EXHIBIT (d)(3)
STOCK PUT OPTION AGREEMENT
STOCK PUT OPTION AGREEMENT, dated as of July 20, 2000 (the
"Agreement"), between Penske Corporation, a Delaware corporation ("Penske"), and
Detroit Diesel Corporation, a Delaware corporation ("DDC").
WHEREAS, concurrently with the execution and delivery of this
Agreement, DaimlerChrysler North America Holding Corporation, a Delaware
corporation ("DCNA"), Diesel Project Development, Inc., a wholly owned
subsidiary of DCNA (the "Purchaser"), and DDC are entering into an Agreement and
Plan of Merger (the "Merger Agreement"), which provides, among other things,
that the Purchaser, upon the terms and subject to the conditions thereof, will
make a tender offer for all outstanding shares of common stock, par value $0.01
per share, of DDC, and thereafter the Purchaser will merge with and into DDC
(the "Merger"); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, DCNA and the Purchaser have required that Penske agree, should
DDC so elect following the Merger, to purchase 51% of the outstanding shares of
capital stock of VM Holdings, Inc., a Delaware corporation and a wholly owned
subsidiary of DDC ("VMH"), upon the terms and subject to the conditions hereof;
and
WHEREAS, VMH is the legal and beneficial owner, directly or
indirectly, of 100% of the capital stock of VM Motori S.p.A., an Italian
corporation, and 99.9% of the outstanding quotas of Detroit Diesel Motores do
Brasil, Ltda., a Brazilian limited liability company, and will at all times
hereafter remain such; and
WHEREAS, it is the intention of the parties to the Merger Agreement
that they, together with Penske and DCNA's parent, DaimlerChrysler AG, will
negotiate in good faith and otherwise use their best commercially reasonable
efforts for a period of 180 days following the Merger in order to create a
three-party joint venture to operate the engine business currently operated by
VMH and its subsidiaries, in which Penske or one of its affiliates would have
industrial leadership and which would include an affiliate of DaimlerChrysler AG
and a third independent industrial partner;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, Penske and DDC agree as follows:
1. GRANT OF PUT OPTION. Following the Merger, upon the terms and
subject to the conditions hereinafter set forth, DDC shall have the right, in
its sole discretion, to require that Penske purchase 510 shares of common stock,
par value $0.01 per share (the "VMH Common
Stock"), of VMH (the "Put Shares"), representing 51% of the outstanding shares
of VMH Common Stock (the "Put Option").
2. PURCHASE PRICE. The Purchase Price of the Put Option shall be
determined as follows:
(a) DDC shall include a proposed purchase price in the
Exercise Notice, and DDC and Penske shall negotiate in good faith for not less
than two weeks in an effort to arrive at a mutually agreeable purchase price.
(b) In the event that Penske and DDC are unable to agree
upon a purchase price they shall jointly appoint an investment bank of
international reputation which has no business, financial or other significant
relationship with Penske or DCNA or any of their respective affiliates. The
parties agree without intending to exclude other possibilities that Merrill
Lynch & Co. Inc., Lazard Freres & Co. LLC and Lehman Brothers Inc. would be
acceptable at the present time. The designated investment bank shall determine
the purchase price within thirty days following receipt of all requested
financial, business and other information necessary to support such
determination. If Penske and DDC are unable to agree upon a joint designation of
an investment banking firm within a two-week period, such designation shall be
made by the International Chamber of Commerce sitting in Paris, France.
3. EXERCISE OF OPTION. If DDC wishes to exercise the Option, it
shall send a written notice to Penske declaring that the Put Option is thereby
exercised and that it is irrevocably contractually committed to sell the Put
Shares to Penske, specifying the proposed Purchase Price to be paid by Penske
for the Put Shares and fixing a date, time and location for the closing of the
purchase (the "Closing"). The written notice shall be deemed a confirmation by
DDC as of the date of such notice of all representations and warranties made by
DDC hereunder. The date and time fixed for the Closing shall be postponed from
time to time as necessary to accommodate the establishment of a Purchase Price
in accordance with Section 2(b) and shall be not later than the fifth business
day following the later of the final determination of the Purchase Price and the
satisfaction of the conditions set forth in Section 4. The Put Option shall
expire and be of no further force and effect on the date which is the 365th day
following the merger of the Purchaser with and into DDC.
