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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DANA CORPORATION
(Name of Subject Company)
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Dana Corporation
(Name of Person(s) Filing Statement)
Common Stock, Par Value $1.00 Per Share
(including the Associated Series A Junior
Participating Preferred Stock Purchase Rights)
(Title of Class of Securities)
235811 10 6
(CUSIP Number of Class of Securities)
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Michael L. DeBacker, Esq.
Vice President, General Counsel and Secretary
Dana Corporation
4500 Dorr Street
Toledo, Ohio 43615
(419) 535-4500
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of the Person(s) Filing Statement)
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With copies to:
Adam O. Emmerich, Esq.
David C. Karp, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
(212) 403-1000
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
TABLE OF CONTENTS
Item 1. Subject Company Information..................................1
Item 2. Identity and Background of Filing Person.....................1
Item 3. Past Contracts, Transactions, Negotiations and Agreements....2
Item 4. The Solicitation or Recommendation...........................6
Item 5. Persons/Assets Retained, Employed, Compensated or Used......19
Item 6. Interest in Securities of the Subject Company...............20
Item 7. Purposes of the Transaction and Plans or Proposals..........21
Item 8. Additional Information to be Furnished......................21
Item 9. Exhibits....................................................23
Annex A.......................................................................28
Annex B.......................................................................38
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Item 1. Subject Company Information.
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(a) The subject company is Dana Corporation, a Virginia
corporation (the "Company" or "Dana"). The address and telephone number of the
Company's principal executive offices are 4500 Dorr Street, Toledo, Ohio 43615
and (419) 535-4500.
(b) This Solicitation/Recommendation Statement on
Schedule 14D-9 (this "Statement") relates to the Company's Common Stock, par
value $1.00 per share (the "Shares"), including the associated rights to
purchase shares of the Company's Series A Junior Participating Preferred Stock,
no par value (the "Rights"), issued pursuant to the Rights Agreement, dated as
of April 25, 1996 (as amended from time to time, the "Rights Agreement"), by and
between the Company and The Bank of New York, as Rights Agent. Unless the
context requires otherwise, all references to the Shares include the Rights and
all references to the Rights include the benefits that may inure to holders of
Rights pursuant to the Rights Agreement. As of July 10, 2003, there were
148,637,211 Shares outstanding, and an additional 30,235,446 Shares reserved for
issuance under the Company's equity compensation plans, of which 19,027,535
Shares are issuable upon or otherwise deliverable in connection with the
exercise of outstanding options or are issuable in respect of restricted stock
units issued pursuant to such plans.
Item 2. Identity and Background of Filing Person.
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(a) Name and Address of Person Filing this Statement.
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The Company is the person filing this Statement. The
information about the Company's address and business telephone number in Item
1(a) above is incorporated herein by reference. The Company's website address is
www.dana.com. The information on the Company's website should not be considered
a part of this Statement.
(b) Tender Offer of the Purchaser.
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This Statement relates to the tender offer by Delta
Acquisition Corp. ("Offeror"), a wholly owned subsidiary of ArvinMeritor, Inc.
("ArvinMeritor"), to purchase (i) all outstanding Shares, and (ii) unless and
until validly redeemed by the board of directors of the Company (the "Board of
Directors" or the "Board"), the Rights, at a price of $15.00 per Share, net to
the seller in cash, without interest. The tender offer is being made on the
terms and subject to the conditions described in the Tender Offer Statement on
Schedule TO (together with the exhibits thereto, as amended the "Schedule TO"),
filed by ArvinMeritor and the Offeror with the Securities and Exchange
Commission (the "SEC") on July 9, 2003. The value of the consideration offered,
together with all of the terms and conditions applicable to the tender offer, is
referred to in this Schedule 14D-9 as the "Offer." The Schedule TO states that,
subject to the satisfaction or waiver of certain conditions, following
completion of the Offer, and in accordance with the Virginia Stock Corporation
Act (the "VSCA"), ArvinMeritor intends to cause the merger of the Offeror with
and into the Company (the "Proposed Merger," and together with the Offer and any
associated financing transactions, the "Proposed Transaction").
The Schedule TO states that the Offeror's and ArvinMeritor's
principal executive offices are located at 2135 West Maple Road, Troy, Michigan
48084 and their telephone number is (248) 435-1000.
Item 3. Past Contracts, Transactions, Negotiations and Agreements.
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Except as described in this Statement or in Annex A hereto, to
the knowledge of the Company, as of the date of this Statement, there are no
material agreements, arrangements or understandings, or any actual or potential
conflicts of interest, between the Company or its affiliates and (i) the
Company's executive officers, directors or affiliates or (ii) the Offeror,
ArvinMeritor or their respective executive officers, directors or affiliates.
The information set forth in Annex A hereto is incorporated herein by this
reference.
(a) Arrangements with Executive Officers and Directors of
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Dana.
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The Company's directors and executive officers have entered
into or participated in, as applicable, the various agreements and arrangements
discussed below. In the case of each plan or agreement discussed below in which
the term "change-of-control" applies, the consummation of the Offer would
constitute a change-of-control.
Cash Consideration Payable Pursuant to the Offer. If the
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Company's directors and executive officers were to tender any Shares they own
for purchase pursuant to the Offer, they would receive the same cash
consideration on the same terms and conditions as the other shareholders of the
Company. As of July 10, 2003, the Company's directors and executive officers
beneficially owned in the aggregate 325,966 Shares (excluding options to
purchase Shares, restricted stock units, stock units granted under the Company's
Additional Compensation Plan and Directors' Deferred Fee Plan, and shares of
restricted stock). If the directors and executive officers were to tender all of
their Shares for purchase pursuant to the Offer and those Shares were accepted
for purchase and purchased by the Offeror, the directors and officers would
receive an aggregate of $4,889,490 in cash. As discussed below in Item 4(d), to
the knowledge of the Company, none of the Company's executive officers,
directors, affiliates or subsidiaries currently intends to tender Shares held of
record or beneficially owned by such person for purchase pursuant to the Offer.
As of July 10, 2003, the Company's directors and executive
officers held options to purchase 3,828,775 Shares, 1,874,475 of which were
vested and exercisable as of that date, with exercise prices ranging from $15.33
to $60.09 and an aggregate weighted average exercise price of $34.18 per
Share. Upon a change-of-control of the Company, 1,954,300 unvested options to
purchase Shares held by directors and executive officers will fully vest and
become exercisable. Also, 386,864 unvested shares of restricted stock and
restricted stock units will fully vest and no longer be subject to
forfeiture in the event that there is a termination of the employment of the
grantees of such restricted stock by the Company following a change-of-control
in circumstances that would entitle the grantee to a severance benefit under his
or her change-of-control agreement, or, if the grantee is not a party to a
change-of-control agreement, in the event that the grantee's employment is
terminated by the Company or its successor following a change-of-control for any
reason. In addition, 104,842 vested restricted stock units will be paid out in
Shares in the event that the grantee's employment is terminated by the
Company or its successor for any reason following a change-of-control.
Employment Agreements. The Company's Chief Executive Officer,
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President and Chief Operating Officer, Joseph M. Magliochetti, has an employment
agreement with the
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Company. The term of his agreement is three years, with an
automatic one-year extension at the end of each year to maintain the full three-
year term unless either party gives notice not to extend the termination date,
or unless the agreement is terminated earlier by Mr. Magliochetti's death or
disability, by the Company for "cause" (as defined in his agreement), or,
following a change-of-control, by Mr. Magliochetti for "good reason" (as defined
in his agreement). The employment agreement provides that while Mr. Magliochetti
is employed by the Company, his base salary may be increased but not decreased.
The Compensation Committee of the Board of Directors (the "Compensation
Committee") approves his base salary annually. His base salary for the calendar
year 2003 is $970,000.
During his period of employment, Mr. Magliochetti is entitled
to participate in the Company's Additional Compensation Plan (the "ACP") and in
the Company's various employee benefit plans. In the event of a
change-of-control of the Company, he will be entitled to continue as a
participant in the Additional Compensation Plan during the remainder of the term
of his employment agreement, the minimum annual bonus award to which he will be
entitled during that period will be equal to 50% of his base salary, and his
awards will be payable in cash (not deferrable). If his employment is terminated
following a change-of-control, any previously deferred awards under the ACP will
be paid on an accelerated basis.
If Mr. Magliochetti is terminated by the Company without
"cause" (as defined in his agreement) or if, after a change-of-control of the
Company, he terminates his employment due to a "good reason" constructive
termination (as defined in his agreement), he will be entitled, until the
earliest of (i) the end of the term of the agreement, (ii) the date that is
three years after the termination or (iii) the date that he turns 65 years of
age (the "Termination Period"), to receive monthly compensation equal to his
highest average monthly compensation (reduced by the amounts payable to him
under any severance plan or policy of the Company), to continue his
participation under the Company's employee benefit plans and to receive credit
for service during the Termination Period. He will also be entitled to a
lump-sum payment in cash in an amount equal to the sum of (i) his accrued but
unpaid compensation, (ii) a pro-rata bonus for the portion of the fiscal year in
which the termination occurs that follows the date of termination and (iii) any
previously deferred compensation, including earnings and interest thereon. If
such termination of employment follows a change-of-control, he will immediately
receive such monthly compensation in a lump sum (discounted to the present
value) and any awards previously deferred under the ACP will be paid out.
If any excise tax is imposed under Section 4999 of the
Internal Revenue Code, as amended ("Section 4999"), on payments received by Mr.
Magliochetti as a result of a change-of-control of the Company, the Company will
pay him an amount that, after applicable taxes, is equal to the amount of the
excise tax.
The retirement benefit payable to Mr. Magliochetti under his
employment agreement is described in Annex A hereto under the heading "Pension
Plans," and is incorporated herein by reference. The pension and retirement
arrangements applicable to the Named Executive Officers (as defined below) are
described more fully in Annex A hereto under the heading "Pension Plans."
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Under his employment agreement, Mr. Magliochetti has agreed
not to disclose any confidential information about the Company to others while
employed by the Company or thereafter and not to engage in competition with the
Company for three years following his termination of employment (unless his
employment is terminated by the Company without "cause" or by him for "good
reason" following a change-of-control of the Company). In addition, if, during
the period that payments in respect of Mr. Magliochetti's supplemental pension
are being made (as discussed in Annex A hereto under the heading "Pension
Plans"), he engages in competition with the Company (unless his employment is
terminated by the Company without "cause" or by him for "good reason" following
a change-of-control of the Company), the Company may cease making such payments.
William J. Carroll, President - Automotive Systems Group,
Marvin A. Franklin, III, President - Dana International and Global Initiatives,
Robert C. Richter, Vice President and Chief Financial Officer, and Bernard N.
Cole, President - Heavy Vehicle Technologies & Systems Group (together with Mr.
Magliochetti, the "Named Executive Officers"), along with three other executive
officers of the Company, each have change-of-control agreements with the Company
that have the same material terms as Mr. Magliochetti's agreement, as described
above, except that they (i) do not provide an additional retirement benefit,
(ii) do not provide for a payment in the event that excise tax is imposed under
Section 4999 and (iii) only become operative upon a change-of-control of the
Company (if the executive is then in the employ of the Company). Should their
agreements become operative, each of Messrs. Carroll, Franklin, Richter and Cole
(together with the other three executive officers) would continue to participate
in all executive incentive plans with at least the same reward opportunities,
and with perquisites, fringe benefits and service credits for benefits at least
equal to those that were provided prior to the change-of-control. Messrs.
Carroll, Franklin, Richter and Cole (and the other three executive officers)
would be entitled to continue to receive no less than their base salaries as in
effect immediately prior to the change-of-control, so long as they are employed
by the Company, subject to annual increase (but not decrease) in the same manner
as Mr. Magliochetti, and an annual bonus in an amount not less than 50% of their
annual base salary.
Each of the Named Executive Officers (and the other three
executive officers) also has a related agreement with the Company which provides
that, in the event of a dispute related to his change-of-control agreement, the
Company will pay legal expenses he may incur to enforce the change-of-control
agreement.
Annual Incentives. The Company's Chief Executive Officer and
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other executive officers have an opportunity to earn annual bonuses under the
ACP, as described more fully in Annex A hereto under the heading "Annual
Incentives," which is incorporated herein by reference. Award opportunities vary
based on the individual's position and base salary. Actual bonuses are based on
the Company's success in achieving performance objectives that are established
in advance. These objectives are set annually based on the Company's short-term
strategic direction and the current economic climate.
In the event of a change-of-control of the Company, unless
otherwise provided, all awards deferred under the ACP, whether to a stock
account or an interest equivalent account, will be paid out promptly to
participants in a lump sum in cash. Stock units held in participants' stock
accounts will be deemed to have the value of the higher of (i) the average of
the closing
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price for the last trading day prior to the effective date of the
change-of-control and the last trading day of each of the two preceding thirty-
day periods, in each case as quoted on the New York Stock Exchange and (ii) the
highest per share consideration paid for Shares in the change-of-control
transaction (the "Stock Unit Value").
Amended and Restated Stock Incentive Plan; Restricted Stock
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Plans. Long-term equity incentives are granted to the Company's Chief Executive
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Officer and other executive officers under the Company's Amended and Restated
Stock Incentive Plan (the "Incentive Plan") and 1999 Restricted Stock Plan (the
"1999 Plan").
Under the Incentive Plan, upon the occurrence of a
change-of-control, all outstanding unexercised options and stock appreciation
rights will become fully exercisable for the remainder of their term and all
other awards will vest and become immediately due and payable. Pursuant to the
restricted stock agreements evidencing grants of restricted stock under the 1999
Plan, all restrictions on such restricted stock lapse (i) in the event that the
grantee's employment is terminated by the Company or its successor following a
change-of-control in circumstances that would entitle the grantee to a severance
benefit under his or her change-of-control agreement, or (ii) if there is no
change-of-control agreement, in the event that the grantee's employment is
terminated by the Company or its successor following a change-of-control for any
reason. Pursuant to the restricted stock agreements evidencing grants under the
Company's 1989 Restricted Stock Plan (the "1989 Plan"), all restrictions on
outstanding restricted stock will lapse upon the grantee's termination of
employment by the Company for any reason following a change-of-control. Under
the 1989 Plan and the 1999 Plan, restricted stock units will be paid out in
shares of stock upon a termination of employment for any reason following a
change-of-control. Further information on the Incentive Plan and 1999 Plan is
set forth in Annex A hereto under the heading "Equity Compensation Plan
Information," and is incorporated herein by reference.
1998 Directors' Stock Option Plan. All non-employee directors
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participate in the Company's 1998 Directors' Stock Option Plan (the "Director
Plan"). The Director Plan provides for the automatic annual grant to each
non-employee director of options to purchase 3,000 Shares. In the event of a
change-of-control of the Company, all outstanding unexercised stock options
issued under the Director Plan will become fully exercisable. Further
information on the Director Plan is set forth in Annex A hereto under the
headings "Equity Compensation Plan Information" and "Director Compensation," and
is incorporated herein by reference.
Director Deferred Fee Plan. Non-employee directors of the
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Company may elect to defer payment of their fees into the Company's Director
Deferred Fee Plan, either to a stock account or an interest equivalent account.
In the event of a change-of-control of the Company, except with respect to
participants who are residents of Canada, all amounts deferred under the
Director Deferred Fee Plan will be paid out to the participants in a lump sum in
cash. Stock units held in participants' stock accounts will be deemed to have
the Stock Unit Value. Further information on the Director Deferred Fee Plan is
set forth in Annex A hereto under the heading "Director Compensation," and is
incorporated herein by reference.
Pension Plans. The Named Executive Officers participate in the
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Company's Retirement, Excess Benefits and Supplemental Benefits Plans (the
"Pension Plans"). In the event
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of a change-of-control of the Company, participants in the Excess Benefits and
Supplemental Benefits Plans will receive a lump-sum payment of all benefits
previously accrued thereunder and will be entitled to continue to accrue
benefits thereunder, and certain transition benefits under the Retirement Plan
will accelerate. Further information on the Pension Plans is set forth in Annex
A hereto under the heading "Pension Plans," and is incorporated herein by
reference.
(b) Transactions with the Offeror and ArvinMeritor.
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Other than as disclosed in this Statement or Annex A hereto,
there are no material agreements, arrangements or understandings or any actual
or potential conflicts of interest, between the Company, or its executive
officers, directors or affiliates, on the one hand, and the Offeror,
ArvinMeritor or their respective executive officers, directors or affiliates, on
the other hand.
Item 4. The Solicitation or Recommendation.
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(a) Solicitation/Recommendation.
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After careful consideration, including a thorough review of
the Offer with its legal and financial advisors, and after taking into account
the recommendation of the Committee of Independent Directors (as defined below)
the Board of Directors by unanimous vote of all directors voting determined that
the Offer is inadequate, from a financial point of view, to holders of Shares
and that the Offer not in the best interests of either Dana or its shareholders.
The Board of Directors believes that the Offer undervalues Dana's businesses,
including its premier franchise in the automotive and heavy-duty vehicle supply
industries, and does not adequately reflect the true value of Dana's unique
market position and business opportunities. The Management and the Board believe
that the Company can deliver more value to its shareholders than that proposed
to be paid in the Offer by continuing to execute its business plan to enhance
operating performance and reduce the Company's debt. ACCORDINGLY, AND FOR THE
OTHER REASONS DESCRIBED IN MORE DETAIL BELOW, THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU REJECT THE OFFER AND DO NOT TENDER YOUR SHARES PURSUANT TO THE OFFER.
