7,
1 First Canadian Place 1989. Vice-Chairman, Nesbitt Burns Inc. Mr. Lumley is a
4th Floor citizen of Canada.
Toronto, Ontario
Canada M5X 1H3
Dr. Gerhard Randa (51)........... Director of Magna International Inc. since July 19,
Vordere Zollamtsstrasse 13 1995. Chairman and Chief Executive Officer of Bank
A-1030 Austria AG since April 5, 1995, prior to which date he
Vienna, Austria served as Deputy Chief Executive Officer and Deputy
Chairman of Bank Austria AG since October 7, 1991 and as
Chairman of the Management Board of Osterreichische
Landerbank AG since 1990. Mr. Randa is a citizen of
Austria.
Donald Resnick (69).............. Director of Magna International Inc. since February 25,
71 Highland Crescent 1992. Mr. Resnick is a citizen of Canada and is retired.
Willowdale, Ontario
Canada M2L 1G7
* Royden R. Richardson (42)........ Director of Magna International Inc. since October 31,
130 Adelaide Street West 1990. Vice-Chairman and Director of Richardson
12th Floor Greenshields of Canada Limited. Mr. Richardson is a
Toronto, Ontario citizen of Canada.
Canada M5H 1T8
</TABLE>
- ---------------
* Each individual has held various positions within the same organization during
the last 5 years.
S-2
<PAGE> 38
II. Officers of Magna Acquisition Corporation
The name, business address, present principal occupation or employment and
five-year employment history of each of the directors and executive officers of
Magna Acquisition Corporation are set forth below.
<TABLE>
<CAPTION>
POSITION WITH MAGNA ACQUISITION CORPORATION;
PRINCIPAL OCCUPATION OR EMPLOYMENT; 5-YEAR
NAME, AGE AND BUSINESS ADDRESS EMPLOYMENT HISTORY
--------------------------------- --------------------------------------------------------
<S> <C> <C>
* Donald Walker (40)............... Director of Magna Acquisition Corporation. President
36 Apple Creek Boulevard (since November 1992), Chief Executive Officer (since
Markham, Ontario November 1994) and Director of Magna International Inc.
Canada L3R 4Y4 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 Acquisition
26200 Lahser Road, Corporation. Vice-Chairman since December 1994 and
Suite 300 Executive Vice-President since October 1994 of Magna
Southfield, Michigan 48034 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 Acquisition Corporation.
36 Apple Creek Boulevard Executive Vice-President, Special Projects of Magna
Markham, Ontario International Inc. since May 1992 and Secretary since
Canada L3R 4Y4 January 1994. Mr. Colburn is a citizen of Canada.
* Graham J. Orr (50)............... Treasurer and Director of Magna Acquisition Corporation.
36 Apple Creek Boulevard Executive Vice-President, Corporate Development of Magna
Markham, Ontario International Inc. since October 1994. Mr. Orr is a
Canada L3R 4Y4 citizen of Canada.
</TABLE>
- ---------------
* Has held various positions within Magna International Inc. during the last
five years.
S-3
<PAGE> 39
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal, certificates for Shares and any other required documents should
be sent or delivered by each stockholder of the Company or his or her broker,
dealer, commercial bank, trust company or other nominee to the Depositary at one
of its addresses set forth below.
The Depositary for the Offer is:
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
BY MAIL BY FACSIMILE TRANSMISSION BY HAND
One Liberty Plaza (for Eligible Institutions
23rd Floor Only) One Liberty Plaza
New York, NY 10006 (212) 225-5436 23rd Floor
New York, NY 10006
CONFIRM BY TELEPHONE TO BY OVERNIGHT COURIER
(212) 225-5438 One Liberty Plaza
23rd Floor
New York, NY 10006
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
below. Additional copies of this Offer to Purchase, the Letter of Transmittal
and other tender offer materials may be obtained from the Information Agent, and
will be furnished promptly at Purchaser's expense. You may also contact your
broker, dealer, commercial bank or trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
[LOGO]
Wall Street Plaza
New York, NY 10005
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292-2018
Call Toll Free: 1-800-541-1266
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
DOUGLAS & LOMASON COMPANY
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 5, 1996
BY
MAGNA ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
MAGNA INTERNATIONAL INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 2, 1996, UNLESS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
One Liberty Plaza (for Eligible Institutions Only) One Liberty Plaza
23rd Floor (212) 225-5436 23rd Floor
New York, NY 10006 New York, NY 10006
Confirm by Telephone: By Overnight Courier:
(212) 225-5438 One Liberty Plaza
23rd Floor
New York, NY 10006
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU
MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED
BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used if certificates for Shares are to
be forwarded herewith or, unless an Agent's Message (as defined in Instruction
2) is utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary at a Book-Entry Transfer Facility as
defined in and pursuant to the procedures set forth in Section 2 of the Offer to
Purchase. Shareholders who deliver Shares by book-entry transfer are referred to
herein as "Book-Entry Shareholders" and other shareholders are referred to
herein as "Certificate Shareholders".
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation (as
defined in Section 2 of the Offer to Purchase) with respect to, their Shares and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares
in accordance with the guaranteed delivery procedures set forth in Section 2 of
the Offer to Purchase. See Instruction 2. Delivery of documents to a Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S) TENDERED(2)
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL SHARES
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by Book-Entry Shareholders.
