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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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OUTBOARD MARINE CORPORATION
(NAME OF SUBJECT COMPANY)
OUTBOARD MARINE CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $0.15 PER SHARE
(TITLE OF CLASS OF SECURITIES)
690020102
(CUSIP NUMBER OF CLASS OF SECURITIES)
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HARRY W. BOWMAN
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
OUTBOARD MARINE CORPORATION
100 SEA HORSE DRIVE
WAUKEGAN, ILLINOIS 60085
(847) 689-6200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
With a copy to:
D. JEFFREY BADDELEY, ESQ.
VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
OUTBOARD MARINE CORPORATION
100 SEA HORSE DRIVE
WAUKEGAN, ILLINOIS 60085
(847) 689-6200
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Outboard Marine Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 100 Sea Horse Drive, Waukegan, Illinois 60085. The title of the
class of equity security to which this Schedule 14D-9 relates is the common
stock, par value $0.15 per share, of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to a tender offer by OMC Acquisition Corp., a
Delaware corporation (the "Offeror") and a wholly-owned subsidiary of Detroit
Diesel Corporation, a Delaware corporation ("DDC"), disclosed in a Tender Offer
Statement on Schedule 14D-1 dated July 15, 1997 (the "Schedule 14D-1"), to
purchase 13,842,619 shares of the Common Stock (the "Shares") at a price of
$16.00 per Share net to the selling shareholder in cash without interest (the
"Offer") as set forth in the Agreement and Plan of Merger among DDC, the Offeror
and the Company (the "Merger Agreement"), a copy of which is filed as Exhibit
99.1 to this Schedule 14D-9. In the event the Offer is consummated, the Merger
Agreement provides that, subject to the satisfaction or waiver of certain
conditions set forth therein, the Offeror will merge (the "Merger") with and
into the Company, which will continue as the surviving corporation of the
Merger. Pursuant to the Merger, at the effective time thereof (the "Effective
Time"), each then issued and outstanding Share (other than Shares held by the
Company as treasury stock, Shares owned by the Offeror or DDC or Shares held by
shareholders who perfect their appraisal rights under the Delaware General
Corporation Law, as amended (the "DGCL")) (the "Exchanged Shares") will be
converted into and represent the right to receive (a) a fractional share of the
common stock of DDC equal to 4,000,000 divided by the number of Exchanged Shares
(the "Exchange Ratio"), plus (b) a cash payment equal to (i) $16.00 minus (ii)
the product of the Exchange Ratio times $25.00, plus (c) in the event the
average closing price of common stock of DDC on the New York Stock Exchange (the
"NYSE") for the 20 consecutive trading days ending on the fifth trading day
prior to the closing date of the Merger (the "Closing Date Market Price") is
less than $25.00, then an additional cash payment equal to the product of the
Exchange Ratio multiplied by the lesser of (i) $25.00 minus the Closing Date
Market Price or (ii) $6.00.
All references in this Schedule 14D-9 to the Merger Agreement and to the
transactions contemplated thereby are qualified in their entirety by reference
to the Merger Agreement.
All information contained in this Schedule 14D-9 or incorporated herein by
reference concerning DDC, the Offeror or their affiliates, or actions or events
with respect to any of them, was provided by DDC or the Offeror, and the Company
takes no responsibility for the accuracy or completeness of such information or
for any failure by such entities to disclose events or circumstances that may
have occurred and may affect the significance, completeness or accuracy of any
such information.
Based on information in the Offer to Purchase, the principal executive
offices of DDC and the Offeror are located at 13400 Outer Drive, West, Detroit,
Michigan 48239-4001.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above.
(b) Except as set forth in this Item 3 and Item 4, to the knowledge of the
Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings, or actual or potential conflicts of interest,
between the Company or any of its affiliates and (i) the Company, its executive
officers, directors or affiliates or (ii) DDC, the Offeror or their executive
officers, directors or affiliates.
SEVERANCE AGREEMENTS. The Company has entered into an Amended and Restated
Severance Agreement dated as of March 31, 1997, with Harry W. Bowman, the
Company's Chairman of the Board, President and Chief Executive Officer (the
"Bowman Severance Agreement"). A copy of the Bowman Severance Agreement is filed
as Exhibit 99.2 to this Schedule 14D-9 and is incorporated herein by reference.
The following summary of the Bowman Severance Agreement does not purport to be
complete and is qualified in
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its entirety by reference to the Bowman Severance Agreement. Capitalized terms
used but not otherwise defined herein are used herein as defined in the Bowman
Severance Agreement.
The Bowman Severance Agreement will become operative only upon a Change in
Control of the Company. A "Change in Control" is defined in the Bowman Severance
Agreement as having occurred when: (a) any individual, entity or group (within
the meaning of the Securities Exchange Act of 1934 (the "Exchange Act")) (a
"Person") acquires beneficial ownership of securities representing 15% or more
of the combined voting power of the voting stock of the Company; (b) individuals
who, as of the date of the Bowman Severance Agreement, constitute the
"incumbent" members of the Board of Directors of the Company (the "Company Board
of Directors") cease for any reason to constitute at least a majority of the
Company Board of Directors, provided that an individual whose election (or
nomination for election by the Company's shareholders) was approved by at least
two-thirds of the incumbent members of the Company Board of Directors shall be
deemed to be an incumbent member of the Company Board of Directors; (c)
consummation of a reorganization, merger or consolidation or a sale or
disposition of all or substantially all of the assets of the Company shall occur
(each, a "Business Combination"), unless immediately following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners of voting stock of the Company immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
80% of the then outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors of the Company or, if applicable, other entity resulting
from such Business Combination in substantially the same proportions relative to
each other as their ownership of the voting stock of the Company immediately
prior to such Business Combination, (ii) no Person (other than the Company or,
if applicable, other entity resulting from such Business Combination, or any
employee benefit plan sponsored or maintained by the Company, any subsidiary of
the Company or, if applicable, other entity resulting from such Business
Combination) beneficially owns, directly or indirectly, 15% or more of the then
outstanding shares of common stock of the entity resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of such
entity, and (iii) at least a majority of the members of the Board of Directors
of the entity resulting from such Business Combination were incumbent members of
the Company Board of Directors at the time of the execution of the initial
agreement or of the action of the Company Board of Directors providing for such
Business Combination; or (iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company shall occur, except pursuant
to a Business Combination that complies with subclauses (i), (ii) and (iii) of
clause (c) above.
Under the Bowman Severance Agreement, Mr. Bowman will remain employed by
the Company during the Severance Period, which is defined in the Bowman
Severance Agreement as the period of time commencing on the date of the first
occurrence of a Change in Control and continuing until the earliest of (a) the
third anniversary of the occurrence of the Change in Control, (b) the death of
Mr. Bowman or (c) Mr. Bowman's attainment of age 65; provided, however, that
commencing on each anniversary of the Change in Control, the Severance Period
will automatically be extended for an additional year unless, not later than 90
calendar days prior to such anniversary date, either the Company or Mr. Bowman
shall give written notice to the other that the Severance Period is not to be so
extended. Mr. Bowman will be entitled to severance pay if (a) he is terminated
by the Company during the Severance Period for any reason other than (i) in the
event of his death, (ii) in the event of his permanent disability and receipt of
disability benefits or (iii) "cause" (as defined in the Bowman Employment
Agreement), or (b) Mr. Bowman terminates his own employment for, among other
reasons, (i) failure of the surviving corporation of a Business Combination to
maintain Mr. Bowman in the same or a similar office or position or removal of
Mr. Bowman as a director of any such surviving corporation, (ii) a material
reduction in duties, responsibilities, compensation or benefits (iii) a
determination by Mr. Bowman that a change in circumstances has occurred which
has rendered him substantially unable to carry out, has substantially hindered
his performance of, or has caused him to suffer a substantial reduction in, any
of the authorities, powers, functions, responsibilities or duties attached to
his position prior to the Change in Control, (iv) the occurrence of a Business
Combination, unless the successor or successors to which all or substantially
all its business or assets have been transferred shall have assumed all duties
and obligations of the Company under the Bowman Severance Agreement, (v) a
relocation of his principal work location more than 35 miles from the location
thereof immediately prior to the Change in
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Control, (vi) any material breach of the Bowman Severance Agreement, or (vii)
any reason or without reason during the one-year period commencing upon a Change
in Control.
If Mr. Bowman is terminated or resigns with the right to receive severance
pay under the Bowman Severance Agreement, that severance pay will include (i) a
lump-sum payment of approximately $3.4 million, which includes an amount equal
to 300% of his base salary, as in effect immediately prior to a change in
control, plus Incentive Pay (determined in accordance with the standards set
forth in Section 1(h) of the Bowman Severance Agreement) and (ii) health and
welfare benefits for a period of one year. The Bowman Severance Agreement
stipulates that payments and benefits available to Mr. Bowman will be increased
by an amount (the "Gross-up Payment") such that, after the payment of all income
and excise taxes, Mr. Bowman will be in the same after-tax position that he
would have been in had no excise tax under Section 4999 of the Internal Revenue
Code been imposed; provided, however, that no Gross-up Payment shall be made
with respect to any excise tax attributable to any incentive stock option
granted prior to the execution of the Bowman Severance Agreement or any stock
appreciation or similar right granted in tandem with any such incentive stock
option.
The Bowman Severance Agreement also contains a non-compete provision that
prohibits Mr. Bowman from certain participation in the business of any company
engaged in a Competitive Activity (as defined in the Bowman Severance Agreement)
without the prior written consent of the Company, which shall not be
unreasonably withheld, for a period ending one year following his termination
with the right to receive severance pay.
The Company has entered into Amended and Restated Severance Agreements (the
"Elected Officer and Key Employee Severance Agreements") with seven of its
elected corporate officers ("Elected Officers") and fourteen of its appointed
corporate officers and key employees ("Key Employees"). A form of the Elected
Officer and Key Employee Severance Agreements is filed as Exhibit 99.3, to this
Schedule 14D-9 and incorporated herein by reference. The following summary of
the Elected Officer and Key Employee Severance Agreements does not purport to be
complete and is qualified in its entirety by reference to the Elected Officer
and Key Employee Severance Agreements.
The Elected Officer and Key Employee Severance Agreements will become
operative only upon a Change in Control. The definition of Change in Control in
the Elected Officer and Key Employee Severance Agreements is substantially the
same as that in the Bowman Severance Agreement. Under the Elected Officer and
Key Employee Severance Agreements, Elected Officers and Key Employees will
remain employed by the Company during the Severance Period. The definition of
Severance Period in the Elected Officer and Key Employee Severance Agreements is
substantially the same as that in the Bowman Severance Agreement. The Elected
Officers and the Key Employees will be entitled to severance pay if terminated
by the Company during the Severance Period for any reason other than (i) in the
event of death, (ii) in the event of permanent disability and receipt of
disability benefits or (iii) "cause" (as defined in the Elected Officer and Key
Employee Severance Agreements), or if the Elected Officer or Key Employee
terminates employment for, among other reasons, (i) failure of the surviving
corporation of a Business Combination to maintain such Elected Officer or Key
Employee in the same or a similar office or position or removal of such Elected
Officer or Key Employee as a director of any such surviving corporation if such
Elected Officer or Key Employee shall have been a director prior to the Change
in Control, (ii) a material reduction in duties, responsibilities, compensation
or benefits, (iii) a determination by such Elected Officer or Key Employee that
a change in circumstances has occurred which has rendered such Elected Officer
or Key Employee substantially unable to carry out, has substantially hindered
such Elected Officer's or Key Employee's performance of, or has caused such
Elected Officer or Key Employee to suffer a substantial reduction in, any of the
authorities, powers, functions, responsibilities or duties attached to the
position held by such Elected Officer or Key Employee prior to the Change in
Control, (iv) the occurrence of a Business Combination unless the successor or
successors to which all or substantially all its business or assets have been
transferred assumed all duties and obligations of the Company under such Elected
Officer's or Key Employee's Elected Officer and Key Employee Severance
Agreement, (v) a relocation of such Elected Officer's or Key Employee's
principal work location more than 35 miles from the location thereof immediately
prior to the Change in Control, or (vi) any material breach of such Elected
Officer's or Key Employee's Elected Officer and Key Employee Severance
Agreement.
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If an Elected Officer or Key Employee is terminated or resigns with the
right to receive severance pay under the Elected Officer and Key Employee
Severance Agreements, that severance pay will include (i) a lump-sum payment
equal to 200%, in the case of an Elected Officer, or 100%, in the case of a Key
Employee, of his or her annual base salary, as in effect immediately prior to a
Change in Control, plus Incentive Pay (determined in accordance with the
standards set forth in Section 1(h) of the Elected Officer and Key Employee
Severance Agreements) and (ii) health and welfare benefits for a period of one
year. To the extent that any amount or benefit to be paid or provided under the
Elected Officer and Key Employee Severance Agreements would be an "Excess
Parachute Payment" within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended, the Elected Officer and Key Employee Severance
Agreements impose a reduction on any amount or benefit to be paid to the minimum
amount necessary to ensure that no portion of any such payment or benefit, as so
reduced, constitutes an Excess Parachute Payment.
The Elected Officer and Key Employee Severance Agreements also contain a
non-compete provision that prohibits an Elected Officer or Key Employee from
certain participation in the business of any company engaged in a Competitive
Activity (as defined in the Elected Officer and Key Employee Severance
Agreements) without the prior written consent of the Company, which shall not be
unreasonably withheld, for a period ending one year following the Elected
Officer's or Key Employee's termination with the right to receive severance pay.
The Company has also entered into severance agreements with four managers
of the Company ("Managers"). A form of these agreements, as amended (the
"Manager Severance Agreements"), is filed as Exhibit 99.4 to this Schedule 14D-9
and incorporated herein by reference. The following summary of the Manager
Severance Agreements does not purport to be complete and is qualified in its
entirety by reference to the Manager Severance Agreements.
Each of the Manager Severance Agreements has a one-year term that is
automatically extended from year to year. The Manager Severance Agreements,
which apply only upon a Change-in-Control of the Company, provide that if a
Manager elects to resign his employment for certain specified reasons or is
terminated by the Company other than for "cause" (as defined in the Manager
Severance Agreements), the Company will pay the Manager an amount in cash, equal
to (i) a fraction, the numerator of which is equal to the lesser of twelve and
the number of full and partial months existing between the date the Manager
terminates his employment and his 65th birthday and the denominator of which is
twelve, multiplied by (ii) the Manager's then current base salary plus the
highest amount of incentive compensation received by the Manager in the five
years preceding the Change-in-Control. In addition, the Company will pay the
Manager, in cash, amounts accelerated, earned, allocated or deferred under the
Company's pension, retirement, compensation or annual and long-term incentive
plans.
For purposes of the Manager Severance Agreements, a Change-in-Control of
the Company shall generally be deemed to have occurred if (i) any person, other
than the Company or fiduciaries holding securities under an employee benefit
plan of the Company, is or becomes the beneficial owner of securities of the
Company representing 15% or more of the combined voting power of the Company's
then outstanding securities; (ii) during any period of two consecutive years,
individuals who constitute the Company Board of Directors at the beginning of
such period, as well as new directors (other than certain directors designated
by a person who has entered into certain change-in-control transactions) whose
election by the Company Board of Directors or nomination for election by the
Company's shareholders is approved by a vote of at least two-thirds of the
directors then still in office, cease for any reason to constitute a majority of
the Company Board of Directors; (iii) the shareholders of the Company approve a
merger or consolidation of the Company with any other company, other than
certain transactions in which the voting securities of the Company continue to
represent at least 80% of the combined voting power of the Company or other
surviving entity of such transaction or certain recapitalizations in which no
person acquires more than 15% of the combined voting power of the Company's then
outstanding securities; (iv) the shareholders of the Company approve a plan of
complete liquidation of the Company; or (v) the Company enters into an agreement
for the disposition of all or substantially all the Company's assets or the
Company otherwise disposes of such assets.
William C. France, a director of the Company, abstained from the decision
of the Company Board of Directors regarding the Merger Agreement, the Offer and
the Merger. Mr. France is also a director of Penske
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Motorsports, Inc. Penske Corporation indirectly owns approximately 46% of DDC
and approximately 58% of Penske Motorsports, Inc.
MERGER AGREEMENT. The following description of certain provisions of the
Merger Agreement does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, a copy of which is filed as
Exhibit 99.1 to this Schedule 14D-9 and incorpoated herein by reference.
Capitalized terms used but not otherwise defined herein are used herein as
defined in the Merger Agreement.
The Merger Agreement provides for the commencement of the Offer not later
than five business days after the execution of the Merger Agreement, subject to
certain specified conditions. Pursuant to the terms and conditions of the Merger
Agreement, DDC, the Offeror and the Company are required to use all reasonable
efforts to take all action as may be necessary or appropriate in order to
effectuate the Offer and the Merger as promptly as possible and to carry out the
transactions provided for or contemplated by the Merger Agreement.
The Merger Agreement provides that, if all of the conditions to the Merger
shall have been fulfilled or waived and the Merger Agreement shall not have been
terminated, the Offeror will be merged with and into the Company, which will
continue as the Surviving Corporation in the Merger.
In the Merger Agreement, the Company, through the Company Board of
Directors, will call a meeting of the shareholders for the purpose of voting
upon the Merger, will hold such meeting as soon as practicable following the
purchase of Shares pursuant to the Offer and the effectiveness of the
registration statement for the shares of common stock, par value $0.01 per
share, of DDC ("DDC Common Shares") to be issued in connection with the Merger
and, subject to the fiduciary duties of the Company Board of Directors under
applicable law as advised by outside counsel for the Company, will recommend to
its shareholders the approval of the Merger. Such recommendation may not be
withdrawn or adversely modified except by resolution of the Company Board of
Directors adopted in the exercise of the aforementioned fiduciary duties. The
Company must use reasonable efforts to solicit from its shareholders proxies in
favor of the Merger and take all other actions reasonably requested by DDC to
secure the vote of shareholders required by the DGCL to effect the Merger. At
any such meeting, all of the Shares then owned by DDC, the Offeror or any of
their subsidiaries or affiliates will be voted in favor of the Merger and the
Merger Agreement.
At the Effective Time, each Share issued and outstanding immediately prior
thereto (other than Shares owned by DDC or the Offeror or held by the Company,
all of which shall be cancelled, and Shares as to which appraisal rights have
been properly exercised under the DGCL) will automatically be converted into the
right to receive the consideration described in the last sentence of the first
paragraph under Item 2 above (the "Merger Consideration"). Each share of common
stock of the Offeror issued and outstanding immediately prior to the Effective
Time will automatically be converted at the Effective Time into one validly
issued and outstanding share of common stock of the Surviving Corporation. In
the Merger Agreement, the Company has agreed to use reasonable efforts to ensure
that all outstanding stock options (the "Options"), performance share awards
(the "Performance Shares") and phantom restricted stock awards (the "Phantom
Restricted Stock Awards") heretofore granted under any plan, program or
arrangement of the Company (collectively, the "Incentive Equity Plans") that are
outstanding immediately prior to the Effective Time shall be acquired by the
Company at the Effective Time for cash payments by the Company as follows:
(I) With respect to Options, an amount equal to (A) the excess, if
any, of (1) (a) for all option holders who are not officers or directors of
the Company for purposes of Section 16 of the Exchange Act, the cash value
of 33% of the per share Merger Consideration payable with respect to the
Shares plus $10.72, and (b) for all option holders who are officers or
directors of the Company for purposes of Section 16 of the Exchange Act,
the greater of (i) the cash value of 33% of the per share Merger
Consideration payable with respect to the Shares plus $10.72 or (ii) the
highest closing price of the Shares on the NYSE during the 180-day period
preceding the date on which the purchase of Shares pursuant to the Offer is
consummated over (2) the exercise price per Share subject to the Option,
multiplied by (B) the number of Shares for which the Option shall not have
theretofore been exercised;
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(II) With respect to Performance Shares, an amount equal to the
product of (A) (1) the number of Performance Shares covered by the award
multiplied by (2) a fraction, the numerator of which is the number of days
that shall have then elapsed in the applicable three-year performance cycle
and the denominator of which is 1,095, and (B) the "Payment Value" (as
defined in the Company's 1994 Long-Term Incentive Plan or Executive Equity
Incentive Plan, as the case may be) specified in the agreement evidencing
the subject Performance Share award; and
(III) With respect to Phantom Restricted Stock Awards, an amount equal
to (A) (1) the number of phantom shares of restricted stock covered by the
award multiplied by (2) the cash value of 33% of the per share Merger
Consideration payable with respect to the Shares plus $10.72 plus (B) the
cash value of dividend equivalents credited to the phantom shares of
restricted stock covered by the award.
Either prior to or as soon as practicable following the consummation of the
Offer, the Company Board of Directors (or, if appropriate, the Compensation
Committee of the Company Board of Directors) is required to adopt such
resolutions or take other such actions as are required to cause any Options that
are not exercisable as of the date of the Merger Agreement to become
exercisable, to cause any Performance Share awards (prorated in accordance with
clause (II) (A) above) that are not payable as of the date of the Merger
Agreement to become payable, and to cause any Phantom Restricted Stock Awards
(and dividend equivalents credited to the phantom shares of restricted stock
covered thereby) that are not payable as of the date of the Merger Agreement to
become payable, at the Effective Time.
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction or waiver, where permissible, prior to the Effective
Time, of the following conditions:
(i) If approval of the Merger Agreement and the Merger by the
Company's shareholders is required by applicable law, the Merger Agreement
and the Merger shall have been approved by the requisite vote of such
holders; and
(ii) There shall not have been issued any injunction or issued or
enacted any law that prohibits or has the effect of prohibiting the
consummation of the Merger or makes such consummation illegal; provided,
however, that each of the parties must use its best efforts to prevent the
entry of any injunctive or other order and to appeal as promptly as
possible any injunction or other order that may be entered.
In the Merger Agreement, the Company has agreed that on the date the
Offeror's offer documents are filed with the Securities and Exchange Commission
(the "Commission"), it will file with the Commission and mail to its
shareholders this Solicitation/Recommendation Statement on Schedule 14D-9
containing the recommendation of the Company Board of Directors that the
Company's shareholders accept the Offer and approve the Merger and the Merger
Agreement, provided that such recommendation may be withdrawn, amended or
modified to the extent the Company Board of Directors determines to do so in the
exercise of its fiduciary duties based upon the written advice of counsel.
The Merger Agreement provides that, upon the purchase of the Shares
pursuant to the consummation of the Offer, DDC shall be entitled to designate
such number of directors, rounded up to the next whole number, as will give DDC
representation on the Board of Directors equal to the product of (1) the number
of directors on the Board of Directors and (2) the percentage that the number of
Shares purchased by the Offeror or DDC, or any affiliate thereof bears to the
aggregate number of Shares outstanding. The Company has agreed, upon the request
of DDC, to promptly increase the size of the Company Board of Directors or
exercise its reasonable efforts to secure the resignations of such number of
directors as is necessary to enable DDC's designees to be elected to the Company
Board of Directors and to cause DDC's designees to be so elected. The Company
has agreed to take all reasonably appropriate action necessary to effect any
such election and shall provide the information required by Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. Notwithstanding the
foregoing, the parties shall use their respective reasonable efforts to ensure
that at least three of the members of the Company Board of Directors not
designated by DDC shall at all times prior to the Effective Time continue in
office.
In the Merger Agreement, the Company has made customary representations and
warranties to DDC and the Offeror, including but not limited to representations
and warranties relating to the Company's
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organization and qualification, capitalization, its authority to enter into the
Merger Agreement and carry out the related transactions, Commission filings
(including financial statements), the documents supplied by the Company relating
to the Offer, required consents and approvals, compliance with applicable laws,
employee benefit plans, litigation, material liabilities of the Company and its
subsidiaries, environmental matters, labor matters, insurance, taxes,
intellectual property and the absence of certain material adverse changes or
events since September 30, 1996.
DDC and the Offeror have also made customary representations and warranties
to the Company, including but not limited to representations and warranties
relating to the Offeror's organization and qualification, its authority to enter
into the Merger Agreement, required consents and approvals, documents related to
the Offer, terms of the Offer, the availability of sufficient funds to
consummate the Offer, compliance with applicable laws, capitalization,
Commission filings (including financial statements), the absence of certain
material adverse changes or events since December 31, 1996, taxes, litigation,
employee benefit plans, material liabilities of DDC and its subsidiaries, and
environmental matters relating to DDC and its subsidiaries.
Pursuant to the Merger Agreement, unless DDC has otherwise consented in
writing thereto, the Company shall, and shall cause each of its subsidiaries to,
(1) conduct its operations according to its usual, regular and ordinary course
of business consistent with past practice; (2) use its reasonable efforts to
preserve intact its business organizations and goodwill, maintain in effect
existing qualifications, licenses, permits, approvals and other authorizations
(other than those the lapse of which would not have, individually or in the
aggregate, a material adverse effect on the Company and its subsidiaries), keep
available the services of its officers and employees and maintain satisfactory
relationships with those persons having business relationships with them; (3)
promptly upon the discovery thereof notify DDC of the existence of any breach of
any representation or warranty of the Company contained in the Merger Agreement
or the occurrence of any event that would cause any representation or warranty
of the Company contained in the Merger Agreement no longer to be true and
correct; and (4) promptly deliver to DDC true and correct copies of any report,
statement or schedule filed with the Commission subsequent to the date of the
Merger Agreement. In addition, from the date of the Merger Agreement to the
Effective Time, unless DDC has consented in writing thereto, the Company shall
not, and shall not permit any of its subsidiaries to, (1) amend its Certificate
of Incorporation or Bylaws or comparable governing instruments or the Rights
Agreement dated as of April 24, 1996, as amended by Amendment No. 1 dated July
8, 1997, between the Company and First Chicago Trust Company of New York; (2)
authorize for issuance, issue, sell, pledge or register for issuance or sale any
shares of its capital stock or other ownership interest in the Company (other
than issuances of Shares in respect of any exercise of Options outstanding on
the date of the Merger Agreement) or any of the subsidiaries, or any securities
convertible into or exchangeable for any such shares or ownership interest, or
any rights (other than rights related to Shares issued upon the exercise of
Options, which entitle the holders of Shares to purchase shares of Series A
Junior Participating Preferred Stock upon the occurrence of certain events),
warrants or options to acquire or with respect to any such shares of capital
stock, ownership interest, or convertible or exchangeable securities, or
accelerate any right to convert or exchange or acquire any securities of the
Company (other than Options, Performance Shares and Phantom Restricted Stock
Awards pursuant to the provisions of the Merger Agreement) or any of its
subsidiaries for any such shares or ownership interest; (3) effect any stock
split or conversion of any of its capital stock or otherwise change its
capitalization as it exists on the date hereof, other than as set forth in the
Merger Agreement; (4) except as contemplated by the Merger Agreement, directly
or indirectly redeem, purchase or otherwise acquire any shares of its capital
stock or capital stock of any of its subsidiaries, or declare, pay or set aside
any dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, other than dividends or
distributions to the Company or a subsidiary wholly owned by the Company; (5)
sell, lease, mortgage, pledge or otherwise dispose of or encumber any of its
assets (including capital stock of subsidiaries), except in the ordinary course
of business consistent with past practice; (6) acquire by merger, purchase or
any other manner, any material business or entity or otherwise acquire any
assets that are material to the Company and its subsidiaries taken as a whole,
except for purchases of inventory, supplies or capital equipment in the ordinary
course of business consistent with past practice; (7) incur or assume any
long-term or short-term debt in excess of $10 million, except for working
capital purposes in the ordinary course of
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<PAGE> 9
business under the Company's existing credit facilities; (8) assume, guarantee
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except wholly owned
subsidiaries of the Company; (9) make or forgive any loans, advances or capital
contributions to, or investments in, any other Person; (10) waive or amend any
term or condition of any confidentiality or "standstill" agreement to which the
Company is a party; (11) enter into any new employment, severance, consulting or
salary continuation agreements with any newly hired employees other than in the
ordinary course of business consistent with past practice or enter into any of
the foregoing with any existing officers, directors or employees or grant any
increases in compensation or benefits to employees, other than increases in the
ordinary course of business consistent with past practice; (12) enter into,
adopt, amend in any material respect or terminate any employee benefit plan or
arrangement (other than the termination of the Company's non-employee director
equity compensation plan and the termination of the Company's employee stock
purchase plan); (13) enter into, amend in any material respect or terminate any
employment agreement or severance agreement entered into between the Company and
its executive officers or waive any material right of the Company thereunder;
(14) make any material changes in the type or amount of their insurance coverage
or permit any material insurance policy naming the Company or any subsidiary as
a beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business consistent with past practice; (15) make any tax
election or, except as may be required by law or generally acceptable accounting
principles, change any material accounting principles or practices used by the
Company or its subsidiaries; (16) take, or fail to take, any action to cause the
Shares to be delisted from the NYSE prior to the completion of the Offer or the
Merger; (17) settle or compromise any claims or litigation involving payments by
the Company or any of its subsidiaries of more than $250,000 in any single
instance or related instances, or that otherwise are material; (18) enter into
any intellectual property license pursuant to which the Company licenses any of
its intellectual property or sublicenses any of its intellectual property; (19)
enter into any lease or amend any lease of real property involving the payment
by the Company of $250,000 or more; or (20) agree in writing or otherwise to
take any of the foregoing actions.