A form of letter communicating the Board of Directors'
recommendation to you and a press release relating to the recommendation to
reject the Offer are filed as Exhibits (a)(1) and (a)(2) to this document,
respectively, and are incorporated herein by reference.
(b) Background.
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In the spring of 2001, ArvinMeritor approached the Company to
express an interest in pursuing a joint venture combining ArvinMeritor's and the
Company's respective aftermarket businesses. The Company and ArvinMeritor
entered into a confidentiality agreement that limited the use of any
confidential information solely for the purpose of analyzing a potential
business relationship for the respective aftermarket businesses, and restricting
the parties from, among other things, disclosing "the fact that the parties are
participating in a study or exploration of a business relationship" or "the fact
that the parties have exchanged confidential information." In the late summer of
2001, the discussions terminated.
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On June 4, 2003, Mr. Larry D. Yost, President and Chief
Executive Officer of ArvinMeritor, telephoned Mr. Joseph M. Magliochetti,
Chairman of the Board and Chief Executive Officer of the Company, and expressed
ArvinMeritor's interest in acquiring the Company and informed Mr. Magliochetti
that ArvinMeritor's board of directors had authorized Mr. Yost to offer $14.00
in cash for each Share. Mr. Magliochetti told Mr. Yost that although he did not
believe there was any interest in pursuing a sale of the Company at this time he
would bring the matter to the Board of Directors. After this conversation, Mr.
Magliochetti contacted each of the Company's directors to inform them of the
conversation.
Later in the day on June 4, 2003, Mr. Magliochetti received
the following letter from Mr. Yost:
June 4, 2003
Mr. Joseph M. Magliochetti
Chairman of the Board and Chief Executive Officer
Dana Corporation
Dear Joe:
Thank you again for taking the time to talk with me earlier
today. As we discussed, I am pleased to present a proposal that
contemplates an acquisition of Dana by ArvinMeritor. I am confident
that this transaction offers an exciting opportunity to create value
for the shareholders of both our companies. In our industry,
consolidation presents an opportunity to further enhance shareholder
value as well as create a stronger company.
I've summarized our proposal in this letter to help you
facilitate its review with your Board and advisors. We would like to
begin discussions with you immediately in the hope of completing a
transaction as quickly as possible.
My Board of Directors has authorized me to offer consideration
of $14.00 in cash for each Dana share, representing a premium of 45%
over yesterday's closing price. As an alternative, we are prepared to
consider a mix of cash and stock consideration if it will facilitate a
transaction. Our proposed price represents full value, and we are
confident that our proposal will be well received by Dana shareholders.
Our objective is to retain the best and the brightest from
each of our organizations. As a result, we hope to integrate as many of
your employees as is practical into the ArvinMeritor family.
We based our proposal on publicly available information. If
you are willing to work with us to consummate a transaction
expeditiously, we may be prepared to analyze further whether a higher
value is warranted. As you can appreciate, our proposal is conditioned
upon the negotiation and execution of a definitive merger agreement
and, of course, the receipt of all necessary shareholder and regulatory
approvals. Regarding the required regulatory approvals, we have
carefully considered all relevant issues with the advice of counsel,
and we are confident that they can be obtained. In addition, financing
is not an issue.
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We have retained financial and legal advisors and they are
fully informed. We and they are prepared to meet with you and your
advisors. We believe it is in the best interests of our respective
shareholders for this transaction to proceed as expeditiously as
possible.
We are confident that you and your Board of Directors will
share our view that this proposal represents a unique and compelling
opportunity for your shareholders, creating a stronger combined company
that will be well positioned to succeed in the very competitive
automotive supply industry.
If you or any of your directors have any questions about our
proposal, please feel free to give me a call. I will make myself
available at any time. My contact numbers are (248) 435-3901 (office)
and 248-670-0498 (mobile). We do not intend to make this letter public.
My Board of Directors and I believe this is a very compelling
transaction for both of our companies and shareholders. Again, we are
excited about this transaction and are committed to getting this
transaction done.
I hope to hear back from you by the end of next week as I am
committed to reporting back to my Board. I look forward to hearing from
you.
Sincerely,
Larry D. Yost
Chairman and Chief Executive Officer
ArvinMeritor, Inc.
Shortly after receipt of the letter, Wachtell, Lipton, Rosen
& Katz, and Howrey, Simon, Arnold & White LLP, were retained to provide legal
advice in connection with ArvinMeritor's proposal.
The Board of Directors met telephonically on June 6, 2003,
with its legal advisors and the Company's management for preliminary discussions
regarding the proposal and to establish a process for properly evaluating the
proposal. The Board's legal advisors provided an overview of the duties of a
board of directors upon receipt of an unsolicited proposal such as the one
received from ArvinMeritor. Over the next few days, Credit Suisse First Boston
LLC ("Credit Suisse First Boston") and Deutsche Bank Securities Inc. ("Deutsche
Bank") were selected to act as financial advisors in connection with
ArvinMeritor's proposal and related matters.
On June 12, 2003, the Board met in person with its legal and
financial advisors and the Company's management to discuss ArvinMeritor's
unsolicited proposal and the Company's past and current business operations,
financial condition and future prospects. At the beginning of the meeting, Mr.
Fernando M. Senderos, a director, noted his role as Chairman and Chief Executive
Officer of DESC, S.A. de C.V. ("DESC"), and the potential that a conflict of
interest, real or apparent, could arise in the consideration of ArvinMeritor's
proposal given the
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business relationship between the Company and its affiliates and DESC and its
affiliates. Mr. Senderos, with the agreement of the Board, decided not to
participate in the consideration of ArvinMeritor's proposal, and, accordingly,
Mr. Senderos has not participated in any of the other meetings described in this
Statement. Management of the Company made presentations and responded to
questions regarding the Company's businesses, and historical financial and
projected results. The legal advisors discussed the Board's duties with the
Board and presented the Board with an overview of the terms of ArvinMeritor's
proposal and the potential antitrust and other legal issues relating to
ArvinMeritor's proposal. The financial advisors reviewed with the Board the
financial aspects of ArvinMeritor's proposal. After thorough discussions, the
Board of Directors went into executive session and, after asking certain of its
advisors and certain members of management to return for further discussion, by
the unanimous vote of all directors voting decided that the Company was not for
sale and that discussions with ArvinMeritor regarding its proposal would not be
productive. The Board also authorized the delivery of a letter to ArvinMeritor
communicating its view.
Following the Board of Directors' meeting, Mr. Magliochetti
telephoned Mr. Yost to express that the Board had carefully considered
ArvinMeritor's proposal and was not interested in the proposed business
combination with ArvinMeritor and that discussion as to any such transaction
would not be productive. Later on June 12, 2003, Mr. Magliochetti sent the
letter that the Board had discussed earlier that day, the text of which was:
June 12, 2003
Mr. Larry D. Yost
Chairman and CEO ArvinMeritor, Inc.
2135 West Maple Road
Troy, Michigan 48084
Dear Mr. Yost,
This will respond to your letter of June 4th. I shared your
letter with our Board of Directors during a telephonic meeting last
week, and we had a lengthy meeting in person today to carefully and
thoroughly consider your proposal. We have been advised in that
connection by able and experienced financial and legal advisors.
The Board is unanimous in concluding that Dana has no interest
whatsoever in pursuing a sale transaction with you, nor do we believe
that any other combination of our companies would be in the interests
of our shareholders. Discussion as to a sale transaction or any other
combination would not be productive. We are aggressively pursuing a
strategic business plan which we believe is the best way to maximize
value for our shareholders.
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We hope that you will respect our decision in this matter;
pursuing your proposal would be disruptive and counterproductive for
both of our shareholder constituencies.
Sincerely,
Joseph M. Magliochetti
On June 17, 2003, the Board of Directors received the
following letter from Mr. Yost reiterating ArvinMeritor's interest in acquiring
the Company:
June 16, 2003
Mr. Joseph M. Magliochetti
Mr. Benjamin F. Bailar
Mr. A. Charles Baillie, Jr.
Mr. Edmond M. Carpenter
Mr. Eric Clark
Ms. Cheryl W. Grise
Mr. Glen H. Hiner
Mr. James P. Kelly
Ms. Marilyn R. Marks
Mr. Richard B. Priory
Mr. Fernando M. Senderos
To the Board of Directors of Dana Corporation:
On June 4, 2003 I spoke with and wrote to Joe Magliochetti, Chairman
and Chief Executive Officer of Dana Corporation, proposing a
combination of ArvinMeritor and Dana in which ArvinMeritor will acquire
all of the outstanding shares of Dana for $14.00 per share in cash.
This will provide your shareholders with a premium of 45% over Dana's
closing stock price on June 3, 2003, the last trading day before I
submitted our proposal to Mr. Magliochetti in writing.
On June 13, 2003 we received a letter from Mr. Magliochetti stating
that Dana had no interest whatsoever in pursuing a business combination
with ArvinMeritor or entering into discussions with ArvinMeritor
regarding our merger proposal. Notwithstanding that Mr. Magliochetti
twice indicated to me during our initial phone conversation on June 4,
2003 that Dana was not for sale and further reiterated this in our
phone conversation on June 12, 2003, we were surprised that the Dana
Board decided to forgo even an initial meeting with us to discuss our
proposal in light of the significant value we are prepared to offer
your shareholders.
I am writing to reiterate our serious interest in pursuing a
transaction between ArvinMeritor and Dana and to provide further
strategic perspective as to why it makes sense to bring our two
companies together. After a thorough review with our financial and
legal advisors of the publicly available information concerning Dana,
the ArvinMeritor Board has concluded that the strategic and financial
benefits of a business combination to both
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of our companies' shareholders and other interested constituencies are
simply too compelling to ignore.
The combination of ArvinMeritor and Dana will create a stronger Tier
One supplier company providing numerous technological and service
benefits for our combined worldwide light vehicle, commercial truck and
aftermarket customers. This transaction will bring together the right
combination of innovation, capabilities and resources to establish a
more significant global enterprise.
Together, ArvinMeritor and Dana will become a true industry leader with
the strategic position that will allow us to better serve our
customers, employees and shareholders. A combined ArvinMeritor-Dana
will extend our market reach. Importantly, the combined company will
have the increased capability to accelerate growth; make strategic
investments; and enlarge our diversified product, service and market
portfolio.
In addition to the compelling strategic fit of our respective product
portfolios, a business combination of our two companies will also
create significant financial benefits, including considerable sales,
operating and cost synergies beyond what either company could achieve
on its own. We believe these benefits will better position us to
compete and succeed in the increasingly competitive automotive supply
industry.
A combination of Dana and ArvinMeritor will also afford us the
opportunity to combine the skills of each of our talented workforces.
As I indicated in my initial letter to Mr. Magliochetti, our objective
is to complete a combination that retains the best and the brightest
from each of our organizations. As a result, we hope to integrate as
many of your employees as is practical into the ArvinMeritor family. We
have a proven track record of successfully integrating large-scale
transactions, as evidenced by the merger of our predecessor companies,
Arvin and Meritor. I am confident that we will be able to join our two
companies together to build a stronger, more efficient leader in the
automotive supply industry that is well positioned for future growth
and success.
We are confident that our attractive all-cash proposal will be well
received by Dana's shareholders and it is our hope that the Dana Board
recognizes the significant benefits to Dana and its shareholders.
Moreover, our proposal would permit your shareholders to realize this
substantial cash value today. Because it remains our strong preference
to work together with the Dana Board, we are flexible in considering a
mix of cash and stock consideration if it will facilitate a
transaction. In addition, if you are willing to work with us to quickly
consummate a transaction, we may be prepared to analyze further whether
a higher value is warranted. We are ready to meet with you on a
moment's notice. We hope you will reconsider your decision and meet
with ArvinMeritor and its advisors to discuss our proposal.
Our merger proposal is conditioned upon the negotiation and execution
of a definitive merger agreement and the receipt of necessary
shareholder and regulatory approvals. With the advice of counsel, we
have carefully considered all relevant issues regarding the required
regulatory approvals, and we are confident that they can be obtained.
As I mentioned in my last letter, financing is not an issue.
-11-
I would like to reiterate our strong preference to work cooperatively
within the framework of a negotiated transaction. To this end, we and
our advisors are prepared to meet with you and your advisors
immediately to discuss the terms of our proposal and to negotiate a
definitive agreement. I am confident that if we work together we can
quickly close a transaction that is in the best interests of both
companies' shareholders and other interested constituencies.
I look forward to hearing from you in the near future.
Sincerely,
Larry D. Yost
Chairman and Chief Executive Officer
ArvinMeritor, Inc.
On June 18, 2003, the Board of Directors met with its legal
and financial advisors and the Company's management telephonically to again
consider ArvinMeritor's proposal. The Board of Directors discussed with its
legal and financial advisors, and the Company's management, matters relating to
ArvinMeritor's proposal that were previously discussed with the Board and was
updated as appropriate. Following full discussion, the Board went into
executive session and, after asking certain of its advisors and certain members
of management to return for further discussion, again by the unanimous vote of
all directors voting decided that ArvinMeritor's proposal was not attractive in
light of the Company's plans and prospects and that discussions with
ArvinMeritor about the proposal would not be productive. The Board again
authorized Mr. Magliochetti to respond to the reiterated proposal in writing.
The next morning, Mr. Magliochetti sent the following letter
that had been discussed by the Board of Directors in response to Mr. Yost's
letter of June 16.
June 19, 2003
Mr. Larry D. Yost
Chairman and CEO
ArvinMeritor, Inc.
2135 West Maple Road
Troy, Michigan 48084
Dear Mr. Yost:
This will respond to your letter of June 16. As was the case
with your prior letter of June 4, this letter has been provided to each
member of our Board of Directors. And our Board has met again to review
it, in detail, with the assistance of our financial and legal advisors.
Our Board has now met and discussed your proposal on three
separate occasions. Following that process, the Board has asked me to
once again convey to you our unanimous conclusion: that Dana has no
interest whatsoever in pursuing a sale transaction
-12-
with ArvinMeritor. The Board is equally unanimous in concluding that no
other combination of our companies would be in the best interests of
Dana's shareholders. There is absolutely no division of opinion on this
matter among our Directors. Accordingly, any meeting or discussion as
to a sale transaction or any other combination would not be productive.
Again, we expect that you will respect our unanimous and
carefully considered decision in this matter; ArvinMeritor's continued
pursuit of its proposal would be disruptive and counterproductive for
both of our shareholder constituencies.
Sincerely,
Joseph M. Magliochetti
On July 8, 2003, concurrently with ArvinMeritor's issuance of
a press release announcing its intention to commence the Offer, Mr. Yost called
Mr. Magliochetti to inform him of the Offer and sent Mr. Magliochetti the
following letter:
July 8, 2003
Mr. Joseph Magliochetti
Chairman, President and Chief Executive Officer
Dana Corporation
4500 Dorr Street
Toledo, OH 43615
Dear Joe:
In light of the dramatic changes taking place in our industry, the
attractive cash price we are prepared to offer your shareowners and the
compelling strategic fit of our two companies, our Board was surprised
and disappointed when in response to our repeated efforts to effect a
business combination of our two companies you informed us that Dana has
"no interest whatsoever" in pursuing a transaction.
Because Dana has been unwilling to proceed with a business combination
or even have an initial meeting with us to discuss our proposal, we are
taking our offer directly to Dana's shareowners. We write to inform you
that we will publicly disclose this morning our intention to commence a
tender offer to purchase all of the outstanding shares of Dana for
$15.00 per share in cash. Our improved offer above the $14.00 per share
that we indicated to you in our earlier communications demonstrates our
full commitment to consummating this transaction. We are hopeful that
your Board recognizes the significant benefits of our offer to Dana and
its shareowners.
We believe this is the most effective way to bring our two companies
together and we are confident that our offer will be well received by
your shareowners. Notwithstanding the significant uncertainties facing
Dana and its business today, our offer permits Dana's shareowners to
realize a premium of 56% over Dana's closing stock price on June 3,
-13-
2003, the last trading day before ArvinMeritor submitted its first
proposal to Dana in writing. It also represents a premium of 39% over
Dana's average closing stock price for the last 30 trading days and a
premium of 25% over Dana's closing stock price on July 7, 2003, the
last trading day before today's announcement.
Although we have found it necessary to go directly to your shareowners
with our offer, it remains our strong preference to work together with
the Dana Board to reach a mutually agreeable transaction. To this end,
we and our advisors are prepared to meet with you and your advisors to
discuss the terms of our offer and to negotiate a definitive agreement.
As I have expressed to you, if you are willing to work with us to
consummate a transaction, we may be prepared to analyze further whether
a higher value is warranted. In addition, we are flexible in
considering a mix of cash and stock if it will facilitate a
transaction.
I am confident that if we work together we can quickly close a
transaction that is in the best interests of both companies'
shareowners and other interested constituencies. We hope you will
reconsider your decision and meet with us.
On behalf of the ArvinMeritor Board of Directors,
Sincerely,
Larry D. Yost
Chairman and Chief Executive Officer
Later on July 8, 2003, the Board of Directors met
telephonically to discuss ArvinMeritor's letter and the related press release.
The Board discussed the process for performing a thorough analysis of the
anticipated tender offer when additional information became available and the
legal requirements and obligations which would become applicable as a result of
the Offer. Later that day, the Company issued a press release regarding the
anticipated tender offer.
On July 9, 2003, ArvinMeritor issued a press release
announcing the commencement of the offer at $15.00 per Share and ArvinMeritor
and Offeror filed the Schedule TO, commencing the Offer.