(2) Unless otherwise indicated, it will be assumed that all Shares described
herein are being tendered. See Instruction 4.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ----------------------------------------------
Check box of Book-Entry Transfer Facility:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number -------------------------------------------------------------
Transaction Code Number ----------------------------------------------------
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s) ---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery -------------------------
Name of Institution that Guaranteed Delivery -------------------------------
If delivered by book-entry transfer check box:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
Account Number -------------------------------------------------------------
Transaction Code Number ----------------------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Magna Acquisition Corporation, a Michigan
corporation (the "Purchaser"), which is a direct wholly owned subsidiary of
Magna International Inc., an Ontario corporation, the above-described shares of
Common Stock, par value $2.00 per share (the "Shares"), of Douglas & Lomason
Company, a Michigan corporation (the "Company"), upon the terms and subject to
the conditions set forth in the Purchaser's Offer to Purchase dated September 5,
1996 and this Letter of Transmittal (which, together with any amendments or
supplements thereto or hereto, collectively constitute the "Offer"), receipt of
which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of the Shares tendered herewith in accordance with the terms of the
Offer, the undersigned hereby sells, assigns and transfers to, or upon the order
of, the Purchaser all right, title and interest in and to all the Shares that
are being tendered hereby (and any and all other Shares or other securities or
rights issued or issuable in respect thereof on or after August 29, 1996), and
irrevocably constitutes and appoints The Bank of Nova Scotia Trust Company of
New York (the "Depositary") the true and lawful agent and attorney-in-fact of
the undersigned, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to the full extent
of the undersigned's rights with respect to such Shares (and any such other
Shares or securities or rights), to (a) deliver certificates for such Shares
(and any such other Shares or securities or rights) or transfer ownership of
such Shares (and any such other Shares or securities or rights) on the account
books maintained by a Book-Entry Transfer Facility together, in any such case,
with all accompanying evidences of transfer and authenticity to, or upon the
order of, the Purchaser, (b) present such Shares (and any such other Shares or
securities or rights) for transfer on the Company's books and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
shares (and any such other Shares or securities or rights), all in accordance
with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the tendered
Shares (and any and all other Shares or other securities or rights issued or
issuable in respect of such Shares on or after August 29, 1996) and, when the
same are accepted for payment by the Purchaser, the Purchaser will acquire good
title thereto, free and clear of all liens, restrictions, claims and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned will, upon request, execute any additional documents deemed by the
Depositary or the Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the tendered Shares (and any and all other Shares or
other securities or rights issued or issuable in respect thereof on or after
August 29, 1996).
All authority conferred or agreed to be conferred pursuant to this Letter
of Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Donald Walker, William H. Fike,
J. Brian Colburn and Graham J. Orr, and each of them, and any other designees of
the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to vote at any annual, special or adjourned meeting
of the Company's shareholders or otherwise in such manner as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, to execute any written consent concerning any matter as
each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, and otherwise to act as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, the Shares tendered hereby that have been accepted for
payment by the Purchaser prior to the time any such action is taken and with
respect to which the undersigned is entitled to vote (and any and all other
Shares, or other securities or rights issued or issuable in respect of such
Shares on or after August 29, 1996). This appointment is effective when, and
only to the extent that, the Purchaser accepts for payment such Shares as
provided in the Offer to Purchase. This power of attorney and proxy are
irrevocable and are granted in consideration of the acceptance for payment of
such Shares in accordance with the terms of the Offer. Upon such acceptance for
payment, all prior powers of attorney, proxies and consents given by the
undersigned with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given (and, if given, will be deemed not
effective) by the undersigned.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions of the Offer.
Without limiting the foregoing, if the price to be paid in the Offer is amended
in accordance with the Offer, the price to be paid to the undersigned will be
the amended price.
<PAGE> 4
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or return any certificates for
Shares not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered". Similarly, unless
otherwise indicated under "Special Delivery Instructions", please mail the check
for the purchase price and/or return any certificates for Shares not tendered or
accepted for payment (and any accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Shares
Tendered". In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or return any certificates for Shares not tendered or
accepted for payment (and any accompanying documents, as appropriate) in the
name of, and deliver such check and/or return such certificates (and any
accompanying documents, as appropriate) to, the person or persons so indicated.
Unless otherwise indicated herein under "Special Payment Instructions", please
credit any Shares tendered herewith by book-entry transfer that are not accepted
for payment by crediting the account at the Book-Entry Transfer Facility
designated above. The undersigned recognizes that the Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
from the name of the registered holder thereof if the Purchaser does not accept
for payment any of the Shares so tendered.
/ / CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE
BEEN LOST, DESTROYED OR STOLEN AND SEE INSTRUCTION 11.
Number of Shares represented by the lost, destroyed or stolen
certificates:
----------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than
the undersigned, or if Shares delivered by book-entry transfer that are
not accepted for payment are to be returned by credit to an account
maintained at a Book-Entry Transfer Facility other than the account
indicated above.
Issue: / / Check / / Certificate(s) to:
Name ----------------------------------------------------
(PLEASE PRINT)
Address --------------------------------------------------
----------------------------------------------------------
(INCLUDE ZIP CODE)
----------------------------------------------------------
(EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
/ / Credit unpurchased Shares delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below:
Check appropriate Box:
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company
------------------------------------------------------------
(ACCOUNT NUMBER)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment (and any accompanying documents, as appropriate) are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that above.
Mail: / / Check / / Certificate(s) to:
Name ----------------------------------------------------
(PLEASE PRINT)
Address --------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(EMPLOYER IDENTIFICATION OR SOCIAL SECURITY NUMBER)
<PAGE> 5
- --------------------------------------------------------------------------------
SIGN SIGN HERE SIGN
HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) HERE
--------------------------------------------------------
--------------------------------------------------------
(SIGNATURE(S) OF SHAREHOLDER(S))
Dated: , 1996
--------------------------------------------------
(Must be signed by registered holder(s) as name(s)
appear(s) on the certificate(s) for the Shares or on a
security position listing or by person(s) authorized to
become registered holder(s) by certificates and
documents transmitted herewith. If signature is by
trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, please
provide the following information and see Instruction
5.)
Dated: , 1996
--------------------------------------------------
Name(s)
-------------------------------------------------
--------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
-----------------------------------
Address
-------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone Number ( )
------------
Employer Identification or
Social Security Number
----------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
------------------------------------
Name
----------------------------------------------------
(PLEASE PRINT)
Name of Firm
--------------------------------------------
Address
-------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number ( )
--------------------
Dated: , 1996
--------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith, unless such registered holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in the
Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on this Letter
of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by shareholders either if certificates are to be forwarded herewith or, unless
an Agent's Message (as defined below) is utilized, if delivery of Shares is to
be made pursuant to the procedures for book-entry transfer set forth in Section
2 of the Offer to Purchase. For a shareholder validly to tender Shares pursuant
to the Offer, either (a) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), together with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and either certificates
for tendered Shares must be received by the Depositary at one of such addresses
or Shares must be delivered pursuant to the procedures for book-entry transfer
set forth herein (and a Book-Entry Confirmation received by the Depositary), in
each case prior to the Expiration Date, or (b) the tendering shareholder must
comply with the guaranteed delivery procedures set forth below and in Section 2
of the Offer to Purchase.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary or complete the procedures for book-entry transfer prior to the
Expiration Date may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such
procedures, (a) such tender must be made by or through an Eligible Institution,
(b) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by the Purchaser, must be received by the
Depositary prior to the Expiration Date and (c) the certificates for all
tendered Shares in proper form for transfer (or a Book-Entry Confirmation with
respect to all such Shares), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other required documents must be received by the Depositary
within three trading days after the date of execution of such Notice of
Guaranteed Delivery as provided in Section 2 of the Offer to Purchase. A
"trading day" is any day on which The NASDAQ Stock Market, Inc.'s National
Market is open for business.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THIS LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering shareholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled "Number
of Shares Tendered". In any such case, new certificate(s) for the remainder of
the Shares that were evidenced by the older certificate(s) will be sent to the
registered holder, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as soon as practicable after the expiration of the Offer.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
<PAGE> 7
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment or certificates for Shares not
tendered or accepted for payment are to be issued to a person other than the
registered owner(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be guaranteed
by an Eligible Institution.