Pursuant to the Merger Agreement, from the date of the Merger Agreement,
unless the Company has otherwise consented in writing thereto, each of DDC and
the Offeror shall, and shall cause each of its subsidiaries to, (1) conduct its
operations according to its usual, regular and ordinary course of business
consistent with past practice; (2) use its reasonable efforts to preserve intact
its business organizations, maintain in effect existing material qualifications,
licenses, permits, approvals and other authorizations (other than those the
lapse of which would not have, individually or in the aggregate, a material
adverse effect on DDC and its subsidiaries), keep available the services of
their officers and employees and maintain satisfactory relationships with those
persons having business relationships with them; (3) promptly upon the discovery
thereof notify the Company of the existence of any breach of any representation
or warranty of DDC or the Offeror contained in the Merger Agreement or the
occurrence of any event that would cause any representation or warranty of DDC
or the Offeror contained in the Merger Agreement no longer to be true and
correct; and (4) promptly deliver to the Company true and correct copies of any
report, statement or schedule filed with the Commission subsequent to the date
of the Merger Agreement. In addition, from and after the date of the Merger
Agreement to the Effective Time, unless the Company has consented in writing
thereto, neither DDC nor the Offeror shall, and neither shall permit any of its
Significant Subsidiaries to, (1) amend its Certificate of Incorporation or
Bylaws or comparable governing instruments; (2) authorize for issuance, issue,
sell, pledge or register for issuance or sale any shares of its capital stock or
other ownership interest in DDC (other than issuances of DDC Common Stock in
respect of any exercise of options outstanding on the date of the Merger
Agreement, issuances necessary to complete the transactions contemplated by the
Merger Agreement and issuances disclosed in Commission filings), the Offeror or
any of their respective Significant Subsidiaries, or any securities convertible
into or exchangeable for any such shares or ownership interest, or any rights,
warrants or options to acquire or with respect to any such shares of capital
stock, ownership interest, or convertible or exchangeable securities, or
accelerate any right to convert or exchange or acquire any securities of DDC,
the Offeror or any of their respective Significant Subsidiaries for any such
shares or ownership interest, except for the issuance of any financial
instruments in connection with the Offer and the Merger and the financing
thereof; (3) effect any stock split or conversion of any of its capital stock or
otherwise change its capitalization as it exists on the date hereof, other than
as set forth in the Merger
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<PAGE> 10
Agreement; (4) directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or capital stock of any of its Significant
Subsidiaries other than as set forth in the Merger Agreement, or declare, pay or
set aside any dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of its capital stock, other than
dividends or distributions to DDC or any Significant Subsidiary wholly owned by
DDC; (5) sell, lease or otherwise dispose of any of its assets (including
capital stock of its Significant Subsidiaries) , except in the ordinary course
of business; (6) acquire by merger, purchase or any other manner, any material
business or entity or otherwise acquire any assets that are material to DDC, the
Offeror and their Significant Subsidiaries taken as a whole, except for
purchases of inventory, supplies or capital equipment in the ordinary course of
business consistent with past practice; (7) incur or assume any long-term or
short-term debt in excess of $50 million, except for working capital purposes in
any amount in the ordinary course of business under DDC's existing credit
facilities and except as may be required to consummate the Offer and the Merger;
(8) assume, guarantee or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person
except subsidiaries of DDC, except in the ordinary course of business consistent
with past practice; (9) make or forgive any loans, advances or capital
contributions to, or investments in, any other Person, other than consistent
with past practices, to or in any subsidiary, and other than by Detroit Diesel
Capital Corporation or Detroit Diesel Credit Corporation in the ordinary course
of their respective businesses consistent with past practices; (10) waive or
amend any term or condition of any confidentiality or "standstill" agreement to
which DDC or the Offeror is a party; (11) adopt or amend in any material respect
or terminate any employee benefit plan or arrangement; (12) amend in any
material respect or terminate any employment agreement or severance agreement
entered into between DDC and its executive officers or waive any material right
of DDC thereunder, except in the ordinary course of business consistent with
past practice; (13) make any material changes in the type or amount of their
insurance coverage or permit any material insurance policy naming DDC or any of
its subsidiaries as a beneficiary or a loss payee to be cancelled or terminated
other than in the ordinary course of business; (14) except as may be required by
law or generally acceptable accounting principles, change any material
accounting principles or practices used by DDC or its Significant Subsidiaries;
(15) take any action to cause the DDC Common Shares to be delisted from the
NYSE; or (16) agree in writing or otherwise to take any of the foregoing
actions.
The Company has agreed in the Merger Agreement that, from the date of the
Merger Agreement and prior to the Effective Time, neither the Company nor its
subsidiaries shall, and the Company shall direct and use its best efforts to
cause its officers, directors, employees, agents and representatives (including,
without limitation, any investment banker, attorney, or accountant retained by
it or any of its subsidiaries) not to, initiate, solicit or encourage, directly
or indirectly, any inquiries or the making or implementation of any proposal or
offer (including without limitation, any proposal or offer to its shareholders)
with respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, the Company or any of its subsidiaries (any such
proposal or offer being referred to as an "Alternative Proposal") or engage in
any negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an Alternative
Proposal. However, the foregoing shall not prohibit the Company Board of
Directors from (i) furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
proposal in writing, to acquire the Company pursuant to a merger, consolidation,
share exchange, purchase of a substantial portion of the assets, business
combination or other similar transaction, if, and only to the extent that, (1)
the Company Board of Directors determines in good faith, and after consultation
with outside counsel and Salomon Brothers Inc ("Salomon Brothers"), the
Company's financial advisor, that such action is required for the Company Board
of Directors to comply with its fiduciary duties to shareholders imposed by law,
(2) prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, the Company provides written notice to
DDC to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity, and (3) the Company
keeps DDC informed of the status (not the terms) of any such discussions or
negotiations.
From and after the Effective Time, DDC has agreed in the Merger Agreement
to indemnify and hold harmless, to the fullest extent permitted under the DGCL,
each person who is, or has been at any time prior to
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<PAGE> 11
the date of the Merger Agreement or who becomes prior to the Effective Time, an
officer, director or similar person of the Company or any subsidiary against all
losses, claims, damages, liabilities, costs or expenses (including attorneys'
fees), judgments, fines, penalties and amounts paid in settlement in connection
with any claims, actions, suits, proceedings, arbitrations, investigations or
audits arising before or after the Effective Time out of or pertaining to acts
or omissions, or alleged acts or omissions, by them in their capacities as such,
which acts or omissions occurred prior to the Effective Time. DDC has also
agreed in the Merger Agreement to purchase a six-year pre-paid noncancellable
directors and officers insurance policy covering the current and all former
directors, officers and similar persons of the Company and its subsidiaries with
respect to acts or failures to act prior to the Effective Time, in a single
aggregate amount over the six-year period immediately following the Closing Date
equal to the policy limit for the Company's current directors and officers
insurance policy (the "Current Policy"). If such insurance is not obtainable at
an annual cost per covered year not in excess of three times the annual premium
paid by the Company for the Current Policy (the "Cap"), then DDC will cause the
Surviving Corporation to purchase policies providing at least the same coverage
as the Current Policy and containing terms and conditions no less advantageous
to the current and former directors, officers and similar persons of the Company
and its subsidiaries than the current policy with respect to acts or failures to
act prior to the Effective Time; provided, however, that DDC and the Surviving
Corporation shall not be required to obtain policies providing such coverage
except to the extent that such coverage can be provided at an annual cost of no
greater than the Cap; and, if equivalent coverage cannot be obtained, or can be
obtained only by paying an annual premium in excess of the Cap, DDC or the
Surviving Corporation shall only be required to obtain as much coverage as can
be obtained by paying an annual premium equal to the Cap.
The Merger Agreement provides that it may be terminated and the Merger
abandoned at any time prior to the Effective Time, notwithstanding approval by
the shareholders of the Company, (1) by mutual written consent of the Company
and DDC duly authorized by their respective Boards of Directors; (2) by the
Company, if the Offeror shall have failed to commence the Offer within five
business days after the date of the Merger Agreement; (3) by the Company, if DDC
or the Offeror materially breaches any of their respective representations or
warranties or covenants contained in the Merger Agreement and, with respect to
any such breach that can be remedied, the breach is not remedied within five
business days after the Company has furnished DDC or the Offeror with written
notice of such failure; (4) by DDC or the Company (a) if the Effective Time
shall not have occurred on or before December 31, 1997 (provided that the right
to terminate the Merger Agreement pursuant to this provision is not available to
any party whose failure to fulfill any obligation under the Merger Agreement has
been the cause of or resulted in the failure of the Effective Time to occur on
or before such date); (b) if there shall be any statute, law, rule or regulation
that makes consummation of the Offer or the Merger illegal or prohibited or if
any court of competent jurisdiction or other governmental entity shall have
issued an order, judgment, decree or ruling, or taken any other action
restraining, enjoining or otherwise prohibiting the Offer or the Merger and such
order, judgment, decree, ruling or other action shall have become final and
non-appealable; or (c) if the Offer terminates or expires on account of the
failure of any condition specified in the Merger Agreement without the Offeror
having purchased any Shares thereunder (provided that the right to terminate the
Merger Agreement pursuant to this provision is not available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the cause
of or resulted in the failure of any such condition); (5) by the Company, at any
time prior to the acceptance for payment of Shares by the Offeror pursuant to
the Offer, if there is an Alternative Proposal which the Company Board of
Directors in good faith determines represents a superior transaction for the
shareholders of the Company as compared to the Offer and the Merger, and the
Company Board of Directors determines, after consultation with outside counsel
and Salomon Brothers, that it is required by its fiduciary duties to the
Company's shareholders imposed by law to terminate the Merger Agreement and the
Company pays to DDC the Termination Fee (as defined below); provided, however,
that the right to terminate the Merger Agreement pursuant to this provision
shall not be available (a) if such Alternative Proposal results from a breach in
any material respect of the Company's obligations under the Merger Agreement
with respect to solicitations or (b) if the Company has not provided DDC and the
Offeror with at least two business days' prior written notice of its intent to
so terminate the Merger Agreement together with a summary of the material terms
and conditions of the Alternative Proposal; and (6) by DDC, if the Company Board
of
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Directors shall have failed to recommend, or shall have withdrawn, modified or
amended in any manner adverse to DDC or Offeror, its approval or recommendation
of the Offer or the Merger, or shall have recommended acceptance of any
Alternative Proposal.
The Company has agreed in the Merger Agreement that, in the event that (i)
the Company Board of Directors shall publicly modify or amend its recommendation
of the Offer or the Merger in a manner adverse to DDC or shall withdraw its
recommendation of the Offer or shall recommend any Alternative Proposal, or
shall resolve to do any of the foregoing, or (ii) at any time prior to the
termination of the Merger Agreement any person (other than DDC or any of its
affiliates) shall publicly announce any Alternative Proposal and, at any time on
or prior to one year after the date of the Merger Agreement, shall become the
beneficial owner of 33% or more of the outstanding Shares or shall consummate an
Alternative Proposal, then in any such event the Company shall promptly, but in
no event later than two business days after the first of such events to occur,
pay DDC an amount equal to $15,750,000 (the "Termination Fee"), which shall be
in lieu of any and all damages, costs, and expenses, for breach of the Merger
Agreement by the Company.
Notwithstanding any other term of the Offer or the Merger Agreement, the
Offeror shall not be required to accept for payment or pay for, subject to any
applicable rules and regulations of the Commission, any Shares not theretofore
accepted for payment or paid for and may terminate or amend the Offer as to such
Shares unless (1) the Minimum Condition is satisfied, (2) any waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 applicable to the
purchase of Shares pursuant to the Offer shall have expired or been terminated
and (3) approvals required by law to be obtained prior to the consummation of
the Offer under any foreign antitrust or competition laws ("Foreign Antitrust
Laws") to the purchase of Shares pursuant to the Offer shall have been obtained.
Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, the Offeror shall not be required to accept for payment or to pay for
any Shares not theretofore accepted for payment or paid for and may terminate or
amend the Offer if, at any time on or after the date of the Merger Agreement and
prior to the expiration of the Offer, any of the following conditions exist or
shall occur and remain in effect:
(a) (i) a court of competent jurisdiction or other Governmental Entity
shall have issued an order, judgment, decree or ruling on the merits in
connection with an action, suit or proceeding brought by any Governmental
Entity which (1) restrains or prohibits the acquisition by DDC of Shares
pursuant to the Offer, or the making or consummation of the Offer or the
Merger, (2) makes the purchase of or payment for some or all of the Shares
pursuant to the Offer or the Merger illegal, (3) imposes material
limitations on the ability of DDC (or any of its affiliates) to acquire or
hold, or to require DDC or any of its affiliates or subsidiaries to dispose
of or hold separate, any material portion of the assets or the business of
DDC and its affiliates taken as a whole or the Company and its subsidiaries
taken as a whole, or (4) imposes material limitations on the ability of DDC
(or its affiliates) to exercise full rights of ownership of the Shares
purchased by it, including, without limitation, the right to vote the
Shares purchased by it on all matters properly presented to the
shareholders of the Company, or (ii) there shall have been instituted and
pending any action or proceeding by any Governmental Entity which, in the
opinion of DDC's counsel (assuming, for purposes of such opinion only, the
validity of the allegations) has a reasonable likelihood of success on the
merits, and which (1) seeks to challenge the acquisition by DDC of Shares
pursuant to the Offer, restrain, prohibit or delay the making or
consummation of the Offer or the Merger, or obtain any material damages in
connection therewith, (2) seeks to make the purchase of or payment for some
or all of Shares pursuant to the Offer or the Merger illegal, (3) seeks to
impose material limitations on the ability of DDC (or any of its
affiliates) effectively to acquire or hold, or to require DDC or the
Company or any of their respective affiliates or subsidiaries to dispose of
or hold separate, any material portion of the assets or the business of DDC
and its affiliates taken as a whole or the Company and its subsidiaries
taken as a whole, or (4) seeks to impose material limitations on the
ability of DDC (or its affiliates) to exercise full rights of ownership of
the Shares purchased by it, including, without limitation, the right to
vote the Shares purchased by it on all matters properly presented to the
shareholders of the Company; or
(b) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States,
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<PAGE> 13
(ii) the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, (iii) the commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States, or (iv) any limitation (whether or
not mandatory) by any governmental or regulatory authority on, or any other
event which has a material adverse effect on the extension of credit by
banks or other lending institutions in the United States; or
(c) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any governmental entity,
any law or there shall have been issued any injunction resulting in any of
the consequences referred to in subsection (a) above; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms; or
(e) (i) the representations and warranties made by the Company in the
Merger Agreement shall not be true and correct as of the date of
consummation of the Offer as though made on and as of that date (other than
representations and warranties made as of a specified date) except for any
breach or breaches which, in the aggregate, would not have a material
adverse effect or (ii) the Company shall have breached or failed to comply
in any material respect with any of its obligations under the Merger
Agreement and, with respect to any such failure that can be remedied, the
failure is not remedied within 20 business days after DDC has furnished the
Company with written notice of such failure; or
(f) during the period from the date of the Merger Agreement through
the expiration of the Offer, the Company and its subsidiaries have not
conducted their business in the ordinary course of such business consistent
with past practices, or there has been any event or state of facts which
would have a material adverse effect on the Company and its subsidiaries;
or
(g) the Board of Directors shall have modified or amended its
recommendation of the Offer or the Merger in any manner adverse to DDC or
the Offeror or shall have withdrawn its recommendation of the Offer or the
Merger or shall have recommended acceptance of any Alternative Proposal or
shall have resolved to do any of the foregoing; or
(h) (i) a tender or exchange offer for 33% or more of the then
outstanding Shares shall have been publicly proposed to be made and not
withdrawn within five business days, or shall have been made, by any
person, corporation, entity or group (other than DDC and any of its
affiliates and other than any person who is the beneficial owner of 33% or
more of the Shares as of the date of the Merger Agreement) at a price in
excess of the value of the Merger Consideration (calculated as if the
Closing Date were the date such tender offer is commenced); (ii) any person
(other than DDC and any of its affiliates) shall have acquired beneficial
ownership of 33% or more of the outstanding Shares, or shall have been
granted any options or rights, conditional or otherwise, to acquire a total
of 33% or more of the outstanding Shares; (iii) any new group shall have
been formed which beneficially owns more than 33% of the outstanding
Shares; or (iv) any person (other than DDC and any of its affiliates) shall
have entered into an agreement in principle or definitive agreement with
the Company with respect to a tender or exchange offer for any Shares or a
merger, consolidation or other business combination with or involving the
Company.
Subject to the Company's right to extend the Offer, the foregoing
conditions (a) through (h) are for the sole benefit of DDC and the Offeror and
may be asserted by DDC regardless of the circumstances giving rise to any such
condition and may be waived by DDC, in whole or in part, at any time and from
time to time, in the sole discretion of DDC. The failure by DDC at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right,
the waiver of such right with respect to any particular facts or circumstances
shall not be deemed a waiver with respect to any other facts or circumstances,
and each right will be deemed an ongoing right which may be asserted at any time
and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the depositary to the tendering shareholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW. Section 203 of the
DGCL limits the ability of a Delaware corporation to engage in business
combinations with "interested stockholders" (defined as any
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beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval to either the business combination or the
transaction which resulted in the shareholder's becoming an "interested
stockholder." On July 8, 1997, the Company Board of Directors approved the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger and all the transactions contemplated thereunder, for purposes of
Section 203 of the DGCL, and, therefore, Section 203 of the DGCL is inapplicable
to the Merger.
PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. The purpose of the
Offer is for DDC, through the Offeror, to acquire control of the Company through
the Offeror's purchase of 13,842,619 Shares, as a first step in consummating a
business combination between DDC and the Company. The purpose of the Merger is
for the Offeror to acquire the Shares not purchased pursuant to the Offer and
thereby accomplish the business combination transaction.
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Company Board of Directors, and the affirmative vote of the holders of
two-thirds of the outstanding Shares are required to approve and adopt the
Merger Agreement and the transactions contemplated thereby, including the
Merger. All members of the Company Board of Directors (with one director
abstaining due to existing relationships with an affiliate of DDC) have approved
the offer, the Merger and the Merger Agreement and the transactions contemplated
thereby, and the only remaining required corporate action of the Company is the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby by the affirmative vote of the holders of two-third of the outstanding
Shares. If the Minimum Condition is satisfied and Shares are purchased pursuant
to the Offer, and assuming no conversion of the Company's outstanding
convertible subordinated debentures into common stock and assuming no exercise
of outstanding options having an exercise price in excess of $16.00 per Share,
the Offeror will have sufficient voting power to cause the approval and adoption
of the Merger Agreement and the transactions contemplated thereby without the
affirmative vote of any other shareholder.
In the Merger Agreement, the Company has agreed to convene a meeting of its
shareholders as promptly as practicable after the consummation of the Offer for
the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby. DDC has agreed that it will cause all Shares
owned by DDC, the Offeror or any of their Subsidiaries or affiliates to be voted
in favor of the Merger Agreement and the transactions contemplated thereby.
BOARD REPRESENTATION. Upon purchase of Shares pursuant to consummation of
the Offer, the Merger Agreement provides that the Offeror will be entitled to
designate representatives to serve on the Company Board of Directors in
proportion to the Offeror's ownership of Shares following such purchase. The
Offeror has indicated that it will designate approximately two-thirds of the
members of the Company Board of Directors from the executive officers and
directors of the Offeror listed in Annex I to the Offeror's Schedule 14D-1 filed
with the Commission on July 15, 1997. The Offeror expects that such
representation may permit the Offeror to exert substantial influence over the
Company's conduct of its business and operations. Notwithstanding the foregoing,
the Company, DDC and the Offeror shall use their respective reasonable efforts
to ensure that at least three members of the Company Board of Directors shall at
all times prior to the Effective Time be current members of the Company Board of
Directors.
APPRAISAL RIGHTS. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, shareholders of the Company will
have certain rights under the DGCL to dissent and demand appraisal of, and to
receive payment in cash of the fair value of, their Shares. Such rights to
dissent, if the statutory procedures are complied with, could lead to a judicial
determination of the fair value of the Shares, as of the day prior to the date
on which the shareholders' vote was taken approving the merger or similar
business combination (excluding any element of value arising from the
accomplishment or expectation of the Merger), required to be paid in cash to
such dissenting shareholders for their Shares. In addition, such dissenting
shareholders would be entitled to receive payment of a fair rate of interest
from the date of consummation of the Merger on the amount determined to be the
fair value of their Shares. In determining the fair value of the Shares, a
Delaware court would be required to take into account all relevant factors.
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Accordingly, such determination would be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer or otherwise
in which the Offeror seeks to acquire the remaining Shares not held by it. The
Offeror believes, however, that if the Merger is consummated within one year of
its purchase of Shares pursuant to the Offer, Rule 13e-3 will not be applicable
to the Merger. Rules 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
shareholders in such transaction, be filed with the Commission and disclosed to
shareholders prior to consummation of the transaction.
CONFIDENTIALITY AGREEMENT. On April 14, 1997, DDC entered into a
confidentiality agreement (the "Confidentiality Agreement") with the Company in
connection with DDC's consideration of a possible acquisition of all or part of
the Company. Pursuant to the Confidentiality Agreement, DDC agreed to treat
confidentially any information that the Company, its agents or its
representatives furnished DDC in connection with DDC's evaluation of the
Company. In connection with its due diligence review of DDC, on July 1, 1997,
the Company entered into a confidentiality agreement with DDC with terms
essentially the same as those contained in the Confidentiality Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
BACKGROUND. Early in fiscal year 1997, the Company embarked on a program to
substantially decrease dealer inventories. While the Company anticipated that
this program would result in a marked decrease in sales for the first six months
of fiscal year 1997 as compared to a similar period in fiscal year 1996, the
Company also experienced an unexpected inability to adjust manufacturing costs
commensurate with these sales declines. As a result, by February 1997, the
Company's projected operating earnings for the first five months of fiscal 1997
were significantly lower than the comparable prior year period. In an effort to
address these circumstances and the possibility that continued financial
deterioration could negatively impact the Company's ability to comply with
certain financial covenants under the Company's bank revolving credit agreement,
a special meeting of the Company Board of Directors was held on March 10, 1997.
In anticipation of that meeting, the Company requested the assistance of
Salomon Brothers in analyzing certain of the issues facing the Company. At the
March 10 meeting, management provided the Company Board of Directors with
information regarding the Company's current financial position, including a
summary of the Company's results for the first two months of the second fiscal
quarter, the prospects for the Company's operations and business, including
potential difficulties in achieving the objectives of the Company's business
plan, the status of matters relating to the Company's bank revolving credit
agreement and possible strategic alternatives designed to address certain of
these issues. Salomon Brothers then discussed the various strengths and
weaknesses of the Company, the deterioration of the Company's recent operating
performance, the Company's lack of success in implementing previously adopted
restructuring plans and management's acknowledgment that achievement of the
objectives set forth in the Company's current business plan would be difficult.
Salomon Brothers noted that these factors have had a significant adverse impact
on the Company's enterprise value.
After a discussion of the matters raised by these presentations, the
Company Board of Directors directed management, with the assistance of outside
professionals, to explore further alternative strategic proposals to maximize
the value of the Company for the shareholders and to present the results of
these activities to the Company Board of Directors at the next meeting. The
Company Board of Directors instructed management to negotiate and execute an
engagement agreement with Salomon Brothers to retain Salomon Brothers to render
financial advisory and investment banking services to the Company in connection
with its pursuit of strategic alternatives for the future of the Company. In
connection with the evaluation of various alternatives, the Company Board of
Directors agreed that Salomon Brothers should contact a limited number of
strategic and
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<PAGE> 16
financial parties with regard to evaluating alternatives involving a sale of the
Company or a possible equity investment in the Company.
On March 12, 1997, an engagement agreement was signed by Salomon Brothers
and the Company, the terms of which are summarized in Item 5 below.
The Company Board of Directors met again on April 2, 1997. At this meeting,
management of the Company presented an update of the Company's recent results
and financial condition and management's expectation relative to the Company's
ability to comply with, or negotiate a waiver or amendment of, certain financial
covenants under the Company's bank revolving credit agreement. In addition,
Salomon Brothers presented the results of its review of the strategic
alternatives which may be available to the Company. Salomon Brothers'
presentation included an analysis of the likelihood of success of each
alternative. As a result of this analysis, Salomon Brothers suggested that a
transaction resulting in a change in control of the Company would be the most
likely alternative to maximize shareholder value and resolve the risks and
uncertainties facing the Company. After a thorough review of this presentation,
the Company Board of Directors instructed Salomon Brothers to solicit
indications of interest from potential parties that might be interested in
acquiring the Company or in making a significant equity investment in the
Company.
In response to this instruction, Salomon Brothers contacted over 50 parties
to determine whether they were interested in investing in or acquiring the
Company. Penske Corporation, a company affiliated with DDC, was one of the
parties contacted as part of this process. On April 14, 1997, Penske Corporation
and the Company entered into a confidentiality agreement relating to Penske
Corporation's due diligence review of the Company.
On April 24, 1997, the Company Board of Directors held a meeting at which
Salomon Brothers presented a summary of the results of its solicitations for
indications of interest in engaging in a strategic project with the Company. In
this process, through the date of the meeting, the Company had signed
confidentiality agreements with 30 entities that had responded to the
solicitations of Salomon Brothers, including the April 14 confidentiality
agreement with Penske Corporation. Each of these parties received information
about the Company and many of these parties indicated an interest in conducting
further due diligence. Management of the Company then presented a review of the
Company's results for the second quarter and the first half of 1997. Management
noted that the Company would be reporting a net loss of $7.3 million, or 36
cents per Share, on sales of $237 million for the second quarter of fiscal year
1997 compared to net earnings of $1.1 million, or five cents per Share, on sales
of $285.5 million for the second fiscal quarter of 1996. For the first six
months of fiscal 1997, the Company would report a net loss of $21.6 million, or
$1.07 per Share, compared to a net loss of $11.3 million, or $0.56 per Share, in
the comparable period in 1996.
After a discussion of these matters, the Company Board of Directors elected
not to declare a dividend for the third fiscal quarter of 1997. The Company
Board of Directors also instructed Salomon Brothers to continue to pursue
strategic alternatives, including a possible sale of the Company. The Company
Board of Directors emphasized that it was imperative that the Company pursue
strategic alternatives to maximize shareholder value. In an effort to ensure
that it was pursuing the most appropriate course to maximize shareholder value,
the Company Board of Directors also decided to engage another investment bank to
undertake certain activities on behalf of the nonmanagement members of the
Company Board of Directors.
On April 25, 1997, the Company issued a press release reporting the
Company's results for the second quarter and the first six months of 1997,
announcing that it had elected not to declare a dividend for the third fiscal
quarter of 1997 and further announcing that the Company had engaged the services
of Salomon Brothers as its financial advisor to explore strategic alternatives
as a means for maximizing shareholder value.
On April 28, 1997, Moody's Investors Service Inc. announced that it had
lowered the ratings on the Company's bank revolving credit agreement, senior
unsecured and industrial revenue bonds and subordinated debt. On April 29, 1997,
Standard & Poor's issued a press release stating that it had lowered the
Company's corporate credit, senior unsecured and subordinated debt ratings.
On April 30, 1997, the Company amended its bank revolving credit agreement.
The amended agreement reduced the maximum amount available to be borrowed
thereunder from $200 million to $150 million,
15
<PAGE> 17
collateralized the Company's borrowings under a borrowing base formula, and
imposed more restrictive terms and conditions than had applied under the prior
credit agreement.
On behalf of the nonmanagement members of the Company Board of Directors,
on May 2, 1997, the Company engaged the services of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch") to serve as financial advisor to
the nonmanagement members of the Company Board of Directors in connection with
an evaluation and assessment of strategic and financial alternatives available
to the Company. Merrill Lynch agreed to perform a financial review of the
Company and provide an assessment of valuation, analyze the strategic
alternatives available to the Company, assist the nonmanagement members of the
Company Board of Directors in evaluating such strategic and financial
alternatives as they became available through the efforts of the Company,
monitor the process conducted by the Company to evaluate its strategic and
financial alternatives and provide strategic and financial advice to the
nonmanagement members of the Company Board of Directors relating to such
process.
On May 15, 1997, Salomon Brothers informed the Company of the terms of the
strategic proposals received through that date. After review of these various
proposals, in consultation with management and members of the Company Board of
Directors, Salomon Brothers was instructed to further explore the proposals
presented by several of the parties that had proposed strategic transactions.
During the following four weeks, the interested parties conducted extensive
due diligence reviews of the Company.
On June 10, 1997, Salomon Brothers, on behalf of the Company, sent
invitations to submit a written offer for the acquisition of the Company to
certain interested parties. The invitation set June 25, 1997 as the deadline for
submitting proposals.
On June 18, 1997, Merrill Lynch circulated a memorandum to the
nonmanagement members of the Company Board of Directors in which it recounted
the activities it performed on behalf of these Directors and set forth its
observations and preliminary recommendations. Merrill Lynch noted that it
conducted financial due diligence, both with the Company's senior management and
with certain third parties who had significant contact with the Company. After
reviewing several alternatives, Merrill Lynch concluded that, based on its due
diligence and financial analysis to date, an outright sale of the Company, at a
fair price, would be in the best interest of the Company's shareholders.
On June 25, 1997, the Vice Chairman of DDC submitted DDC's offer to Salomon
Brothers, which provided that an affiliate of DDC would acquire by tender offer
approximately 67% of the issued and outstanding Shares (subsequently changed to
13,842,619 Shares) for $16.00 per Share in cash, followed by a merger in which
the shareholders would receive a combination of DDC Stock and cash. The next
day, after discussions with the Company, Salomon Brothers contacted the Vice
Chairman of DDC to clarify and negotiate the terms of DDC's offer relating to
the consideration to be paid in the Merger. By letter dated June 27, 1997, the
Vice Chairman of DDC responded, proposing certain revisions to the terms. On
June 27, 1997, after further discussions with the Company, Salomon Brothers
again contacted the Vice Chairman of DDC to confirm that certain key terms of
the DDC proposal (specifically, the consideration to be paid to the Company's
shareholders, the amount of the Termination Fee and the circumstances under
which the Termination Fee would be payable) represented DDC's best offer. The
Vice Chairman of DDC responded the following day proposing to reduce the
Termination Fee and increase the merger consideration in the event of decreases
in the price of DDC Stock below $20.00 but above $19.00.
The Company Board of Directors met on the morning of June 30, 1997 and
thoroughly reviewed the proposals received by Salomon Brothers. At that meeting,
the Company Board of Directors heard presentations from management, Salomon
Brothers and the Company's legal counsel concerning the Company, its financial
condition, results of operations, business and prospects and the terms of the
proposals received and the transactions contemplated thereby. Merrill Lynch also
orally presented the findings of its review of various strategic alternatives
and confirmed its view that, in the light of the alternatives currently
available to the Company, a sale of the Company, at a fair price, would be in
the best interests of the Company's shareholders. The Company Board of Directors
then thoroughly reviewed the proposals with Salomon Brothers and
16
<PAGE> 18
management, including an analysis of the likelihood of success of such proposals
and the likelihood of such proposals maximizing shareholder value. The Company
Board of Directors discussed with Salomon Brothers and management various
matters raised in the implementation of the Company's current strategic plan,
the risk associated with pursuing that plan, the likely timing of any
realization of benefits from the implementation of that plan, the competitive
environment in which the Company operated and the likelihood of DDC or a third
party being willing to pay more than $16.00 per Share for the Company.
