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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 3, 1998
Echlin Inc.
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(Exact Name of Registrant as Specified in its Charter)
Connecticut 1-4651 06-0330448
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(State or Other Jurisdiction of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
100 Double Beach Road
Branford, Connecticut 06405 06405
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(Address of Principal Executive Offices) (Zip Code)
(203) 481-5751
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(Registrant's telephone number, including area code)
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(Former Name or Former Address, if Changed Since Last Report
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ITEM 5. Other Events.
On May 3, 1998, Echlin Inc., a Connecticut corporation
("Echlin"), Dana Corporation, a Virginia corporation ("Dana"), and Echo
Acquisition Corp., a Connecticut corporation and a wholly-owned direct
subsidiary of Dana ("Merger Subsidiary"), entered into an Agreement and Plan
of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement and
subject to the terms and conditions set forth therein, Merger Subsidiary will
be merged with and into Echlin, with Echlin to be the surviving corporation of
such merger (the "Merger"), and as a result of the Merger, Echlin will become
a wholly-owned subsidiary of Dana. At the Effective Time (as defined in the
Merger Agreement) of the Merger, each issued and outstanding share of common
stock (a "Common Share"), par value $1.00 per share, of Echlin, including the
associated right issued pursuant to the Rights Agreement dated as of June 21,
1989, as amended, between the Company and The First National Bank of Boston,
will be converted into the right to receive 0.9293 of a share of common stock,
par value $1.00 per share, of Dana.
In connection with the execution of the Merger Agreement,
Echlin entered into a Stock Option Agreement (the "Option Agreement") dated as
of May 3, 1998, with Dana. Pursuant to the Option Agreement, Echlin granted
to Dana an option (the "Option"), exercisable under certain circumstances, to
purchase the number of Common Shares equal to 19.9% of Echlin's issued and
outstanding Common Shares, at an aggregate price of $55.00 per share.
A copy of the Merger Agreement is attached hereto as Exhibit
2.1. The foregoing description is qualified in its entirety by reference to
the full text of such exhibit. A joint press release announcing the entering
into of the Merger Agreement was issued on May 4, 1998. The information
contained in the press release is incorporated herein by reference. The press
release is attached hereto as Exhibit 99.1.
ITEM 7(c). Exhibits.
Exhibit 2.1 Agreement and Plan of Merger dated as of May 3, 1998
among Echlin Inc., Dana Corporation and Echo
Acquisition Corp. (Schedules and Exhibits omitted).
Exhibit 2.2 Stock Option Agreement dated as of May 3, 1998
between Echlin Inc. and Dana Corporation.
Exhibit 99.1 Joint Press Release dated May 4, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ECHLIN INC.
Dated: May 4, 1998 By: /s/ Jon P. Leckerling
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Name: Jon P. Leckerling
Title: Senior Vice President,
General Counsel and Corporate
Secretary
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page No.
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Exhibit 2.1 Agreement and Plan of Merger dated as of 1
May 3, 1998 among Echlin Inc., Dana
Corporation and Echo Acquisition Corp.
(Schedules and Exhibits omitted).
Exhibit 2.2 Stock Option Agreement dated as of May 3, 41
1998 between Echlin Inc. and Dana
Corporation.
Exhibit 99.1 Joint Press Release dated May 4, 1998. 58
Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DANA CORPORATION
ECHO ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF DANA CORPORATION
AND
ECHLIN INC.
MAY 3, 1998
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TABLE OF CONTENTS
Page
ARTICLE I CERTAIN DEFINITIONS.................................. 1
Section 1.1. Certain Definitions.................................. 1
ARTICLE II THE MERGER; EFFECTS OF THE MERGER.................... 6
Section 2.1. The Merger........................................... 6
Section 2.2. Effective Date and Effective Time.................... 7
Section 2.3. Directors............................................ 7
Section 2.4. Officers............................................. 8
Section 2.5. Tax Consequences..................................... 8
Section 2.6. Accounting Treatment................................. 8
ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES............ 8
Section 3.1. Merger Consideration................................. 8
Section 3.2. Rights as Stockholders; Stock Transfers.............. 9
Section 3.3. Fractional Shares.................................... 9
Section 3.4. Exchange Procedures.................................. 9
Section 3.5. Anti-Dilution Provisions............................. 11
Section 3.6. Treasury Shares...................................... 11
Section 3.7. Options.............................................. 11
Section 3.8. Performance Units.................................... 12
ARTICLE IV ACTIONS PENDING MERGER............................... 12
Section 4.1. Ordinary Course...................................... 12
Section 4.2. Capital Stock........................................ 12
Section 4.3. Dividends, Etc....................................... 13
Section 4.4. Compensation; Employment Agreements; Etc............. 13
Section 4.5. Benefit Plans........................................ 13
Section 4.6. Acquisitions and Dispositions........................ 14
Section 4.7. Amendments........................................... 14
Section 4.8. Accounting Methods................................... 14
Section 4.9. Adverse Actions...................................... 14
Section 4.10. Agreements........................................... 14
ARTICLE V REPRESENTATIONS AND WARRANTIES....................... 15
Section 5.1. Disclosure Schedules................................. 15
Section 5.2. Standard............................................. 15
Section 5.3. Representations and Warranties....................... 15
ARTICLE VI COVENANTS............................................ 24
Section 6.1. Best Efforts......................................... 24
Section 6.2. Stockholder Approvals................................ 24
Section 6.3. Registration Statement............................... 26
Section 6.4. Press Releases....................................... 27
Section 6.5. Access; Information.................................. 27
Section 6.6. Acquisition Proposals................................ 28
Section 6.7. Affiliate Agreements................................. 28
Section 6.8. Takeover Laws........................................ 29
Section 6.9. No Rights Triggered.................................. 29
Section 6.10. Shares Listed........................................ 29
Section 6.11. Regulatory Applications.............................. 29
Section 6.12. Indemnification; Directors' and Officers' Insurance.. 30
Section 6.13. Benefits Plans....................................... 31
Section 6.14. Notification of Certain Matters...................... 31
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER............. 32
Section 7.1. Shareholder Vote..................................... 32
Section 7.2. Regulatory Approvals................................. 32
Section 7.3. No Injunction, Etc................................... 32
Section 7.4. Representations, Warranties and Covenants of Dana.... 32
Section 7.5. Representations, Warranties and Covenants of
the Company....................................... 33
Section 7.6. Effective Registration Statement..................... 33
Section 7.7. Tax Opinion.......................................... 33
Section 7.8. Exchange Listing..................................... 34
Section 7.9. Company Rights Agreement............................. 34
Section 7.10. Accounting Treatment................................. 34
ARTICLE VIII TERMINATION.......................................... 34
Section 8.1. Termination.......................................... 34
Section 8.2. Effect of Termination and Abandonment................ 36
Section 8.3. Break-up Expenses.................................... 36
ARTICLE IX MISCELLANEOUS........................................ 37
Section 9.1. Survival............................................. 37
Section 9.2. Waiver; Amendment.................................... 37
Section 9.3. Counterparts......................................... 38
Section 9.4. Governing Law........................................ 38
Section 9.5. Expenses............................................. 38
Section 9.6. Confidentiality...................................... 38
Section 9.7. Notices.............................................. 39
Section 9.8. Understanding; No Third Party Beneficiaries.......... 39
Section 9.9. Interpretation; Absence of Presumption............... 40
Section 9.10. Headings............................................. 40
Section 9.11. Severability......................................... 40
Section 9.12. Specific Performance................................. 40
Section 9.13. Successors and Assigns............................... 41
EXHIBIT A Form of Stock Option Agreement With Respect to Option
Issued by Echlin Inc.
EXHIBIT B Form of Affiliate Letter Addressed to Echlin Inc.
EXHIBIT C Form of Affiliate Letter Addressed to Dana Corporation
AGREEMENT AND PLAN OF MERGER, dated as of May 3, 1998 (this
"Agreement"), by and among Dana Corporation, a Virginia corporation ("Dana"),
Echo Acquisition Corp., a Connecticut corporation and a wholly owned subsidiary
of Dana ("Merger Sub"), and Echlin Inc., a Connecticut corporation (the
"Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Dana, Merger Sub and the Company
deem it advisable and in the best interests of their respective companies and
their stockholders that Merger Sub merge with and into the Company (the
"Merger"), subject to the terms and conditions set forth herein, so that the
Company is the surviving corporation in the Merger and becomes a wholly owned
subsidiary of Dana;
WHEREAS, the Board of Directors of the Company has further
determined that the Merger is consistent with the long-term business strategy of
the Company and in the best interests of the employees, customers, creditors,
suppliers and communities of the Company;
WHEREAS, in connection with the execution of this Agreement, Dana
and the Company will enter into a stock option agreement, with the Company as
issuer and Dana as grantee (the "Stock Option Agreement") in the form attached
hereto as Exhibit A; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. Certain Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Affiliate" shall have the meaning set forth in Section 6.7(a).
"Agreement" shall have the meaning set forth in the recitals to
this Agreement.
"CBCA" shall mean the Connecticut Business Corporation Act.
"Certificate of Merger" shall have the meaning set forth in
Section 2.1(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the recitals to this
Agreement.
"Company Common Stock" shall have the meaning set forth in Section
3.1(a).
"Company Meeting" shall have the meaning set forth in Section 6.2.
"Company Preferred Stock" shall have the meaning set forth in
Section 5.3(b).
"Company Right" shall have the meaning set forth in Section 3.1(a).
"Company Rights Agreement" shall have the meaning set forth in
Section 3.1(a).
"Company Stock" shall mean Company Common Stock and Company
Preferred Stock.
"Company Stock Option" shall have the meaning set forth in Section
3.7.
"Company Stock Option Plans" shall have the meaning set forth in
Section 3.7.
"Compensation and Benefit Plans" shall have the meaning set forth
in Section 5.3(l).
"Competing Transaction" shall mean (i) a merger or consolidation, or
any similar transaction, involving the Company or any Significant Subsidiary of
the Company, (ii) a purchase, lease or other acquisition or assumption of all or
a substantial portion of the assets of the Company or any Significant Subsidiary
of the Company, (iii) a purchase or other acquisition (including by way of
merger, consolidation, tender offer, exchange offer, share exchange or
otherwise) of securities representing 20% or more of the voting power of the
Company or any Significant Subsidiary of the Company, or (iv) any substantially
similar transaction; provided, however, that in no event shall any merger,
consolidation, purchase or similar transaction involving only the Company and
one or more of its wholly owned Subsidiaries or involving only any two or more
of such wholly owned Subsidiaries, be deemed to be a Competing Transaction.
"Confidentiality Agreement" shall mean the Confidentiality and
Standstill Agreement, dated April 23, 1998, between the Company and Dana.
"Dana" shall have the meaning set forth in the recitals to this
Agreement.
"Dana Common Stock" shall have the meaning set forth in Section
3.1(a).
"Dana Meeting" shall have the meaning set forth in Section 6.2.
"Dana Preferred Stock" shall have the meaning set forth in Section
5.3(b).
"Dana Rights Agreement" shall have the meaning set forth in
Section 3.1(a).
"Disclosure Schedule" shall have the meaning set forth in Section
5.1.
"Effective Date" shall have the meaning set forth in Section 2.2.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Environmental Laws" shall have the meaning set forth in Section
5.3(p).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall have the meaning set forth in Section
5.3(m)(v).
"Excess Shares" shall have the meaning set forth in Section 3.3.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"Exchange Agent" shall have the meaning set forth in Section
3.4(a).
"Exchange Fund" shall have the meaning set forth in Section 3.4(a).
"Exchange Ratio" shall have the meaning set forth in Section
3.1(a).
"Expense Fee" shall have the meaning set forth in Section 8.3(b).
"Fractional Shares Fund" shall have the meaning set forth in
Section 3.3.
"Governmental Entity" shall mean any court, administrative agency,
commission or other governmental authority or instrumentality, whether local,
state, federal or foreign.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"International Stock Exchanges" shall mean stock exchanges located
outside of the U.S. on which Dana Common Stock is listed as of the Effective
Time.
"Joint Proxy Statement" shall have the meaning set forth in
Section 6.3.
"Liens" shall mean any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" shall mean with respect to the Company or
Dana, respectively, any effect that (i) is material and adverse to the financial
position, results of operations or business of the Company and its Subsidiaries
taken as a whole, or Dana and its Subsidiaries taken as a whole, respectively,
or (ii) would materially impair the ability of the Company or Dana,
respectively, to perform its obligations under this Agreement or otherwise
materially threaten or materially impede the consummation of the Merger and the
other transactions contemplated by this Agreement; provided, however, that
Material Adverse Effect shall be deemed not to include the impact of (a) changes
in laws of general applicability or interpretations thereof by Governmental
Entities, (b) changes in generally accepted accounting principles, (c) actions
or omissions of the Company or Dana taken with the prior written consent of the
Company or Dana, as applicable, in connection with the transactions contemplated
hereby, (d) circumstances affecting the automotive or automotive parts
industries generally, and (e) the effects of the Merger and compliance by either
party with the provisions of this Agreement on the business, financial condition
or results of operations of such party and its Subsidiaries, or the other party
and its Subsidiaries, as the case may be.
"Meeting" shall have the meaning set forth in Section 6.2.
"Merger" shall have the meaning set forth in the recitals to this
Agreement.
"Merger Consideration" shall have the meaning set forth in Section
2.1.
"Merger Sub" shall have the meaning set forth in the Recitals to
this Agreement.
"Multiemployer Plans" shall have the meaning set forth in Section
5.3(m)(iv).
"New Certificates" shall have the meaning set forth in Section
3.4(a).
"NYSE" shall mean The New York Stock Exchange, Inc.
"Old Certificates" shall have the meaning set forth in Section
3.4(a).
"Pension Plan" shall have the meaning set forth in Section
5.3(m)(iv).
"Person" or "person" shall mean any individual, corporation,
partnership, association, joint-stock company, business trust, limited liability
entity, or unincorporated organization.
"Plans" shall have the meaning set forth in Section 5.3(m)(iv).
"Previously Disclosed" by a party shall mean information set forth
in its Disclosure Schedule or in its SEC Documents filed prior to the date
hereof.
"PSE" shall mean the Pacific Exchange.
"Registration Statement" shall have the meaning set forth in
Section 6.3.