On July 10, 2003, the Company issued the following press
release:
TOLEDO, Ohio, July 10 -- Dana Corporation (NYSE: DCN - News)
issued the following statement today in response to the announcement
yesterday by ArvinMeritor, Inc. (NYSE: ARM - News) that it commenced a
tender offer for the outstanding Dana shares.
Dana is evaluating ArvinMeritor's tender offer. As indicated
Tuesday, Dana's Board of Directors will advise Dana shareholders of its
position regarding the offer and state its reasons for such position
within 10 business days of the commencement of the
-14-
offer. Dana continues to urge its shareholders to defer making a
determination whether to accept or reject ArvinMeritor's offer until
they have been advised of Dana's position with respect to the offer.
Dana's shareholders, and its customers, suppliers and
employees, are strongly advised to carefully read Dana's
solicitation/recommendation statement, when it becomes available,
regarding the tender offer referred to in this press release, because
it will contain important information, which should be considered
carefully before any decision is made with respect to the tender offer.
Copies of the solicitation/recommendation statement, which will be
filed by Dana with the Securities and Exchange Commission, will be
available free of charge at the SEC's web site at www.sec.gov, or at
the Dana web site at www.dana.com, and will also be available, without
charge, by directing requests to Dana's Investor Relations Department.
On July 11, 2003, the Board of Directors met with its legal
and financial advisors and the Company's management to review developments with
respect to the Offer. Among other things, at this meeting the Board was updated
as to the status of the Offer, further details as to its terms and conditions,
and the timetable for the Board's response under applicable law. The Board also
received advice from its legal advisors concerning its duties in responding to
the Offer, and was updated as to the litigation that had been commenced by
ArvinMeritor with respect to the Offer. The Board discussed the appropriate
framework for its consideration of the Offer, and, among other things, the
desirability of providing a structure for the independent members of the Board
to convene regularly as a committee to review and discuss, with such advice as
they deemed appropriate, matters relevant to the Board's response to the Offer.
In addition, at the July 11 meeting, the Board determined not to redeem the
Rights or otherwise render them inapplicable to the Offer and resolved to delay
the Distribution Date (as defined in the Rights Agreement) of the Rights, as
more fully described under "Board Action Regarding Rights Agreement" in Item 8
below. The Board also authorized the retention of Goldman, Sachs & Co.
("Goldman Sachs") as an additional financial advisor in connection with the
Offer.
On July 14, 2003, Goldman Sachs was retained as an additional
financial advisor to the Board in connection with the Offer.
On July 18, 2003, the Board met again to review and consider
the Offer. At the commencement of the meeting, the Board resolved to create a
committee of independent directors (consisting of Ms. Grise and Ms. Marks and
Messrs. Bailar, Baillie, Carpenter, Clark, Hiner, Kelly and Priory) (the
"Committee of Independent Directors") to consider and evaluate the Offer,
possible strategic alternatives and other matters as the Committee of
Independent Directors may determine and provide reports and recommendations to
the Board regarding these matters. The Board elected Mr. Hiner as Chairman of
the Committee of Independent Directors. This structure is consistent with the
Board's periodic practice of holding executive sessions of non-management
directors in conjunction with regular Board meetings. The Committee of
Independent Directors also determined to retain Skadden, Arps, Slate, Meagher &
Flom LLP, as special counsel to the Committee of Independent Directors, and the
Board agreed with such retention.
-15-
The July 18 Board meeting continued with the Board receiving
written and oral presentations concerning its legal duties and the legal and
regulatory framework relevant to the Offer from a representative of Wachtell,
Lipton, Rosen & Katz, counsel to the Board, and written and oral presentations
from representatives of Credit Suisse First Boston and Deutsche Bank concerning
certain financial information relevant to consideration of the Offer. These
latter presentations included a review of certain financial matters concerning
the Offer, such as calculations of the offer price premiums and implied
multiples to earnings per share, earnings before interest and taxes and other
financial metrics, and reaction to the Offer by investors, equity analysts and
rating agencies. A representative of management then presented the Company's
near-term outlook and long-range management forecast, including the assumptions
on which the latter was based, after which the financial advisors
commented on the process they had engaged in with management to review the long-
term forecast. The financial advisors also presented a financial analysis of
the Company, which included a selected comparable companies analysis, a selected
comparable acquisitions analysis, and a discounted cash flow analysis, including
a discounted cash flow analysis demonstrating the sensitivities of the analysis
to assumptions contained in management's long-range forecast. In the course of
these presentations, the Board asked questions and, following the conclusion of
the presentations to the Board, the Committee of Independent Directors met
separately with representatives of Skadden, Arps, Slate, Meagher & Flom LLP, its
special counsel, to further review and discuss matters related to the Offer.
At a meeting held on July 21, 2003, the Board met with its
legal and financial advisors, the Committee of Independent Directors legal
advisor and the Company's management to further discuss the Offer and
financial, legal and other considerations deemed relevant to the Offer. Among
other things, the Board reviewed and discussed the factors and considerations
summarized under "Reasons for the Recommendation" contained herein. Also at this
meeting Credit Suisse First Boston and Deutsche Bank delivered to the Board of
Directors their respective opinions, dated July 21, 2003, to the effect that,
as of the dated of such opinions, the Offer was inadequate, from a
financial point of view, to holders of Shares. At the conclusion of the July
21, 2003 meeting, in light of the delay in advising Dana of the prior contacts
between Deutsche Bank and ArvinMeritor described in Item 5, Deutsche Bank and
the Board agreed that Deutsche Bank would not continue Deutsche Bank's
financial advisory engagement in connection with the Offer and the Proposed
Transaction, but would continue to serve the Company in other advisory and
financing matters as are mutually agreed. In addition, on July 21, 2003, the
Committee of Independent Directors met separately with its legal advisors to
review and discuss matters relating to the Offer. In recognition of the fact
that their service on the Committee of Independent Directors would require a
substantial commitment of time, the Board authorized the payment of annual
stipends, meeting fees and expense reimbursement for members and the Chairman of
the Committee of Independent Directors, on the same basis as provided to members
of the Audit, Compensation and Advisory Committees of the Board.
On July 22, 2003, after consideration, including consultation
with its legal advisor and the Board's legal and financial advisors and taking
into account the factors described in Item 4(c) below, the Committee of
Independent Directors unanimously determined that the Offer is inadequate, from
a financial point of view, to holders of Shares and that the Offer is not in the
best interests of either Dana or its shareholders and unanimously recommended to
the full Board that the full Board, in turn, recommend that Dana shareholders
reject the Offer and not tender their Shares pursuant to the Offer. On July 22,
2003, following a thorough discussion and in
-16-
light of the factors described in
Item 4(c) below and taking into account the recommendation of the Committee of
Independent Directors, the Board determined that the Offer is inadequate, from a
financial point of view, to holders of Shares and that the Offer is not in the
best interests of either Dana or its shareholders, and determined to recommend
that Dana shareholders reject the Offer and not tender their Shares pursuant to
the Offer.
(c) Reasons for the Recommendation.
------------------------------
In reaching the conclusion that the Offer is inadequate from a
financial point of view, to holders of Shares and the Offer is not in the best
interests of either Dana or its shareholders and the recommendation described
above, the Board of Directors consulted with its legal and financial advisors
and senior management of the Company and took into account the recommendation of
the Committee and numerous other factors, including, but not limited to, the
following:
(i) The presentations of, and the Board's discussions
with, its financial advisors at meetings of the Board of Directors held
on July 18 and July 21 concerning the Company, ArvinMeritor and the
financial aspects of the Offer, including the opinions dated July 21,
2003, to the Board of Directors of Credit Suisse First Boston and
Deutsche Bank, to the effect that as of the date of such opinions, the
Offer was inadequate, from a financial point of view, to holders of
Shares;
(ii) The facts that the market price per share has
been above the Offer price per Share since the public announcement of
the Offer on July 8, 2003; the closing price per share on the New York
Stock Exchange on July 21, 2003, the last trading day prior to the
Board of Directors' decision to recommend that shareholders reject the
Offer and not tender their Shares pursuant to the Offer, was $15.24,
which is higher than the Offer price of $15.00 per share;
(iii) The Board's understanding of the Company's
business, financial condition and results of operations, business
strategy, restructuring plan, backlog of new business and future
prospects and, based upon presentations by management, management and
the Board's belief that Dana's strategy is meeting its target to
deliver improved financial performance for the remainder of 2003, 2004
and beyond, which management and the Board believes has not been fully
reflected in the current stock price;
(iv) The fact that the Company has already
demonstrated significant success in executing its restructuring plan as
evidenced by the improved earnings since the inception of the plan in
October of 2001, the generation of $540 million in proceeds
-17-
from asset sales, and the reduction of net debt by
approximately $590 million over the past 18 months (excluding the
approximately $710 million in asset sales and $580 million in debt
reduction attributable to Dana Credit Corporation's disposition
activities over the same period of time;
(v) The Board's consideration of several key economic
trends in the heavy-duty vehicle sector that it believes will have a
significant positive impact on Dana's performance in future years; in
this regard, the Board noted, among other things, that forecasts for
heavy-duty vehicle production is expected to increase from 181 thousand
units in 2002 to approximately 280 thousand units in 2005, an increase;
of approximately 49%;
(vi) The Board's belief that the Proposed
Transaction, including the Offer, is opportunistic and if consummated
would deprive all Dana shareholders, including those that do not accept
the Offer, of the opportunity to realize the full value of their
investment in the Company;
(vii) The fact that regulatory approval is a
condition of the Offer. The Board believes, based upon the advice of
the Company's antitrust counsel, that serious antitrust issues could
prevent ArvinMeritor from consummating the Offer; for example Dana and
ArvinMeritor are the only substantial North American producers of
axles, driveshafts and foundation brakes for medium- and heavy-duty
trucks, with combined market shares ranging from 80 percent to 100
percent, and through joint arrangements with Eaton Corporation and ZF
Group, respectively, are the only North American suppliers of complete
heavy truck drivetrain systems; as a result, the Board believes, based
upon the advice of the Company's antitrust counsel, the transaction is
very likely to be subject to intensive scrutiny from government
antitrust authorities and may result in antitrust litigation to block
the Offer; in this regard the Board also noted that as of the date of
its deliberations [(and as of the date hereof)], ArvinMeritor had not
yet even made the necessary filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976;
(viii) The fact that the Offer is conditioned upon
ArvinMeritor having received proceeds under new financings sufficient,
together with cash on hand, to consummate the Proposed Transaction and
that ArvinMeritor has acknowledged in response to regulatory inquiries
that it has not entered into any agreements, commitments, credit
facilities, letters of credit or other financing arrangements with
regard to financing the Offer or the Proposed Transaction; the size of
the financing required as well as the resulting pro forma credit
ratios, which based on ArvinMeritor's public disclosures, would result
in an approximate 88% pro forma debt-to-capital ratio, which would
be among the highest in the industry, provide significant financing
risk for ArvinMeritor. The inability to satisfy this condition would be
a significant obstacle to completion of the Offer; and
(ix) The fact that the Offer is highly conditional
and includes conditions that could provide significant obstacles to
completion of the Offer or the other aspects of the Proposed
Transaction and result in significant uncertainty that the Offer will
be consummated, and, further, in the event of non-completion of the
Offer due to the failure to satisfy certain conditions to the Offer
for reasons not within the Company's control, could adversely affect
the Company.
In light of the above factors, the Committee of Independent
Directors and the Board determined that the Offer is not in the best interests
of either Dana or its shareholders.
-18-
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU REJECT THE OFFER AND DO
NOT TENDER YOUR SHARES PURSUANT TO THE OFFER.
The foregoing discussion of the information and factors
considered by the Committee of Independent Directors and the Board of Directors
is not intended to be exhaustive but addresses all of the material information
and factors considered by the Committee of Independent Directors and the Board
of Directors in their consideration of the Offer and the Proposed Transaction.
In view of the variety of factors and the amount of information considered, the
Board of Directors did not find it practicable to provide specific assessments
of, quantify or otherwise assign any relative weights to, the specific factors
considered in determining their recommendations. Such determination was made
after consideration of the factors taken as a whole. Individual members of the
Committee of Independent Directors and the Board of Directors may have given
differing weights to different factors. In addition, in arriving at their
respective recommendations, the directors of the Company were aware of the
interests of certain officers and directors of the Company as described under
"Past Contracts, Transactions, Negotiations and Agreements."
Finally, the Board noted in the course of its deliberations as
to the Offer that it has a continuing obligation to both oversee the ongoing
progress of the business plan in relation to its objectives and to consider
changes to the plan as well as other business or strategic alternatives if they
appear desirable. The Board expects to actively continue such oversight as part
of its responsibilities to set the strategic direction for the Company and to
fulfill the goal of building shareholder value and safeguarding shareholder
interests.
(d) Intent to Tender.
-----------------
To the Company's knowledge, none of the Company's executive
officers, directors, affiliates or subsidiaries currently intends to sell or
tender for purchase pursuant to the Offer any Shares owned of record or
beneficially owned.
Item 5. Persons/Assets Retained, Employed, Compensated or Used.
------------------------------------------------------
Credit Suisse First Boston, Deutsche Bank and Goldman Sachs
were retained as financial advisors in connection with ArvinMeritor's
proposal and with respect to any possible purchase of all or a portion of the
stock or assets of the Company, or a sale of the Company. The Company has agreed
to pay each of Credit Suisse First Boston, Deutsche Bank and Goldman Sachs
customary fees for such services; to reimburse them for all expenses, including
fees and expenses of counsel; and to indemnify them and certain related persons
against certain liabilities, including liabilities under federal securities
laws, relating to or arising out of their respective engagements.
Credit Suisse First Boston, Deutsche Bank and Goldman Sachs,
and their respective affiliates, in the past have provided, and in the future
may provide, investment banking and financial services to the Company, for which
services they have received, and would expect to receive, compensation. In
addition, an affiliate of each of Credit Suisse First Boston and Deutsche Bank
are lenders to the Company under the Company's current revolving bank credit
facility, for which services such affiliates have received, and will receive,
compensation. In the
-19-
ordinary course of business, each of the financial advisors and their respective
affiliates may actively trade or hold securities of Dana and ArvinMeritor
for its own account or for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities. Prior to the time
ArvinMeritor first privately approached Dana concerning a possible acquisition
or combination transaction, representatives of Deutsche Bank had met with
ArvinMeritor in the ordinary course of Deutsche Bank's investment banking
activities, for the purpose of seeking business with ArvinMeritor. In the
course of that dialogue, Deutsche Bank discussed with ArvinMeritor a variety of
transactional and financing possibilities, including a combination with Dana.
In that context, based solely on publicly available information and market
conditions at that time, between February and April 2003, Deutsche Bank
presented analyses to ArvinMeritor regarding a business combination with Dana,
including a cash acquisition, a stock and cash acquisition, and an all stock
transaction in which the Dana shareholders would continue their equity interests
and own a majority of the resulting combined company. Deutsche Bank reviewed
illustrative transaction structures for Dana shares at less than or equal to the
Offer Price, which represented a premium of greater than 50% of the trading
price of Dana's shares at the time, and transaction effects at various Dana
share prices, at less than or greater than, the Offer Price. Deutsche Bank was
not retained by ArvinMeritor and did not receive any remuneration in connection
with these discussions. In late April, Deutsche Bank was asked by ArvinMeritor,
and declined, any participation on behalf of ArvinMeritor in any potential
transaction involving an acquisition by ArvinMeritor of Dana. As noted above in
Item 4(b), at the conclusion of the July 21, 2003 meeting of the Board of
Directors, Deutsche Bank and Dana agreed that Deutsche Bank would not
continue Deutsche Bank's financial advisory engagement in connection with the
Offer and the Proposed Transaction, but would continue to serve the Company in
other advisory and financing matters as are mutually agreed.
The Company has retained D. F. King & Co., Inc. ("D. F. King")
to assist it in connection with the Company's communications with its
shareholders with respect to the Offer, to monitor trading activity in the
Shares and to identify investors holding noteworthy positions in street name.
The Company has agreed to pay D. F. King reasonable customary compensation for
its services and reimbursement of out-of-pocket expenses in connection
therewith. The Company has also agreed to indemnify D. F. King against certain
liabilities arising out of or in connection with the engagement.
The Company has retained Kekst & Company, Inc. as its public
relations advisor in connection with the Offer. The Company has agreed to pay
customary compensation for such services and to reimburse Kekst & Company, Inc.
for its out-of-pocket expenses arising out of or in connection with the
engagement. The Company has also agreed to indemnify Kekst & Company,Inc.
against certain liabilities arising out of or in connection with the engagement.
Except as set forth above, neither the Company nor any person
acting on its behalf has employed, retained or agreed to compensate any person
to make solicitations or recommendations to shareholders of the Company
concerning the Offer.
-20-
Item 6. Interest in Securities of the Subject Company.
---------------------------------------------
Except as set forth on Annex B hereto, no transactions in the
Shares have been effected during the past 60 days by the Company or, to the
Company's knowledge, any of the Company's directors, executive officers,
affiliates or subsidiaries.
Item 7. Purposes of the Transaction and Plans or Proposals.
--------------------------------------------------
Except as set forth in this Statement, the Company is not
currently undertaking or engaged in any negotiation in response to the Offer
that relates to (i) a tender offer for or other acquisition of securities by or
of the Company, any subsidiary of the Company or any other person; (ii) an
extraordinary transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries; (iii) a purchase, sale or
transfer of a material amount of assets by the Company or any of its
subsidiaries; or (iv) any material change in the indebtedness, present
capitalization or dividend policy of the Company.
