OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
DETROIT DIESEL CORPORATION
AT
$23.00 NET PER SHARE
BY
DIESEL PROJECT DEVELOPMENT, INC.
A WHOLLY OWNED SUBSIDIARY OF
DAIMLERCHRYSLER NORTH AMERICA HOLDING CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 25, 2000, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER,
DATED AS OF JULY 20, 2000 (THE "MERGER AGREEMENT"), AMONG DAIMLERCHRYSLER
NORTH AMERICA HOLDING CORPORATION ("DCNA"), WHICH IS A WHOLLY OWNED SUBSIDIARY
OF DAIMLERCHRYSLER AG, A GERMAN AKTIENGESELLSCHAFT, DIESEL PROJECT
DEVELOPMENT, INC., A WHOLLY OWNED SUBSIDIARY OF DCNA (THE "PURCHASER"), AND
DETROIT DIESEL CORPORATION (THE "COMPANY"), AND IS CONDITIONED UPON, AMONG
OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE
EXPIRATION OF THE OFFER THAT NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.01
PER SHARE, OF THE COMPANY (THE "SHARES"), WHICH, WHEN ADDED TO THE NUMBER OF
SHARES CURRENTLY OWNED BY DCNA (APPROXIMATELY 21.4% OF THE OUTSTANDING
SHARES), REPRESENTS AT LEAST A MAJORITY OF THE THEN OUTSTANDING SHARES ON A
FULLY DILUTED BASIS, AND (2) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER
HAVING EXPIRED OR BEEN TERMINATED, AND THE NOTIFICATION OF AND APPROVAL BY THE
EUROPEAN COMMISSION UNDER THE EU COUNCIL REGULATION 4064/89, AS AMENDED,
HAVING BEEN RECEIVED. DDC HOLDINGS, INC., A WHOLLY OWNED INDIRECT SUBSIDIARY
OF PENSKE CORPORATION, THE COMPANY'S MAJOR STOCKHOLDER BENEFICIALLY OWNING
APPROXIMATELY 48.6% OF THE COMPANY'S OUTSTANDING SHARES, HAS AGREED TO TENDER
ITS SHARES IN THE OFFER. SEE SECTION 11. ASSUMING DDC HOLDINGS TENDERS ITS
SHARES IN THE OFFER, THE MINIMUM CONDITION IN (1) ABOVE WILL BE SATISFIED
WITHOUT THE NEED FOR ANY OTHER STOCKHOLDER TO TENDER SHARES IN THE OFFER. THE
OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE SECTION 15.
----------------------------
BASED UPON, AMONG OTHER THINGS, THE UNANIMOUS RECOMMENDATION OF ITS SPECIAL
COMMITTEE, THE BOARD OF DIRECTORS OF THE COMPANY BY UNANIMOUS VOTE OF THOSE
PRESENT (1) DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER DESCRIBED
HEREIN ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY, (2) APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND (3) RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO
THE OFFER AND ADOPT THE MERGER AGREEMENT.
----------------------------
IMPORTANT
Any stockholder of the Company wishing to tender Shares in the Offer must
(1) complete and sign the Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions in the Letter of Transmittal and mail or
deliver the Letter of Transmittal and all other required documents to the
Depositary (as defined herein) together with certificates representing the
Shares tendered or follow the procedure for book-entry transfer set forth in
Section 3 or (2) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee effect the transaction for the stockholder. A
stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if
such stockholder wishes to tender such Shares.
Any stockholder of the Company who wishes to tender Shares and cannot deliver
certificates representing such Shares and all other required documents to the
Depositary on or prior to the Expiration Date (as defined herein) or who
cannot comply with the procedures for book-entry transfer on a timely basis
may tender such Shares pursuant to the guaranteed delivery procedure set forth
in Section 3.
Questions and requests for assistance may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be obtained from the Information
Agent or the Dealer Manager. Stockholders may also contact their broker,
dealer, commercial bank, trust company or other nominee for copies of these
documents.
--------------------------
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN & CO.
July 31, 2000
TABLE OF CONTENTS
PAGE
--------
SUMMARY TERM SHEET.......................................... 1
INTRODUCTION................................................ 6
THE TENDER OFFER............................................ 8
1. Terms of the Offer.................................. 8
2. Acceptance for Payment and Payment for Shares....... 10
3. Procedures for Accepting the Offer and Tendering
Shares................................................. 11
4. Withdrawal Rights................................... 13
5. Certain United States Federal Income Tax
Consequences........................................... 14
6. Price Range of Shares; Dividends.................... 15
7. Certain Information Concerning the Company.......... 16
8. Certain Information Concerning DCNA and the
Purchaser.............................................. 17
9. Source and Amount of Funds.......................... 19
10. Background of the Offer; Past Contacts or
Negotiations with the Company.......................... 19
11. The Merger Agreement; The Stock Purchase Agreement;
The Stock Put Option Agreement and The Management
Services Agreement.................................. 20
12. Purpose of the Offer; Plans for the Company......... 35
13. Certain Effects of the Offer........................ 36
14. Dividends and Distributions......................... 37
15. Certain Conditions of the Offer..................... 37
16. Certain Legal Matters; Regulatory Approvals......... 39
17. Fees and Expenses................................... 41
18. Miscellaneous....................................... 41
SCHEDULE I--Information Concerning Directors and Executive
Officers
of DaimlerChrysler AG, DCNA and the Purchaser............... I-1
i
SUMMARY TERM SHEET
Diesel Project Development, Inc. is offering to purchase all of the
outstanding common stock of Detroit Diesel Corporation for $23.00 per share in
cash. The following are some of the questions you, as a stockholder of Detroit
Diesel, may have and answers to those questions. We urge you to read carefully
the remainder of this Offer to Purchase and the Letter of Transmittal because
the information in this summary term sheet is not complete. Additional important
information is contained in the remainder of this Offer to Purchase and the
Letter of Transmittal.
WHO IS OFFERING TO BUY MY SECURITIES?
Our name is Diesel Project Development, Inc. We are a Delaware corporation
formed for the purpose of making a tender offer for all of the common stock of
Detroit Diesel and have carried on no activities other than in connection with
the merger agreement among DaimlerChrysler North America Holding Corporation,
which is a wholly owned subsidiary of DaimlerChrysler AG, a German
Aktiengesellschaft, Detroit Diesel and ourselves. We are a wholly owned
subsidiary of DaimlerChrysler North America Holding Corporation, a Delaware
corporation. See the "Introduction" and Section 1.
WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER?
We are seeking to purchase all of the issued and outstanding shares of
common stock of Detroit Diesel. See the "Introduction" and Section 1.
HOW MUCH ARE YOU OFFERING TO PAY? WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO
PAY ANY FEES OR COMMISSIONS?
We are offering to pay $23.00 per share, net to you, in cash. If you are the
record owner of your shares and you tender your shares to us in the offer, you
will not have to pay brokerage fees or similar expenses. If you own your shares
through a broker or other nominee, and your broker tenders your shares on your
behalf, your broker or nominee may charge you a fee for doing so. You should
consult your broker or nominee to determine whether any charges will apply. See
the "Introduction."
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
DaimlerChrysler North America, our parent company, will provide us with
sufficient funds to purchase all shares validly tendered and not withdrawn in
the offer and to provide funding for the merger, which is expected to follow the
successful completion of the offer in accordance with the terms and conditions
of the merger agreement. DaimlerChrysler North America will obtain its funds
from its parent corporation, DaimlerChrysler AG, which will use internally
generated funds for this purpose. See Section 9.
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
We do not think our financial condition is relevant to your decision whether
to tender in the offer because the form of payment consists solely of cash, and
we have already arranged for all of our funding to come from the internally
generated funds of DaimlerChrysler AG. Additionally, the offer is not subject to
any financing condition. See Section 9.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, New York City time, on Friday,
August 25, 2000, to tender your shares in the offer. Further, if you cannot
deliver everything that is required in order to make a valid tender by that
time, you may be able to use a guaranteed delivery procedure, which is described
later in this Offer to Purchase. See Sections 1 and 3.
1
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
We have agreed in the merger agreement that:
- Without the consent of Detroit Diesel, we may extend the offer beyond the
scheduled expiration date if at that date any of the conditions to our
obligation to accept for payment and to pay for the shares are not
satisfied or, to the extent permitted by the merger agreement, waived.
- Without the consent of Detroit Diesel, we may extend the offer for any
period required by any rule, regulation or interpretation of the
Securities and Exchange Commission applicable to the offer.
- Unless Detroit Diesel advises us that it does not wish us to extend the
offer, we will extend the offer from time to time until the earlier of
(1) 30 days after the date on which any applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act has expired or terminated
and the notification of and approval by the European Commission under the
EU Council Regulation 4064/89, as amended, has been received or
(2) December 31, 2000, in the event that on the then-scheduled expiration
date all of the conditions to the offer have not been satisfied or waived
as permitted by the merger agreement.
- If all conditions to the offer have been satisfied or waived, we will
accept for payment and pay for all shares validly tendered and not
withdrawn at such time (which shares may not thereafter be withdrawn) and
extend the offer to provide a "subsequent offering period" for at least
three business days during which time stockholders whose shares have not
been accepted for payment may tender their shares and receive the offer
consideration. There will be no withdrawal rights during the subsequent
offering period. In addition, we are not permitted under the federal
securities laws to provide a subsequent offering period of more than 20
business days (for all such extensions).
Any extension under the circumstances described in the first and third
bullet points above will not exceed that number of days that we reasonably
believe is necessary to cause the conditions of the offer to be satisfied, and
in no event will exceed ten business days.
See Section 1 of this Offer to Purchase for more details on our ability to
extend the offer.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will inform ChaseMellon Shareholder Services,
L.L.C. (the depositary for the offer) of that fact and will make a public
announcement of the extension not later than 9:00 a.m., New York City time, on
the next business day after the day on which the offer was scheduled to expire.
See Section 1.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
- We are not obligated to purchase any shares that are validly tendered
unless the number of shares validly tendered and not withdrawn before the
expiration date of the offer which, when added to the number of shares
currently owned by DaimlerChrysler North America, represents at least a
majority of the then outstanding shares on a fully diluted basis. We call
this condition the "minimum condition." For purposes of the offer, "on a
fully diluted basis" means, as of any time, on a basis that includes the
number of shares of Detroit Diesel common stock that are actually issued
and outstanding plus the maximum number of such shares that Detroit Diesel
may be required to issue under stock options, warrants and other rights
(including restricted stock grants) or securities convertible into shares
of Detroit Diesel common stock, whether or not currently exercisable. DDC
HOLDINGS, INC., A WHOLLY OWNED INDIRECT SUBSIDIARY OF PENSKE CORPORATION,
DETROIT DIESEL'S MAJOR STOCKHOLDER BENEFICIALLY OWNING APPROXIMATELY 48.6%
OF THE COMPANY'S OUTSTANDING SHARES, HAS AGREED TO TENDER ITS SHARES IN
THE OFFER. ASSUMING DDC HOLDINGS TENDERS THE SHARES IT BENEFICIALLY
2
OWNS IN THE OFFER THE MINIMUM CONDITION WOULD BE SATISFIED WITHOUT ANY
OTHER STOCKHOLDER TENDERING SHARES IN THE OFFER BECAUSE DAIMLERCHRYSLER
NORTH AMERICA CURRENTLY BENEFICIALLY OWNS APPROXIMATELY 21.4% OF THE
COMPANY'S OUTSTANDING SHARES. See Section 11.
- We are not obligated to purchase shares that are validly tendered if,
among other things, there is a material adverse change in the business,
operations, assets or financial condition of Detroit Diesel.
- We are not obligated to purchase shares that are validly tendered if,
among other things, the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act has not expired or been
terminated or the notification of and approval by the European Commission
under the EU Council Regulation has not been received.
The offer is also subject to a number of other conditions. We can waive some
of the conditions to the offer without Detroit Diesel's consent; however, we
cannot waive the minimum condition. See Section 15.
HOW DO I TENDER MY SHARES?
To tender shares, you must deliver the certificates representing your
shares, together with a completed letter of transmittal and any other documents
required by the letter of transmittal, to ChaseMellon Shareholder Services,
L.L.C., the depositary for the offer, not later than the time the tender offer
expires. If your shares are held in street name, the shares can be tendered by
your nominee through ChaseMellon Shareholder Services, L.L.C. If you are unable
to deliver any required document or instrument to the depositary by the
expiration of the tender offer, you may gain some extra time by having a broker,
a bank or other fiduciary that is an eligible institution guarantee that the
missing items will be received by the depositary within three New York Stock
Exchange trading days. For the tender to be valid, however, the depositary must
receive the missing items within that three trading day period. See Section 3.
UNTIL WHAT TIME MAY I WITHDRAW PREVIOUSLY TENDERED SHARES?
You may withdraw shares at any time until the offer has expired and, if we
have not accepted your shares for payment by Thursday, September 28, 2000, you
may withdraw them at any time after that date until we accept shares for
payment. This right to withdraw will not apply to the subsequent offering period
discussed in Section 1. See Section 4.
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the depositary while you
still have the right to withdraw the shares. See Section 4.
WHAT DOES THE DETROIT DIESEL BOARD OF DIRECTORS RECOMMEND REGARDING THE OFFER?
We are making the offer pursuant to the merger agreement, which the Detroit
Diesel board of directors has approved by a unanimous vote of those directors
present at the meeting. Based upon the unanimous recommendation of the special
committee of independent directors who are unaffiliated with both Penske
Corporation and DaimlerChrysler North America, the board of directors also
(1) determined that the terms of the offer and the merger are fair to and in the
best interests of the stockholders of Detroit Diesel, and (2) recommends that
Detroit Diesel's stockholders accept the offer and tender their shares pursuant
to the offer and adopt the merger agreement. See the "Introduction."
HAVE ANY DETROIT DIESEL STOCKHOLDERS AGREED TO TENDER THEIR SHARES?
Yes. DDC Holdings, Inc., a wholly owned indirect subsidiary of Penske
Corporation, Detroit Diesel's major stockholder owning approximately 48.6% of
the Company's outstanding shares, has agreed to tender its shares in the offer.
3
IF A MAJORITY OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL DETROIT
DIESEL CONTINUE AS A PUBLIC COMPANY?
No. Following the purchase of shares in the offer we expect to consummate
the merger. If the merger takes place, Detroit Diesel will no longer be publicly
owned. Even if for some reason the merger does not take place, if we purchase
all of the tendered shares, there may be so few remaining stockholders and
publicly held shares that the Detroit Diesel common stock will no longer be
eligible to be traded through the New York Stock Exchange; there may not be a
public trading market for the Detroit Diesel common stock; and Detroit Diesel
may cease making filings with the Securities and Exchange Commission or
otherwise cease being required to comply with the SEC rules relating to publicly
held companies. See Section 13.
WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL OF THE DETROIT DIESEL
CORPORATION SHARES ARE NOT TENDERED IN THE OFFER?
Yes. If we accept for payment and pay for at least a majority of the shares
of Detroit Diesel on a fully diluted basis, the purchaser, Diesel Project
Development, Inc., will be merged with and into Detroit Diesel. If that merger
takes place, DaimlerChrysler North America will own all of the shares of Detroit
Diesel, and all remaining stockholders of Detroit Diesel (other than us and
stockholders properly exercising dissenters' rights) will receive $23.00 per
share in cash (or any higher price per share that is paid in the offer). See the
"Introduction."
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the merger described above takes place, stockholders not tendering in the
offer will receive the same amount of cash per share that they would have
received had they tendered their shares in the offer, subject to any dissenters'
rights properly exercised under Delaware law. Therefore, if the merger takes
place and you do not exercise dissenters' rights, the only difference to you
between tendering your shares and not tendering your shares is that you will be
paid earlier if you tender your shares. If the merger does not take place,
however, the number of stockholders and the number of shares of Detroit Diesel
that are still in the hands of the public may be so small that there no longer
will be an active public trading market (or, possibly, there may not be any
public trading market) for the Detroit Diesel common stock. Also, as described
above, Detroit Diesel may cease making filings with the SEC or otherwise may not
be required to comply with the SEC rules relating to publicly held companies.
See the "Introduction" and Sections 12 and 13.
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On July 19, 2000, the last trading day before we announced the acquisition,
the last sale price of Detroit Diesel common stock reported on the New York
Stock Exchange was $21 3/8 per share. On July 28, 2000, the last trading day
before we commenced the tender offer, the last sale price of Detroit Diesel
common stock reported on the New York Stock Exchange was $22 13/16. We encourage
you to obtain a recent quotation for shares of Detroit Diesel common stock in
deciding whether to tender your shares. See Section 6.
4
GENERALLY, WHAT ARE THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
TENDERING SHARES?
The receipt of cash for shares pursuant to the tender offer or the merger
will be a taxable transaction for United States federal income tax purposes and
possibly for state, local and foreign income tax purposes as well. In general, a
stockholder who sells shares pursuant to the tender offer or receives cash in
exchange for shares pursuant to the merger will recognize gain or loss for
United States federal income tax purposes equal to the difference, if any,
between the amount of cash received and the stockholder's adjusted tax basis in
the shares sold pursuant to the tender offer or exchanged for cash pursuant to
the merger. If the shares exchanged constitute capital assets in the hands of
the stockholder, such gain or loss will be capital gain or loss. In general,
capital gain recognized by an individual will be subject to a maximum United
States federal income tax rate of 20% if the shares were held for more than one
year, and if held for one year or less they will be subject to tax at ordinary
income tax rates. See Section 5.
TO WHOM MAY I SPEAK IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You may call MacKenzie Partners, Inc. at (800) 322-2885 (toll free) or J.P.
Morgan Securities Inc. at (877) 576-7940 (toll free). MacKenzie Partners, Inc.
is acting as the information agent and J.P. Morgan is acting as the dealer
manager for our tender offer. See the back cover of this Offer to Purchase.