6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any person(s) other than the registered holder(s), or
if tendered certificates are registered in the name(s) of any person(s) other
than the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder(s) or such person(s))
payable on account of the transfer to such person(s) will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
Except as provided above, it will not be necessary for transfer tax stamps
to be affixed to the certificates listed in this Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or accepted for
payment are to be returned to, a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to a person other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Any shareholder(s) delivering Shares by
book-entry transfer may request that Shares not accepted for payment be credited
to such account maintained at a Book-Entry Transfer Facility as such
shareholder(s) may designate.
8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its
sole discretion to waive any of the specified conditions of the Offer, in whole
or in part, in the case of any Shares tendered.
9. 31% BACKUP WITHHOLDING. In order to avoid "backup withholding" of
Federal income tax on payments of cash pursuant to the Offer, a shareholder
surrendering shares in the Offer must, unless an exemption applies, provide the
Depositary with such shareholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify under
penalties of perjury that such TIN is correct and that such shareholder is not
subject to backup withholding. If a shareholder does not provide such
shareholder's correct TIN or fails to provide the certifications described
above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on such
shareholder and payment of cash to such shareholder pursuant to the Offer may be
subject to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the Federal income tax liability
of the person subject to the backup withholding, provided that the required
information is given to the IRS. If backup withholding results in an overpayment
of tax, a refund can be obtained by the shareholder upon filing an income tax
return.
The shareholder is required to give the Depositary the TIN (i.e., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
<PAGE> 8
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering shareholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
shareholder if a TIN is provided to the Depositary within 60 days.
Certain shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign shareholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent or the Dealer Manager at their respective
addresses set forth below.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed, or stolen, the shareholder should
properly notify the Depositary by checking the box immediately preceding the
special payment/special delivery instructions and indicating the number of
Shares lost, destroyed or stolen and then telephone the Information Agent who
will instruct the shareholder as to the steps that must be taken in order to
replace the certificate. This Letter of Transmittal and related documents cannot
be processed until the procedures for replacing lost, destroyed or stolen
certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN
AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE AND CERTIFICATES FOR TENDERED SHARES
MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE
PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE,
OR THE TENDERING SHAREHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED
DELIVERY.
<PAGE> 9
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------------
PAYER'S NAME: THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
- ---------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- Please provide your TIN in the box at
Form W-9 right and certify by signing and dating below. ----------------------------
Department of the Treasury Social Security Number
Internal Revenue Service
OR
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION ----------------------------
NUMBER (TIN) Employer Identification
Number(s)
-----------------------------------------------------------------------------
PART 2 -- Certification -- Under penalties of
perjury, I certify that:
(1) The number shown on this form is my correct PART 3 --
Taxpayer Identification Number (or I am writing Awaiting TIN
for a number to be issued to me) and / /
(2) I am not subject to backup withholding
because (a) I am exempt from backup withholding
or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I PART 4 --
am subject to backup withholding as a result Exempt TIN
of a failure to report all interest or dividends / /
or (c) the IRS has notified me that I am no longer
subject to backup withholding.
-----------------------------------------------------------------------------
Certification Instructions -- You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax returns.
However, if after being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS stating that you
are no longer subject to backup withholding, do not cross out such Item (2).
If you are exempt from backup withholding, check the box in Part 4 above.
- ---------------------------------------------------------------------------------------------------------
Signature Date , 1996
--------------------------------------------------- ------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
<PAGE> 10
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that, if I do not provide a taxpayer identification number to the
Depositary, 31% of all reportable payments made to me will be withheld, but
will be refunded if I provide a certified taxpayer identification number
within 60 days.
--------------------------------------------------------------
--------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
INFORMATION.
The Information Agent for the Offer is:
[LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect (212) 440-9800
CALL TOLL FREE: 1-800-223-2064
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292-2018
CALL TOLL FREE: 1-800-541-1266
September 5, 1996
<PAGE> 1
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292-2018
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DOUGLAS & LOMASON COMPANY
AT
$31.00 NET PER SHARE
BY
MAGNA ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
MAGNA INTERNATIONAL INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 2, 1996, UNLESS EXTENDED.
September 5, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Magna Acquisition Corporation, a Michigan
corporation (the "Purchaser") and a direct wholly owned subsidiary of Magna
International Inc., an Ontario corporation ("Parent"), to act as Dealer Manager
in connection with the Purchaser's offer to purchase all outstanding shares of
Common Stock, par value $2.00 per share (the "Shares"), of Douglas & Lomason
Company, a Michigan corporation (the "Company"), at $31.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase dated September 5,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer").
Please furnish copies of the enclosed materials to those of your clients
for whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated September 5, 1996;
2. Letter of Transmittal to be used by shareholders of the Company in
accepting the Offer;
3. A letter to shareholders of the Company from Harry A. Lomason, II,
Chairman, President and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 filed
with the Securities and Exchange Commission by the Company and mailed to
shareholders of the Company;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares in your name or in the name of a nominee, with
space provided for obtaining such clients' instructions with regard to
the Offer;
5. Notice of Guaranteed Delivery;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to The Bank of Nova Scotia Trust Company of
New York, the Depositary.
<PAGE> 2
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 2, 1996,
UNLESS EXTENDED.
The Board of Directors of the Company has unanimously adopted resolutions
approving the Offer, determining that the terms of the Offer are fair to, and in
the best interests of, the Company and its shareholders and recommending that
the Company's shareholders accept the Offer.
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and the
Information Agent as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed
upon request for customary mailing and handling expenses incurred by you in
forwarding the enclosed offering materials to your clients.
Any inquiries you may have with respect to the Offer should be addressed to
Georgeson & Company Inc., the Information Agent, at Wall Street Plaza, New York,
New York 10005, (212) 440-9800 or the Dealer Manager, Prudential Securities
Incorporated, at One New York Plaza, New York, New York 10292-2018,
1-800-541-1266.