After this review, the nonmanagement members of the Company Board of
Directors met in executive session. Following this discussion, the Company Board
of Directors instructed Salomon Brothers to pursue the proposal submitted by DDC
in light of the fact that this represented the only definitive proposal to
acquire the entire Company and was consistent with the views of Merrill Lynch
and Salomon Brothers that an outright sale of the Company would be in the best
interests of the Company's shareholders. The Company Board of Directors
instructed Salomon Brothers to attempt to further reduce the amount of the
Termination Fee and to eliminate the requirement to pay the Termination Fee
under certain circumstances upon termination of the Merger Agreement.
On the afternoon of June 30, 1997, Salomon Brothers again contacted the
Vice Chairman of DDC, during which it was agreed that the circumstances under
which the Termination Fee would be paid would be narrowed and it was agreed that
the Termination Fee would be reduced to $15,750,000. On July 1, 1997, the
Company and DDC entered into a confidentiality agreement relating to the
Company's due diligence investigation of DDC. Thereafter, the parties negotiated
the final terms of the Merger Agreement and the other definitive documents for
the transaction.
On July 7, 1997, Merrill Lynch informed the Company Board of Directors
that, as a result of a "potential indirect conflict," it was resigning as the
financial advisor to the nonmanagement members of the Company Board of Directors
on the advice of counsel. In its letter of resignation, Merrill Lynch noted
that, although its resignation prevented it from delivering a fairness opinion,
during the course of its engagement, nothing had come to the attention of
Merrill Lynch which would have prevented it from delivering a fairness opinion.
The Company Board of Directors met again on the evening of July 8, 1997.
The Company Board of Directors heard a further presentation from Salomon
Brothers concerning the Company, DDC and the status of negotiations regarding
the proposed Merger Agreement. Salomon Brothers rendered its oral opinion,
subsequently confirmed in writing (the "Salomon Brothers Opinion"), that, based
upon and subject to certain considerations and assumptions, the consideration to
be received by the holders of the Company's Common Stock pursuant to the Offer
and the Merger is fair to such holders from a financial point of view. Copies of
the Salomon Brothers Opinion containing the assumptions made, procedures
followed, matters considered and limits of its review is attached as Annex A to
this Schedule 14D-9 and is incorporated herein by reference. THE FULL TEXT OF
SUCH OPINION SHOULD BE READ IN CONJUNCTION WITH THIS SCHEDULE 14D-9.
The Company Board of Directors then heard a further presentation from the
Company's legal counsel concerning the terms and conditions of the Merger
Agreement, the terms of the proposed treatment of outstanding grants made
pursuant to the Incentive Equity Plans, and the other instruments under
consideration. The Company Board of Directors discussed the likely timing of the
transaction and the conditions to consummation of the Offer, the right of the
Company Board of Directors to terminate the Merger Agreement to accept a
superior proposal under certain conditions after paying the Termination Fee and
the other principal terms of the Merger Agreement.
Thereafter, all members of the Company Board of Directors (with one
director abstaining due to existing relationships with an affiliate of DDC)
approved and adopted the Merger Agreement, approved the Offer, the Merger, and
the transactions contemplated by the Merger Agreement and determined that the
terms of the Offer, the Merger and the Merger Agreement were fair and in the
best interests of the shareholders of the Company and recommended that the
shareholders of the Company accept the Offer and tender their Shares to the
Offeror pursuant to the Offer.
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<PAGE> 19
RECOMMENDATION OF BOARD. At its meeting held on July 8, 1997, as discussed
above, all members of the Company Board of Directors (with one director
abstaining due to existing relationships with an affiliate of DDC) approved and
adopted the Merger Agreement, approved the Offer, the Merger and the
transactions contemplated by the Merger Agreement, determined that the terms of
the Offer and the Merger were fair to and in the best interest of the
shareholders of the Company and recommended that the shareholders of the Company
accept the Offer and tender their Shares to Offeror pursuant to the Offer. In
making its recommendations to the shareholders of the Company with respect to
the Offer and the Merger, the Company Board of Directors considered a number of
factors, including the following:
Financial Condition, Results of Operations, Business and Prospects of
the Company. The Company Board of Directors considered the financial
condition, results of operations, business and prospects of the Company,
including its prospects if it were to remain independent. The Company Board
of Directors also discussed the high likelihood of a significant decrease
in the Company's equity value in the event that the sale transaction does
not proceed.
Other Potential Transactions. The Company Board of Directors also
considered the information regarding alternative transactions and potential
acquirors of the Company. The Company Board of Directors noted that the
Company and Salomon Brothers had conducted an extremely broad process in an
effort to determine whether any better or higher offer existed, contacting
over 50 parties as to their interest in potentially acquiring or making an
investment in the Company. The Company Board of Directors also noted that
the DDC proposal was not subject to any financing conditions and that the
Merger Agreement would permit the Company to terminate the Merger Agreement
under the circumstances described above to accept a superior proposal from
a third party (subject to payment of the $15,750,000 Termination Fee).
Historical Stock Price Performance. The Company Board of Directors
reviewed the historical stock price performance of the Company and noted
that the consideration to be received by the Company's shareholders
pursuant to the Offer and the Merger would represent a premium of
approximately 47% over the closing price of the Shares on the NYSE on April
24, 1997, the last full trading day on the NYSE prior to the date of the
Company's announcement that it had retained Salomon Brothers to explore
strategic alternatives for the Company.
Investment Bank Presentations. The Company Board of Directors took
into account the presentations and advice of Salomon Brothers with respect
to the financial and other terms of the Offer and the Merger and the
Salomon Brothers Opinion that the consideration to be received by the
holders of the Company's Common Stock pursuant to the Offer and the Merger
is fair to such holders from a financial point of view. A copy of the
Salomon Brothers Opinion is filed as Exhibit 99.5 to this Schedule 14D-9
and is incorporated herein by reference. Holders of Shares should read the
Salomon Brothers Opinion in its entirety for a description of procedures
followed, assumptions and qualifications made, matters considered and
limitations on the review undertaken by Salomon Brothers. The Company Board
of Directors also considered the oral report of Merrill Lynch which
concluded that a sale of the Company, at a fair price, would be in the best
interests of the Company's shareholders.
Terms and Conditions of the Offer and the Merger. The Company Board of
Directors also considered the terms and conditions of the Merger Agreement,
the Offer and the Merger. The Company Board of Directors noted that the
transaction was being structured as a cash tender offer for 13,842,619
Shares, followed promptly thereafter by a merger of the Offeror into the
Company, pursuant to which the outstanding Shares would be exchanged for an
aggregate of 4,000,000 shares of Common Stock of DDC plus a variable amount
of cash subject to certain adjustments. The Company Board of Directors
noted the limited conditions to DDC's obligations to consummate the
transactions contemplated by the Merger Agreement.
The foregoing discussion of the information and factors considered and
given weight by the Company Board of Directors is not intended to be exhaustive.
In view of the variety of factors considered in connection with its evaluation
of the Merger Agreement, the Offer and the Merger, the Company Board of
Directors did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors
18
<PAGE> 20
considered in reaching its determination. In addition, individual members of the
Company Board of Directors may have given different weights to different
factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained the services of Salomon Brothers pursuant to a letter
agreement (the "Salomon Letter Agreement") dated March 12, 1997, to render
financial advisory and investment banking services to the Company in connection
with possible transactions including: (a) sale of the Company or an interest in
the Company to another corporation or other business entity; (b) placement of
the Company's equity securities with an investor or investors; (c) developing
and implementing a common stock buy back program; and (d) restructuring,
refinancing or recapitalizing the Company's indebtedness and shareholder equity.
In exchange for the services provided, the Company agreed to pay Salomon
Brothers $150,000 upon the execution of the Salomon Letter Agreement, plus an
additional fee (subject to a credit for the $150,000 paid upon execution) equal
to 0.75% of the Aggregate Consideration (as defined in the Salomon Letter
Agreement) of any sale of the Company or an interest in the Company, such
additional fee to be contingent upon the consummation of a sale of the Company
or of an interest therein and payable at the closing thereof. The Salomon Letter
Agreement also provided that the Company would pay Salomon Brothers for
reasonable expenses whether or not any transaction is proposed or consummated.
The Company and Salomon also entered into a separate letter agreement, dated
March 12, 1997, whereby the Company agreed to indemnify Salomon Brothers in
connection with Salomon Brothers' engagement under the Salomon Letter Agreement.
Salomon Brothers has provided certain investment banking services to the
Company from time to time for which it has received customary compensation. In
the ordinary course of its business, Salomon Brothers may trade the equity
securities of the Company for its own account and for the accounts of customers
and may, therefore, at any time hold a long or short position in such
securities.
On May 2, 1997, the Company Board of Directors engaged the services of
Merrill Lynch, pursuant an engagement letter dated May 2, 1997, to serve as
financial advisor to the outside directors in connection with an evaluation and
assessment of strategic and financial alternatives available to the Company in
order to maximize shareholder value. Merrill Lynch agreed to perform a financial
review of the Company and provide an assessment of valuation, analyze the
strategic alternatives available to the Company, assist the outside directors in
evaluating such strategic and financial alternatives as they become available
through the efforts of the Company, monitor the process conducted by the Company
to evaluate its strategic and financial alternatives, and provide strategic and
financial advice to the outside directors relating to such process.
In exchange for the services provided, the Company agreed to pay Merrill
Lynch $350,000, payable in cash within 90 days of the date of the agreement. The
agreement also provided that the Company would pay Merrill Lynch reasonable
expenses not to exceed $25,000 without the Company's prior written consent. The
Company agreed to indemnify Merrill Lynch in connection with Merrill Lynch's
engagement under the agreement dated May 2, 1997. Merrill Lynch subsequently
resigned its engagement on July 7, 1997.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to the shareholders of the Company on its behalf concerning the
Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, no transaction in Shares has been effected by
the Company or, to the Company's knowledge, by any executive officer, director
or affiliate of the Company.
(b) To the Company's knowledge, to the extent permitted by applicable
securities laws, rules or regulations, each of the Company's executive officers
and directors currently intends to tender all Shares over which such executive
officer or director has sole dispositive power pursuant to the Offer.
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<PAGE> 21
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) As described under Item 4 above, the Company has agreed in the Merger
Agreement not to engage in certain activities in connection with any proposal to
engage in a business combination with, or acquire an interest in or assets of,
the Company.
Except in accordance with the terms of the Merger Agreement, in connection
with the exercise of fiduciary duties as advised by counsel as described under
Item 4 of this Schedule 14D-9, the Company does not presently intend to
undertake any negotiations in response to the Offer which relate to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any of its subsidiaries, (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any of its
subsidiaries, (iii) a tender offer for or other acquisition of securities by or
of the Company or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described herein, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the events referred to
in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
Exhibit 99.1: Agreement and Plan of Merger dated as of July 8, 1997, among
Detroit Diesel Corporation, OMC Acquisition Corp. and
Outboard Marine Corporation.
Exhibit 99.2: Severance Agreement dated as of March 31, 1997, between Harry
W. Bowman and the Company.
Exhibit 99.3: Form of Severance Agreement between Outboard Marine
Corporation and each of George L. Schueppert, Carlisle R.
Davis, Richard H. Medland, Clark J. Vitulli, D. Jeffrey
Baddeley, John D. Flaig and Thomas G. Goodman, providing for
a lump-sum payment of 200% of the sum of Base Pay and
Incentive Pay; and between Outboard Marine Corporation and
each of Peter W. Brown, Miles E. Dean, Hans Lamens, Robert S.
Romano, Peter L. Schelle, Gary F. Swartz, Raymond M. Cartade,
Edgar M. Fradle, Grainger B. McFarlane, Russell J. VanRens,
Paul R. Rabe, Robert F. Young, Paul S. Rummage and Peter J.
VanLancker, provide for a lump-sum payments of 100% of the
sum of Base Pay and Incentive Pay.
Exhibit 99.4: The form of Amended and Restated Severance Agreement between
Outboard Marine Corporation and each of Jack L. Feurig,
Dennis G. Holmes, Robert J. Moerchen and J.P. Murphy.
Exhibit 99.5: Fairness Opinion of Salomon Brothers Inc dated July 8, 1997
(filed as Annex A to this Schedule 14D-9).*
Exhibit 99.6: Form of letter dated July 15, 1997 to be sent to the
shareholders of Outboard Marine Corporation.*
- ---------------
* Copy sent to shareholders of the Company.
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<PAGE> 22
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Schedule 14D-9 is true, complete
and correct.
Dated: July 15, 1997 OUTBOARD MARINE CORPORATION
By: /s/ HARRY W. BOWMAN
------------------------------------
Name: Harry W. Bowman
Title: Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 23
ANNEX A
July 8, 1997
Board of Directors
Outboard Marine Corporation
100 Sea Horse Drive
Waukegan, IL 60085
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of common stock, par value of $0.15 per share ("Company
Common Stock"), of Outboard Marine Corporation (the "Company"), of the
consideration described in the next sentence to be received by such holders (the
"Consideration"), in connection with the Agreement and Plan of Merger, dated as
of July 8, 1997 (the "Merger Agreement"), among the Company, Detroit Diesel
Corporation ("Parent") and OMC Acquisition Corp. ("Sub"), a wholly owned
subsidiary of Parent. The Merger Agreement provides for, among other things, (i)
a tender offer by Sub to acquire 13,842,619 shares of the outstanding share of
Company Common Stock at a price of $16 per share in cash (the "Tender Offer")
and (ii) a subsequent merger of Sub with the Company pursuant to which each
outstanding share of Company Common Stock (other than shares with respect to
which appraisal rights are exercised) will be converted into the right to
receive the equivalent of $16 per share in a combination of shares of common
stock, par value $0.01 per share, of Parent (the "Parent Common Stock") and
cash, subject to certain adjustments as described in the Merger Agreement (the
"Merger" and, together with the Tender Offer, the "Transaction").
In connection with rendering our opinion, we have reviewed certain publicly
available information concerning the Company and Parent and certain other
financial information concerning the Company and Parent, including financial
forecasts, that were provided to us by the Company and Parent, respectively. We
have discussed the past and current business operations, financial condition and
prospects of the Company and Parent with certain officers and employees of the
Company and Parent, respectively. We have also considered such other
information, financial studies, analyses, investigations and financial, economic
and market criteria that we deemed relevant.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of the information reviewed by us
for the purpose of this opinion and we have not assumed any responsibility for
independent verification of such information. With respect to the financial
forecasts of the Company and Parent, we express no opinion herein with respect
to such forecasts or the assumptions on which they are based. We have not
assumed any responsibility for any independent evaluation or appraisal of any of
the assets (including properties and facilities) or liabilities of the Company
and Parent.
Our opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below does not imply any
conclusion as to the likely trading range for Parent Common Stock following the
consummation of the Merger, which may vary depending upon, among other factors,
market conditions, changes in interest rates, dividend rates, general economic
conditions and other factors that generally influence the price of securities.
Our opinion does not address the Company's underlying business decision to
effect the Transaction, and we express no view on the effect on the Company of
the Transaction and related transactions. Our opinion is directed only to the
fairness, from a financial point of view, of the Consideration to be received by
the holders of Company Common Stock pursuant to the Transaction and does not
constitute a recommendation concerning whether such holders should accept the
Tender Offer or how such holders should vote with respect to the Merger
Agreement or the Merger.
We have acted as financial advisor to the Board of Directors of the Company
in connection with the Transaction and will receive a fee for our services, the
balance of which is contingent upon consummation of the Tender Offer. In the
ordinary course of business, we may actively trade the securities of the Company
and Parent for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or
A-1
<PAGE> 24
short position in such securities. In addition, we have previously rendered
certain investment banking and financial advisory services to the Company and
Parent for which we have received customary compensation.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received by the holders of Company Common
Stock pursuant to the Transaction is fair to such holders from a financial point
of view.
Very truly yours,
/s/ SALOMON BROTHERS INC
--------------------------------------
SALOMON BROTHERS INC
A-2
<PAGE> 1
EXHIBIT 99.1
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
DETROIT DIESEL CORPORATION,
OMC ACQUISITION CORP.
AND
OUTBOARD MARINE CORPORATION
DATED AS OF JULY 8, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 The Offer................................................... 1
1.1. The Offer................................................... 1
1.2. Actions By Purchaser and Merger Sub......................... 2
1.3. Actions by the Company...................................... 2
1.4. Directors................................................... 4
ARTICLE 2 The Merger.................................................. 4
2.1. The Merger.................................................. 4
2.2. The Closing................................................. 4
2.3. Effective Time.............................................. 4
ARTICLE 3 Certificate of Incorporation and Bylaws of the Surviving 5
Corporation.................................................
3.1. Certificate of Incorporation................................ 5
3.2. Bylaws...................................................... 5
ARTICLE 4 Directors and Officers of the Surviving Corporation......... 5
4.1. Directors................................................... 5
4.2. Officers.................................................... 5
ARTICLE 5 Effect of the Merger on Securities of Merger Sub and the 5
Company.....................................................
5.1. Merger Sub Stock............................................ 5
5.2. Company Securities.......................................... 5
5.3. Exchange of Certificates Representing Common Stock.......... 6
5.4. Adjustment of Merger Consideration.......................... 8
5.5. Dissenting Company Shareholders............................. 8
ARTICLE 6 Representations and Warranties of the Company............... 8
6.1. Existence; Good Standing; Corporate Authority............... 8
6.2. Authorization, Validity and Effect of Agreements............ 8
6.3. Compliance with Laws........................................ 9
6.4. Capitalization.............................................. 9
6.5. Subsidiaries................................................ 9
6.6. No Violation................................................ 10
6.7. Company Reports; Offer Documents............................ 10
6.8. Absence of Certain Changes.................................. 11
6.9. Taxes....................................................... 12
6.10. Litigation.................................................. 12
6.11. Employee Benefit Plans...................................... 12
6.12. Employment Relations and Agreements......................... 13
6.13. Contracts................................................... 13
6.14. Environmental Laws and Regulations.......................... 13
6.15. Brokers..................................................... 14
6.16. Opinion of Financial Advisor................................ 14
6.17. No Restrictions on the Offer or the Merger.................. 14
6.18. Intellectual Property....................................... 14
ARTICLE 7 Representations and Warranties of Purchaser and Merger 15
Sub.........................................................
7.1. Existence; Good Standing; Corporate Authority............... 15
7.2. Authorization, Validity and Effect of Agreements............ 15
7.3. Offer Documents............................................. 15
7.4. No Violation................................................ 16
7.5. Financing................................................... 16
7.6. Merger Sub.................................................. 16
7.7. Compliance with Laws........................................ 16
7.8. Capitalization.............................................. 17
</TABLE>
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<TABLE>
<S> <C> <C>
7.9. Purchaser Reports........................................... 17
7.10. Absence of Certain Changes.................................. 18
7.11. Taxes....................................................... 18
7.12. Litigation.................................................. 18
7.13. Employee Benefit Plans...................................... 18
7.14. Contracts................................................... 19
7.15. Environmental Laws and Regulations.......................... 19
ARTICLE 8 Covenants................................................... 19
8.1. No Solicitation............................................. 19
8.2. Interim Operations of the Company........................... 20
8.2A. Interim Operations of Purchaser and Merger Sub.............. 21
8.3. Company Shareholder Approval; Proxy Statement............... 23
8.4. Filings; Other Action....................................... 24
8.5. Publicity................................................... 24
8.6. Further Action.............................................. 24
8.7. Insurance; Indemnity........................................ 24
8.8. Restructuring of Merger..................................... 26
8.9. Employee Benefit Plans...................................... 26
8.10. Acceleration of Outstanding Indebtedness.................... 26
8.11. Real Property Transfer Taxes................................ 26
ARTICLE 9 Conditions.................................................. 26
9.1. Conditions to Each Party's Obligation to Effect the 26
Merger......................................................
ARTICLE 10 Termination; Amendment; Waiver.............................. 27
10.1. Termination................................................. 27
10.2. Effect of Termination....................................... 27
10.3. Amendment................................................... 28
10.4. Extension; Waiver........................................... 28
ARTICLE 11 General Provisions.......................................... 28
11.1. Nonsurvival of Representations and Warranties............... 28
11.2. Notices..................................................... 28
11.3. Assignment; Binding Effect.................................. 29
11.4. Entire Agreement............................................ 29
11.5. Fees and Expenses........................................... 29
11.6. Governing Law............................................... 29
11.7. Headings.................................................... 29
11.8. Interpretation.............................................. 29
11.9. Severability................................................ 30
11.10. Enforcement of Agreement.................................... 30
11.11. Counterparts................................................ 30
11.12. Obligation of Purchaser..................................... 30
11.13. Certain Definitions......................................... 30
EXHIBIT
EXHIBIT A Conditions of the Offer
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of July 8, 1997,
among Detroit Diesel Corporation, a Delaware corporation ("Purchaser"), OMC
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Purchaser ("Merger Sub"), and Outboard Marine Corporation, a Delaware
corporation (the "Company").
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company each have
determined that it is in the best interests of their respective companies and
shareholders for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection herewith;
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE OFFER
1.1. THE OFFER.
(a) Subject to the provisions of this Agreement and this Agreement not
having been terminated in accordance with Article 10 hereof, as promptly as
practicable but in any event within five business days after the first public
announcement of this Agreement, Merger Sub shall commence, within the meaning of
Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act"), an offer to
purchase 13,842,619 shares of common stock, par value $.15 per share (the
"Common Stock") of the Company at a price of $16.00 per share of Common Stock,
net to the seller in cash (the "Offer"). The obligation of Merger Sub to
commence the Offer and accept for payment, and pay for, any shares of Common
Stock tendered pursuant to the Offer shall be subject to the conditions set
forth in Exhibit A hereto and to the terms and conditions of this Agreement and
no such payment shall be made until after calculation of proration. If proration
of tendered shares is required, the shares purchased from each shareholder
tendering shares will be determined by multiplying 13,842,619 by a fraction, the
numerator of which is the number of shares tendered by such shareholder and the
denominator of which is the number of shares tendered by all tendering
shareholders. Subject to the provisions of this Agreement, the Offer shall
expire 20 business days after the date of its commencement, unless this
Agreement is terminated in accordance with Article 10, in which case the Offer
(whether or not previously extended in accordance with the terms hereof) shall
expire on such date of termination.
(b) Merger Sub expressly reserves the right to modify the terms of the
Offer and to waive any condition of the Offer, except that, without the prior
written consent of the Company, Merger Sub shall not (i) waive the Minimum
Condition (as defined in Exhibit A), (ii) reduce the number of shares of Common
Stock subject to the Offer, (iii) reduce the price per share of Common Stock to
be paid pursuant to the Offer, (iv) change the form of consideration payable in
the Offer, (v) amend or modify any term or condition of the Offer (including the
conditions set forth on Exhibit A) in any manner adverse to the holders of
Common Stock or (vi) impose additional conditions to the Offer other than such
conditions required by applicable Law (as hereinafter defined). So long as this
Agreement is in effect and all the conditions to the Offer have not been
satisfied or waived, at the request of the Company, Merger Sub shall extend the
Offer for an aggregate period of not more than 10 business days (for all
extensions requested by the Company) beyond the originally scheduled expiration
date of the Offer. Notwithstanding the foregoing, so long as this Agreement is
in effect, Merger Sub may, without the consent of the Company, extend the Offer
(i) if at the then scheduled expiration date of the Offer any of the conditions
to Merger Sub's obligation to accept for payment and pay for shares of Common
Stock shall not be satisfied or waived, until such time as such conditions are
satisfied or
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<PAGE> 5
waived; (ii) for any period required by any rule, regulation, interpretation or
position of the SEC or the staff applicable to the Offer; and (iii) up to 10
days following the satisfaction of all the conditions in Exhibit A; provided,
however, that in no event shall Purchaser extend the Offer for more than 20 days
in the aggregate without the consent of the Company. Subject to the terms and
conditions of the Offer and this Agreement, Merger Sub shall accept for payment
and pay for, in accordance with the terms of the Offer, 13,842,619 shares of
Common Stock, on a fully diluted basis, to the extent validly tendered and not
withdrawn pursuant to the Offer as soon as practicable after the expiration of
the Offer.
1.2. ACTIONS BY PURCHASER AND MERGER SUB.
(a) As soon as reasonably practicable following execution of this
Agreement, but in no event later than five business days from the date hereof,
Purchaser and Merger Sub shall file with the Securities and Exchange Commission
(the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer, which shall contain an offer to purchase and a related letter of
transmittal and any other ancillary documents pursuant to which the Offer shall
be made (such Schedule 14D-1 and the documents therein pursuant to which the
Offer will be made, together with any supplements or amendments thereto, the
"Offer Documents"). The Company and its counsel shall be given a reasonable
opportunity to review and comment upon the Offer Documents prior to the filing
thereof with the SEC. The Offer Documents shall comply as to form in all
material respects with the requirements of the Exchange Act, and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's shareholders, the Offer Documents shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
that no representation is made by Purchaser or Merger Sub with respect to
information supplied in writing by the Company specifically for inclusion in the
Offer Documents. Each of Purchaser, Merger Sub and the Company agrees promptly
to correct any information provided by it for use in the Offer Documents if and
to the extent such information shall have become false or misleading in any
material respect, and each of Purchaser, Merger Sub and the Company further
agrees to take all steps necessary to cause the Offer Documents as so corrected
to be filed with the SEC and to be disseminated to holders of shares of Common
Stock, in each case as and to the extent required by applicable federal
securities laws. Purchaser and Merger Sub agree to provide the Company and its
counsel in writing with any comments Purchaser, Merger Sub or their counsel may
receive from the SEC or its staff with respect to the Offer Documents promptly
after receipt of such comments.
(b) Purchaser shall provide or cause to be provided to Merger Sub all the
funds necessary to purchase any shares of Common Stock that Merger Sub becomes
obligated to purchase pursuant to the Offer.
1.3. ACTIONS BY THE COMPANY.
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that the Board of Directors of the Company (the "Board of
Directors" or the "Board") at a meeting duly called and held has duly adopted
resolutions (i) approving this Agreement, the Offer and the Merger (as
hereinafter defined), determining that the Merger is advisable and that the
terms of the Offer and Merger are fair to, and in the best interests of, the
Company's shareholders and recommending that the Company's shareholders accept
the Offer and approve the Merger and this Agreement, and (ii) taking all action
necessary to render Section 203 of the Delaware General Corporation Law (the
"DGCL"), Article Eighteenth of the Company's Restated Certificate of
Incorporation and the provisions of the Rights Agreement, dated as of April 24,
1996, between the Company and First Chicago Trust Company of New York
inapplicable to the Offer, the Merger, this Agreement and any of the
transactions contemplated hereby. The Company further represents and warrants
that the Board of Directors has received the written opinion of Salomon Brothers
Inc (the "Financial Advisor") that the proposed consideration to be received by
the holders of shares of Common Stock pursuant to the Offer and the Merger is
fair to such holders from a financial point of view (the "Fairness Opinion").
The Company hereby consents to the inclusion in the Offer Documents, subject to
prior review and consent by the Company, of the recommendation of the Board of
Directors described in the first sentence of this Section 1.3(a). The Company
hereby represents and warrants that it has been authorized by the Financial
Advisor to permit the inclusion of the Fairness Opinion, and, subject to the
reasonable approval of the
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<PAGE> 6
Financial Advisor, the inclusion of references to such Fairness Opinion, in the
Offer Documents, the Schedule 14D-9 (as hereinafter defined) and the Proxy
Statement (as hereinafter defined). The Company has been advised by each of its
directors and executive officers that each such person intends to tender all
shares of Common Stock owned by such person pursuant to the Offer, except to the
extent of any restrictions created by Section 16(b) of the Exchange Act. If the
Board of Directors determines based on the advice of counsel that its fiduciary
duties require it to withdraw, modify or amend its recommendations described
above, such withdrawal, amendment or modification shall not constitute a breach
of this Agreement but shall have the effects specified herein.
(b) On the date the Offer Documents are filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended from time to
time, the "Schedule 14D-9") containing the recommendations described in the
first sentence of Section 1.3(a) (subject to the last sentence of Section
1.3(a)) and shall mail the Schedule 14D-9 to the shareholders of the Company. To
the extent practicable, the Company shall cooperate with Purchaser in mailing or
otherwise disseminating the Schedule 14D-9 with the appropriate Offer Documents
to the Company's shareholders. Purchaser and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-9 prior to
the filing thereof with the SEC. The Schedule 14D-9 shall comply as to form in
all material respects with the requirements of the Exchange Act and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Purchaser or Merger Sub for inclusion in the Schedule 14D-9. Each of the
Company, Purchaser and Merger Sub agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to the
holders of shares of Common Stock, in each case as and to the extent required by
applicable federal securities laws. The Company agrees to provide Purchaser and
Merger Sub and their counsel in writing with any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its transfer
agent to assist Merger Sub in compiling mailing labels containing the names and
addresses of the record holders of Common Stock as of a recent date and of those
persons becoming record holders subsequent to such date, and to furnish copies
of other information in the Company's possession or control regarding the
beneficial owners of Common Stock, and shall furnish to Merger Sub such
information and assistance (including updated lists of shareholders, security
position listings and computer files) as Merger Sub may reasonably request in
communicating the Offer to the Company's shareholders. Subject to the
requirements of law, and except for such steps as are necessary to disseminate
the Offer Documents and any other documents necessary to consummate the Offer
and the Merger, Purchaser and Merger Sub and each of their affiliates and
associates shall hold in confidence the information contained in any of such
labels, lists and files, shall use such information only in connection with the
Offer and the Merger, and, if this Agreement is terminated, shall promptly
deliver to the Company all copies of such information then in their possession
or under their control.
