EXHIBIT (d)(4)
MANAGEMENT SERVICES AGREEMENT
MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and entered into
as of the 20th day of July, 2000, by and between PENSKE COM PANY, LLC, a
Delaware limited liability company ("Penske"), and DETROIT DIESEL CORPORATION, a
Delaware corporation ("DDC").
RECITALS
WHEREAS, prior to the date of this Agreement, Penske provided DDC and its
subsidiaries (collectively, the "DDC Group") with certain services, including
corporate management and supervision; strategic planning assistance, including
acquisition and divestiture analyses and services; sales, marketing and business
development, including development and management of customer relationships and
customer contacts; risk-management services; and tax planning and
administration; and
WHEREAS, simultaneously with the execution and delivery of this Agreement,
DDC is entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"), among DaimlerChrysler North America Holding
Corporation, a Delaware corporation ("DCNA"), which is wholly owned by
DaimlerChrysler AG, a German Aktiengesellschaft ("DCAG"), Diesel Project
Development, Inc., a Delaware corporation (the "DPD"), which is wholly owned by
DCNA, and DDC; and
WHEREAS, the Merger Agreement provides for the merger of DPD into DDC
pursuant to which, at the Effective Time (as such term is defined in the Merger
Agreement), DDC will become a wholly owned subsidiary of DCNA; and
WHEREAS, in anticipation of the Merger DDC and Penske wish to provide for
the continuation of certain of the services previously provided by Penske to the
DDC Group on a basis, for the period and for consideration as provided in this
Agreement; and
WHEREAS, in particular, DDC desires to acquire from Penske on a fee basis
for the benefit of the DDC Group those services set forth in Exhibit A annexed
hereto (the
"Services") from the Effective Time until the date which is the third
anniversary of the Effective Time (such period being referred to herein as the
"Service Period"); and
WHEREAS, Penske is willing to provide to DDC the Services during the
Service Period pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EFFECTIVENESS AND TERM OF AGREEMENT. This Agreement shall be conditioned
upon consummation of the Merger and shall be effective and shall achieve full
force and effect only at the Effective Time. The term of this Agreement shall be
three (3) years from and after the Effective Time, after which this Agreement
shall expire and shall be of no further force or effect, unless extended. The
term of this Agreement may be extended only upon the mutual agreement of the
parties.
2. SERVICES. During the Service Period Penske shall provide to the DDC
Group all of the Services set forth in Exhibit A. Such Services shall be
provided as requested by DDC on reasonable notice. Routine, recurring Services
will be arranged by Penske and DDC in a manner that will permit such Services to
be made available as needed on a regular basis.
3. FEE FOR SERVICES. The aggregate fee payable by DDC to Penske for all
Services to be rendered during the Service Period shall be Five Million United
States Dollars ($5,000,000), to be paid in equal quarterly installments of Four
hundred Sixteen Thousand Six Hundred Sixty-Six and Sixty-Seven Hundreths United
States Dollars ($416,666.67) on the last business day of each March, June,
September and December. The first such installment shall be due on the first of
such quarterly payment dates to occur after the Effective Time. In addition,
Penske shall be reimbursed for its reasonable cash out-of-pocket expenses
incurred in connection with the provision of Services.
4. ADDITIONAL SERVICES. At any time prior to commencement of or during the
Service Period, DDC may request that Penske provide additional services to DDC.
Upon any such request, the parties will discuss in good faith, without
obligation, an appropriate increase in the service fees due hereunder to reflect
such additional Services, after which
2
DDC shall notify Penske in writing whether it wishes to accept such additional
Services and such adjustment in the service fees payable hereunder.
5. PRIOR PAYMENTS. Penske and DDC hereby agree that Penske will, within 90
days from the date of this Agreement, invoice DDC for all amounts owing by DDC
to Penske, or chargeable by Penske to DDC, in payment for any services rendered
to the DDC Group by Penske prior to the Effective Time. In addition, DDC will
sublease to Penske and its affiliates office space comparable to the office
space utilized by Penske and its affiliates prior to the date hereof on terms
and conditions comparable to the terms and conditions as of the date hereof and
which are arm's-length.
6. LIMITATION OF LIABILITY. Except as may be provided in Section 7 below
and except that Penske shall be obligated to perform this Agreement in
accordance with its terms and DDC shall be entitled to require such performance
and enforce such obligation, Penske, its affiliates, director, officers,
employees, agents or permitted assigns (each, a "Penske Party") shall not be
liable to the DDC Group or any affiliate, director, officer, employee, agent or
permitted assign of the DDC Group (each, a "DDC Group Party") for any
liabilities, claims, damages, losses or expenses, including, but not limited to,
any special, indirect, incidental or consequential damages of a DDC Group Party
arising in connection with this Agreement or the Services.