Requests for copies of the enclosed materials should be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
Prudential Securities Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE
INFORMATION AGENT OR THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM OR
AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY STATEMENT
OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER
THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DOUGLAS & LOMASON COMPANY
AT
$31.00 NET PER SHARE
BY
MAGNA ACQUISITION CORPORATION
A DIRECT WHOLLY OWNED SUBSIDIARY OF
MAGNA INTERNATIONAL INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 2, 1996, UNLESS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated September 5,
1996 (the "Offer to Purchase"), and a Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the "Offer")
relating to the Offer by Magna Acquisition Corporation, a Michigan corporation
(the "Purchaser") and a direct wholly owned subsidiary of Magna International
Inc., an Ontario corporation ("Parent"), to purchase for cash all outstanding
shares of Common Stock, par value $2.00 per share (the "Shares"), of Douglas &
Lomason Company, a Michigan corporation (the "Company"), at a price of $31.00
per Share net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer. Holders of Shares whose
certificates for such Shares are not immediately available or who cannot deliver
their certificates and all other required documents to The Bank of Nova Scotia
Trust Company of New York (the "Depositary") or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in the Offer to
Purchase) must tender their Shares according to the guaranteed delivery
procedures set forth in Section 2 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any
of or all the Shares held by us for your account, pursuant to the terms and
conditions set forth in the Offer.
Please note the following:
1. The tender price is $31.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions of
the Offer.
2. The Offer is being made for all outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, October 2, 1996, unless extended by the
Purchaser.
4. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn prior to the Expiration Date of the
Offer that number of Shares that would represent at least 51% of all
outstanding Shares on a fully diluted basis on the date of purchase.
5. The Board of Directors of the Company has unanimously adopted
resolutions approving the Offer, determining that the terms of the Offer
are fair to, and in the best interests of, the Company and its shareholders
and recommending that the Company's shareholders accept the Offer.
<PAGE> 2
6. Any stock transfer taxes applicable to a sale of Shares to the
Purchaser will be borne by the Purchaser, except as otherwise provided in
Instruction 6 to the Letter of Transmittal.
Your instructions to us should be forwarded promptly to permit us to submit
a tender on your behalf prior to the expiration of the Offer.
If you wish to have us tender any of or all the Shares held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form set forth below. If you authorize the tender of your
Shares, all such Shares will be tendered unless otherwise specified below. An
envelope to return your instructions to us is enclosed. Your instructions should
be forwarded to us in ample time to permit us to submit a tender on your behalf
prior to the expiration of the Offer.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase)
with respect to) such Shares, (b) a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer effected pursuant to the
procedure set forth in Section 2 of the Offer to Purchase, an Agent's Message,
and (c) any other documents required by the Letter of Transmittal. Accordingly,
tendering shareholders may be paid at different times depending upon when
certificates for Shares or Book-Entry Confirmations with respect to Shares are
actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE
PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
The Offer is not being made to, nor will tenders be accepted from, or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK
OF
DOUGLAS & LOMASON COMPANY
The undersigned acknowledge(s) receipt of your letter, the Offer to
Purchase of Magna Acquisition Corporation dated September 5, 1996 (the "Offer to
Purchase"), and the related Letter of Transmittal relating to an offer by Magna
Acquisition Corporation, a Michigan corporation (the "Purchaser") and a direct
wholly owned subsidiary of Magna International Inc., an Ontario corporation, to
purchase for cash all outstanding shares of Common Stock, par value $2.00 per
share (the "Shares"), of Douglas & Lomason Company, a Michigan corporation.
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned, on the terms and subject to the
conditions in such Offer to Purchase and Letter of Transmittal.
Number of Shares to be Tendered:* _____________________________________________
Date: _________________________________________________________________________
SIGN HERE
Signature(s): _________________________________________________________________
(Print Name(s)): ______________________________________________________________
(Print Address(es)): __________________________________________________________
(Area Code and Telephone Number(s)): __________________________________________
(Taxpayer Identification or Social Security Number(s)): _______________________
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
DOUGLAS & LOMASON COMPANY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, OCTOBER 2, 1996, UNLESS EXTENDED.
As set forth in Section 2 of the Offer to Purchase (as defined below), this
Notice of Guaranteed Delivery or one substantially equivalent hereto must be
used to accept the Offer (as defined below) if certificates for shares of Common
Stock, par value $2.00 per share (the "Shares"), of Douglas & Lomason Company, a
Michigan corporation (the "Company"), are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Depositary referred to below
prior to the Expiration Date (as defined in the Offer to Purchase). This Notice
of Guaranteed Delivery may be delivered by hand or transmitted by telegram,
facsimile transmission or letter to the Depositary and must include a guarantee
by an Eligible Institution (as defined in the Offer to Purchase). See Section 2
of the Offer to Purchase.
The Depositary for the Offer is:
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand:
One Liberty Plaza (for Eligible Institutions Only) One Liberty Plaza
23rd Floor (212) 225-5436 23rd Floor
New York, NY 10006 Confirm by Telephone: New York, NY 10006
(212) 225-5438 By Overnight Courier:
One Liberty Plaza
23rd Floor
New York, NY 10006
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal referred to below is
required to be guaranteed by an Eligible Institution under the instructions
thereto, such signature guarantee must appear in the applicable space provided
in the signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares (or a Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to such Shares) to the Depositary within the time
period shown herein. Failure to do so would result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 2
<TABLE>
<S><C>
Ladies and Gentlemen:
The undersigned hereby tenders to Magna Acquisition Corporation, a Michigan corporation (the "Purchaser") and a direct
wholly owned subsidiary of Magna International Inc., an Ontario corporation, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated September 5, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with all amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged,
the number of Shares indicated below pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase.
Number of Shares: _______________________________________ Name(s) of Record Holder(s): ________________________
Certificate Nos. (if available): ________________________ _____________________________________________________
_________________________________________________________ (PLEASE PRINT)
(Check one if Shares will be tendered by book-
entry transfer) Address(es): ________________________________________
/ / The Depository Trust Company _____________________________________________________
/ / Philadelphia Depository Trust Company (ZIP CODE)
Account Number: _________________________________________ Area Code and Tel. No.: _____________________________
Signature(s): _______________________________________
Dated: __________________________________________________ _____________________________________________________
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to the Depositary either the
certificates representing the Shares tendered hereby, in proper form for transfer, or Book-Entry Confirmation with respect to such
Shares, in any such case together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message, and any other required documents, within three NASDAQ National Market trading
days after the date hereof.
The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the
Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could
result in a financial loss to such Eligible Institution. All terms used herein have the meanings set forth in the Offer to Purchase.
