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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9/A
AMENDMENT NO. 1
TO
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 incorporated 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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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. The alternatives reviewed
included the continued pursuit of the Company's current business plan, a stock
repurchase program, a leveraged recapitalization of the Company, a sale of
common or preferred equity in the Company, a divesture or spin-off of assets of
the Company, a sale of a minority interest in the Company and a sale of control
of 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
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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, 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 nine
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 five 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 four
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. 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. In addition
to the DDC proposal to acquire
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the entire Company, the proposals reviewed included proposals to make equity
investments in the Company or to pursue strategic arrangements or partnerships
with the Company. Merrill Lynch also orally presented the findings of its review
of various strategic alternatives which may be available to the Company. These
alternatives included a sale of the entire Company, a moderate restructuring
pursuant to which the Company would continue to pursue its current business plan
and a dramatic restructuring. After reviewing these alternatives, Merrill Lynch
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 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.
Merrill Lynch has also informed the Company that neither the discovery nor the
existence of the "potential indirect conflict" had any impact on the advice
rendered to the Company Board of Directors prior to Merrill Lynch's resignation.
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.
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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.
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
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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 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.
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(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.
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, Paula 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.
**Previously filed.
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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/A is true,
complete and correct.
Dated: July 31, 1997 OUTBOARD MARINE CORPORATION
By: /s/ HARRY W. BOWMAN
------------------------------------
Name: Harry W. Bowman
Title: Chairman of the Board,
President and Chief
Executive Officer