5
To the Holders of Shares of Common Stock
of Detroit Diesel Corporation:
INTRODUCTION
Diesel Project Development, Inc. (the "Purchaser"), a Delaware corporation
and a wholly owned subsidiary of DaimlerChrysler North America Holding
Corporation, a Delaware corporation ("DCNA"), hereby offers to purchase all of
the issued and outstanding shares of common stock, par value $0.01 per share
(the "Company Common Stock" or the "Shares"), of Detroit Diesel Corporation (the
"Company"), at a price of $23.00 per Share, net to the seller in cash (the
"Offer Price"), upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, together with
any amendments or supplements hereto or thereto, collectively constitute the
"Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of July 20, 2000 (the "Merger Agreement") among DCNA, the Purchaser, and the
Company. The Merger Agreement provides that following the Offer the Purchaser
will be merged with and into the Company (the "Merger"), with the Company
continuing as the surviving corporation (the "Surviving Corporation"). The
Company will be a wholly owned subsidiary of DCNA. Pursuant to the Merger, at
the effective time of the Merger (the "Effective Time") each Share outstanding
immediately prior to the Effective Time (other than Shares owned by DCNA or the
Company or any of their respective subsidiaries, all of which will be cancelled,
and other than Shares that are held by stockholders, if any, who properly
exercise their dissenters' rights under the Delaware General Corporation Law
(the "DGCL")) will be converted into the right to receive $23.00 or any greater
per Share price paid in the Offer in cash, without interest (the "Merger
Consideration"). The Merger Agreement is more fully described in Section 11.
As an inducement to DCNA and the Purchaser to enter into the Merger
Agreement, DDC Holdings, Inc. ("DDC Holdings"), a wholly owned indirect
subsidiary of Penske Corporation, Detroit Diesel's major stockholder owning
approximately 48.6% of the Company's outstanding shares, has entered into a
Stock Purchase Agreement with DCNA (the "Stock Purchase Agreement") pursuant to
which DDC Holdings has agreed, among other things, to tender all of its Shares
in the Offer. The Stock Purchase Agreement and the other agreements entered into
in connection with the Merger Agreement are more fully described in Section 11.
Tendering stockholders who are record owners of their Shares and tender
directly to the Depositary (as defined below) will not be obligated to pay
brokerage fees or commissions or, except as otherwise provided in Instruction 6
of the Letter of Transmittal, stock transfer taxes with respect to the purchase
of Shares by the Purchaser pursuant to the Offer. Stockholders who hold their
Shares through a broker or bank should consult such institution as to whether it
charges any service fees. DCNA or the Purchaser will pay all charges and
expenses of J.P. Morgan Securities Inc., as dealer manager ("J.P. Morgan" or the
"Dealer Manager"), ChaseMellon Shareholder Services, L.L.C., as depositary (the
"Depositary"), and MacKenzie Partners, Inc., as information agent (the
"Information Agent"), incurred in connection with the Offer. See Section 17.
BASED UPON THE UNANIMOUS RECOMMENDATION OF A SPECIAL COMMITTEE OF
INDEPENDENT DIRECTORS OF THE COMPANY WHO ARE UNAFFILIATED WITH BOTH PENSKE
CORPORATION AND DCNA (THE "SPECIAL COMMITTEE"), THE BOARD OF DIRECTORS OF THE
COMPANY (THE "COMPANY BOARD") BY UNANIMOUS VOTE OF THOSE PRESENT (1) DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE STOCKHOLDERS OF THE COMPANY, (2) APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
(3) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER AND ADOPT THE MERGER AGREEMENT.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER AND NOT WITHDRAWN PRIOR TO
THE EXPIRATION DATE OF THE OFFER THAT NUMBER OF SHARES WHICH, WHEN ADDED TO THE
NUMBER OF SHARES CURRENTLY OWNED BY DCNA (APPROXIMATELY 21.4% OF THE OUTSTANDING
SHARES), REPRESENTS AT LEAST A MAJORITY OF THE THEN OUTSTANDING SHARES ON A
FULLY DILUTED BASIS
6
(THE "MINIMUM CONDITION"), AND (2) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE
REGULATIONS THEREUNDER (THE "HSR ACT") HAVING EXPIRED OR BEEN TERMINATED AND THE
NOTIFICATION OF AND APPROVAL BY THE EUROPEAN COMMISSION UNDER THE EU COUNCIL
REGULATION 4064/89, AS AMENDED (THE "EU REGULATION"), HAVING BEEN RECEIVED (THE
"REGULATORY CONDITION"). DDC HOLDINGS, A WHOLLY OWNED INDIRECT SUBSIDIARY OF
PENSKE CORPORATION, THE COMPANY'S MAJOR STOCKHOLDER BENEFICIALLY OWNING
APPROXIMATELY 48.6% OF THE COMPANY'S OUTSTANDING SHARES, HAS AGREED TO TENDER
ITS SHARES IN THE OFFER. ASSUMING DDC HOLDINGS TENDERS ITS SHARES IN THE OFFER,
THE MINIMUM CONDITION WILL BE SATISFIED WITHOUT THE NEED FOR ANY OTHER
STOCKHOLDER TO TENDER SHARES IN THE OFFER. SEE SECTION 11. THE OFFER IS ALSO
SUBJECT TO THE SATISFACTION OF CERTAIN OTHER CONDITIONS. SEE SECTION 15.
For purposes of the Offer, "on a fully diluted basis" means, as of any time,
on a basis that includes the number of Shares that are actually issued and
outstanding plus the maximum number of Shares that the Company may be required
to issue pursuant to obligations under stock options, warrants and other rights
(including restricted stock grants) or securities convertible into shares of
Common Stock, whether or not currently exercisable.
The Company has represented to DCNA that, as of July 20, 2000, 23,120,291
Shares were issued and outstanding, 1,203,375 Shares were subject to outstanding
stock options, and 102,560 Shares were granted as deferred stock awards under
the Company's Stock Incentive Plans, and 1,585,900 Shares were issued and held
in the treasury of the Company. DCNA beneficially owns 4,935,361 Shares.
Accordingly, the Minimum Condition will be satisfied if 7,277,752 Shares are
tendered in the Offer. DDC Holdings, a wholly owned indirect subsidiary of
Penske Corporation, Detroit Diesel's major shareholder, beneficially owns
11,240,000 Shares and has agreed to tender all of its Shares in the Offer
pursuant to the Stock Purchase Agreement. Assuming DDC Holdings tenders the
Shares it beneficially owns in the Offer, the Minimum Condition will be
satisfied without the need for any other stockholder to tender Shares in the
Offer. See Section 11.
The Merger Agreement provides that promptly upon the purchase of and payment
for Shares pursuant to the Offer, DCNA will be entitled to designate such
additional number of directors, rounded up to the next whole number, on the
Company Board that equals the product of (1) the total number of directors on
the Company Board (giving effect to the directors designated by DCNA pursuant to
the Merger Agreement) and (2) the percentage that the number of Shares so
purchased and paid for bears to the total number of Shares then outstanding. The
Company has agreed, upon request of the Purchaser, promptly to increase the size
of the Company Board or exercise its best efforts to secure the resignations of
such number of directors, or both, as is necessary to enable DCNA's designees to
be so elected to the Company Board and, subject to Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1
promulgated thereunder, to cause DCNA's designees to be so elected; PROVIDED,
HOWEVER, that until the Effective Time there must be at least two members of the
Company Board who were directors as of the date of the Merger Agreement and were
members of the Special Committee. See Section 11.
The Merger is subject to the satisfaction or waiver of certain conditions,
including, if required, the adoption of the Merger Agreement by the affirmative
vote of the holders of a majority of the outstanding Shares. If the Minimum
Condition is satisfied, the Purchaser would have sufficient voting power to
adopt the Merger Agreement without the affirmative vote of any other stockholder
of the Company. The Company has agreed, if required, to cause a meeting of its
stockholders to be held as promptly as practicable following consummation of the
Offer for the purposes of considering and taking action upon the adoption of the
Merger Agreement. DCNA and the Purchaser have agreed to vote their Shares in
favor of the adoption of the Merger Agreement. See Section 11.
This Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
7
THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of such extension or
amendment), the Purchaser will accept for payment and pay for all Shares validly
tendered on or prior to the Expiration Date and not properly withdrawn as
permitted under Section 4. The term "Expiration Date" means 12:00 midnight, New
York City time, on Friday, August 25, 2000, unless the Purchaser, in accordance
with the Merger Agreement, extends the period during which the Offer is open, in
which event the term "Expiration Date" means the latest time and date on which
the Offer, as so extended (other than any extension with respect to the
Subsequent Offering Period described below), expires.
The Offer is conditioned upon the satisfaction of the Minimum Condition and
the other conditions set forth in Section 15. Subject to the provisions of the
Merger Agreement, the Purchaser may waive any or all of the conditions to its
obligation to purchase Shares pursuant to the Offer (other than the Minimum
Condition). If by the initial Expiration Date or any subsequent Expiration Date
any or all of the conditions to the Offer have not been satisfied or waived,
subject to the provisions of the Merger Agreement, the Purchaser may elect to
(i) terminate the Offer and return all tendered Shares to tendering
stockholders, (ii) waive all of the unsatisfied conditions (other than the
Minimum Condition) and, subject to any required extension, purchase all Shares
validly tendered by the Expiration Date and not properly withdrawn or
(iii) extend the Offer and, subject to the right of stockholders to withdraw
Shares until the new Expiration Date, retain the Shares that have been tendered
until the expiration of the Offer as extended.
Under the terms of the Merger Agreement, the Purchaser may not make any
change to the Offer without the prior written consent of the Company that
(i) decreases the price per Share payable in the Offer, (ii) reduces the maximum
number of Shares to be purchased in the Offer, (iii) changes the form of
consideration to be paid in the Offer, (iv) modifies or amends any of the
conditions to the Offer set forth in Section 15, (v) imposes conditions to the
Offer in addition to the conditions set forth in Section 15, (vi) waives the
Minimum Condition, (vii) makes any other changes in the terms and conditions of
the Offer that are in any manner adverse to the holders of Shares or
(viii) except as provided below, extends the Offer.
Subject to the terms of the Merger Agreement, the Purchaser may, without the
consent of the Company, (i) extend the Offer beyond the scheduled Expiration
Date if any of the conditions to the Purchaser's obligation to accept for
payment and to pay for the Shares are not satisfied or, to the extent permitted
by the Merger Agreement, waived or (ii) extend the Offer for any period required
by any rule, regulation or interpretation of the Securities and Exchange
Commission (the "SEC") or its staff applicable to the Offer. In addition, unless
the Company advises the Purchaser that it does not wish the Purchaser to extend
the Offer, the Purchaser will extend the Offer from time to time until the
earlier of (a) 30 days after the date on which the Regulatory Condition has been
satisfied or (b) December 31, 2000, in the event that on such date all of the
conditions to the Offer have not been satisfied or earlier waived as permitted
by the Merger Agreement. An extension described in the preceding sentence or
described in clause (i) of the first sentence of this paragraph will not exceed
the lesser of (a) ten business days or (b) such fewer number of days that the
Purchaser reasonably believes is necessary to cause the conditions of the Offer
to be satisfied.
Rule 14d-11 under the Exchange Act permits the Purchaser, subject to certain
conditions, to provide a subsequent offering period following the expiration of
the Offer on the Expiration Date (a "Subsequent Offering Period"). A Subsequent
Offering Period is an additional period of time from three business days to 20
business days in length, beginning after the Purchaser purchases Shares tendered
in the Offer, during which stockholders may tender, but not withdraw, their
Shares and receive the Offer Price.
8
The Purchaser has agreed to include a Subsequent Offering Period of not less
than three business days in the event that all of the conditions to the Offer
have been satisfied or waived, as permitted by the Merger Agreement, as of the
Expiration Date. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal
rights apply to Shares tendered during a Subsequent Offering Period and no
withdrawal rights apply during the Subsequent Offering Period with respect to
Shares tendered in the Offer and accepted for payment. During a Subsequent
Offering Period, the Purchaser will promptly purchase and pay for all Shares
tendered at the same price paid in the Offer.
Subject to the applicable rules and regulations of the SEC and the
provisions of the Merger Agreement, the Purchaser also expressly reserves the
right, in its sole discretion, at any time or from time to time, (i) to
terminate the Offer if any of the conditions set forth in Section 15 have not
been satisfied and (ii) to waive any condition to the Offer (other than the
Minimum Condition) or otherwise amend the Offer in any respect, in each case by
giving written notice of such extension, termination, waiver or amendment to the
Depositary and by making a public announcement thereof. If the Purchaser accepts
for payment any Shares pursuant to the Offer, it will accept for payment all
Shares validly tendered prior to the Expiration Date and not properly withdrawn,
and will promptly pay for all Shares so accepted for payment.
The rights reserved by the Purchaser in the preceding paragraph are in
addition to the Purchaser's rights pursuant to Section 15. Any extension, delay,
termination, waiver or amendment will be followed as promptly as practicable by
public announcement thereof, such announcement in the case of an extension to be
made no later than 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date, in accordance with the public
announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act,
which require that material changes be promptly disseminated to stockholders in
a manner reasonably designed to inform them of such changes) and without
limiting the manner in which the Purchaser may choose to make any public
announcement, the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a press
release to the Dow Jones News Service.
If the Purchaser extends the Offer or if the Purchaser is delayed in its
acceptance for payment of or payment for Shares or it is unable to pay for
Shares pursuant to the Offer for any reason, then, without prejudice to the
Purchaser's rights under the Offer, the Depositary may retain tendered Shares on
behalf of the Purchaser, and such Shares may not be withdrawn except to the
extent tendering stockholders are entitled to withdrawal rights as described
herein under Section 4. However, the ability of the Purchaser to delay the
payment for Shares that the Purchaser has accepted for payment is limited by
(i) Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the
consideration offered or return the securities deposited by or on behalf of
stockholders promptly after the termination or withdrawal of such bidder's
offer, unless such bidder elects to offer a Subsequent Offering Period and pays
for Shares tendered during the Subsequent Offering Period in accordance with
Rule 14d-11 under the Exchange Act and (ii) the terms of the Merger Agreement,
which require that the Purchaser pay for Shares that are tendered pursuant to
the Offer as soon as permitted after the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will disseminate additional tender offer materials and
extend the Offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1
under the Exchange Act. The minimum period during which an offer must remain
open following material changes in the terms of the Offer, other than a change
in price, percentage of securities sought or inclusion of or changes to a
dealer's soliciting fee, will depend upon the facts and circumstances, including
the materiality, of the changes. In the SEC's view, an offer should remain open
for a minimum of five (5) business days from the date the material change is
first published, sent or given to stockholders and, if material changes are made
with respect to information that approaches the significance of price and share
levels, a minimum of ten (10) business days may be required to allow for
adequate dissemination to
9
stockholders. Accordingly, if, prior to the Expiration Date, the Purchaser
decreases the number of Shares being sought or increases or decreases the
consideration offered pursuant to the Offer, and if the Offer is scheduled to
expire at any time earlier than the tenth business day from the date that notice
of such increase or decrease is first published, sent or given to stockholders,
the Offer will be extended at least until the expiration of such tenth business
day. For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or a federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares whose names
appear on the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment) and the satisfaction or earlier waiver of all the conditions to the
Offer set forth in Section 15, the Purchaser will accept for payment and will
pay for all Shares validly tendered on or prior to the Expiration Date and not
properly withdrawn pursuant to the Offer as soon as it is permitted to do so
under applicable law. Subject to the Merger Agreement and compliance with
Rule 14e-1(c) under the Exchange Act, the Purchaser expressly reserves the right
to delay payment for Shares in order to comply in whole or in part with any
applicable law. See Section 16.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (1) the certificates
evidencing such Shares (the "Share Certificates") or confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company (the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3, (2) the Letter of Transmittal
(or a facsimile thereof), properly completed and duly executed, with any
required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined below) in lieu of the Letter of Transmittal and
(3) any other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the Offer Price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to tendering stockholders whose Shares have been
accepted for payment. If, for any reason whatsoever, acceptance for payment of
any Shares tendered pursuant to the Offer is delayed, or the Purchaser is unable
to accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights under Section 1 hereof, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares, and such
Shares may not be withdrawn, except to the extent that the tendering
stockholders are entitled to withdrawal rights as described in Section 4 and as
otherwise required by Rule 14e-1(c) under the Exchange Act.
UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR SHARES BE PAID,
REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
10
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in Section 3, such Shares will be credited to an account
maintained at the Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates, the right to purchase
all or any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations under
the Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES.
VALID TENDERS. In order for a stockholder validly to tender Shares pursuant
to the Offer, either (1) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message in lieu
of the Letter of Transmittal) and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase and either the Share Certificates
evidencing tendered Shares must be received by the Depositary at such address or
such Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case on or prior to the Expiration Date, or (2) the
tendering stockholder must comply with the guaranteed delivery procedures
described below.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, that states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that are the subject of such Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at the Book-Entry Transfer Facility,
either the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedure described below.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal (1) if the Letter of Transmittal is signed by the registered holder
of the Shares tendered therewith, unless such holder has completed either the
box entitled "Special Delivery Instructions" or the box entitled "Special
11
Payment Instructions" on the Letter of Transmittal or (2) if the Shares are
tendered for the account of a firm that is participating in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (each an
"Eligible Institution" and collectively "Eligible Institutions"). In all other
cases, all signatures on a Letter of Transmittal must be guaranteed by an
Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a Share
Certificate is registered in the name of a person or persons other than the
signer of the Letter of Transmittal, or if payment is to be made or delivered
to, or a Share Certificate not accepted for payment or not tendered is to be
issued, in the name of, a person other than the registered holder(s), then the
Share Certificate must be endorsed or accompanied by appropriate duly executed
stock powers, in either case signed exactly as the name(s) of the registered
holder(s) appear on the Share Certificate, with the signature(s) on such Share
Certificate or stock powers guaranteed by an Eligible Institution as provided in
the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and the Share Certificates evidencing such stockholder's Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered; PROVIDED that all of the following conditions are satisfied:
(1) such tender is made by or through an Eligible Institution;
(2) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Purchaser, is received
prior to the Expiration Date by the Depositary as provided below; and
(3) the Share Certificates (or a Book-Entry Confirmation) evidencing all
tendered Shares, in proper form for transfer, in each case together with
the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal are received by the
Depositary within three New York Stock Exchange trading days after the
date of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the form of Notice of
Guaranteed Delivery made available by the Purchaser.