Number of Shares: _______________________________________ _____________________________________________________
Name of Firm: ___________________________________________ (AUTHORIZED SIGNATURE)
Address: ________________________________________________ Name: _______________________________________________
(PLEASE PRINT)
_________________________________________________________
(ZIP CODE) Title: ______________________________________________
Area Code and Tel. No.: _________________________________ Dated: ______________________________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY; CERTIFICATES FOR SHARES SHOULD BE SENT ONLY
WITH YOUR LETTER OF TRANSMITTAL
</TABLE>
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
IRS INSTRUCTIONS
(SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.)
PURPOSE OF FORM. -- A person who is required to file an information return
with the Internal Revenue Service (the IRS) must obtain your correct taxpayer
identification number (TIN) to report income paid to you, real estate
transactions, mortgage interest you paid, the acquisition or abandonment of
secured property, or contributions you made to an individual retirement account
(IRA). Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN), and, when applicable, (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and (3)
to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN A W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. -- If you do not have a TIN, apply for one immediately.
To apply, get FORM SS-5, Application for a Social Security Card (SSN) (for
individuals), from your local office of the Social Security Administration, or
FORM SS-4, Application for Employer Identification Number (EIN) (for businesses
and all other entities), from your local IRS office.
To complete Form W-9, if you do not have a TIN, check the box in Part 3 of the
substitute Form W-9, sign and date the form, and give it to the requester.
Generally, you will then have 60 days to obtain a TIN and furnish it to the
requester. If the requester does not receive your TIN within 60 days, backup
withholding, if applicable, will begin and continue until you furnish your TIN
to the requester. For reportable interest or dividend payments, the payer must
exercise one of the following options concerning backup withholding during this
60-day period. Under option (1), a payer must backup withhold on any withdrawals
you make from your account after 7 business days after the requester receives
this form back from you. Under option (2), the payer must backup withhold on any
reportable interest or dividend payments made to your account, regardless of
whether you make any withdrawals. The backup withholding under option (2) must
begin no later than 7 business days after the requester receives this form back.
Under option (2), the payer is required to refund the amounts withheld if your
certified TIN is received within the 60-day period and you were not subject to
backup withholding during the period.
NOTE: CHECKING THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9 MEANS THAT YOU
HAVE ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR
FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your TIN,
sign and date this form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding." Payments that could be
subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation, and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to backup withholding
because you failed to report all your interest and dividends on your tax return
(for reportable interest and dividends only), or
(4) You fail to certify to the requester that you are not subject to backup
withholding under (3) above (for reportable interest and dividend accounts
opened after 1983 only), or
(5) You fail to certify your TIN. This applies only to reportable interest,
dividend, broker or barter exchange accounts opened after 1983, or broker
accounts considered inactive in 1983.
Except as explained in (5) above, other reportable payments are subject to
backup withholding only if (1) or (2) above applies. Certain payees and payments
are exempt from backup withholding and information reporting. See PAYEES AND
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING, below, and EXEMPT PAYEES AND PAYMENTS
under SPECIFIC INSTRUCTIONS, on page 2, if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. -- The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are exempt
except item (9). For broker transactions, payees listed in (1) through (13) and
a person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in Items (1) through (7), except that a corporation that provides
medical and health care services or bills and collects payments for such
services is not exempt from backup withholding or information reporting. Only
payees described in items (2) through (6) are exempt from backup withholding for
barter exchange transactions, patronage dividends, and payments by certain
fishing boat operators.
(1) A corporation.
(2) An organization exempt from tax under Section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the U.S. or
a possession of the U.S.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends generally not subject to backup
withholding also include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in trade or business in the U.S. and
that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR MORE
AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045,
6049, 6050A, and 6050N, and their regulations.
PENALTIES
FAILURE TO FURNISH TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
<PAGE> 2
SPECIFIC INSTRUCTIONS
NAME. -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card and your new last name.
If you are a sole proprietor, you must furnish your individual name and either
your SSN or EIN. You may also enter your business name. Enter your name(s) as
shown on your social security card and/or as it was used to apply for your EIN
on Form SS-4.
SIGNING THE CERTIFICATION. --
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983. -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) INTEREST, DIVIDEND, BROKER AND BARTER EXCHANGE ACCOUNTS OPENED AFTER 1983
AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983. -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item (2) in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. -- You must sign the certification. You may
cross out item (2) of the certification.
(4) OTHER PAYMENTS. -- You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. -- You are requested to furnish your correct
TIN, but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. -- If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part 1, write "EXEMPT" in the block in Part 2, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a completed Form W-8,
Certificate of Foreign Status.
(7) "AWAITING TIN". -- Follow the instructions under HOW TO OBTAIN A TIN, on
page 1, check the box in Part 3 of the Substitute Form W-9 and sign and date the
form.
SIGNATURE. -- For a joint account, only the person whose TIN is shown in Part
1 should sign the form.
PRIVACY ACT NOTICE. -- Section 6109 requires you to furnish your correct TIN
to persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a TIN to a payer. Certain penalties may also apply.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<C> <S> <C>
---------------------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF:
- ---------------------------------------------------------------
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of
the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
4. a. The usual revocable savings trust The
(grantor is also trustee) grantor-trustee(1)
b. So-called trust account that is not The actual owner(1)
a legal or valid trust under state law
5. Sole proprietorship The owner(3)
---------------------------------------------------------------
GIVE THE NAME AND
EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER
OF:
- ---------------------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, estate or pension trust Legal entity(4)
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a state or local
government, school district, or prison)
that receives agricultural program
payments
</TABLE>
- --------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the individual's name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE> 1
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
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase
dated September 5, 1996, and the related Letter of Transmittal and any
amendments or supplements thereto and is being made to all holders of
Shares. The Offer is not being made to (nor will tenders be accepted from
or on behalf of) holders of Shares in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the
laws of such jurisdiction. In any jurisdiction where the securities, blue
sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed made on behalf of the Purchaser by
Prudential Securities Incorporated or one or more registered brokers or
dealers that are licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DOUGLAS & LOMASON COMPANY
AT
$31.00 NET PER SHARE
BY
MAGNA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
MAGNA INTERNATIONAL INC.