"Rights" shall mean, with respect to any person, securities or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire, or any options, calls or commitments relating to,
shares of capital stock of such person.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Documents" shall have the meaning set forth in Section 5.3(h).
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"Stock Option Agreement" shall have the meaning set forth in the
recitals.
"Subsidiary" and "Significant Subsidiary" shall have the meanings
ascribed to them in Rule 1-02 of Regulation S-X of the SEC.
"Superior Proposal" shall mean a bona fide written proposal from a
third party for a Competing Transaction, which the Company's financial advisor
determines is reasonably capable of being financed, on terms which the Board of
Directors of the Company reasonably determines to be more favorable than the
Merger, in accordance with and having regard to the interests of the Company's
stockholders and the other interests required to be considered by the Board of
Directors under Section 33-756(d) of the CBCA. A proposal shall not constitute a
Superior Proposal unless, in the written opinion (with only customary
qualifications) of the Company's independent financial advisors, the value of
the consideration provided for in such proposal is more favorable to the
stockholders of the Company from a financial point of view to that offered in
the Merger. References in this definition to the "Merger" shall refer, as
applicable, to any proposed alteration of the terms of this Agreement by Dana
pursuant to Sections 6.2(c).
"Surviving Corporation" shall have the meaning set forth in
Section 2.1(a).
"Takeover Laws" shall have the meaning set forth in Section 5.3(o).
"Tax Returns" shall have the meaning set forth in Section 5.3(q).
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, goods and services, capital, transfer, franchise, profits, license,
withholding, payroll, employment, employer health, excise, estimated, severance,
stamp, occupation, property or other taxes, custom duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority.
"Termination Fee" shall have the meaning set forth in Section
8.3(a).
"Treasury Shares" shall have the meaning set forth in Section
3.1(a).
"Triggering Event" shall have the meaning set forth in Section
8.3(a).
ARTICLE II
THE MERGER; EFFECTS OF THE MERGER
2.1. The Merger. (a) The Surviving Corporation. Upon the terms and
subject to the conditions set forth herein, and in accordance with the CBCA, at
the Effective Time, Merger Sub shall merge with and into the Company, the
separate corporate existence of Merger Sub shall cease and the Company shall
survive and continue to exist as a Connecticut corporation (the Company, as the
surviving corporation in the Merger, sometimes being referred to herein as the
"Surviving Corporation"). Dana may at any time in its sole discretion change the
method of effecting the combination with the Company (including the provisions
of this Article II) if and to the extent it deems such change to be desirable,
including to provide for a merger of the Company into Dana or any other
Subsidiary of Dana; provided, however, that no such change shall (i) alter or
change the amount or kind of consideration to be issued to holders of Company
Stock as provided for in this Agreement (the "Merger Consideration"), (ii)
adversely affect the tax treatment of the Company or the Company's stockholders
as a result of receiving the Merger Consideration, (iii) materially impede or
delay consummation of the transactions contemplated by this Agreement, or (iv)
otherwise adversely affect the Company or its stockholders.
(b) Closing. The closing of the Merger will take place at 10:00
a.m. on the Effective Date, at the offices of Wachtell, Lipton, Rosen & Katz, 51
West 52nd Street, New York, New York 10019, unless another time, date or place
is agreed to in writing by the parties hereto.
(c) Effectiveness and Effects of the Merger. Subject to the
satisfaction or waiver of the conditions set forth in Article VII in accordance
with this Agreement, the Merger shall become effective upon the occurrence of
the filing in the office of the Secretary of State of Connecticut of a
certificate of merger (the "Certificate of Merger"), or such later date and time
as may be set forth in the Certificate of Merger, in accordance with Section
33-819 of the CBCA. The Merger shall have the effects prescribed in Section
33-820 of the CBCA.
(d) Certificate of Incorporation and By-Laws. The certificate of
incorporation and by-laws of the Surviving Corporation shall be those of Merger
Sub, as in effect immediately prior to the Effective Time, except that the name
of the Surviving Corporation shall be Echlin Inc.
2.2. Effective Date and Effective Time. Subject to the
satisfaction or waiver of each of the conditions set forth in Article VII in
accordance with this Agreement, the parties shall cause the effective date of
the Merger (the "Effective Date") to occur on (1) the third business day to
occur after the last of the conditions set forth in Sections 7.1, 7.2 and 7.9
shall have been satisfied or waived in accordance with the terms of this
Agreement, or (2) such other date to which the parties may agree in writing. The
time on the Effective Date when the Merger shall become effective is referred to
as the "Effective Time."
2.3. Directors. The directors of Merger Sub immediately prior to
the Effective Time and the four directors of the Company set forth on Section
2.3 of the Company Disclosure Schedule shall be the directors of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation and by-laws of the Surviving Corporation, or as
otherwise provided by the CBCA.
2.4. Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and by-laws of the Surviving Corporation, or as
otherwise provided by the CBCA.
2.5. Tax Consequences. It is intended that the Merger shall
qualify as a reorganization under Section 368(a) of the Code, and that the
Agreement shall constitute a "plan of reorganization" for purposes of Section
354 of the Code.
2.6. Accounting Treatment. It is intended that the Merger
be accounted for as a "pooling of interests" under generally accepted
accounting principles.
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
3.1. Merger Consideration. Subject to the provisions of this
Agreement (including Section 8.1(f)), at the Effective Time, automatically by
virtue of the Merger and without any action on the part of any party or
stockholder:
(a) Outstanding Company Common Stock. Each share (excluding (i)
shares held by the Company or any of its Subsidiaries or by Dana, Merger Sub or
any of their Subsidiaries ("Treasury Shares")) of the common stock, par value
$1.00 per share, of the Company, including each attached right (a "Company
Right") issued pursuant to the Rights Agreement, dated June 21, 1989, as amended
prior to the date hereof or pursuant to Section 4.7 (the "Company Rights
Agreement"), between the Company and the Rights Agent named therein (the
"Company Common Stock"), issued and outstanding immediately prior to the
Effective Time shall by virtue of the Merger and without any action on the part
of the holder thereof become and be converted into the right to receive 0.9293
of a share (subject to adjustment as set forth herein, the "Exchange Ratio") of
common stock, par value $1.00 per share of Dana (the "Dana Common Stock"),
including attached rights, issued pursuant to the Rights Agreement, dated as of
April 25, 1996, between Dana and the Rights Agent named therein (the "Dana
Rights Agreement").
3.2. Rights as Stockholders; Stock Transfers. At the Effective
Time, holders of Company Stock shall cease to be, and shall have no rights as,
stockholders of the Company, other than to receive any dividend or other
distribution with respect to such Company Stock with a record date occurring
prior to the Effective Time and the consideration provided under this Article
III. After the Effective Time, there shall be no transfers on the stock transfer
books of the Company of shares of Company Stock.
3.3. Fractional Shares. Notwithstanding any other provision
hereof, no fractional shares of Dana Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger
In lieu of any such fractional share, each holder of an Old Certificate who
would otherwise have been entitled to a fraction of a share of Dana Common Stock
upon surrender of an Old Certificates for exchange pursuant to Section 3.4 shall
be paid, upon such surrender, cash (without interest) in an amount equal to such
holder's proportionate interest in the net proceeds from the sale or sales in
the open market by the Exchange Agent, on behalf of all such holders, of the
aggregate fractional Dana Common Stock that would otherwise have been issued
pursuant hereto. From time to time following the Effective Time, the Exchange
Agent shall determine the excess of (i) the number of full shares of Dana Common
Stock to be delivered by the Exchange Agent to holders of Old Certificates that
have been delivered to the Exchange Agent over (ii) the sum of the number of
full shares of Dana Common Stock to be distributed to such holders of Old
Certificates (such excess being herein called the "Excess Shares"), and the
Exchange Agent, as agent for the former holders of Old Certificates, shall sell
the Excess Shares at the prevailing prices on the NYSE. Such sales of Excess
Shares by the Exchange Agent shall be executed on the NYSE through one or more
member firms of the NYSE and shall be executed in round lots to the extent
practicable. Dana shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Shares. Until
the net proceeds of such sale have been distributed to the holders of Old
Certificates, the Exchange Agent will hold such proceeds in trust for such
former holders of Old Certificates (the "Fractional Shares Fund"). As soon as
practicable after any determination of the amount of cash to be paid to holders
of Old Certificates in lieu of any fractional interests, the Exchange Agent
shall make available in accordance with this Agreement such amounts to such
holders of Old Certificates. The parties acknowledge that payment of cash in
lieu of issuing fractional shares was not separately bargained for consideration
but merely represents a mechanical rounding off for purposes of simplifying the
corporate and accounting problems that would otherwise be caused by the issuance
of fractional shares.
3.4. Exchange Procedures. (a) At or prior to the Effective Time,
Dana shall deposit, or shall cause to be deposited, with an exchange agent (the
"Exchange Agent"), for the benefit of the holders of certificates representing
the shares of Company Common Stock ("Old Certificates"), for exchange in
accordance with this Article III, certificates representing the shares of Dana
Stock ("New Certificates") and an estimated amount of cash to be paid in lieu of
fractional shares (such cash and New Certificates, together with any dividends
or distributions with respect thereto (without any interest thereon), being
hereinafter referred to as the "Exchange Fund") to be paid pursuant to this
Article III in exchange for outstanding shares of Company Stock.
(b) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Dana, on a daily basis. Any interest and other
income resulting from such investments shall be paid to Dana.
(c) As promptly as practicable after the Effective Date, Dana shall
send or cause to be sent to each former holder of record of shares (other than
Treasury Shares) of Company Stock immediately prior to the Effective Time
transmittal materials for use in exchanging such stockholder's Old Certificates
for the consideration set forth in this Article III. Dana shall cause the New
Certificates into which shares of a stockholder's Company Stock are converted on
the Effective Date and/or any check in respect of any fractional share interests
or dividends or distributions which such person shall be entitled to receive to
be delivered to such stockholder upon delivery to the Exchange Agent of Old
Certificates representing such shares of Company Stock (or indemnity reasonably
satisfactory to Dana and the Exchange Agent, if any of such certificates are
lost, stolen or destroyed) owned by such stockholder. No interest will be paid
on any such cash to be paid pursuant to this Article III upon such delivery.
(d) Notwithstanding the foregoing, neither the Exchange Agent nor
any party hereto shall be liable to any former holder of Company Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(e) No dividends or other distributions with respect to Dana Stock
with a record date occurring after the Effective Time shall be paid to the
holder of any unsurrendered Old Certificate representing shares of Company Stock
converted in the Merger into shares of Dana Common Stock until the holder
thereof shall surrender such Old Certificate in accordance with this Article
III. After the surrender of an Old Certificate in accordance with this Article
III, the record holder thereof shall be entitled to receive any such dividends
or other distributions, without any interest thereon, which theretofore had
become payable with respect to shares of Dana Common Stock represented by such
Old Certificate.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of the Company for twelve months after the Effective Time shall be
paid to Dana. Any stockholders of the Company who have not theretofore complied
with this Article III shall thereafter look only to Dana for payment of the
shares of Dana Common Stock, cash in lieu of any fractional shares and unpaid
dividends and distributions on the Dana Common Stock deliverable in respect of
each share of Company Stock such stockholder holds as determined pursuant to
this Agreement, in each case, without any interest thereon.
3.5. Anti-Dilution Provisions. In the event Dana changes (or
establishes a record date for changing) the number of, or provides for the
exchange of, shares of Dana Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend, recapitalization,
reclassification, reorganization or similar transaction with respect to the
outstanding Dana Common Stock and the record date therefor shall be prior to the
Effective Date, the Exchange Ratio shall be proportionately adjusted.
3.6. Treasury Shares. Each of the shares of Company Stock
constituting Treasury Shares immediately prior to the Effective Time shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
3.7. Options. (a) At the Effective Time, all employee and director
stock options to purchase shares of Company Common Stock (each, a "Company Stock
Option"), which are then outstanding and unexercised, shall cease to represent a
right to acquire shares of Company Common Stock and shall be converted
automatically into options to purchase shares of Dana Common Stock, and Dana
shall assume each such Company Stock Option subject to the terms of any of the
stock option plans listed under "Stock Option Plans" in Section 5.3(m)(i) of the
Company's Disclosure Schedule (collectively, the "Company Stock Option Plans"),
and the agreements evidencing grants thereunder; provided, however, that from
and after the Effective Time, (i) the number of shares of Dana Common Stock
purchasable upon exercise of such Company Stock Option shall be equal to the
number of shares of Company Common Stock that were purchasable under such
Company Stock Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, and rounding to the nearest whole share, and (ii) the per share
exercise price under each such Company Stock Option shall be adjusted by
dividing the per share exercise price of each such Company Stock Option by the
Exchange Ratio, and rounding down to the nearest cent. Notwithstanding the
foregoing, the number of shares and the per share exercise price of each Company
Stock Option which is intended to be an "incentive stock option" (as defined in
Section 422 of the Code) shall be adjusted in accordance with the requirements
of Section 424 of the Code. Accordingly, with respect to any incentive stock
options, fractional shares shall be rounded down to the nearest whole number of
shares and where necessary the per share exercise price shall be rounded up to
the nearest cent.
(b) Prior to the Effective Time, Dana shall reserve for issuance
the number of shares of Dana Common Stock necessary to satisfy Dana's
obligations under Section 3.7(a). Promptly after the Effective Time, Dana shall
file with the SEC a registration statement on an appropriate form or a
post-effective amendment to a previously filed registration statement under the
Securities Act with respect to the shares of Dana Common Stock subject to
options to acquire Dana Common Stock issued pursuant to Section 3.7(a), and
shall use its best efforts to maintain the current status of the prospectus
contained therein, as well as comply with any applicable state securities or
"blue sky" laws, for so long as such options remain outstanding.
3.8. Performance Units. As soon as practicable following the
Effective Time, each performance unit under the Company's Performance Unit Plan
shall be equitably adjusted by Dana.
ARTICLE IV
ACTIONS PENDING MERGER
From the date hereof until the Effective Time, except as expressly
contemplated by this Agreement, (i) without the prior written consent of Dana
(which consent shall not be unreasonably withheld or delayed) the Company will
not, and will cause each of its Subsidiaries not to, and (ii) without the prior
written consent of the Company (which consent shall not be unreasonably withheld
or delayed) Dana will not, and will cause each of its Subsidiaries not to:
4.1. Ordinary Course. Conduct the business of it and its
Subsidiaries other than in the ordinary course or fail to use reasonable efforts
to preserve intact their business organizations and assets and maintain their
rights, franchises and existing relations with customers, suppliers, employees
and business associates, or take any action that would (i) adversely affect the
ability of any party to obtain any necessary approvals of any Governmental
Entities required for the transactions contemplated hereby, or (ii) adversely
affect its ability to perform any of its material obligations under this
Agreement.