(d) Subject to the terms and conditions of this Agreement, if there shall
occur a change in law or in a binding judicial interpretation of existing law
which would, in the absence of action by the Company or the Board, prevent the
Merger Sub, were it to acquire a specified percentage of the shares of Common
Stock then outstanding, from approving and adopting this Agreement by its
affirmative vote as the holder of 67% of the issued and outstanding shares of
Common Stock and without the affirmative vote of any other shareholder, the
Company will use its best efforts to promptly take or cause such action to be
taken, or, at the election of the Purchaser prior to consummation of the Offer,
this Agreement shall terminate.
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<PAGE> 7
1.4. DIRECTORS.
(a) Upon the purchase of shares of Common Stock pursuant to the
consummation of the Offer, Purchaser shall be entitled to designate such number
of directors, rounded up to the next whole number, as will give Purchaser
representation on the Board of Directors equal to the product of (i) the number
of directors on the Board of Directors and (ii) the percentage that the number
of shares of Common Stock purchased by Merger Sub or Purchaser or any affiliate
thereof bears to the aggregate number of shares of Common Stock outstanding (the
"Percentage"), and the Company shall, upon request by Purchaser, promptly
increase the size of the Board of Directors or exercise its reasonable efforts
to secure the resignations of such number of directors as is necessary to enable
Purchaser's designees to be elected to the Board of Directors and shall cause
Purchaser's designees to be so elected. At the request of Purchaser, the Company
will use its reasonable efforts to cause such individuals designated by
Purchaser to constitute the same Percentage of (i) each committee of the Board,
(ii) the board of directors of each Subsidiary (as hereinafter defined) and
(iii) the committees of each such board of directors. The Company's obligations
to seek to appoint designees to the Board of Directors shall be subject to
Section 14(f) of the Exchange Act. The Company shall take all reasonably
appropriate action necessary to effect any such election and shall, subject to
the next succeeding sentence, include in the Schedule 14D-9 the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Purchaser will supply to the Company in writing and be solely
responsible for any information with respect to itself and its nominees,
directors and affiliates required by Section 14(f) and Rule 14f-1.
Notwithstanding the foregoing, the parties hereto shall use their respective
reasonable efforts to ensure that at least three of the members of the Board of
Directors shall at all times prior to the Effective Time (as hereinafter
defined) be Continuing Directors (as hereinafter defined).
(b) Following the election or appointment of Purchaser's designees pursuant
to this Section 1.4 and prior to the Effective Time, the approval of a majority
of the directors of the Company then in office who are not designated by
Purchaser (the "Continuing Directors") shall be required to authorize (and such
authorization shall constitute the authorization of the Board of Directors and
no other action on the part of the Company, including any action by any other
director of the Company, shall be required to authorize) any termination of this
Agreement by the Company, any amendment of this Agreement requiring action by
the Board of Directors, any extension of time for the performance of any of the
obligations or other acts of Purchaser or Merger Sub, and any waiver of
compliance with any of the agreements or conditions contained herein for the
benefit of the Company.
ARTICLE 2
THE MERGER
2.1. THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall be merged with and into the Company in
accordance with this Agreement and the applicable provisions of the DGCL, and
the separate corporate existence of Merger Sub shall thereupon cease (the
"Merger"). The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"). The Merger
shall have the effects specified in the DGCL.
2.2. THE CLOSING. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place at the offices of
Detroit Diesel Corporation, 13400 Outer Drive, West, Detroit, Michigan
48239-4001, as soon as practicable following the satisfaction (or waiver if
permissible) of the conditions set forth in Article 9. The date on which the
Closing occurs is hereinafter referred to as the "Closing Date."
2.3. EFFECTIVE TIME. If all the conditions to the Merger set forth in
Article 9 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 10, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware
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<PAGE> 8
in accordance with the DGCL or at such later time which the parties hereto shall
have agreed upon and designated in such filing as the effective time of the
Merger (the "Effective Time").
ARTICLE 3
CERTIFICATE OF INCORPORATION AND BYLAWS
OF THE SURVIVING CORPORATION
3.1. CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with applicable law and the terms thereof.
3.2. BYLAWS. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law, the terms thereof and the Surviving
Corporation's Certificate of Incorporation.
ARTICLE 4
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
4.1. DIRECTORS. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law and the Surviving Corporation's Certificate of
Incorporation and Bylaws.
4.2. OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law and the Surviving Corporation's Certificate of
Incorporation and Bylaws.
ARTICLE 5
EFFECT OF THE MERGER ON SECURITIES
OF MERGER SUB AND THE COMPANY
5.1. MERGER SUB STOCK. At the Effective Time, each share of common stock,
$0.01 par value per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, $0.01 par value per share,
of the Surviving Corporation.
5.2. COMPANY SECURITIES.
(a) At the Effective Time, each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of Common
Stock owned by Purchaser or Merger Sub or held by the Company, all of which
shall be cancelled, and other than shares of Dissenting Common Stock (as
hereinafter defined)) (the "Exchanged Common Shares") shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive (1) 4,000,000 divided by the number of Exchanged
Common Shares (the "Exchange Ratio") shares of fully paid and nonassessable
common shares of Purchaser ("Purchaser Common Shares") plus (2) a cash payment
equal to (i) $16.00 minus (ii) the product of the Exchange Ratio times $25, plus
(3) in the event the average closing price on the New York Stock Exchange for
Purchaser Common Shares for the 20 consecutive trading days ending on the fifth
trading day prior to the Closing Date (the "Closing Date Market Price") is less
than $25.00, then an additional cash payment equal to the product of the
Exchange Ratio multiplied by the lesser of (i) $25.00 minus the Closing Date
Market Price or (ii) $6.00 (the "Merger Consideration").
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all shares of Common Stock shall cease to
be outstanding and shall be cancelled and retired and shall cease to exist, and
each holder of shares of Common Stock (other than Merger Sub, Purchaser and the
5
<PAGE> 9
Company) shall thereafter cease to have any rights with respect to such shares
of Common Stock, except the right to receive, without interest, the Merger
Consideration in accordance with Section 5.3 upon the surrender of a certificate
or certificates (a "Certificate") representing such shares of Common Stock.
(c) Each share of Common Stock issued and held in the Company's treasury at
the Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be cancelled and retired without payment of any consideration therefor.
(d) The Company shall use reasonable efforts to ensure that all outstanding
stock options (individually, an "Option" and, collectively, the "Options"),
performance share awards (individually, a "Performance Share" and, collectively,
the "Performance Shares") and phantom restricted stock awards (individually, a
"Phantom Restricted Stock Award" and, collectively, the "Phantom Restricted
Stock Awards") heretofore granted under any plan, program or arrangement of the
Company (collectively, the "Incentive Equity Plans") that are outstanding
immediately prior to the Effective Time shall be acquired by the Company at the
Effective Time for cash payments by the Company as follows:
(i) With respect to Options, an amount equal to (A) the excess, if
any, of (1) (I) for all option holders who are not officers or directors of
the Company for purposes of Section 16 of the Exchange Act, the cash value
of 33% of the per share Merger Consideration payable with respect to the
Common Stock plus $10.72, and (II) for all option holders who are officers
or directors of the Company for purposes of Section 16 of the Exchange Act,
the greater of (x) the cash value of 33% of the per share Merger
Consideration payable with respect to the Common Stock plus $10.72 or (y)
the highest closing price of the Common Stock on the New York Stock
Exchange during the 180-day period preceding the date on which the
purchases of shares of Common Stock pursuant to the Offer is consummated
over (2) the exercise price per share of Common Stock subject to the
Option, multiplied by (B) the number of shares of Common Stock for which
the Option shall not have theretofore been exercised;
(ii) With respect to Performance Shares, an amount equal to the
product of (A) (1) the number of Performance Shares covered by the award
multiplied by (2) a fraction, the numerator of which is the number of days
that shall have then elapsed in the applicable three-year performance cycle
and the denominator of which is 1,095, and (B) the "Payment Value" (as
defined in the Company's 1994 LongTerm Incentive Plan or Executive Equity
Incentive Plan, as the case may be) specified in the agreement evidencing
the subject Performance Share award; and
(iii) With respect to Phantom Restricted Stock Awards, an amount equal
to (A) (I) the number of Phantom Restricted Stock Awards covered by the
award multiplied by (II) the cash value of 33% of the per share Merger
Consideration payable with respect to the Common Stock plus $10.72 plus (B)
the cash value of dividend equivalents credited to the Phantom Restricted
Stock Awards covered by the award.
Either prior to or as soon as practicable following the consummation of the
Offer, the Board of Directors (or, if appropriate, the Compensation Committee of
the Board of Directors) shall adopt such resolutions or take other such actions
as are required to cause any Options that are not exercisable as of the date
hereof to become exercisable, to cause any Performance Share awards (prorated in
accordance with clause (ii)(A) of this Section 5.2(d)) that are not payable as
of the date hereof to become payable, and to cause any Phantom Restricted Stock
Awards (and dividend equivalents credited to the shares of phantom restricted
stock covered thereby) that are not payable, as of the date hereof to become
payable at the Effective Time. All amounts payable pursuant to this Section
5.2(d) shall be subject to any required withholding of taxes and shall be paid
without interest.
5.3. EXCHANGE OF CERTIFICATES REPRESENTING COMMON STOCK.
(a) Prior to the Effective Time, Purchaser shall appoint a commercial bank
or trust company having net capital of not less than $200 million, or such other
party reasonably satisfactory to the Company, to act as paying agent hereunder
for payment or exchange of the Merger Consideration upon surrender of
Certificates (the "Paying Agent"). Purchaser shall cause the Surviving
Corporation to provide the Paying Agent with cash in amounts necessary to pay
for and certificates necessary for the exchange of Purchaser Common Shares for
6
<PAGE> 10
all the shares of Common Stock pursuant to Section 5.2(a) and, in connection
with the Options, Performance Shares and Phantom Restricted Stock Awards
pursuant to Section 5.2(d), as and when such amounts are needed by the Paying
Agent. Such amounts and certificates shall hereinafter be referred to as the
"Exchange Fund."
(b) Promptly after the Effective Time, Purchaser shall cause the Paying
Agent to mail to each holder of record of shares of Common Stock (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to such Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and which letter shall be in such form and have
such other provisions as Purchaser may reasonably specify and (ii) instructions
for effecting the surrender of such Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate to the Paying Agent together with
such letter of transmittal, duly executed and completed in accordance with the
instructions thereto, and such other documents as may reasonably be required by
the Paying Agent, the holder of such Certificate shall promptly receive in
exchange therefor the Merger Consideration payable with respect to the shares of
Common Stock represented by such Certificate pursuant to this Agreement plus any
cash payment owed with respect to fractional shares of Purchaser Common Shares
and the shares represented by the Certificate so surrendered shall forthwith be
cancelled. Notwithstanding the foregoing, no certificates or scrip representing
fractional Purchaser Common Shares will be issued upon the surrender for
exchange of Certificates, and each holder of a fractional Purchaser Common Share
shall be paid, upon surrender of such Certificate, an amount in cash equal to
the product obtained by multiplying (i) such fractional interest to which such
holder (after taking into account all fractional Purchaser Common Shares then
held by such holder) would otherwise be entitled by (ii) the Closing Date Market
Price. As promptly as practicable after the determination of the amount of cash,
if any, to be paid to holders of fractional Purchaser Common Shares, the Paying
Agent shall so notify the Surviving Corporation, and the Surviving Corporation
shall cause the Paying Agent to forward payment to such holders of fractional
Purchaser Common Shares. No interest will be paid or will accrue on the cash
payable upon surrender of any Certificate. In the event of a transfer of
ownership of Common Stock which is not registered in the transfer records of the
Company, payment may be made with respect to such Common Stock to such a
transferee if the Certificate representing such shares of Common Stock is
presented to the Paying Agent, accompanied by all documents reasonably required
to evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged as provided in this Article 5.
(d) Any portion of the Exchange Fund (including the proceeds of any
interest and other income received by the Paying Agent in respect of all such
funds) that remains unclaimed by the former shareholders of the Company one year
after the Effective Time shall be delivered to the Surviving Corporation. Any
former shareholders of the Company who have not theretofore complied with this
Article 5 shall thereafter look only to the Surviving Corporation for payment of
any Merger Consideration that may be payable in respect of each share of Common
Stock such shareholder holds as determined pursuant to this Agreement, without
any interest thereon.
(e) None of Purchaser, the Company, the Surviving Corporation, the Paying
Agent or any other person shall be liable to any former holder of shares of
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) If any Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation, the
posting by such person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the Merger Consideration payable in
respect thereof pursuant to this Agreement.
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(g) Except as otherwise provided herein, Purchaser shall pay all charges
and expenses, including those of the Paying Agent, in connection with the
exchange of the Merger Consideration for Certificates.
5.4. ADJUSTMENT OF MERGER CONSIDERATION. If, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of Common
Stock or Purchaser Common Shares shall have been changed into a different number
of shares or a different class as a result of a stock split, reverse stock
split, stock dividend, distribution (other than normal cash dividends as
provided in this Agreement), subdivision, reclassification, split, combination,
exchange, recapitalization or other similar transaction, the Merger
Consideration shall be appropriately adjusted.
5.5. DISSENTING COMPANY SHAREHOLDERS. Notwithstanding any provision of this
Agreement to the contrary, if required by the DGCL but only to the extent
required thereby, shares of Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by holders of such
shares of Common Stock who have properly exercised appraisal rights with respect
thereto in accordance with Section 262 of the DGCL (the "Dissenting Common
Stock") will not be exchangeable for the right to receive the Merger
Consideration, and holders of such shares of Dissenting Common Stock will be
entitled to receive payment of the appraised value of such shares of Common
Stock in accordance with the provisions of such Section 262 unless and until
such holders fail to perfect or effectively withdraw or lose their rights to
appraisal and payment under the DGCL. If, after the Effective Time, any such
holder fails to perfect or effectively withdraws or loses such right, such
shares of Common Stock will thereupon be treated as if they had been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive the Merger Consideration, without any interest thereon. The Company will
give Purchaser notice of any demands received by the Company for appraisals of
shares of Common Stock. The Company shall not, except with the prior written
consent of Purchaser, make any payment with respect to any demands for appraisal
or settle any such demands.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections of the disclosure letter,
dated the date hereof, delivered by the Company to Purchaser (the "Disclosure
Letter"), the Company hereby represents and warrants to Purchaser and Merger Sub
as follows:
6.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of the Company and
its Subsidiaries is (i) a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and (ii) is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States or the laws
of any foreign jurisdiction, if applicable, in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary, except where the failure to be so qualified
or to be in good standing would not have a material adverse effect on the
business, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole or on the ability of the Company to consummate
the transactions contemplated by this Agreement (a "Material Adverse Effect").
Each of the Company and its Subsidiaries has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted except where the failure to have such power and authority would
not have a Material Adverse Effect. The Company has heretofore made available to
Purchaser true and correct copies of the Certificate of Incorporation and Bylaws
of the Company and each of its Subsidiaries as currently in effect.
6.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby or executed in connection
herewith (the "Ancillary Documents") and subject, if required with respect to
the consummation of the Merger, to the approval of holders of the Common Stock,
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Ancillary Documents by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Board of Directors, and no
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other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Ancillary Documents or to consummate the
transactions contemplated hereby and thereby (other than the approval of this
Agreement and the Merger by the holders of the Common Stock). This Agreement has
been, and any Ancillary Document at the time of execution will have been, duly
and validly executed and delivered by the Company, and (assuming this Agreement
and such Ancillary Documents each constitutes a valid and binding obligation of
Purchaser and Merger Sub) constitutes and will constitute the valid and binding
obligations of the Company, and the Agreement is enforceable in accordance with
its terms (subject to the approval of this Agreement and the Merger by the
holders of the Common Stock).
6.3. COMPLIANCE WITH LAWS. Except as set forth in the Disclosure Letter,
neither the Company nor any of its Subsidiaries is in violation of, and the
consummation of the transactions contemplated by this Agreement will not result
in any violation of, any foreign, federal, state or local law, statute,
ordinance, rule, regulation, order, judgment, ruling or decree ("Laws") of any
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority or any court, arbitration, board
or tribunal ("Governmental Entity") applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, except for
violations which would not have a Material Adverse Effect, which compliance
includes, but is not limited to, the possession by the Company and its
Subsidiaries of all licenses, permits and other governmental authorizations
required under applicable Laws and compliance with the terms and conditions
thereof (collectively, "Permits"), except where the failure of the Company or
its Subsidiaries to possess such licenses, permits and authorizations, or comply
with the terms and conditions thereof, would not, individually or in the
aggregate, have a Material Adverse Effect. The completion of the transactions
contemplated by this Agreement will not result in the lapse or termination of
any Permits, other than such lapse or termination which would not have a
Material Adverse Effect.
6.4. CAPITALIZATION. The authorized capital stock of the Company consists
of 90,000,000 shares of Common Stock and 3,000,000 shares of preferred stock,
$10.00 par value ("Preferred Stock"). As of June 30, 1997, (a) 20,205,515 shares
of Common Stock were issued and outstanding, (b) Options to purchase an
aggregate of 1,426,725 shares of Common Stock were outstanding, (c) 129,716
shares of Common Stock were held by the Company in its treasury, and (d) no
shares of capital stock of the Company were held by the Company's Subsidiaries.
The Company has no outstanding bonds, debentures, notes or other obligations
entitling the holders thereof to vote (or which are convertible into or
exercisable for securities having the right to vote) with the shareholders of
the Company on any matter. Since June 30, 1997, the Company (i) has not issued
any shares of Common Stock, other than upon the exercise of Options, or
Preferred Stock, (ii) has granted no Options to purchase shares of Common Stock
under the Incentive Equity Plans and (iii) has not split, combined, converted or
reclassified any of its shares of capital stock. All issued and outstanding
shares of Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in this Section
6.4 or in the Disclosure Letter, there are no other shares of capital stock or
voting securities of the Company, and no existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock of, or equity interests in, the
Company or any of its Subsidiaries. Except as provided under the Incentive
Equity Plans, there are no equity equivalents, interests in the ownership or
earnings of the Company or its Subsidiaries, or similar rights authorized,
issued or outstanding similar to those under Incentive Equity Plans. Except as
set forth in the Disclosure Letter, there are no outstanding obligations of the
Company or any Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock of the Company and there are no performance awards
outstanding under the Incentive Equity Plan or any other outstanding
stock-related awards. There are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries or, to the
knowledge of the Company, any of the Company's directors or executive officers
is a party with respect to the voting of capital stock of the Company or any of
its Subsidiaries.
6.5. SUBSIDIARIES. Except as set forth in the Disclosure Letter, (i) the
Company owns, directly or indirectly through a Subsidiary, all the outstanding
shares of capital stock (or other ownership interests having by their terms
ordinary voting power to elect directors or others performing similar functions
with respect to such Subsidiary) of each of the Company's Subsidiaries (except
for director qualifying and similar shares),
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and (ii) each of the outstanding shares of capital stock (or other ownership
interests having by their terms ordinary voting power to elect directors or
others performing similar functions with respect to such Subsidiary) of each of
the Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and (except for director qualifying and similar shares) is owned,
directly or indirectly, by the Company free and clear of all liens, pledges,
security interests, claims or other encumbrances ("Encumbrances").
6.6. NO VIOLATION. Except as set forth in the Disclosure Letter, neither
the execution and delivery by the Company of this Agreement or any of the
Ancillary Documents nor the consummation by the Company of the transactions
contemplated hereby or thereby will: (i) violate, conflict with or result in a
breach of any provisions of the Certificate of Incorporation or Bylaws of the
Company or comparable governing instruments of any of its Subsidiaries; (ii)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a right of
termination of, accelerate the performance required by or benefit obtainable
under, result in the triggering of any payment, penalty or other obligations
pursuant to, result in the creation of any Encumbrance upon any of the
properties of the Company or its Subsidiaries under, or result in there being
declared void, voidable, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture or other
obligation for borrowed money to which the Company or any of its Subsidiaries is
a party, or by which the Company or any of its Subsidiaries or any of their
respective properties is bound (each, a "Contract" and, collectively,
"Contracts"), except for any such breach, default or right with respect to which
requisite waivers or consents have been, or prior to the Effective Time will be,
obtained or any of the foregoing matters which would not have a Material Adverse
Effect; (iii) require any consent, approval or authorization of, license, permit
or waiver by, or declaration, filing or registration (collectively, "Consents")
with, any Governmental Entity, including any such Consent under the Laws of any
foreign jurisdiction, other than (x) the filings provided for in Section 2.3 and
the filings required under the Exchange Act and the Securities Act of 1933, as
amended (the "Securities Act"), and (y) the filing required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the filing
required under the Exon-Florio Amendment to the Defense Production Act of 1950
("Exon-Florio Amendment"), and any Consents required or permitted to be obtained
pursuant to the Laws of any foreign jurisdiction relating to antitrust matters
or competition ("Foreign Antitrust Laws") (collectively, "Other Antitrust
Filings and Consents," and, together with the other filings described in clauses
(x) and (y) above, "Regulatory Filings"), except for those Consents the failure
of which to obtain or make would not, individually or in the aggregate, have a
Material Adverse Effect; or (iv) violate any Laws applicable to the Company or
any of its Subsidiaries, except for violations which would not, individually or
in the aggregate, have a Material Adverse Effect.
6.7. COMPANY REPORTS; OFFER DOCUMENTS.
(a) The Company has delivered or otherwise made available to Purchaser each
registration statement, report, proxy statement or information statement (as
defined under the Exchange Act) filed by it since September 30, 1994, each in
the form (including exhibits and any amendments thereto) filed with the SEC
(collectively, the "Company Reports"). As of their respective dates, the Company
Reports (i) complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did 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, taken as a whole and in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of the Company included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
is true and complete in all material respects and fairly presents the
consolidated financial position of the Company and its Subsidiaries as of its
respective date, and each of the consolidated statements of income, retained
earnings and cash flows of the Company included in or incorporated by reference
into the Company Reports (including any related notes and schedules) is true and
complete in all material respects and fairly presents the results of operations,
retained earnings or cash flows, as the case may be, of the Company and its
Subsidiaries for the periods set forth therein in accordance with United States
generally accepted accounting principles, consistently applied during the
periods involved, except as may be noted therein. Except as disclosed in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, or
the Company's audited financial statements included in the Company's
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Annual Report on Form 10-K for the year ended September 30, 1996 neither the
Company nor its Subsidiaries has any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a balance sheet of the
Company or in the notes thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except liabilities and obligations
arising in the ordinary course of business since March 31, 1997 and except for
liabilities or obligations that would not constitute a Material Adverse Effect.
The Company has heretofore made available or promptly will make available to
Purchaser a complete and correct copy of any amendments or modifications, which
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously have been filed by the Company with the SEC as
exhibits to the Company Reports.
(b) None of the Schedule 14D-9, any information statement filed by the
Company in connection with the Offer (the "Information Statement"), any schedule
required to be filed by the Company with the SEC and any amendment or supplement
thereto, at the respective times such documents are filed with the SEC or first
published, sent or given to the Company's shareholders, will contain any untrue
statement of a material fact or will omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading except that
no representation is made by the Company with respect to information supplied by
Purchaser or Merger Sub for inclusion in the Schedule 14D-9 or Information
Statement or any amendment or supplement. None of the information supplied or to
be supplied by the Company expressly for inclusion or incorporation by reference
in the Offer Documents will, at the date of filing with the SEC or first
publication, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. If, at any time prior to the Effective Time, the Company
shall obtain knowledge of any facts with respect to itself, any of its officers
and directors or any of its Subsidiaries that would require the supplement or
amendment to any of the foregoing documents in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or to comply with applicable Laws, such amendment or supplement
shall be promptly filed with the SEC and, as required by Law, disseminated to
the shareholders of the Company, and in the event Purchaser shall advise the
Company as to its obtaining knowledge of any facts that would make it necessary
to supplement or amend any of the foregoing documents, the Company shall
promptly amend or supplement such document as required and distribute the same
to its shareholders.
(c) None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by Purchaser in connection with the issuance
of Purchaser Common Shares in the Merger (such S-4, and all amendments and
supplements thereto, the "S-4") will, at the time the S-4 is filed with the SEC
and at the time it becomes effective under the Securities Act, 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/prospectus included in the S-4 (such proxy
statement, and all amendments and supplements thereto, the "Proxy Statement")
will, at the date of mailing to shareholders and at the times of the meetings of
shareholders to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The Proxy
Statement (except for such portions thereof that relate only to Purchaser) will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations of the SEC thereunder.
6.8. ABSENCE OF CERTAIN CHANGES. Except as set forth in the Company Reports
or the Disclosure Letter, during the period from September 30, 1996 through the
date of this Agreement, the Company and its Subsidiaries have conducted their
business in the ordinary course of such business consistent with past practices,
and there have not been (i) any events or states of fact which individually, or
in the aggregate, would have a Material Adverse Effect; (ii) any declaration,
setting aside or payment of any dividend or other distribution with respect to
its capital stock other than the regular quarterly dividend declared and paid in
the first three quarters of fiscal 1997; (iii) any repurchase, redemption or any
other acquisition by the Company or its Subsidiaries of any outstanding shares
of capital stock or other securities of, or other ownership interests in,
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the Company or its Subsidiaries; (iv) any material change in accounting
principles, practices or methods; (v) any entry into any employment agreement
with, or any material increase in the rate or terms (including, without
limitation, any acceleration of the right to receive payment) of compensation
payable or to become payable by the Company or any of its Subsidiaries to, their
respective directors, officers or employees, except for increases occurring in
the ordinary course of business in accordance with their customary practices and
employment agreements entered into in the ordinary course of business; (vi) any
material increase in the rate or terms (including, without limitation, any
acceleration of the right to receive payment) of any bonus, insurance, pension
or other employee benefit plan or arrangement covering any such directors,
officers or employees, except increases occurring in the ordinary course of
business in accordance with its customary practices; (vii) any revaluation by
the Company or any of its Subsidiaries of any material amount of their assets,
taken as a whole, including, without limitation, write-downs of inventory or
write-offs of accounts receivable other than in the ordinary course of business
consistent with past practices and (viii) any amendment or change to the
Certificate of Incorporation or Bylaws or comparable governing instruments of
the Company or any of its Subsidiaries.
6.9. TAXES. Except as set forth in the Disclosure Letter, the Company and
each of its Subsidiaries have timely filed all material Tax Returns required to
be filed by any of them. All such Tax Returns are true, correct and complete,
except for such instances, if any, which would not, individually or in the
aggregate, have a Material Adverse Effect. All Taxes of the Company and its
Subsidiaries which are (i) shown as due on such Returns, (ii) otherwise due and
payable or (iii) claimed or asserted by any taxing authority to be due, have
been paid, except for those Taxes being contested in good faith and for which
adequate reserves have been established in the financial statements included in
the Company Reports in accordance with generally accepted accounting principles,
consistently applied. There are no proposed or, to the knowledge of the Company,
threatened Tax claims or assessments which, if upheld, would, individually or in
the aggregate, have a Material Adverse Effect. Except as set forth in the
Disclosure Letter, the Company and each Subsidiary have withheld and paid over
to the relevant taxing authority all Taxes required to have been withheld and
paid in connection with payments to employees, independent contractors,
creditors, shareholders or other third parties, except where the failure to
withhold and pay would not, individually or in the aggregate, have a Material
Adverse Effect. For purposes of this Agreement, (a) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, transfer or
excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, imposed by any Governmental Entity, and (b) "Tax Return" means any
return, report or similar statement required to be filed with respect to any Tax
(including any attached schedules), including, without limitation, any
information return, claim for refund, amended return or declaration of estimated
Tax.
6.10. LITIGATION. As of the date of this Agreement, except as disclosed in
the Disclosure Letter, there are no actions, suits, or proceedings pending
against the Company or its Subsidiaries or, to the knowledge of the Company,
threatened against the Company or its Subsidiaries at law or in equity, or
before or by any federal or state commission, board, bureau, agency,
instrumentality or any arbitrator or arbitration, tribunal, that, if decided
adversely, individually or in the aggregate would have a Material Adverse
Effect.
6.11. EMPLOYEE BENEFIT PLANS.
(a) Except as disclosed in the Disclosure Letter, the Company has complied
with and performed all contractual obligations and all obligations under
applicable federal, state, and local laws, rules and regulations (domestic and
foreign) required to be performed by it under or with respect to any of the
Company Benefit Plans (as hereinafter defined) or any related trust agreement or
insurance contract, other than where the failure to so comply or perform will
not have a Material Adverse Effect. All contributions and other payments
required to be made by the Company to any Company Benefit Plan or Multi-Employer
Plan (as hereinafter defined), prior to the date hereof have been made, other
than where the failure to so contribute or make payments will not have a
Material Adverse Effect. Except as disclosed in the Disclosure Letter, there is
no claim, dispute, grievance, charge, complaint, restraining or injunctive
order, litigation, or proceeding pending, or, to the Company's knowledge,
threatened (other than routine claims for benefits) against or relating to any
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Company Benefit Plan or against the assets of any Company Benefit Plan, which
will have, individually or in the aggregate, a Material Adverse Effect.
(b) Neither the Company nor its Subsidiaries has incurred, nor has any
event occurred which has imposed or is reasonably likely to impose, upon the
Company any withdrawal liability (partial or complete) in respect of any
multi-employer plan (within the meaning of Section 3(37) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("Multi-Employer
Plan"), which withdrawal liability has not been satisfied or discharged in full
or which, either individually or in the aggregate, will cause a Material Adverse
Effect.
(c) (i) "Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life
insurance, severance, separation or other employee benefit plan, practice,
policy or arrangement of any kind, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA and (ii) "Company
Benefit Plan" means any employee pension benefit plan and any Plan, other than a
Multi-Employer Plan, established by the Company or to which the Company
contributes or has contributed (including any such Plans not now maintained by
the Company or to which the Company does not now contribute, but with respect to
which the Company has or may have any liability).
6.12. EMPLOYMENT RELATIONS AND AGREEMENTS. (a) Except as disclosed in the
Disclosure Letter or as would not constitute a Material Adverse Effect, as of
the date of this Agreement, (i) no unfair labor practice complaint against the
Company or any of its Subsidiaries is pending before the National Labor
Relations Board; (ii) there is no, and has not been during the last three years,
any labor strike, slowdown or stoppage actually pending which may interfere with
the business activities of the Company or its Subsidiaries; (iii) no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and no claim therefore has been asserted; and (iv) no collective
bargaining agreement is currently being negotiated by the Company or any of its
Subsidiaries.