<PAGE> 2
Magna Acquisition Corporation, a Michigan corporation (the "Purchaser"),
which is a direct wholly owned subsidiary of Magna International Inc., an
Ontario corporation ("Parent"), is offering to purchase all outstanding shares
of Common Stock, par value $2.00 per share (the "Shares"), of Douglas & Lomason
Company, a Michigan corporation (the "Company"), at $31.00 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated September 5, 1996 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, OCTOBER 2, 1996, UNLESS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of August 29, 1996 (the "Merger Agreement"), among the Purchaser, Parent and
the Company, which provides that, following the Offer and upon the terms and
subject to the conditions of the Merger Agreement, the Purchaser will be merged
with and into the Company and each outstanding Share (except those 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
in cash, without interest.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in the Offer
to Purchase) that number of Shares that would represent at least 51% of all
outstanding Shares on a fully diluted basis on the date of purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY ADOPTED RESOLUTIONS
APPROVING THE OFFER, DETERMINING THAT THE TERMS OF THE OFFER ARE FAIR TO, AND IN
THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDING THAT
THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
The Bank of Nova Scotia Trust Company of New York (the "Depositary") of the
Purchaser's acceptance for payment of such Shares. Upon the terms and subject to
the conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering shareholders for the purpose
of receiving payment from the Purchaser and transmitting payment to tendering
shareholders. In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates for (or a timely Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message (as defined in the Offer to Purchase), and (iii) any other documents
required by the Letter of Transmittal. Under no circumstances will interest be
paid on the purchase price of the Shares to be paid by the Purchaser, regardless
of any extension of the Offer or any delay in making such payment.
<PAGE> 3
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment and paid for by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after
November 3, 1996. For a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase and must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn, if different from the name of
the person who tendered the Shares. If certificates for Shares have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution (as defined in the Offer to Purchase), the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been delivered pursuant to the procedures for book-entry transfer as
set forth in Section 2 of the Offer to Purchase, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility (as defined in the Offer to Purchase) to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for any
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 of the Offer to Purchase
at any time prior to the Expiration Date. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Purchaser in its sole discretion, which determination will be final and
binding.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment and thereby purchased tendered Shares as, if and when the Purchaser
gives oral or written notice to the Depositary of its acceptance of the tenders
of such Shares.
The Purchaser expressly reserves the right, at any time or from time to
time, in its sole discretion, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the
Offer to Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL, WHICH ARE BEING MAILED
TO SHAREHOLDERS OF RECORD, CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ
CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
<PAGE> 4
Requests for copies of the Offer to Purchase and the Letter of Transmittal
may be directed to the Information Agent as set forth below, and copies will be
furnished promptly at the Purchaser's expense. Questions or requests for
assistance may be directed to the Information Agent or the Dealer Manager, as
set forth below.
The Information Agent is:
(LOGO)
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect (212) 440-9800
Call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
PRUDENTIAL SECURITIES INCORPORATED
One New York Plaza
New York, New York 10292-2018
CALL TOLL FREE: 1-800-541-1266
September 5, 1996
<PAGE> 1
PRESS RELEASE
MAGNA INTERNATIONAL COMMENCES $31.00 PER SHARE TENDER OFFER
FOR DOUGLAS & LOMASON COMPANY
SEPTEMBER 5, 1996, Markham, Ontario -- MAGNA INTERNATIONAL INC. (NYSE: MGA;
TSE: MG.A, MG.B; ME: MG.A) announced today that Magna Acquisition Corporation
("MAC"), a wholly-owned subsidiary of Magna, has commenced its previously
announced tender offer for all outstanding shares of Common Stock of Douglas &
Lomason Company (NASDAQ: DOUG) at a price of US$31.00 per share in cash,
without interest or an aggregate of approximately US$135 million. Following the
successful completion of the tender offer, MAC will be merged with Douglas &
Lomason Company ("D&L") and each remaining D&L share will be converted into the
right to receive US$31.00 in cash, without interest.
The Board of Directors of D&L 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, D&L and its
shareholders, and recommending that D&L's shareholders accept the offer.
The tender offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration date of the offer, that
number of shares that would constitute at least 51% of the outstanding D&L
shares on a fully diluted basis. The tender offer and withdrawal rights under
the tender offer will expire at 12:00 midnight, New York City time, on
Wednesday, October 2, 1996, unless extended.
Prudential Securities Incorporated is acting as dealer manager for the tender
offer. Georgeson & Company Inc. is the information agent.
Magna, 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 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.
For further information, please contact: Graham Orr, Executive Vice-President,
Corporate Development at (905) 477-7766.
<PAGE> 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>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE TENDER OFFER............................................ 2
Section 1.1 The Offer........................................................ 2
Section 1.2 Company Action................................................... 4
ARTICLE II
THE MERGER............................................... 5
Section 2.1 Effective Time of the Merger..................................... 5
Section 2.2 Closing.......................................................... 5
Section 2.3 Effects of the Merger............................................ 5
Section 2.4 Articles of Incorporation and By-Laws............................ 6
Section 2.5 Directors........................................................ 6
Section 2.6 Officers......................................................... 6
ARTICLE III
CONVERSION OF SECURITIES........................................ 7
Section 3.1 Conversion of Capital Stock...................................... 7
Section 3.2 Exchange of Certificates......................................... 8
Section 3.3 No Further Ownership Rights in Company
Common Stock..................................................... 9
Section 3.4 Closing of Company Transfer Books................................ 9
Section 3.5 Withholding...................................................... 9
Section 3.6 Lost, Stolen or Destroyed Certificates........................... 9
Section 3.7 Further Assurances............................................... 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 10
Section 4.1 Organization..................................................... 10
Section 4.2 Capitalization................................................... 11
Section 4.3 Authority........................................................ 12
Section 4.4 Consents and Approvals; No Violations............................ 12
Section 4.5 SEC Reports and Financial Statements............................. 14
Section 4.6 Information in Disclosure Documents.............................. 15
Section 4.7 Litigation....................................................... 15
Section 4.8 No Material Adverse Change; Material
Agreements....................................................... 16
Section 4.9 Taxes............................................................ 16
Section 4.10 Benefit Plans; Labor Matters..................................... 17
Section 4.11 Opinion of Financial Advisor..................................... 21
Section 4.12 Certain Antitakeover Provisions Not
Applicable....................................................... 21
Section 4.13 Intellectual Property............................................ 22
Section 4.14 Votes Required................................................... 22
Section 4.15 Brokers.......................................................... 23
Section 4.16 Certain Agreements............................................... 23
Section 4.17 Environmental Matters............................................ 23
Section 4.18 Tangible Property; Real Property and
Leases........................................................... 25
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND Purchaser......................... 26
Section 5.1 Organization..................................................... 26
Section 5.2 Authority........................................................ 26
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.3 Consents and Approvals; No Violations............................... 27
Section 5.4 Information in Disclosure Documents................................. 28
Section 5.5 Financing........................................................... 28
Section 5.6 Brokers............................................................. 28
ARTICLE VI
COVENANTS.................................................. 28
Section 6.1 Conduct of Business of the Company.................................. 28
Section 6.2 Reasonable Best Efforts............................................. 31
Section 6.3 Access to Information............................................... 32
Section 6.4 Company Shareholders Meeting........................................ 32
Section 6.5 Company Option Plans................................................ 33
Section 6.6 Company Benefit Plans............................................... 34
Section 6.7 No Solicitation..................................................... 34
Section 6.8 Fees and Expenses................................................... 36
Section 6.9 Notification of Certain Matters..................................... 37
Section 6.10 Company Debt Agreements............................................. 37
Section 6.11 Public Announcements................................................ 38
Section 6.12 State Takeover Laws................................................. 38
Section 6.13 Indemnification..................................................... 38
Section 6.14 Shareholder Litigation.............................................. 39
Section 6.15 Directors........................................................... 39
ARTICLE VII
CONDITIONS.................................................. 40
Section 7.1 Conditions to Each Party's Obligation To
Effect the Merger................................................... 40
Section 7.2 Conditions to Obligations of Parent and
Purchaser........................................................... 41
Section 7.3 Conditions to Obligations of the
Company............................................................. 41
ARTICLE VIII
TERMINATION................................................. 42
Section 8.1 Termination......................................................... 42
Section 8.2 Effect of Termination............................................... 43
ARTICLE IX
MISCELLANEOUS................................................ 43
Section 9.1 Nonsurvival of Representations and
Warranties.......................................................... 43
Section 9.2 Amendment........................................................... 44
Section 9.3 Extension; Waiver................................................... 44
Section 9.4 Notices............................................................. 44
Section 9.5 Interpretation...................................................... 45
Section 9.6 Counterparts........................................................ 46
Section 9.7 Entire Agreement; No Third Party
Beneficiaries....................................................... 46
Section 9.8 Governing Law....................................................... 46