4.2. Capital Stock. Other than (i) pursuant to Rights or other
stock options or stock-based awards Previously Disclosed in its Disclosure
Schedule, (ii) pursuant to the Stock Option Agreement, (iii) pursuant to the
Company Rights Agreement or the Dana Rights Agreement (as the case may be), or
(iv) in the case of the Company, as otherwise set forth on Section 6.13 of the
Company Disclosure Schedule, (x) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of capital
stock, any stock appreciation rights, any Rights, or any other equity-linked
securities, (y) enter into any agreement with respect to the foregoing, or (z)
permit any additional shares of capital stock to become subject to new grants of
employee stock options, stock appreciation rights, or similar stock-based
employee rights.
4.3. Dividends, Etc. (1) Make, declare or pay any dividend (other
than (i) in the case of the Company, (A) regular quarterly cash dividends on
Company Common Stock in an amount not to exceed the rate most recently paid
regular quarterly cash dividend on such Company Common Stock as of the date
hereof, and (B) dividends from Subsidiaries to the Company or a wholly owned
Subsidiary of the Company, as applicable, and (ii) in the case of Dana, (A)
regular quarterly cash dividends on Dana Common Stock at a quarterly rate of
$0.29 as may be adjusted in the ordinary course consistent with past practice,
and (B) dividends from Subsidiaries to Dana or a wholly owned Subsidiary of
Dana, as applicable) on or in respect of, or declare or make any distribution on
any shares of its capital stock, or (2) other than (A) as Previously Disclosed
in its Disclosure Schedule, or (B) in the ordinary course pursuant to employee
benefit plans, directly or indirectly combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock. After the date of this
Agreement, each of Dana and the Company shall coordinate with the other the
declaration of any dividends in respect of Dana Common Stock and Company Common
Stock and the record dates and payment dates relating thereto, it being the
intention of the parties hereto that holders of Dana Common Stock or Company
Common Stock shall not receive two dividends, or fail to receive one dividend,
for any single calendar quarter with respect to their shares of Dana Common
Stock and/or Company Common Stock and any shares of Dana Common Stock any such
holder receives in exchange therefor in the Merger.
4.4. Compensation; Employment Agreements; Etc. In the case of the
Company and its Subsidiaries, except as set forth on Section 6.13 of the Company
Disclosure Schedule, enter into or amend any written employment, severance or
similar agreements or arrangements with any of its directors, officers or
employees, or grant any salary or wage increase or increase any employee benefit
(including incentive or bonus payments), except for (i) normal increases in
compensation to employees in the ordinary course of business consistent with
past practice, or (ii) other changes as are provided for herein or as may be
required by law or to satisfy contractual obligations existing as of the date
hereof or additional grants of awards to newly hired employees consistent with
past practice.
4.5. Benefit Plans. In the case of the Company and its
Subsidiaries, except as set forth on Section 6.13 of the Company Disclosure
Schedule, enter into or amend (except as may be required by applicable law, to
satisfy contractual obligations existing as of the date hereof) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees, including taking any action that accelerates the vesting or exercise
of any benefits payable thereunder or the funding of the Company's Rabbi Trust.
4.6. Acquisitions and Dispositions. In the case of the Company,
except as Previously Disclosed in its Disclosure Schedule, dispose of or
discontinue any portion of its assets, business or properties, which is material
to it and its Subsidiaries taken as a whole, or acquire (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past practice) all or any
portion of, the business or property of any other entity which is material to it
and its Subsidiaries taken as a whole. In the case of Dana, not, and not cause
its Subsidiaries to, make any acquisition or take any other action which would
materially adversely affect its ability to consummate the transactions
contemplated by this Agreement.
4.7. Amendments. Amend its Certificate of Incorporation or By-laws
or amend or waive any rights under the Company Rights Agreement, in a manner
that would materially and adversely affect either party's ability to consummate
the Merger or the economic benefits of the Merger to either party; provided
however that Dana shall not be prevented from amending its Restated Articles of
Incorporation to increase the number of authorized shares of capital stock.
4.8. Accounting Methods. Implement or adopt any change in its
accounting principles, practices or methods, other than as may be required by
generally accepted accounting principles or Regulation S-X promulgated under the
Exchange Act.
4.9. Adverse Actions. (1) Take any action that would, or would be
reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or for "pooling
of interests" accounting treatment under generally accepted accounting
principles, or (2) knowingly take any action that is intended or is reasonably
likely to result in (x) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, (y) any of the conditions to the Merger set forth
in Article VII not being satisfied, or (z) a material violation of any provision
of this Agreement except, in each case, as may be required by applicable law.
4.10. Agreements. Agree or commit to do anything
prohibited by Sections 4.1 through 4.9.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Disclosure Schedules. On or prior to the date hereof, Dana
has delivered to the Company and the Company has delivered to Dana a schedule
(respectively, its "Disclosure Schedule") setting forth, among other things,
items the disclosure of which is necessary or appropriate in relation to any or
all of its representations and warranties; provided, that (i) no such item is
required to be set forth in a Disclosure Schedule as an exception to a
representation or warranty if its absence is not reasonably likely to result in
the related representation or warranty being deemed untrue or incorrect under
the standard established by Section 5.2, and (ii) the mere inclusion of an item
in a Disclosure Schedule shall not be deemed an admission by a party that such
item represents a material exception or fact, event or circumstance or that such
item is reasonably likely to result in a Material Adverse Effect.
5.2. Standard. No representation or warranty of Dana or the
Company contained in Section 5.3 shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, circumstance or event unless such
fact, circumstance or event, individually or taken together with the existence
of all other facts, circumstances or events inconsistent with any paragraph of
Section 5.3, has had or is reasonably expected to have a Material Adverse
Effect.
5.3. Representations and Warranties. Subject to Sections 5.1 and
5.2 and except as Previously Disclosed, the Company hereby represents and
warrants to Dana, and Dana hereby represents and warrants to the Company, to the
extent applicable, in each case with respect to itself and its Subsidiaries, as
follows:
(a) Organization, Standing and Authority. Such party is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its organization. Such party is duly qualified to do
business and is in good standing in the states of the United States and foreign
jurisdictions where its ownership or leasing of property or the conduct of its
business requires it to be so qualified. It has in effect all federal, state,
local, and foreign governmental authorizations necessary for it to own or lease
its properties and assets and to carry on its business as it is now conducted.
(b) Shares. (i) As of the date hereof, the authorized capital stock
of the Company consists solely of 150,000,000 shares of Company Common Stock, of
which, as of March 31, 1998, 63,594,700 shares were outstanding, and 1,000,000
shares of company preferred stock ("Company Preferred Stock"), of which, as of
March 31, 1998, no shares were outstanding. As of the date hereof, the
authorized capital stock of Dana consists solely of 240,000,000 shares of Dana
Common Stock, of which, as of April 30, 1998, 105,758,992 shares were
outstanding, and 5,000,000 shares of preferred stock (the "Dana Preferred
Stock"), of which, as of the date hereof, no shares were outstanding. As of the
date hereof, 270,264 shares of Company Common Stock and no shares of Dana Common
Stock were held in treasury. The outstanding shares of such party's capital
stock are validly issued and outstanding, fully paid and nonassessable, and
subject to no preemptive rights (and were not issued in violation of any
preemptive rights). In the case of Dana, as of the date hereof, there are no
shares of Dana's capital stock authorized and reserved for issuance except
pursuant to plans or commitments Previously Disclosed, Dana does not have any
Rights issued or outstanding with respect to its capital stock, and Dana does
not have any commitment to authorize, issue or sell any such shares or Rights,
except in each case pursuant to this Agreement, the Stock Option Agreement, and
the Dana Rights Agreement, as the case may be. In the case of the Company, there
are no shares of such party's capital stock authorized and reserved for issuance
except pursuant to plans or commitments Previously Disclosed, the Company does
not have any Rights issued or outstanding with respect to its capital stock, and
the Company does not have any commitment to authorize, issue or sell any such
shares or Rights, except in each case pursuant to this Agreement, the Stock
Option Agreement, and the Company Rights Agreement, as the case may be. The
authorized capital stock of Merger Sub consists of 1,000 shares of common stock,
par value $.01 per share, all of which are validly issued, fully paid and
nonassessable, and are owned by Dana free and clear of any Lien.
(ii) The number of shares of Company Common Stock which are
issuable and reserved for issuance upon exercise of Company Stock Options as of
the date hereof are Previously Disclosed, and the number of shares of Dana
Common Stock which are issuable and reserved for issuance upon exercise of any
employee or director stock options to purchase shares of Dana Common Stock as of
the date hereof are Previously Disclosed.
(c) Subsidiaries. (i) (A) Such party has Previously Disclosed a
list of all of its Subsidiaries together with the jurisdiction of organization
of each such Subsidiary, (B) it owns, directly or indirectly all of the issued
and outstanding shares of each of its Significant Subsidiaries, (C) no equity
securities of any of its Significant Subsidiaries are or may become required to
be issued (other than to it or a Subsidiary of it) by reason of any Rights, (D)
there are no contracts, commitments, understandings or arrangements by which any
of such Significant Subsidiaries is or may be bound to sell or otherwise
transfer any shares of the capital stock of any such Significant Subsidiaries
(other than to it or a Subsidiary of it), (E) there are no contracts,
commitments, understandings, or arrangements relating to its rights to vote or
to dispose of such shares (other than to it or a Subsidiary of it), and (F) all
of the shares of capital stock of each such Significant Subsidiary held by it or
its Subsidiaries are fully paid and nonassessable and are owned by it or its
Subsidiaries free and clear of any Liens.
(ii) In the case of the representations and warranties of the
Company, the Company does not own (other than the equity securities of its
Subsidiaries) beneficially, directly or indirectly, any shares of any equity
securities or similar interests of any person, or any interest in a partnership
or joint venture of any kind.
(iii) Each of such party's Significant Subsidiaries and Merger
Sub, in the case of Dana, has been duly organized and is validly existing in
good standing under the laws of the jurisdiction of its organization, and is
duly qualified to do business and in good standing in the jurisdictions where
its ownership or leasing of property or the conduct of its business requires it
to be so qualified. Each of such Significant Subsidiaries and Merger Sub has in
effect all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now conducted.
(d) Corporate Power. Such party and each of its Significant
Subsidiaries and Merger Sub, in the case of Dana, has the corporate power and
authority to carry on its business as it is now being conducted and to own all
its properties and assets; and it has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the Stock
Option Agreement and to consummate the transactions contemplated hereby and
thereby.
(e) Corporate Authority. Subject in the case of this Agreement only
to approval (i) by the holders of two-thirds of the shares of Company Common
Stock entitled to vote thereon, and (ii) by the holders of a majority of the
shares of Dana Common Stock casting votes at the Dana Meeting, provided that a
majority of the shares of Dana Common Stock entitled to vote thereon vote, in
person or by proxy at the Dana Meeting, each of this Agreement and the Stock
Option Agreement and the transactions contemplated hereby and thereby (including
the election of the directors of Merger Sub as directors of the Surviving
Corporation pursuant to Section 2.3) have been authorized by all necessary
corporate action of each of the Company, Dana and Merger Sub, including by their
respective Boards of Directors, as the case may be, and each of this Agreement
and the Stock Option Agreement is a legal, valid and binding agreement of each
of the Company, Dana and Merger Sub, as the case may be, enforceable in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles).
(f) Board Recommendation. In the case of the Dana, the Board of
Directors of Dana, at a meeting duly called and held, has by unanimous vote of
those directors present (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, taken together, are fair to and in
the best interests of Dana and the stockholders of Dana, and (ii) resolved to
recommend that the stockholders of Dana approve and authorize the issuance of
shares of Dana Common Stock in the Merger. In the case of the Company, the Board
of Directors of the Company, at a meeting duly called and held, has by unanimous
vote of those directors present (i) determined that this Agreement, the Stock
Option Agreement and the transactions contemplated hereby and thereby, including
the Merger, taken together, are fair to and in the best interests of the
stockholders of the Company, and (ii) resolved to recommend that the holders of
the shares of Company Common Stock approve this Agreement and the transactions
contemplated herein, including the Merger.
(g) No Defaults. Subject to receipt of the regulatory approvals,
and expiration of the waiting periods, referred to in Section 7.2, the required
filings under federal and state securities laws and the approvals contemplated
by Sections 7 and 9 of the Stock Option Agreement (in the case of the
representations and warranties of the Company), the execution, delivery and
performance of this Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby by it do not
and will not (i) constitute a breach or violation of, or a default under, any
law, rule or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of it or of any of its
Significant Subsidiaries or Merger Sub, in the case of Dana, or to which it or
any of its Significant Subsidiaries or Merger Sub, in the case of Dana, or
properties is subject or bound, (ii) constitute a breach or violation of, or a
default under, its articles or certificate of incorporation or by-laws, or (iii)
require any consent or approval under any such law, rule, regulation, judgment,
decree, order, governmental permit or license, agreement, indenture or
instrument.
(h) Financial Reports and SEC Documents. Its Annual Report on Form
10-K for the fiscal year ended December 31, 1997, in the case of Dana, and
August 31, 1997, in the case of the Company, and all other reports, registration
statements, definitive proxy statements or information statements filed or to be
filed by it or any of its Subsidiaries subsequent to December 31, 1995, in the
case of Dana, and August 31, 1995, in the case of the Company, under the
Securities Act, or under Sections 13(a), 13(c), 14 and 15(d) of the Exchange
Act, in the form filed, or to be filed (collectively, its "SEC Documents"), with
the SEC (i) complied or will comply in all material respects as to form with the
applicable requirements under the Securities Act or the Exchange Act, as the
case may be, and (ii) as of its filing date did not or will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading; and each of the
balance sheets contained in or incorporated by reference into any such SEC
Document (including the related notes and schedules thereto) fairly presents or
will fairly present the financial position of the entity or entities to which it
relates as of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such SEC
Documents (including any related notes and schedules thereto) fairly presents or
will fairly present the results of operations, changes in stockholders' equity
and changes in cash flows, as the case may be, of the entity or entities to
which it relates for the periods to which it relates, in each case in accordance
with generally accepted accounting principles consistently applied during the
periods involved, except in each case as may be noted therein, subject to normal
year-end audit adjustments in the case of unaudited statements.