In all cases, Shares will not be deemed validly tendered unless a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) is
received by the Depositary.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, RECEIPT OF A BOOK-ENTRY
CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. The Purchaser also reserves the absolute right to waive
any defect or irregularity in the tender of any Shares of any particular
stockholder, whether or not similar defects or irregularities are waived in the
case of other stockholders. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived to
the satisfaction of the Purchaser. None of DCNA, the Purchaser, the Dealer
Manager, the Depositary, the
12
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any liability
for failure to give any such notification. The Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of the Purchaser
as such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser (including, with respect to any and all
other Shares or other securities issued or issuable in respect of such Shares on
or after the date of this Offer to Purchase). All such proxies shall be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts such
Shares for payment. Upon such acceptance for payment, all prior proxies given by
such stockholder with respect to such Shares (and such other Shares and
securities) will be revoked without further action, and no subsequent proxies
may be given nor any subsequent written consent executed by such stockholder
(and, if given or executed, will not be deemed to be effective) with respect
thereto. The designees of the Purchaser will, with respect to the Shares and
other securities for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. The Purchaser reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the Purchaser's payment for such Shares, the Purchaser must be able to
exercise full voting rights with respect to such Shares.
The tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the Offer, as well as
the tendering stockholder's representation and warranty that such stockholder
has the full power and authority to tender and assign the Shares tendered, as
specified in the Letter of Transmittal. The Purchaser's acceptance for payment
of Shares tendered pursuant to the Offer will constitute a binding agreement
between the tendering stockholder and the Purchaser upon the terms and subject
to the conditions of the Offer.
BACKUP WITHHOLDING. Under the "backup withholding" provisions of United
States federal income tax law, the Depositary may be required to withhold 31% of
the amount of any payments pursuant to the Offer. In order to prevent backup
federal income tax withholding with respect to payments to certain stockholders
of the Offer Price for Shares purchased pursuant to the Offer, each such
stockholder must provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") and certify that such stockholder is not subject
to backup withholding by completing the Substitute Form W-9 in the Letter of
Transmittal. Certain stockholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
If a stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service may impose a
penalty on the stockholder and the payment of cash to the stockholder pursuant
to the Offer may be subject to backup withholding. All stockholders surrendering
Shares pursuant to the Offer should complete and sign the Substitute Form W-9
included in the Letter of Transmittal to provide the information necessary to
avoid backup withholding. Non-corporate foreign stockholders should complete and
sign a Form W-8, Certificate of Foreign Status (a copy of which may be obtained
from the Depositary) in order to avoid backup withholding. See Instruction 8 of
the Letter of Transmittal.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
such Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after
Thursday, September 28, 2000.
13
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to Purchase.
Any such notice of withdrawal must specify the name, address and taxpayer
identification number of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of such
Shares, if different from that of the person who tendered such Shares. If Share
Certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such Share
Certificates, the serial numbers shown on such Share Certificates must be
submitted to the Depositary and the signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution, unless such Shares have been
tendered for the account of an Eligible Institution. If Shares have been
tendered pursuant to the procedure for book-entry transfer as set forth in
Section 3 hereof, any notice of withdrawal must also specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as described herein.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of DCNA, the
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date or during the Subsequent Offering Period by following one of the
procedures described in Section 3 hereof.
No withdrawal rights will apply to Shares tendered into a Subsequent
Offering Period and no withdrawal rights apply during the Subsequent Offering
Period with respect to Shares tendered in the Offer and accepted for payment.
See Section 1.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to stockholders of the Company whose
Shares are tendered and accepted for payment pursuant to the Offer or whose
Shares are converted into the right to receive cash in the Merger. The
discussion is for general information only and does not purport to consider all
aspects of United States federal income taxation that might be relevant to
stockholders of the Company. The discussion is based on current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing, proposed
and temporary regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change, possibly with a
retroactive effect. The discussion applies only to stockholders of the Company
who hold their Shares as capital assets within the meaning of Section 1221 of
the Code and who do not own directly or through attribution 50% or more of the
stock of DaimlerChrysler AG. This discussion does not apply to Shares received
pursuant to the exercise of employee stock options or otherwise as compensation,
or to certain types of stockholders (such as insurance companies, tax-exempt
organizations, financial institutions and broker-dealers) who may be subject to
special rules. This discussion does not address the United States federal income
tax consequences to any stockholder of the Company who, for United States
federal income tax purposes, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
14
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD CONSULT
HIS OR HER OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED
BELOW AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER ON A BENEFICIAL
HOLDER OF SHARES, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE
MINIMUM TAX, AND ANY STATE, LOCAL AND FOREIGN TAX LAWS AND OF CHANGES IN SUCH
LAWS.
The exchange of Shares for cash pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes and possibly
for state, local and foreign income tax purposes as well. In general, a
stockholder who sells Shares pursuant to the Offer or receives cash in exchange
for Shares pursuant to the Merger will recognize gain or loss for United States
federal income tax purposes equal to the difference, if any, between the amount
of cash received and the stockholder's adjusted tax basis in the Shares sold
pursuant to the Offer or exchanged for cash pursuant to the Merger. Gain or loss
will be determined separately for each block of Shares (I.E., Shares acquired at
the same cost in a single transaction) tendered pursuant to the Offer or
exchanged for cash pursuant to the Merger. Such gain or loss will be long-term
capital gain or loss provided that a stockholder's holding period for such
Shares is more than one year at the time of consummation of the Offer or the
Merger, as the case may be. Capital gain recognized by an individual upon a
disposition of a Share that has been held for more than one year generally will
be subject to a maximum United States federal income tax rate of 20% or, in the
case of a Share that has been held for one year or less, will be subject to tax
at ordinary income tax rates. Certain limitations apply to the use of a
stockholder's capital losses.
A stockholder whose Shares are purchased in the Offer may be subject to 31%
backup withholding unless certain information is provided to the Depositary or
an exemption applies. See Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares trade on the New York Stock Exchange (the "NYSE") under the
symbol "DDC." The following table sets forth, for the periods indicated, the
high and low sale prices per Share as well as the dividends paid to stockholders
for the periods indicated. Share prices are as reported on the NYSE based on
published financial sources.
COMMON STOCK
-----------------------------------------
HIGH LOW DIVIDENDS
------------- ------------- ---------
Fiscal Year 1998:
First Quarter............................................. $ 23 3/4 $ 17 15/16 --
Second Quarter............................................ 25 3/4 20 3/16 --
Third Quarter............................................. 22 3/16 16 1/4 --
Fourth Quarter............................................ 23 15 1/2 --
Fiscal Year 1999:
First Quarter............................................. $ 23 3/8 $ 19 7/8 $0.125
Second Quarter............................................ 25 1/2 20 5/8 0.125
Third Quarter............................................. 24 7/8 18 1/16 0.125
Fourth Quarter............................................ 20 9/16 17 7/8 0.125
Fiscal Year 2000:
First Quarter............................................. $ 19 7/8 $ 14 7/8 $0.125
Second Quarter............................................ 19 3/8 12 7/8 0.125
Third Quarter (through July 28, 2000)..................... 22 13/16 15 1/8 0.125
On July 19, 2000, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the last sale price of
the Shares on the NYSE was $21 3/8 per Share. On July 28, 2000, the last full
day of trading before the commencement of the Offer, the last sale price of the
Shares on the NYSE was $22 13/16 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A
CURRENT MARKET QUOTATION FOR THE SHARES.
15
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
GENERAL. The Company is a Delaware corporation with its principal offices
located at 13400 Outer Drive West, Detroit, Michigan 48239-4001. The telephone
number of the Company is (313) 592-5000. According to the Company's Form 10-K
for the fiscal year ended December 31, 1999, the company designs, manufactures,
markets, services and provides aftermarket and remanufactured products for a
full range of high performance diesel and alternative fuel engines. The company
primarily sells engines directly to original equipment manufacturers in the
truck, automotive and off-road markets. The Company's wholly owned subsidiary,
Detroit Diesel Remanufacturing Corporation, remanufactures two- and four-cycle
engines and component parts. The Company's wholly owned subsidiary, VM Motori
S.p.A. ("VM Motori"), located in Italy, is a major independent supplier of
diesel engines to the international automotive industry. In Brazil, the
Company's wholly owned subsidiary, Detroit Diesel Motores do Brasil Ltda. ("DDC
Brazil"), assembles the 2.5-liter, 4-cylinder automotive diesel engine
manufactured by VM Motori. VM Holdings, Inc. ("VM Holdings"), a wholly owned
subsidiary of the Company, is the legal and beneficial owner of 100% of the
capital stock of VM Motori and DDC Brazil.
CERTAIN PROJECTED FINANCIAL DATA OF THE COMPANY. Prior to entering into the
Merger Agreement, representatives of DaimlerChrysler AG conducted a due
diligence review of the Company and in connection with such review received
certain projections of the Company's future operating performance. The Company
does not in the ordinary course publicly disclose projections and these
projections were based on numerous assumptions made by the Company's management,
including, among others, unit sales, engineering costs, capital expenditures,
depreciation and amortization and cost savings as well as industry performance
and general business, economic, market and financial conditions, all of which
are difficult to predict and many of which are beyond the Company's control.
Accordingly, there can be no assurance that the assumptions made in preparing
the projections will prove to be accurate. These projections do not give effect
to the Offer or the potential combined operations of the DaimlerChrysler AG
group and the Company or any changes that may be made to the Company's
operations or strategy after the consummation of the Offer. The information set
forth below is presented for the limited purpose of giving the Detroit Diesel
stockholders access to the material financial projections prepared by the
Company's management that were made available to DaimlerChrysler AG in
connection with its due diligence investigation.
DETROIT DIESEL CORPORATION
($ in millions, except per Share data)
PROJECTED FYE DECEMBER 31,
----------------------------------------------------
2000 2001 2002 2003 2004
-------- -------- -------- -------- --------
Net Sales.................... $2,110.7 $2,178.8 $2,275.3 $2,348.3 $2,455.4
Gross Profit................. 508.2 534.6 565.3 587.5 621.7
EBIT......................... 63.2 74.2 98.5 119.8 137.6
Net Income................... 35.3 39.8 55.1 70.3 83.3
Earnings Per Share........... $ 1.52 $ 1.72 $ 2.38 $ 3.03 $ 3.59
It is the understanding of DaimlerChrysler AG, DCNA and the Purchaser that
the projections were not prepared with a view to public disclosure or compliance
with published guidelines of the SEC or the guidelines established by the
American Institute of Certified Public Accountants regarding projections or
forecasts and are included herein only because such information was provided to
DaimlerChrysler AG in connection with its evaluation of a business transaction
with the Company. The projections do not purport to present operations in
accordance with generally accepted accounting principles, and the Company's
independent auditors have not examined or compiled the projections presented
herein and accordingly assume no responsibility for them. These projections are
subject to certain risks and uncertainties that could cause actual results to
differ materially from the projections. The inclusion of the projections herein
16
should not be regarded as an indication that any of DaimlerChrysler AG, DCNA,
the Purchaser, the Company or their respective affiliates or representatives
considered or consider the projections to be a reliable prediction of future
events, and the projections should not be relied upon as such. None of
DaimlerChrysler AG, DCNA, the Purchaser, the Company or any of their respective
affiliates or representatives has made or makes any representation to any person
regarding the actual performance of the Company compared to the information
contained in the projections, and none of them intends to update or otherwise
revise the projections to reflect circumstances existing after the date when
made or to reflect the occurrence of future events even in the event that any or
all of the assumptions underlying the projections are shown to be in error.
MISCELLANEOUS. For a description of certain business relationships between
the Company and DaimlerChrysler AG and its affiliates, see Section 8.
FINANCIAL INFORMATION. Certain financial information relating to the
Company is hereby incorporated by reference to the audited financial statements
for the Company's 1998 and 1999 fiscal years set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1999, beginning on
page 31 of such report. The report may be inspected at, and copies may be
obtained from, the same places and in the same manner set forth under
"--Available Information" below.
AVAILABLE INFORMATION. The Shares are registered under the Exchange Act.
Accordingly, the Company is subject to the informational reporting requirements
of the Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the SEC relating to its
business, financial condition and other matters. Information as of particular
dates concerning the Company's directors and officers, their remuneration, stock
options granted to them, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in proxy statements distributed to the Company's
stockholders and filed with the SEC. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the SEC's regional offices located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the
public reference facilities may be obtained from the SEC by telephoning
1-800-SEC-0330. The Company's filings are also available to the public on the
SEC's Internet site (http://www.sec.gov). Copies of such materials may also be
obtained by mail from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates.
8. CERTAIN INFORMATION CONCERNING DCNA AND THE PURCHASER.
GENERAL. DCNA is a Delaware corporation with its principal offices located
at 1000 Chrysler Drive, Auburn Hills, Michigan 48326-2766. The telephone number
of DCNA is (248) 512-6130. DCNA was established to achieve financial benefits
through the consolidation of certain DaimlerChrysler AG activities in North
America. DCNA acts as a financial clearing entity for many of DaimlerChrysler
AG's subsidiaries by providing appropriate capital funding through outside
finance resources as well as through self-generated resources within the
DaimlerChrysler AG group of companies. DCNA is a wholly owned subsidiary of
DaimlerChrysler AG.
The Purchaser is a Delaware corporation with its principal offices located
at 1000 Chrysler Drive, Auburn Hills, Michigan 48326. The telephone number of
the Purchaser is (248) 512-6130. The Purchaser is a wholly owned subsidiary of
DCNA. The Purchaser has not carried on any activities other than in connection
with the Merger Agreement.
DaimlerChrysler AG is a stock corporation organized under the laws of the
Federal Republic of Germany, with its principal offices located at Epplestrasse
225, 70567 Stuttgart, Germany. The telephone number of DaimlerChrysler AG is
011-49-711-17-0. DaimlerChrysler AG is the ultimate parent company
17
of the DaimlerChrysler Group. The Group is engaged in the development,
manufacture, distribution and sale of a wide range of automotive and
transportation products, including passenger cars, commercial vehicles and rail
systems. It also provides a variety of financial and other services relating to
the automotive value chain. The DaimlerChrysler Group is active primarily in
Europe, the United States, Canada and Mexico. DaimlerChrysler AG owns 100% of
DaimlerChrysler North America Holding Corporation and DaimlerChrysler Services
(debis) AG, and 93.8% of DaimlerChrysler Luft- und Raumfahrt Holding
Aktiengesellschaft.
In both 1998 and 1999, the Company and its affiliates had business
relationships with DaimlerChrysler AG and its affiliates, including DCNA, MTU
Motoren- und Turbinen-Union Friedrichshafen GmbH and Freightliner Corporation.
Under the Company's financing agreement with DCNA, DDC Holdings has agreed
to vote for the election to the Company Board two nominees designated by DCNA.
Pursuant to the Agreement, one such nominee is to be a member of the
Compensation Committee. DCNA has agreed to vote its Shares in favor of DDC
Holdings' nominees. Under the financing agreement, DCNA's consent is required
with respect to certain significant business matters. In addition, DCNA and DDC
Holdings have reciprocal rights of first refusal with respect to each other's
shares of Company Common Stock.
The Company paid DaimlerChrylser AG and its affiliates $1.3 million and
$5.8 million in 1998 and 1999, respectively, for service parts pursuant to a
North American distribution agreement for parts and service for certain
Mercedes-Benz industrial diesel engines and other miscellaneous items. In 1998
and 1999, the Company sold approximately $140 million and $163.8 million,
respectively, of engines and related parts to DaimlerChrysler AG and
approximately $581 million and $790.8 million, respectively, of engines and
related parts to Freightliner Corporation.
In 1998 and 1999, the Company paid MTU $61 million and $39.6 million,
respectively, for engine blocks for the Series 149 engine, parts for the
Series 2000 and 4000 engines, engines and service parts pursuant to an agreement
for MTU products and services in North America, and other miscellaneous items,
and received from MTU approximately $5.0 million and $2.4 million, respectively,
as reimbursement for warranty services on MTU engines. The Company will pay MTU
approximately $9.7 million over the next several years related to the allocation
of costs incurred under license agreements for the Series 2000 and 4000 engines.
The name, citizenship, business address, business phone number, principal
occupation or employment and five-year employment history for each of the
directors and executive officers of DaimlerChrysler AG, DCNA and the Purchaser
and certain other information are set forth in Schedule I hereto.
Except as described in this Offer to Purchase and in Schedule I hereto,
(1) none of DCNA, the Purchaser nor, to the best knowledge of DCNA and the
Purchaser, any of the persons listed in Schedule I to this Offer to Purchase or
any associate or majority-owned subsidiary of DCNA or the Purchaser or any of
the persons so listed beneficially owns or has any right to acquire, directly or
indirectly, any Shares, and (2) none of DCNA, the Purchaser nor, to the best
knowledge of DCNA and the Purchaser, any of the persons or entities referred to
above nor any director, executive officer or subsidiary of any of the foregoing
has effected any transaction in the Shares during the past 60 days.
Except as provided in the Merger Agreement and the Stock Purchase Agreement
or as otherwise described in this Offer to Purchase, none of DCNA, the Purchaser
nor, to the best knowledge of DCNA and the Purchaser, any of the persons listed
in Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting of
such securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of loans, guarantees against loss, guarantees of
profits, division of profits or loss or the giving or withholding of proxies.