Section 9.9 Specific Performance................................................ 46
Section 9.10 Assignment.......................................................... 46
Section 9.11 Validity............................................................ 46
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").
W I T N E S S E T H:
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:
<PAGE> 5
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 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
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"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.
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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 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
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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
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
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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.
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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 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.
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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 Certificates
shall not have been surrendered prior to two
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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
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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 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.
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(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.
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(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 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,
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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, 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
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<PAGE> 17
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
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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.
(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
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<PAGE> 19
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
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authorities have been paid, fully settled or adequately provided for in the
Company's financial statements, and no issue or claim has been 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,
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<PAGE> 21
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 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
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<PAGE> 22
"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.
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(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.
(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.
(l) 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.
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<PAGE> 24
(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 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).
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<PAGE> 25
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.
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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 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. Sections 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.
Sections 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. Sections 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
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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;
(vi) there is not now, nor to the best knowledge of
the Company has there ever been, on or in any property owned
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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.
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(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.
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
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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 by-laws 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.
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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.
(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
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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);
(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
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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;
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(k) alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of any Subsidiary;
(l) 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
(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
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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
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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 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
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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 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
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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
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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 (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,
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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 on terms
reasonably acceptable to Parent and
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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.
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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 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
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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 Section 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
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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;
(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
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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.
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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 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
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<PAGE> 48
(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
(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
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<PAGE> 49
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.
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<PAGE> 50
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: 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
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<PAGE> 51
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
<PAGE> 52
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 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;
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<PAGE> 53
(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
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<PAGE> 54
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 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.
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<PAGE> 1
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 469,764 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
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<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
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<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
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<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.
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<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,
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<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;
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<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
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<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
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<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
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<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
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<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
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<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.
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<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.
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<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
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<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.
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<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 316,641
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> 20
EXHIBIT A
ESCROW AGREEMENT
ESCROW AGREEMENT dated as of August 29, 1996, among MAGNA
INTERNATIONAL INC., an Ontario corporation ("Parent"), MAGNA ACQUISITION
CORPORATION, a Michigan corporation (the "Purchaser"), the persons listed on
Schedule 1 to the Stock Option Agreement referred to below (the "Stockholders"),
and NBD Bank, as escrow agent (the "Escrow Agent").
WHEREAS the Stockholders have entered into a Stock Option
Agreement dated as of August 29, 1996 (the "Stock Option Agreement"), with
Parent and the Purchaser, pursuant to which the Stockholders have agreed to
deposit with the Escrow Agent all shares of Common Stock, par value $2.00 per
share, of Douglas & Lomason Company, a Michigan corporation (the "Company")
owned by the Stockholders (the "Optioned Shares"); and
WHEREAS, this Agreement is being entered into pursuant to
Section 8(d) of the Stock Option Agreement for the purpose of securing to Parent
and the Purchaser certain of the obligations of the Stockholders under the Stock
Option Agreement.
NOW, THEREFORE, in consideration of the execution of the Stock
Option Agreement and the agreements herein contained, the parties agree as
follows:
1. Escrowed Property. (a) The Escrow Agent is hereby appointed
as escrow agent to hold and dispose of the Escrowed Property (as hereinafter
defined) in accordance with the terms of this Agreement.
(b) Simultaneously with the execution and delivery of this
Agreement, each Stockholder will deliver to the Escrow Agent certificates
representing the Optioned Shares
-1-
<PAGE> 21
owned by such Stockholder duly endorsed in blank or accompanied by stock powers
duly executed by such Stockholder in blank, in proper form for transfer,
together with an irrevocable proxy substantially in the form of Exhibit A to the
Stock Option Agreement, duly executed by such Stockholder, receipt of which is
hereby acknowledged by the Escrow Agent. If on or after the date of the Stock
Option Agreement and prior to the expiration of the Option there shall occur any
dividend, distribution, stock split, recapitalization, combination, 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 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 agrees to deliver to the Escrow Agent all such
shares, other securities, cash or other property (and any securities that became
Optioned Shares as contemplated by Section 8(a)(ii) of the Stock Option
Agreement), 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. The certificates, stock powers, proxy, shares,
securities, cash, other property and instruments of transfer delivered to the
Escrow Agent by the Stockholders pursuant to this Section 1(b), are referred to
in this Agreement as the "Escrowed Property".
-2-
<PAGE> 22
(c) During the period that the certificates representing a
Stockholder's Optioned Shares are held by the Escrow Agent hereunder and unless
and until the Escrow Agent is required to deliver such certificates to the
Purchaser pursuant to the terms of this Agreement, 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 the Stock Option 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.