(i) Litigation; Regulatory Action. (i) There are no civil, criminal
or administrative actions, suits, claims, hearings or proceedings pending or, to
the best of its knowledge, threatened, or investigation pending, against it or
any of its Subsidiaries.
(ii) Neither it nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with any Governmental Entity.
(iii) Neither it nor any of its Subsidiaries has been advised by
any Governmental Entity that such Governmental Entity is contemplating issuing
or requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum of understanding or similar
arrangement.
(j) Compliance with Laws. It and each of its Subsidiaries:
(i) in the conduct of its business, is in compliance with all
applicable federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders or decrees applicable thereto or to the
employees conducting such businesses;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and have made all filings, applications and registrations with,
all Governmental Entities that are required in order to permit them to conduct
their businesses substantially as presently conducted; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect and, to the best of its knowledge, no suspension or cancellation of any
of them is threatened; and
(iii) has received, since December 31, 1995, in the case of Dana,
and August 31, 1995 in the case of the Company, no notification or communication
from any Governmental Entity (A) asserting that it or any of its Subsidiaries is
not in compliance with any of the statutes, regulations, or ordinances which
such Governmental Entity enforces, (B) threatening to revoke any license,
franchise, permit, or governmental authorization, or (C) failing to approve any
proposed acquisition, or stating its intention not to approve acquisitions
proposed to be effected by it within a certain time period or indefinitely.
(k) Defaults. Neither it nor any of its Subsidiaries is in default
under any contract, agreement, commitment, arrangement, lease, insurance policy,
or other instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected, or under which it or its
respective assets, business, or operations receives benefits, and there has not
occurred any event that, with the lapse of time or the giving of notice or both,
would constitute such a default.
(l) No Brokers. No action has been taken by it that would give rise
to any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by this
Agreement, excluding, in the case of the Company, fees to be paid to Salomon
Smith Barney Inc. and, in the case of Dana, fees to be paid to Lehman Brothers
Inc., in each case pursuant to letter agreements which have been heretofore
disclosed to the other party.
(m) Employee Benefit Plans. (i) Such Party's Disclosure Schedule
contains a complete list of all material written bonus, vacation, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock and stock option
plans, all employment or severance contracts, all medical, dental, disability,
health and life insurance plans, all other employee benefit and fringe benefit
plans, contracts or arrangements and any applicable "change of control" or
similar provisions in any plan, contract or arrangement maintained or
contributed to by it or any of its Subsidiaries for the benefit of officers,
former officers, employees, former employees, directors, former directors, or
the beneficiaries of any of the foregoing (collectively, "Compensation and
Benefit Plans").
(ii) True and complete copies of its Compensation and Benefit
Plans, including, but not limited to, any trust instruments and/or insurance
contracts, if any, forming a part thereof, and all amendments thereto have been
made available to the other party.
(iii) Except as provided in Section 6.13 of the Company Disclosure
Schedule, the Merger and the other transactions contemplated by this Agreement
(including any stockholder approval of the Merger and the employment and
election of the directors under Section 2.3) will not be treated as a "Change in
Control" under any Compensation and Benefit Plan of the Company or its
Subsidiaries.
(iv) Each of its Compensation and Benefit Plans has been
administered in all material respects in accordance with the terms thereof. All
"employee benefit plans" within the meaning of Section 3(3) of ERISA, other than
"multiemployer plans" within the meaning of Section 3(37) of ERISA
("Multiemployer Plans"), covering employees or former employees of it and its
Subsidiaries (its "Plans"), to the extent subject to ERISA, are in material
compliance with ERISA, the Code, the Age Discrimination in Employment Act and
other applicable laws. Each Compensation and Benefit Plan of it or its
Subsidiaries which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA ("Pension Plan") and which is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service, and it is not aware of any circumstances
reasonably likely to result in the revocation or denial of any such favorable
determination letter. There is no pending or, to its knowledge, threatened
litigation or governmental audit, examination or investigation relating to the
Plans.
(v) No material liability under Title IV of ERISA has been or is
expected to be incurred by it or any of its Subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them,
or the single-employer plan of any entity which is considered one employer with
it under Section 4001(a)(15) of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither it nor any of its Subsidiaries presently contributes to a
Multiemployer Plan, nor have they contributed to such a plan within the past
five calendar years. No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan of it or any of its
Subsidiaries or by any ERISA Affiliate within the past 12 months.
(vi) All contributions, premiums and payments required to be made
under the terms of any Compensation and Benefit Plan of it or any of its
Subsidiaries have been made. Neither any Pension Plan of it or any of its
Subsidiaries nor any single-employer plan of an ERISA Affiliate of it or any of
its Subsidiaries has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code or Section 302 of ERISA. Neither
it nor any of its Subsidiaries has provided, or is required to provide, security
to any Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(vii) Under each Pension Plan of it or any of its Subsidiaries
which is a single-employer plan, as of the last day of the most recent plan year
ended prior to the date hereof, the actuarially determined present value of all
"benefit liabilities", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in the Plan's
most recent actuarial valuation) did not exceed the then current value of the
assets of such Plan, and there has been no adverse change in the financial
condition of such Plan (with respect to either assets or benefits) since the
last day of the most recent Plan year.
(viii) Neither it nor any of its Subsidiaries has any obligations
under any Compensation and Benefit Plans to provide benefits, including death or
medical benefits, with respect to employees of it or its Subsidiaries beyond
their retirement or other termination of service other than (i) coverage
mandated by Part 6 of Title I of ERISA or Section 4980B of the Code, (ii)
retirement or death benefits under any employee pension benefit plan (as defined
under Section 3(2) of ERISA), (iii) disability benefits under any employee
welfare plan that have been fully provided for by insurance or otherwise, or
(iv) benefits in the nature of severance pay.
(ix) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of it or any of its
Subsidiaries under any Compensation and Benefit Plan or otherwise from it or any
of its Subsidiaries, (ii) increase any benefits otherwise payable under any
Compensation and Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(n) Labor Matters. Neither it nor any of its Subsidiaries is a
party to, or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is it
or any of its Subsidiaries the subject of a proceeding asserting that it or any
such Subsidiaries has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel it or such Subsidiaries
to bargain with any labor organization as to wages and conditions of employment.
(o) Takeover Laws; Rights Plans. (i) It has taken all action
required to be taken by it in order to exempt this Agreement and the Stock
Option Agreement and the transactions contemplated hereby and thereby from, and
this Agreement and the Stock Option Agreement and the transactions contemplated
hereby and thereby are exempt from, the requirements of any "moratorium",
"control share", "fair price" or other anti-takeover laws and regulations
(collectively, "Takeover Laws") of (i) the State of Connecticut in the case of
the representations and warranties of the Company, including Sections 33-841 and
33-844 of the CBCA, and (ii) the State of Virginia in the case of the
representations and warranties of Dana, including Sections 13.1-725, 13.1-726
and 13.1-728 of the Virginia Stock Corporation Act.
(ii) In the case of the representations and warranties of the
Company, it has (A) duly entered into an appropriate amendment to the Company
Rights Agreement which amendment has been provided to Dana and (B) taken all
other action necessary or appropriate so that the entering into of this
Agreement and the Stock Option Agreement, and the consummation of the
transactions contemplated hereby and thereby (including the Merger) do not and
will not result in the ability of any person to exercise any Rights under the
Company Rights Agreement or enable or require the Company Rights to separate
from the shares of Company Common Stock to which they are attached or to be
triggered or become exercisable and the Company Rights Agreement will expire
immediately prior to the Effective Time, and the Company Rights Agreement, as so
amended, has not been further amended or modified except in accordance herewith.
Copies of such amendments to the Company Rights Agreement have been previously
provided to Dana.
(iii) In the case of the representations and warranties of the
Company, no "Distribution Date" or "Stock Acquisition Date" (as such terms are
defined in the Company Rights Plan) has occurred.
(p) Environmental Matters. (i) As used in this Plan, "Environmental
Laws" means all applicable local, state, federal and foreign environmental,
health and safety laws and regulations, including the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation, and
Liability Act, the Clean Water Act, the Federal Clean Air Act, and the
Occupational Safety and Health Act, each as amended, regulations promulgated
thereunder, and state counterparts.
(ii) Neither the conduct nor operation of such party or its
Subsidiaries nor any condition of any property presently or previously owned,
leased or operated by any of them violates or violated Environmental Laws and no
condition has existed or event has occurred with respect to any of them or any
such property or any predecessor or previously owned or operated asset or
Subsidiary of any of them that, with notice or the passage of time, or both, is
reasonably likely to result in liability under Environmental Laws. Neither such
party nor any of its Subsidiaries has received any notice from any person or
entity that it or its Subsidiaries or the operation or condition of any property
ever owned, leased, operated, held as collateral or held as a fiduciary by any
of them are or were in violation of or otherwise are alleged to have liability
under any Environmental Law, including but not limited to responsibility (or
potential responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes, substances or materials
at, on, beneath, or originating from any such property.
(q) Tax Matters. (A) All material returns, declarations, reports,
estimates, information returns and statements required to be filed under
federal, state, local or any foreign tax laws ("Tax Returns") with respect to it
or any of its Subsidiaries, have been timely filed, or requests for extensions
have been timely filed and have not expired; (B) all Tax Returns filed by it are
complete and accurate in all material respects; (C) all Taxes shown to be due on
such Tax Returns have been paid or adequate reserves have been established for
the payment of such Taxes; and (D) no material (1) audit or examination or (2)
refund litigation with respect to any Tax Return is pending.
(r) Tax Treatment; Accounting Treatment. As of the date hereof, it
is aware of no reason why the Merger will, and has not taken or agreed to take
any action that would cause the Merger to (i) fail to qualify as a
reorganization under Section 368(a) of the Code, or (ii) not be accounted for as
a "pooling of interests" under generally accepted accounting principles.
(s) Opinions of Financial Advisors. It has received the written
opinion of its financial advisor, to the effect that, as of the date of this
Agreement, the Exchange Ratio is (i) in the case of the Company, fair to its
stockholders from a financial point of view, and (ii) in the case of Dana, fair
to Dana from a financial point of view. It has heretofore provided copies of
such opinions to the other party hereto and such opinion has not been withdrawn
or revoked or modified in any material respect.
(t) No Material Adverse Effect. Since December 31, 1997, in the
case of Dana and since, August 31, 1997, in the case of the Company, (i) it and
its Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of expenses related to this Agreement and
the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or taken together with all other existing
facts, circumstances and events (described in any paragraph of Section 5.3 or
otherwise), is reasonably likely to have a Material Adverse Effect with respect
to it.
ARTICLE VI
COVENANTS
The Company hereby covenants to and agrees with Dana, and Dana
hereby covenants to and agrees with the Company, that:
6.1. Best Efforts. Subject to the terms and conditions of this
Agreement, it shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or desirable, or advisable under applicable laws, so as to
permit consummation of the Merger as promptly as practicable and otherwise to
enable consummation of the transactions contemplated hereby including obtaining
(and cooperating with the other party hereto to obtain) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Entity and any other third party that is required to be obtained by the Company
or Dana or any of their respective Subsidiaries in connection with the Merger
and the other transactions contemplated by this Agreement, and using reasonable
best efforts to lift or rescind any injunction or restraining order or other
order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and using reasonable best efforts to defend
any litigation seeking to enjoin, prevent or delay the consummation of the
transactions contemplated hereby or seeking material damages, and each shall
cooperate fully with the other parties hereto to that end.
6.2. Stockholder Approvals. (a) Each of them shall take, as soon
as practicable, in accordance with applicable law, applicable stock exchange
rules and their respective articles or certificate of incorporation and by-laws,
all action necessary to convene, respectively, an appropriate meeting of
stockholders of Dana to consider and vote upon the approval of the issuance of
shares of Dana Common Stock pursuant to this Agreement and any other matters
required to be approved by Dana stockholders for consummation of the Merger
(including any adjournment or postponement, the "Dana Meeting"), and an
appropriate meeting of stockholders of the Company to consider and vote upon the
approval of this Agreement, the Merger and any other matters required to be
approved by the Company's stockholders for consummation of the Merger (including
any adjournment or postponement, the "Company Meeting"; and each of the Dana
Meeting and the Company Meeting, a "Meeting"), respectively, as promptly as
practicable after the date hereof. The Board of Directors of each of Dana and
the Company shall recommend such approval, and each of Dana and the Company
shall take all reasonable lawful action to solicit such approval by its
respective stockholders. Notwithstanding the previous sentence, the Company's
Board of Directors may withdraw or modify its approval or recommendation of this
Agreement or the Merger if the Board of Directors of the Company, after having
consulted with outside counsel, determines that the refusal to do so would
constitute a breach by the Board of Directors of the Company of their fiduciary
duties under applicable laws, including their duties under Section 33-756(d) of
the CBCA; provided, however, the Company's Board of Directors may not approve or
recommend (and in connection therewith, withdraw or modify its approval or
recommendation of this Agreement or the Merger) a Competing Transaction unless
such Competing Transaction is a Superior Proposal and unless it shall have first
consulted with outside counsel, and have determined that the refusal to do so
would constitute a breach by the Board of Directors of the Company of their
fiduciary duties under applicable laws, including their duties under Section
33-756(d) of the CBCA. Dana's Board of Directors may withdraw or modify its
approval or recommendation of this Agreement, the Merger or the issuance of
shares of Dana Common Stock in the Merger if the Board of Directors of Dana,
after having consulted with outside counsel, determines that the refusal to do
so would constitute a breach by the Board of Directors of Dana of their
fiduciary duties under applicable laws.
(b) The Company shall promptly (within 8 hours) advise Dana orally
and in writing of its receipt of any proposal or inquiry which may be or may
result in a Superior Proposal, of the substance thereof, and of the identity of
the person making such proposal or inquiry. The Company will keep Dana fully
informed of the status and material details of any such proposal or inquiry or
negotiations or discussions relating thereto.