18
Except as set forth in this Offer to Purchase, none of DCNA, the Purchaser
nor, to the best knowledge of DCNA and the Purchaser, any of the persons listed
on Schedule I hereto, has had any business relationship or transaction with the
Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the SEC applicable to
the Offer. Except as set forth in this Offer to Purchase, there have been no
contracts, negotiations or transactions between DCNA or any of its subsidiaries
or, to the best knowledge of DCNA, any of the persons listed in Schedule I to
this Offer to Purchase, on the one hand, and the Company or its affiliates, on
the other hand, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets. None of the persons listed in
Schedule I has, during the past five years, been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors). None of the
persons listed in Schedule I has, during the past five years, been a party to
any judicial or administrative proceeding (except for matters that were
dismissed without sanction or settlement) that resulted in a judgment, decree or
final order enjoining the person from future violations of, or prohibiting
activities subject to, federal or state securities laws, or a finding of any
violation of federal or state securities laws.
9. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Purchaser to purchase Shares
pursuant to the Offer and the Merger is estimated to be approximately
$433,000,000 plus any related transaction fees and expenses. The Purchaser will
obtain such funds from DCNA. DCNA will obtain its funds from its parent
corporation, DaimlerChrysler AG, which will use internally generated funds for
this purpose. The Purchaser has no alternative financing plans or arrangements.
10. BACKGROUND OF THE OFFER; PAST CONTACTS OR NEGOTIATIONS WITH THE COMPANY.
In 1993 DCNA, through a wholly owned subsidiary, entered into a financing
agreement with the Company pursuant to which it purchased $20 million principal
amount of a convertible debenture. Shortly thereafter in 1993 the Company
determined to make an initial public offering ("IPO"), which it completed in
October 1993. In accordance with its rights under the financing agreement DCNA
acquired approximately 11.3% of the Shares outstanding immediately following the
IPO through conversion of its debenture and the exercise of an option to acquire
Shares in the IPO. In 1994 DCNA exercised a further right which it had in the
financing agreement to acquire additional shares of Common Stock to bring its
percentage ownership to the 20% level. In addition to DCNA's investment in the
Company, DaimlerChrysler AG and its affiliates have pursued various co-operative
ventures and developmental efforts in a number of different areas. See
Section 8.
At various times in 1997, 1998 and 1999 representatives of DaimlerChrysler
AG and representatives of the Company and Penske Corporation have broached the
subject of a possible business combination between the parties, but these
contacts never made any significant progress and each time encountered
significant obstacles virtually from the outset. The most difficult obstacles
included price, form of consideration and whether to include the Company's
European automotive engine business in the proposed transaction. In addition,
conflicting priorities of one or both parties also intervened from time to time
to divert attention from a particular discussion initiative.
In late May 2000 a representative of DaimlerChrysler AG had a discussion
with a representative of the Company in which the possibility of a business
combination transaction was again seriously raised. Thereafter, following up on
that conversation, in early June 2000, representatives of DaimlerChrysler AG,
the Company and Penske Corporation met in New York City to discuss specific
topics relating to the feasibility and desirability of such a business
combination transaction. The discussions included price, form of consideration,
tax considerations, accounting considerations, how the Company's activities
conducted through VM Holdings would be treated and the timing of any possible
transaction. The meeting concluded with a number of open issues in these general
areas and with an understanding that the three most
19
complex issues were price, form of consideration and the treatment of VM
Holdings. With respect to the latter two issues the DaimlerChrysler AG
representatives expressed the position that cash was a preferable form of
consideration but that DaimlerChrysler AG would consider DaimlerChrysler AG
common shares provided that it did not create unrelated difficulties for
DaimlerChrysler AG and that DaimlerChrysler AG required that VM Holdings must be
restructured as a joint venture that would include DaimlerChrysler AG and Penske
Corporation participation, with third parties also possibly participating as a
condition of proceeding with any transaction. Throughout June there were
follow-up telephone conversations between various parties in which the
issues--which consisted principally of price, form of consideration and
treatment of VM Holdings--and possible compromises of the issues were discussed.
Late in June 2000 representatives of DaimlerChrysler AG, the Company and
Penske Corporation met again in New York with the objective of concluding their
feasibility discussions and establishing a timetable for a transaction if that
proved viable. The parties concluded that there was sufficient common ground on
the issues that a tentative timetable could be established for proceeding with a
possible transaction. Specifically, they agreed to target mid-July as a decision
point, to work on a put agreement for shares of VM Holdings that would serve as
a back-stop for negotiating a joint venture of the Company's European/ Brazilian
automotive activities (VM Holdings) after the business combination closing and
finally that cash would be an agreeable form of consideration for the
transaction if an acceptable price could be agreed upon.
In preparation for a regularly scheduled Company Board meeting and a
regularly scheduled DaimlerChrysler AG Supervisory Board (AUFSICHTSRAT) meeting,
both in mid-July, the parties agreed that representatives of DaimlerChrysler AG
would be afforded the opportunity to conduct an in-depth due diligence in
Detroit during the week of July 10-14, 2000. In the course of the due diligence
process DaimlerChrysler AG recognized a need for a management services agreement
obligating Penske Corporation (or one of its affiliates) to continue providing
the Company with various tax, risk management, sales, marketing, customer
relations and strategic consulting services during a transitional period
following the closing of the transaction. During the week of July 3-7, 2000, the
parties exchanged drafts of forms of contractual documentation for the proposed
transaction and resolved most of the issues relating to that documentation. In
addition, representatives of DaimlerChrysler AG and representatives of the
Company and Penske Corporation reached agreement on the form of the Stock Put
Option Agreement, which eliminated one of the more significant obstacles to a
transaction.
On July 17 and 18, representatives of DaimlerChrysler AG and the Company
finalized their negotiations and concluded the terms of agreements which could
be recommended to their respective Boards (the Supervisory Board (AUFSICHTSRAT)
for DaimlerChrysler AG and the Board of Directors for the Company).
On July 19, 2000, the Company Board and DaimlerChrysler AG's Supervisory
Board considered and approved the transactions contemplated by the Merger
Agreement, the Stock Purchase Agreement, the Stock Put Option Agreement and the
Management Services Agreement, and shortly thereafter the appropriate parties
executed and delivered the agreements. The agreements and the transactions they
contemplate were announced on the morning of July 20.
11. THE MERGER AGREEMENT; THE STOCK PURCHASE AGREEMENT; THE STOCK PUT OPTION
AGREEMENT AND THE MANAGEMENT SERVICES AGREEMENT.
The following is a summary of the material provisions of the Merger
Agreement, the Stock Purchase Agreement, the Stock Put Option Agreement and the
Management Services Agreement, a copy of each of which is filed as an exhibit to
the Tender Offer Statement on Schedule TO filed by DCNA and the Purchaser
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act with the SEC in connection with the Offer (the "Schedule TO"). The summary
is qualified in its entirety by reference to such Agreements, which are deemed
to be incorporated by reference herein. Capitalized terms used herein and not
otherwise defined have the meanings ascribed to them in the Agreements.
20
THE MERGER AGREEMENT
THE OFFER. The Merger Agreement provides for the making of the Offer. The
obligation of the Purchaser to accept for payment and pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and the satisfaction or waiver of the Regulatory Condition and certain other
conditions that are described in Section 15.
DIRECTORS. The Merger Agreement provides that promptly upon the purchase of
and payment for Shares pursuant to the Offer, DCNA shall be entitled to
designate such additional number of directors, rounded up to the next whole
number, on the Company Board that equals the product of (1) the total number of
directors on the Company Board (giving effect to the directors designated by
DCNA pursuant to the Merger Agreement) and (2) the percentage that the number of
Shares so purchased and paid for bears to the total number of Shares then
outstanding. In furtherance thereof, the Company will, upon request of the
Purchaser, promptly increase the size of the Company Board or exercise its best
efforts to secure the resignations of such number of directors, or both, as is
necessary to enable DCNA's designees to be so elected to the Company Board and
will cause DCNA's designees to be so elected; PROVIDED, HOWEVER, that until the
Effective Time there shall be at least two members of the Company Board who were
directors as of the date of the Merger Agreement and members of the Special
Committee.
Following the election of DCNA's designees to the Company Board, (a) any
amendment or termination of the Merger Agreement by the Company, (b) any
extension or waiver by the Company of the time for the performance of any of the
obligations or other acts of DCNA or the Purchaser under the Merger Agreement,
or (c) any waiver of any of the Company's rights under the Merger Agreement
will, prior to the Effective Time, require the concurrence of a majority of the
remaining directors who were members of the Special Committee (the "Independent
Director Approval").
THE MERGER. The Merger Agreement provides that upon the terms and subject
to the conditions set forth therein, at the Effective Time the Purchaser will be
merged with and into the Company with the Company being the Surviving
Corporation in the Merger. Following the Merger, the separate corporate
existence of the Purchaser will cease, and the Company will continue as the
Surviving Corporation and become a wholly owned subsidiary of DCNA.
If required by the DGCL, the Company will call and hold a meeting of its
stockholders (the "Company Stockholders' Meeting") promptly following
consummation of the Offer for the purpose of voting upon the approval of the
Merger Agreement. At any such meeting all Shares then owned by DCNA or the
Purchaser or any subsidiary of DCNA will be voted in favor of adopting the
Merger Agreement.
Pursuant to the Merger Agreement, each Share outstanding at the Effective
Time (other than Shares owned by DCNA or the Company or any of their respective
subsidiaries, all of which will be cancelled, and other than Shares that are
held by stockholders, if any, who properly exercise their dissenters' rights
under the DGCL) will be converted into the right to receive the Merger
Consideration. Stockholders who perfect their dissenters' rights under the DGCL
will be entitled to the amounts determined pursuant to such proceedings. See
Section 12.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to DCNA and the
Purchaser, including representations relating to corporate existence and power;
capitalization; corporate authorizations; subsidiaries; SEC filings; financial
statements; absence of certain changes (including any material adverse effect on
the business, results of operations, assets, or financial condition of the
Company); absence of undisclosed liabilities; government authorizations;
litigation; compliance with laws; employee matters; labor matters; environmental
matters; taxes; intellectual property; accuracy of certain disclosures; the
opinion of the Company's financial advisor; and the required stockholder vote.
Certain representations and warranties in the Merger Agreement made by the
Company and DCNA are qualified as to "materiality" or "Material Adverse Effect."
For purposes of the Merger Agreement and
21
this Offer to Purchase, the term "Material Adverse Effect" means any state of
facts, event, change or effect that has had, or would reasonably be expected to
have, a material adverse effect on the business, results of operations, assets
or financial condition of the Company and its subsidiaries, taken as a whole, or
DCNA and its subsidiaries, taken as a whole, as the case may be, but does not
include the financial projections provided to DCNA and the Purchaser prior to
execution of the Merger Agreement.
Pursuant to the Merger Agreement, DCNA and the Purchaser have made customary
representations and warranties to the Company, including representations
relating to their corporate existence and power; good standing; corporate
authority; corporate authorizations; the accuracy of certain disclosures; and
their ability to finance the Offer and the Merger.
COVENANTS. The Merger Agreement contains various covenants of the parties
thereto. A description of certain of these covenants follows:
COMPANY CONDUCT OF BUSINESS COVENANTS. The Merger Agreement provides that,
prior to the Effective Time and except as may be agreed in writing by DCNA,
which will not be unreasonably withheld or delayed, or as expressly permitted by
the Merger Agreement, the Company:
(1) will, and will cause each of its subsidiaries to, conduct its operations
in all material respects according to its ordinary course of business;
(2) will use its reasonable best efforts to, and cause each of its
subsidiaries to use its reasonable best efforts to, (a) preserve intact
its business organization and goodwill, (b) keep available the services
of its current officers and other key employees, and (c) preserve its
current relationships with those persons having significant business
dealings with the Company and its subsidiaries;
(3) will notify DCNA of any emergency or other substantial change in the
normal course of its or its subsidiaries' respective businesses or in
the operation of its or its subsidiaries' respective properties and of
any complaints of or hearings of which the Company has knowledge before
any federal, regional, state or local court, arbitrator, tribunal,
administrative agency or commission or other governmental or other
regulatory authority or agency, whether U.S. or foreign (a "Governmental
Entity") if such emergency, change, complaint or hearing would have a
Material Adverse Effect on the Company;
(4) will not, and will not permit any of its subsidiaries that is not
incorporated or organized in the United States or not wholly owned to,
repatriate funds, authorize or pay any dividends on or make any
distribution with respect to its outstanding shares of capital stock
(other than dividends or distributions by wholly owned subsidiaries of
the Company);
(5) will not, and will not permit any of its subsidiaries to, establish,
enter into or amend any severance plan, agreement or arrangement or any
employee benefit plan or materially increase the compensation payable or
the benefits provided to its officers or employees, except as may be
required by applicable law or a contract in existence on the date of the
Merger Agreement and except for increases for nonofficer employees in
the normal course of business consistent with past practice and except
as otherwise set forth in the Merger Agreement;
(6) will not, and will not permit any of its subsidiaries to, authorize or
announce an intention to authorize, or enter into an agreement with
respect to, any merger, consolidation or business combination (other
than the Merger), any acquisition of any assets or securities or any
disposition of any assets or securities, except in an amount that is not
material to the Company and its subsidiaries taken as a whole, except
for the disposition of the Company's 50% ownership in DeAngelo Marine
Exhaust, Inc.;
(7) will not, and will not permit any of its subsidiaries to, propose or
adopt any amendments to its certificate of incorporation or by-laws (or
other similar organizational documents);
22
(8) will not, and will not permit any of its subsidiaries to, issue or
authorize the issuance of, or agree to issue or sell any shares of
capital stock of any class (whether through the issuance or granting of
options, warrants, commitments, convertible securities, subscriptions,
rights to purchase or otherwise), except for the disposition of the
Company's 50% ownership in DeAngelo Marine Exhaust, Inc., or take any
action to cause to be exercisable any unexercisable option under any
existing option plan, except for the issuance of shares of Company
Common Stock pursuant to options and grants outstanding as of the date
of the Merger Agreement which were issued or made pursuant to the
Company's 1993 and 1998 Stock Incentive Plans;
(9) will not, and will not permit any of its subsidiaries to, reclassify,
combine, split, purchase or redeem any shares of its capital stock or
purchase or redeem any rights, warrants or options to acquire any such
shares (other than as contemplated by the Company's employee benefit
plans);
(10) will not, and will not permit any of its subsidiaries to, (a) incur or
prepay any indebtedness for borrowed money or issue any debt securities
other than incurrences and repayments of indebtedness under the
Company's or its subsidiaries' credit facilities in existence on the
date of the Merger Agreement in the ordinary course of business
consistent with past practice or (b) assume, guarantee, endorse or
otherwise become liable or responsible for the obligations of any other
person, except for guarantees by subsidiaries of the Company of
indebtedness permitted under the preceding clause (a);
(11) will not, and will not permit any of its subsidiaries to (or consent to
any proposal by any entity in which the Company has an investment to),
make or forgive any loans, advances or capital contributions to, or
investments in, any other person, other than the Company or any wholly
owned subsidiary of the Company (including any intercompany loans,
advances or capital contributions to or investments in, any affiliate),
other than advances to employees in the ordinary course of business in
accordance with the Company's or its subsidiaries' established policies;
(12) will not, and will not permit any of its subsidiaries to, (a) enter into
any material lease or license or otherwise subject to any material lien
any of its properties or assets (including securitizations), other than
in the ordinary course of business consistent with past practice;
(b) modify or amend in any material respect, or terminate, any of its
material contracts (except in the ordinary course of business);
(c) waive, release or assign any rights that are material to the Company
and its subsidiaries taken as a whole; or (d) permit any insurance
policy naming it as a beneficiary or a loss payable payee to lapse, be
cancelled or expire unless a new policy with substantially identical
coverage is in effect as of the date of lapse, cancellation or
expiration;
(13) will not, and will not permit any of its subsidiaries to, change any of
the financial accounting methods used by it unless required by generally
accepted accounting principles of the applicable country or a change in
applicable law;
(14) will not, and will not permit any of its subsidiaries to, file with, or
submit to, any Governmental Entity (including the SEC) any registration
statement, prospectus or similar document relating to the issuance of
any securities of the Company or any subsidiary of the Company, other
than a registration statement of the Company on Form S-8 filed with the
SEC in connection with the Company's 1993 and 1998 Stock Incentive Plans
in each case, in the ordinary course of business consistent with past
practice; and
(15) will not, and will not permit its subsidiaries to, agree to take any of
the foregoing actions or take any action that would (a) make certain
representations and warranties of the Company in the Merger Agreement
untrue or incorrect in any material respect or (b) result in any of the
conditions to the Offer or any of the conditions to the Merger not being
satisfied.
23
DCNA CONDUCT OF BUSINESS COVENANT. The Merger Agreement provides that,
prior to the Effective Time and except as may be agreed in writing by the
Company or as may be expressly permitted pursuant to the Merger Agreement, DCNA
will not, and will not permit any of its subsidiaries to, (i) agree to take any
action that would result in any of the conditions to the Offer or any of the
conditions to the Merger not being satisfied or (ii) delay the consummation of
the Offer.
ACCESS; CONFIDENTIALITY. The Merger Agreement provides that, except for
competitively sensitive information or government "classified" information or as
limited by applicable law or the terms of any confidentiality agreement or
provision in effect on the date of the Merger Agreement, the Company will and
will cause each of its subsidiaries to afford to DCNA's representatives
reasonable access during normal business hours upon reasonable notice,
throughout the period prior to the earlier of the Effective Time or the
termination of the Merger Agreement, to its properties, offices, facilities,
employees, contracts, commitments, books and records and any report, schedule or
other document filed or received by it pursuant to the requirements of federal
or state securities laws and will and will cause each of its subsidiaries to
furnish to DCNA such additional financial and operating data and tax and other
information as to its and its subsidiaries' respective businesses and properties
as DCNA may from time to time reasonably request. The Merger Agreement further
provides that DCNA will hold any information provided under this covenant that
is non-public in confidence to the extent required by, and in accordance with,
the provisions of the letter dated July 7, 2000, among Penske Corporation, the
Company and DaimlerChrysler AG.