2. Release of the Escrowed Property. (a) The Escrow Agent
shall hold the Escrowed Property in its possession until delivery in accordance
with the terms of this Section 2.
(b) The Purchaser shall give written notice (the date of such
notice being herein called the "Notice Date") to the Escrow Agent specifying the
number of Optioned Shares the Purchaser will purchase pursuant to the exercise
of the Option and a place, time and date not later than ten business days from
the Notice Date for the closing of such purchase.
(c) At each closing and upon receipt from the Purchaser of a
certified or official bank check payable to the order of each Stockholder in New
York Clearing House funds in an amount at least equal to the product of the Per
Share Price (as defined in the Stock Option Agreement) and the number of
Optioned Shares being purchased at such closing, the Escrow Agent shall deliver
(i) to the Purchaser, the Escrowed Property relating
-3-
<PAGE> 23
to the Optioned Shares to be purchased at such closing and (ii) to each
Stockholder, the certified or official bank check relating to the sale of its
Optioned Shares.
(d) In the event that the Purchaser notifies the Escrow Agent
in writing that the Stock Option Agreement has expired or been terminated or
that this Agreement has been terminated, the Escrow Agent shall promptly deliver
the Escrowed Property to the Stockholders.
3. Settlement of Disputes. Any dispute which may arise under
this Agreement with respect to the delivery, ownership or right of possession of
the Escrowed Property or any portion thereof, the duties of the Escrow Agent
under this Agreement or any other questions arising under this Agreement shall
be settled either by mutual agreement of the parties to such dispute (evidenced
by appropriate instructions in writing to the Escrow Agent signed by all the
parties to such dispute) or by a final judgment, order or decree of a court of
competent jurisdiction in the United States of America (the time for appeal
therefrom having expired and no appeal having been perfected). The Escrow Agent
shall be under no duty to institute or defend any such proceedings and none of
the costs and expenses of any such proceedings shall be borne by the Escrow
Agent. In the event the terms of a settlement of such a dispute increase the
duties or liabilities of the Escrow Agent under this Agreement and the Escrow
Agent has not participated in such settlement so as to be bound thereby, such
settlement shall be effective as to the Escrow Agent in respect of such increase
in its duties or liabilities only upon the Escrow Agent's written assent
thereto. Prior to the settlement of any dispute as provided in this Section 3,
the Escrow Agent is authorized and directed to retain in its possession such
Escrowed Property as is the subject of or involved in the dispute.
-4-
<PAGE> 24
4. Concerning the Escrow Agent. (a) The Escrow Agent shall be
reimbursed by Parent or the Purchaser for all out-of-pocket expenses,
disbursements and advances (including reasonable attorneys' fees and expenses
actually incurred by the Escrow Agent in connection with the use of outside
attorneys) incurred or made by the Escrow Agent in the performance of its duties
hereunder.
(b) The Escrow Agent may resign at any time by giving notice
of such resignation to the Stockholders and the Purchaser specifying a date not
less than 10 business days following the date of such notice when such
resignation shall take effect. Upon such notice, a successor escrow agent shall
be appointed by the Purchaser, such successor escrow agent to become the Escrow
Agent hereunder upon the resignation date specified in such notice. The
Purchaser may at any time appoint a new escrow agent by giving notice thereof to
the Escrow Agent then acting. The Escrow Agent shall continue to serve until its
successor accepts such appointment and receives the Escrowed Property.
(c) The Escrow Agent undertakes to perform only such duties as
are specifically set forth in this Agreement. The Escrow Agent shall not be
liable for any acts or omissions by it of any kind unless caused by its own
misconduct, bad faith or negligence, and shall be entitled to rely upon (i) any
written notice, instrument or signature reasonably believed by it to be genuine
and to have been signed or presented by the proper party or parties duly
authorized to do so and (ii) the advice of counsel (which may be of the Escrow
Agent's own choosing). The Escrow Agent shall have no responsibility for the
contents of any writing submitted to it under this Agreement and shall be
entitled reasonably to rely in good faith upon the contents thereof.
-5-
<PAGE> 25
(d) The Purchaser and each Stockholder agrees to indemnify the
Escrow Agent and to hold it harmless against any and all liabilities incurred by
it under this Agreement as a consequence of their respective actions, except for
liabilities incurred by the Escrow Agent resulting from its own misconduct, bad
faith or negligence.
5. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned by any of the
parties hereto without the prior written consent of the other parties. This
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and permitted assigns.
6. General Provisions. (a) Amendments. This Agreement may not
be amended except by an instrument in writing signed by each of the parties
hereto.
(b) 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 address for a party as shall be specified by like notice):
(i) if to the Purchaser, to it in care of:
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
-6-
<PAGE> 26
(ii) if to the Stockholders, at the addresses set forth opposite
their names on Schedule 1 to the Stock Option Agreement; and
(iii) if to the Escrow Agent, to
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: J. M. Banas
Corporate Trust, 11th Floor
Telephone: (313) 225-3415
Telecopier: (313) 225-3420
(c) Interpretation. 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.
(d) 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 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.
(e) Entire Agreement. This Agreement (including the documents
and instruments referred to herein) 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.
(f) 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 law.
-7-
<PAGE> 27
IN WITNESS WHEREOF, the Purchaser, the Parent, the
Stockholders and the Escrow Agent have signed or caused this Agreement to be
signed by the respective persons thereunto duly authorized, all as of the date
first written above.
MAGNA INTERNATIONAL INC.
by
-------------------------------
Name: William H. Fike
Title: Vice Chairman and Executive Vice
President
by
-------------------------------
Name: J. Brian Colburn
Title: Executive Vice President, Special
Projects and Secretary
MAGNA ACQUISITION CORPORATION
by
-------------------------------
Name: William H. Fike
Title: President
HARRY A. LOMASON, II
-----------------------------------
HARRY A. LOMASON, II CHILDREN'S
TRUST NO. 2
by Harry A. Lomason, II,
as Trustee
-----------------------------------
-8-
<PAGE> 28
HARRY A. LOMASON, II CHILDREN'S
TRUST NO. 3
by Harry A. Lomason, II,
as Trustee
-----------------------------------
HARRY A. LOMASON, II,
as Custodian for Heather Lomason
-----------------------------------
HARRY A. LOMASON, II,
as Custodian for Harry Lomason
-----------------------------------
NBD BANK
by
-------------------------------
Name:
Title:
-9-
<PAGE> 1
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
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
<PAGE> 1
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: WILLIAM H. FIKE
--------------------------------------------------------
Title: Vice-Chairman
-----------------------------------------------------
4
<PAGE> 1
[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 be 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