7. PENSKE INDEMNIFICATION. Penske shall indemnify, defend and hold harmless
each DDC Group Party from and against all liabilities, claims, damages, losses
and expenses (including, but not limited to, court costs and reasonable
attorneys' fees), of third parties unrelated to any DDC Group Party caused by or
arising in connection with Penske's negligence or willful misconduct in its
perfor mance of the Services' unless such negligence or willful misconduct was
caused by the acts or omissions of any DDC Group Party. Notwithstanding the
foregoing, Penske shall not be liable for any special, indirect, incidental or
consequential damages relating to such third party claims. In the event that any
DDC Group Party knows of a claim that may be subject to indemnification under
this Section 7, it shall promptly notify Penske of such claim and Penske, in its
sole discretion, may defend, settle or otherwise litigate such claim.
8. DDC INDEMNIFICATION. DDC shall indemnify, defend and hold harmless each
Penske Party from and against all liabilities, claims, damages, losses and
expenses (including, but not limited to, court costs and reasonable attorneys'
fees), of third parties unrelated to any member of the DDC Group caused by or
arising in connection with
3
DDC's negligence or willful misconduct in its perfor mance of its obligations
hereunder unless such negligence or willful misconduct was caused by the acts or
omissions of any Penske Party. Notwithstanding the foregoing, DDC shall not be
liable for any special, indirect, incidental or consequential dam ages relating
to such third party claims. In the event that a Penske Party knows of a claim
that may be subject to indemnification under this Section 8, it shall promptly
notify DDC of such claim and DDC, in its sole discretion, may defend, settle or
otherwise litigate such claim.
9. INFORMATION. Each party hereto covenants and agrees to provide the other
party with all information regarding itself and transactions under this Agree
ment as are required by such party to comply with all applicable federal, state,
county and local laws, ordinances, regulations and codes, including, but not
limited to, securities laws and regulations.
10. CONFIDENTIAL INFORMATION. DDC and Penske hereby covenant and agree to
hold in trust and to maintain strictly confidential, except as otherwise
required by law, all Confidential Information relating to the other party or any
of its subsidiaries. As used herein, Confidential Information shall mean all
information disclosed by either parry to the other in connection with this
Agreement whether visually, in writing or in any other tangible form, and
includes, but is not limited to, technical, economic and business data,
know-how, flow sheets, drawings, business plans, computer information data
bases, and other similar types of information. Without prejudice to the rights
and remedies of any party to this Agreement, each party shall be entitled to any
equitable remedy (including specific performance, mandatory injunctive relief,
and injunctive restraints) appropriate or necessary to prevent the other party
from any breach or threatened breach of any provision of this Section 10. For
purposes of this Section 10 the parties agree that no remedy at law would be
adequate to redress any breach or threatened breach of this Agreement.
11. ASSIGNMENT. Neither party may assign or transfer any of its rights or
duties under this Agreement to any person or entity without the prior written
consent of the other party. In case either party seeks such consent, the other
party shall not unreasonably withhold such consent.
12. NOTICES. Any notice, instruction, direction or demand under the terms
of this Agreement required to be in writing will be duly given upon delivery, if
delivered by hand, facsimile transmission or internal DDC mail, or five (5) days
after posting if sent by certified mail, return receipt requested to the
following addresses:
4
PENSKE
Penske Corporation
13400 Outer Drive West
Detroit, Michigan 48239-4001
Attention: Robert Kurnick, Jr.
Telecopy: 313-592-7124
and
DDC
Detroit Diesel Corp.
13400 Outer Drive West
Detroit, Michigan 48239-4001
Attention: John F. Farmer
Telecopy: 313-592-5014
or to such other address as either parry may have furnished to the other in
writing in accordance with this Section 12.
13. GOVERNING LAW. This Agreement shall be construed in accordance with and
governed by the laws of the State of Michigan.
14. SUSPENSION. The obligations of any party to perform any acts hereunder
may be suspended if such performance is prevented by fires, strikes, embargoes,
riot, invasion, governmental interference, inability to secure goods or
materials, or other circumstances outside the control of the parties.
15. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not render the entire
Agree ment invalid. In any such event, the Agreement shall be construed as if it
did not contain the particular invalid or unenforceable provision, and the
rights and obliga tions of each party shall be construed and enforced
accordingly.
5
16. RIGHTS UPON ORDERLY TERMINATION. Upon expiration of this Agreement,
each party shall, upon request, forthwith return to the other party all reports,
paper, materials and other information required to be provided to the other
party by this Agreement. In addition, each party shall assist the other in the
orderly termina tion of this Agreement or any of the Services described herein.
17. AMENDMENT. This Agreement may only be amended by a written agreement
executed by all of the parties hereto; provided that any of the Exhibits
attached hereto may be amended upon the delivery of a replacement Exhibit so
designated and executed by the parties hereto.
18. ENTIRE AGREEMENT. This Agreement, including any exhibits, constitutes
the entire agreement between the parties, and supersedes all prior agreements,
representations, negotiations, statements or proposals related to the subject
matter hereof.
19. COUNTERPARTS. This Agreement may be executed in separate counter parts,
each of which shall be deemed an original and all of which, when taken together,
shall constitute one agreement.
6
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their duly authorized representatives as of the date first above written.