(b) Except as disclosed in the Disclosure Letter, to the knowledge of the
Company, neither the Company nor its Subsidiaries has any employment agreement
with any other person that could have a Material Adverse Effect.
(c) There are no work stoppages or any actual or, to the Company's
knowledge, threatened termination or modification of the business relationships
of the Company or any of its Subsidiaries with any of their customers or
suppliers, that would have a Material Adverse Effect, except to the extent
commencing after the public announcement of, and arising out of or relating to,
the transactions contemplated hereby.
6.13. CONTRACTS. Except as set forth in the Company Reports or disclosed in
the Disclosure Letter, neither the Company nor its Subsidiaries is a party to or
bound by (i) any "material contract" (as such term is defined in Item 601(b)(10)
of Regulation S-K of the SEC), or (ii) any non-competition agreement or other
agreement which purports to limit in any material respect the manner in which,
or the location in which, all or any material portion of the business of the
Company and its Subsidiaries is conducted (all contracts of the type described
in clauses (i) and (ii) being referred to herein as "Material Contracts"). Each
Material Contract is valid and binding on the Company (or, to the extent a
Subsidiary of the Company is a party, such Subsidiary) and is in full force and
effect, and the Company and each of its Subsidiaries have in all material
respects performed all obligations required to be performed by them to date
under each Material Contract, except where noncompliance, individually or in the
aggregate, would not have a Material Adverse Effect. The Company does not know
of, and has not received notice of, any violation or default under (nor, to the
knowledge of the Company, does there exist any condition which with the passage
of time or the giving of notice or both would result in such a violation or
default under) any Material Contract, which default would have a Material
Adverse Effect.
6.14. ENVIRONMENTAL LAWS AND REGULATIONS. (a) As of the date of this
Agreement, except as disclosed in the Company Reports or the Disclosure Letter,
(i) neither the Company nor any of its Subsidiaries has received written notice
of, or, to the knowledge of the Company, is the subject of, any action, cause of
action,
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claim, investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Law relating to pollution or
protection of human health or the environment (including without limitation
ambient air, surface water, ground water, land surface or surface strata) (an
"Environmental Claim") that individually or in the aggregate would have a
Material Adverse Effect; and (ii) to the knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance in the future.
(b) As of the date of this Agreement, except as disclosed in the Company
Reports or the Disclosure Letter, there are no Environmental Claims which
individually or in the aggregate would have a Material Adverse Effect that are
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or, to the knowledge of the Company, against any person
or entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) As of the date of this Agreement, except as disclosed in the Company
Reports or the Disclosure Letter, there has been no spill, discharge, leak,
emission, injection, disposal, escape, dumping or release of any kind by the
Company or its Subsidiaries on, beneath or above the real property owned by the
Company or any of its Subsidiaries, or the real property leased, used, or in
which any other interest is maintained by the Company and its Subsidiaries at
the Effective Time or, to the knowledge of the Company, previously owned by,
used by or leased to the Company or any Subsidiary (collectively, the
"Property") or into the environment surrounding the Property of any pollutants,
contaminants, hazardous substances, hazardous chemicals, toxic substances,
hazardous wastes, infectious wastes, radioactive materials, petroleum (including
crude oil or any fraction thereof), asbestos fibers or solid wastes
(collectively, "Hazardous Materials"), including but not limited to those
defined in any Law and all regulations promulgated under each and all amendments
thereof, or any other federal, state or local environmental law, ordinance,
regulations, rule or order, except such of the foregoing occurrences as do not
have a Material Adverse Effect.
6.15. BROKERS. The Company has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
Purchaser or the Company to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby,
except that the Company has retained the Financial Advisor and Merrill Lynch
Pierce Fenner & Smith Incorporated, the arrangements with which have been
disclosed in writing to Purchaser prior to the date hereof.
6.16. OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of
the Financial Advisor, to the effect that, as of the date hereof, the Merger
Consideration to be received by the holders of Common Stock pursuant to the
Offer and the Merger is fair to such shareholders from a financial point of
view.
6.17. NO RESTRICTIONS ON THE OFFER OR THE MERGER. No provision of the
Certificate of Incorporation, Bylaws or other governing instruments of the
Company or any of its Subsidiaries (i) imposes restrictions materially adversely
affecting (or materially delaying) the consummation of the Offer or the Merger
or (ii) would, as a result of the Offer, the Merger, the transactions
contemplated hereby or the acquisitions of securities of the Company or the
Surviving Corporation by Purchaser or Merger Sub (A) restrict or impair the
ability of Purchaser to vote, or otherwise to exercise the rights of a
shareholder with respect to, securities of the Company or the Surviving
Corporation and their Subsidiaries that may be acquired or controlled by
Purchaser or (B) entitle any person, entity, or group to acquire securities of
the Company or the Surviving Corporation on a basis not available to Purchaser.
Except as set forth in the Disclosure Letter, the Company is not a party to any
plan or agreement pursuant to which payments are required or acceleration of
benefits are required to be paid to any employee or former employee of the
Company upon a "change in control" of the Company as a result of the
consummation of the transactions contemplated hereby. The approval and adoption
of the Merger requires the affirmative vote of two-thirds of the outstanding
shares of Common Stock.
6.18. INTELLECTUAL PROPERTY. Each of the Company and its Subsidiaries is
the owner of, or a licensee under a valid license for, all items of intellectual
property that are material to its business. Except as disclosed in the
Disclosure Letter or as would not result in a Material Adverse Effect, there are
no claims pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened challenging that the Company or any of
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its Subsidiaries is in violation of the intellectual property rights of any
third party nor, to the Company's knowledge, are there any infringements by
others of any of the rights owned by or licensed to the Company or any of its
Subsidiaries.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Except as set forth in the corresponding sections of the disclosure letter,
dated the date hereof, delivered by Purchaser to the Company (the "Purchaser
Disclosure Letter"), Purchaser and Merger Sub hereby represent and warrant to
the Company as follows:
7.1. EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Purchaser and
Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted, except where the failure to have
such power and authority would not have a materially adverse effect on the
business, results of operations or financial condition of Purchaser or on the
ability of Purchaser or Merger Sub to consummate the transactions contemplated
by this Agreement (a "Purchaser Material Adverse Effect").
7.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of Purchaser
and Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and the Ancillary Documents and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Ancillary Documents and the consummation by Purchaser and
Merger Sub of the transactions contemplated hereby and thereby have been duly
and validly authorized by the respective Boards of Directors of Purchaser and
Merger Sub and by Purchaser as the sole shareholder of Merger Sub and no other
corporate proceedings on the part of Purchaser or Merger Sub are necessary to
authorize this Agreement and the Ancillary Documents or to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and any
Ancillary Documents at the time of execution will have been, duly and validly
executed and delivered by Purchaser and Merger Sub, and (assuming this Agreement
and such Ancillary Documents each constitutes a valid and binding obligation of
the Company) constitutes and will constitute the valid and binding obligations
of each of Purchaser and Merger Sub, and the Agreement is enforceable in
accordance with its terms.
7.3. OFFER DOCUMENTS.
(a) None of the Offer Documents, any schedule required to be filed by
Purchaser or Merger Sub with the SEC or any amendment or supplement thereto will
contain, at the respective times such documents are filed with the SEC or first
published, sent or given to the Company's shareholders, any untrue statement of
a material fact or will omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they are made, not misleading, except that no
representation is made by Purchaser or Merger Sub with respect to information
supplied by the Company specifically for inclusion in the Offer Documents or the
Information Statement, any schedule required to be filed with the SEC or any
amendment or supplement. None of the information supplied or to be supplied by
Purchaser or Merger Sub for inclusion or incorporation by reference in the
Schedule 14D-9 will, at the date of filing with the SEC or first publication,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time either Purchaser or
Merger Sub shall obtain knowledge of any facts with respect to itself, any of
its officers and directors or any of its Subsidiaries that would require the
supplement or amendment to any of the foregoing documents in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or to comply with applicable Laws, such amendment or
supplement shall be promptly filed with the SEC and, as required by Law,
disseminated to the shareholders of the Company, and in the event the Company
shall advise Purchaser or Merger Sub as to its obtaining knowledge of any facts
that would make it necessary to supplement or amend any of the foregoing
documents, Purchaser
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<PAGE> 19
or Merger Sub shall promptly amend or supplement such document as required and
distribute the same to the shareholders of the Company.
(b) None of the information supplied or to be supplied by Purchaser for
inclusion or incorporation by reference in (i) the S-4 will, at the time the S-4
is filed with the SEC and becomes effective under the Securities Act, 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 Proxy Statement will, at the date of mailing to
shareholders and at the times of the meetings of shareholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Proxy Statement (except for such portions
thereof that relate only to the Company) will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC thereunder, and the S-4 (except for such portions thereof that relate
only to the Company) will comply as to form in all material respects with the
requirements of the Securities Act and the rules and regulations of the SEC
thereunder.
7.4. NO VIOLATION. Neither the execution and delivery of this Agreement or
any of the Ancillary Documents by Purchaser and Merger Sub nor the consummation
by them of the transactions contemplated hereby or thereby will (i) violate,
conflict with or result in any breach of any provision of the respective
Certificates of Incorporation or Bylaws of Purchaser or any of its Subsidiaries;
(ii) violate, conflict with, result in a breach of any provision of, constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a right of
termination of, accelerate the performance required by or benefit obtainable
under, result in the triggering of any payment or other obligations pursuant to,
result in the creation of any Encumbrance upon any of the properties of
Purchaser or Merger Sub under, or result in there being declared void, voidable,
or without further binding effect, any Contract to which Purchaser or Merger Sub
is a party, or by which Purchaser or Merger Sub or any of their respective
properties is bound, except for any such breach, default or right with respect
to which requisite waivers or consents have been, or prior to the Effective Time
will be, obtained or any of the foregoing matters which would not have a
Purchaser Material Adverse Effect; (iii) other than the Regulatory Filings,
require any Consent of any Governmental Entity, the lack of which would have a
Purchaser Material Adverse Effect; or (iv) violate any Laws applicable to
Purchaser or the Merger Sub or any of their respective assets, except for
violations which would not, individually or in the aggregate, have a Purchaser
Material Adverse Effect.
7.5. FINANCING. On the date hereof, Purchaser has access to funds
sufficient to consummate the Offer and the Merger on the terms contemplated
hereby. The source and any commitments related thereto are set forth in the
Purchaser Disclosure Letter. At the consummation of the Offer and at the
Effective Time, Purchaser will have, and will cause Merger Sub to have, funds
available to it sufficient to consummate the Offer and the Merger on the terms
contemplated hereby.
7.6. MERGER SUB. Merger Sub was formed solely for the purpose of engaging
in the transactions contemplated hereby. Except for obligations or liabilities
incurred in connection with its incorporation or organization and the
transactions contemplated hereby, Merger Sub has not incurred any obligations or
liabilities or engaged in any business or activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
7.7. COMPLIANCE WITH LAWS. Except as set forth in the Purchaser Disclosure
Letter, Purchaser is not in violation of, and the consummation of the
transactions contemplated by this Agreement will not result in any violation of,
any Laws of any Governmental Entity applicable to Purchaser or any of its
Subsidiaries or any of their respective properties or assets, except for
violations which would not have a Purchaser Material Adverse Effect, which
compliance includes, but is not limited to, the possession by the Purchaser and
its Subsidiaries of all Permits and compliance with the terms and conditions
thereof, except where the failure of Purchaser or its Subsidiaries to possess
such licenses, permits and authorizations, or comply with the terms and
conditions thereof, would not, individually or in the aggregate, have a
Purchaser Material Adverse Effect. The completion of the transactions
contemplated by this Agreement will not result in the lapse or termination of
any Permits, other than such lapse or termination which would not have a
Purchaser Material Adverse Effect.
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<PAGE> 20
7.8. CAPITALIZATION. The authorized capital stock of Purchaser consists of
40,000,000 shares of Purchaser Common Stock and 10,000,000 shares of preferred
stock, $0.01 par value ("Purchaser Preferred Stock"). As of May 1, 1997, (a)
24,698,816 shares of Purchaser Common Stock were issued and outstanding, (b)
options to purchase an aggregate of 907,500 shares of Purchaser Common Stock
were outstanding, (c) no shares of Purchaser Common Stock were held by Purchaser
in its treasury, (d) no shares of capital stock of Purchaser were held by
Purchaser's Subsidiaries and (e) no shares of Purchaser Preferred Stock are
outstanding. Purchaser has no outstanding bonds, debentures, notes or other
obligations entitling the holders thereof to vote (or which are convertible into
or exercisable for securities having the right to vote) with the shareholders of
Purchaser on any matter. Since May 1, 1997, Purchaser (i) has not issued any
shares of Purchaser Common Stock, other than upon the exercise of options, or
Purchaser Preferred Stock, and (ii) has not split, combined, converted or
reclassified any of its shares of capital stock. All issued and outstanding
shares of Purchaser Common Stock are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in this
Section 7.8 or in the Purchaser Disclosure Letter, there are no other shares of
capital stock or voting securities of Purchaser, and no existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate Purchaser or any of its Subsidiaries to
issue, transfer or sell any shares of capital stock of, or equity interests in,
Purchaser or any of its Subsidiaries. Except for the options to acquire
Purchaser Common Stock described in this Section 7.8, there are no equity
equivalents, interests in the ownership or earnings of the Purchaser or its
Subsidiaries, or similar rights authorized, issued or outstanding similar to
those granted by the Company under Incentive Equity Plans. Except as set forth
in the Disclosure Letter, there are no outstanding obligations of Purchaser or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Purchaser and there are no outstanding stock-related awards.
Except as set forth in the Purchaser Disclosure Letter, there are no voting
trusts or other agreements or understandings to which Purchaser or any of its
Subsidiaries or, to the knowledge of Purchaser, any of Purchaser's directors or
executive officers is a party with respect to the voting of capital stock of
Purchaser or any of its Subsidiaries.
7.9. PURCHASER REPORTS. Purchaser has delivered or otherwise made available
to the Company each registration statement, report, proxy statement or
information statement (as defined under the Exchange Act) filed by it since
January 1, 1994, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "Purchaser Reports"). As of their
respective dates, the Purchaser Reports (i) complied as to form in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act, and the rules and regulations thereunder and (ii) did 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, taken as a
whole and in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of Purchaser included in or
incorporated by reference into the Purchaser Reports (including the related
notes and schedules) is true and complete in all material respects and fairly
presents the consolidated financial position of Purchaser and its Subsidiaries
as of its respective date, and each of the consolidated statements of income,
retained earnings and cash flows of Purchaser included in or incorporated by
reference into the Purchaser Reports (including any related notes and schedules)
is true and complete in all material respects and fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of Purchaser
and its Subsidiaries for the periods set forth therein in accordance with United
States generally accepted accounting principles, consistently applied during the
periods involved, except as may be noted therein. Except as disclosed in the
Purchaser's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
and Purchaser's audited financial statements included in its Annual Report on
Form 10-K for the year ended December 31, 1996, neither Purchaser nor its
Subsidiaries has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of Purchaser or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities and obligations arising in
the ordinary course of business since March 31, 1997 and except for liabilities
or obligations that would not constitute a Material Adverse Effect. Purchaser
has heretofore made available or promptly will make available to the Company a
complete and correct copy of any amendments or modifications, which have not yet
been filed with the SEC, to agreements, documents or other instruments which
previously have been filed by Purchaser with the SEC as exhibits to the
Purchaser Reports.
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7.10. ABSENCE OF CERTAIN CHANGES. Except as set forth in the Purchaser
Reports or the Purchaser Disclosure Letter, during the period from December 31,
1996 through the date of this Agreement, Purchaser and its Subsidiaries have
conducted their business in the ordinary course of such business consistent with
past practices, and there have not been (i) any events or states of fact which
individually, or in the aggregate, would have a Purchaser Material Adverse
Effect; (ii) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock; (iii) any repurchase, redemption
or any other acquisition by Purchaser or its Subsidiaries of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
Purchaser or its Subsidiaries; (iv) any material change in accounting
principles, practices or methods; (v) any entry into any employment agreement
with, or any material increase in the rate or terms (including, without
limitation, any acceleration of the right to receive payment) of compensation
payable or to become payable by Purchaser or any of its Subsidiaries to, their
respective directors, officers or employees, except for increases occurring in
the ordinary course of business in accordance with their customary practices and
employment agreements entered into in the ordinary course of business; (vi) any
material increase in the rate or terms (including, without limitation, any
acceleration of the right to receive payment) of any bonus, insurance, pension
or other employee benefit plan or arrangement covering any such directors,
officers or employees, except increases occurring in the ordinary course of
business in accordance with its customary practices; (vii) any revaluation by
Purchaser or any of its Subsidiaries of any material amount of their assets,
taken as a whole, including, without limitation, write-downs of inventory or
write-offs of accounts receivable other than in the ordinary course of business
consistent with past practices and (viii) any amendment or change to the
Certificate of Incorporation or Bylaws or comparable governing instruments of
Purchaser or any of its Subsidiaries.
7.11. TAXES. Except as set forth in the Purchaser Disclosure Letter,
Purchaser and each of its Subsidiaries have timely filed all material Tax
Returns required to be filed by any of them. All such Tax Returns are true,
correct and complete, except for such instances, if any, which would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect. All
Taxes of Purchaser and its Subsidiaries which are (i) shown as due on such
Returns, (ii) otherwise due and payable or (iii) claimed or asserted by any
taxing authority to be due, have been paid, except for those Taxes being
contested in good faith and for which adequate reserves have been established in
the financial statements included in the Purchaser Reports in accordance with
generally accepted accounting principles, consistently applied. There are no
proposed or to the knowledge, of Purchaser, threatened Tax claims or assessments
which, if upheld, would, individually or in the aggregate, have a Purchaser
Material Adverse Effect. Except as set forth in the Purchaser Disclosure Letter,
Purchaser and each Subsidiary have withheld and paid over to the relevant taxing
authority all Taxes required to have been withheld and paid in connection with
payments to employees, independent contractors, creditors, shareholders or other
third parties, except where the failure to withhold and pay would not,
individually or in the aggregate, have a Purchaser Material Adverse Effect.
7.12. LITIGATION. Except as disclosed in the Purchaser Disclosure Letter,
there are no actions, suits, or proceedings pending against Purchaser or its
Subsidiaries or, to the knowledge of the Purchaser, threatened against the
Purchaser or its Subsidiaries at law or in equity, or before or by any federal
or state commission, board, bureau, agency, instrumentality or any arbitrator or
arbitration, tribunal, that, if decided adversely, individually or in the
aggregate, would have a Purchaser Material Adverse Effect, or is reasonably
expected to prevent or materially delay the consummation of the transactions
contemplated hereby.
7.13. EMPLOYEE BENEFIT PLANS.
(a) Except as disclosed in the Purchaser Disclosure Letter, Purchaser has
complied with and performed all contractual obligations and all obligations
under applicable federal, state, and local laws, rules and regulations (domestic
and foreign) required to be performed by it under or with respect to any of the
Purchaser Benefit Plans (as defined below) or any related trust agreement or
insurance contract, other than where the failure to so comply or perform will
not have a Purchaser Material Adverse Effect. All contributions and other
payments required to be made by Purchaser to any Purchaser Benefit Plan or
Multi-Employer Plan, prior to the date hereof have been made, other than where
the failure to so contribute or make payments will not have a Purchaser Material
Adverse Effect. Except as disclosed in the Purchaser Disclosure Letter, there is
no claim, dispute, grievance, charge, complaint, restraining or injunctive
order, litigation, or proceeding
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pending, or, to Purchaser's knowledge, threatened (other than routine claims for
benefits) against or relating to any Purchaser Benefit Plan or against the
assets of any Purchaser Benefit Plan, which will have, individually or in the
aggregate, a Purchaser Material Adverse Effect.
(b) Neither Purchaser nor its Subsidiaries has incurred, nor has any event
occurred which has imposed or is reasonably likely to impose upon Purchaser, any
withdrawal liability (partial or complete) in respect of any Multi-Employer
Plan, which withdrawal liability has not been satisfied or discharged in full or
which, either individually or in the aggregate, will cause a Purchaser Material
Adverse Effect.
(c) "Purchaser Benefit Plan" means any employee pension benefit plan and
any Plan, other than a Multi-Employer Plan, established by Purchaser or to which
Purchaser contributes or has contributed (including any such Plans not now
maintained by Purchaser or to which the Purchaser does not now contribute, but
with respect to which Purchaser has or may have any liability).
7.14. CONTRACTS. Except as set forth in the Purchaser Reports or disclosed
in the Purchaser Disclosure Letter, neither Purchaser nor its Subsidiaries is a
party to or bound by any Material Contract. Each Material Contract is valid and
binding on Purchaser (or, to the extent a Purchaser Subsidiary is a party, such
Subsidiary) and is in full force and effect, and Purchaser and each of its
Subsidiaries have in all material respects performed all obligations required to
be performed by them to date under each Material Contract, except where
noncompliance, individually or in the aggregate, would not have a Purchaser
Material Adverse Effect. Purchaser does not know of, and has not received notice
of, any violation or default under (nor, to the knowledge of Purchaser, does
there exist any condition which with the passage of time or the giving of notice
or both would result in such a violation or default under) any Material
Contract, which default would have a Purchaser Material Adverse Effect.
7.15. ENVIRONMENTAL LAWS AND REGULATIONS. (a) Except as disclosed in the
Purchaser Reports or the Disclosure Letter, (i) neither Purchaser nor any of its
Subsidiaries has received written notice of, or, to the knowledge of Purchaser,
is the subject of, any Environmental Claim that individually or in the aggregate
would have a Purchaser Material Adverse Effect; and (ii) to the knowledge of
Purchaser, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as disclosed in the Purchaser Reports or the Purchaser
Disclosure Letter, there are no Environmental Claims which individually or in
the aggregate would have a Purchaser Material Adverse Effect that are pending
or, or the knowledge of Purchaser, threatened against Purchaser or any of its
Subsidiaries or, to the knowledge of Purchaser, against any person or entity
whose liability for any Environmental Claim Purchaser or any of its Subsidiaries
has or may have retained or assumed either contractually or by operation of law.
(c) Except as disclosed in the Purchaser Reports or the Purchaser
Disclosure Letter, there has been no spill, discharge, leak, emission,
injection, disposal, escape, dumping or release of any kind by Purchaser or its
Subsidiaries on, beneath or above the real property owned by Purchaser or any of
its Subsidiaries, or the real property leased, used, or in which any other
interest is maintained by Purchaser and its Subsidiaries at the Effective Time
or, to the knowledge of Purchaser, previously owned by, used by or leased to
Purchaser or any Subsidiary (collectively, the "Purchaser Property") or into the
environment surrounding the Purchaser Property of any Hazardous Materials,
including but not limited to those defined in any Law and all regulations
promulgated under each and all amendments thereof, or any other federal, state
or local environmental law, ordinance, regulations, rule or order, except such
of the foregoing occurrences as do not have a Purchaser Material Adverse Effect.
ARTICLE 8
COVENANTS
8.1. NO SOLICITATION. From and after the date of this Agreement and prior
to the Effective Time, except as provided below, the Company agrees (a) that
neither the Company nor its Subsidiaries shall, and the Company shall direct and
use its best efforts to cause its officers, directors, employees, agents and
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<PAGE> 23
representatives (including, without limitation, any investment banker, attorney,
or accountant retained by it or any of its Subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including without limitation, any
proposal or offer to its shareholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, the Company or
any of its Subsidiaries (any such proposal or offer being hereinafter referred
to as an "Alternative Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person relating to an Alternative Proposal, or otherwise facilitate any
effort or attempt to make or implement an Alternative Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 8.1; and (c) that it will notify Purchaser promptly if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with it, including the identity of the other party and the terms of its
proposal; provided however, that nothing contained in this Section 8.1 shall
prohibit the Board of Directors of the Company from (i) furnishing information
to or entering into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide proposal in writing, to acquire the Company
pursuant to a merger, consolidation, share exchange, purchase of a substantial
portion of the assets, business combination or other similar transaction, if,
and only to the extent that, (A) the Board of Directors determines in good
faith, and after consultation with outside counsel and the Financial Advisor,
that such action is required for the Board of Directors to comply with its
fiduciary duties to shareholders imposed by law, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides written notice to Purchaser to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person or entity, and (C) the Company keeps Purchaser informed of the
status (not the terms) of any such discussions or negotiations; and (ii) to the
extent applicable, complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Alternative Proposal. Subject to Article 10, nothing in this
Section 8.1 shall (x) permit the Company to terminate this Agreement, (y) permit
the Company to enter into any agreement with respect to an Alternative Proposal
during the term of this Agreement, or (z) affect any other obligation of any
party under this Agreement. The Company shall enter into a confidentiality
agreement with any third party permitted by this Section 8.1, on terms which
shall not be more favorable to, or less restrictive on, such third party as the
terms applicable to Purchaser set forth in the letter agreement dated as of
April 14, 1997, between the Company and Purchaser (the "Confidentiality
Agreement") relating to the confidential treatment of Confidential Information
(as defined therein).
8.2. INTERIM OPERATIONS OF THE COMPANY.
(a) From the date of this Agreement to the Effective Time, unless Purchaser
has consented in writing thereto, the Company shall, and shall cause each of its
Subsidiaries to, (i) conduct its operations according to its usual, regular and
ordinary course of business consistent with past practice; (ii) use its
reasonable efforts to preserve intact its business organizations and goodwill,
maintain in effect all existing qualifications, licenses, permits, approvals and
other authorizations referred to in Section 6.3 (other than those the lapse of
which would not have, individually or in the aggregate, a Material Adverse
Effect), keep available the services of its officers and employees and maintain
satisfactory relationships with those persons having business relationships with
them; (iii) promptly upon the discovery thereof notify Purchaser of the
existence of any breach of any representation or warranty of the Company
contained herein (or, in the case of any representation or warranty that makes
no reference to Material Adverse Effect, any breach of such representation or
warranty in any material respect) or the occurrence of any event that would
cause any representation or warranty of the Company contained herein no longer
to be true and correct (or, in the case of any representation or warranty that
makes no reference to Material Adverse Effect, to be no longer be true and
correct in any material respect); and (iv) promptly deliver to Purchaser true
and correct copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(b) From and after the date of this Agreement to the Effective Time, unless
Purchaser has consented in writing thereto, the Company shall not, and shall not
permit any of its Subsidiaries to, (i) amend its
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Certificate of Incorporation or Bylaws or comparable governing instruments or
the Rights Agreement dated as of April 24, 1996, as amended by Amendment No. 1
dated July 8, 1997, between the Company and First Chicago Trust Company of New
York; (ii) authorize for issuance, issue, sell, pledge or register for issuance
or sale any shares of its capital stock or other ownership interest in the
Company (other than issuances of Common Stock in respect of any exercise of
Options outstanding on the date hereof) or any of the Subsidiaries, or any
securities convertible into or exchangeable for any such shares or ownership
interest, or any rights (other than rights related to shares of Common Stock
issued upon the exercise of Options, which entitle the holders of shares of
Common Stock to purchase shares of Series A Junior Participating Preferred Stock
upon the occurrence of certain events), warrants or options to acquire or with
respect to any such shares of capital stock, ownership interest, or convertible
or exchangeable securities; or accelerate any right to convert or exchange or
acquire any securities of the Company (other than Options pursuant to Section
5.2(d)) or any of its Subsidiaries for any such shares or ownership interest;
(iii) effect any stock split or conversion of any of its capital stock or
otherwise change its capitalization as it exists on the date hereof, other than
as set forth in this Agreement; (iv) except as contemplated by this Agreement,
directly or indirectly redeem, purchase or otherwise acquire any shares of its
capital stock or capital stock of any of its Subsidiaries, or declare, pay or
set aside any dividend or other distribution (whether in cash, stock or property
or any combination thereof) in respect of its capital stock, other than
dividends or distributions to the Company or a Subsidiary wholly-owned by the
Company; (v) sell, lease, mortgage, pledge or otherwise dispose of or encumber
any of its assets (including capital stock of Subsidiaries), except in the
ordinary course of business consistent with past practice; (vi) acquire by
merger, purchase or any other manner, any material business or entity or
otherwise acquire any assets that are material to the Company and its
Subsidiaries taken as a whole, except for purchases of inventory, supplies or
capital equipment in the ordinary course of business consistent with past
practice; (vii) incur or assume any long-term or short-term debt in excess of
$10 million, except for working capital purposes in the ordinary course of
business under the Company's existing credit facilities; (viii) assume,
guarantee or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person except wholly
owned Subsidiaries of the Company; (ix) make or forgive any loans, advances or
capital contributions to, or investments in, any other Person; (x) waive or
amend any term or condition of any confidentiality or "standstill" agreement to
which the Company is a party; (xi) enter into any new employment, severance,
consulting or salary continuation agreements with any newly hired employees
other than in the ordinary course of business consistent with past practice or
enter into any of the foregoing with any existing officers, directors or
employees or grant any increases in compensation or benefits to employees, other
than increases in the ordinary course of business consistent with past practice;
(xii) enter into, adopt, amend in any material respect or terminate any employee
benefit plan or arrangement (other than the termination of the Company's
non-employee director equity compensation plan and the termination of the
Company's employee stock purchase plan); (xiii) enter into, amend in any
material respect or terminate any employment agreement or severance agreement
entered into between the Company and its executive officers or waive any
material right of the Company thereunder; (xiv) make any material changes in the
type or amount of their insurance coverage or permit any material insurance
policy naming the Company or any Subsidiary as a beneficiary or a loss payee to
be cancelled or terminated other than in the ordinary course of business
consistent with past practice; (xv) make any tax election or, except as may be
required by law or generally acceptable accounting principles, change any
material accounting principles or practices used by the Company or its
Subsidiaries; (xvi) take, or fail to take, any action to cause the Common Stock
to be delisted from the New York Stock Exchange prior to the completion of the
Offer or the Merger; (xvii) settle or compromise any claims or litigation
involving payments by the Company or any of its Subsidiaries of more than
$250,000 in any single instance or related instances, or that otherwise are
material; (xviii) enter into any intellectual property license pursuant to which
the Company licenses any of its intellectual property or sublicenses any of its
intellectual property; (xvix) enter into any lease or amend any lease of real
property involving the payment by the Company of $250,000 or more; or (xx) agree
in writing or otherwise to take any of the foregoing actions.