Except as set forth in this Statement, there are no
transactions, Board of Directors' resolutions, agreements in principle or signed
agreements in response to the Offer that relate to or would result in one or
more of the events referred to in the first paragraph of this item.
Item 8. Additional Information to be Furnished.
---------------------------------------
The information contained in all of the Exhibits referred to
in Item 9 below is incorporated herein by reference in its entirety.
Litigation. On July 8, 2003, ArvinMeritor and the Offeror
----------
initiated an action in the Circuit Court for the City of Buena Vista, Virginia
(the "State Action") naming the Company and its directors as defendants.
ArvinMeritor and the Offeror are seeking a declaratory judgment in the State
Action that the defendants breached their fiduciary duties to the Company's
shareholders by refusing to negotiate or meet with ArvinMeritor to discuss the
proposal ArvinMeritor made in June prior to rejecting it. In addition,
ArvinMeritor and the Offeror seek a declaratory judgment that, among other
things, the defendants have breached their fiduciary obligations by failing to
ensure that no conflict exists between the defendants' own interests and those
of the Company's shareholders or, if any such conflicts exist, to ensure that
they are resolved in favor of the Company's shareholders, and by failing to
redeem the Rights in response to the Offer. ArvinMeritor and the Offeror also
seek an injunction prohibiting the Company from taking any action with respect
to the Rights Agreement or otherwise that is designed to impede or delay the
Offer or the Proposed Merger. The Company and the Board of Directors believe the
allegations in the State Action are without merit.
On July 9, 2003, ArvinMeritor and the Offeror initiated an
action in the United States District Court for the Western District of Virginia
("the Federal Action") against the Company seeking a declaratory judgment that
ArvinMeritor's and the Offeror's statements and disclosures in connection with
the Offer comply with applicable federal law. The Company and the Board of
Directors believe the Federal Action is without merit.
On July 15, 2003, a Dana shareholder purported class action
lawsuit was filed in the United States District Court for the Western District
of Virginia (the "Shareholder Action")
-21-
against the Company and each of its directors. The Shareholder Action purports
to be brought on behalf of all persons, other than the defendants in the action,
who own the common stock of the Company and who are similarly situated. The
Shareholder Action asserts that the director defendants breached their fiduciary
duties to the Company's shareholders in connection with the Offer. The
Shareholder Action seeks relief declaring that the action can properly be
maintained as a class action, directing the director defendants to exercise
their duty of care by giving due consideration to any proposed business
combination, and directing the director defendants to ensure that no conflict
exists between the directors' own interests and those of the Company's
shareholders or, if any such conflict exists, to ensure that all such conflicts
are resolved in the best interests of the Company's shareholders. However, the
Company and the Board of Directors believe the allegations in the Shareholder
Action are without merit.
The Company and its directors have been named as defendants in
two purported derivative actions filed in the Circuit Court for the City of
Buena Vista. Each of actions alleges that the directors breached their fiduciary
duties by allegedly failing to give due consideration to the June 2003 private
proposals made by ArvinMeritor, and further allege that the defendants are
subject to conflicts of interest and the board's not redeeming the Rights to
permit the ArvinMeritor proposal to be effectuated is a breach of fiduciary
duty. As relief, the complaints seek, among other things, an order restricting
the use of the Rights and damages in an unspecified amount. The Company believes
the allegations of the Complaint are without merit.
The foregoing description is qualified in its entirety by
reference to Exhibits (a)(5) though (a)(8).
Board Action Regarding Rights Agreement. At its meeting on
---------------------------------------
July 11, 2003, the Board of Directors took action, as permitted by the Rights
Agreement, to postpone the Distribution Date (as defined in the Rights
Agreement), which otherwise would be triggered by the Offer, until the earlier
of: (1) 10 days after the Shares Acquisition Date (as defined in the Rights
Agreement) or (2) such date as may be subsequently determined by the Board of
Directors. Until the Distribution Date, the Rights will continue to be evidenced
by the certificates for the Shares and the Rights will be transferable only in
connection with the transfer of the associated Shares.
Board Action Regarding By-Law Amendments. In addition to
------------------------------------------
amending the Company's By-Laws to establish the Committee of Independent
Directors, at its meeting on July 22, 2003 the Board of Directors amended the
Company's By-Laws to clarify that a meeting of the Board of Directors may be
called by the Chairman of the Board, or by a majority of Directors.
Forward-Looking Statements. Certain statements made in this
---------------------------
Statement indicating the Company's or management's intentions, beliefs,
expectations or predictions for the
-22-
future are forward-looking statements. These statements are only predictions and
may differ materially from actual or future events or results. Such forward-
looking statements are not guarantees of future performance and may involve
known and unknown risks, uncertainties and other factors that could cause actual
results to differ materially from those expressed or implied. Risks and
uncertainties include, without limitation, global and regional economic
conditions, business conditions in the overall automotive industry and the cost
and timing of the Company's repositioning plan implementation. They also include
other factors discussed herein and those detailed from time to time in the
Company's filings with the SEC.
Item 9. Exhibits.
--------
Exhibit No. Description
- -------------- ----------------------------------------------------------
(a) (1) Letter, dated July 22, 2003, to Dana shareholders
(a) (2) Press release issued by Dana on July 22, 2003
(a) (3) E-mail, dated July 22, 2003, to Dana employees (to be
filed by amendment)
(a) (4) Complaint filed by ArvinMeritor, Inc. on July 8, 2003 in
the Circuit Court for the City of Buena Vista, Virginia
(a) (5) Complaint filed by ArvinMeritor, Inc. on July 9, 2003 in
United States District Court for the Western District of
Virginia
(a) (6) Complaint filed by Roger Ryan, on behalf of himself
and all others similarly situated, on July 15, 2003 in
United States District Court for the Western District of
Virginia
(a) (7) Complaint filed for shareholder derivative action filed
by Michael Martin, dated July 11,2003 in the Circuit
Court for the City of Buena Vista, Virgina (to be filed
by amendment)
(a) (8) Complaint filed for shareholder derivative action file
by Adolph Feuerstein, dated July 10, 2003 in the Circuit
Court for the City of Buena Vista, Virginia (to be filed
by amendment)
(e) (1) Additional Compensation Plan (incorporated by
reference to Exhibit A to Dana's Proxy Statement dated
March 3, 2000)
(e) (2) First Amendment to Additional Compensation Plan
(incorporated by reference to Exhibit 10-A(1) to Dana's
Form 10-Q for the quarter ended June 30, 2002)
(e) (3) Amended and Restated Stock Incentive Plan
(incorporated by reference to Exhibit B to Dana's Proxy
Statement, dated March 5, 2003)
(e) (4) Excess Benefits Plan (incorporated by reference to
Exhibit 10-F to Dana's Form 10-K for the year ended
December 31, 1998)
(e) (5) First Amendment to Excess Benefits Plan (incorporated
by reference to Exhibit 10-C(1) to Dana's Form 10-Q for
the quarter ended September 30, 2000)
(e) (6) Second Amendment to Excess Benefits Plan (incorporated
by reference to Exhibit 10-C(2) to Dana's Form 10-Q for
the quarter ended June 30, 2002)
(e) (7) Director Deferred Fee Plan (incorporated by reference
to Exhibit C to Dana's Proxy Statement dated March 5,
2003)
(e) (8) Employment Agreement between Dana and J.M.
Magliochetti (incorporated by reference to Exhibit 10-E
to Dana's Form 10-K for the year ended December 31,
2000)
(e) (9) Change-of-control Agreement between Dana and W.J.
Carroll (incorporated by reference to Exhibit 10-J(4) to
Dana's Form 10-K for the year ended December 31, 1997.
There are substantially similar agreements with B.N.
Cole, M.A. Franklin, C.F. Heine, J.M Laisure, T.R.
McCormack and R.C. Richter)
-23-
Exhibit No. Description
- --------------- ----------------------------------------------------------
(e) (10) Collateral Assignment Split-Dollar Insurance
Agreement for the Universal Life Policies between Dana
and J.M. Magliochetti (incorporated by reference to
Exhibit 10-G to Dana's Form 10-K for the year ended
December 31, 2001. There are substantially similar
agreements with W.J. Carroll, B.N. Cole, M.A. Franklin
and R.C. Richter)
(e) (11) Supplemental Benefits Plan (incorporated by reference
to Exhibit 10-H to Dana's Form 10-Q for the quarter
ended September 30, 2002)
(e)(12) 1999 Restricted Stock Plan, as amended and restated
(incorporated by reference to Exhibit A to Dana's Proxy
Statement dated March 5, 2002)
(e)(13) 1998 Directors' Stock Option Plan (incorporated by
reference to Exhibit A to Dana's Proxy Statement dated
February 27, 1998)
(e)(14) Supplementary Bonus Plan (incorporated by reference to
Exhibit 10-N to Dana's Form 10-Q for the quarter ended
June 30, 1995)
(g) Not applicable
- --------------------------------------------------------------------------------
-21-
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
DANA CORPORATION
By: /s/ Joseph M. Magliochetti
----------------------------
Joseph M. Magliochetti
Chairman of the Board and
Chief Executive Officer
Dated: July 22, 2003
-25-
INDEX OF EXHIBITS
Exhibit No. Description
- --------------- ----------------------------------------------------------
(a) (1) Letter, dated July 22, 2003, to Dana shareholders
(a) (2) Press release issued by Dana on July 22, 2003
(a) (3) E-mail, dated July 22, 2003, to Dana employees (to be
filed by amendment)
(a) (4) Complaint filed by ArvinMeritor, Inc. on July 8, 2003 in
the Circuit Court for the City of Buena Vista, Virginia
(a) (5) Complaint filed by ArvinMeritor, Inc. on July 9, 2003 in
United States District Court for the Western District of
Virginia
(a) (6) Complaint filed by Roger Ryan, on behalf of himself
and all others similarly situated, on July 15, 2003 in
United States District Court for the Western District of
Virginia
(a) (7) Complaint filed for shareholder derivative action filed
by Michael Martin, dated July 11,2003 in the Circuit
Court for the City of Buena Vista, Virgina (to be filed
by amendment)
(a) (8) Complaint filed for shareholder derivative action file
by Adolph Feuerstein, dated July 10, 2003 in the Circuit
Court for the City of Buena Vista, Virginia (to be filed
by amendment)
(a) (9) Complaint filed for shareholder derivative action file by
Adolph Feuerstein, dated July 10, 2003 in the Circuit
Court for the City of Buena Vista, Virginia (to be filed
by amendment)
(e) (1) Additional Compensation Plan (incorporated by
reference to Exhibit A to Dana's Proxy Statement dated
March 3, 2000)
(e) (2) First Amendment to Additional Compensation Plan
(incorporated by reference to Exhibit 10-A(1) to Dana's
Form 10-Q for the quarter ended June 30, 2002)
(e) (3) Amended and Restated Stock Incentive Plan (incorporated by
reference to Exhibit B to Dana's Proxy
Statement, dated March 5, 2003)
(e) (4) Excess Benefits Plan (incorporated by reference to
Exhibit 10-F to Dana's Form 10-K for the year ended
December 31, 1998)
(e) (5) First Amendment to Excess Benefits Plan (incorporated
by reference to Exhibit 10-C(1) to Dana's Form 10-Q for
the quarter ended September 30, 2000)
(e) (6) Second Amendment to Excess Benefits Plan (incorporated
by reference to Exhibit 10-C(2) to Dana's Form 10-Q for
the quarter ended June 30, 2002)
(e) (7) Director Deferred Fee Plan (incorporated by reference
to Exhibit C to Dana's Proxy Statement dated March 5,
2003)
(e) (8) Employment Agreement between Dana and J.M.
Magliochetti (incorporated by reference to Exhibit 10-E to
Dana's Form 10-K for the year ended December 31, 2000)
(e) (9) Change-of-control Agreement between Dana and W.J.
Carroll (incorporated by reference to Exhibit 10-J(4) to
Dana's Form 10-K for the year ended December 31, 1997.
There are substantially similar agreements with B.N. Cole,
M.A. Franklin, C.F. Heine, J.M Laisure, T.R. McCormack and
R.C. Richter)
(e) (10) Collateral Assignment Split-Dollar Insurance
Agreement for the Universal Life Policies between Dana and
J.M. Magliochetti (incorporated by reference to Exhibit
10-G to Dana's Form 10-K for the year ended December 31,
2001. There are substantially similar agreements with W.J.
Carroll, B.N. Cole, M.A. Franklin and R.C. Richter)
(e) (11) Supplemental Benefits Plan (incorporated by reference
to Exhibit 10-H to Dana's Form 10-Q for the quarter ended
September 30, 2002)
-26-
(e) (12) 1999 Restricted Stock Plan, as amended and restated
(incorporated by reference to Exhibit A to Dana's Proxy
Statement dated March 5, 2002)
(e) (13) 1998 Directors' Stock Option Plan (incorporated by
reference to Exhibit A to Dana's Proxy Statement dated
February 27, 1998)
(e) (14) Supplementary Bonus Plan (incorporated by reference to
Exhibit 10-N to Dana's Form 10-Q for the quarter ended
June 30, 1995)
(g) Not applicable
-27-
ANNEX A.
(a) Executive Compensation
----------------------
SUMMARY COMPENSATION TABLE
The following table contains information about the
compensation from Dana Corporation (the "Company") and its subsidiaries paid or
awarded to, or earned by, the Company's Chief Executive Officer and the four
other highest compensated persons who were serving as executive officers of the
Company at the end of 2002 for the three fiscal years ended December 31, 2000,
2001 and 2002 (the "Named Executive Officers").
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- --------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION AWARDS OPTIONS/ COMPENSATION
Name and Principal Position Year ($)(1) ($)(2) ($)(3) ($)(4) SARs(#)(5) ($)(6)
- --------------------------- ---- ------ ------- ------------ ---------- ---------- ------------
Joseph M. Magliochetti
Chief Executive Officer, 2002 $935,000 $430,000 $68,346 $0 250,000 $3,158
President and 2001 935,000 0 79,727 1,019,400 250,000 3,218
Chief Operating Officer 2000 850,000 0 98,363 0 250,000 3,218
William J. Carroll
President - Automotive 2002 536,500 245,500 55,836 0 55,000 5,115
Systems Group 2001 520,000 0 59,759 509,700 55,000 4,395
2000 480,000 0 61,947 0 55,000 4,395
Marvin A. Franklin, III
President - Dana 2002 495,000 226,500 52,787 0 55,000 3,158
International and Global 2001 480,000 0 59,888 509,700 55,000 2,708
Initiatives 2000 440,000 0 51,472 0 55,000 3,218
Robert C. Richter
Vice President and 2002 480,000 263,600 - 0 55,000 3,158
Chief Financial Officer 2001 451,667 0 48,723 509,700 55,000 2,708
2000 400,000 0 45,622 103,600 55,000 3,218
Bernard N. Cole
President - Heavy Vehicle 2002 398,000 182,100 - 0 40,000 5,115
Technologies & Systems 2001 390,000 0 43,961 407,760 36,000 4,395
Group 2000 365,000 0 36,823 0 36,000 4,395
- --------------------------------------------------------------------------------------------------------------------------------
(1) In general, salary increases in 2002 were delayed until July 2002 for the
senior executive group as they were for most of the Company's salaried
employees.
(2) Annual bonuses received (or deferred) under the Company's Additional
Compensation Plan or otherwise are reported in the year earned, whether
deferred or paid in that year or in the following year.
(3) "Other Annual Compensation" includes perquisites and personal benefits
where such perquisites and benefits exceed the lesser of $50,000 or 10% of
the officer's annual salary and bonus for the year. Of the amounts
reported, the following items exceeded 25% of the total perquisites and
benefits reported for the officer: for Mr. Magliochetti, professional
services valued at $43,350 in 2002, $54,182 in 2001 and $70,649 in 2000;
for Mr. Carroll, professional services valued at $30,329 in 2002, $35,394
in 2001 and $37,482 in 2000; and vehicles valued at $15,420 in 2002 and
$15,754 in 2001; for Mr. Franklin, professional services valued at $29,172
in 2002, $35,595 in 2001 and $36,467 in 2000; for Mr. Richter,
professional services valued at $29,165 in 2001 and $28,615 in 2000; and
vehicles valued at $13,894 in 2001 and $14,346 in 2000; and for Mr. Cole,
professional services valued at $25,292 in 2001 and $22,618 in 2000; and
vehicles valued at $12,724 in 2001 and $9,374 in 2000. Professional
services include financial, tax and estate planning services received by
the officer. Of the amounts reported, the following
-28-
represent insurance premiums (after tax gross-up) paid prior to the
enactment of the Sarbanes-Oxley Act of 2002 on behalf of the named
executive for life insurance coverages: for Mr. Magliochetti, $10,322 in
2002, $9,485 in 2001 and $11,251 in 2000; for Mr. Carroll, $4,342 in 2002,
$4,016 in 2001 and $4,422 in 2000; for Mr. Franklin, $3,130 in 2002,
$2,933 in 2001 and $3,335 in 2000; for Mr. Richter, $2,003 in 2001 and
$2,286 in 2000; and for Mr. Cole, $3,493 in 2001 and $4,831 in 2000.