4. CONDITIONS TO EXERCISE OF PUT OPTION. Penske's obligation to
purchase and pay for the Put Shares at the Closing is subject to the following
conditions:
(a) No statute, rule, regulation, executive order, decree,
ruling or permanent injunction have been enacted, entered, promulgated or
enforced by any governmental entity which prohibits the exercise of the Put
Option substantially on the terms contemplated hereby or has the effect of
making the acquisition of the Put Shares by Penske illegal;
(b) All waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") and the European Union merger
control regulations
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applicable to the purchase of the Put Shares by Penske shall have expired or
been terminated; and
(c) The Merger shall have been consummated and at least 180
days shall have elapsed following the Effective Time (as defined in the Merger
Agreement).
5. PUT OPTION CLOSING. At the Closing, DDC will deliver to Penske
a certificate or certificates representing the Put Shares in the denominations
designated by Penske in writing at least three business days prior to the
Closing, and Penske will purchase such Shares from DDC at the Purchase Price.
Payment by Penske to DDC of the Purchase Price shall be by wire transfer of
immediately available funds to a bank account designated in writing by DDC at
least three business days prior to Closing.
6. REPRESENTATIONS AND WARRANTIES OF DDC. DDC hereby represents
and warrants to Penske as follows: DDC has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of DDC and no other corporate proceedings on the part of DDC
are necessary to authorize the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by DDC
and, assuming this Agreement constitutes a valid and binding agreement of
Penske, constitutes a valid and binding agreement of DDC, enforceable against
DDC in accordance with its terms. The Put Shares are fully paid and
nonassessable and are free and clear of any lien or encumbrance. Information
regarding VMH provided by or on behalf of DDC to Penske does not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make such information in light of the circumstances in which it was
provided not misleading.
7. REPRESENTATIONS AND WARRANTIES OF PENSKE. Penske hereby
represents and warrants to DDC as follows: Penske has the corporate power and
authority to enter into this Agreement and to carry out its obligations
hereunder. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
the Board of Directors of Penske and no other corporate proceedings on the part
of Penske are necessary to authorize the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Penske and, assuming this Agreement constitutes a valid and binding
agreement of DDC, constitutes a valid and binding agreement of Penske,
enforceable against Penske in accordance with its terms.
8. FURTHER ASSURANCES. DDC and Penske will execute and deliver
all such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated hereby.
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9. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
damages would be an inadequate remedy for a breach of this Agreement and that
the obligations of the parties hereto shall be specifically enforceable.
10. NOTICES. All notices and other communications hereunder shall
be in writing (including telecopy or similar writing) and shall be effective (a)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 10 and the appropriate telecopy confirmation is
received or (b) if given by any other means, when delivered at the address
specified in this Section 10:
To DDC:
Detroit Diesel Corporation
13400 Outer Drive West
Detroit, Michigan 48239-4001
Attention: John F. Farmer
Telecopy: 313-592-7664
with a copy to:
DaimlerChrysler North America Holding Corporation
100 Chrysler Drive
Auburn Hills, Michigan 48326
USA
Attention: President
copy to:
DaimlerChrysler AG
70546 Stuttgart
Germany
Attention: Arne Anderson
Telecopy: 011-49-711-17-58190
copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036-6522
Attention: J. Michael Schell, Esq.
Margaret L. Wolff, Esq.
Telecopy: (212) 735-2000
To Penske:
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Penske Corporation
13400 Outer Drive West
Detroit, Michigan 48239-4001
Attention: Robert Kurnick, Jr.
Telecopy: 313-592-7124
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall be one and the same document.
12. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the States of Delaware, without giving
effect to the choice of law doctrine thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
PENSKE CORPORATION
By: /s/ Roger Penske
--------------------------------
Name: Roger Penske
Title: Chief Executive Officer
DETROIT DIESEL CORPORATION
By: /s/ Charles G. McClure
--------------------------------
Name: Charles G. McClure
Title: President and Chief
Executive Officer
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