8.2A. INTERIM OPERATIONS OF PURCHASER AND MERGER SUB.
(a) From the date of this Agreement to the Effective Time, unless the
Company has consented in writing thereto, each of Purchaser and Merger Sub
shall, and shall cause each of its Subsidiaries to,
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(i) conduct its operations according to its usual, regular and ordinary course
of business consistent with past practice; (ii) use its reasonable efforts to
preserve intact its business organizations, maintain in effect all existing
material qualifications, licenses, permits, approvals and other authorizations
(other then those the lapse of which would not have, individually or in the
aggregate, a Purchaser Material Adverse Effect), keep available the services of
their officers and employees and maintain satisfactory relationships with those
persons having business relationships with them; (iii) promptly upon the
discovery thereof notify the Company of the existence of any breach of any
representation or warranty of Purchaser or Merger Sub contained herein (or, in
the case of any representation or warranty that makes no reference to Purchaser
Material Adverse Effect, any breach of such representation or warranty in any
material respect) or the occurrence of any event that would cause any
representation or warranty of Purchaser or Merger Sub contained herein no longer
to be true and correct (or, in the case of any representation or warranty that
makes no reference to Purchaser Material Adverse Effect, to no longer be true
and correct in any material respect); and (iv) promptly deliver to the Company
true and correct copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(b) From and after the date of this Agreement to the Effective Time, unless
the Company has consented in writing thereto, neither Purchaser nor Merger Sub
shall, and neither shall permit any of their Significant Subsidiaries to, (i)
amend its Certificate of Incorporation or Bylaws or comparable governing
instruments; (ii) authorize for issuance, issue, sell, pledge or register for
issuance or sale any shares of its capital stock or other ownership interest in
the Purchaser (other than issuances of Purchaser Common Stock in respect of any
exercise of options outstanding on the date hereof, issuances necessary to
complete the transactions contemplated by this Agreement and issuances disclosed
in the Company Reports), the Merger Sub or any of their respective Significant
Subsidiaries, or any securities convertible into or exchangeable for any such
shares or ownership interest, or any rights, warrants or options to acquire or
with respect to any such shares of capital stock, ownership interest, or
convertible or exchangeable securities; or accelerate any right to convert or
exchange or acquire any securities of Purchaser, Merger Sub or any of their
respective Significant Subsidiaries for any such shares or ownership interest,
except for the issuance of any financial instruments in connection with the
Offer and the Merger and the financing thereof; (iii) effect any stock split or
conversion of any of its capital stock or otherwise change its capitalization as
it exists on the date hereof, other than as set forth in this Agreement; (iv)
directly or indirectly redeem, purchase or otherwise acquire any shares of its
capital stock or capital stock of any of its Significant Subsidiaries other than
as set forth in this Agreement, or declare, pay or set aside any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock, other than dividends or distributions
to the Purchaser or any Significant Subsidiary wholly-owned by the Purchaser;
(v) sell, lease or otherwise dispose of any of its assets (including capital
stock of its Significant Subsidiaries), except in the ordinary course of
business; (vi) acquire by merger, purchase or any other manner, any material
business or entity or otherwise acquire any assets that are material to
Purchaser, Merger Sub and their Significant Subsidiaries taken as a whole,
except for purchases of inventory, supplies or capital equipment in the ordinary
course of business consistent with past practice; (vii) incur or assume any
long-term or short-term debt in excess of $50 million, except for working
capital purposes in any amount in the ordinary course of business under
Purchaser's existing credit facilities and except as may be required to
consummate the Offer and the Merger; (viii) assume, guarantee or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except Subsidiaries of Purchaser, except in
the ordinary course of business consistent with past practice; (ix) make or
forgive any loans, advances or capital contributions to, or investments in, any
other person, other than consistent with past practices, to or in any
Subsidiary, and other than by Detroit Diesel Capital Corporation or Detroit
Diesel Credit Corporation in the ordinary course of their respective businesses
consistent with past practices; (x) waive or amend any term or condition of any
confidentiality or "standstill" agreement to which Purchaser or Merger Sub is a
party; (xi) adopt or amend in any material respect or terminate any employee
benefit plan or arrangement; (xii) amend in any material respect or terminate
any employment agreement or severance agreement entered into between Purchaser
and its executive officers or waive any material right of Purchaser thereunder,
except in the ordinary course of business consistent with past practice; (xiii)
make any material changes in the type or amount of their insurance coverage or
permit any material insurance policy naming Purchaser or any of its Subsidiaries
as a beneficiary or a loss payee to be cancelled or terminated other
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than in the ordinary course of business; (xiv) except as may be required by law
or generally acceptable accounting principles, change any material accounting
principles or practices used by Purchaser or its Significant Subsidiaries; (xv)
take any action to cause the Purchaser Common Shares to be delisted from the New
York Stock Exchange; or (xvi) agree in writing or otherwise to take any of the
foregoing actions.
8.3. COMPANY SHAREHOLDER APPROVAL; PROXY STATEMENT.
(a) The Company, through its Board of Directors, shall (i) call a meeting
of its shareholders (the "Shareholders Meeting") for the purpose of voting upon
the Merger, (ii) hold the Shareholders Meeting as soon as practicable following
the purchase of shares of Common Stock pursuant to the Offer and the
effectiveness of the S-4, and (iii) subject to the fiduciary duties of the Board
of Directors under applicable law as advised by outside counsel of the Company,
recommend to its shareholders the approval of the Merger. The Company shall use
reasonable efforts to solicit from shareholders of the Company proxies in favor
of the Merger and shall take all other actions reasonably requested by Purchaser
to secure the vote of shareholders required by the DGCL to effect the Merger.
The record date for the Shareholders Meeting shall be a date subsequent to the
date Purchaser or Merger Sub becomes a record holder of Common Stock purchased
pursuant to the Offer.
(b) As soon as practicable following the date of this Agreement, Purchaser,
Merger Sub and the Company shall prepare and file the Proxy Statement with the
SEC, and Purchaser shall, in cooperation with the Company, prepare and file with
the SEC the S-4. Each of Purchaser, Merger Sub and the Company shall use all
reasonable efforts to have the S-4 declared effective under the Securities Act
as promptly as practicable after such filing and to keep the S-4 effective as
long as is necessary to consummate the Merger. The Company shall mail the Proxy
Statement to its shareholders as promptly as practicable after the S-4 is
declared effective under the Securities Act. Purchaser shall also take any
action (other than qualifying to do business in any jurisdiction in which
Purchaser is not now so qualified) required to be taken under any applicable
U.S. state securities laws in connection with the issuance of Purchaser Common
Shares in connection with the Merger.
(c) The Company represents and warrants that the Proxy Statement will
comply as to form in all material respects with the Exchange Act and, at the
respective times filed with the SEC and distributed to shareholders of the
Company, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representation or warranty as to any information included in the Proxy Statement
which was provided by Purchaser or Merger Sub. Purchaser represents and warrants
that none of the information supplied by Purchaser or Merger Sub for inclusion
in the Proxy Statement will, at the respective times filed with the SEC and
distributed to shareholders of the Company, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) Purchaser represents and warrants that the S-4 will comply as to form
in all material respects with the Securities Act and, at the respective times
filed with the SEC, when the same becomes effective and when the prospectus
therein is distributed to shareholders of the Company, will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; provided, however, that Purchaser makes no representation or
warranty as to any information included in the Proxy Statement which was
provided by the Company. The Company represents and warrants that none of the
information supplied by the Company for inclusion in the S-4 will, at the
respective times filed with the SEC, when the same becomes effective and when
distributed to shareholders of the Company, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading.
(e) Purchaser shall use its best efforts to obtain the approval of the New
York Stock Exchange to the listing of the Purchaser Common Shares to be issued
in the Merger prior to the Effective Date and shall file all listing
applications and other documents requested by the New York Stock Exchange in
connection with such listing.
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(f) Subject to clause (iii) of Section 8.3(a), the Company shall use its
reasonable efforts to obtain the necessary approvals by its shareholders of the
Merger, this Agreement and the transactions contemplated hereby.
(g) Purchaser agrees to cause all shares of Common Stock purchased by
Merger Sub pursuant to the Offer and all other shares of Common Stock owned by
Purchaser, Merger Sub or any other Subsidiary or affiliate of Purchaser to be
voted in favor of the approval of the Merger.
(h) Except as required by law, no amendment or supplement to the Proxy
Statement or the S-4 shall be made by the Company or Purchaser without the
approval of the other party (which shall not be unreasonably withheld). Each
party shall advise the other party, promptly after it receives notice thereof,
of the time when the S-4 has become effective or any supplement or amendment has
been filed, of the issuance of any stop order, of the suspension of the
qualification of Purchaser Common Shares issuable in connection with the Merger
for offering or sale in any jurisdiction, or of any request by the SEC for
amendment of the Proxy Statement or the S-4 or comments thereon and responses
thereto or requests by the SEC for additional information.
8.4. FILINGS; OTHER ACTION.
Subject to the terms and conditions herein provided, the Company, Purchaser
and Merger Sub shall: (a) promptly make their respective filings and thereafter
make any other required submissions under the HSR Act and the Exon-Florio
Amendment with respect to the Offer and, if applicable, the Merger; (b)
cooperate and consult with one another in (i) determining which Regulatory
Filings are required or, in the case of Other Antitrust Filings and Consents,
permitted to be made prior to the Effective Time with, and which Consents are
required or, in the case of Other Antitrust Filings and Consents, permitted to
be obtained prior to the Effective Time from Governmental Entities or other
third parties in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby, and all Consents
required to transfer to the Company any Permits or registrations held on behalf
of the Company or any of its Subsidiaries by or in the name of distributors,
brokers or sales agents; (ii) preparing all Regulatory Filings and all other
filings, submissions and presentations required or prudent to obtain all
Consents, including by providing to the other parties drafts of such material
reasonably in advance of the anticipated filing or submission dates; and (iii)
timely making all such Regulatory Filings and timely seeking all such Consents
and (c) use their reasonable efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. Each of Purchaser and the Company shall use its best efforts to
contest any proceeding seeking a preliminary injunction or other legal
impediment to, and to resolve any objections as may be asserted by any
Governmental Entity with respect to, the Offer or the Merger under the HSR Act
or Foreign Antitrust Laws. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purpose of this Agreement, the
proper officers and directors of Purchaser and the Surviving Corporation shall
take all such necessary action.
8.5. PUBLICITY. The initial press release relating to this Agreement shall
be a joint press release and thereafter the Company and Purchaser shall, subject
to their respective legal obligations (including the requirements of the New
York Stock Exchange and other similar regulating bodies), use reasonable efforts
to agree upon the text of any press release before issuing such press release or
otherwise making public statements with respect to the transactions contemplated
hereby and in making any filings with any Governmental Entity or with any
securities exchange with respect thereto.
8.6. FURTHER ACTION. Each party hereto shall, subject to the fulfillment at
or before the Effective Time of each of the conditions of performance set forth
herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to complete the transactions
contemplated hereby.
8.7. INSURANCE; INDEMNITY.
(a) Purchaser will cause the Surviving Corporation to purchase a six-year
pre-paid noncancellable directors and officers insurance policy covering the
current and all former directors, officers and similar persons of the Company
and its Subsidiaries with respect to acts or failures to act prior to the
Effective Time,
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in a single aggregate amount over the six-year period immediately following the
Closing Date equal to the policy limit for the Company's current directors and
officers insurance policy (the "Current Policy"). If such insurance is not
obtainable at an annual cost per covered year not in excess of three times the
annual premium paid by the Company for the Current Policy (the "Cap"), then
Purchaser will cause the Surviving Corporation to purchase policies providing at
least the same coverage as the Current Policy and containing terms and
conditions no less advantageous to the current and former directors, officers
and similar persons of the Company and its Subsidiaries than the Current Policy
with respect to acts or failures to act prior to the Effective Time; provided,
however, that Purchaser and the Surviving Corporation shall not be required to
obtain policies providing such coverage except to the extent that such coverage
can be provided at an annual cost of no greater than the Cap; and, if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual premium
in excess of the Cap, Purchaser or the Surviving Corporation shall only be
required to obtain as much coverage as can be obtained by paying an annual
premium equal to the Cap.
(b) Purchaser shall cause the Surviving Corporation to keep in effect in
its Bylaws provisions for a period of not less than six years after the
Effective Time (or, in the case of matters occurring prior to the Effective Time
which have not been resolved prior to the sixth anniversary of the Effective
Time, until such matters are finally resolved) which provide for exculpation of
director and officer liability and indemnification (and advancement of expenses
related thereto) of the past and present officers and directors of the Company
and its Subsidiaries to the fullest extent permitted by the DGCL which
provisions shall not be amended except as required by applicable law or except
to make changes permitted by law that would enhance the rights of past or
present officers and directors to indemnification or advancement of expenses.
(c) From and after the Effective Time, Purchaser shall indemnify and hold
harmless, to the fullest extent permitted under the DGCL, each person who is, or
has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer, director or similar person of the Company or any
Subsidiary against all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement (collectively, "Losses") in connection with any claims, actions,
suits, proceedings, arbitrations, investigations or audits (collectively
"Litigation") arising before or after the Effective Time out of or pertaining to
acts or omissions, or alleged acts or omissions, by them in their capacities as
such, which acts or omissions occurred prior to the Effective Time. Without
limiting the foregoing, Purchaser shall periodically advance expenses as
incurred with respect to the foregoing to the fullest extent permitted under
applicable law provided that the person to whom the expenses are advanced
provides an undertaking to repay such advance if it is ultimately determined
that such person is not entitled to indemnification.
(d) If the Merger shall have been consummated, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless Purchaser and any person or entity who was a shareholder, officer,
director or affiliate of Purchaser prior to the Effective Time against any
Losses in connection with any Litigation arising out of or pertaining to any of
the transactions contemplated by this Agreement or the Ancillary Documents.
(e) If, after the Effective Time, Purchaser or Surviving Corporation or any
of their respective successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all its properties and assets to any person, then, in each such case, proper
provisions shall be made so that successors and assigns of Purchaser or
Surviving Corporation, as the case may be, shall assume all the obligations set
forth in this Section 8.7. The provisions of this Section 8.7 are intended for
the benefit of and shall be enforceable by each person who is now or has been at
any time prior to the date of this Agreement, or who becomes prior to the
Effective Time, an officer, director or similar person of the Company or any of
its Subsidiaries.
(f) Any Indemnified Party will promptly notify Purchaser and the Surviving
Corporation of any claim, action, suit, proceeding or investigation for which
such party may seek indemnification under this Section. If any Litigation
described in paragraph (c) or (d) of this Section 8.7 (each, an "Action") arises
or occurs, the Surviving Corporation shall control the defense of such Action
with counsel selected by the Surviving Corporation, which counsel shall be
reasonably acceptable to the party seeking indemnification pursuant to
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paragraph (c) or (d) of this Section 8.7 (each, an "Indemnified Party"),
provided that the Indemnified Party shall be permitted to participate in the
defense of such Action through counsel selected by the Indemnified Party, at the
Indemnified Party's expense. Notwithstanding the foregoing, if there is any
actual or potential conflict between the Surviving Corporation and any
Indemnified Party or there are additional defenses available to any Indemnified
Party, such Indemnified Party shall be permitted to participate in the defense
of such Action with counsel selected by the Indemnified Party, at the Surviving
Corporation's expense; provided, however, that the Surviving Corporation shall
not be obligated to pay the reasonable fees and expenses of more than one
counsel for all Indemnified Parties in any single Action except to the extent
that two or more of such Indemnified Parties have conflicting interests in the
outcome of such Action. The Surviving Corporation shall not be liable for any
settlement effected without its written consent, which consent shall not
unreasonably be withheld.
8.8. RESTRUCTURING OF MERGER. Upon the mutual agreement of Purchaser and
the Company, the Merger shall be restructured in the form of a forward
subsidiary merger of the Company into Merger Sub, with Merger Sub being the
surviving corporation, or as a merger of the Company into Purchaser, with
Purchaser being the surviving corporation. In such event, this Agreement shall
be deemed appropriately modified to reflect such form of merger.
8.9. EMPLOYEE BENEFIT PLANS. From and after the Effective Time, the
Surviving Corporation and its respective Subsidiaries will honor, in accordance
with their terms, all existing employment and severance agreements between the
Company or any of its Subsidiaries and any current or former officer, director,
consultant or employee of the Company or any of its Subsidiaries to the extent
in effect on the date hereof and all benefits or other amounts earned or accrued
to the extent vested or which become vested pursuant to the terms of such
agreements or in accordance with the terms of this Agreement through the
Effective Time under all employee benefit plans of the Company and any of its
Subsidiaries, in each case to the extent in effect on the date hereof.
8.10. ACCELERATION OF OUTSTANDING INDEBTEDNESS. If, after the Offer is
consummated, the Company's or any Subsidiary's obligation for borrowed money
outstanding is accelerated or the Company or such Subsidiary is otherwise
required to repurchase, repay or prepay any such obligation, Purchaser agrees,
within five business days after notice thereof, to loan to the Company an amount
equal to the amount which the Company or any such Subsidiary is required to so
repurchase, repay or prepay (including any related prepayment premiums or
penalties) at an interest rate not to exceed the rate under Purchaser's bank
credit facility. The term of such loan shall be equal to the term of such
accelerated obligation (prior to its acceleration) and the Company and Purchaser
shall enter into any agreements reasonably necessary to evidence such agreement.
8.11. REAL PROPERTY TRANSFER TAXES. Any liability for real property
transfer taxes, real property gains taxes or similar taxes imposed with respect
to the property of the Company by any state, local or foreign taxing authority
with respect to the Offer and the Merger shall be paid or caused to be paid by
Surviving Corporation.
ARTICLE 9
CONDITIONS
9.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction or waiver, where permissible, prior to the Effective Time, of the
following conditions:
(a) If approval of this Agreement and the Merger by the holders of Common
Stock is required by applicable law, this Agreement and the Merger shall have
been approved by the requisite vote of such holders.
(b) There shall not have been issued any injunction or issued or enacted
any Law which prohibits or has the effect of prohibiting the consummation of the
Merger or makes such consummation illegal; provided, however, that each of the
parties shall have used its best efforts to prevent the entry of any injunction
or other order and to appeal as promptly as possible any injunction or other
order that may be entered.
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ARTICLE 10
TERMINATION; AMENDMENT; WAIVER
10.1. TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time
notwithstanding approval thereof by the shareholders of the Company:
(a) by mutual written consent of the Company and Purchaser duly authorized
by their respective Boards of Directors;
(b) by the Company, if Merger Sub shall have failed to commence the Offer
within five business days after the date of this Agreement;
(c) by the Company, if Purchaser or Merger Sub materially breaches any of
their respective representations or warranties or covenants contained in this
Agreement and, with respect to any such breach that can be remedied, the breach
is not remedied within five business days after the Company has furnished
Purchaser or Merger Sub with written notice of such failure;
(d) by Purchaser or the Company:
(i) if the Effective Time shall not have occurred on or before
December 31, 1997 (provided that the right to terminate this Agreement
pursuant to this clause (i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Effective Time to occur on or before
such date);
(ii) if there shall be any statute, law, rule or regulation that makes
consummation of the Offer or the Merger illegal or prohibited or if any
court of competent jurisdiction or other Governmental Entity shall have
issued an order, judgment, decree or ruling, or taken any other action
restraining, enjoining or otherwise prohibiting the Offer or the Merger and
such order, judgment, decree, ruling or other action shall have become
final and non-appealable; or
(iii) if the Offer terminates or expires on account of the failure of
any condition specified in Exhibit A without Merger Sub having purchased
any shares of Common Stock thereunder (provided that the right to terminate
this Agreement pursuant to this clause (iii) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of any such condition); or
(e) by the Company, at any time prior to the acceptance for payment of
shares of Common Stock by Merger Sub pursuant to the Offer, if there is an
Alternative Proposal which the Board of Directors in good faith determines
represents a superior transaction for the shareholders of the Company as
compared to the Offer and the Merger, and the Board of Directors determines,
after consultation with outside counsel and the Financial Advisor, that it is
required by its fiduciary duties to the Company's shareholders imposed by law to
terminate this Agreement and the Company pays to Purchaser any amounts owed
under Section 10.2 below; provided, however, that the right to terminate this
Agreement pursuant to this Section 10.1(e) shall not be available (i) if such
Alternative Proposal shall result from a breach in any material respect of the
Company's obligations under Section 8.1 or (ii) if the Company has not provided
Purchaser and Merger Sub with at least two business days' prior written notice
of its intent to so terminate this Agreement together with a summary of the
material terms and conditions of the Alternative Proposal; and
(f) by Purchaser, if the Board of Directors of the Company shall have
failed to recommend, or shall have withdrawn, modified or amended in any manner
adverse to Purchaser or Merger Sub, its approval or recommendation of the Offer
or the Merger, or shall have recommended acceptance of any Alternative Proposal.
10.2. EFFECT OF TERMINATION. (a) Subject to this Section 10.2, if this
Agreement is terminated and the Merger is abandoned pursuant to Section 10.1,
this Agreement, except for the provisions of Sections 1.3(c) (with respect to
confidentiality), 8.5 and Article 11, shall terminate, without any liability on
the part of any party or their respective directors, officers or shareholders.
Nothing herein shall relieve any party to this
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Agreement of liability for breach of this Agreement or prejudice the ability of
the non-breaching party to seek damages from any other party for any breach of
this Agreement including, without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity.
(b) In the event (i) the Board of Directors of the Company shall publicly
modify or amend its recommendation of the Offer or the Merger in a manner
adverse to Purchaser or shall withdraw its recommendation of the Offer or shall
recommend any Alternative Proposal, or shall resolve to do any of the foregoing,
or (ii) at any time prior to the termination of this Agreement any person (other
than Purchaser or any of its affiliates) shall publicly announce any Alternative
Proposal and, at any time on or prior to one year after the date of this
Agreement, shall become the beneficial owner of 33% or more of the outstanding
shares of Common Stock or shall consummate an Alternative Proposal, then in any
such event the Company shall promptly, but in no event later than two business
days after the first of such events to occur, pay Purchaser an amount equal to
$15,750,000 which shall be in lieu of any and all damages, costs and expenses
for breach of this Agreement by the Company.
10.3. AMENDMENT. To the extent permitted by applicable law, this Agreement
may be amended by action taken by or on behalf of the Boards of Directors of the
Company and Purchaser at any time before or after adoption of this Agreement by
the shareholders of the Company but, after any such shareholder approval, no
amendment shall be made which decreases the Merger Consideration or which
adversely affects the rights of the Company's shareholders hereunder without the
approval of such shareholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of all of the parties.
10.4. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken by or on behalf of the Board of Directors of the
Company (subject to Section 1.4) and Purchaser, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein, except
after any adoption of this Agreement by the shareholders of the Company, for any
waiver which has the effect of decreasing the Merger Consideration or which
adversely affects the rights of the Company's shareholders hereunder without
approval of such shareholders. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 11
GENERAL PROVISIONS
11.1. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
11.2. NOTICES. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission (with a
confirmatory copy sent by overnight courier), by courier service (with proof of
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service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
<TABLE>
<S> <C>
If to Purchaser or Merger Sub: If to the Company:
Detroit Diesel Corporation Outboard Marine Corporation
13400 Outer Drive, West 100 Sea Horse Drive
Detroit, Michigan 48239-4001 Waukegan, Illinois 60085
Facsimile: (313) 592-3725 Facsimile: (847) 689-6006
Attention: Timothy D. Leuliette Attention: Harry W. Bowman
With a copy to: With a copy to:
Detroit Diesel Corporation Jones, Day, Reavis & Pogue
13400 Outer Drive, West 77 West Wacker Drive
Detroit, Michigan 48239-4001 Chicago, Illinois 60601-1692
Facsimile: (313) 592-5014 Facsimile: (312) 782-8585
Attention: John F. Farmer Attention: William P. Ritchie
</TABLE>
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
11.3. ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties; provided, however, that either Purchaser
or Merger Sub (or both) may assign its rights hereunder (including, without
limitation, the right to make the Offer or to purchase shares of Common Stock in
the Offer) to a wholly owned subsidiary but nothing shall relieve the assignor
from its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Sections 8.7 and 8.9, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
11.4. ENTIRE AGREEMENT. This Agreement, the Confidentiality Agreement, the
Disclosure Letter, the Purchaser Disclosure Letter, the Exhibits, the Ancillary
Documents and any other documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto.
11.5. FEES AND EXPENSES. Except as provided in Section 10.2, whether or not
the Offer or Merger is consummated, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses.
11.6. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Each of the Company, Purchaser and Merger Sub hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts located in Lake County, Illinois and of the United States of
America located in the Northern District of Illinois (the "Northern Illinois
Courts") for any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agrees not to commence any litigation
relating thereto except in such courts), waives any objection to the laying of
venue of any such litigation in the Northern Illinois Courts and agrees not to
plead or claim in any Northern Illinois Court that such litigation brought
therein has been brought in an inconvenient forum.
11.7. HEADINGS. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
11.8. INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all
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<PAGE> 33
genders and words denoting natural persons shall include corporations and
partnerships and vice versa. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." As used in this Agreement, the words
"Subsidiary," "affiliate" and "associate" shall have the meanings ascribed
thereto in Rule 12b-2 under the Exchange Act. The phrase "Significant
Subsidiary" means any Subsidiary which is material to Purchaser's results of
operations, financial condition or business and a "Significant Subsidiary" as
such term is defined in Rule 12b-2 under the Exchange Act.
11.9. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
11.10. ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any Northern Illinois Court,
this being in addition to any other remedy to which they are entitled at law or
in equity. The prevailing party in any judicial action shall be entitled to
receive from the other party reimbursement for the prevailing party's reasonable
attorney's fees and disbursements, and court costs.
11.11. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
11.12. OBLIGATION OF PURCHASER. Whenever this Agreement requires Merger Sub
to take any action, such requirement shall be deemed to include an undertaking
on the part of Purchaser to cause Merger Sub to take such action.
11.13. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the meanings ascribed to them below:
(a) "BENEFICIAL OWNER" with respect to any securities means a person
that would be a beneficial owner pursuant to Rule 13d-3 promulgated under
the Exchange Act.
(b) "BUSINESS DAY" means any day other than a Saturday, Sunday, or
Federal holiday, and consists of the time period from 12:01 a.m. through
12:00 midnight, New York City time.
(c) "PERSON" means a natural person, company, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
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<PAGE> 34
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
OUTBOARD MARINE CORPORATION
By: /s/ HARRY W. BOWMAN
--------------------------------------
Name: Harry W. Bowman
Title: Chairman of the Board,
President and Chief
Executive Officer
DETROIT DIESEL CORPORATION
By: /s/ TIMOTHY D. LEULIETTE
--------------------------------------
Name: Timothy D. Leuliette
Title: Vice Chairman
OMC ACQUISITION CORP.
By: /s/ TIMOTHY D. LEULIETTE
--------------------------------------
Name: Timothy D. Leuliette
Title: Vice Chairman
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<PAGE> 35
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Agreement and Plan of
Merger (the "Merger Agreement"), Merger Sub shall not be required to accept for
payment or pay for, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) of the Exchange Act, any shares of Common Stock not
theretofore accepted for payment or paid for and may terminate or amend the
Offer as to such shares of Common Stock unless (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer that number of
shares of Common Stock which would represent at least 13,842,619 shares of the
outstanding shares of Common Stock on a fully diluted basis (collectively, the
"Minimum Condition"), (ii) any waiting period under the HSR Act applicable to
the purchase of shares of Common Stock pursuant to the Offer shall have expired
or been terminated and (iii) approvals required by law to be obtained prior to
the consummation of the Offer under any Foreign Antitrust Laws to the purchase
of shares of Common Stock pursuant to the Offer shall have been obtained.
Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, Merger Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any shares of Common Stock not theretofore accepted for
payment or paid for, and may terminate or amend the Offer if at any time on or
after the date of the Merger Agreement and prior to the expiration of the Offer,
any of the following conditions exist or shall occur and remain in effect:
(a) (i) A court of competent jurisdiction or other Governmental Entity
shall have issued an order, judgment, decree or ruling on the merits in
connection with an action, suit or proceeding brought by any Governmental
Entity or person which (1) restrains or prohibits the acquisition by
Purchaser of shares of Common Stock pursuant to the Offer, or the making or
consummation of the Offer or the Merger, (2) makes the purchase of or
payment for some or all of the shares of Common Stock pursuant to the Offer
or the Merger illegal, (3) imposes material limitations on the ability of
Purchaser (or any of its affiliates) to acquire or hold, or to require
Purchaser or any of its affiliates or Subsidiaries to dispose of or hold
separate, any material portion of the assets or the business of Purchaser
and its affiliates taken as a whole or the Company and its Subsidiaries
taken as a whole, or (4) imposes material limitations on the ability of
Purchaser (or its affiliates) to exercise full rights of ownership of the
shares of Common Stock purchased by it, including, without limitation, the
right to vote the shares purchased by it on all matters properly presented
to the shareholders of the Company, or (ii) there shall have been
instituted and pending any action or proceeding by any Governmental Entity
which, in the opinion of Purchaser's counsel (assuming, for purposes of
such opinion only, the validity of the allegations) has a reasonable
likelihood of success on the merits, and which (1) seeks to challenge the
acquisition by Purchaser of shares of Common Stock pursuant to the Offer,
restrain, prohibit or delay the making or consummation of the Offer or the
Merger, or obtain any material damages in connection therewith, (2) seeks
to make the purchase of or payment for some or all of the shares of Common
Stock pursuant to the Offer or the Merger illegal, (3) seeks to impose
material limitations on the ability of Purchaser (or any of its affiliates)
effectively to acquire or hold, or to require Purchaser or the Company or
any of their respective affiliates or subsidiaries to dispose of or hold
separate, any material portion of the assets or the business of Purchaser
and its affiliates taken as a whole or the Company and its subsidiaries
taken as a whole, or (4) seeks to impose material limitations on the
ability of Purchaser (or its affiliates) to exercise full rights of
ownership of the shares of Common Stock purchased by it, including, without
limitation, the right to vote the shares purchased by it on all matters
properly presented to the shareholders of the Company; or
(b) There shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) the commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States, or (iv) any limitation (whether or
not mandatory) by any governmental or regulatory authority on, or any other
event which has a material adverse effect on the extension of credit by
banks or other lending institutions in the United States; or
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<PAGE> 36
(c) there shall have been promulgated, enacted, entered, enforced or
deemed applicable to the Offer or the Merger, by any Governmental Entity,
any Law or there shall have been issued any injunction resulting in any of
the consequences referred to in subsection (a) above; or
(d) the Merger Agreement shall have been terminated in accordance with
its terms; or
(e) (i) the representations and warranties made by the Company in the
Merger Agreement shall not be true and correct as of the date of
consummation of the Offer as though made on and as of that date (other than
representations and warranties made as of a specified date) except for any
breach or breaches which, in the aggregate, would not have a Material
Adverse Effect or (ii) the Company shall have breached or failed to comply
in any material respect with any of its obligations under this Agreement
and, with respect to any such failure that can be remedied, the failure is
not remedied within 20 business days after Purchaser has furnished the
Company with written notice of such failure; or
(f) during the period from the date of this Agreement through the
expiration of the Offer, the Company and its Subsidiaries have not
conducted their business in the ordinary course of such business consistent
with past practices, or there has been any event or state of fact which
would have a Material Adverse Effect; or
(g) the Board of Directors shall have modified or amended its
recommendation of the Offer or the Merger in any manner adverse to
Purchaser or Merger Sub or shall have withdrawn its recommendation of the
Offer or the Merger or shall have recommended acceptance of any Alternative
Proposal or shall have resolved to do any of the foregoing; or
(h) (i) a tender or exchange offer for 33% or more of the then
outstanding shares of Common Stock shall have been publicly proposed to be
made and not withdrawn within five business days, or shall have been made,
by any person, corporation, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act) (other than Purchaser and any of its
affiliates and other than any person who is the beneficial owner of 33% or
more of the shares of Common Stock as of the date of the Merger Agreement)
at a price in excess of the value of the Merger Consideration (calculated
as if the Closing Date were the date such tender offer is commenced); (ii)
any person (other than Purchaser and any of its affiliates) shall have
acquired beneficial ownership of 33% or more of the outstanding shares of
Common Stock, or shall have been granted any options or rights, conditional
or otherwise, to acquire a total of 33% or more of the outstanding shares
of Common Stock; (iii) any new group shall have been formed which
beneficially owns more than 33% of the outstanding shares of Common Stock;
or (iv) any person (other than Purchaser and any of its affiliates) shall
have entered into an agreement in principle or definitive agreement with
the Company with respect to a tender or exchange offer for any shares of
Common Stock or a merger, consolidation or other business combination with
or involving the Company.
Subject to Section 1.1(b) of the Merger Agreement, the foregoing conditions
(a) through (h) are for the sole benefit of Purchaser and Merger Sub and may be
asserted by Purchaser regardless of the circumstances giving rise to any such
condition and may be waived by Purchaser, in whole or in part, at any time and
from time to time, in the sole discretion of Purchaser. The failure by Purchaser
at any time to exercise any of the foregoing rights will not be deemed a waiver
of any right, the waiver of such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances, and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered shares of Common Stock not theretofore accepted for payment shall
forthwith be returned by the depositary to the tendering shareholders.
2
<PAGE> 1
EXHIBIT 99.2
SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this Agreement) dated as of
March 31, 1997, is made and entered by and between Outboard Marine Corporation,
a Delaware corporation (the "Company"), and Harry W. Bowman (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive or a key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short- and long-term profitability,
growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum severance
benefits for certain of its senior executives and key employees, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives and key
employees are not practically disabled from discharging their duties in respect
of a proposed or actual transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a rate not
less than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in Control or
such higher rate as may be determined from time to time by the Board or a
committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to Section
3(b), the Executive shall have been:
(i) convicted of a criminal violation involving fraud, embezzlement
or theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary;
(ii) committed intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) committed intentional wrongful disclosure of secret processes
or confidential information of the Company or any Subsidiary; or
(iv) intentionally, wrongfully engaged in any Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act on
the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted
<PAGE> 2
by the affirmative vote of not less than two-thirds of the Board then in
office at a meeting of the Board called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in
the good faith opinion of the Board, the Executive had committed an act
constituting "Cause" as herein defined and specifying the particulars
thereof in detail. Nothing herein will limit the right of the Executive
or his beneficiaries to contest the validity or propriety of any such
determination.
(d) "Change in Control" means the occurrence during the Term of any of
the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of the combined
voting power of the then outstanding Voting Stock; provided, however,
that for purposes of this Section 1(d)(i), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly
from the Company that is approved by the Incumbent Board, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, or (D) any acquisition by any Person pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d); or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
Director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least two-thirds of the Directors then comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be deemed to have been a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule 14a-11
of the Exchange Act) with respect to the election or removal of
Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) consummation of (A) a reorganization, merger or
consolidation, (B) a sale or other disposition of all or substantially
all of the assets of the Company, or (C) a sale or other disposition of
all or substantially all of the assets ("Boat Group Assets") of the
Company used in its Boat Group businesses (each, a "Business
Combination"), unless, in each case, immediately following such Business
Combination, (I) all or substantially all of the individuals and
entities who were the beneficial owners of Voting Stock of the Company
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
Directors of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions relative to each other as their
ownership, immediately prior to such Business Combination, of the Voting
Stock of the Company, (II) no Person (other than the Company, such
entity resulting from such Business Combination, or any employee benefit
plan (or related trust) sponsored or maintained by the Company, any
Subsidiary or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 15% or more of the then
outstanding shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors of such entity, and (III) at least a majority of the
members of the Board of Directors of the entity resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
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<PAGE> 3
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d).
(e) "Competitive Activity" means the Executive's participation,
without the written consent of an officer of the Company, in the management
of any business enterprise if such enterprise engages in substantial and
direct competition with the Company and such enterprise's sales of any
product or service competitive with any product or service of the Company
amounted to 10% of such enterprise's net sales for its most recently
completely fiscal year and if the Company's net sales of said product or
service amounted to 10% of the Company's net sales for its most recently
completed fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of rights
appurtenant thereto or (ii) participation in the management of any such
enterprise other than in connection with the competitive operations of such
enterprise.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs or arrangements in
which Executive is entitled to participate, including without limitation
any stock option, performance share, performance unit, stock purchase,
stock appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital or
other insurance (whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement and other
employee benefit policies, plans, programs or arrangements that may now
exist or any equivalent successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company, providing perquisites,
benefits and service credit for benefits at least as great in the aggregate
as are payable thereunder prior to a Change in Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Pay" means an annual amount equal to not less than the
highest aggregate annual bonus, incentive or other payments of cash
compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any fiscal year during the five fiscal years
immediately preceding, or, if greater, the two fiscal years immediately
following, the fiscal year in which the Change in Control occurred pursuant
to any bonus, incentive, profit-sharing, performance, discretionary pay or
similar agreement, policy, plan, program or arrangement (whether or not
funded) of the Company, or any successor thereto, providing benefits at
least as great as the benefits payable thereunder prior to a Change in
Control.
(i) "Retirement Plans" means the retirement income, supplemental
executive retirement, excess benefits and retiree medical, life and similar
benefit plans providing retirement perquisites, benefits and service credit
for benefits at least as great in the aggregate as are payable thereunder
prior to a Change in Control.
(j) "Severance Period" means the period of time commencing on the date
of the first occurrence of a Change in Control and continuing until the
earliest of (i) the third anniversary of the occurrence of the Change in
Control, (ii) the Executive's death, or (iii) the Executive's attainment of
age 65; provided, however, that commencing on each anniversary of the
Change in Control, the Severance Period will automatically be extended for
an additional year unless, not later than 90 calendar days prior to such
anniversary date, either the Company or the Executive shall have given
written notice to the other that the Severance Period is not to be so
extended.
(k) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(l) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 1999,
or (ii) the expiration of the Severance Period; provided, however that (A)
commencing on January 1, 1998 and each January 1 thereafter, the term of
this Agreement will automatically be extended for an additional year
unless, not later than September 30 of
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<PAGE> 4
the immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not wish to
have the Term extended and (B) subject to the last sentence of Section 9,
if, prior to a Change in Control, the Executive ceases for any reason to be
an employee of the Company and any Subsidiary, thereupon without further
action the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect. For purposes of this
Section 1(k), the Executive shall not be deemed to have ceased to be an
employee of the Company and any Subsidiary by reason of the transfer of
Executive's employment between the Company and any Subsidiary, or among any
Subsidiaries.
(m) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if
the termination is pursuant to Section 3(b)).
(n) "Voting Stock" means securities entitled to vote generally in the
election of directors.
2. OPERATION OF AGREEMENT. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, without further action, this Agreement shall become immediately
operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period and the Executive shall be entitled
to the benefits provided by Section 4 unless such termination is the result of
the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the meaning
of, and begins actually to receive disability benefits pursuant to, the
long-term disability plan in effect for, or applicable to, Executive
immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated
by the Company or any Subsidiary other than pursuant to Section 3(a)(i),
3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits
provided by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary during the
Severance Period with the right to severance compensation as provided in Section
4 upon the occurrence of one or more of the following events (regardless of
whether any other reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation other
employment):
(i) Failure to elect or reelect or otherwise to maintain the Executive
in the office or the position, or a substantially equivalent office or
position, of or with the Company and/or a Subsidiary, as the case may be,
which the Executive held immediately prior to a Change in Control, or the
removal of the Executive as a Director of the Company (or any successor
thereto) if the Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in the
aggregate of the Executive's Base Pay and Incentive Pay received from the
Company and any Subsidiary, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the scope or
value thereof, any of which is not remedied by the Company within 10
calendar days after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the case may be;
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(iii) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in
Control, including, without limitation, a change in the scope of the
business or other activities for which the Executive was responsible
immediately prior to the Change in Control, which has rendered the
Executive substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a substantial
reduction in, any of the authorities, powers, functions, responsibilities
or duties attached to the position held by the Executive immediately prior
to the Change in Control, which situation is not remedied within 10
calendar days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all its
business or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer or otherwise) to which all
or substantially all its business or assets have been transferred (directly
or by operation of law) assumed all duties and obligations of the Company
under this Agreement pursuant to Section 11(a);
(v) The Company relocates its principal executive offices, or requires
the Executive to have his principal location of work changed, to any
location that is in excess of 35 miles from the location thereof
immediately prior to the Change in Control, or requires the Executive to
travel away from his office in the course of discharging his
responsibilities or duties hereunder at least 20% more (in terms of
aggregate days in any calendar year or in any calendar quarter when
annualized for purposes of comparison to any prior year) than was required
of Executive in any of the three full years immediately prior to the Change
in Control without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto
which is not remedied by the Company within 10 calendar days after receipt
by the Company of written notice from the Executive of such breach.
(c) Notwithstanding anything contained in this Agreement to the contrary,
in the event of a Change in Control, the Executive may terminate employment with
the Company and any Subsidiary for any reason, or without reason, during the
30-day period immediately following the first anniversary of the first
occurrence of a Change in Control with the right to severance compensation as
provided in Section 4.
(d) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) or Section 3(c) will not affect any rights
that the Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof, except for any rights to severance compensation
to which Executive may be entitled upon termination of employment under name of
Executive's severance/employment agreement which rights shall, during the
Severance Period, be superseded by this Agreement.
4. SEVERANCE COMPENSATION. (a) If, following the occurrence of a Change in
Control, the Company terminates the Executive's employment during the Severance
Period other than pursuant to Section 3(a), or if the Executive terminates his
employment pursuant to Section 3(b) or Section 3(c), the Company will pay to the
Executive as severance benefits the amounts described on Annex A within five
business days after the Termination Date and will continue to provide to the
Executive the benefits described on Annex A for the periods described therein.
(b) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be made
or provided hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to the so-called
composite "prime rate" as quoted from time to time during the relevant period in
the Midwest Edition of The Wall Street Journal. Such interest will be payable as
it accrues on demand. Any change in such prime rate will be effective on and as
of the date of such change.
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(c) Notwithstanding any provision of this Agreement to the contrary, the
parties' respective rights and obligations under this Section 4 and under
Sections 5 and 7 will survive any termination or expiration of this Agreement or
the termination of the Executive's employment following a Change in Control for
any reason whatsoever.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Anything in this
Agreement to the contrary notwithstanding, in the event that this Agreement
shall become operative and it shall be determined (as hereafter provided) that
any payment or distribution by the Company or any of its affiliates to or for
the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise pursuant to
or by reason of any other agreement, policy, plan, program or arrangement,
including without limitation stock appreciation right or similar right, or the
lapse or termination of any restriction on, or the vesting or exercisability of,
any of the foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision thereto) by reason of being considered "contingent
on a change in ownership or control" of the Company, within the meaning of
Section 280G of the Code (or any successor provision thereto) or to any similar
tax imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment or payments
(collectively, a "Gross-up Payment"); provided, however, that no Gross-up
Payment shall be made with respect to the Excise Tax, if any, attributable to
(i) any incentive stock option, as defined by Section 422 of the Code ("ISO")
granted prior to the execution of this Agreement, or (ii) any stock appreciation
or similar right, whether or not limited, granted in tandem with any ISO
described in clause (i). The Gross-up Payment shall be in an amount such that,
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed upon the
Gross-up Payment, the Executive retains an amount of the Gross-up Payment equal
to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Section 5(f), all determinations required
to be made under this Section 5, including whether an Excise Tax is payable by
the Executive and the amount of such Excise Tax and whether a Gross-up Payment
is required to be paid by the Company to the Executive and the amount of such
Gross-up Payment, if any, shall be made by a nationally recognized accounting
firm (the "Accounting Firm") selected by the Executive in his sole discretion.
The Executive shall direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive within 30
calendar days after the Termination Date, if applicable, and any such other time
or times as may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the Company
shall pay the required Gross-up Payment to the Executive within five business
days after receipt of such determination and calculations with respect to any
Payment to the Executive. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal,
state or local income or other tax return. As a result of the uncertainty in the
application of Section 4999 of the Code (or any successor provision thereto) and
the possibility of similar uncertainty regarding applicable state or local tax
law at the time of any determination by the Accounting Firm hereunder, it is
possible that Gross-up Payments which will not have been made by the Company
should have been made (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or fails
to pursue its remedies pursuant to Section 5(f) and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive shall direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and the Executive as promptly as possible. Any such Underpayment shall
be promptly paid by the Company to, or for the benefit of, the Executive within
five business days after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in
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connection with the preparation and issuance of the determinations and
calculations contemplated by Section 5(b). Any determination by the Accounting
Firm as to the amount of the Gross-up Payment shall be binding upon the Company
and the Executive.
(d) The federal, state and local income or other tax returns filed by the
Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-up Payment should be reduced, the
Executive shall within five business days pay to the Company the amount of such
reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determination and calculations contemplated by Section 5(b)
shall be borne by the Company. If such fees and expenses are initially paid by
the Executive, the Company shall reimburse the Executive the full amount of such
fees and expenses within five business days after receipt from the Executive of
a statement therefor and reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service or any other taxing authority that, if successful,
would require the payment by the Company of a Gross-up Payment. Such
notification shall be given as promptly as practicable but no later than 10
business days after the Executive actually received notice of such claim and the
Executive shall further apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid (in each case, to the extent
known by the Executive). The Executive shall not pay such claim prior to the
earlier of (i) the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such
claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim; and
(iv) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including interest and penalties) incurred in connection with
such contest and shall indemnify and hold harmless the Executive, on an
after-tax basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 5(f), the Company shall control all
proceedings taken in connection with the contest of any claim contemplated
by this Section 5(f) and, at its sole option, may pursue or forego any and
all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may, at
its option, either direct the Executive to pay the tax claimed and sue for
a refund or contest the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay the tax claimed and sue
for a refund, the Company shall advance the amount of such payment to the
Executive on an interest-free basis and
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shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income or other tax, including interest or penalties
with respect thereto, imposed with respect to such advance; and provided
further, however, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to
which the contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of any such contested
claim shall be limited to issues with respect to which a Gross-up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(f), the Executive receives any refund with respect
to such claim, the Executive shall (subject to the Company's complying with the
requirements of Section 5(f)) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial or refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of any such advance shall offset, to the extent
thereof, the amount of Gross-up Payment required to be paid by the Company to
the Executive pursuant to this Section 5.]
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will
be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Paragraph 2 set forth on Annex A.
7. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
(b) Without limiting the obligations of the Company pursuant to Section
7(a) hereof, in the event a Change in Control occurs, the performance of the
Company's obligations under this Section 7 shall be secured by amounts deposited
or to be deposited in trust pursuant to certain trust agreements to which the
Company shall be a party, which amounts deposited shall in the aggregate be not
less than $1,000,000 providing that the
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fees and expenses of counsel selected from time to time by the Executive
pursuant to Section 7(a) shall be paid, or reimbursed to the Executive if paid
by the Executive, either in accordance with the terms of such trust agreements,
or, if not so provided, on a regular, periodic basis upon presentation by the
Executive to the trustee of a statement or statements prepared by such counsel
in accordance with its customary practices. Any failure by the Company to
satisfy any of its obligations under this Section 7(b) shall not limit the
rights of the Executive hereunder. Subject to the foregoing, the Executive shall
have the status of a general unsecured creditor of the Company and shall have no
right to, or security interest in, any assets of the Company or any Subsidiary.
8. COMPETITIVE ACTIVITY. During a period ending one year following the
Termination Date, if the Executive shall have received or shall be receiving
benefits under Section 4, the Executive shall not, without the prior written
consent of the Company, which consent shall not be unreasonably withheld, engage
in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of employment of the Executive
or the removal of the Executive from the office or position in the Company or
any Subsidiary following the commencement of any discussion with a third person
that ultimately results in a Change in Control shall be deemed to be a
termination or removal of the Executive after a Change in Control for purposes
of this Agreement.
10. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 11(a) and 11(b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, in the event of any attempted assignment
or transfer contrary to this Section 11(c), the Company shall have no liability
to pay any amount so attempted to be assigned, transferred or delegated.
12. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express, UPS, or Purolator, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office
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and to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of changes of address shall be effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
14. VALIDITY. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.
15. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
17. PRIOR AGREEMENT. The Agreement dated February 19, 1995 (the "Prior
Agreement"), between the Company and the Executive shall, without further
action, be terminated and superseded as of the date first above written.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
HARRY W. BOWMAN OUTBOARD MARINE CORPORATION
/s/ HARRY W. BOWMAN By: /s/ R.J. STEGEMEIER
- -------------------------------------- -------------------------------------
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ANNEX A
SEVERANCE COMPENSATION
(1) A lump sum payment in an amount equal to three times the sum of (A)
Base Pay (at the highest rate in effect for any period prior to the Termination
Date), plus (B) Incentive Pay (determined in accordance with the standards set
forth in Section 1(h)).
(2) For a period of twelve (12) months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the Executive with
Employee Benefits that are welfare benefits (but not stock option, performance
share, performance unit, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the Termination Date (or,
if greater, immediately prior to the reduction, termination, or denial described
in Section 3(b)(ii)), except that the level of any such Employee Benefits to be
provided to the Executive may be reduced in the event of a corresponding
reduction generally applicable to all recipients of or participants in such
Employee Benefits. If and to the extent that any benefit described in this
Paragraph 2 is not or cannot be paid or provided under any policy, plan, program
or arrangement of the Company or any Subsidiary, as the case may be, then the
Company will itself pay or provide for the payment to the Executive, his
dependents and beneficiaries, of such Employee Benefits. Without otherwise
limiting the purposes or effect of Section 5, Employee Benefits otherwise
receivable by the Executive pursuant to this Paragraph 2 will be reduced to the
extent comparable welfare benefits are actually received by the Executive from
another employer during the Continuation Period following the Executive's
Termination Date, and any such benefits actually received by the Executive shall
be reported by the Executive to the Company.
(3) In addition to the retirement income, supplemental executive
retirement, and other benefits to which Executive is entitled under the
Company's Retirement Plans, a lump sum payment in an amount equal to the
actuarial equivalent of the excess of (x) the retirement pension and the
medical, life and other benefits that would be payable to the Executive under
the Retirement Plans if Executive continued to be employed through the
Continuation Period given the Executive's Base Salary (without regard to any
amendment to the Retirement Plans made subsequent to a Change in Control which
adversely affects in any manner the computation of retirement or welfare
benefits thereunder), over (y) the retirement pension and the medical, life and
other benefits that the Executive is entitled to receive (either immediately or
on a deferred basis) under the Retirement Plans. For purposes of this
subsection, "actuarial equivalent" shall be determined using the same methods
and assumptions utilized under the Company's qualified retirement plan for
salaried employees in effect immediately prior to the Change in Control.
(4) In lieu of Executive's right to receive deferred compensation under the
OMC Bonus Plan or other plan providing for deferral of amounts otherwise
currently payable to the Executive, a lump sum payment in an amount equal to
amounts deferred pursuant to such plans, together with any earnings or interest
credited on such amounts under such Plans.
(5) Outplacement services by a firm selected by the Executive, at the
expense of the Company in an amount up to 20% of the Executive's Base Pay.
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EXHIBIT 99.3
SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this "Agreement"), dated as
of March 31, 1997, is made and entered by and between Outboard Marine
Corporation, a Delaware corporation (the "Company"), and (the
"Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive or a key employee of the
Company or one or more of its Subsidiaries and has made and is expected to
continue to make major contributions to the short- and long-term profitability,
growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly held
companies, the possibility of a Change in Control (as defined below) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and desires to establish certain minimum severance
benefits for certain of its senior executives and key employees, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives and key
employees are not practically disabled from discharging their duties in respect
of a proposed or actual transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. CERTAIN DEFINED TERMS. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a rate not
less than the Executive's annual fixed or base compensation as in effect
for Executive immediately prior to the occurrence of a Change in Control or
such higher rate as may be determined from time to time by the Board or a
committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to Section
3(b), the Executive shall have been:
(i) convicted of a criminal violation involving fraud, embezzlement
or theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary;
(ii) committed intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) committed intentional wrongful disclosure of secret processes
or confidential information of the Company or any Subsidiary; or
(iv) intentionally, wrongfully engaged in any Competitive Activity;
and any such act shall have been demonstrably and materially harmful to
the Company. For purposes of this Agreement, no act or failure to act on
the part of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence, but shall be deemed
"intentional" only if done or omitted to be done by the Executive not in
good faith and without reasonable belief that his action or omission was
in the best interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted
<PAGE> 2
by the affirmative vote of not less than two-thirds of the Board then in
office at a meeting of the Board called and held for such purpose, after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding that, in
the good faith opinion of the Board, the Executive had committed an act
constituting "Cause" as herein defined and specifying the particulars
thereof in detail. Nothing herein will limit the right of the Executive
or his beneficiaries to contest the validity or propriety of any such
determination.
(d) "Change in Control" means the occurrence during the Term of any of
the following events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 15% or more of the combined
voting power of the then outstanding Voting Stock; provided, however,
that for purposes of this Section 1(d)(i), the following acquisitions
shall not constitute a Change in Control: (A) any acquisition directly
from the Company that is approved by the Incumbent Board, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
Subsidiary, or (D) any acquisition by any Person pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d); or
(ii) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board;
provided, however, that any individual becoming a Director subsequent to
the date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least two-thirds of
the Directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be deemed to have been a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest (within the meaning of Rule 14a-11 of the
Exchange Act) with respect to the election or removal of Directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) consummation of (A) a reorganization, merger or
consolidation, (B) a sale or other disposition of all or substantially
all of the assets of the Company, or (C) a sale or other disposition of
all or substantially all of the assets ("Boat Group Assets") of the
Company used in its Boat Group businesses (each, a "Business
Combination"), unless, in each case, immediately following such Business
Combination, (I) all or substantially all of the individuals and
entities who were the beneficial owners of Voting Stock of the Company
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 80% of the then outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
Directors of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions relative to each other as their
ownership, immediately prior to such Business Combination, of the Voting
Stock of the Company, (II) no Person (other than the Company, such
entity resulting from such Business Combination, or any employee benefit
plan (or related trust) sponsored or maintained by the Company, any
Subsidiary or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 15% or more of the then
outstanding shares of common stock of the entity resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors of such entity, and (III) at least a majority of the
members of the Board of Directors of the entity resulting from such
Business Combination were members of the Incumbent Board at the time of
the execution of the initial agreement or of the action of the Board
providing for such Business Combination; or
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<PAGE> 3
(iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company, except pursuant to a Business
Combination that complies with clauses (I), (II) and (III) of subsection
(iii) of this Section 1(d).
(e) "Competitive Activity" means the Executive's participation,
without the written consent of an officer of the Company, in the management
of any business enterprise if such enterprise engages in substantial and
direct competition with the Company and such enterprise's sales of any
product or service competitive with any product or service of the Company
amounted to 10% of such enterprise's net sales for its most recently
completely fiscal year and if the Company's net sales of said product or
service amounted to 10% of the Company's net sales for its most recently
completed fiscal year. "Competitive Activity" will not include (i) the mere
ownership of securities in any such enterprise and the exercise of rights
appurtenant thereto or (ii) participation in the management of any such
enterprise other than in connection with the competitive operations of such
enterprise.
(f) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs or arrangements in
which Executive is entitled to participate, including without limitation
any stock option, performance share, performance unit, stock purchase,
stock appreciation, savings, pension, supplemental executive retirement, or
other retirement income or welfare benefit, deferred compensation,
incentive compensation, group or other life, health, medical/hospital or
other insurance (whether funded by actual insurance or self-insured by the
Company), disability, salary continuation, expense reimbursement and other
employee benefit policies, plans, programs or arrangements that may now
exist or any equivalent successor policies, plans, programs or arrangements
that may be adopted hereafter by the Company, providing perquisites,
benefits and service credit for benefits at least as great in the aggregate
as are payable thereunder prior to a Change in Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Incentive Pay" means an annual amount equal to not less than the
highest aggregate annual bonus, incentive or other payments of cash
compensation, in addition to Base Pay, made or to be made in regard to
services rendered in any fiscal year during the five fiscal years
immediately preceding, or, if greater, the two fiscal years immediately
following, the fiscal year in which the Change in Control occurred pursuant
to any bonus, incentive, profit-sharing, performance, discretionary pay or
similar agreement, policy, plan, program or arrangement (whether or not
funded) of the Company, or any successor thereto, providing benefits at
least as great as the benefits payable thereunder prior to a Change in
Control.
(i) "Retirement Plans" means the retirement income, supplemental
executive retirement, excess benefits and retiree medical, life and similar
benefit plans providing retirement perquisites, benefits and service credit
for benefits at least as great in the aggregate as are payable thereunder
prior to a Change in Control.
(j) "Severance Period" means the period of time commencing on the date
of the first occurrence of a Change in Control and continuing until the
earliest of (i) the third anniversary of the occurrence of the Change in
Control, (ii) the Executive's death, or (iii) the Executive's attainment of
age 65; provided, however, that commencing on each anniversary of the
Change in Control, the Severance Period will automatically be extended for
an additional year unless, not later than 90 calendar days prior to such
anniversary date, either the Company or the Executive shall have given
written notice to the other that the Severance Period is not to be so
extended.
(k) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(l) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on December 31, 1999,
or (ii) the expiration of the Severance Period; provided, however, that (A)
commencing on January 1, 1998 and each January 1 thereafter, the term of
this Agreement will automatically be extended for an additional year
unless, not later than September 30 of
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<PAGE> 4
the immediately preceding year, the Company or the Executive shall have
given notice that it or the Executive, as the case may be, does not wish to
have the Term extended and (B) subject to the last sentence of Section 9,
if, prior to a Change in Control, the Executive ceases for any reason to be
an employee of the Company and any Subsidiary, thereupon without further
action the Term shall be deemed to have expired and this Agreement will
immediately terminate and be of no further effect. For purposes of this
Section 1(k), the Executive shall not be deemed to have ceased to be an
employee of the Company and any Subsidiary by reason of the transfer of
Executive's employment between the Company and any Subsidiary, or among any
Subsidiaries.
(m) "Termination Date" means the date on which the Executive's
employment is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the Executive if
the termination is pursuant to Section 3(b)).
(n) "Voting Stock" means securities entitled to vote generally in the
election of directors.
2. OPERATION OF AGREEMENT. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs. Upon the occurrence of a Change in Control at any time during
the Term, without further action, this Agreement shall become immediately
operative.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL. (a) In the event of the
occurrence of a Change in Control, the Executive's employment may be terminated
by the Company during the Severance Period and the Executive shall be entitled
to the benefits provided by Section 4 unless such termination is the result of
the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled within the meaning
of, and begins actually to receive disability benefits pursuant to, the
long-term disability plan in effect for, or applicable to, Executive
immediately prior to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated
by the Company or any Subsidiary other than pursuant to Section 3(a)(i),
3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits
provided by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and any Subsidiary during the
Severance Period with the right to severance compensation as provided in Section
4 upon the occurrence of one or more of the following events (regardless of
whether any other reason, other than Cause as hereinabove provided, for such
termination exists or has occurred, including without limitation other
employment):
(i) Failure to elect or reelect or otherwise to maintain the Executive
in the office or the position, or a substantially equivalent office or
position, of or with the Company and/or a Subsidiary, as the case may be,
which the Executive held immediately prior to a Change in Control, or the
removal of the Executive as a Director of the Company (or any successor
thereto) if the Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(ii) (A) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Company and any Subsidiary which the Executive held
immediately prior to the Change in Control, (B) a reduction in the
aggregate of the Executive's Base Pay and Incentive Pay received from the
Company and any Subsidiary, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the scope or
value thereof, any of which is not remedied by the Company within 10
calendar days after receipt by the Company of written notice from the
Executive of such change, reduction or termination, as the case may be;
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<PAGE> 5
(iii) A determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has been made in
good faith and in all events will be presumed to have been made in good
faith unless otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred following a Change in
Control, including, without limitation, a change in the scope of the
business or other activities for which the Executive was responsible
immediately prior to the Change in Control, which has rendered the
Executive substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer a substantial
reduction in, any of the authorities, powers, functions, responsibilities
or duties attached to the position held by the Executive immediately prior
to the Change in Control, which situation is not remedied within 10
calendar days after written notice to the Company from the Executive of
such determination;
(iv) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or substantially all its
business and/or assets, unless the successor or successors (by liquidation,
merger, consolidation, reorganization, transfer or otherwise) to which all
or substantially all its business and/or assets have been transferred
(directly or by operation of law) assumed all duties and obligations of the
Company under this Agreement pursuant to Section 11(a);
(v) The Company relocates its principal executive offices, or requires
the Executive to have his principal location of work changed, to any
location that is in excess of 35 miles from the location thereof
immediately prior to the Change in Control, or requires the Executive to
travel away from his office in the course of discharging his
responsibilities or duties hereunder at least 20% more (in terms of
aggregate days in any calendar year or in any calendar quarter when
annualized for purposes of comparison to any prior year) than was required
of Executive in any of the three full years immediately prior to the Change
in Control without, in either case, his prior written consent; or
(vi) Without limiting the generality or effect of the foregoing, any
material breach of this Agreement by the Company or any successor thereto
which is not remedied by the Company within 10 calendar days after receipt
by the Company of written notice from the Executive of such breach.