(4) "Restricted Stock Awards" reflect grants of restricted stock under the
Company's 1999 Restricted Stock Plan. Awards of restricted stock under the
Plan are generally subject to a 5-year restriction period during which the
executive must remain a full-time employee of the Company or its
subsidiaries. The Compensation Committee, which administers the Plan, has
the discretion to shorten any restriction periods or to waive the
restrictions. The restrictions lapse in the event the executive's
employment is terminated at the Company's initiative following a
change-of-control. In the discretion of the Compensation Committee,
dividends on the granted shares are paid in additional restricted shares,
in lieu of cash, at the same times and rates as cash dividends are paid to
the Company's shareholders. The Plan provides participants with the
opportunity to convert restricted stock awards into restricted stock units
which are payable in Shares (as defined herein) after they have retired.
During the period between conversion and distribution, the executive's
restricted stock units will continue to be credited with dividends that
are declared on the restricted shares. Messrs. Magliochetti, Carroll,
Franklin, Richter and Cole, and several other executives, have elected to
convert some or all of their restricted stock into restricted stock units.
The value of the restricted stock grants shown in the Summary Compensation
Table was calculated by multiplying the number of shares awarded by the
difference between the closing price of Shares on the date of grant (as
reported in the New York Stock Exchange-Composite Transactions published
in The Wall Street Journal) and the purchase price, if any, paid by the
executive.
At December 31, 2002, Mr. Magliochetti held 131,320 shares of restricted
stock valued at $1,359,173; Mr. Carroll held 52,019 shares of restricted
stock valued at $558,554; Mr. Franklin held 52,163 shares of restricted
stock valued at $565,887; Mr. Richter held 42,180 shares of restricted
stock valued at $472,037; and Mr. Cole held 32,586 shares of restricted
stock valued at $349,995. The restricted stock holdings described in this
paragraph include all restricted stock units credited to the executives.
The value of these aggregate restricted stock holdings was calculated by
multiplying the number of shares held by the difference between the
closing price of Shares on December 31, 2002 ($11.76 per share), as
reported in the New York Stock Exchange-Composite Transactions published
in The Wall Street Journal, and the purchase price, if any, paid by the
executives.
(5) "Securities Underlying Options/SARs" represents Shares underlying options
granted in 2000 through 2002. There are no outstanding stock appreciation
rights ("SARs").
(6) "All Other Compensation" consists of contributions made by the Company
under its Savings and Investment Plan to match contributions made by the
executives to their accounts.
OPTION GRANTS IN 2002
The following table contains information about the stock
options granted under the Company's Amended and Restated Stock Incentive Plan
(the "Incentive Plan") in 2002 to the executive officers named in the Summary
Compensation Table. No SARs were granted in 2002. In calculating the "Grant Date
Present Value," the Company used a variation of the Black-Scholes option pricing
model, as described in Note 3. The value shown is a hypothetical value only;
over their lives, the options could have a greater or a lesser value than that
shown in the table, and under some circumstances they could have zero value.
-29-
OPTION GRANTS IN LAST FISCAL YEAR
-------------------------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS EXERCISE GRANT
OPTIONS GRANTED TO OR BASE DATE
GRANTED EMPLOYEES PRICE EXPIRATION PRESENT
NAME (#) IN 2002 ($/SHARE)(1) DATE(2) VALUE($)(3)
- ----------------- --------------- ------------- --------------- -------------- -----------------
Mr. Magliochetti 250,000 7.83% $15.33 7/15/12 $ 1,917,500
Mr. Carroll 55,000 1.72% 15.33 7/15/12 421,850
Mr. Franklin 55,000 1.72% 15.33 7/15/12 421,850
Mr. Richter 55,000 1.72% 15.33 7/15/12 421,850
Mr. Cole 40,000 1.25% 15.33 7/15/12 307,800
(1) The exercise price (the price that the executive must pay to purchase each
Share that is subject to an option) is equal to the "fair market value"
(as defined in the Incentive Plan) of a Share on the date of grant of the
option. All options shown were granted on July 16, 2002.
(2) Options may be exercised during a period that begins one year after the
date of grant and ends ten years after the date of grant. During the
exercise period, an optionee may exercise 25% of the total options after
one year from the date of grant, 50% after two years from the date of
grant, 75% after three years from the date of grant, and all of the
options after four years from the date of grant. Options may be exercised
for up to five years following the retirement (as defined in the Incentive
Plan) of the executive. An optionee's exercise rights will be accelerated
in the event of a change-of-control of the Company.
(3) A variant of the Black-Scholes option pricing model was used to determine
the hypothetical grant date value for these options. In applying the
model, the Company assumed a 12-month volatility of 53.24%, a 3.53%
risk-free rate of return, a dividend yield at the date of grant of 0.26%
and a 5.4-year option term. The model did not assume any forfeitures prior
to exercise, which could have reduced the reported grant date values.
Since this model is assumption-based, it may not accurately determine the
options' present value. The true value of the options, when and if
exercised, will depend on the actual market price of a Share on the date
of exercise.
AGGREGATED OPTION EXERCISES IN 2002 AND 2002 YEAR-END OPTION VALUES
The following table contains information about the options for
the Company's Common Stock, par value $1.00 per share ("Shares") that were
exercised in 2002 by the Named Executive Officers, the aggregate value of these
officers' unexercised options at the end of 2002 and the aggregate value of
these officers' unexercised in-the-money options at the end of 2002. None of the
officers held any SARs as of December 31, 2002.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 12/31/02(#) 12/31/02($)
-------------------------------- -----------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------------- ------------ ------------ -------------- ------------ --------------
Mr. Magliochetti 0 $ 0 590,500 587,500 $ 0 $ 0
Mr. Carroll 0 0 190,750 132,250 0 0
Mr. Franklin 0 0 228,250 132,250 0 0
Mr. Richter 0 0 197,250 130,250 0 0
Mr. Cole 0 0 202,500 91,500 0 0
PENSION PLANS
For the Named Executive Officers, pension benefits are
determined under the Company's pension plans, as described below. In addition,
Mr. Magliochetti is eligible to receive supplemental retirement benefits under
his employment agreement. Mr. Magliochetti's employment agreement provides that
if his employment with the Company is terminated other
-29-
than for "cause" (as defined in his employment agreement), he will receive a
supplemental lifetime monthly pension calculated at 50% (or, if higher, the
percentage which is the product of 1.6% multiplied by his years of credited
service at retirement) of his highest average monthly compensation (defined as
salary received during the month preceding his termination of service plus
1/12th of the average of the highest bonuses paid to him by the Company during
any three consecutive years) reduced by benefits payable to him by the Company
under the pension plans described below, pension or disability benefits payable
to him by other organizations and 50% of his primary Social Security benefit.
The types of compensation that are reported in the Summary Compensation Table
under "Salary" and "Bonus" (and also including deferred bonuses) will be used to
calculate the retirement benefits payable to Mr. Magliochetti under his
employment agreement. The agreement also provides for a pre-retirement death
benefit. The maximum monthly pension that Mr. Magliochetti would have received
under his employment agreement if he had retired on January 1, 2003, before
taking into account the reductions described above, would be $76,310. In lieu of
receiving this benefit in the form of a monthly pension, Mr. Magliochetti may
elect to receive the distribution of the benefit in any form permitted under the
Dana Corporation Retirement Plan (the "Retirement Plan").
The Retirement Plan is a cash balance plan (a type of
non-contributory defined benefit pension plan in which participants' benefits
are expressed as individual accounts). Benefits are computed as follows: During
each year of participation in the Retirement Plan, a participant earns a service
credit equal to a specified percentage of his "earnings" (as defined in the
Retirement Plan) up to one-quarter of the Social Security taxable wage base,
plus a specified percentage of his earnings above one-quarter of the taxable
wage base. The percentages increase with the length of service with the Company.
A participant with 30 or more years of service receives the maximum credit (6.4%
of earnings up to one-quarter of the taxable wage base, plus 12.8% of earnings
over one-quarter of the taxable wage base). A participant employed by the
Company on July 1, 1988 (when the Retirement Plan was converted to a cash
balance plan) also earns a transition benefit designed to provide that his
retirement benefit under the current Retirement Plan will be comparable to the
benefit he would have received under the predecessor plan. A participant earns
this transition benefit ratably over the period from July 1, 1988, to his 62nd
birthday, except that in the event of a change in control of the Company, he
will be entitled to the entire transition benefit. The accumulated service
credits and the transition benefit are credited with interest annually, in an
amount (generally, not less than 5%) established by the Board of Directors of
the Company (the "Board"). A participant employed by the Company on July 1,
1988, who was eligible to retire on July 1, 1993, but who elects to retire after
that date, will receive the greater of the benefit provided by the current
Retirement Plan or a benefit comparable to the benefit provided under the
predecessor plan (determined as of July 1, 1993) with interest credits. The
normal retirement age under the Retirement Plan is 65.
Federal tax law imposes maximum payment limitations on tax
qualified-plans. The Company has adopted an Excess Benefits Plan which covers
all employees eligible to receive retirement benefits under a funded Company
tax-qualified defined benefit plan. Under the Excess Benefits Plan, the Company
will pay from its general funds any amounts that exceed the federal limitations
and any amounts that are not paid under the Retirement Plan due to earnings
being reduced by deferral of the employees' bonus payments.
-30-
The Company has also adopted a Supplemental Benefits Plan
which covers U.S.-based members of the Company's "A" and "B" Groups (as defined
by the Compensation Committee of the Board of Directors (the "Compensation
Committee")). Under this Supplemental Benefits Plan, the Company will pay Mr.
Magliochetti the difference between the aggregate benefits that he will receive
under the Retirement Plan and the Excess Benefits Plan and the benefit that he
would have been entitled to receive under the predecessor plan to the Retirement
Plan in effect prior to July 1, 1988. Messrs. Carroll, Franklin, Richter and
Cole, and the other "A" and "B" Group executives who were participants in the
predecessor plan to the Retirement Plan and who are not listed in the Summary
Compensation Table, are entitled to 80% of this benefit if they retire before
the end of 2004, 70% if they retire in the years 2005-2009, and no benefit if
they retire after 2009. Benefits payable under the predecessor plan are based on
the participant's credited service and "final monthly earnings," which for Mr.
Magliochetti is defined as base salary (before reduction for salary deferrals
under the Company's Savings and Investment Plan), plus bonuses paid (or that
would have been paid, but for a deferral arrangement) during the three highest
of his last ten years of employment prior to retirement, divided by 36. With
respect to Messrs. Carroll, Franklin, Richter and Cole, and the other "A" and
"B" Group executives who were participants in the predecessor plan to the
Retirement Plan and who are not listed in the Summary Compensation Table, "final
monthly earnings" is defined as base salary (before reduction for salary
deferrals under the Company's Savings and Investment Plan), plus bonuses paid
(or that would have been paid, but for a deferral arrangement) during the five
highest consecutive years of their last ten years of employment prior to
retirement, divided by 60. The types of compensation that are reported in the
Summary Compensation Table under "Salary" and "Bonus" will be used to calculate
the retirement benefits payable to these executives under the predecessor plan.
The Supplemental Benefits Plan provides for a pre-retirement death benefit. In
addition, the maximum level of bonus award that is includable under the
Supplemental Benefits Plan, as well as under the Retirement Plan, the Excess
Benefits Plan and the pension portion of Mr. Magliochetti's employment
agreement, is 125% of base salary. In the event of a change-of-control of the
Company, participants in the Excess Benefits and Supplemental Benefits Plans
will receive a lump-sum payment of all benefits previously accrued thereunder
and will be entitled to continue to accrue benefits thereunder.
The estimated monthly annuity benefits payable, starting at
age 65, as accrued through December 31, 2002, in the aggregate under the
Retirement Plan, Excess Benefits Plan and Supplemental Benefits Plan for the
Named Executive Officers, are as follows: Mr. Magliochetti, $62,647; Mr.
Carroll, $31,209; Mr. Franklin, $24,515; Mr. Richter, $21,323; and Mr. Cole,
$25,212. The benefits shown above for Mr. Magliochetti will reduce the
retirement benefit payable to him under his employment agreement (described
above).
ANNUAL INCENTIVES
The Named Executive Officers and other executive officers have
an opportunity to earn annual bonuses under the Company's Additional
Compensation Plan. Award opportunities vary, based on the individual's position
and base salary. Actual bonuses are based on the Company's success in achieving
performance objectives that are established in advance. These objectives are set
annually, based on the Company's short-term strategic direction and the current
economic climate.
-31-
The 2002 performance objectives under the Additional
Compensation Plan consisted of a hurdle (the minimum level of corporate
performance that had to be achieved for bonuses to be paid) a goal (the
corporate performance level at which bonuses equal to 60% of salary would be
paid), and performance in excess of the goal (at which bonuses up to a maximum
of 96% of salary would be paid).
For 2002, the Compensation Committee approved performance
objectives which included corporate operating income and ROIC, as well as five
strategic operating objectives tied to the Company's restructuring goals. The
Compensation Committee also approved an additional bonus modifier based on the
Company's total shareholder return relative to 24 industry peer companies. These
peer companies differ somewhat from the peer companies used for compensation
comparisons.
The Company's operating income and ROIC performance exceeded
the minimum hurdle required to earn a bonus in 2002, and the Company achieved
four of the five strategic operating objectives approved by the Compensation
Committee. Based on these results, the Compensation Committee approved bonus
payments for 2002 equal to approximately 46% of base salary for Messrs.
Magliochetti, Carroll, Franklin, Richter and Cole, based upon the performance
objectives that were approved by the Committee. There was no additional bonus
awarded as a result of the total shareholder return modifier. In order to reward
Mr. Richter for superior individual performance relating to the improvement in
the Company's liquidity and financial position, as well as his involvement in
the Company's corporate governance activities, the Compensation Committee
awarded him a discretionary additional bonus of $44,000. The annual bonuses
awarded to these five individuals, including the supplemental bonus to Mr.
Richter, under the Additional Compensation Plan, are reflected in the Summary
Compensation Table. In view of the fact that Mr. Magliochetti's total
compensation package is less than that of CEOs of comparable companies, the
Committee decided in February 2003 to award him 15,900 shares of restricted
stock. This award will be reported in the Summary Compensation Table in the 2004
Proxy Statement.
In the event of a change-of-control of the Company, unless
otherwise provided, all awards deferred under the plan, whether to a stock
account or an interest equivalent account, are paid out to participants in a
lump sum in cash.
(b) Director Compensation
---------------------
Non-employee directors are paid the following fees for their
services, in addition to reimbursement for expenses incurred: a $40,000 annual
stipend for service on the Board, a $2,500 annual stipend for service on each
Committee ($10,000 for the Committee Chairmen of the Audit, Compensation and
Advisory Committees; $5,000 for the Funds Committee Chairman), a fee of $1,000
for each Board or Committee meeting attended, and a fee of $1,000 per half day
for any special services performed at the request of the Chairman of the Board.
Non-employee directors may elect to defer payment of the
foregoing fees under the Company's Director Deferred Fee Plan. In addition, each
non-employee director receives an annual credit of 800 deferred stock units
under the Plan. Deferred fees may be credited to a stock account or an interest
equivalent account or both. Stock units are credited to a stock ac-
-32-
count based upon the amount of fees deferred and the market price of Shares.
Whenever cash dividends are paid on Shares, each stock account is credited with
additional stock units equal to the number of Shares that could have been
purchased if a cash dividend had been paid on the number of stock units
currently in the account. The number of stock units in each director's stock
account as of December 31, 2002 is shown in the table that appears under the
caption, "Stock Ownership." The value of the stock units in each stock account
at the time of distribution will be based on the market value of the Shares at
that time. Interest equivalent accounts accrue interest quarterly at the rate
for prime commercial loans. Distribution of the deferred fees, whether held in a
stock account or an interest equivalent account, is made in cash, Shares or a
combination of cash and Shares, in a lump sum or up to ten annual installments,
at the time the Director retires, dies or terminates service with the Company.
Directors may, during the five-year period following retirement or termination
of service as a director, elect to convert all or any percentage (or dollar
amount) of the stock units credited to their stock account into an equivalent
dollar balance in their interest equivalent account. In the event of a
change-of-control of the Company, all amounts deferred under the Director
Deferred Fee Plan are paid out to participants in a lump sum in cash.
All non-employee directors also participate in the Company's
stockholder-approved 1998 Directors' Stock Option Plan. This plan provides for
the automatic grant of options to purchase 3,000 Shares to each non-employee
director annually on the date of the Board's organizational meeting which is
held after the Annual Meeting of Shareholders. Options are priced at the fair
market value of the Shares on the date of grant and have a term of 10 years,
except in the case of the director's earlier death or retirement, when they
become exercisable within specified periods following the date of such event. In
the event of a change-of-control of the Company, all outstanding unexercised
stock options issued under the 1998 Directors' Stock Option Plan would become
fully exercisable.
(c) Equity Compensation Plan Information
------------------------------------
The following table gives information as of December 31, 2002,
about Shares that may be issued upon the exercise of options, warrants and
rights under all of the Company's existing equity compensation plans (together,
the "Equity Plans"). The table does not include the 5,000,000 additional Shares
authorized under the Incentive Plan or the 200,000 additional Shares authorized
under the Dana Corporation Directors Deferred Fee Plan, which were approved by
shareholders at the 2003 Annual Meeting.