(c) Prior to approving or recommending (and, in connection
therewith, withdrawing or modifying its approval or recommendation of this
Agreement or the Merger) a third party proposal as a Superior Proposal pursuant
to Section 6.2(a), the Company shall, unless to do so would constitute a breach
by the Board of Directors of the Company of their fiduciary duties under
applicable laws, including their duties under Section 33-756(d) of the CBCA,
first offer Dana and Merger Sub the right to propose alterations to the terms of
the Merger Agreement. If after considering such proposed alterations, the Board
of Directors of the Company determines that the third party proposal is a
Superior Proposal and, after having consulted with outside counsel, that the
failure to approve or recommend (and, in connection therewith, withdraw or
modify its approval or recommendation of this Agreement or the Merger) such
Superior Proposal would constitute a breach by the Board of Directors of the
Company of their fiduciary duties under applicable laws, including their duties
under Section 33-756(d) of the CBCA, then the Company's Board of Directors may
approve or recommend (and, in connection therewith, withdraw or modify its
approval or recommendation of this Agreement or the Merger) such Superior
Proposal; provided, however, that nothing contained in Section 6.2(a) shall
prohibit the Company or its Board of Directors from taking and disclosing to the
Company's stockholders a position pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such other disclosure to the
Company's stockholders which, in the reasonable determination of the Board of
Directors of the Company after consultation with outside counsel, may be
required under applicable law. Any such initial disclosure pursuant to Rules
14d-9 and 14e-2(a) shall be consistent with the recommendation of the Board of
Directors of the Company in Section 6.2(a), and all disclosures pursuant to
Rules 14d-9 and 14e-2(a) (initial or otherwise) shall be in a form that has been
reviewed by Dana.
6.3. Registration Statement. (a) Each of Dana and the Company
agrees to cooperate in the preparation of a registration statement on Form S-4
(the "Registration Statement") to be filed by Dana with the SEC in connection
with the issuance of Dana Common Stock in the Merger (including the joint proxy
statement, prospectus and other proxy solicitation materials of Dana and the
Company constituting a part thereof (the "Joint Proxy Statement") and all
related documents). Provided the Company has cooperated as required above, Dana
agrees to file the Registration Statement with the SEC as promptly as
practicable, but in no event later than 30 days after the date of this
Agreement. Each of the Company and Dana agrees to use all reasonable best
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof, and
to cause the Joint Proxy Statement to be mailed as promptly as practicable to
the stockholders of the Company and Dana. Dana also agrees to use all reasonable
best efforts to obtain all necessary state securities law or "Blue Sky" permits
and approvals required to carry out the transactions contemplated by this
Agreement. The Company agrees to furnish to Dana all information concerning the
Company, its Subsidiaries, officers, directors and stockholders as may be
reasonably requested in connection with the foregoing.
(b) Each of the Company and Dana agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act and at the Effective Time,
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and (ii) the Joint Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to stockholders and at the times
of the Dana Meeting and the Company Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or any statement
which, in the light of the circumstances under which such statement is made,
will be false or misleading with respect to any material fact, or which will
omit to state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any statement in any
earlier statement in the Joint Proxy Statement or any amendment or supplement
thereto. Each of the Company and Dana further agrees that if it shall become
aware prior to the Effective Date of any information that would cause any of the
statements in the Joint Proxy Statement to be false or misleading with respect
to any material fact, or to omit to state any material fact necessary to make
the statements therein not false or misleading, to promptly inform the other
party thereof and to take the necessary steps to correct the Joint Proxy
Statement.
(c) In the case of Dana, Dana will advise the Company, promptly
after Dana receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of the Dana
Stock for offering or sale in any jurisdiction, of the initiation or threat of
any proceeding for any such purpose, or of any request by the SEC for the
amendment or supplement of the Registration Statement or for additional
information.
6.4. Press Releases. It will not, without the prior approval of
the other party hereto, which approval shall not be unreasonably withheld or
delayed, issue any press release or written statement for general circulation
relating to the transactions contemplated hereby, except as otherwise required
by applicable law or regulation or the rules of the NYSE.
6.5. Access; Information. (a) Upon reasonable notice and subject
to applicable laws relating to the exchange of information, it shall, and shall
cause its Subsidiaries to, afford the other parties and their officers,
employees, counsel, accountants and other authorized representatives, access,
during normal business hours throughout the period prior to the Effective Date,
to all of its properties, books, contracts, commitments and records, and to its
officers, employees, accountants, counsel or other representatives, and, during
such period, it shall, and shall cause its Subsidiaries to, furnish promptly to
such other parties and representatives (i) a copy of each material report,
schedule and other document filed by it pursuant to the requirements of federal
or state securities or banking laws (other than reports or documents that Dana
or the Company, or their respective Subsidiaries, as the case may be, are not
permitted to disclose under applicable law), and (ii) all other information
concerning the business, properties and personnel of it as the other may
reasonably request. Neither Dana nor the Company nor any of their respective
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under the circumstances in which
the restrictions of the preceding sentence apply.
(b) It will not use any information obtained pursuant to this
Section 6.5 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement and, if this Agreement is terminated, will
promptly destroy all information and documents obtained pursuant to this
paragraph. No investigation by either party of the business and affairs of the
other shall affect or be deemed to modify or waive any representation, warranty,
covenant or agreement in this Agreement, or the conditions to either party's
obligation to consummate the transactions contemplated by this Agreement.
6.6. Acquisition Proposals. Without the prior written consent of
Dana, the Company shall not, shall cause its Subsidiaries not to, and shall use
best efforts to cause the Company's and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, facilitate, solicit or encourage any
inquiries or proposals, whether made prior to or after the date hereof, with
respect to, or engage in any negotiations concerning, or provide any information
to, or have any discussions with, any person relating to, any Competing
Transaction; provided, however that the Company's Board of Directors may, and
may authorize and permit its officers, directors, employees or agents to,
furnish information and participate in such discussions and negotiations if the
Company's Board of Directors, after having consulted with outside counsel, has
reasonably determined that the failure to provide information or participate in
negotiations and discussions in response to a proposed Competing Transaction
which may be a Superior Proposal would constitute a breach by the Board of
Directors of the Company of their fiduciary duties under applicable laws. Upon
such determination, the Company shall notify Dana of its taking of such actions
within 8 hours thereof.
6.7. Affiliate Agreements. (a) Not later than the 15th day prior
to the mailing of the Joint Proxy Statement, the Company shall deliver to Dana
and Dana shall deliver to the Company, a schedule of each person that, to the
best of its knowledge, is or is reasonably likely to be, as of the date of the
relevant Meeting, deemed to be an "affiliate" of it (each, an "Affiliate") as
that term is used in SEC Accounting Series Releases 130 and 135 and, in the case
of the Company only, in Rule 145 under the Securities Act.
(b) The Company and Dana shall use its respective reasonable best
efforts to cause each person who may be deemed to be an Affiliate of the Company
or Dana, as the case may be, to execute and deliver to the Company and Dana on
or before the date of mailing of the Joint Proxy Statement an agreement in the
form attached hereto as Exhibit B (in the case of affiliates of the Company) or
Exhibit C (in the case of affiliates of Dana).
(c) Dana shall use its reasonable best efforts to publish, not
later than 45 days after the end of the first full calendar month commencing
after the Effective Time occurs, financial results covering at least thirty (30)
days of post-Merger combined operations as contemplated by and in accordance
with the terms of SEC Accounting Series Release No. 135.
6.8. Takeover Laws. Neither party shall take any action that would
cause the transactions contemplated by this Agreement and the Stock Option
Agreement to be subject to requirements imposed by any Takeover Law and each of
them shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions contemplated by this Agreement and the
Stock Option Agreement from, or if necessary challenge the validity or
applicability of, any applicable Takeover Law, as now or hereafter in effect,
including Sections 33-841 and 33-844 of the CBCA, Sections 13.1-725, 13.1-726
and 13.1-728 of the Virginia Stock Corporation Act and Takeover Laws of any
other State that purport to apply to this Agreement, the Stock Option Agreement
or the transactions contemplated hereby or thereby.
6.9. No Rights Triggered. Each of Company and Dana shall use their
respective reasonable best efforts to ensure that the entering into of this
Agreement and the consummation of the transactions contemplated hereby and any
other action or combination of actions, or any other transactions contemplated
hereby, do not and will not result in the grant of any rights to any person (i)
under any material agreement to which it or any of its Subsidiaries is a party
(including, in the case of the Company, the Company Rights Agreement), or (ii)
in the case of the Company, to exercise or receive certificates for Rights, or
acquire any property in respect of Rights, under the Company Rights Agreement.
6.10. Shares Listed. In the case of Dana, Dana shall use its best
efforts to list, prior to the Effective Date, on the NYSE, PSE and International
Stock Exchanges, upon official notice of issuance, the shares of Dana Common
Stock to be issued in the Merger.
6.11. Regulatory Applications. Dana and the Company and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts (i) to prepare all documentation, to effect all filings, to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities necessary to consummate the transactions contemplated by
this Agreement, and to comply with the terms and conditions of such permits,
consents, approvals and authorizations and (ii) to cause the Merger to be
consummated as expeditiously as practicable. Each of Dana and the Company shall
have the right to review in advance, and to the extent practicable each will
consult with the other, in each case subject to applicable laws relating to the
exchange of information, with respect to, all material written information
submitted to any third party or any Governmental Entities in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the parties hereto agrees to act reasonably and as promptly as
practicable. Each party hereto agrees that it will consult with the other
parties hereto with respect to the obtaining of all material permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other parties apprised of the status of
material matters relating to completion of the transactions contemplated hereby.
6.12. Indemnification; Directors' and Officers' Insurance. (a)
From and after the Effective Time, Dana shall indemnify, defend and hold
harmless the present and former officers and directors of the Company in respect
of acts or omissions occurring on or prior to the Effective Time to the fullest
extent permitted by applicable law, including with respect to taking all actions
necessary to advance expenses to the extent permitted by applicable law.
(b) Dana shall use its best efforts to cause the Surviving
Corporation or Dana to obtain and maintain in effect for a period of six years
after the Effective Time policies of directors' and officers' liability
insurance at no cost to the beneficiaries thereof with respect to acts or
omissions occurring on or prior to the Effective Time with substantially the
same coverage and containing substantially similar terms and conditions as
existing policies; provided, however, that neither the Surviving Corporation nor
Dana shall be required to pay an annual premium for such insurance coverage in
excess of 200% of the Company's current annual premium, but in such case shall
purchase as much coverage as possible for such amount.
(c) In the event Dana or any of its 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 or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Dana shall
assume the obligations set forth in this Section 6.12.
(d) The provisions of this Section 6.12 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
6.13. Benefits Plans. (a) At and following the Effective Time,
Dana agrees that it shall honor all obligations of the Company or its
Subsidiaries under the severance plans, policies or agreements, and
indemnification agreements of the Company or its Subsidiaries set forth on
Section 5.3(m) of the Company Disclosure Schedule. Dana agrees to employ all key
management employees of the Company through October 31, 1998 and to employ the
employees of the Company set forth on Schedule 6.13(a) of the Company Disclosure
Schedule until January 31, 1999, and to give each employee at least one business
day's notice of any termination of such employee's employment thereafter.
(b) Dana shall, during the period commencing at the Effective Time
and ending on the first anniversary thereof, provide or cause the Company or its
Subsidiaries to provide the employees of the Company and its Subsidiaries with
benefits under employee benefit plans (other than plans involving the issuance
of stock-based awards) that are no less favorable in the aggregate than either
those benefits currently provided by the Company and its Subsidiaries to such
employees or provided by Dana and its Subsidiaries to similarly situated
employees of Dana and its Subsidiaries.
(c) The parties hereto agree that, except as provided on Section
6.13(c) of the Company Disclosure Schedule, the Merger and the other
transactions contemplated by this Agreement (including any stockholder approval
of the Merger and the appointment and election of directors under Section 2.3)
will not be treated as a Change in Control under any Compensation and Benefit
Plan of the Company or any of its Subsidiaries.
(d) The Company shall be permitted to establish a retention pool in
an amount not to exceed $8.7 million in the aggregate to be paid to key
management employees of the Company who are employed by the Company at least
through October 31, 1998.
6.14. Notification of Certain Matters. Each of the Company and
Dana shall give prompt notice to the other of any fact, event or circumstance
known to it that (i) is reasonably likely, individually or taken together with
all other existing facts, events and circumstances known to it, to result in any
Material Adverse Effect with respect to it, or (ii) would cause or constitute a
material breach of any of its representations, warranties, covenants or
agreements contained herein.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of each of the parties to consummate the Merger is
conditioned upon the satisfaction (or waiver by the party for whose benefit the
applicable condition exists) of each of the following:
7.1. Shareholder Vote. Approval of the Plan of Merger
contained in this Agreement by the requisite votes of the stockholders of the
Company and of Dana, respectively.
7.2. Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby, including the termination or
expiration of the waiting period under the HSR Act, shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired, other than any such regulatory approvals the
failure to obtain which are not reasonably likely, individually, in the
aggregate or together with all other existing facts, events and circumstances,
to result in any Material Adverse Effect with respect to the Company or Dana.
7.3. No Injunction, Etc. No order, decree or injunction of any
court or agency of competent jurisdiction shall be in effect, and no law,
statute or regulation shall have been enacted or adopted, that enjoins,
prohibits or makes illegal consummation of any of the transactions contemplated
hereby provided, however, that each of Dana and the Company shall have used its
best efforts to prevent any such rule, regulation, injunction, decree or other
order, and to appeal as promptly as possible any injunction, decree or other
order that may be entered.
7.4. Representations, Warranties and Covenants of Dana. In the
case of the Company's obligation to consummate the Merger: (i) each of the
representations and warranties contained herein of Dana shall be true and
correct as of the Effective Date with the same effect as though all such
representations and warranties had been made on the Effective Date, except for
any such representations and warranties made as of a specified date, which shall
be true and correct as of such date, in any case subject to the standard set
forth in Section 5.2, (ii) each and all of the agreements and covenants of Dana
to be performed and complied with pursuant to this Agreement on or prior to the
Effective Date shall have been duly performed and complied with in all material
respects, and (iii) the Company shall have received a certificate signed by an
executive officer of Dana, dated the Effective Date, to the effect set forth in
clauses (i) and (ii) of this Section 7.5.