SPECIAL MEETING; PROXY STATEMENT. Following the purchase of Shares pursuant
to the Offer, if required by applicable law in order to consummate the Merger,
the Company, acting through its Board of Directors, will, in accordance with
applicable law:
(i) call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") for the purposes of considering and
taking action upon the approval and adoption of the Merger Agreement; and
(ii) prepare and file with the SEC a preliminary proxy or information
statement relating to the Merger and the Merger Agreement (the "Proxy
Statement") and obtain and furnish the information required to be included
by the SEC in the Proxy Statement and, after consultation with DCNA, respond
promptly to any comments made by the SEC with respect to the preliminary
proxy or information statement and cause a definitive proxy or information
statement, to be mailed to its stockholders at the earliest practicable
date, PROVIDED that no amendments or supplements to the Proxy Statement will
be made by the Company without consultation with DCNA and its counsel.
DCNA will vote, or cause to be voted, all of the Shares acquired in the
Offer or otherwise then owned by it, the Purchaser or any of DaimlerChrysler
AG's other subsidiaries in favor of the approval and adoption of the Merger
Agreement.
In the event that DCNA, the Purchaser and any other Subsidiaries of DCNA
acquires in the aggregate at least 90% of the outstanding shares of each class
of capital stock of the Company pursuant to the Offer or otherwise, the parties
hereto will, subject to the conditions to the Merger set forth in the Merger
Agreement, take all necessary and appropriate action to cause the Merger to
become effective as soon as practicable after such acquisition, without a
meeting of stockholders of the Company, in accordance with Section 253 of the
DGCL.
REASONABLE BEST EFFORTS. The Merger Agreement provides that subject to the
terms and conditions of the Merger Agreement and applicable law, each of DCNA,
the Purchaser and the Company will act in good faith and use reasonable best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
the transactions contemplated by the Merger Agreement as soon as practicable.
DCNA, the Purchaser and the Company have agreed to (and to cause their
respective subsidiaries, and to use reasonable best efforts to cause their
24
respective affiliates, directors, officers, employees, agents, attorneys,
accountants and representatives, to) do the following:
(i) consult and cooperate with and provide assistance to each other in
the preparation and filing of certain documents with the SEC;
(ii) obtain all consents, approvals, waivers, licenses, permits,
authorizations, registrations, qualifications or other permissions or
actions by, and give all necessary notices to, and make all filings with and
applications and submissions to, any Governmental Entity or other person
necessary in connection with the consummation of the transactions
contemplated by the Merger Agreement as soon as reasonably practicable;
(iii) provide all such information concerning DCNA, the Company, their
respective subsidiaries and their respective officers, directors, employees,
partners and affiliates as may be necessary or reasonably requested in
connection with any of the foregoing;
(iv) avoid the entry of, or have vacated or terminated, any decree,
order, or judgment that would restrain, prevent, or delay the consummation
of the Offer or the Merger, including but not limited to defending through
litigation on the merits any claim asserted in any court by any person; and
(v) take any and all reasonable steps necessary to avoid or eliminate
every impediment under any antitrust, competition, or trade regulation law
that is asserted by any Governmental Entity with respect to the Offer or the
Merger so as to enable the consummation of the Offer or the Merger to occur
as expeditiously as possible, PROVIDED, HOWEVER, that DCNA will not be
required to take any actions in connection with, or agree to, any hold
separate order, sale, divestiture, or disposition of plants, assets and
businesses of DCNA or any of its subsidiaries or of the Company or any of
its subsidiaries. Before making an application to or filing with a
Governmental Entity or other entity in connection with the Merger Agreement
(other than filing under the HSR Act and the European Union merger control
regulations), each party will provide the other with drafts thereof and
afford the other party a reasonable opportunity to comment on such drafts.
The Merger Agreement also provides that the Company and DCNA will keep the
other reasonably apprised of the status of matters relating to completion of the
transactions contemplated thereby, including promptly furnishing the other with
copies of notices or other communications received by DCNA, the Purchaser or the
Company, as the case may be, or any of their respective subsidiaries, from any
third party and/or any Governmental Entity with respect to the transactions
contemplated by the Merger Agreement.
EMPLOYEE STOCK OPTIONS AND OTHER EMPLOYEE BENEFITS. The Merger Agreement
provides that the Company will use its reasonable best efforts to cause each
outstanding option to purchase shares of Company Common Stock (including any
related alternative rights) granted under any stock option or compensation plan
or arrangement of the Company or its subsidiaries (collectively, the "Company
Option Plans") (including those granted to current or former employees and
directors of the Company or any of its subsidiaries) (the "Employee Stock
Options") to become exercisable, and each restricted share of Company Common
Stock and each deferred stock award granted under the Company Option Plans, to
vest in full and become fully transferable and free of restrictions, either
prior to the purchase of the Shares pursuant to the Offer or immediately prior
to the Effective Time, as permitted pursuant to the terms and conditions of the
applicable Company Option Plan. The Merger Agreement provides that immediately
prior to the Effective Time, each outstanding Employee Stock Option granted
pursuant to the Company Option Plans, shall be cancelled and each holder thereof
shall be entitled to receive an amount in cash equal to the product of (x) the
difference between the Offer Price and the per Share exercise price of such
Employee Stock Option and (y) the number of shares of Company Common Stock
covered by such Employee Stock Option. The Company shall give an explicit notice
of the cancellation of the Employee Stock Options to each holder thereof at
least seven days prior to the Effective Time. The Merger Agreement also provides
that all payments in respect of such Employee Stock Options will be made as
25
promptly as practicable after the Purchase Date, subject to the collection of
all applicable withholding taxes required by law to be collected by the Company.
The Merger Agreement provides that immediately prior to the Effective Time,
units credited to deferred compensation accounts, maintained under the Deferred
Compensation Plan for Directors and the Deferred Compensation Plan for Senior
Management (Such plans, the "Deferred Compensation Plans") which are deemed
invested in shares of Company Common Stock will be deemed settled in a cash
amount equal to the product of (i) the Offer Price and (ii) the number of units
of Company Common Stock credited to each such account. Any such amount (and any
other cash amounts credited to accounts under the Deferred Compensation Plans)
will continue to be governed by the terms of the applicable plan, as may be
amended from time to time.
Pursuant to the Merger Agreement, DCNA has also agreed (1) that from the
Purchase Date through December 31, 2001, DCNA will, or will cause the Company or
the Surviving Corporation to, maintain employee benefit plans, programs and
arrangements for continuing employees that are no less favorable in the
aggregate than those provided by the Company and its subsidiaries as of the
Purchase Date; and more specifically DCNA has agreed to continue to use the
current methodology for determining the lump sum payout of benefits to former
General Motors salaried employees under the Company's defined benefit pension
plan; and (2) to give credit to each person who is an employee or former
employee of the Company or its Subsidiaries immediately prior to the Purchase
Date (a "Company Employee") for all service with the Company or any of its
Subsidiaries (and service credited by the Company or any of its Subsidiaries)
prior to the Purchase Date, using the same methodology utilized by the Company
immediately before the Purchase Date for crediting service and determining
levels of benefits, under (i) all employee benefit plans, programs and
arrangements maintained by or contributed to by DCNA and its subsidiaries
(including, without limitation, the Company and the Surviving Corporation) in
which such Company Employees become participants for purposes of eligibility to
participate, vesting and determination of level of benefits (excluding, however,
benefit accrual under any defined benefit plans), and (ii) severance plans for
purposes of calculating the amount of each Company Employee's severance
benefits.
Pursuant to the Merger Agreement, DCNA, the Company and the Surviving
Corporation will (x) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Company Employees under any welfare benefit plans
that such Company Employees may be eligible to participate in after the Purchase
Date, other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Purchase
Date under any welfare benefit plan maintained for the Company Employees
immediately prior to the Purchase Date, and (y) provide each Company Employee
with credit for any co-payments and deductibles paid prior to the Purchase Date
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such Company Employees are eligible to participate in after
the Purchase Date.
TAKEOVER STATUTE. If any "fair price," "moratorium," "control share
acquisition" or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated by the Merger Agreement, each of the
Company, DCNA and the Purchaser and the members of their respective Boards of
Directors will grant such approvals and take such actions as are reasonably
necessary so that such transactions may be consummated as promptly as
practicable on the terms contemplated by the Merger Agreement and otherwise act
to eliminate or minimize the effects of such statute or regulation on such
transactions.
NO SOLICITATION. The Merger Agreement provides that neither the Company nor
any of its subsidiaries nor any of the officers and directors of any of them
will, and the Company will direct and use its reasonable best efforts to cause
it and its subsidiaries' employees, agents and representatives, including any
investment banker, attorney or accountant retained by it or any of its
subsidiaries not to, directly or indirectly through another person,
(1) initiate, solicit, encourage or otherwise knowingly facilitate any
26
inquiry, proposal or offer from any person that constitutes an Acquisition
Proposal or (2) participate in any discussions or negotiations regarding an
Acquisition Proposal; PROVIDED, HOWEVER, that the Company Board may, or may
authorize the Company, its subsidiaries and their respective officers,
directors, employees, agents and representatives to, in response to an
Acquisition Proposal that the Company Board concludes in good faith is an
Incipient Superior Proposal, (x) furnish information with respect to the Company
and its subsidiaries to any person making such Acquisition Proposal pursuant to
a customary confidentiality agreement and (y) participate in discussions or
negotiations regarding such Acquisition Proposal, PROVIDED that, prior to taking
any such action, the Company provides reasonable advance notice to DCNA that it
is taking such action.
The term "Acquisition Proposal" is defined in the Merger Agreement to mean
any direct or indirect inquiry, proposal or offer (or any improvement,
restatement, amendment, renewal or reiteration thereof) relating to the
acquisition or purchase of a business or shares of any class of equity
securities of the Company or any of its subsidiaries, any tender offer or
exchange offer that, if consummated, would result in any person beneficially
owning shares of any class of equity securities of the Company or any of its
subsidiaries, or any merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction (a "Business Combination Transaction") involving the Company or any
of its subsidiaries, or any purchase or sale of a substantial portion of the
consolidated assets (including without limitation stock of subsidiaries owned
directly or indirectly by the Company) of the Company or any of its subsidiaries
(an "Asset Transaction"), other than the transactions contemplated by the Merger
Agreement or certain other transactions permitted by the Merger Agreement. The
term "Incipient Superior Proposal" is defined in the Merger Agreement to mean an
unsolicited bona fide written Acquisition Proposal that the Company Board
concludes in good faith (after consultation with the Company's financial
advisor) would, if consummated, provide greater aggregate value to the Company's
stockholders from a financial point of view than the transactions contemplated
by the Merger Agreement, PROVIDED that for purposes of this definition the term
"Acquisition Proposal" will have the meaning set forth above, except that
(x) references to "shares of any class of equity securities of the Company" will
be deemed to be references to "100% of the outstanding Shares" and (y) an
"Acquisition Proposal" will be deemed to refer only to a Business Combination
Transaction involving the Company or, with respect to an Asset Transaction, such
transaction must involve the assets of the Company and its subsidiaries, taken
as a whole, and not any subsidiary of the Company alone. The term "Superior
Proposal" is defined to mean an Incipient Superior Proposal for which any
required financing is committed or which in the good faith judgment of the
Company Board (after consultation with its financial advisor) is capable of
being financed by the person making the Acquisition Proposal.
The Merger Agreement provides that neither the Company Board nor any
committee thereof may (i) withdraw, modify or change, or propose publicly to
withdraw, modify or change, in a manner adverse to DCNA, the recommendation by
the Company Board or such committee of the Offer, the Merger or the Merger
Agreement unless the Company Board has determined in good faith, after
consultation with its financial advisor, that the Offer, the Merger or the
Merger Agreement is no longer in the best interests of the Company's
stockholders and that such withdrawal, modification or change is, therefore,
required in order to satisfy its fiduciary duties to the Company's stockholders
under applicable law, (ii) approve or recommend, or propose publicly to approve
or recommend, any Acquisition Proposal, or (iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") related to any Acquisition
Proposal. Notwithstanding the foregoing, the Company may, in response to a
Superior Proposal, (a) take any of the actions described in clauses (i) or
(ii) above or (b) subject to this paragraph, terminate the Merger Agreement (and
concurrently with or after such termination, if it so chooses, cause the Company
to enter into any Acquisition Agreement with respect to any Acquisition
Proposal) but only after the third business day following DCNA's receipt of
written notice advising DCNA that the Company's Board is prepared to accept an
Acquisition Proposal, and attaching the most current version of any such
Acquisition Proposal or any draft
27
of an Acquisition Agreement as long as the Company is not in breach of any of
its "no solicitation" obligations described above.
The Merger Agreement also provides that the Company will promptly (but in
any event within one business day) notify DCNA orally and in writing of any
Acquisition Proposal or any inquiry regarding the making of any Acquisition
Proposal.
Nothing contained in the Merger Agreement prohibits the Company or the
Company Board from at any time taking and disclosing to its stockholders a
position contemplated by Rule 14e-2 promulgated under the Exchange Act or from
making any disclosure to the Company's stockholders required by applicable law.
PUBLIC ANNOUNCEMENTS. DCNA and the Company agree that neither one of them
will issue any press release or otherwise make any public statement with respect
to the Merger Agreement or the transactions contemplated therein without the
prior approval of the other party (which approval will not be unreasonably
withheld or delayed), except as may be required by applicable law or the rules
of any stock exchange on which such party's securities are listed.
INDEMNIFICATION; INSURANCE. The Merger Agreement provides that from and
after the Purchase Date, DCNA will indemnify and hold harmless each present and
former director and officer of the Company and its subsidiaries against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, by reason of the fact that such individual is
or was a director, officer, employee or agent of the Company or any of its
subsidiaries, or is or was serving at the request of the Company or any of its
subsidiaries as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, arising out of or
pertaining to matters existing or occurring at or prior to the purchase of
Shares in the Offer, whether asserted or claimed prior to or after the purchase
of Shares in the Offer, to the fullest extent permitted under applicable law,
and DCNA will also advance fees and expenses as incurred to the fullest extent
permitted under applicable law.
The Merger Agreement provides that the Certificate of Incorporation of the
Company will, from and after the Purchase Date, and the Certificate of
Incorporation of the Surviving Corporation will, from and after the Effective
Time, contain provisions no less favorable with respect to indemnification than
are set forth as of the date of the Merger Agreement in Section 6 of the
Certificate of Incorporation of the Company, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Purchase Date in any manner that would adversely affect the rights thereunder of
individuals who at the Purchase Date were directors, officers or employees of
the Company; PROVIDED that this provision does not limit DCNA's ability to merge
the Company into DCNA or any of its subsidiaries or otherwise eliminate the
Company's corporate existence; and PROVIDED FURTHER that in the event of a
merger in which the Company is not the Surviving Corporation, the Certificate of
Incorporation of the Surviving Corporation shall contain indemnity provisions
substantially identical to Section 6 of the Certificate of Incorporation of the
Company.
The Merger Agreement further provides that for six years from the Effective
Time, DCNA will maintain in effect the Company's and its Subsidiaries' current
directors' and officers' liability insurance policy (the "Policies") covering
those persons who are currently covered by the Policies; PROVIDED, HOWEVER, that
in no event will DCNA be required to expend in any one year an amount in excess
of 200% of the annual premiums currently paid by the Company and its
subsidiaries for such insurance, and, PROVIDED, FURTHER, that if the annual
premiums of such insurance coverage exceed such amount, DCNA will be obligated
to obtain policies with the greatest coverage available for a cost not exceeding
such amount; and PROVIDED, FURTHER, that DCNA may meet its obligations under
this paragraph by covering the above persons under either DaimlerChrysler AG's
or DCNA's insurance policy on the terms described above that
28
expressly provided coverage for any acts which are covered by the existing
policies of the Company and its Subsidiaries.
The Merger Agreement further provides that the rights of each Indemnified
Party under the Merger Agreement are in addition to any other rights such
Indemnified Party may have under the Certificate of Incorporation or By-Laws of
the Company or any subsidiary, under the DGCL or otherwise. The indemnification
provisions of the Merger Agreement survive the consummation of the transactions
contemplated by the Merger Agreement, and each Indemnified Party is, for all
purposes, a third party beneficiary of the covenants and agreements of the
Company contained in the Merger Agreement and, accordingly, will be treated as a
party to the Merger Agreement for purposes of the rights and remedies relating
to enforcement of such covenants and agreements and will be entitled to enforce
any such rights and exercise any such remedies directly.