-33-
EQUITY COMPENSATION PLAN INFORMATION
--------------------------------------------------------------------------------------
(C)
NUMBER OF SECURITIES RE-
(A) (B) MAINING AVAILABLE FOR FUTURE
NUMBER OF SECURITIES TO BE WEIGHTED AVERAGE ISSUANCE UNDER EQUITY COM-
ISSUED UPON EXERCISE OF EXERCISE PRICE PENSATION PLANS (EXCLUDING
OUTSTANDING OPTIONS, OF OUTSTANDING OPTIONS, SECURITIES REFLECTED IN COL-
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS UMN (A))
- ----------------------- ------------------------- ------------------------ ------------------------------
Equity Plans approved by
security holders 17,758,007 (1) $ 30.1780 7,744,392 (2)
Equity Plans not approved by
security holders -0- N/A 58,530 (3)
---------------------------- ---------------------------- ----------------------------
Total 17,758,007 $ 30.1780 7,802,922
---------------------------- ---------------------------- ----------------------------
- ---------------------
(1) This number includes options outstanding at December 31, 2002, under the
1997 Stock Option Plan and the Company's 1993 and 1998 Directors Stock
Option Plans and under the Echlin Inc. 1992 Stock Option Plan and 1996
Non-Executive Director Stock Option Plans. The number shown does not
include: (a) 232,819 restricted stock units ("RSUs") that are outstanding
under the Company's 1989 Restricted Stock Plan, which has been approved by
the Company's shareholders; (b) 473,902 stock "units" credited to
participants' stock accounts under the Company's stockholder-approved
Additional Compensation Plan, representing deferred compensation that may
be distributed in the form of Shares when a participant terminates
employment; and (c) 101,170 stock "units" credited to non-employee
directors' stock accounts under the Company's stockholder-approved
Director Deferred Fee Plan, representing deferred fees that may be
distributed in the form of Shares when the director retires or terminates
service with the Company.
(2) This number includes the aggregate number of Shares that remain available
for future issuance, at December 31, 2002, under all of our
stockholder-approved Equity Plans. This includes 890,014 shares available
under the Company's 1999 Restricted Stock Plan, which provides for the
grant of restricted stock, 458,093 shares available (as dividend
equivalents to be credited on restricted stock awards previously granted)
under the Company's 1989 Restricted Stock Plan and 1,467,612 shares
available under the Incentive Plan. It also includes 326,086 shares
available for future issuance under the Additional Compensation Plan;
55,000 shares available under the 1998 Directors' Stock Option Plan;
47,587 shares available under the Director Deferred Fee Plan (the "DDFP")
and 4,500,000 Shares that may be issued under the Company's Employees'
Stock Purchase Plan (the "ESPP") for sale to the ESPP Custodian. To date,
all Shares allocated to participants' accounts under the ESPP have been
obtained by the Custodian by the purchase of outstanding Shares on the
open market.
(3) This is the number of Shares available for issuance at December 31, 2002
under the Company Stock Award Plan, the only Equity Plan that has not been
approved by our shareholders. A pool of 100,000 Shares is authorized for
issuance under this Plan annually, with no carry-over of unissued Shares.
Consequently, at December 31, 2002, there were 58,530 Shares available for
future issuance under this Plan in 2002 (i.e., not issued in 2002) and at
January 1, 2003, there were 100,000 Shares available for issuance under
the Plan in 2003. This Plan was terminated as of the 2003 Annual Meeting.
(d) Stock Ownership
---------------
COMPANY SHARES
The following table shows Shares and stock units with a value
tied to Shares that were beneficially owned on December 31, 2002, by the
Company's directors and the Named Executive Officers and all directors,
director-nominees and executive officers as a group. At that date, the group
beneficially owned approximately 1.6%, and each person beneficially owned less
than 1%, of the outstanding Shares. All reported Shares were beneficially owned
directly except as follows: Mr. Bailar indirectly owned 2,100 Shares that were
held in a retirement plan account and 900 Shares that were held in a trust for
which he was trustee; Mr. Carroll indirectly owned 3,920 Shares that were held
in trusts for which he was trustee; Ms. Marks indirectly owned 4,000 Shares that
were held in trusts for which she was a trustee; and Mr. Priory indirectly owned
3,000 Shares that were held by his children.
STOCK OWNERSHIP,
INCLUDING RESTRICTED
STOCK AND EXERCISABLE PERCENT OF
BENEFICIAL OWNER OPTIONS (1) STOCK UNITS (2) CLASS
- -------------------------------------------------------------------------------------------------------------------------
Benjamin F. Bailar..................................... 30,000 Shares 6,673 Units (3)
A. Charles Baillie .................................... 14,000 Shares 6,875 Units (3)
Edmund M. Carpenter ................................... 31,181 Shares 23,360 Units (3)
William J. Carroll .................................... 287,434 Shares 13,210 Units (3)
Eric Clark ............................................ 27,000 Shares 3,248 Units (3)
Bernard N. Cole ....................................... 288,530 Shares 23,653 Units (3)
Marvin A. Franklin, III ............................... 297,392 Shares 18,407 Units (3)
Cheryl W. Grise ....................................... 0 Shares 0 Units (3)
Glen H. Hiner ......................................... 25,000 Shares 12,698 Units (3)
James P. Kelly ........................................ 2,000 Shares 300 Units (3)
Joseph M. Magliochetti ................................ 774,239 Shares 26,841 Units (3)
Marilyn R. Marks ...................................... 27,500 Shares 12,526 Units (3)
Richard B. Priory ..................................... 23,000 Shares 15,790 Units (3)
Robert C. Richter ..................................... 261,230 Shares 20,171 Units (3)
Fernando M. Senderos .................................. 3,000 Shares 610 Units (3)
Directors, Director Nominees and Executive
Officers as a Group (18 persons) ...................... 2,427,509 Shares 212,423 Units 1.6%
(1) The Shares reported for the Named Executive Officers include restricted
stock which the officers were entitled to vote under the Company's 1989
and 1999 Restricted Stock Plans and Shares subject to options exercisable
within 60 days. Details of the officers' restricted stock ownership appear
at Note 4 to the Summary Compensation Table. Shares subject to options
exercisable within 60 days include: Mr. Carroll, 190,750 Shares; Mr. Cole,
202,500 Shares; Mr. Franklin, 228,250 Shares; Mr. Magliochetti, 590,500
Shares; and Mr. Richter, 197,250 Shares; the directors, director-nominees
and executive officers as a group, 1,733,475 Shares. The Shares reported
for directors include Shares subject to options exercisable within 60 days
which were awarded under the 1998 Directors' Stock Option Plan.
(2) The stock units reported for the non-employee directors represent deferred
compensation credited to the directors' stock accounts under the Company's
Director Deferred Fee Plan, which is described under the caption "Director
Compensation."
The stock units reported for the Named Executive Officers represent annual
bonuses earned under the Company's Additional Compensation Plan and
deferred to the officers' stock accounts. Under this plan, the
Compensation Committee may defer payment of all or a portion of a
participant's bonus and credit the deferred amounts to a stock account, an
interest equivalent account, or both. Stock units are credited to the
participant's stock account based on the amount of the deferred bonus and
the market price of Shares. Whenever cash dividends are paid on Shares,
each stock account is credited with additional stock units equal to the
number of Shares that could have been purchased if a cash dividend had
been paid on the number of stock units currently in the account. Under the
plan, a participant may, during the five-year period following retirement
or termination of service, elect to convert all or any percentage (or
dollar amount) of the stock units credited to his stock account into an
equivalent dollar balance in the interest equivalent account.
For both the non-employee directors and the executive officers, the value
of the unconverted stock units at the time
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of distribution will be based on the market value of a Share at that time.
The deferred amounts can be paid in cash, Shares or a combination of cash
and Shares, in a lump sum or annual installments, at the time the director
or executive officer retires, dies or terminates service.
(3) Less than 1%.
-35-
ANNEX B
Recent Transactions by Directors and Executive Officers of the Company
DATE OF NATURE OF NO. OF
NAME TRANSACTION TRANSACTION SHARES SHARE PRICE TRANSACTION TYPE
---- ----------- ----------- ------ ----------- ----------------
B.F. Bailar 6/30/2003 Acquisition 9 9.1167 Dividends-DDFP
A.C. Baillie 6/30/2003 Acquisition 10 9.1167 Dividends-DDFP
6/30/2003 Acquisition 1,145 9.1167 Units-DDFP
E.M. Carpenter 6/30/2003 Acquisition 29 9.1167 Dividends-DDFP
6/30/2003 Acquisition 2,674 9.1167 Units-DDFP
6/30/2003 Acquisition 3.75 DRIP
W.J. Carroll 6/30/2003 Acquisition 2.52 DRIP
6/13/2003 Acquisition 35 9.1167 Dividends-RSP
6/13/2003 Acquisition 23 9.1167 Units-RSP
6/13/2003 Acquisition 15 9.1167 Dividends-ACP
5/30/2003 Acquisition 1,083.52 ESPP
E. Clark 6/30/2003 Acquisition 4 9.1167 Dividends-DDFP
B.N. Cole 6/13/2003 Acquisition 28 9.1167 Dividends-RSP
6/13/2003 Acquisition 8 9.1167 Units-RSP
6/13/2003 Acquisition 26 9.1167 Dividends-ACP
5/30/2003 Acquisition 798.18 ESPP
M.A. Franklin, III 6/30/2003 Acquisition 0.07 DRIP
6/13/2003 Acquisition 35 9.1167 Dividends-RSP
6/13/2003 Acquisition 22 9.1167 Units-RSP
6/13/2003 Acquisition 20 9.1167 Dividends-ACP
5/30/2003 Acquisition 225.92 ESPP
C.F. Heine 6/30/2003 Acquisition 3.57 DRIP
6/13/2003 Acquisition 49 9.1167 Dividends-RSP
6/13/2003 Acquisition 10 9.1167 Units-RSP
6/13/2003 Acquisition 17 9.1167 Dividends-ACP
5/30/2003 Acquisition 738.64 ESPP
-36-
DATE OF NATURE OF NO. OF
NAME TRANSACTION TRANSACTION SHARES SHARE PRICE TRANSACTION TYPE
---- ----------- ----------- ------ ----------- ----------------
G.H. Hiner 6/30/2003 Acquisition 15 9.1167 Dividends-DDFP
J.P. Kelly 6/30/2003 Acquisition 1 9.1167 Dividends-DDFP
J.M. Laisure 6/30/2003 Acquisition 2.30 DRIP
6/13/2003 Acquisition 61 9.1167 Dividends-RSP
6/13/2003 Acquisition 43 9.1167 Dividends-ACP
5/30/2003 Acquisition 738.64 ESPP
J.M. Magliochetti 6/13/2003 Acquisition 87 9.1167 Dividends-RSP
6/13/2003 Acquisition 75 9.1167 Units-RSP
6/13/2003 Acquisition 32 9.1167 Dividends-ACP
M.R. Marks 6/30/2003 Acquisition 14 9.1167 Dividends-DDFP
T.R. McCormack 6/13/2003 Acquisition 60 9.1167 Dividends-RSP
6/13/2003 Acquisition 4 9.1167 Dividends-ACP
5/30/2003 Acquisition 170.34 ESPP
R.B. Priory 6/30/2003 Acquisition 21 9.1167 Dividends-DDFP
6/30/2003 Acquisition 2,715 9.1167 Units-DDFP
R.C. Richter 6/13/2003 Acquisition 39 9.1167 Dividends-RSP
6/13/2003 Acquisition 7 9.1167 Units-RSP
6/13/2003 Acquisition 28 9.1167 Dividends-ACP
5/30/2003 Acquisition 111.33 ESPP
F.M. Senderos 6/30/2003 Acquisition 2 9.1167 Dividends-DDFP
R.J. Westerheide 5/30/2003 Acquisition 414.98 ESPP
ACP - ADDITIONAL COMPENSATION PLAN
DDFP - DIRECTOR DEFERRED FEE PLAN
DRIP - DIVIDEND REINVESTMENT PROGRAM
ESPP - EMPLOYEES' STOCK PURCHASE PLAN
RSP - 1999 RESTRICTED STOCK PLAN
Exhibit (a) (1)
[DANA LETTERHEAD]
July 22, 2003
Dear Fellow Shareholders:
On July 9, 2003, ArvinMeritor, Inc. launched an unsolicited tender offer
for all outstanding shares of Dana common stock at $15 per share, subject to the
terms and conditions contained in ArvinMeritor's tender offer documents.
After a thorough review process including consultation with our legal and
financial advisors, your Board of Directors determined that ArvinMeritor's offer
is a financially inadequate, high-risk proposal that is not in the best
interests of Dana or its shareholders.
Your Board of Directors recommends that you reject the ArvinMeritor offer
and not tender your shares. I'd like to share some of the Board's reasons with
you:
o ArvinMeritor's offer was inadequate, from a financial point of view, to
holders of Dana common stock, as indicated in the opinions, dated July 21,
2003, that the Board of Directors received from its financial advisors,
Credit Suisse First Boston LLC and Deutsche Bank Securities Inc.
o Dana's restructuring and transformation efforts are producing results.
Management has reported these results to the Board, and both have
reaffirmed their belief that the Company's ongoing strategy is a better way
to enhance value for shareholders. Management and the Board also believe
that Dana's strategy is meeting its targets to deliver improved financial
performance for the remainder of 2003, 2004 and beyond - performance that
they believe is not yet reflected in the current stock price.
o Dana has already achieved success in executing its restructuring plan as
evidenced by improved earnings, the generation of $540 million in proceeds
from asset sales, and the reduction of net debt by approximately $590
million over the past 18 months (excluding approximately $710 million in
asset sales and $580 million in debt reduction attributable to Dana Credit
Corporation's disposition activities over the same period of
time. ArvinMeritor's proposed transaction raises serious antitrust issues
and is very likely to attract intensive scrutiny from government antitrust
authorities, which may result in litigation to block the offer. For
example, Dana and ArvinMeritor are the only substantial North American
producers of axles, driveshafts and foundation brakes for medium- and
heavy-duty trucks, with combined market shares ranging from 80 percent to
100 percent. ArvinMeritor has not yet even begun the process of seeking
antitrust clearance by making the required filing under the
Hart-Scott-Rodino Act.
PRIVILEGED AND CONFIDENTIAL
DRAFT 7/22/02 1:00 PM
o Although ArvinMeritor would need to arrange substantial borrowings to
consummate its offer, when confronted by securities regulators from the
State of Ohio, ArvinMeritor stated that it has not entered into any
commitments or agreements to obtain any such financing. Based on
ArvinMeritor's public disclosures, the size of the required financing would
result in ArvinMeritor having a pro forma debt-to-capital ratio of
approximately 88%, which would be among the highest in the automotive
supply industry.
o ArvinMeritor's offer is highly conditional, which creates significant
uncertainty that the offer could ever be completed.
Your Board and management are committed to increasing shareholder value
through the continued execution of our business plan. We will not let
ArvinMeritor's unsolicited, unfinanced, opportunistic and high-risk proposal
distract us from our continued focus on Dana's ongoing aggressive cost-cutting
initiatives, productivity improvements and customer relationship enhancements.
The enclosed Schedule 14D-9 contains a detailed description of the reasons
for your Board of Directors' recommendation and the factors considered by the
Board. We urge you to read the Schedule 14D-9 carefully so that you will be
fully informed before you make your decision.
We greatly appreciate your continued support and encouragement. Thank you.
Sincerely,
/s/ Joseph M. Magliochetti
Joseph M. Magliochetti
Chairman and Chief Executive Officer
Exhibit (a) (2)
NEWS RELAEASE
Contact: Michelle Hards
(419) 535-4636
michelle.hards@dana.com
DANA CORPORATION'S BOARD OF DIRECTORS
REJECTS UNSOLICITED OFFER FROM ARVINMERITOR
TOLEDO, OHIO, JULY 22, 2003 - Dana Corporation (NYSE: DCN) today announced that
its Board of Directors has rejected an unsolicited tender offer from
ArvinMeritor, Inc., (NYSE: ARM) after a thorough review and consultation with
its financial and legal advisers. On June 9, 2003, ArvinMeritor launched a
tender offer for all outstanding shares of Dana common stock at a price of
$15.00 per share.
Dana today filed a Schedule 14D-9 with the Securities and Exchange Commission
recommending that its shareholders not tender their stock in response to this
offer.
The Board stated as reasons for its recommendation that ArvinMeritor's offer is
a financially inadequate, high-risk proposal that is not in the best interests
of Dana or its shareholders. In addition, the Board cited the significant
financing risks and serious antitrust concerns raised by the offer that could
prevent its completion.
The Board said in its response that:
o ArvinMeritor's offer was inadequate, from a financial point of view, to
holders of Dana common stock, as indicated in the opinions, dated July 21,
2003, that the Board of Directors received from our financial advisors,
Credit Suisse First Boston LLC and Deutsche Bank Securities Inc.
o Dana's restructuring and transformation efforts are producing results.
Management has reported these results to the Board, and both have
reaffirmed their belief that the Company's ongoing strategy is a better
way to enhance value for shareholders. Management and the Board also
believe that Dana's strategy is meeting its target to deliver improved
financial performance for the remainder of 2003, 2004, and beyond -
performance that is not yet reflected in the current stock price.
o Dana has already achieved success in executing its restructuring plan as
evidenced by improved earnings, the generation of $540 million in proceeds
from asset sales, and the reduction of net debt by approximately $590
million over the past 18 months. These numbers exclude the approximately
$710 million in asset sales and $580 million in debt reduction
attributable to Dana Credit Corporation's disposition activities over the
same period of time.
o ArvinMeritor's proposed transaction raises serious antitrust issues and,
in the Board's view, is very likely to attract intensive scrutiny from
government regulatory authorities, which may result in litigation to block
the offer. For example, Dana and ArvinMeritor are the only substantial
North American producers of axles, driveshafts, and foundation brakes for
medium- and heavy-duty trucks, with combined market shares ranging from 80
percent to 100 percent. ArvinMeritor has not yet even begun the process of
seeking antitrust clearance by making the required filing under the
Hart-Scott-Rodino Act.
o Although ArvinMeritor would need to arrange substantial borrowings to
consummate its offer, when confronted by securities regulators from the
State of Ohio, ArvinMeritor stated that it has received no commitments or
agreements to obtain any such financing. Based on ArvinMeritor's public
disclosures, the size of the required financing would result in
ArvinMeritor having an approximately 88% pro forma debt-to-capital ratio,
which would be among the highest in our industry.
o ArvinMeritor's offer is highly conditional, which creates significant
uncertainty that the offer could ever be completed.