DETROIT DIESEL CORPORATION
By: /s/ Roger Penske
-----------------------------
Name: Roger Penske
Title: Managing Member
PENSKE CORPORATION
By: /s/ Charles G. McClure
-----------------------------
Name: Charles G. McClure
Title: President and Chief
Executive Officer
7
EXHIBIT A
SERVICES
TAX DEPARTMENT
Penske `s tax department will provide tax services to the DDC Group in the
following general areas:
o Tax planning and advice in connection with the transition of majority
ownership of DDC to DCNA and its affiliated group for U.S. tax
purposes
o Preparation of federal and state income tax returns to the extent
necessary to facilitate an orderly transition of majority ownership of
DDC to DCNA and its affiliated group for U.S. tax purposes
o Audit negotiation and support to the extent information is not avail-
able through the DDC Group's personnel or records and to the extent
that any audit relates to periods ending prior to the Effective Time.
RISK MANAGEMENT
Penske's risk management group will provide risk insurance management
functions necessary to facilitate an orderly transition of majority ownership to
DCNA and DCAG. These services would specifically include the following:
o Recommending post-Effective Time insurance coverage in types and
amounts appropriate after taking into account the change in circum-
stances effected by the Merger and the change in ownership from Penske
to DCNA, taking into account existing coverages prior to the Effective
Time
o Assisting in the negotiation with underwriters and brokers for transi-
tion insurance coverage and services and the placement of such
coverage, as appropriate
A-1
o Arranging for certificates and other proofs of insurance
o Gathering, compiling and submitting underwriting data to various
insurers/underwriters to obtain coverage
o Handling requests for information arising in connection with the
transition of majority ownership of DDC to DCNA and DCAG
SALES, MARKETING AND CUSTOMER RELATIONS
Penske will provide sales, marketing and customer relations assistance,
including:
o Consulting in the areas of business development, business contact
development and potential customer identification
o Arranging and attending meetings with major customers of DDC and
employees of DDC and its affiliates, both in connection with the
immediate transition of majority ownership of DDC to DCNA and
otherwise as reasonably necessary during the Service Period
o Consulting and assisting with responses to complaints by major
customers, both in connection with the immediate transition of major
ity ownership of DDC to DCNA and otherwise as reasonably necessary
during the Service Period
EUROPEAN JOINT VENTURE
Penske will develop and present to DDC a plan to establish a joint venture
to hold and operate the assets currently owned by VM Holding, Inc. and its
subsidiaries, including obtaining and negotiating with potential joint venture
"partners," which the parties expect will include Penske or one of its
affiliates.
A-2
EXECUTIVE DEPARTMENT
Penske's Executive Department will, upon request, provide general advice
and guidance, both in connection with the immediate transition of majority owner
ship of DDC to DCNA and DCAG and otherwise as reasonably necessary during the
three-year Service Period.
STRATEGIC CONSULTING
DDC has been advised by DCAG and DCNA that it is their intention to
integrate the worldwide business activities of the DDC Group into DCAG's
Powertrain Business Unit's worldwide activities. In connection with such
integration DDC has requested period strategic consulting assistance from Penske
and its affiliates as follows:
o As requested Penske and its affiliates will provide reasonable
consulting support for the integration of DCAG's on-road and off-road
propulsion activities
o As requested Penske and its affiliates will provide reasonable
consulting support for the integration of DDC's on-road and off-road
propulsion activities
o As requested Penske and its affiliates will make Mr. Roger Penske
available on a reasonable basis (time, notice, scheduling and travel
logistics all to be given reasonable consideration) to serve
periodically in one of the following capacities:
o Member of the Board of Directors of DDC
o Member of an executive planning committee or planning group for
the DCAG Powertrain Business Unit
o Member of an advisory committee for strategic development of the
DCAG Powertrain Business Unit
A-3
July 28, 2000
Detroit Diesel Corporation
13400 West Outer Drive
Detroit, MI 48239
Attention: Charles G. McClure
RE: MANAGEMENT SERVICES AGREEMENT DATED JULY 20, 2000, BY AND BETWEEN
PENSKE COMPANY LLC AND DETROIT DIESEL CORPORATION (THE "AGREEMENT")
Gentlemen:
This letter confirms our understanding that, effective as of July 20, 2000, the
captioned agreement is hereby amended to replace Penske Company LLC, a Delaware
limited company ("Penske LLC") as a party to the Agreement in place of Penske
Corporation, a Delaware corporation ("Penske"). Except as amended hereby, the
terms of the Agreement remain in full force and effect and otherwise modified.
If the foregoing accurately sets forth our understanding, please so indicate by
executing where provided for below.
Sincerely,
PENSKE CORPORATION
By: /s/ Peter E. Mogk,
Its: Vice President and Treasurer
Date: July 28, 2000
PENSKE COMPANY LLC
By: /s/ J. Patrick Conroy
Its: Senior Vice President
Date: July 28, 2000
DETROIT DIESEL CORPORATION
By: /s/ Charles G. McClure
Its: Chief Executive Officer
Date: July 28, 2000