SHARED CORPORATE SERVICES. The Merger Agreement provides that the Company
will not amend the terms of the Management Services Agreement, and that, except
as expressly provided therein, within 90 days following the Effective Time the
Company will cease using services provided by or procured by Penske Corporation
or DDC Holdings and will cease to be obligated to compensate either such party
for such services. To the extent that Penske Corporation or DDC Holdings use
services provided by the Company, such services will also cease and Penske
Corporation and DDC Holdings will no longer be obligated to accept or pay for
such services within 90 days following the Effective Time. The Merger Agreement
also provides that prior to the Effective Time, the Company, the Purchaser and
DCNA will use reasonable best efforts to develop and implement plans that will
permit the separation of the Company from Penske Corporation and DDC Holdings
and will permit separation of corporate services currently shared by such
parties, on an expeditious, cost-efficient and harmonious basis, including
through the provision of services by one party to the other for an appropriate
and mutually agreeable transition period on an arm's-length basis. Following the
Effective Time the parties are to use their reasonable best efforts to implement
such plan.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the
obligations of DCNA, the Purchaser and the Company to consummate the Merger are
subject to the satisfaction of the following conditions at or prior to the
Effective Time:
(1) if required by the DGCL, the approval of the Merger Agreement by the
stockholders of the Company;
(2) no statute, rule, regulation, executive or court order, decree, ruling
or permanent injunction shall have been enacted, entered, promulgated or
enforced by any Governmental Entity that prohibits the consummation of
the Merger substantially on the terms contemplated by the Merger
Agreement or has the effect of making DCNA's or the Purchaser's
acquisition of Shares illegal;
(3) DCNA or the Purchaser or any of their respective affiliates shall have
purchased Shares pursuant to the Offer or pursuant to the Stock Purchase
Agreement, except that this condition shall not be a condition to DCNA's
and the Purchaser's obligation to effect the Merger if DCNA or the
Purchaser shall have failed to purchase Shares pursuant to the Offer in
breach of their obligations under the Merger Agreement; and
(4) the applicable waiting period under the HSR Act shall have expired or
been terminated and the applicable waiting period under the European
Union merger control regulations shall have expired.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after adoption of the Merger Agreement by
stockholders:
(1) by the mutual written consent of the Company (including, if applicable,
the Independent Director Approval contemplated by the Merger Agreement),
DCNA and the Purchaser;
29
(2) by either DCNA if it simultaneously terminates the Stock Purchase
Agreement without having bought any Shares thereunder or the Company if
(a) (i) the Offer shall have expired in accordance with the terms of the
Merger Agreement and without any Shares being purchased pursuant
thereto, or (ii) the Offer is not consummated on or before December 31,
2000; PROVIDED, HOWEVER, that the right to terminate the Merger
Agreement shall not be available to either party whose failure (or, in
the case of DCNA, the failure of the Purchaser) to fulfill any
obligation under the Merger Agreement or the Offer has been the cause
of, or resulted in, the failure of the Shares to have been purchased
pursuant to the Offer; (b) a statute, rule, regulation or executive
order shall have been enacted, entered, promulgated or enforced
prohibiting the consummation of the Offer or the Merger substantially on
the terms contemplated in the Merger Agreement or otherwise making the
acquisition of Shares by DCNA or the Purchaser substantially on the
terms contemplated in the Merger Agreement illegal; or (c) an order,
decree, ruling or injunction shall have been entered permanently
restraining, enjoining or otherwise prohibiting the consummation of the
Offer or the Merger substantially on the terms contemplated in the
Merger Agreement and such order, decree, ruling or injunction shall have
become final and non-appealable; PROVIDED, that the party seeking to
terminate the Merger Agreement used its reasonable best efforts to
remove such order, decree, ruling or injunction;
(3) by DCNA if it simultaneously terminates the Stock Purchase Agreement
without having bought any Shares thereunder, if due to an occurrence or
circumstance, other than as a result of a breach by DCNA or the
Purchaser of its obligations under the Merger Agreement or under the
Offer, resulting in a failure to satisfy any condition to the Offer, the
Purchaser shall have (i) failed to commence the Offer within 20 days
following the date of the Merger Agreement, or (ii) terminated the Offer
without having accepted any Shares for payment;
(4) by the Company, if due to an occurrence or circumstance, other than as a
result of a breach by the Company of its obligations under the Merger
Agreement, resulting in a failure to satisfy any condition to the Offer,
the Purchaser shall have (i) failed to commence the Offer within
20 days following the date of the Merger Agreement, or (ii) terminated
the Offer without having accepted any Shares for payment;
(5) by the Company, in accordance with the Merger Agreement, in response to
a Superior Proposal, PROVIDED that such termination shall not be
effective unless and until the Company shall have paid to DCNA the
Termination Fee described below.
If the Merger Agreement is terminated, there shall be no other liability
(other than with respect to termination fees, confidentiality and expenses) on
the part of DCNA, the Purchaser or the Company or their respective officers or
directors except liability arising out of a willful breach of the Merger
Agreement. In the event of termination of the Merger Agreement prior to the
expiration of the Offer, DCNA and the Purchaser will promptly terminate the
Offer without purchasing Shares.
In the event that the Merger Agreement shall have been terminated pursuant
to paragraph (3) under "--Termination" above as a result of the failure of the
condition set forth in paragraph (d) of Section 15 below or pursuant to
paragraph (5) under "Termination" above, the Company will immediately pay DCNA a
fee equal to $3 million (the "Termination Fee"), payable by wire transfer of
immediately available funds, the receipt of which by DCNA in the case of
termination pursuant to paragraph (5) under "--Termination" above shall be a
condition to the effectiveness of such termination.
EXPENSES. Except as otherwise specified above, all expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses, whether or not the Offer or
the Merger is consummated.
ASSIGNMENT. Neither the Merger Agreement nor any of the rights, interests
or obligations therein shall be assignable by any of the parties thereto without
the prior written consent of the other parties, except that the Purchaser may
assign, in its sole discretion, all or any of its rights and interests therein
to
30
DCNA or to any direct or indirect wholly owned subsidiary of DCNA, provided that
no such assignment will relieve the Purchaser of its obligations therein if such
assignee does not perform such obligations.
AMENDMENT OR SUPPLEMENT. At any time prior to the Effective Time, the
Merger Agreement may be amended or supplemented in any and all respects, whether
before or after adoption of the Merger Agreement by stockholders of the Company,
by written agreement of the parties thereto, by action taken by their respective
Boards of Directors (which in the case of the Company shall include the
Independent Director Approval contemplated in the Merger Agreement); PROVIDED,
HOWEVER, that after adoption of the Merger Agreement by stockholders of the
Company, there shall be no amendment or change to the Merger Agreement that
would reduce the amount or change the type of consideration into which each
Share shall be converted upon consummation of the Merger or other change
requiring stockholder approval without further approval by the stockholders of
the Company.
THE STOCK PURCHASE AGREEMENT
As a condition to the willingness of DCNA and the Purchaser to enter in the
Merger Agreement, they required that DDC Holdings enter into the Stock Purchase
Agreement. The Stock Purchase Agreement provides that DCNA will purchase from
DDC Holdings all of the shares of Company Common Stock owned by DDC Holdings for
an aggregate purchase price of $23.00 per Share (the "Purchase Price"), payable
on the earlier of (i) the Closing pursuant to the Merger Agreement or
(ii) satisfaction or waiver of the conditions set forth below. The Stock
Purchase Agreement provides that as long as the Merger Agreement has not been
terminated, DDC Holdings will tender all of its Shares in the Offer. Upon the
Purchaser's acceptance of the Shares for payment in the Offer and payment to DDC
Holdings for its Shares, all rights and obligations of DCNA, DDC Holdings and
Penske Corporation under the Stock Purchase Agreement end, and the Agreement is
automatically terminated.
CONDITIONS. The Stock Purchase Agreement provides that the obligations of
DCNA and DDC Holdings to consummate the Stock Purchase will be subject to the
satisfaction of each of the following conditions: (i) no statute, rule,
regulation, executive order, decree, ruling or permanent injunction shall have
been enacted, entered, promulgated or enforced by any Governmental Entity which
has the effect of making the acquisition of the Shares by DCNA illegal or
otherwise restrains or prohibits the acquisition of the Shares by DCNA; and
(ii) any waiting period applicable to the consummation of the transactions
contemplated hereby under the HSR Act and the EU Regulation shall have expired
or been terminated.
The Stock Purchase Agreement provides that the obligations of DDC Holdings
to consummate the transactions contemplated thereby will also be subject to the
satisfaction or waiver by DDC Holdings of the following additional conditions:
(1) the accuracy in all material respects of the representations and warranties
of DCNA contained in the Stock Purchase Agreement and of DCNA and Purchaser
contained in the Merger Agreement and receipt by DDC Holdings of a certificate
of the Chief Executive Officer or Chief Financial Officer of DCNA to such
effect; and (2) the performance or compliance in all material respects with all
agreements and covenants by DCNA required by the Stock Purchase Agreement and by
DCNA and Purchaser in the Merger Agreement, and the receipt by DDC Holdings of a
certificate of the Chief Executive Officer or Chief Financial Officer of DCNA to
such effect.
The obligations of DCNA to consummate the transactions contemplated by the
Stock Purchase Agreement are subject to the satisfaction or waiver by DCNA of
conditions which are substantially identical to the conditions set forth in
Section 15 below.
REPRESENTATIONS AND WARRANTIES. Pursuant to the Stock Purchase Agreement,
each of the parties has made customary representations and warranties to the
other, including representations relating to incorporation, corporate power and
authority; the absence of certain conflicts the Stock Purchase Agreement might
create; and the absence of broker's fees. In addition, DDC Holdings has made
certain additional representations regarding its creation and business purpose
and its record and beneficial ownership of Shares.
31
COVENANTS. The Stock Purchase Agreement contains various covenants,
including the following:
(1) DDC Holdings will not transfer or otherwise dispose of, grant a proxy
with respect to, create or permit to exist any security interest, lien or
limitation on DDC Holdings' voting rights, or otherwise create an
encumbrance of any nature with respect to, any of the Shares.
(2) DDC Holdings will not (i) take any action that would make any of its
representations or warranties untrue or incorrect in any material respect
or have the effect of preventing or disabling DDC Holdings from
performing its obligations or (ii) directly or indirectly, initiate,
solicit or encourage any person or entity to take actions that could
reasonably be expected to lead to the occurrence of any of the foregoing.
(3) DDC Holdings will not, directly or indirectly, solicit, initiate or
encourage, or take any other action knowingly to facilitate, any
inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to stockholders of the Company) that
may reasonably be expected to lead to, any Acquisition Proposal, or take
or allow to be taken any action in furtherance thereof, and will notify
DCNA promptly of any proposal or offer, or any inquiry or contact
regarding an Acquisition Proposal.
(4) DCNA and DDC Holdings shall each use its reasonable efforts to obtain
from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by
any party in connection with the authorization, execution and delivery of
the Stock Purchase Agreement and the consummation of the transactions
contemplated thereby and will cooperate fully with each other in promptly
seeking to obtain all such authorizations, consents, orders and
approvals, including with respect to the HSR Act and the EU Regulation.
(5) Penske Corporation will take all actions and execute all documents or
other instruments necessary or desirable (i) to cause DDC Holdings to
perform its obligations under the Stock Purchase Agreement and (ii) to
cause the consummation of the transactions contemplated by the Stock
Purchase Agreement.
(6) Penske Corporation will not amend the terms of the Management Services
Agreement between the Company and Penske Corporation. Except as expressly
provided in the Management Services Agreement, within 90 days following
the Effective Time the Company will cease using services provided by or
procured by Penske Corporation or DDC Holdings and will cease to be
obligated to compensate either such party for such services, and to the
extent that Penske Corporation or DDC Holdings use services provided by
the Company, such services will also cease and Penske Corporation and DDC
Holdings will no longer be obligated to accept or pay for such services
within 90 days following the Effective Time. The Stock Purchase Agreement
also provides that prior to the Effective Time the Company, the Purchaser
and DCNA will use reasonable best efforts to develop and implement plans
that will permit the separation of the Company from Penske Corporation
and DDC Holdings and will permit separation of corporate services
currently shared by such parties, including through the provision of
services by one party to the other for an appropriate and mutually
agreeable transition period on an arm's-length basis. Following the
Effective Time the parties will use their reasonable best efforts to
implement such plan.
VOTING AGREEMENT AND PROXY. The Stock Purchase Agreement provides that
until the termination of the Merger Agreement, at any meeting of the
stockholders of the Company and in any action by consent of the stockholders of
the Company, DDC Holdings will vote (or cause to be voted) the Shares owned by
it (a) in favor of the approval of the Merger and all of the transactions
contemplated by the Merger Agreement and the Stock Purchase Agreement and
otherwise in such manner as may be necessary to consummate the Merger;
(b) against any action, proposal, agreement or transaction that would result in
a breach of any covenant, obligation, agreement, representation or warranty of
the Company contained in the Merger Agreement or in the Stock Purchase
Agreement; and (c) against any action, proposal, agreement or transaction that
could result in any of the conditions to the Company's obligations under the
32
Merger Agreement not being fulfilled or that is intended, or could reasonably be
expected, to impede, interfere or be inconsistent with, delay, postpone,
discourage or adversely affect the Merger Agreement, the Merger or the Stock
Purchase Agreement. The Stock Purchase Agreement further provides that DDC
Holdings irrevocably appoints DCNA and each of its officers, as DDC Holdings'
attorney and proxy pursuant to the provisions of Section 212(c) of the DGCL,
with full power of substitution, to vote and otherwise act (by written consent
or otherwise) with respect to the Shares at any meeting of stockholders of the
Company or consent in lieu of any such meeting.
TERMINATION. The Stock Purchase Agreement may be terminated and the
transactions contemplated thereby abandoned at any time prior to the closing
date as follows:
(1) by mutual written consent duly authorized by the Boards of Directors of
each of DCNA and DDC Holdings;
(2) by either DCNA or DDC Holdings, if the Closing Date has not occurred on
or before March 31, 2001; PROVIDED, HOWEVER, that the right to terminate
will not be available to any party whose failure to fulfill any covenant
under the Stock Purchase Agreement has been the cause of, or resulted in,
the failure of the Closing Date to occur;
(3) by either DCNA or DDC Holdings, if any Governmental Entity shall have
issued a statute, rule, regulation or executive order or taken any other
action permanently restraining or enjoining or otherwise prohibiting the
transactions contemplated by the Stock Purchase Agreement and such order
shall be final and nonappealable; or
(4) by either party upon a breach of any representation, warranty, covenant
or agreement on the part of the other party, as set forth in the Stock
Purchase Agreement.
THE STOCK PUT OPTION AGREEMENT
The Stock Put Option Agreement provides that, as a condition to their
willingness to enter into the Merger Agreement, DCNA and the Purchaser have
required that Penske Corporation agree to grant the Company a right in its sole
discretion following the Merger to require that Penske Corporation purchase 51%
of the outstanding shares of capital stock (such option being referred to as the
"VM Put Option" and such shares being referred to as the "Put Shares") of VM
Holdings. VM Holdings 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
the outstanding quotas of Detroit Diesel Motores do Brasil, Ltda., a Brazilian
limited liability company. The parties to the Merger Agreement, together with
Penske Corporation and DaimlerChrysler AG, intend to 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 VM Holdings and its
subsidiaries, in which Penske Corporation or one of its affiliates would have
industrial leadership and which would include an affiliate of DaimlerChrysler AG
and a third independent industrial partner.
The Stock Put Option Agreement provides that the Company will propose the
purchase price of the VM Put Option and that if the Company and Penske
Corporation are unable to arrive at a mutually agreeable purchase price after
negotiating in good faith for not less than two weeks, they shall jointly
appoint an investment bank of international reputation which has no business,
financial or other significant relationship with Penske Corporation or DCNA or
any of their respective affiliates to determine the purchase price within thirty
days following receipt of all requested information necessary to support such
determination. If the Company wishes to exercise the VM Put Option, it shall
send a written notice to Penske Corporation declaring that the VM Put Option is
thereby exercised and that it is irrevocably contractually committed to sell the
Put Shares to Penske Corporation, specifying the proposed purchase price to be
paid by Penske Corporation for the Put Shares and fixing a date, time and
location for the closing of the purchase.
33
Pursuant to the Stock Put Option Agreement, the Company and Penske
Corporation have made customary representations and warranties to each other,
including representations relating to corporate power, authority and
authorizations; and that the Stock Put Agreement constitutes a valid, binding
and enforceable agreement. The Company also has made representations that the
Put Shares are fully paid and nonassessable and are free and clear of any lien
or encumbrance; and that information regarding VM Holdings provided by or on
behalf of the Company to Penske Corporation 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.
The Stock Put Option Agreement provides that Penske Corporation's obligation
to purchase and pay for the Put Shares is subject to the following conditions:
(1) no statute, rule, regulation, executive order, decree, ruling or permanent
injunction being enacted, entered, promulgated or enforced by any Governmental
Entity which prohibits the exercise of the VM Put Option substantially on the
terms contemplated by the Stock Put Option Agreement or having the effect of
making the acquisition of the Put Shares by Penske Corporation illegal; (2) all
waiting periods under the HSR Act and the European Union merger control
regulations applicable to the purchase of the Put Shares by Penske Corporation
having expired or been terminated; and (3) the Merger being consummated and at
least 180 days having elapsed following the Effective Time.
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
the Company.
THE MANAGEMENT SERVICES AGREEMENT
Contemporaneously with the signing of the Merger Agreement, Penske
Corporation and the Company entered into the Management Services Agreement which
provides for the continuation following the Effective Time of the Merger of
certain services provided by Penske Corporation to DDC and its subsidiaries (the
"DDC Group") for a period ending on the third anniversary of the Effective Time
(the "Service Period"). The services to be provided under the Agreement include
those with respect to taxes; risk management; sales, marketing and customer
relations; establishment of a European joint venture regarding the operations of
VM Holdings, general advice and guidance and strategic planning (collectively,
the "Services").
The Management Services Agreement provides that Penske Corporation will
provide Services as requested by DDC. The aggregate fee payable by DDC to Penske
Corporation for all Services rendered during the Service Period will be
$5,000,000 which will be paid in equal quarterly installments. DDC may request
that Penske Corporation provide additional services to DDC. In respect of these
services, the parties have agreed to discuss in good faith an appropriate
increase in the service fees to reflect any such additional services. Penske
Corporation and DDC have agreed that, within 90 days from the date of the
Management Services Agreement, Penske Corporation will invoice DDC for all
amounts owing by DDC to Penske Corporation. The Management Service Agreement
further provides that DDC will sublease to Penske Corporation and its affiliates
office space comparable to that used by them, and on terms and conditions
comparable to those existing, prior to the date of the Management Services
Agreement and which are arm's-length.
The Management Services Agreement provides that Penske Corporation, its
affiliates, directors, officers, employees, agents or permitted assigns (each, a
"Penske Party") will 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 arising in connection with the Management
Services Agreement or the Services. Each party will indemnify the other against
all liabilities, claims, damages, losses and expenses of third parties unrelated
to the indemnified party arising in connection with indemnifying party's
negligence or willful misconduct in its performance of its obligations under the
Management Services Agreement, unless such negligence or willful misconduct was
caused by the acts or omissions of the indemnified party.