7.5. Representations, Warranties and Covenants of the Company. In
the case of Dana's obligation to consummate the Merger: (i) each of the
representations and warranties contained herein of the Company shall be true and
correct as of the Effective Date with the same effect as though all such
representations and warranties had been made on the Effective Date, except for
any such representations and warranties made as of a specified date, which shall
be true and correct as of such date, in any case subject to the standard set
forth in Section 5.2, (ii) each and all of the agreements and covenants of the
Company to be performed and complied with pursuant to this Agreement on or prior
to the Effective Date shall have been duly performed and complied with in all
material respects, and (iii) Dana shall have received a certificate signed by an
executive officer of the Company, dated the Effective Date, to the effect set
forth in clauses (i) and (ii) of this Section 7.5.
7.6. Effective Registration Statement. The Registration Statement
shall have become effective and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any other
Governmental Entity.
7.7. Tax Opinion. In the case of Dana, Dana shall have received an
opinion from Wachtell, Lipton, Rosen & Katz dated as of the Effective Time, and
in the case of the Company, the Company shall have received an opinion from
Davis Polk & Wardwell dated as of the Effective Time, each substantially to the
effect that, on the basis of the facts, representations, covenants and
assumptions set forth in such opinions or certificates of officers referred to
below, the Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that
accordingly (other than in the case of the opinion of Davis Polk & Wardwell,
which shall not address (i)):
(i) No gain or loss will be recognized by Dana, Merger Sub, or the
Company as a result of the Merger;
(ii) No gain or loss will be recognized by the stockholders of the
Company who exchange all of their Company Common Stock solely for Dana Common
Stock pursuant to the Merger (except with respect to cash received in lieu of a
fractional share interest in Dana Common Stock); and
(iii) The aggregate tax basis of the Dana Common Stock received by
stockholders who exchange all of their Company Common Stock solely for Dana
Common Stock in the Merger will be the same as the aggregate tax basis of the
Company Common Stock surrendered in exchange therefor (reduced by any amount
allocable to a fractional share interest for which cash is received).
In rendering such opinions, such counsel may require and rely upon
representations and covenants including those contained in certificates of
officers of Dana, the Company and others, reasonably satisfactory in form and
substance to such counsel.
7.8. Exchange Listing. The shares of Dana Common Stock issuable
pursuant to this Agreement shall have been approved for listing on the NYSE,
subject to official notice of issuance.
7.9. Company Rights Agreement. Each of the representations and
warranties of the Company contained in Section 5.3(o) shall be true and correct
as of the Effective Time in all respects with the same effect as though such
representations and warranties had been made at the Effective Time, without
giving effect to the standard set forth in Section 5.2.
7.10. Accounting Treatment. Dana and the Company shall have
received from Price Waterhouse LLP, independent public accountants for Dana and
the Company, a letter, dated as of or shortly before the Effective Date, stating
its opinion that the Merger shall qualify for "pooling of interests" accounting
treatment.
A failure to satisfy any of the conditions set forth in Section 7.5 or 7.9 shall
only constitute conditions if asserted by Dana, and a failure to satisfy the
condition set forth in Section 7.4 shall only constitute a condition if asserted
by the Company, and a failure to satisfy the condition set forth in Section 7.7
shall only constitute a condition if asserted by the party which has not
received an opinion contemplated thereby to be delivered to such party.
ARTICLE VIII
TERMINATION
8.1. Termination. This Agreement may be terminated, and the Merger
may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Dana and the Company in a written instrument, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board.
(b) Breach. At any time prior to the Effective Time, by Dana or the
Company (provided that the terminating party is not then in material breach of
any representation, warranty, covenant or other agreement contained herein), if
its Board of Directors so determines by vote of a majority of the members of its
entire Board, in the event of either: (i) a breach by the other party of any
representation or warranty contained herein (subject to the standard set forth
in Section 5.2), which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach; or
(ii) a material breach by the other party of any of the covenants or agreements
contained herein, which breach cannot be or has not been cured within 30 days
after the giving of written notice to the breaching party of such breach.
(c) Delay. At any time prior to the Effective Time, by Dana or the
Company, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not consummated by
December 31, 1998, except to the extent that the failure of the Merger then to
be consummated arises out of or results from the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein.
(d) No Approval. By the Company or Dana, if its Board of Directors
so determines by a vote of a majority of the members of its entire Board, in the
event (i) any Governmental Entity of competent jurisdiction shall have issued a
final nonappealable order enjoining or otherwise prohibiting the consummation of
the transactions contemplated by this Agreement, or (ii) any stockholder
approval required by Section 7.1 herein is not obtained at (x) the Company
Meeting or (y) the Dana Meeting.
(e) Company Recommendation. By the Board of Directors of Dana if
the Board of Directors of the Company shall or shall resolve to (i) not
recommend, or withdraw its approval or recommendation of, the Merger, this
Agreement or any of the transactions contemplated hereby, (ii) modify such
approval or recommendation in a manner adverse to Dana or Merger Sub, or (iii)
approve, recommend or fail to take a position that is adverse to any proposed
Competing Transaction.
(f) Dana Recommendation. By the Board of Directors of the Company
if the Board of Directors of Dana shall or shall resolve to (i) not recommend,
or withdraw its approval or recommendation of, the Merger, this Agreement or any
of the transactions contemplated hereby, or (ii) modify such approval or
recommendation in a manner adverse to the Company.
(g) Competing Transaction. By the Board of Directors of the Company
if to the extent permitted by Section 6.2, the Board of Directors of the Company
approves or recommends any Superior Proposal.
8.2. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (i) as set forth in Section 9.1,
and (ii) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement giving rise to such termination.
8.3. Break-up Expenses. (a) Provided that neither of Dana or
Merger Sub is in material breach of their representations, warranties and
agreements under this Agreement, (w) if this Agreement is terminated by the
Board of Directors of the Company pursuant to Section 8.1(g), (x) if this
Agreement is terminated by the Board of Directors of Dana pursuant to Section
8.1(e) and any Competing Transaction has been proposed or announced on or after
the date hereof, (y) if this Agreement is terminated by Dana pursuant to Section
8.1(d)(ii)(x) and any Competing Transaction has been proposed or announced on or
after the date hereof, or (z) if within 12 months of the termination of this
Agreement by Dana pursuant to Section 8.1(b), 8.1(c), 8.1(d)(ii)(x) or 8.1(e),
any Competing Transaction is entered into, agreed to or consummated by the
Company (any such event specified in clauses (w)-(z) of this Section 8.3, a
"Triggering Event"), then the Company shall pay to Dana (or to any Subsidiary of
Dana designated in writing by Dana to the Company) $87,500,000 (the "Termination
Fee") (less any Expense Fee that may previously have been paid or is payable in
the same circumstances) in same-day funds, on the date of such termination, in
the case of clause (w), (x), or (y), or on the earlier of the date an agreement
is entered into with respect to a Competing Transaction or a Competing
Transaction is consummated in the case of clause (z). In no event shall more
than one Termination Fee be payable under this Agreement.
(b) If this Agreement is terminated by either the Company or Dana
for any reason pursuant to Section 8.1(b), 8.1(e) or 8.1(f), then the
non-terminating party shall (notwithstanding Section 9.5), on the date of such
termination, pay to the terminating party (or to any Subsidiary of the
terminating party designated in writing to the other party) $5,000,000 (the
"Expense Fee") representing the cash amount necessary to compensate the
terminating party and its affiliates for all fees and expenses incurred at any
time prior to such termination by any of them or on their behalf in connection
with the Merger, the preparation of this Agreement and the transactions
contemplated by this Agreement.
(c) The parties acknowledge that the agreements contained in
paragraphs (a) and (b) of this Section 8.3 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
they would not enter into this Agreement; accordingly, if any party fails to pay
promptly any amount due pursuant to this Section 8.3 and, in order to obtain
such payment, any other party commences a suit that results in a judgment
against any other party for any such amount, such first party shall pay to such
other party its cost and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the prime or base
rate of Citibank, N.A. from the date such payment was due under this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1. Survival. All representations, warranties, agreements and
covenants contained in this Agreement shall not survive the Effective Time or
termination of this Agreement if this Agreement is terminated prior to the
Effective Time; provided, however, if the Effective Time occurs, the agreements
of the parties in Sections 3.4, 3.7, 6.7(c), 6.12, 6.13, 9.1, 9.4 and 9.8 shall
survive the Effective Time, and if this Agreement is terminated prior to the
Effective Time, the agreements of the parties in Sections 6.5(b), 8.2, 8.3, 9.1,
9.4, 9.5, 9.6, 9.7 and 9.8, shall survive such termination.
9.2. Waiver; Amendment. (a) Subject to compliance with applicable
law, prior to the Effective Time, any provision of this Agreement may be amended
or waived if, but only if, such amendment or waiver is in writing and is signed,
in the case of an amendment, by each party to this Agreement or in the case of a
waiver, by the party against whom the waiver is to be effective; provided that
after the adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
reduce the amount or change the kind of consideration to be received in exchange
for any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
9.3. Counterparts. This Agreement may be executed in one
or more counterparts and by facsimile, each of which shall be deemed to
constitute an original.
9.4. Governing Law. (a) This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Connecticut, without
regard to the conflict of law principles thereof (except to the extent that
mandatory provisions of Federal law govern).
(b) Any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement
or the transactions contemplated hereby may be brought in any federal court
located in the State of Connecticut or any Connecticut state court, and each of
the parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 9.7 shall be deemed
effective service of process on such party.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
9.5. Expenses. Except as set forth in Section 8.3, each party
hereto will bear all expenses incurred by it in connection with this Agreement
and the transactions contemplated hereby, except that the costs of printing,
mailing and filing the Registration Statement with the SEC and the filings of
the pre-merger notification and report forms under the HSR Act (including filing
fees) shall be shared equally between the Company and Dana.
9.6. Confidentiality. Each of the parties hereto and their
respective agents, attorneys and accountants will maintain the confidentiality
of all information provided in connection herewith in accordance, and subject to
the limitations of, the Confidentiality Agreement. From and after the date
hereof, unless and until this Agreement shall have been terminated in accordance
with the terms hereof (and including that any Expense Fee or Termination Fee
shall have been paid to the extent payable in accordance with the terms hereof)
Section 10 of the Confidentiality Agreement shall no longer be of any force or
effect.
9.7. Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Dana, to:
Dana Corporation
4500 Dorr Street
Toledo, Ohio 43615
Attention: Martin J. Strobel, Esq.
Telecopier: (419) 535-4544
With copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
Telecopier: (212) 403-2234
If to the Company, to:
Echlin Inc.
100 Double Beach Road
Branford, Connecticut 06405
Attention: Jon P. Leckerling, Esq.
Telecopier: (203) 481-3628
With copies to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: John J. McCarthy, Jr., Esq.
Telecopier: (212) 450-4800
9.8. Understanding; No Third Party Beneficiaries. Except for the
Confidentiality Agreement (which shall remain in effect; provided, however, that
the provisions of Section 10 thereof will remain in effect as modified by
Section 9.6) and the Stock Option Agreements, this Agreement represents the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and supersede any and all other oral or written
agreements heretofore made. Except for Section 6.12, nothing in this Agreement,
expressed or implied, is intended to confer upon any person, other than the
parties hereto or their respective successors, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
9.9. Interpretation; Absence of Presumption. (a) For the purposes
hereof, (i) words in the singular shall be held to include the plural and vice
versa and words of one gender shall be held to include the other gender as the
context requires, (ii) the terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all of the Schedules and Exhibits hereto) and
not to any particular provision of this Agreement, and Article, Section,
paragraph and Schedule and Exhibit references are to the Articles, Sections,
paragraphs, Schedules and Exhibits to this Agreement unless otherwise specified,
(iv) the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation," unless the context
otherwise requires or unless otherwise specified, (v) the word "or" shall not be
exclusive, and (vi) provisions shall apply, when appropriate, to successive
events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the Party
drafting or causing any instrument to be drafted.
9.10. Headings. The Section, Article and other headings contained
in this Agreement are inserted for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
9.11. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent possible.
9.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy to which they are entitled at law or in equity.
9.13. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed in counterparts by their duly authorized officers, all as of the
day and year first above written.
ECHLIN INC.
By: /s/ Larry W. McCurdy
---------------------------------
Name: Larry W. McCurdy
Title: Chairman, President and
Chief Executive Officer
DANA CORPORATION
By: /s/ Southwood J. Morcott
---------------------------------
Name: Southwood J. Morcott
Title: Chairman and Chief Executive
Officer
ECHO ACQUISITION CORP.
By: /s/ Martin J. Strobel
---------------------------------
Name: Martin J. Strobel
Title: Vice President
Exhibit 2.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of May 3, 1998, between Echlin
Inc., a Connecticut corporation ("Issuer"), and Dana Corporation, a Virginia
corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan
of Merger of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto simultaneously with this Stock Option
Agreement (the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement and in consideration therefor, Issuer has agreed to grant Grantee the
Option (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, subject to the
terms hereof, up to 12,655,345 fully paid and nonassessable shares
of Issuer's Common Stock, par value $1.00 per share ("Common
Stock"), at an aggregate price of $55 per share (the "Option
Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed
19.9% of the Issuer's issued and outstanding shares of Common
Stock without giving effect to any shares subject to or issued
pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are
either (i) issued or otherwise become outstanding after the date
of this Agreement (other than pursuant to this Agreement), or (ii)
redeemed, repurchased, retired or otherwise cease to be
outstanding after the date of the Agreement, the number of shares
of Common Stock subject to the Option shall be increased or
decreased, as appropriate, so that, after such issuance, such
number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject
or issued pursuant to the Option. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to
authorize Issuer or Grantee to breach any provision of the Merger
Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the
Option, in whole or part, and from time to time, if, but only if,
a Triggering Event (as defined in Section 8.3(a) of the Merger
Agreement) shall have occurred prior to the occurrence of an
Exercise Termination Event (as hereinafter defined), provided that
the Holder shall have sent the written notice of such exercise (as
provided in subsection (c) of this Section 2 within 60 days
following such Triggering Event. Each of the following shall be an
"Exercise Termination Event": (i) the Effective Time (as defined
in the Merger Agreement) of the Merger; or (ii) the passage of 12
months after termination of the Merger Agreement. The term
"Holder" shall mean the holder or holders of the Option.