Dana Corporation Chairman and CEO Joe Magliochetti said, "There is virtually no
rationale for accepting this offer, which represents inadequate value and a high
level of risk for shareholders.
"We are confident that with the substantial completion of our restructuring, the
critical momentum we are beginning to achieve in our transformation process, our
market leadership and the expected cyclical upward turn in our heavy-duty
markets, we are positioned to outperform our peers as the industry recovers. We
are confident that as we go forward, the benefits of our restructuring will
enhance shareholder value."
Dana Corporation also announced today that it has retained Goldman, Sachs & Co.
as a financial adviser in connection with this matter.
Dana is a global leader in the design, engineering, and manufacture of
value-added products and systems for automotive, commercial, and off-highway
vehicle manufacturers and their related aftermarkets. The company employs
approximately 60,000 people worldwide. Founded in 1904 and based in Toledo,
Ohio, Dana operates hundreds of technology, manufacturing, and customer service
facilities in 30 countries. The company reported 2002 sales of $9.5 billion.
DANA'S SHAREHOLDERS ARE STRONGLY ADVISED TO CAREFULLY READ DANA'S SOLICITATION/
RECOMMENDATION STATEMENT REGARDING THE TENDER OFFER REFERRED TO HEREIN BECAUSE
IT CONTAINS IMPORTANT INFORMATION. FREE COPIES OF THE
SOLICITATION/RECOMMENDATION STATEMENT (INCLUDING ANY AMENDMENTS) FILED BY DANA
WITH THE SECURITIES AND EXCHANGE
COMMISSION ARE AVAILABLE AT THE SEC'S WEB SITE AT WWW.SEC.GOV, OR AT THE DANA
WEB SITE AT WWW.DANA.COM, AND ARE ALSO AVAILABLE, WITHOUT CHARGE, BY DIRECTING
REQUESTS TO DANA'S INVESTOR RELATIONS DEPARTMENT. STATEMENTS MADE IN THIS
RELEASE INDICATING DANA'S, THE BOARD OF DIRECTORS' OR MANAGEMENT'S INTENTIONS,
BELIEFS, EXPECTATIONS OR PREDICTIONS FOR THE FUTURE ARE FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS ARE ONLY PREDICTIONS AND MAY DIFFER MATERIALLY FROM
ACTUAL OR FUTURE EVENTS OR RESULTS. SUCH FORWARD-LOOKINGSTATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND MAY INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED. SUCH RISKS AND UNCERTAINTIES
INCLUDE, WITHOUT LIMITATION, GLOBAL AND REGIONAL ECONOMIC CONDITIONS, BUSINESS
CONDITIONS IN THE OVERALL AUTOMOTIVE INDUSTRY, AND THE COST AND TIMING OF DANA'S
REPOSITIONING PLAN IMPLEMENTATION. THEY ALSO INCLUDE OTHER FACTORS DISCUSSED
HEREIN AND THOSE DETAILED FROM TIME TO TIME IN DANA'S FILINGSWITH THE SECURITIES
AND EXCHANGE COMMISSION.
# # #
EXHIBIT (a)(4)
V I R G I N I A:
IN THE CIRCUIT COURT FOR THE CITY OF BUENA VISTA
ARVINMERITOR, INC. )
)
and )
)
DELTA ACQUISITION CORP., )
)
Complainants, )
) Chancery No. _________
v. )
)
DANA CORPORATION, )
JOSEPH M. MAGLIOCHETTI, )
BENJAMIN F. BAILAR, A. CHARLES )
BAILLIE, EDMUND M. CARPENTER, )
ERIC CLARK, GLEN H. HINER, )
JAMES P. KELLY, MARILYN R. MARKS, )
RICHARD B. PRIORY, FERNANDO M. )
SENDEROS, CHERYL W. GRISE, )
)
Defendants.
BILL OF COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF
Complainants ArvinMeritor, Inc. ("ArvinMeritor") and Delta Acquisition
Corp., by their counsel, allege upon knowledge with respect to themselves and
their own acts, and upon information and belief as to all other matters, as
follows:
SUMMARY OF THIS ACTION
1. On July 8, 2003, ArvinMeritor announced its tender offer (the "Tender
Offer") to acquire all of the outstanding common stock of Defendant Dana
Corporation ("Dana," or the "Company") for $15 per share in cash, an aggregate
price of approximately $2.5 billion for the common equity of the Company. The
Tender Offer represents a 55.7 percent premium over the closing price of the
Company's common stock on June 3, 2003, the last trading day before
ArvinMeritor first submitted a written proposal for a business combination to
Dana, and a 24.9 percent premium over the closing price of Dana's common stock
on July 7, 2003.
2. From the time that ArvinMeritor first contacted Dana, Dana has flatly
rejected ArvinMeritor's proposals for business combination and has refused to
negotiate with ArvinMeritor. In fact, Dana has refused to meet with ArvinMeritor
even once to discuss its proposal. Instead, Dana's Board of Directors (the
"Board") has embarked upon a campaign to ensure the continued control of Dana by
its current top management and the Board, notwithstanding its fiduciary
obligations to Dana's shareholders.
3. ArvinMeritor seeks to acquire Dana through a transaction that is
non-coercive, non-discriminatory and entirely fair to Dana shareholders. Indeed,
the transaction will maximize the value of the Company's outstanding common
shares, and for that reason, it is in the best interest of Dana's shareholders.
4. If the Tender Offer is successful, ArvinMeritor will complete its
acquisition (the "Proposed Acquisition") of the entire equity interest of Dana
by a merger of Delta Acquisition Corp. into Dana. By this Proposed Acquisition,
ArvinMeritor envisions the creation of an industry leader with the strategic
position, size, and scope of operations that will allow both companies to better
serve their customers, employees, and ultimately, their shareholders.
5. In light of the fair and non-coercive nature of ArvinMeritor's Proposed
Acquisition and its substantial value to Dana shareholders, Dana's refusal to
negotiate or even to discuss the details of ArvinMeritor's proposal constitutes
an unreasonable response to the Proposed Acquisition, in violation of the
fiduciary duties of Defendants to the Company's shareholders. By this action,
ArvinMeritor seeks to compel Defendants to fulfill their fiduciary duties.
2
JURISDICTION AND VENUE
6. This Court has jurisdiction over the Company because Dana is
incorporated under the laws of the Commonwealth of Virginia, and over the
individual defendants because, among other reasons, they are directors of a
Virginia corporation, and they are subject to jurisdiction under Virginia Code
ss. 8.01-3281. This action is not removable.
7. Venue is proper in this Court under Virginia Code ss. 8.01-262(3)
because Dana conducts business in Buena Vista, Virginia, at its branch (the
"Branch") located at 3200 Green Forest Avenue. This Branch, a division of Dana,
manufactures automotive and light truck axles. Upon information and belief, the
Branch has approximately 300 employees.
THE PARTIES
8. Complainant ArvinMeritor is an Indiana corporation with its principal
place of business at 2135 West Maple Road, Troy, Michigan, 48084-7186.
ArvinMeritor is the beneficial holder of approximately 1,085,300 shares, or .73
percent, of Dana common stock. ArvinMeritor is a global supplier of integrated
systems, modules, components, and applications serving various industries.
ArvinMeritor also provides coil coating applications to the transportation,
appliance, constriction and furniture industries.
9. Complainant Delta Acquisition Corp. was incorporated under the laws of
the Commonwealth of Virginia for the purpose of engaging in a business
combination with the Company. It is a wholly-owned subsidiary of ArvinMeritor.
Delta Acquisition Corp. has not, and is not expected to, engage in any business
other than in connection with its organization, the Tender Offer and the
Proposed Acquisition. Its principal executive offices and telephone number are
the same as those of ArvinMeritor.
3
10. Defendant Dana is a corporation with its principal executive offices at
4500 Dorr Street, Toledo, Ohio, 43615. It was incorporated in Virginia.
According to its most recent Form 10-K, Dana is global supplier of modules,
systems, and components serving various industries.
11. As of April 25, 2003, Dana had approximately 148,620,000 shares of
common stock outstanding. (Dana Corp., /form 10-Q (May 1, 2003)). According to
its most recent Form 10-K, as of February 14, 2003, Dana had 37,400 shareholders
of record. Upon information and belief, those shareholders are located in many,
and perhaps all, states in this country as well as in a number of foreign
countries. Dana stock trades on the New York Stock Exchange and the Pacific
Exchange.
12. In 2002, Dana had gross sales of $9.5 billion, and, through year-end
2002, more than 63,000 employees. (Dana Corp., Form 10-K (Feb. 25, 2003)). Upon
information and belief, fewer than 500 of Dana's employees are located in
Virginia, with approximately 300 located at the Branch.
13. Dana maintains operations in 30 countries worldwide. Dana has
consolidated subsidiaries in 36 countries or territories and twelve states.
(Dana Corp., Form 10-K (Feb. 25, 2003)). Upon information and belief, none of
these consolidated subsidiaries is located in Virginia.
14. Upon information and belief, Dana does not own any real property in
Virginia.
15. Defendant Joseph M. Magliochetti is Chairman of the Dana Board and the
Company's Chief /Executive Officer, President, and Chief Operating Officer.
16. Defendant Benjamin F. Bailar is a director of Dana.
17. Defendant A. Charles Baillie is a director of Dana.
18. Defendant Edmund M. Carpenter is a director of Dana.
4
19. Defendant Eric Clark is a director of Dana.
20. Defendant Glen H. Hiner is a director of Dana.
21. Defendant James P. Kelly is a director of Dana.
22. Defendant Marilyn R. Marks is a director of Dana.
23. Defendant Richard B. Priory is a director of Dana.
24. Defendant Fernando M. Senderos is a director of Dana.
25. Defendant Cheryl W. Grise is a director of Dana.
26. Defendants named in paragraphs 15 through 25 above are sometimes
collectively referred to herein as the "Individual Defendants."
FACTUAL BACKGROUND
DANA'S CURRENT FINANCIAL CONDITION
27. Dana has encountered significant financial difficulties over the past
several years, as evidenced by a steady decline in its stock price. In June
1999, Dana's stock was trading at more than $54 per share. Over the next four
years, Dana's stock lost substantial value, closing at $9.63 on June 3, 2003,
the last trading day before ArvinMeritor first submitted its proposal in writing
to Dana, and at $12.02 on July 7, 2003.
28. Upon information and belief, due to its substantial financial
difficulties, Dana undertook a restructuring program nearly two years ago, in
September 2001. However, this restructuring plan has led only to plant closings
and to lost jobs for Dana employees, as Dana itself has acknowledge:
Among the elements of the restructuring are a workforce reduction of more
than 15 percent and the planned closure or consolidation of more than 30
facilities. Through June 30, [2002,] Dana had reduced its permanent
workforce by approximately 8 percent, closed 14 facilities, and announced
plans to close 14 others.
(Dana Corp., Press Release (July 17, 2002)).
5
Dana has reduced its permanent workforce by approximately 9 percent,
closed 18 facilities, and announced plans to close 16 others from the
inception of the restructuring plan announced one year ago through Sept.
30, 2002.
(Dana Corp., Press Release (July 17, 2002)).
29. Dana's performance has not improved since last year. In fact, as of
February 12, 2003, Dana had been forced to close 28 of its facilities as part of
its restructuring program. (Dana Corp., Press Release (Feb. 12, 2003)).
30. The Proposed Acquisition would dramatically improve the situation for
Dana's shareholders. In fact, ArvinMeritor's Tender Offer of $15 per share would
provide Dana's shareholders with a 55.7 percent premium over the closing price
of the Company's common stock on June 3, 2003, the last trading day before
ArvinMeritor first submitted its proposal in writing to Dana, and a 24.9 percent
premium over the closing price of Dana's common stock on July 7, 2003.
ARVINMERITOR'S PROPOSAL AND DANA'S RESPONSE
31. From the start, despite the clear-cut, substantial economic benefits
for Dana's shareholders and Dana's significant financial struggles in the hands
of its current management, Dana and its Board have improperly dismissed
ArvinMeritor's proposal without sufficient consideration. This conduct is
entirely inconsistent with the Board's fiduciary duty to protect the interests
of Dana shareholders and to maximize shareholder value.
32. On July 8, 2003, ArvinMeritor publicly announced its Tender Offer to
acquire all of the outstanding shares of Dana for $15 per share in cash.
ArvinMeritor first conveyed is interest in acquiring Dana for $14 per share in
cash to Defendant Magliochetti, Dana's Chairman, Chief Executive Officer,
President, and Chief Operating Officer, during a telephone conversation on June
4, 2003 (the "June 4, 2003 Conversation").
6
33. Defendant Magliochetti's reaction was immediate and adverse to Dana's
shareholders. He simply refused to discuss ArvinMeritor's proposal. Instead,
twice during the June 4, 2003 Conversation, Defendant Magliochetti stated
emphatically that Dana was "not for sale."
34. This rejection of ArvinMeritor's proposal was not based on consulting
with the Board, any committees of the Board, any officers of Dana, or any legal
counsel or other professional. As such, Defendant Magliochetti's rejection of
ArvinMeritor's proposal constitutes a breach of his fiduciary duty to the
Company's shareholders.
35. Following Defendant Magliochetti's improper rejection of ArvinMeritor's
proposal without discussing any details with ArvinMeritor or consulting with the
Board, on June 4, 2003, Larry D. Yost, the Chairman and Chief Executive Officer
of ArvinMeritor, sent a letter to Defendant Magliochetti (the "June 4, 2003
Letter") memorializing ArvinMeritor's proposal of June 4, 2003. The letter noted
that the price offered by ArvinMeritor represented a premium of 45 percent over
the closing price of Dana's common stock on June 3, 2003.
36. The June 4, 2003 Letter also noted that, as an alternative to the
proposal advanced earlier that day, ArvinMeritor was "prepared to consider a mix
of cash and stock consideration if it will facilitate a transaction." The June
4, 2003 Letter further stated that "[i]f you are willing to work with us to
consummate a transaction expeditiously, we may be prepared to analyze further
whether a higher value is warranted."
37. Finally, in the June 4, 2003 Letter, Mr. Yost indicated that "[I]f you
or any of your directors have any questions about our proposal, please feel free
to give me a call. I will make myself available at any time." At no time since
ArvinMeritor first communicated its
7
proposal, however, has defendant Magliochetti or any member of Dana's Board
called Mr. Yost to raise questions about ArvinMeritor's proposal.
38. On June 12, 2003, Defendant Magliochetti telephoned Mr. Yost (the "June
12, 2003 Conversation") to express that Dana was not interested in a business
combination with ArvinMeritor. On June 12, 2003, Defendant Magliochetti also
sent a letter (the "June 12, 2003 Letter") to ArvinMeritor stating that Dana did
not have any interest whatsoever in pursuing a sale transaction with
ArvinMeritor. Upon information and belief, Dana's Board failed to give the offer
due consideration. Indeed, in violation of the fiduciary duties of Defendants to
act in good faith and in the best interests of Dana's shareholders, Dana refused
to meet with ArvinMeritor or even to discuss ArvinMeritor's proposal with
ArvinMeritor.
39. The June 12, 2003 Letter also stated that Dana was pursuing a plan to
maximize value for its shareholders. Upon information and belief, this statement
was merely an after-the-fact rationalization for the failure of Dana's Board to
give ArvinMeritor's proposal due consideration, as its fiduciary duties require.
40. In addition, the June 12, 2003 Letter stated that Dana "[h]as been
advised by able and experienced financial and legal advisors." The Letter does
not contain any description of any advice received by Dana, nor does it identify
the purported advisors.
41. On June 16, 2003, Mr. Yost sent a letter to Defendant Magliochetti and
to Dana's Board (the "June 16, 2003 Letter") reiterating ArvinMeritor's serious
interest in pursuing a transaction with Dana. In addition, Mr. Yost further
explained the significant benefits to both companies' shareholders of a merger
between ArvinMeritor and Dana. As the letter noted,
The combination of ArvinMeritor and Dana will create a stronger Tier One
supplier company providing numerous technological and service benefits for
our combined worldwide light vehicle, commercial truck and aftermarket
customers. This transaction will bring together the right combination of
innovation, capabilities and resources to
8
establish a more significant global enterprise. Together, ArvinMeritor and
Dana will become a true industry leader with the strategic positions that
will allow us to better serve our customers, employees and shareholders
. . .
In addition to the compelling strategic fit of our respective product
portfolios, a business combination of our two companies will also create
significant financial benefits, including considerable sales, operating
and cost synergies beyond what either company could achieve on its own. We
believe these benefits will better position us to compete and succeed in
the increasingly competitive automotive supply industry.
(June 16, 2003 Letter).
42. The June l6, 2003 Letter also stated that ArvinMeritor was "flexible in
considering a mix of cash and stock consideration if it will facilitate a
transaction," and again noted that ArvinMeritor "may be prepared to analyze
further whether a higher value is warranted." Again, in further derogation of
its fiduciary duties, Dana's Board refused to meet with ArvinMeritor or even to
discuss ArvinMeritor's proposal with ArvinMeritor.