34
12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY.
PURPOSE OF THE OFFER. The purpose of the Offer is to acquire control of,
and the entire equity interest in, the Company. The purpose of the Merger is to
acquire all outstanding Shares not tendered and purchased pursuant to the Offer.
If the Offer is successful, the Purchaser intends to consummate the Merger as
promptly as practicable.
The Company Board, based on among other things, the unanimous recommendation
of the Special Committee, has approved the Merger and the Merger Agreement.
Depending upon the number of Shares purchased by the Purchaser pursuant to the
Offer, the Company Board may be required to submit the Merger Agreement to the
Company's stockholders for approval and adoption at a stockholder's meeting
convened for that purpose in accordance with the DGCL. If stockholder approval
is required, the Merger Agreement must be approved by a majority of all votes
entitled to be cast at such meeting. If the Minimum Condition is satisfied or
the Shares are otherwise purchased pursuant to the Stock Purchase Agreement, the
Purchaser will have sufficient voting power to approve the Merger Agreement at
the stockholders' meeting without the affirmative vote of any other stockholder.
If DCNA beneficially owns at least 90% of the then outstanding Shares
following the Offer, the Merger may be consummated without a stockholder meeting
and without the approval of the Company's stockholders. The Merger Agreement
provides that the Purchaser will be merged into the Company and that the
certificate of incorporation and bylaws of the Purchaser will be the certificate
of incorporation and bylaws of the Surviving Corporation following the Merger;
PROVIDED THAT, at the Effective Time, such certificate of incorporation shall be
amended to provide that the name of the corporation shall be "Detroit Diesel
Corporation."
APPRAISAL RIGHTS. Under the DGCL, holders of Shares do not have dissenters'
rights in connection with the Offer. In connection with the Merger, however,
stockholders of the Company may have the right to dissent and demand appraisal
of their Shares under the DGCL. Dissenting stockholders who comply with the
applicable statutory procedures under the DGCL will be entitled to receive a
judicial determination of the fair value of their Shares (exclusive of any
element of value arising from the accomplishment or expectation of the Merger)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of the Shares could be based upon considerations
other than or in addition to the price per Share paid in the Merger and the
market value of the Shares. In WEINBERGER V. UOP, INC., the Delaware Supreme
Court stated, among other things, that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in an appraisal proceeding.
Stockholders should recognize that the value so determined could be higher or
lower than the price per Share paid pursuant to the Offer or the consideration
per Share to be paid in the Merger. Moreover, the Purchaser may argue in an
appraisal proceeding that, for purposes of such a proceeding, the fair value of
the Shares is less than the price paid in the Offer or the Merger.
PLANS FOR THE COMPANY. Pursuant to the terms of the Merger Agreement,
promptly upon the purchase of and payment for any Shares by the Purchaser
pursuant to the Offer, DCNA currently intends to seek maximum representation on
the Company Board, subject to the requirement in the Merger Agreement that if
Shares are purchased pursuant to the Offer, there shall be until the Effective
Time at least two members of the Company Board who were directors as of the date
of the Merger Agreement and who are members of the Special Committee.
Except as otherwise set forth in this Offer to Purchase, it is expected that
initially following the Merger, the business and operations of the Company will
be continued substantially as they are currently being conducted. DCNA will
continue to evaluate the business and operations of the Company during the
pendency of the Offer. In addition, after the consummation of the Offer and the
Merger, DaimlerChrysler AG intends to conduct a comprehensive review of the
Company's business, operations, capitalization, corporate structure and
management with a view to optimizing development of the Company's potential in
35
conjunction with DaimlerChrysler AG's businesses. After such review
DaimlerChrysler AG will determine what actions or changes, if any, would be
desirable in light of the circumstances which then exist.
Except as described above or elsewhere in this Offer to Purchase, the
Purchaser and DCNA have no present plans or proposals that would relate to or
result in (i) any extraordinary corporate transaction involving the Company or
any of its subsidiaries (such as a merger, reorganization, liquidation,
relocation of any operations or sale or other transfer of a material amount of
assets), (ii) any sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, (iii) any change in the Company Board or management
of the Company, (iv) any material change in the Company's capitalization or
dividend policy, (v) any other material change in the Company's corporate
structure or business, (vi) a class of securities of the Company being delisted
from a national securities exchange or ceasing to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities association
or (vii) a class of equity securities of the Company being eligible for
termination of registration pursuant to Section 12(g) of the Exchange Act.
13. CERTAIN EFFECTS OF THE OFFER.
MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly, which could adversely affect the liquidity and market
value of the remaining Shares held by stockholders other than the Purchaser. The
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the Offer Price.
STOCK QUOTATION. The Shares are currently listed and traded on the NYSE,
which constitutes the principal trading market for the Shares. Depending upon
the number of Shares purchased pursuant to the Offer, the Shares may no longer
meet the standards for continued listing on the NYSE. According to the NYSE's
published guidelines, the NYSE would consider delisting the Shares if, among
other things, the number of publicly held Shares falls below 600,000, the number
of record holders of at least 100 Shares falls below 400 (or below 1,200 if the
average monthly trading volume is below 100,000 for the last twelve months) or
the aggregate market value of such publicly held Shares falls below $8,000,000.
Shares held by officers or directors of the Company or their immediate families,
or by any beneficial owner of 10% or more of the Shares, ordinarily will not be
considered to be publicly held for this purpose.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, the Shares no longer meet the requirements of the NYSE for continued
listing and the listing of the Shares is discontinued, the market for the Shares
could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the Nasdaq National Market or through other sources. The extent of the
public market for such Shares and the availability of such quotations would
depend, however, upon such factors as the number of stockholders and/or the
aggregate market value of such securities remaining at such time, the interest
in maintaining a market in the Shares on the part of securities firms, the
possible termination of registration under the Exchange Act as described below
and other factors.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
Regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding the market for the Shares and stock
quotations, it is possible that, following the Offer, the Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of the
Federal Reserve Board and therefore could no longer be used as collateral for
loans made by brokers.
36
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application of the
Company to the SEC if the Shares are neither listed on a national securities
exchange nor held by 300 or more holders of record. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and to the SEC and
would make certain provisions of the Exchange Act no longer applicable to the
Company, such as the short-swing profit recovery provisions of Section 16(b) of
the Exchange Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with stockholders' meetings and
the related requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions. Furthermore, the ability of "affiliates" of the Company
and persons holding "restricted securities" of the Company to dispose of such
securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as
amended, may be impaired or eliminated. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for trading on the NYSE. DCNA and the Purchaser currently intend
to seek to cause the Company to terminate the registration of the Shares under
the Exchange Act as soon after consummation of the Offer as the requirements for
termination of registration are met.
14. DIVIDENDS AND DISTRIBUTIONS.
As discussed in Section 11, the Merger Agreement provides that from the date
of the Merger Agreement to the Effective Time, without the prior written
approval of DCNA, the Company will not and will not permit any of its
subsidiaries that are not incorporated or organized in the United States to
repatriate funds, authorize or pay any dividends on or make any distribution
with respect to its outstanding shares of capital stock (other than dividends or
distributions by wholly owned subsidiaries of the Company).
15. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, the Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange
Act (relating to the Purchaser's obligation to pay for or return Shares promptly
after termination or withdrawal of the Offer), pay for, and may postpone the
acceptance for payment of and payment for Shares tendered, and, except as set
forth in the Merger Agreement, terminate the Offer as to any Shares not then
paid for if (i) the Minimum Condition shall not have been satisfied at the
Expiration Date, (ii) the Regulatory Condition shall not have been satisfied at
the Expiration Date, or (iii) immediately prior to the expiration of the Offer,
in the reasonable good faith judgment of the Purchaser, any of the following
conditions shall exist:
(a) there shall have been entered, enforced or issued by any
Governmental Entity, any judgment, order, injunction or decree (i) which
makes illegal, restrains or prohibits the acceptance for payment of, or
payment for, any Shares by DCNA, the Purchaser or any other affiliate of
DCNA, or the consummation of the Merger transaction; (ii) which prohibits or
limits materially the ownership or operation by the Company, DCNA or any of
their Subsidiaries of all or any material portion of the business or assets
of the Company, DCNA or any of their Subsidiaries, or compels the Company,
DCNA or any of their Subsidiaries to dispose of or hold separate all or any
portion of the business or assets of the Company, DCNA or any of their
Subsidiaries; (iii) which imposes or confirms limitations on the ability of
DCNA, the Purchaser or any other affiliate of DCNA to exercise full rights
of ownership of any Shares, including, without limitation, the right to vote
any Shares acquired by the Purchaser pursuant to the Offer or otherwise on
all matters properly presented to the Company's stockholders, including,
without limitation, the approval and adoption of the Merger Agreement and
the transactions contemplated by the Merger Agreement; (iv) which requires
divestiture by DCNA, the Purchaser or any other affiliate of DCNA of any
Shares; or (v) which otherwise would have a
37
Material Adverse Effect on the Company to the extent that it relates to or
arises out of the transactions contemplated by the Merger Agreement or DCNA;
(b) there shall have been any statute, rule, regulation, legislation or
interpretation enacted, enforced, promulgated, amended or issued by any
Governmental Entity or deemed by any Governmental Entity applicable to
(i) DCNA, the Company or any subsidiary or affiliate of DCNA or the Company
or (ii) any transaction contemplated by the Merger Agreement, other than the
HSR Act and the EU Regulation, which is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (v) of paragraph (a) above;
(c) there shall have occurred any changes, conditions, events or
developments that would have, or be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on the Company;
(d) the Board of Directors of the Company or any committee thereof shall
have (i) withdrawn, modified or changed, in a manner adverse to DCNA or the
Purchaser, the recommendation by such Board of Directors or such committee
of the Offer, the Merger or the Merger Agreement, (ii) approved or
recommended, or proposed publicly to approve or recommend, an Acquisition
Proposal, (iii) caused the Company to enter into any Acquisition Agreement
relating to any Acquisition Proposal, or (iv) resolved to do any of the
foregoing;
(e) the representations or warranties of the Company set forth in the
Merger Agreement that are qualified by materiality or Material Adverse
Effect shall not be true and correct, or the representations and warranties
of the Company set forth in the Merger Agreement that are not so qualified
shall not be true and correct in all material respects, in each case, as if
such representations or warranties were made as of such time on or after the
date of the Merger Agreement (except to the extent such representations and
warranties speak as of a specific date or as of the date of the Merger
Agreement, in which case such representations and warranties shall not be so
true and correct or true and correct in all material respects, as the case
may be, as of such specific date or as of the date of the Merger Agreement,
respectively);
(f) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement;
(g) the VM Put Option shall not be in full force and effect, or shall
have been amended or otherwise modified;
(h) the Merger Agreement shall have been terminated in accordance with
its terms; or
(i) the Purchaser and the Company shall have agreed that the Purchaser
shall terminate the Offer;
which, in the reasonable good faith judgment of the Purchaser in any such case,
and regardless of the circumstances (including any action or inaction by DCNA or
any of its affiliates) giving rise to any such condition, makes it inadvisable
to proceed with such acceptance for payment.
The foregoing conditions are for the benefit of the Purchaser and DCNA and,
subject to applicable provisions of the Merger Agreement, may be asserted by the
Purchaser or DCNA regardless of the circumstances giving rise to any such
condition or may be waived by the Purchaser or DCNA in whole or in part at any
time and from time to time in their reasonable discretion on or prior to the
Expiration Date. The failure by DCNA or the Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right; the
waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
38
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
GENERAL. The Purchaser is not aware of any pending legal proceeding
relating to the Offer. Except as described in this Section 16, based on its
examination of publicly available information filed by the Company with the SEC
and other publicly available information concerning the Company, the Purchaser
is not aware of any governmental license or regulatory permit that appears to be
material to the Company's business that might be adversely affected by the
Purchaser's acquisition of Shares as contemplated herein or of any approval or
other action by any governmental, administrative or regulatory authority or
agency, domestic or foreign, that would be required for the acquisition or
ownership of Shares by the Purchaser or DCNA as contemplated herein. Should any
such approval or other action be required, the Purchaser currently contemplates
that, except as described below under "State Takeover Statutes," such approval
or other action will be sought. While the Purchaser does not currently intend to
delay acceptance for payment of Shares tendered pursuant to the Offer pending
the outcome of any such matter, there can be no assurance that any such approval
or other action, if needed, would be obtained or would be obtained without
substantial conditions or that if such approvals were not obtained or such other
actions were not taken, adverse consequences might not result to the Company's
business, or certain parts of the Company's business might not have to be
disposed of, any of which could cause the Purchaser to elect to terminate the
Offer without the purchase of Shares thereunder under certain conditions. See
Section 15.
STATE TAKEOVER STATUTES. A number of states have adopted laws that purport,
to varying degrees, to apply to attempts to acquire corporations that are
incorporated in, or that have substantial assets, stockholders, principal
executive offices or principal places of business or whose business operations
otherwise have substantial economic effects in, such states. The Company,
directly or through subsidiaries, conducts business in a number of states
throughout the United States, some of which have enacted such laws.
In EDGAR V. MITE CORP., the Supreme Court of the United States invalidated
on constitutional grounds the Illinois Business Takeover Statute which, as a
matter of state securities law, made takeovers of corporations meeting certain
requirements more difficult. However, in 1987 in CTS CORP. V. DYNAMICS CORP. OF
AMERICA, the Supreme Court held that the State of Indiana could, as a matter of
corporate law, constitutionally disqualify a potential acquiror from voting
shares of a target corporation without the prior approval of the remaining
stockholders where, among other things, the corporation is incorporated in, and
has a substantial number of stockholders in, the state. Subsequently, in TLX
ACQUISITION CORP. V. TELEX CORP., a Federal District Court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma in that they would subject such
corporations to inconsistent regulations. Similarly, in TYSON FOODS, INC. V.
MCREYNOLDS, a Federal District Court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the United States Court of
Appeals for the Sixth Circuit.
The Company is incorporated under the laws of the State of Delaware. In
general, Section 203 of the DGCL ("Section 203") prevents an "interested
stockholder" (including a person who has the right to acquire 15% or more of the
corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other actions) with a
Delaware corporation for a period of three years following the date such person
became an interested stockholder. The Company Board approved for purposes of
Section 203 the entering into by the Purchaser, DCNA and the Company of the
Merger Agreement and the Stock Purchase Agreement by DCNA and DDC Holdings and
the consummation of the transactions contemplated thereby and has taken all
appropriate action so that Section 203, with respect to the Company, will not be
applicable to DCNA and the Purchaser by virtue of such actions.
If any government official or third party should seek to apply any state
takeover law to the Offer or the Merger or other business combination between
the Purchaser or any of its affiliates and the Company, the Purchaser will take
such action as then appears desirable, which action may include challenging the
39
applicability or validity of such statute in appropriate court proceedings. In
the event it is asserted that one or more state takeover statutes is applicable
to the Offer or the Merger and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser
might be required to file certain information with, or to receive approvals
from, the relevant state authorities or holders of Shares, and the Purchaser
might be unable to accept for payment or pay for Shares tendered pursuant to the
Offer, or be delayed in continuing or consummating the Offer or the Merger. In
such case, the Purchaser may not be obligated to accept for payment or pay for
any tendered Shares. See Section 15.
UNITED STATES ANTITRUST COMPLIANCE. Under the HSR Act and the rules that
have been promulgated thereunder by the Federal Trade Commission (the "FTC"),
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the FTC and certain waiting period
requirements have been satisfied. The purchase of Shares pursuant to the Offer
is subject to such requirements.
Pursuant to the requirements of the HSR Act, the Purchaser expects to
file a Notification and Report Form with respect to the Offer and Merger with
the Antitrust Division and the FTC shortly. The waiting period applicable to the
purchase of Shares pursuant to the Offer will expire at 11:59 p.m., New York
City time, 15 days after the date on which the Purchaser makes such filing.
However, prior to such time, the Antitrust Division or the FTC may extend the
waiting period by requesting additional information or documentary material
relevant to the Offer from the Purchaser. If such a request is made, the waiting
period will be extended until 11:59 p.m., New York City time, on the tenth day
after substantial compliance by the Purchaser with such request. Thereafter,
such waiting period can be extended only by court order.
The Antitrust Division and the FTC scrutinize the legality under the
antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer. At any time before or after the consummation of
any such transactions, the Antitrust Division or the FTC could take such action
under the antitrust laws of the United States as it deems necessary or desirable
in the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or seeking divestiture of the Shares so acquired or
divestiture of substantial assets of DCNA or the Company. Private parties
(including individual States) may also bring legal actions under the antitrust
laws of the United States. The Purchaser does not believe that the consummation
of the Offer will result in a violation of any applicable antitrust laws.
However, there can be no assurance that a challenge to the Offer on antitrust
grounds will not be made, or if such a challenge is made, what the result will
be. See Section 15, including conditions with respect to litigation and certain
governmental actions and Section 11 for certain termination rights.
EEA AND EUROPEAN NATIONAL MERGER REGULATION. DCNA and the Company each
conduct substantial operations in the European Economic Area. Council Regulation
(EEC) 4064/89, as amended, and Article 57 of the European Economic Area
Agreement require that concentrations with a "Community or EFTA dimension" be
notified in prescribed form to the Commission of the European Communities for
review and approval. In these cases, the European Commission, as opposed to the
individual countries within the European Economic Area, will, with certain
exceptions, have exclusive jurisdiction to review the concentration. Approval by
the European Commission is, with certain very limited exceptions, required prior
to completion of transactions, with "Community or EFTA dimensions."
DCNA and the Company have determined that the Offer and the Merger have a
"community dimension," and thus, intend to file notification in the prescribed
form with the European Commission in accordance with the European Regulation
promptly.
This filing will trigger a one-month review period in which the European
Commission is required to determine whether the proposed Merger is compatible
with the European common market or that there is sufficiently "serious doubt"
about the proposed Merger's compatibility with the common market to require a
more complete review of the proposed merger.