(b) Issuer shall notify Grantee promptly in writing of the
occurrence of any Triggering Event of which it has knowledge, it
being understood that the giving of such notice by Issuer shall
not be a condition to the right of the Holder to exercise the
Option, but that the 60-day time period set forth in the prior
subsection shall not commence until the giving of such notice.
(c) In the event the Holder is entitled to and wishes to exercise
the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying
(i) the total number of shares it will purchase pursuant to such
exercise and (ii) a place and date not earlier than three business
days nor later than 60 days from the Notice Date for the closing
of such purchase (the "Closing Date"); provided that if prior
notification to or approval of any regulatory agency is required
in connection with such purchase, the Issuer and the Holder shall
promptly file the required notice or application for approval and
shall cooperate and use reasonable best efforts to expeditiously
process the same, and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated
or such approvals have been obtained and any requisite waiting
period or periods shall have passed; provided further that if any
such required notification periods have not expired or been
terminated or such approvals have not been obtained or any
requisite waiting period or periods shall not have passed on or
prior to the 12-month anniversary of the Notice Date, despite the
Issuer's compliance with all of its obligations hereunder, the
provisions of Section 7(a)(i) shall be deemed to have been
invoked, without regard to the expiration of any time periods that
might otherwise apply thereto, and the Issuer shall thereupon
immediately pay to the Holder the Option Repurchase Price. Any
exercise of the Option shall be deemed to occur on the Notice Date
relating thereto.
(d) At the closing referred to in subsection (c) of this Section
2, the Holder shall pay to Issuer the aggregate purchase price for
the shares of Common Stock purchased pursuant to the exercise of
the Option in immediately available funds by wire transfer to a
bank account designated by Issuer, provided that failure or
refusal of Issuer to designate such a bank account shall not
preclude the Holder from exercising the Option.
(e) At such closing, simultaneously with the delivery of
immediately available funds as provided in subsection (d) of this
Section 2, Issuer shall deliver to the Holder a certificate or
certificates representing the number of shares of Common Stock
purchased by the Holder and, if the Option should be exercised in
part only, a new Option evidencing the rights of the Holder
thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer a copy of this
Agreement and a letter agreeing that the Holder will not offer to
sell or otherwise dispose of such shares in violation of
applicable law or the provisions of this Agreement.
(f) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend that shall
read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer and to resale restrictions
arising under the Securities Act of 1933, as amended. A copy
of such agreement is on file at the principal office of Issuer
and will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "1933
Act"), in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the Holder
shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that such legend
is not required for purposes of the 1933 Act; (ii) the reference
to the provisions to this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in
compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference;
and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other
legend as may be required by law.
(g) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (c) of
this Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the
Holder. Issuer shall pay all expenses, and any and all United
States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issue and delivery
of stock certificates under this Section 2 in the name of the
Holder or its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free
from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be
exercised without additional authorization of Common Stock after
giving effect to all other options, warrants, convertible
securities and other rights to purchase Common Stock; (ii) that it
will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by Issuer; (iii) use its best
efforts to promptly take all action as may from time to time be
required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
and regulations promulgated thereunder and (y) in the event prior
approval of or notice to any regulatory authority is necessary
before the Option may be exercised, cooperating fully with the
Holder in preparing such applications or notices and providing
such information to such regulatory authority as they may require)
in order to permit the Holder to exercise the Option and Issuer
duly and effectively to issue shares of Common Stock pursuant
hereto; and (iv) use its best efforts to promptly take all action
provided herein to protect the rights of the Holder against
dilution.
4. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon
presentation and surrender of this Agreement at the principal
office of Issuer, for other Agreements providing for Options of
different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set
forth herein, in the aggregate the same number of shares of Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Stock Option Agreements and related
Options for which this Agreement (and the Option granted hereby)
may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Agreement, if mutilated, Issuer will execute
and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any
time be enforceable by anyone.
5. In addition to the adjustment in the number of shares of
Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of
Common Stock purchasable upon the exercise of the Option and the
Option Price shall be subject to adjustment from time to time as
provided in this Section 5. In the event of any change in, or
distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations,
subdivisions, conversions, exchanges of shares, distributions on
or in respect of the Common Stock, in each case, that would be
prohibited under the terms of the Merger Agreement, the type and
number of shares of Common Stock purchasable upon exercise hereof
and the Option Price shall be appropriately adjusted in such
manner as shall fully preserve the economic benefits provided
hereunder and proper provision shall be made in any agreement
governing any such transaction to provide for such proper
adjustment and the full satisfaction of the Issuer's obligations
hereunder.
6. Upon the occurrence of a Triggering Event that occurs prior to
an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered within 60 days of such Triggering Event (whether
on its own behalf or on behalf of any subsequent holder of this
Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current a
shelf registration statement under the 1933 Act covering this
Option and any shares issued and issuable pursuant to this Option
and shall use its reasonable best efforts to cause such
registration statement to become effective and remain current in
order to permit the sale or other disposition of this Option and
any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its rea sonable
best efforts to cause such registration statement first to become
effective and then to remain effective for such period not in
excess of 120 days from the day such registration statement first
becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee
shall have the right to demand two such registrations. The
foregoing notwithstanding, if, at the time of any request by
Grantee for registration of the Option or Option Shares as
provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in
the good faith judgment of the managing underwriter or managing
underwriters, or, if none, the sole underwriter or underwriters,
of such offering the inclusion of the Holder's Option or Option
Shares would interfere with the successful marketing of the shares
of Common Stock offered by Issuer, the number of Option Shares
otherwise to be covered in the registration statement contemplated
hereby may be reduced; and provided, however, that after any such
required reduction the number of Option Shares to be included in
such offering for the account of the Holder shall constitute at
least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that
if such reduction occurs, then the Issuer shall file a
registration statement for the balance as promptly as practical
and no reduction shall thereafter occur. Each such Holder shall
provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If
requested by any such Holder in connection with such registration,
Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities and
other agreements customarily included in secondary offering
underwriting agreements for the Issuer. Upon receiving any request
under this Section 6 from any Holder, Issuer agrees to send a copy
thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the
persons entitled to receive such copies. Notwithstanding anything
to the contrary contained herein, in no event shall Issuer be
obligated to effect more than two registrations pursuant to this
Section 6 by reason of the fact that there shall be more than one
Grantee as a result of any assignment or division of this
Agreement.
7. (a) At any time from or after the occurrence of a Triggering
Event, (i) at the request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto)
shall repurchase the Option from the Holder at a price (the
"Option Repurchase Price") equal to the amount by which (A) the
Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option
may then be exercised and (ii) at the request of the owner of
Option Shares from time to time (the "Owner"), delivered within 60
days of such occurrence (or such later period as provided in
Section 10), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the highest
price per share of Common Stock to be paid or received in
connection with or as a result of such Triggering Event
(including, in the event of a sale of all or a substantial portion
of Issuer's assets, the sum of the price paid in such sale for
such assets and the current market value of the remaining assets
of Issuer as determined by a nationally recognized investment
banking firm selected by the Holder or the Owner, as the case may
be, and reasonably acceptable to the Issuer, divided by the number
of shares of Common Stock of Issuer outstanding at the time of
such sale), or (ii) the highest closing price for shares of Common
Stock within the six-month period immediately preceding the date
the Holder gives notice of the required repurchase of this Option
or the Owner gives notice of the required repurchase of Option
Shares, as the case may be. In determining the Market/Offer Price,
the value of consideration other than cash shall be determined by
a nationally recognized investment banking firm selected by the
Holder or Owner, as the case may be, and reasonably acceptable to
the Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option
Shares pursuant to this Section 7 by surrendering for such purpose
to Issuer, at its principal office, a copy of this Agreement or
certificates for Option Shares, as applicable, accompanied by a
written notice or notices stating that the Holder or the Owner, as
the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions
of this Section 7. Within the latter to occur of (x) five business
days after the surrender of the Option and/or certificates
representing Option Shares and the receipt of such notice or
notices relating thereto and (y) the time that is immediately
prior to the occurrence of a Triggering Event, Issuer shall
deliver or cause to be delivered to the Holder the Option
Repurchase Price and/or to the Owner the Option Share Repurchase
Price therefor or the portion thereof, if any, that Issuer is not
then prohibited under applicable law and regulation from so
delivering or with respect to which Issuer does not require the
approval (or has obtained such approval) of its stockholders
pursuant to Article VIII of Issuer's Amended Certificate of
Incorporation.
(c) To the extent that Issuer is prohibited under applicable law
or regulation from repurchasing, or requires any approval of its
stockholders to repurchase, the Option and/or the Option Shares in
full, Issuer shall immediately so notify the Holder and/or the
Owner and thereafter deliver or cause to be delivered, from time
to time, to the Holder and/or the Owner, as appropriate, the
portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which
Issuer is no longer so prohibited; provided, however, that if
Issuer at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 7 is prohibited under
applicable law or regulation from delivering, or requires any
approval of its stockholders to deliver, to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option
Share Repurchase Price, respectively, in full (and Issuer hereby
undertakes to use its best efforts to obtain such approval of its
stockholders and all required regulatory and legal approvals and
to file any required notices, in each case as promptly as
practicable in order to accomplish such repurchase), the Holder or
Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of
the Option Repurchase Price or the Option Share Repurchase Price
that Issuer is not prohibited from delivering; and (ii) deliver,
as appropriate, either (A) to the Holder, a new Stock Option
Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the
number of shares of Common Stock for which the surrendered Stock
Option Agreement was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option
Repurchase Price, or (B) to the Owner, a certificate for the
Option Shares it is then so prohibited from repurchasing.
(d) The parties hereto agree that Issuer's obligations to
repurchase the Option or Option Shares under this Section 7 shall
not terminate upon the occurrence of an Exercise Termination Event
unless no Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event.
8. (a) In the event that prior to an Exercise Termination Event,
Issuer shall enter into an agreement (i) to consolidate with or
merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge
into Issuer and Issuer shall be the continuing or surviving
corporation, but, in connection with such merger, the then
outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other person or
cash or any other property or the then outstanding shares of
Common Stock shall after such merger represent less than 50% of
the outstanding voting shares and voting share equivalents of the
merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee
or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision
so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be
converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the
Acquiring Corporation (as hereinafter defined), or (y) any person
that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(A) "Acquiring Corporation" shall mean (i) the
continuing or surviving corporation of a consolidation or
merger with Issuer (if other than Issuer), (ii) Issuer in
a merger in which Issuer is the continuing or surviving
person, and (iii) the transferee of all or substantially
all of Issuer's assets.
(B) "Substitute Common Stock" shall mean the common
stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(C) "Assigned Value" shall mean the Market/Offer Price,
as defined in Section 7.
(D) "Average Price" shall mean the average closing price
of a share of the Substitute Common Stock for the 45
business days immediately preceding the consolidation,
merger or sale in question; provided that if Issuer is
the issuer of the Substitute Option, the Average Price
shall be computed with respect to a share of common stock
issued by the person merging into Issuer or by any
company which controls or is controlled by such person,
as the Holder may elect.
(c) The Substitute Option shall have the same terms as the
Option, provided, that if the terms of the Substitute Option
cannot, for legal reasons, be the same as the Option, such terms
shall be as similar as possible and in no event less advantageous
to the Holder. The issuer of the Substitute Option shall also
enter into an agreement with the then Holder or Holders of the
Substitute Option in substantially the same form as this
Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned
Value multiplied by the number of shares of Common Stock for which
the Option is then exercisable, divided by the Average Price. The
exercise price of the Substitute Option per share of Substitute
Common Stock shall then be equal to the Option Price multiplied by
a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute
Common Stock for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing subsections,
shall the Substitute Option be exercisable for more than 19.9% of
the shares of Substitute Common Stock outstanding prior to
exercise of the Substitute Option. In the event that the
Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder
equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (e) over
(ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm
selected by the Holder or the Owner, as the case may be, and
reasonably acceptable to the Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in
subsection (a) of this Section 8 unless the Acquiring Corporation
and any person that controls the Acquiring Corporation assume in
writing all the obligations of Issuer hereunder.
9. (a) Prior to the Exercise Termination Date, at the request of
the holder of the Substitute Option (the "Substitute Option
Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price
(the "Substitute Option Repurchase Price") equal to (x) the amount
by which (i) the Highest Closing Price (as hereinafter defined)
exceeds (ii) the exercise price of the Substitute Option,
multiplied by the number of shares of Substitute Common Stock for
which the Substitute Option may then be exercised plus (y)
Grantee's reasonable out-of-pocket expenses (to the extent not
previously reimbursed), and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock
(the "Substitute Shares"), the Substitute Option Issuer shall
repurchase the Substitute Shares at a price (the "Substitute Share
Repurchase Price") equal to (x) the Highest Closing Price
multiplied by the number of Substitute Shares so designated plus
(y) Grantee's reasonable Out-of-Pocket Expenses (to the extent not
previously reimbursed). The term "Highest Closing Price" shall
mean the highest closing price for shares of Substitute Common
Stock within the six-month period immediately preceding the date
the Substitute Option Holder gives notice of the required
repurchase of the Substitute Option or the Substitute Share Owner
gives notice of the required repurchase of the Substitute Shares,
as applicable.
(b) Prior to the Exercise Termination Date, the Substitute Option
Holder and the Substitute Share Owner, as the case may be, may
exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute
Shares pursuant to this Section 9 by surrendering for such purpose
to the Substitute Option Issuer, at its principal office, the
agreement for such Substitute Option (or, in the absence of such
an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share
Owner, as the case may be, elects to require the Substitute Option
Issuer to repurchase the Substitute Option and/or the Substitute
Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of
such notice or notices relating thereto, the Substitute Option
Issuer shall deliver or cause to be delivered to the Substitute
Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable
law and regulation, or under any express provision of its
certificate of incorporation or similar charter document requiring
prior stockholder approval, from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited
under applicable law or regulation from repurchasing, or requires
any approval of its stockholders pursuant to its certificate of
incorporation or similar charter document to repurchase, the
Substitute Option and/or the Substitute Shares in part or in full,
the Substitute Option Issuer following a request for repurchase
pursuant to this Section 9 shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and
thereafter deliver or cause to be delivered, from time to time, to
the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the portion of the Substitute Share Repurchase Price,
respectively, which it is no longer prohibited from delivering,
within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that
if the Substitute Option Issuer is at any time after delivery of a
notice of repurchase pursuant to subsection (b) of this Section 9
prohibited under applicable law or regulation from delivering, or
requires the any approval of its stockholders under its
certificate of incorporation or similar charter document to
deliver, to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Optio Repurchase
Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts
to obtain any such required stockholder approval and all required
regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the
Substitute Option Holder or Substitute Share Owner may revoke its
notice of repurchase of the Substitute Option or the Substitute
Shares either in whole or to the extent of the prohibition,
whereupon, in the latter case, the Substitute Option Issuer shall
promptly (i) deliver to the Substitute Option Holder or Substitute
Share Owner, as appropriate, that portion of the Substitute Option
Repurchase Price or the Substitute Share Repurchase Price that the
Substitute Option Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Substitute Option
Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the
Substitute Common Stock obtained by multiplying the number of
shares of the Substitute Common Stock for which the surrendered
Substitute Option was exercisable at the time of delivery of the
notice of repurchase by a fraction, the numerator of which is the
Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the
denominator of which is the Substitute Option Repurchase Price, or
(B) to the Substitute Share Owner, a certificate for the
Substitute Common Shares it is then so prohibited from
repurchasing.