(d) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights that the Executive
may have pursuant to any agreement, policy, plan, program or arrangement of the
Company providing Employee Benefits, which rights shall be governed by the terms
thereof, except for any rights to severance compensation to which Executive may
be entitled upon termination of employment under name of Executive's
severance/employment agreement which rights shall, during the Severance Period,
be superseded by this Agreement.
4. SEVERANCE COMPENSATION. (a) If, following the occurrence of a Change in
Control, the Company terminates the Executive's employment during the Severance
Period other than pursuant to Section 3(a), or if the Executive terminates his
employment pursuant to Section 3(b), the Company will pay to the Executive as
severance benefits the amounts described on Annex A within five business days
after the Termination Date and will continue to provide to the Executive the
benefits described on Annex A for the periods described therein.
(b) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be made
or provided hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to the so-called
composite "prime rate" as quoted from time to time during the relevant period in
the Midwest Edition of The Wall Street Journal. Such interest will be payable as
it accrues on demand. Any change in such prime rate will be effective on and as
of the date of such change.
(c) Notwithstanding any provision of this Agreement to the contrary, the
parties' respective rights and obligations under this Section 4 and under
Sections 5 and 7 will survive any termination or expiration of this Agreement or
the termination of the Executive's employment following a Change in Control for
any reason whatsoever.
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<PAGE> 6
5. LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding any provision of
this Agreement to the contrary, if any amount or benefit to be paid or provided
under this Agreement would be an "Excess Parachute Payment," within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor provision thereto, but for the application of this sentence,
then the payments and benefits to be paid or provided under this Agreement shall
be reduced to the minimum extent necessary (but in no event to less than zero)
so that no portion of any such payment or benefit, as so reduced, constitutes an
Excess Parachute Payment; provided, however, that the foregoing reduction shall
be made only if and to the extent that such reduction would result in an
increase in the aggregate payment and benefits to be provided, determined on an
after-tax basis (taking into account the excise tax imposed pursuant to Section
4999 of the Code, or any successor provision thereto, any tax imposed by any
comparable provision of state law, and any applicable federal, state and local
income taxes). The determination of whether any reduction in such payments or
benefits to be provided under this Agreement or otherwise is required pursuant
to the preceding sentence shall be made at the expense of the Company, if
requested by the Executive or the Company, by the Company's independent
accountants. The fact that the Executive's right to payments or benefits may be
reduced by reason of the limitations contained in this Section 5 shall not of
itself limit or otherwise affect any other rights of the Executive other than
pursuant to this Agreement. In the event that any payment or benefit intended to
be provided under this Agreement or otherwise is required to be reduced pursuant
to this Section 5, the Executive shall be entitled to designate the payments
and/or benefits to be so reduced in order to give effect to this Section 5. The
Company shall provide the Executive with all information reasonably requested by
the Executive to permit the Executive to make such designation. In the event
that the Executive fails to make such designation within 10 business days of the
Termination Date, the Company may effect such reduction in any manner it deems
appropriate.
6. NO MITIGATION OBLIGATION. The Company hereby acknowledges that it will
be difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried
employees do not provide for mitigation, offset or reduction of any severance
payment received thereunder. Accordingly, the payment of the severance
compensation by the Company to the Executive in accordance with the terms of
this Agreement is hereby acknowledged by the Company to be reasonable, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will any
profits, income, earnings or other benefits from any source whatsoever create
any mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Paragraph 2 set forth on Annex A.
7. LEGAL FEES AND EXPENSES. (a) It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's rights
under this Agreement by litigation or otherwise because the cost and expense
thereof would substantially detract from the benefits intended to be extended to
the Executive hereunder. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this
Agreement or in the event that the Company or any other person takes or
threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to
recover from, the Executive the benefits provided or intended to be provided to
the Executive hereunder, the Company irrevocably authorizes the Executive from
time to time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder
or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company will pay and be solely financially responsible for any
and all attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
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(b) Without limiting the obligations of the Company pursuant to Section
7(a) hereof, in the event a Change in Control occurs, the performance of the
Company's obligations under this Section 7 shall be secured by amounts deposited
or to be deposited in trust pursuant to certain trust agreements to which the
Company shall be a party, which amounts deposited shall in the aggregate be not
less than $1,000,000 providing that the fees and expenses of counsel selected
from time to time by the Executive pursuant to Section 7(a) shall be paid, or
reimbursed to the Executive if paid by the Executive, either in accordance with
the terms of such trust agreements, or, if not so provided, on a regular,
periodic basis upon presentation by the Executive to the trustee of a statement
or statements prepared by such counsel in accordance with its customary
practices. Any failure by the Company to satisfy any of its obligations under
this Section 7(b) shall not limit the rights of the Executive hereunder. Subject
to the foregoing, the Executive shall have the status of a general unsecured
creditor of the Company and shall have no right to, or security interest in, any
assets of the Company or any Subsidiary.
8. COMPETITIVE ACTIVITY. During a period ending one year following the
Termination Date, if the Executive shall have received or shall be receiving
benefits under Section 4, the Executive shall not, without the prior written
consent of the Company, which consent shall not be unreasonably withheld, engage
in any Competitive Activity.
9. EMPLOYMENT RIGHTS. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control. Any termination of employment of the Executive
or the removal of the Executive from the office or position in the Company or
any Subsidiary following the commencement of any discussion with a third person
that ultimately results in a Change in Control shall be deemed to be a
termination or removal of the Executive after a Change in Control for purposes
of this Agreement.
10. WITHHOLDING OF TAXES. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the Company is
required to withhold pursuant to any law or government regulation or ruling.
11. SUCCESSORS AND BINDING AGREEMENT. (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform if no
such succession had taken place. This Agreement will be binding upon and inure
to the benefit of the Company and any successor to the Company, including
without limitation any persons acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this Agreement), but will
not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 11(a) and 11(b). Without limiting the generality or effect of the
foregoing, the Executive's right to receive payments hereunder will not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will or by the
laws of descent and distribution and, in the event of any attempted assignment
or transfer contrary to this Section 11(c), the Company shall have no liability
to pay any amount so attempted to be assigned, transferred or delegated.
12. NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission
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<PAGE> 8
(with receipt thereof orally confirmed), or five business days after having been
mailed by United States registered or certified mail, return receipt requested,
postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as Federal Express, UPS, or Purolator,
addressed to the Company (to the attention of the Secretary of the Company) at
its principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Delaware, without giving effect to the
principles of conflict of laws of such State.
14. VALIDITY. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances will not be affected, and
the provision so held to be invalid, unenforceable or otherwise illegal will be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.
15. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
will be deemed a waiver of similar or dissimilar provisions or conditions at the
same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement. References to Sections are to references to Sections of this
Agreement.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
17. PRIOR AGREEMENT. The Agreement dated , (the "Prior
Agreement"), between the Company and the Executive shall, without further
action, be terminated and superseded as of the date first above written.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
<TABLE>
<S> <C>
[NAME OF EXECUTIVE] OUTBOARD MARINE CORPORATION
By: /s/ Harry W. Bowman
- -------------------------------------------- ----------------------------------------
</TABLE>
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<PAGE> 9
ANNEX A
SEVERANCE COMPENSATION
(1) A lump sum payment in an amount equal to [two, in the case of Elected
Officers] [one, in the case of Key Employees] times the sum of (A) Base Pay (at
the highest rate in effect for any period prior to the Termination Date), plus
(B) Incentive Pay (determined in accordance with the standards set forth in
Section 1(h)).
(2) For a period of twelve (12) months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the Executive with
Employee Benefits that are welfare benefits (but not stock option, performance
share, performance unit, stock purchase, stock appreciation or similar
compensatory benefits) substantially similar to those that the Executive was
receiving or entitled to receive immediately prior to the Termination Date (or,
if greater, immediately prior to the reduction, termination, or denial described
in Section 3(b)(ii)), except that the level of any such Employee Benefits to be
provided to the Executive may be reduced in the event of a corresponding
reduction generally applicable to all recipients of or participants in such
Employee Benefits. If and to the extent that any benefit described in this
Paragraph 2 is not or cannot be paid or provided under any policy, plan, program
or arrangement of the Company or any Subsidiary, as the case may be, then the
Company will itself pay or provide for the payment to the Executive, his
dependents and beneficiaries, of such Employee Benefits. Without otherwise
limiting the purposes or effect of Section 5, Employee Benefits otherwise
receivable by the Executive pursuant to this Paragraph 2 will be reduced to the
extent comparable welfare benefits are actually received by the Executive from
another employer during the Continuation Period following the Executive's
Termination Date, and any such benefits actually received by the Executive shall
be reported by the Executive to the Company.
(3) In addition to the retirement income, supplemental executive
retirement, and other benefits to which Executive is entitled under the
Company's Retirement Plans, a lump sum payment in an amount equal to the
actuarial equivalent of the excess of (x) the retirement pension and the
medical, life and other benefits that would be payable to the Executive under
the Retirement Plans if Executive continued to be employed through the
Continuation Period given the Executive's Base Salary (without regard to any
amendment to the Retirement Plans made subsequent to a Change in Control which
adversely affects in any manner the computation of retirement or welfare
benefits thereunder), over (y) the retirement pension and the medical, life and
other benefits that the Executive is entitled to receive (either immediately or
on a deferred basis) under the Retirement Plans. For purposes of this
subsection, "actuarial equivalent" shall be determined using the same methods
and assumptions utilized under the Company's qualified retirement plan for
salaried employees in effect immediately prior to the Change in Control.
(4) In lieu of Executive's right to receive deferred compensation under the
OMC Bonus Plan or other plan providing for deferral of amounts otherwise
currently payable to the Executive, a lump sum payment in an amount equal to
amounts deferred pursuant to such plans, together with any earnings or interest
credited on such amounts under such Plans.
(5) Outplacement services by a firm selected by the Executive, at the
expense of the Company in an amount up to 20% of the Executive's Base Pay.
9
<PAGE> 1
EXHIBIT 99.4
OMC
- --------------------------------------------------------------------------------
OUTBOARD MARINE CORPORATION 100 Sea Horse Drive
Waukegan, Illinois 60085
Telephone: 847/689-5207
Facsimile: 847/689-6006
Voice Mail: 847/689-5519
HW BOWMAN
CHAIRMAN OF THE BOARD
PRESIDENT
CHIEF EXECUTIVE OFFICER
[DATE]
Dear :
Outboard Marine Corporation (the "Corporation") recognizes that your
contribution to the growth and success of the Corporation has been substantial
and desires to assure the Corporation of your continued employment. In this
connection, the Board of Directors of the Corporation (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control may exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Corporation and its
stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, and in
consideration of your agreement set forth in paragraph (ii) Section 2 hereof the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement ("Agreement") in the event your employment with the
Corporation is terminated subsequent to a "Change in Control of the Corporation"
(as defined in Section 2 hereof) under the circumstances described below.
1. TERM OF AGREEMENT. This Agreement will commence on the date hereof and
shall continue in effect until December 31, , until you reach age 65, or
until your death or Disability, whichever comes first; provided, however, that
commencing on January 1, , and each January 1 thereafter, the term of this
Agreement shall automatically be renewed for one additional year unless, not
later than November 1 of the preceding year, the Corporation shall have given
notice that it does not wish to extend this Agreement; and provided, further,
that if a Change in Control of the Corporation shall have occurred during the
original or extended term of this Agreement, this Agreement shall continue in
effect for a period of thirty-six (36) months beyond the month in which such
Change in Control of the Corporation occurred.
2. CHANGE IN CONTROL OF THE CORPORATION.
(i) No benefits shall be payable hereunder unless there shall have
been a Change in Control of the Corporation, as set forth below. For
purposes of this Agreement, a "Change in Control of the Corporation" shall
be deemed to have occurred if:
(A) any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Corporation, any trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation, or any
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of
stock of the Corporation), is or becomes the "beneficial
<PAGE> 2
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing thirty percent
(30%) or more of the combined voting power of the Corporation's then
outstanding securities;
(B) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Corporation to effect a transaction described in
clause (A), (C), (D) or (E) of this Section) whose election by the Board
or nomination for election by the Corporation's stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved
cease for any reason to constitute at least a majority thereof;
(C) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation, other than
(1) a merger or consolidation which would result in the voting
securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80%
of the combined voting power of the voting securities of the Corporation
or such surviving entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in which no
"person" (as herein-above defined) acquires more than 20% of the
combined voting power of the Corporation's then outstanding securities;
(D) the stockholders of the Corporation approve a plan of complete
liquidation of the Corporation; or
(E) the Corporation enters into an agreement for the sale or other
disposition of all or substantially all of the Corporation's assets or
the Corporation otherwise disposes of such assets.
(ii) For purposes of this Agreement, a "potential Change in Control of
the Corporation" shall be deemed to have occurred if
(A) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control of the
Corporation;
(B) any person (including the Corporation) publicly announces an
intention to take or to consider taking actions which if consummated
would constitute a Change in Control of the Corporation;
(C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Corporation or a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of
stock of the Corporation, who is or becomes the beneficial owner,
directly or indirectly, of securities of the Corporation representing
9.5% or more of the combined voting power of the Corporation's then
outstanding securities increases his beneficial ownership of such
securities, by 5% or more over the percentage so owned by such person on
the date hereof; or
(D) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a potential Change in Control of the Corporation has
occurred.
You agree that, subject to the terms and conditions of this Agreement, in the
event of a potential Change in Control of the Corporation, you will remain in
the employ of the Corporation until the earliest of (i) a date which is six (6)
months from the occurrence of such potential Change in Control of the
Corporation, (ii) the termination by you of your employment by reason of your
death or Disability, as defined in Subsection 3(a), or (iii) the occurrence of a
Change in Control of the Corporation.
3. TERMINATION FOLLOWING A CHANGE IN CONTROL OF THE CORPORATION. If any of
the events described in Section 2(i) hereof constituting a Change in Control of
the Corporation shall have occurred, you shall be
2
<PAGE> 3
entitled to the benefits provided in Section 4(d) hereof upon the termination of
your employment during the term of this Agreement unless such termination is (i)
because of your death or Disability, (ii) by the Corporation for Cause, (iii) by
you other than for Good Reason or (iv) on or after the date that you attain age
sixty-five (65). Your entitlement to benefits under any of the Corporation's
retirement plans will not adversely affect your rights to receive payments
hereunder.
(a) DISABILITY. If, as a result of your incapacity due to physical or
mental illness which in the opinion of a licensed physician renders you
incapable of performing your assigned duties with the Corporation, you
shall have been absent from the full-time performance of your duties with
the Corporation for six (6) consecutive months, and within thirty (30) days
after written notice of termination is given you shall not have returned to
the full-time performance of your duties, the Corporation may terminate
your employment for "Disability."
(b) CAUSE. Termination by the Corporation of your employment for
"Cause" shall mean termination upon (i) the willful and continued failure
by you to substantially perform your duties with the Corporation (other
than any such failure resulting from termination by you for Good Reason),
after a demand for substantial performance is delivered to you that
specifically identifies the manner in which the Corporation believes that
you have not substantially performed your duties, and you have failed to
resume substantial performance of your duties on a continuous basis within
fourteen (14) days of receiving such demand, (ii) the willful engaging by
you in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise or (iii) your conviction of a felony
or conviction of a misdemeanor which impairs your ability substantially to
perform your duties with the Corporation. For purposes of this Subsection,
no act, or failure to act, on your part shall be deemed "willful" unless
done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
the Corporation.
(c) GOOD REASON. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in
Control of the Corporation of any one or more of the following:
(i) the assignment to you of duties inconsistent with your present
position as Director of Marketing Services of the Corporation or a
reduction or alteration in the nature of your position, duties, status
or responsibilities from those in effect as of the date hereof;
(ii) a reduction by the Corporation in your base salary as in
effect on the date hereof (without regard to any temporary reduction
effected by the Corporation prior to a Change in Control) or as the same
shall be increased from time to time ("Base Salary") except for
across-the-board temporary salary reductions of 20% or less similarly
affecting all senior executives of the Corporation and all senior
executives of any person in control of the Corporation;
(iii) the Corporation's requiring you to be based at a location
other than Waukegan, Illinois;
(iv) the failure by the Corporation to continue in effect any of
the Corporation's employee benefit plans, programs, policies, practices
or arrangements in which you participate (or substantially equivalent
successor or replacement employee benefit plans, programs, policies,
practices or arrangements) or the failure by the Corporation to continue
your participation therein on substantially the same basis, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants in such plans, as existed
as of the date hereof (or as the same may be increased from time to
time);
(v) the failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and agree to
perform this Agreement, as contemplated in Section 5 hereof; and
(vi) any purported termination by the Corporation of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of subparagraph (d) below, and for purposes
of this Agreement, no such purported termination shall be effective.
3
<PAGE> 4
Your right to terminate your employment pursuant to this Section 3 shall not be
affected by your incapacity due to physical or mental illness or your
participation in the OMC Salary Continuation Program or your receipt of
disability payments from OMC. Your continued employment shall not constitute
consent to, or a waiver of rights with respect to, any circumstance constituting
Good Reason hereunder.
(d) Notice of Termination. Any termination by the Corporation for
Cause or by you for Good Reason shall be communicated by Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a written notice which shall indicate
the specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the provision so
indicated.
(e) Date of Termination. "Date of Termination" shall mean if your
employment is terminated for Cause, or for any other reason (other than
Disability) the date specified in the Notice of Termination (which, in the
case of a termination for Cause shall not be less than thirty (30) days,
and in the case of any other termination shall not be less than fifteen
(15) nor more than sixty (60) days, respectively, from the date such Notice
of Termination is given); provided that if within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this proviso), the party
notifies the other party that a dispute exists concerning the termination,
the Date of Termination shall be the date on which the dispute is finally
determined, either by mutual written agreement of the parties or by a
binding arbitration award; provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in
good faith and the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given (including, but
not limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were participating
when the notice giving rise to the dispute was given, until the dispute is
fully resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a Change
in Control of the Corporation, as defined in Section 2 hereof, upon termination
of your employment or during a period of disability you shall be entitled to the
following benefits:
(a) During any period that you fail to perform your full-time duties
with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive your Base Salary at the rate in
effect at the commencement of any such period, until your employment is
terminated pursuant to Section 3(a) hereof. Thereafter, your benefits shall
be determined in accordance with the Corporation's retirement, insurance
and other applicable programs and plans then in effect.
(b) If your employment shall be terminated by the Corporation for
Cause or by you other than for Good Reason, the Corporation shall pay you
your full Base Salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given or on the Date of Termination if
no Notice of Termination is required hereunder, plus all other amounts to
which you are entitled under any compensation plan of the Corporation at
the time such payments are due, and the Corporation shall have no further
obligations to you under this Agreement.
(c) If your employment terminates by reason of your death, your
benefits shall be determined in accordance with the Corporation's
retirement, survivor's benefits, insurance and other applicable programs
and plans, then in effect.
(d) If your employment by the Corporation shall be terminated (i) by
the Corporation other than for Cause or Disability or (ii) by you for Good
Reason, you shall be entitled to the benefits (the "Severance Payments")
provided below:
4
<PAGE> 5
(A) the Corporation shall pay you your full Base Salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, or the Date of Termination where no Notice of
Termination is required hereunder; and
(B) the Corporation will pay as severance benefits to you, not
later than the fifth day following the Date of Termination, a lump sum
severance payment, in cash, equal to (1) a fraction, the numerator of
which is equal to the lesser of (x) twelve (12) or (y) the number of
full and partial months existing between the Date of Termination and
your sixty-fifth (65th) birthday and the denominator of which is equal
to twelve (12), multiplied by (2) the sum of (x) your annual Base Salary
in effect immediately prior to the occurrence of the circumstances
giving rise to such termination, and (y) the amount, if any, of the
highest annual amount awarded to you (whether paid, payable or deferred)
under the Corporation's Management Incentive Compensation Plan in the
five (5) years immediately preceding the Change in Control of the
Corporation (or, if greater, such annual amount awarded during the two
years following such Change in Control of the Corporation)
(e) The payments provided for in paragraph (d) above shall be made not
later than the fifth day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally determined
on or before such day, the Corporation shall pay to you on such day an
estimate as determined in good faith by the Corporation of the minimum
amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Corporation to you payable on the fifth day after demand by the Corporation
(together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code).
(f) The Corporation shall also pay to you all legal fees and expenses
incurred by you as a result of such termination of employment (including
all such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Section 4999 of
the Code to any payment or benefit provided hereunder).
(g) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment by
another employer after the Date of Termination, or otherwise.
5. SUCCESSORS; BINDING AGREEMENT.
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation or of
any division or subsidiary thereof employing you to expressly assume and
agree to perform this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no such succession
had taken place. Failure of the Corporation to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to compensation from the
Corporation in the same amount and on the same terms as you would be
entitled hereunder if you terminate your employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die
while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement, to your
devisee, legatee or other designee or, if there is not such designee, to
your estate.
5
<PAGE> 6
6. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage pre-paid, addressed to the
respective addresses set forth on the first page of this Agreement.
7. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by you and such officer as may be specifically designated by the
Board. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware.
8. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
9. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
10. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in accordance
with the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance of
your right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
11. ENTIRE AGREEMENT. This Agreement supersedes any other agreement or
understanding between the parties hereto.
12. EFFECTIVE DATE. This Agreement shall become effective as of the date
set forth above. If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
OUTBOARD MARINE
By
-----------------------------------
Name:
Title:
Agreed to this ___ day
of _________ , ____
By
--------------------------------------------------
Name:
-------------------------------------------
Title:
--------------------------------------------
6
<PAGE> 7
FIRST AMENDMENT TO SEVERANCE AGREEMENT
This Amendment to the Severance Agreement is dated as of this st day of
,
between Outboard Marine Corporation, a Delaware corporation (the "Company") and
, (the "Executive").
WHEREAS, on , the Corporation and Executive entered
into a Severance Agreement which provided for certain benefits to be payable to
the Executive upon a "change in control of the Company"; and
WHEREAS, Executive continues to be employed by the Company; and
WHEREAS, the Company and the Executive each desire to amend the Severance
Agreement to reduce the "change in control" percent from 30% to 20%.
NOW THEREFORE, for the mutual promises hereinafter provided and the
consideration hereby evidenced, the parties hereto agree as follows:
1. That Section 2(i)(A) of the Severance Agreement executed as of th
day of , between the Company and the Executive is
hereby amended by changing "thirty percent (30%)" in the Section 2(i)(A) of
said Severance Agreement to "twenty percent (20%)".
2. All other provisions of the Severance Agreement shall be unchanged
and remain in full force and effect.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT ON THE
DATES SET OPPOSITE THEIR RESPECTIVE SIGNATURE.
OUTBOARD MARINE CORPORATION
By
---------------------------------------------------
Date
------------------------------------------------
EXECUTIVE
By
---------------------------------------------------
Date
------------------------------------------------
7
<PAGE> 8
SECOND AMENDMENT TO SEVERANCE AGREEMENT
This Amendment to the Severance Agreement (as defined below) is effective
as of the sixth day of , between Outboard Marine
Corporation, a Delaware corporation (the "Corporation") and ,
(the "Executive").
WHEREAS, on , the Corporation and Executive entered
into a Severance Agreement which provided for certain benefits to be payable to
the Executive upon a "change in control of the Corporation" (as such term is
defined in the Severance Agreement);
WHEREAS, such Severance Agreement was first amended, by mutual consent of
the parties, on July 21, 1989 (the Severance Agreement originally entered into
by Executive, as amended, shall hereinafter be referred to as the "Severance
Agreement");
WHEREAS, Executive continues to be employed by the Corporation; and
WHEREAS, the Corporation and the Executive each desire to amend the
Severance Agreement to reduce the "change in control" percent from 20% to 15%.
NOW THEREFORE, for the mutual promises hereinafter provided and the
consideration hereby evidenced, the parties hereto agree as follows:
1. That Section 2 of the Severance Agreement be, and it hereby is,
amended, by changing the words and number "twenty percent (20%)" in such
Section 2(i)(A) of said Severance Agreement to "fifteen percent (15%)".
2. All other provisions of the Severance Agreement shall be unchanged
and remain in full force and effect.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AS OF
THE FIRST DATE SET FORTH ABOVE.
OUTBOARD MARINE CORPORATION
By
---------------------------------------------------
EXECUTIVE
By
---------------------------------------------------
8
<PAGE> 9
THIRD AMENDMENT TO SEVERANCE AGREEMENT
This Amendment to the Severance Agreement (as defined below) is dated as of
this between Outboard Marine Corporation, a Delaware corporation
(the "Corporation") and , (the "Executive").
WHEREAS, on , the Corporation and Executive entered
into a Severance Agreement which provided for certain benefits to be payable to
the Executive upon a "change in control of the Corporation" (as such term is
defined in the Severance Agreement);
WHEREAS, such Severance Agreement was first amended, by mutual consent of
the parties, on , and was amended by mutual consent of the
parties as of , (the Severance Agreement originally entered
into by Executive, as amended, shall hereinafter be referred to as the
"Severance Agreement");
WHEREAS, Executive continues to be employed by the Corporation; and
WHEREAS, the Corporation and the Executive each desire to amend the
Severance Agreement as set forth below.
NOW THEREFORE, for the mutual promises hereinafter provided and the
consideration hereby evidenced, the parties hereto agree as follows:
1. That Section 2 of the Severance Agreement be, and it hereby is,
amended, by deleting the word "hereunder" in the first line of Section 2(i)
and inserting therefor the words "under this agreement".
2. That Section 5 of the Severance Agreement be, and it hereby is,
amended, by adding at the beginning of said Section, before Section 5(a)
the words: "Provided there has been a Change in control of the
Corporation,".
3. That Section 11 of the Severance Agreement be, and it hereby is,
amended, by deleting such Section in its entirety and substituting the
following therefor:
"11. ENTIRE AGREEMENT. This Agreement supersedes any other
agreement or understanding between the parties hereto except any
agreement covering inventions, writings and confidential information,
and any agreement covering non-competitive employment, which Executive
may have entered into with the Corporation."
4. All other provisions of the Severance Agreement shall be unchanged
and remain in full force and effect.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT AS OF
THE DATE FIRST SET FORTH ABOVE.
OUTBOARD MARINE CORPORATION
By
---------------------------------------------------
EXECUTIVE
By
---------------------------------------------------
9
<PAGE> 1
EXHIBIT 99.6
OMC
- --------------------------------------------------------------------------------
OUTBOARD MARINE CORPORATION 100 Sea Horse Drive
Waukegan, Illinois 60085
Telephone: 847/689-5207
Facsimile: 847/689-6006
Voice Mail: 847/689-5519
HW BOWMAN
CHAIRMAN OF THE BOARD
PRESIDENT
CHIEF EXECUTIVE OFFICER
July 15, 1997
Dear Shareholder:
On July 9, 1997, Outboard Marine Corporation (the "Company") announced it
had entered into an Agreement and Plan of Merger (the "Agreement") with Detroit
Diesel Corporation ("DDC") and OMC Acquisition Corp. (the "Offeror"), a Delaware
corporation and a wholly-owned subsidiary of DDC, pursuant to which the Offeror
agreed to purchase 13,842,619 shares of the Company's common stock (the
"Shares") at a price of $16.00 per Share payable in cash through a tender offer
to the shareholders of the Company (the "Offer"). In the event the Offer is
consummated, the Agreement provides for the merger of the Offeror into the
Company (the "Merger") pursuant to which the outstanding shares of the Company's
common stock (other than those owned by DDC or the Offeror or held in treasury
by the Company and other than shares as to which appraisal rights have been
properly exercised under Delaware law) will be exchanged for an aggregate of
4,000,000 shares of the common stock of DDC ("DDC Common Shares"), plus a
variable amount of cash based on the applicable closing price of DDC Common
Shares.
All members of your Board of Directors (with one director abstaining due to
existing relationships with an affiliate of DDC) have approved the Agreement,
the Offer and the Merger and determined that terms of each of the Agreement, the
Offer and the Merger are fair to and in the best interests of shareholders.
ACCORDINGLY, THE BOARD RECOMMENDS THAT SHAREHOLDERS TENDER THEIR SHARES PURSUANT
TO THE OFFER. Salomon Brothers Inc, the Company's financial advisor, has
rendered its opinion that the consideration to be received by the holders of the
Shares pursuant to the Offer and the Merger is fair to such shareholders from a
financial point of view. A copy of the opinion of Salomon Brothers Inc is
attached as Annex A to the enclosed Schedule 14D-9.
In arriving at its decision to recommend the Offer, the Board of Directors
gave careful consideration to a number of factors, which are described in the
Schedule 14D-9 filed by the Company with the Securities and Exchange Commission
and enclosed with this letter. I urge you to read the Schedule 14D-9 carefully.
Very truly yours,
/s/ Harry W. Bowman
Harry W. Bowman
Chairman of the Board, President and
Chief Executive Officer