The one-month review period can be extended to six weeks if the parties
offer undertakings to address certain concerns the European Commission may have.
If after the initial one-month (or six weeks) review
40
period, the European Commission continues to have serious doubts regarding the
compatibility of the Merger with the European common market, the total review
period can be as long as five months from the date of complete notification.
During the review process conditions can be imposed and obligations by the
parties may become necessary.
OTHER FILINGS. DCNA and the Company each conduct operations in a number of
foreign countries, and filings may have to be made with foreign governments
under their pre-merger notification statutes. The filing requirements of various
nations are being analyzed by the parties and, where necessary, such filings
will be made.
17. FEES AND EXPENSES.
J.P. Morgan Securities Inc. is acting as the Dealer Manager in connection
with the Offer and DCNA's proposed acquisition of the Company. J.P. Morgan will
receive reasonable and customary compensation for its services relating to the
Offer and will be reimbursed for certain out-of-pocket expenses. DCNA and the
Purchaser will indemnify J.P. Morgan and certain related persons against certain
liabilities and expenses in connection with its engagement, including certain
liabilities under the federal securities laws.
DCNA and the Purchaser have retained MacKenzie Partners, Inc. to be the
Information Agent and ChaseMellon Shareholder Services L.L.C. to be the
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telecopy, telegraph and personal interview
and may request banks, brokers, dealers and other nominees to forward materials
relating to the Offer to beneficial owners of Shares.
The Information Agent and the Depositary each will receive reasonable and
customary compensation for their respective services in connection with the
Offer, will be reimbursed for reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under federal securities laws.
Neither of DCNA nor the Purchaser will pay any fees or commissions to any
broker or dealer or to any other person (other than to the Dealer Manager, the
Depositary and the Information Agent) in connection with the solicitation of
tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and
trust companies will, upon request, be reimbursed by the Purchaser for customary
mailing and handling expenses incurred by them in forwarding offering materials
to their customers.
18. MISCELLANEOUS.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, the Purchaser may, in its discretion, take such action as
it may deem necessary to make the Offer in any such jurisdiction and extend the
Offer to holders of Shares in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF DCNA OR THE PURCHASER NOT CONTAINED HEREIN OR IN THE
LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, together with exhibits furnishing certain additional information with
respect to the Offer, and may file amendments thereto. In addition, the Company
has filed with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 under the
Exchange Act, setting forth the recommendation of the Company Board with respect
to the Offer and the reasons for such recommendation and furnishing certain
additional related information. A copy of such documents, and any amendments
thereto, may be examined at, and copies may be obtained from, the SEC (but not
the regional offices of the SEC) in the manner set forth under Section 7 above.
DIESEL PROJECT DEVELOPMENT, INC.
July 31, 2000
41
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF DAIMLERCHRYSLER AG,
DCNA AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF DAIMLERCHRYSLER AG.
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each member of the Supervisory Board and Management Board
(substantially the same as directors and executive officers) of DaimlerChrysler
AG. Unless otherwise indicated, each such person is a citizen of the Federal
Republic of Germany.
SUPERVISORY BOARD SUPERVISORY BOARD POSITION;
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
HILMAR KOPPER.......................... Chairman, Supervisory Board. Chairman, Supervisory Board
Taunusanlage 12 of Deutsche Bank AG. Supervisory Board Memberships:
60325 Frankfurt am Main Akzo-Nobel N.V., Bayer AG, Solvay S.A. and Unilever N.V.;
Germany Director, Xerox Corp.
ERICH KLEMM............................ Deputy Chairman, Supervisory Board. Chairman of the
Tubinger Allee 2 Corporate Works Council, DaimlerChrysler AG and
71065 Sindelfingen DaimlerChrysler Group.
Germany
ROBERT E. ALLEN........................ Member, Supervisory Board. Retired Chairman of the Board
101 JFK Parkway and Chief Executive Officer of AT&T Corp. Director,
Room ID403 Bristol-Myers Squibb Co. and PepsiCo.
Short Hills, NJ 07078
Citizen of the United States of America
WILLI BOHM............................. Member, Supervisory Board. Senior Manager Wage Accounting,
Daimlerstrasse 1 Member of the Works Council, Worth Plant, DaimlerChrysler
76744 Worth am Rhein AG.
Germany
SIR JOHN P. BROWNE..................... Member, Supervisory Board. Chief Executive Officer of BP
Britannic House Amoco p.l.c. Director, Intel Corporation and Goldman Sachs
1 Finsbury Circus Inc.
London EC2M 7BA
Great Britain
Citizen of England
MANFRED GOBELS......................... Member, Supervisory Board. Director Service and Mobility
Plieninger Strasse 140 Concept, Chairman of the Management Representative
70567 Stuttgart Committee, DaimlerChrysler Group.
Germany
RUDOLF KUDA............................ Member, Supervisory Board. Retired Head of Department,
Lyoner Strasse 32 Executive Council, German Metal Workers' Union.
60528 Frankfurt am Main
Germany
I-1
SUPERVISORY BOARD POSITION;
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
ROBERT J. LANIGAN...................... Member, Supervisory Board. Chairman Emeritus of Owens-
10th Floor, One Seagate Illinois, Inc. Director, IMS Health and Owens-Illinois,
Toledo, OH 43666 Inc.
Citizen of the United States of America
HELMUT LENSE........................... Member, Supervisory Board. Chairman of the Works Council,
Mercedesstrasse 136 Unterturkheim Plant, DaimlerChrysler AG.
70327 Stuttgart
Germany
PETER A. MAGOWAN....................... Member, Supervisory Board. Retired Chairman of the Board
Candlestick Park of Safeway, Inc. President and Managing General Partner of
San Francisco, CA 94124 San Francisco Giants. Director, Safeway Inc. and
Citizen of the United States of America Caterpillar Inc.
GERD RHEUDE............................ Member, Supervisory Board. Chairman of the Works Council,
Daimlerstrasse 1 Worth Plant, DaimlerChrysler AG.
76744 Worth am Rhein
Germany
HERBERT SCHILLER....................... Member, Supervisory Board. Chairman of the Corporate Works
Mergenthaler Allee 42 Council, DaimlerChrysler Services (debis) AG.
65760 Eschborn
Germany
DR. RER. POL. MANFRED SCHNEIDER........ Member, Supervisory Board. Chairman of the Board of
Kaiser-Wilhelm-Allee Management of Bayer AG. Supervisory Board Memberships:
Hochhaus W1 Allianz AG, Metro AG and RWE AG.
51368 Leverkusen
Germany
PETER SCHONFELDER...................... Member, Supervisory Board. Chairman of the Works Council,
Haunstetterstrasse 225 Augsburg Plant, DaimlerChrysler Aerospace AG.
86179 Augsberg
Germany
G. RICHARD THOMAN...................... Member, Supervisory Board. President and Chief Executive
Bldg. 100 Officer of Xerox Corporation. Director, Fuji Xerox Company
First Stamford Place, 2nd Floor Ltd., General Electric Investments Equity and Union
Stamford, CT 06904 Bancaire Privee.
Citizen of the United States of America
BERNHARD WALTER........................ Member, Supervisory Board. Supervisory Board Memberships:
c/o Dresdner Bank AG Bilfinger+Berger Bauaktiengesellschaft, Degussa-Huls AG,
Jurgen-Ponto-Platz 1 Deutsche Lufthansa AG, Deutsche Telekom AK, Heidelberger
60329 Frankfurt am Main Zement AG, Henkel KGaA, Metallgesellschaft AG, Staatliche
Germany Porzellan-Manufaktur Meissen GmbH and Thyssen Krupp AG.
I-2
SUPERVISORY BOARD POSITION;
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
LYNTON R. WILSON....................... Member, Supervisory Board. Chairman of the Board of BCE
Suite 4700 Inc. Director, Imperial Oil Limited, Ontario Power
181 Bay Street Generation Inc, Bell Canada International Inc., Nortel
P.O. Box 794 Networks Corp., DaimlerChrysler Canada Inc., Team Canada
Toronto, Ontario Inc. and JP Morgan & Co.
Canada M5J 2T3
Citizen of Canada
DR.-ING. MARK WOSSNER.................. Member, Supervisory Board. Chairman of the Supervisory
Carl-Bertelsmann-Strasse 270 Board of Bertelsmann AG. Supervisory Board Memberships:
33311 Gutersloh Druck- und Verlagshaus Gruner+Jahr AG (Chairman),
Germany Bertelsmann Arvato AG and Bertelsmann Buch AG.
BERNHARD WURL.......................... Member, Supervisory Board. Head of Department, Executive
Lyoner Strasse 32 Council, German Metalworkers' Union. Supervisory Board
60528 Frankfurt am Main Memberships: Deutsche Babcock AG.
Germany
STEPHEN P. YOKICH...................... Member, Supervisory Board. President of International
Solidarity House Union United Automobile, Aerospace and Agricultural
8000 E. Jefferson Avenue Implement Workers of America (UAW); Director, Blue Cross
Detroit, MI 48214 Blue Shield of Michigan (BCBSM).
Citizen of the United States of America
MANAGEMENT BOARD
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
JURGEN E. SCHREMPP..................... Chairman, Management Board (1998 to present). Chairman of
Epplestrasse 225 the Board of Management of Daimler-Benz AG.
70567 Stuttgart
Germany
DR. RER. POL. MANFRED BISCHOFF......... Member, Management Board responsible for Aerospace and
Epplestrasse 225 Non- Automotive segments (1998 to present); Member,
70567 Stuttgart Management Board of Daimler-Benz AG and Chief Executive
Germany Officer of Daimler-Benz Aerospace AG.
DR. RER. POL. ECKHARD CORDES........... Member, Management Board responsible for Corporate
Epplestrasse 225 Development and IT-Management (including responsibility
70567 Stuttgart for MTU Friedrichshafen und TEMIC) (1998 to present);
Germany Member, Management Board of Daimler-Benz AG--Corporate
Development and Directly Managed Businesses; Deputy
Member, Management Board--Corporate Development and
Directly Managed Businesses; Senior Vice
President--Corporate Development.
I-3
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
GUNTHER FLEIG.......................... Member, Management Board responsible for Human Resources &
Epplestrasse 225 Labor Relations Director (1999 to present); President of
70567 Stuttgart DaimlerChrysler France, DaimlerChrysler Holding France and
Germany Head of the Corporate Representation Office; President of
Mercedes-Benz France; Head of European Sales Projects,
Mercedes-Benz AG.
THOMAS C. GALE......................... Member, Management Board responsible for Product
1000 Chrysler Drive Development, Design Chrysler Group & Passenger Car
Auburn Hills, Michigan 48326-2766 Operations (1998 to present); Executive Vice President of
Citizen of the United States of America Chrysler Corporation--Product Strategy, Design and
External Affairs and General Manager--Jeep Operations;
Executive Vice President--Product Development; Executive
Vice President--Product Design and International
Operations.
DR. IUR. MANFRED GENTZ................. Member, Management Board responsible for Finance and
Epplestrasse 225 Controlling (1998 to present); Member, Management Board of
70567 Stuttgart Daimler-Benz AG--Finance & Controlling, Human Resources.
Germany
JAMES P. HOLDEN........................ Member, Management Board responsible for Chrysler Group
1000 Chrysler Drive (1998 to present); Executive Vice President of Chrysler
Auburn Hills, Michigan 48326-2766 Corporation--Sales and Marketing and General Manager--
Citizen of the United States of America Minivan Operations; Executive Vice President--Sales and
Marketing; Vice President--Quality, Capacity and Process
Management.
PROF JURGEN HUBBERT.................... Member, Management Board responsible for Mercedes-Benz
Epplestrasse 225 Passenger Cars and smart (1998 to present); Member,
70567 Stuttgart Management Board of Daimler-Benz AG--Passenger Cars;
Germany Member, Management Board of Mercedes-Benz AG--Passenger
Cars.
DR. IUR. KLAUS MANGOLD................. Member, Management Board responsible for Services (debis)
Epplestrasse 225 (1998 to present); Member, Management Board of
70567 Stuttgart Daimler-Benz AG and President and Chief Executive Officer
Germany of Daimler-Benz InterServices (debis) AG.
THOMAS W. SIDLIK....................... Member, Management Board responsible for Procurement &
1000 Chrysler Drive Supply Chrysler Group & Jeep Operations, (1998 to
Auburn Hills, Michigan 48326-2766 present); Executive Vice President of Chrysler
Citizen of the United States of America Corporation--Procurement & Supply; Vice President and
Chairman of Chrysler Financial Corporation and General
Manager--Small Car Operations.
GARY C. VALADE......................... Member, Management Board responsible for Global
1000 Chrysler Drive Procurement & Supply (1998 to present); Executive Vice
Auburn Hills, Michigan 48326-2766 President and Chief Financial Officer of Chrysler
Citizen of the United States of America Corporation.
I-4
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
PROF. KLAUS-DIETER VOHRINGER........... Member, Management Board responsible for Research &
Epplestrasse 225 Technology (1998 to present); Member, Management Board of
70567 Stuttgart Daimler-Benz AG--Research & Technology; Deputy Member,
Germany Management Board of Mercedes-Benz AG--Powertrain Unit
Commercial Vehicles.
DR.-ING DIETER ZETSCHE................. Member, Management Board responsible for Commercial
Epplestrasse 225 Vehicles (1998 to present); Member, Management Board of
70567 Stuttgart DaimlerChrysler AG--Sales and Marketing; Member,
Germany Management Board of Daimler-Benz AG--Sales and Marketing;
Member, Management Board of Mercedes-Benz AG--Passenger
Cars Development.
2. DIRECTORS AND EXECUTIVE OFFICERS OF DCNA.
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of DCNA. Unless otherwise
indicated, the current business address of each person is 1000 Chrysler Drive,
Auburn Hills, Michigan, 48326-2766. Unless otherwise indicated, each such person
is a citizen of the United States of America.
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
MANFRED GENTZ.......................... Chairman, Board of Directors. Member, Management Board
Epplestrasse 225 responsible for Finance and Controlling, DaimlerChrysler
70567 Stuttgart AG; Member, Management Board of Daimler-Benz AG--Finance
Germany and Controlling, Human Resources.
Citizen of the Federal Republic of
Germany
THOMAS P. CAPO......................... Member, Board of Directors. Senior Vice President and
Treasurer, DaimlerChrysler AG.
EDMUND J. LABATCH...................... Member, Board of Directors. Vice President, Treasurer,
DaimlerChrysler North American Holding Corporation.
KARL REINERT........................... Member, Board of Directors. Vice President, Risk
Epplestrasse 225 Controlling/ Project-Trade Finance (FR), DaimlerChrysler
70567 Stuttgart AG; CIO, Mercedes Benz United Kingdom.
Germany
Citizen of the Federal Republic of
Germany
PAUL WICK.............................. Member, Board of Directors. Senior Vice President, Finance
Epplestrasse 225 and Taxation, DaimlerChrylser AG.
70567 Stuttgart
Germany
Citizen of the Federal Republic of
Germany
I-5
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
T.P. DYKSTRA........................... Member, Board of Directors. Assistant Treasurer,
DaimlerChrysler North America Holding Corporation.
JOHN L. LOFFREDO....................... Vice President, Taxation, DaimlerChrysler North America
Holding Corporation.
3. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER.
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employments for the
past five years of each director and executive officer of the Purchaser. Unless
otherwise indicated, each such person is a citizen of the Federal Republic of
Germany.
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS
- ------------------------- -------------------------------
THOMAS P. CAPO......................... Senior Vice President and Treasurer, DaimlerChrysler AG;
1000 Chrysler Drive Director, Diesel Project Development, Inc.; President,
Auburn Hills, Michigan 48326-2766 Diesel Project Development, Inc.
Citizen of the United States of America
ARNE ANDERSON.......................... Director, M&A Automotive, DaimlerChrysler AG (1996 to
DaimlerChrysler AG present); Member, Legal Department, AEG AG; Director,
Mercedesstrasse 137 Diesel Project Development, Inc.; Vice President and
HPC: F601 Treasurer, Diesel Project Development, Inc.
D-70327 Stuttgart
Germany
JOACHIM DREES.......................... Senior Manager, M&A Automotive, DaimlerChrysler AG (1996
DaimlerChrysler AG to present); Senior Consultant, Baumgartner & Partner;
Mercedesstrasse 137 Director, Diesel Project Development, Inc.; Vice President
HPC: F601 and Secretary, Diesel Project Development, Inc.
D-70327 Stuttgart
Germany
I-6
- --------------------------------------------------------------------------------
Manually signed facsimile copies of the Letter of Transmittal, properly
completed and duly executed, will be accepted. The Letter of Transmittal,
certificates for Shares and any other required documents should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of the addresses
set forth below:
THE DEPOSITARY FOR THE OFFER IS:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
BY FACSIMILE
TRANSMISSION
(for Eligible
Institutions only):
(201) 296-4293
CONFIRM BY TELEPHONE:
(201) 296-4860
BY OVERNIGHT COURIER: BY MAIL: BY HAND:
Reorganization Reorganization Reorganization
Department Department Department
85 Challenger Road P.O. Box 3301 120 Broadway
Mail Stop--Reorg. South Hackensack, NJ 13th Floor
Ridgefield Park, NJ 07606 New York, NY 10271
07660
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager, at the addresses and telephone numbers set forth
below. Additional copies of this Offer to Purchase, the Letter of Transmittal,
the Notice of Guaranteed Delivery and related materials may be obtained from the
Information Agent or the Dealer Manager as set forth below and will be furnished
promptly at the Purchaser's expense. Stockholders may also contact their broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
Call Toll Free: (800) 322-2885
Call Collect: (212) 929-5500
THE DEALER MANAGER FOR THE OFFER IS:
J.P. MORGAN & CO.
60 Wall Street
New York, NY 10260-0060
Call Toll Free: (877) 576-7940