10. The 60-day period for exercise of certain rights under
Sections 2, 6, 7 and 14 shall be extended: (i) to the extent
necessary to obtain all regulatory approvals for the exercise of
such rights, for the expiration of all statutory waiting periods,
and to the extent required to obtain any required stockholder
approval or until such stockholder approval is no longer required
pursuant to the relevant certificate of incorporation or similar
charter document; and (ii) to the extent necessary to avoid
liability under Section 16(b) of the 1934 Act by reason of such
exercise.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of
Issuer and no other corporate proceedings on the part of Issuer
(other than the shareholder approval referred to in Sections 7(b)
and 9(a)) are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has
been duly and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize
and reserve and to permit it to issue, and at all times from the
date hereof through the termination of this Agreement in
accordance with its terms will have reserved for issuance upon the
exercise of the Option, that number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares,
upon issuance pursuant hereto, will be duly authorized, validly
issued, fully paid, nonassessable, and will be delivered free and
clear of all claims, liens, encumbrance and security interests and
not subject to any preemptive rights.
(c) Issuer has taken all action (including if required redeeming
all of the Rights or amending or terminating the Rights Agreement)
so that the entering into of this Option Agreement, the
acquisition of shares of Common Stock hereunder and the other
transactions contemplated hereby do not and will not result in the
grant of any rights to any person under the Rights Agreement or
enable or require the Rights to be exercised, distributed or
triggered.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part
of Grantee. This Agreement has been duly executed and delivered by
Grantee.
(b) The Option is not being, and any shares of Common Stock or
other securities acquired by Grantee upon exercise of the Option
will not be, acquired with a view to the public distribution
thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration
under the Securities Act.
13. (a) Notwithstanding anything to the contrary contained
herein, in no event shall Grantee's Total Profit (as defined below
in Section 13(c)) exceed $35 million.
(b) Notwithstanding anything to the contrary contained herein,
the Option may not be exercised for a number of shares as would,
as of the date of exercise, result in a Notional Total Profit (as
defined below in Section 13(d)) of more than $35 million;
provided, that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the
aggregate amount (before taxes) of the following: (i) the amount
received by Grantee pursuant to Issuer's repurchase of the Option
(or any portion thereof) pursuant to Section 7, (ii) (x) the
amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 7, less (y) Grantee's purchase
price for such Option Shares, and (iii) any equivalent amount with
respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect
to any number of shares as to which Grantee may propose to
exercise the Option shall be the Total Profit determined as of the
date of such proposed exercise assuming that the Option were
exercised on such date for such number of shares and assuming that
such shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the
closing market price for the Common Stock as of the close of
business on the preceding trading day (less customary brokerage
commissions).
14. Neither of the parties hereto may assign any of its rights or
obligations under this Option Agreement or the Option created
hereunder to any other person, without the express written consent
of the other party, except that Grantee, subject to the express
provisions hereof, may assign in whole or in part its rights and
obligations hereunder to any of its wholly owned subsidiaries.
15. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the
transactions contemplated by this Agreement, including making
application to list the shares of Common Stock issuable hereunder
on the New York Stock Exchange upon official notice of issuance.
16. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be
enforceable by either party hereto through injunctive or other
equitable relief.
17. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and
covenants and restrictions contained in this Agreement shall
remain in full force and effect, and shall in no way be affected,
impaired or invalidated. If for any reason such court or
regulatory agency determines that the Holder is not permitted to
acquire, or Issuer is not permitted to repurchase pursuant to
Section 7, the full number of shares of Common Stock provided in
Section 1(a) (as adjusted pursuant to Section 1(b) or 5), it is
the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as
may be permissible, without any amendment or modification hereof.
18. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed
given if personally delivered, telecopied (with confirmation) or
mailed by registered or certified mail (return receipt requested)
at the respective addresses of the parties set forth in the Merger
Agreement.
19. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, regardless
of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
20. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
21. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred
by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and
counsel.
22. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between
the parties with respect to the transactions contemplated
hereunder and supersedes all prior arrangements or understandings
with respect thereof, written or oral. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties hereto,
and their respective successors except as assigns, any rights,
remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided herein.
23. Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger
Agreement.
24. Subject to compliance with applicable law, prior to the
Effective Time, any provision hereof may be (i) waived by the
party benefited by the provision, or (ii) amended or modified at
any time, by an agreement in writing between the parties hereto
approved by their respective Boards of Directors and executed in
the same manner as this Agreement.
25. The provisions of Sections 9.9 and 9.10 of the Merger
Agreement shall apply equally to this Agreement as if included
herein.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
ECHLIN INC.
By: /s/ Larry W. McCurdy
------------------------------
Name: Larry W. McCurdy
Title: Chairman, President and
Chief Executive Officer
DANA CORPORATION
By: /s/ Southwood J. Morcott
------------------------------
Name: Southwood J. Morcott
Title: Chairman and Chief Executive
Officer
Exhibit 99.1
FOR IMMEDIATE RELEASE
DANA AND ECHLIN ANNOUNCE STOCK-FOR-STOCK TRANSACTION CREATING $13 BILLION
GLOBAL LEADER IN AUTOMOTIVE COMPONENTS
Transaction Represents $55 Per Echlin Share Or $4.2 Billion In Total
---------------------------------------------------------
TOLEDO, OH and BRANFORD, CT - (May 4, 1998) - Dana Corporation (NYSE: DCN) and
Echlin Inc. (NYSE: ECH) announced today that each company's board of directors
has unanimously approved a definitive merger agreement for a tax-free,
stock-for-stock transaction combining a global leader in automotive original
equipment ("OE") with a global leader in the automotive aftermarket. The
combined company would have annual sales of approximately $13 billion and a
total equity market value of approximately $10 billion. The transaction is
expected to be accounted for as a pooling of interests and to become accretive
to earnings per share during the first full year of operations after the merger.
Under the terms of the agreement, Echlin shareholders would receive 0.9293
shares of Dana for each share of Echlin they own. Based upon a closing price of
$59.1875 per share for Dana on Friday, May 1, 1998, this represents a price of
$55 per Echlin share. Dana would issue approximately $3.6 billion in common
stock to Echlin shareholders and assume approximately $570 million in net debt.
Once full integration is achieved, which will be substantially complete by the
year 2000, the companies anticipate synergies would add approximately $200
million annually to operating income. These synergies would be over and above
the Phase I and Phase II repositioning initiatives previously announced by
Echlin. 1999 pre-tax synergies from the transaction are expected to be $75
million. Savings would result from the elimination of duplicate functions,
consolidation of distribution and marketing infrastructure, improved
productivity, and the benefits of global materials and components sourcing. More
importantly, the combined company would be able to leverage its marketing
strengths - capitalizing on Echlin's premier position in the aftermarket to sell
Dana's products, while at the same time accelerating Echlin's efforts to grow
with its global OE customers where Dana has a leadership position.
The combination with Echlin would greatly expand Dana's presence in the global
automotive aftermarket and selected OE segments. The combined company will be
able to offer more comprehensive product lines to both OE and aftermarket
customers worldwide than either company could achieve individually. These
products include fuel system and engine management components, brakes, and
vehicular drivetrain components and systems. Dana and Echlin together will have
a stable of premium brand names including Raybestos(registered),
BWD(registered), Quinton Hazell(registered), Spicer(registered), Perfect
Circle(registered), Victor Reinz(registered), and Wix(registered).
The transaction fortifies Dana's position as one of the world's largest
independent manufacturers of automotive components for the passenger car, truck
and off-highway vehicle markets. Following the transaction, Dana will also be
one of the largest independent manufacturers of components for the worldwide
automotive aftermarket.
Southwood J. Morcott, chairman and chief executive officer of Dana, said, "This
transaction is a major step toward achieving our previously announced Beyond
2000 strategic goals, including improved financial performance, growth in our
core product areas, and increased emphasis on the global aftermarket. In fact,
this combination helps us to accomplish our goals of 50% diversified sales and
$10 billion in annual sales ahead of schedule. This move will have the benefit
of expanding our product line and significantly broadening and balancing our
customer base.
"The combination will benefit Dana shareholders by further diversifying the
company's business base," Mr. Morcott continued. "In addition to the substantial
synergies, by diversifying the company's business base, we expect that this
combination will enhance shareholder value relative to the historically higher
multiples accorded aftermarket businesses. We have identified a number of ways
to streamline the distribution process and to generate economies in
manufacturing, capitalizing on our proven track record of aggressive asset
management. We see opportunities to sell Echlin components to Dana customers and
to further utilize Dana's R&D and engineering capabilities to produce a broader
range of world-class quality components for the aftermarket. Dana and Echlin are
an ideal combination of products, markets, leadership, and cultures. I look
forward to closing this transaction and getting on with the business of seizing
the opportunities it creates."
Mr. Morcott added, "In short, Echlin helps us in the aftermarket. Dana helps
Echlin in original equipment. Dana gains two new core products -- brakes and
engine fluid products -- each with combined sales of over $1 billion. This
greatly enhances our engine components strategic business unit, which would now
exceed $3 billion in sales.
"This transaction also strengthens our balance sheet. By the end of this year,
the combined company is expected to have debt-to-total capital of less than 40%
- -- achieving another important goal. This positions Dana well to capitalize on
opportunities for future growth," said Mr. Morcott.
Larry McCurdy, chairman, president and chief executive officer of Echlin, said,
"Joining with Dana makes strategic sense because it will result in a financially
strong company that has a diversified business mix with leadership positions in
virtually all of its markets. This transaction with Dana is a win-win for our
shareholders, employees and customers. The transaction provides our shareholders
with an immediate premium while allowing all Echlin constituents to participate
in the upside potential of the combined company.
"Together, we will offer customers a full range of high quality automotive
products building on the combined company's strong brands and long-standing
distribution relationships. We will provide superior products, services, and
value to our customers. I know our customers will be delighted with this
combination. I am excited about the opportunities this transaction presents,"
Mr. McCurdy concluded.
Upon completion of the merger, Mr. McCurdy will become president of the Echlin
Strategic Business Unit of Dana, which will lead Dana's aftermarket activities.
Mr. Morcott added, "I am particularly pleased that Larry McCurdy will join Dana.
Larry and I have known each other for over 20 years. He is a very good
businessman, and I have great respect for his integrity, vision, industry
expertise and leadership. I look forward to working with the Echlin team to
build on their strengths in the combined company."
Dana currently pays an annualized dividend of $1.16 per share. Based on the
conversion ratio, Echlin shareholders would expect to receive an annualized
dividend of $1.08 per share compared to Echlin's current annualized dividend of
$0.90 per share, an increase of 20%. Effective with the payment of its June 1998
dividend, Dana will mark its 242nd consecutive dividend paid and continue a more
than 60-year succession of dividends paid without a decrease or missed payment.
The merger is conditioned upon the approval of Dana and Echlin shareholders and
customary regulatory approvals. The companies anticipate that the transaction
should close in the third calendar quarter of 1998.
Lehman Brothers Inc. acted as financial advisor and provided a fairness
opinion to Dana and Salomon Smith Barney acted as financial advisor and
provided a fairness opinion to Echlin.
Echlin, with annual sales of $3.5 billion, is a leading producer of quality
automotive parts, with more than 140 operations and 28,000 employees spread
across six continents. It manufactures and distributes brake, engine, power
transmission, and steering and suspension system components for the world's 650
million motor vehicles. The company sells these products to a broad base of
aftermarket customers, who, in turn, supply them to professional technicians and
do-it-yourselfers. It also sells components to original equipment customers for
factory installation on new vehicles. Echlin's home page address on the Internet
is www.echlin.com.
Dana Corporation is a global leader in the engineering, manufacture, and
distribution of products and services for the automotive, engine, heavy truck,
off-highway, industrial, and leasing markets. Founded in 1904 and based in
Toledo, Ohio, Dana operates facilities in 30 countries and employs more than
50,000 people. The company reported record sales of $8.3 billion in 1997. The
Internet address for Dana's home page is www.dana.com. Certain statements
contained herein constitute "forward-looking" statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve numerous assumptions, known and unknown risks, uncertainties
and other factors which may cause actual and future performance or achievements
of Dana or Echlin, including with respect to the proposed merger, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among other things, the following: achieving sales levels to fulfill revenue
expectations; the absence of presently unexpected costs or charges, certain of
which may be outside the control of Dana and Echlin; the cyclical nature of the
automotive industry; failure to achieve synergies or savings anticipated in the
merger; general economic and business conditions; and competition. Additional
factors are detailed in Dana's and Echlin's public filings with the Securities
and Exchange Commission. Dana and Echlin disclaim any responsibility to update
any forward-looking statement provided in this press release.
This release is neither an offer to sell nor a solicitation of an offer to buy
Dana Corporation securities, nor a solicitation of a proxy. Any such offer or
solicitation will only be made in compliance with applicable securities laws.
Contacts:
FOR DANA:
Investors: Media:
Stephen N. Superits Gary Corrigan
Vice President - Investor Relations Director - Corporate
(419) 535-4636 Communications
(419) 535-4813
Joele Frank/Daniel Katcher
Abernathy MacGregor Frank
(212) 371-5999
FOR ECHLIN:
Paul R. Ryder Lawrence Rand/Eric Berman
Vice President - Investor Relations Kekst & Co.
(203) 481-5751 (212) 521-4800
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