43. The June 16, 2003 Letter further noted that ArvinMeritor was "ready to
meet at a moment's notice." Yet Dana's Board refused to meet with ArvinMeritor
even once.
44. Dana's wholesale refusal to consider ArvinMeritor's proposal or to
attempt to negotiate the terms of the deal clearly is not in the best interest
of Dana's shareholders and is inconsistent with the Board's fiduciary duties.
ArvinMeritor's proposal is available to all Dana shareholders, for all
outstanding shares. It is not "front-end loaded" or otherwise coercive in
nature, and ArvinMeritor has made clear that it intends to acquire any shares
not tendered in response to the Tender Offer for the same price of $15 per share
in cash in a second-step merger. The Tender Offer provides Dana shareholders
with the opportunity to realize a 55.7 percent premium over the closing price of
their shares on June 3, 2003, the last trading day before ArvinMeritor first
submitted its proposal in writing to Dana, and a 24.9 percent premium over the
closing price of their shares on July 7, 2003.
9
45. Notwithstanding the fair and non-coercive nature of the Proposed
Acquisition, the substantial premium that ArvinMeritor is offering to Dana's
shareholders and Dana's impaired financial condition under its current
management, on June 19, 2003 - only three days after ArvinMeritor sent its
second letter to Defendant Magliochetti - ArvinMeritor received a letter from
Defendant Magliochetti (the "June 19, 2003 Letter") reiterating that Dana had no
interest whatsoever in pursuing a sale transaction with ArvinMeritor.
46. In addition, despite ArvinMeritor's clear offer to negotiate the terms
of the Proposed Acquisition, the June 19, 2003 Letter - like the June 12, 2003
Letter - conveyed an adamant refusal to meet with ArvinMeritor or even to
discuss ArvinMeritor's proposal with ArvinMeritor. Upon information and belief,
this knee-jerk reaction arises from the Board's impermissible attempt to
entrench itself and Dana's current management at the expense, and to the
detriment, of Dana's shareholders.
47. Indeed, Dana's officers and directors have a great stake in preventing
the Proposed Acquisition. Upon information and belief, Dana's directors awarded
themselves, as well as the Company's officers, significant numbers of stock
options in order to reap substantial personal gains at the expense of Dana's
shareholders. Due to the mismanagement of the Company by the Board and Dana's
officers, upon information and belief, the vast majority of those options are
currently "under water" - the price at which they may be exercised is higher
than Dana's stock price as of July 7, 2003 and the price per share of the Tender
Offer. The Individual Defendants, upon information and belief, are acting to
entrench themselves in an effort to hang on in the unfounded hope that, at some
point, their options will have value, or that they will have time to issue
themselves new options at a lower exercise price in order to enrich themselves.
The Individual Defendants and Dana's management, upon information and belief,
10
are not willing to relinquish control and the ability to issue themselves new
options, notwithstanding that relinquishing such control would be in the best
interests of those who own the Company - the shareholders.
48. ArvinMeritor intends, as soon as is practicable following consummation
of the Tender Offer, to propose and seek to have Dana consummate the Proposed
Acquisition. The purpose of the Proposed Acquisition is to acquire - at the same
price of $15 per share - any Dana shares that are not tendered and purchased
pursuant to the Tender Offer or otherwise.
49. The Proposed Acquisition cannot be consummated unless Defendants -
voluntarily or by direction of the Court - remove or render inapplicable Dana's
anti-takeover devices, including Dana's shareholder rights plan (the "Rights
Plan" or "Poison Pill").
DANA'S RIGHTS PLAN
50. On April 25, 1996, the Company adopted its Rights Plan pursuant to a
Rights Agreement (the "Rights Agreement") with Chemical Mellon Shareholder
Services, L.L.C. (the predecessor in interest to Bank of New York). The term of
the Rights Plan extends until July 25, 2006.
51. On April 15, 1996, the Company's Board derived a dividend of one
preferred share purchase right (the "Right") for each outstanding share of
common stock, par value $1 per share, of the Company. The dividend became
payable on July 25, 1996 to the shareholders of record on that date.
52. The primary purpose of the Rights Plan is to allow the holders of the
Rights, under certain circumstances, to purchase shares of Dana's common stock
at a deep discount. In this way, the Rights Plan enables the holders of the
Rights to dilute the interests in Dana of a person or group of affiliated or
associated persons (an "Acquiring Person") who has acquired, obtained the right
to acquire, or commenced or announced an intention to commence a tender
11
offer or exchange offer for, 15 percent or more of the outstanding shares of
Dana's common stock.
53. Each Right entitles the holder, except for the Acquiring Person, to
purchase from the Company one one-thousandth of a share of the Company's Series
A Junior Participating Preferred Stock, no par value (the "Preferred Shares"),
at a price of $110 per one one-thousandth of a Preferred Share, subject to
adjustment (the "Purchase Price"). The Rights do not become exercisable, and
separate certificates representing the rights (the "Rights Certificate") are not
distributed, unless and until the earlier to occur of:
a) ten days after a public announcement or notice to the Company that an
Acquiring Person has acquired, or obtained the right to acquire,
beneficial ownership of 15 percent or more of the outstanding shares
of common stock of the Company; or
b) ten business days (or such later date as may be determined by action
of the Board prior to such time a person becomes an Acquiring Person)
after the commencement of, or the announcement of an intention to
make, a tender offer or exchange offer for 15 percent or more of the
outstanding shares of the Company's common stock.
54. The Rights do not have any economic value until the occurrence of a
"Flip-In Event" or a "Flip-Over Event." A Flip-In Event occurs if and when a
holder of Dana stock becomes an Acquiring Person. At that point, all Rights
other than those held by the Acquiring Person "flip-in" and become discount
rights which entitle the holders to purchase Dana common stock at a steep
discount, thereby diluting the interests of the Acquiring Person. Specifically,
each right that "flips-in" becomes exercisable for shares of the Company's
common stock with a
12
value equal to twice the Right's exercise price. Thus, for the exercise prime of
$110, the holder of a Right other than an Acquiring Person may purchase Dana
common stock having a market value of $220 - a 50 percent discount to market
price.
55. If and when Dana engages in a merger or a sale of 50 percent or more of
its assets (a "Flip-Over Event"), the Rights then "flip-over." Following a
Flip-Over Event, each holder of the Rights - other than the Acquiring Person -
will be entitled to receive shares of the acquiring company. In particular, upon
exercising the Rights at their then-current exercise price, the holders will be
entitled to receive that number of shares of common stock of the acquiring
company with a market value, at the time of such event of twice the exercise
price of the Right. In this way, the Company's shareholders come to
significantly dilute the percentage of the acquiror's stock that the acquiror's
original stockholders held.
56. The existence of the Rights has the practical affect of precluding
ArvinMeritor from consummating the Tender Offer, regardless of the extent to
which Dana's shareholders wish to sell their shares pursuant to the Tender
Offer. ArvinMeritor believes that the Board's failure to redeem the Rights,
insofar as the Rights subvert the wishes of the Company's shareholders to those
of the Board and deny the shareholders the opportunity to accept the Tender
Offer, constitutes a breach of fiduciary duties on the part of the Board.
57. Any amendment of the Rights Agreement to further hinder and/or delay
consummation of the Proposed Acquisition, which the Board may effect without the
approval of the holders of the Rights, would constitute a further breach of the
Board's fiduciary duties to Dana's shareholders.
13
58. Dana's Board also has the power to redeem the Rights, at a redemption
price of $0.01 per Right, at any time before an Acquiring Person acquires
beneficial ownership of 15 percent or more of the Company's outstanding common
stock.
59. In light of the fair and non-coercive nature of the Tender Offer, the
substantial premium that ArvinMeritor is offering to the Company's shareholders
and the fiduciary obligations of the Individual Defendants to Dana's
shareholders, Dana's Board should redeem the Rights as described above.
60. Unless the Board redeems the Rights, ArvinMeritor's acceptance of
shares tendered pursuant to its Tender Offer (i) will result in it becoming an
Acquiring Person, (ii) will make the Rights exercisable for shares of Dana's
common stock at a discount of 50 percent of their market value, (iii) will make
the Tender Offer economically infeasible for ArvinMeritor to accomplish, and
(iv) will deprive Dana's shareholders of the ability to benefit from the
Proposed Acquisition.
COUNT I
(BREACH OF FIDUCIARY DUTY; FAILURE TO NEGOTIATE)
61. Complainants repeat and reallege each and every allegation set forth in
paragraphs 1 through 60 as if fully set forth herein.
62. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
63. In light of the superior value offered to Dana shareholders by the
Proposed Acquisition, there is no legitimate reason for the Dana Board to refuse
to meet with ArvinMeritor or even to discuss ArvinMeritor's proposal with
ArvinMeritor. Defendants' failure to discuss the details of ArvinMeritor's
proposal with ArvinMeritor and to negotiate or even meet with
14
ArvinMeritor deprives Dana's shareholders of the opportunity to sell their Dana
shares at the premium price offered by the Proposed Acquisition, and
accordingly, to maximize their wealth.
64. Defendants' failure to negotiate has no economic justification, serves
no legitimate purpose, and is an unreasonable response to the Proposed
Acquisition, which poses no threat to the interests of Dana's shareholders. As
such, the actions of Defendants are in breach of their fiduciary duties to
Dana's shareholders.
65. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
COUNT II
(BREACH OF FIDUCIARY DUTY; CONFLICT OF INTEREST)
66. Complainants repeat and reallege each and every allegation set forth in
paragraphs 1 through 65 as if fully set forth herein.
67. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
68. Pursuant to these duties, Defendants must ensure that no conflict
exists between Defendants' own interests and those of Dana's shareholders, or,
if such a conflict exists, to ensure that such a conflict is resolved in favor
of the Company's shareholders.
69. In light of the superior value offered to Dana shareholders by the
Proposed Acquisition, there is no legitimate reason for the Dana Board to refuse
to meet with ArvinMeritor or even to discuss the details of ArvinMeritor's
proposal with ArvinMeritor. Defendants' failure to discuss the details of
ArvinMeritor's proposal with ArvinMeritor and to negotiate or even meet with
ArvinMeritor deprives Dana's shareholders of the opportunity to sell their Dana
shares at the premium price offered by the Proposed Acquisition, and
accordingly, to maximize their wealth.
15
70. Defendants' failure to negotiate is due to their personal interest in
entrenching themselves in the unfounded hope that, at some point, their options
that are currently under water will have value, or, in the alternative, that
they will have time to issue themselves new options at a lower exercise price in
order to enrich themselves. This failure to negotiate is in breach of
Defendants' fiduciary duties to Dana's shareholders.
71. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
COUNT III
(BREACH OF FIDUCIARY DUTY: THE RIGHTS PLAN
72. Complainants repeat and reallege each and every allegation set forth in
paragraphs 1 through 71 as if fully set forth herein.
73. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
74. In light of the superior value offered to Dana shareholders by the
Proposed Acquisition, there is no legitimate reason for Defendants to retain the
Rights Plan. Defendants' failure to redeem the Rights or to render the Rights
Plan inapplicable to the Proposed Acquisition has no economic justification,
serves no legitimate purpose, and is an unreasonable response to the Proposed
Acquisition, which poses no threat to the interests of Dana's shareholders. As
such, this failure of Defendants constitutes a breach of their fiduciary duties
to Dana's shareholders.
75. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
16
COUNT IV
(DECLARATORY AND INJUNCTIVE RELIEF: ANTI-TAKEOVER DEVICES)
76. Complainants repeat and reallege each and every allegation set forth in
paragraphs 1 through 75 as if fully set forth herein.
77. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
78. The Tender Offer is non-coercive and non-discriminatory. It is fair to
Dana's shareholders and represents a substantial premium over the market price
of Dana common stock.
79. Adoption of any defensive measures by Defendants against the Proposed
Acquisition, or of any measure that would prevent a future board of directors
from exercising its fiduciary duties - including, but not limited to, amendments
to the Rights Plan, amendments to Dana's Bylaws, pursuit of alternative
transactions with substantial break-up fees and/or lock-ups, "White Knight"
stock issuances, changes to licensing agreements, or executive compensation
arrangements with substantial payments triggered by a change in control - would
itself constitute a breach of the fiduciary duties owed to Dana's shareholders
and should be enjoined.
80. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
PRAYER FOR RELIEF
WHEREFORE, Complainants respectfully request that this Court:
a) declare that Defendants have breached their fiduciary obligations to
Dana's shareholders by refusing to negotiate and even to meet with
ArvinMeritor;
17
b) declare that Defendants have breached their fiduciary obligations to
Dana's shareholders by failing to resolve all conflicts of interest in
favor of the Company's shareholders;
c) enjoin Dana, its employees, agents and all persons acting on its
behalf or in concert with it from taking any action with respect to
the Rights Plan, including, but not limited to, adopting any other
Rights Plan, designed to impede, or that has the effect of impeding,
the Tender Offer or the efforts of ArvinMeritor to acquire control of
Dana, in violation of their respective fiduciary duties to Dana's
shareholders.
d) enjoin Defendants from adopting any further measure that has the
effect of improperly impeding, thwarting, frustrating or interfering
with the Proposed Acquisition in a manner inconsistent with their
fiduciary duties;
e) enjoin Defendants from taking any action to delay, impede, postpone or
thwart the voting or other rights of Dana's shareholders;
f) award Complainants their costs and disbursements in this action,
including reasonable attorneys' and experts' fees; and
g) grant Complainants such other and further relief as this Court may
deem just and proper.
Respectfully Submitted,
ARVINMERITOR, INC. and DELTA
ACQUISITION CORP.
By Counsel
McGUIREWOODS, LLP
Court Square Building
310 Fourth Street, N.E., Suite 300
Charlottesville, Virginia 22902
Telephone: (434) 977-2500
Facsimile: (434) 980-2222
18
By:
---------------------------
Richard Cullen (VSB No. 16765)
Thomas E. Spahn (VSB No. 17411)
Charles W. McIntyre (VSB No. 27480)
Michael E. Derdeyn (VSB No. 40240)
OF COUNSEL
Wesley G. Howell
Adam H. Offenhartz
Jennifer H. Rearden
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue
47th Floor FILED IN THE CLERK'S OFFICE OF THE
New York, New York 10166-0193 CIRCUIT COURT OF BUENA VISTA, VA. ON
Telephone: (212) 351-4000 DATE 7-8-03 AT 8:34 AM.
Facsimile: (212) 351-4035 /S/ CLERK/DEPUTY
------------------------
Dated: Charlottesville, Virginia
July 7, 2003
A TRUE COPY OF A RECORD
ON FILE IN THIS OFFICE
TESTE: JUDY F. SNIDER, CLERK
BY /S/ D.C.
---------------------------------
CITY OF BUENA VISTA CIRCUIT COURT
19
EXHIBIT (a)(5)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
LYNCHBURG DIVISION
- -------------------------------------------
x
ArvinMeritor, Inc. and Delta Acquisition :
Corp. :
:
Plaintiffs, : Civil Action No.
v. :
:
Dana Corporation, : COMPLAINT FOR
: DECLARATORY RELIEF
Defendant. :
x
- -------------------------------------------
Plaintiffs ArvinMeritor, Inc ("ArvinMeritor") and Delta Acquisition Corp.,
by their counsel, allege upon knowledge with respect to themselves and their own
acts, and upon information and belief as to all other matters, as follows:
SUMMARY OF THIS ACTION
1. ArvinMeritor has commenced a tender offer today (the "Tender Offer") for
all of the outstanding common stock of Defendant Dana Corporation ("Dana" or the
"Company") for $15 per share in cash, an aggregate price of approximately $2.5
billion for the common equity of the Company. The Tender Offer represents a 55.7
percent premium over the closing price of the Company's common stock on June 3,
2003, the last trading day before ArvinMeritor first submitted a written
proposal for a business combination to Dana, and a 24.9 percent premium over the
closing price of Dana common stock on July 7, 2003, the last trading day before
ArvinMeritor announced the Tender Offer.
2. As required by Section 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), ArvinMeritor and Delta Acquisition Corp. have fired their
tender offer materials (the "Tender Offer Materials") with the Securities and
Exchange Commission ("SEC").
3. Dana rejected ArvinMeritor's earlier proposals for a business
combination and has refused to negotiate with ArvinMeritor. In fact, Dana has
refused to meet with ArvinMeritor even once to discuss ArvinMeritor's proposal.
Instead, Dana's Board of Directors (the "Board") has embarked upon a campaign to
ensure the continued control of Dana by its current top management and its
Board, notwithstanding its fiduciary obligations to Dana's shareholders.
4. ArvinMeritor seeks to acquire Dana through a transaction that is
non-coercive, non-discriminatory, and entirely fair to Dana shareholders. This
transaction will not pose a threat to the interests of Dana's shareholders.
5. If the Tender Offer is successful, ArvinMeritor will complete its
acquisition (the "Proposed Acquisition") of the entire equity interest of Dana
by a merger of Delta Acquisition Corp. into Dana. By this Proposed Acquisition,
ArvinMeritor envisions the creation of an industry leader with the strategic
position, size, and scope of operations that will allow both companies to better
serve their customers, employees, and ultimately, their shareholders.
6. In light of the resistance to ArvinMeritor's proposal that Dana and its
Board already have shown, Plaintiffs believe that Dana will bring a challenge
under Section 14(e) of the Exchange Act to its statements and disclosures in
conjunction with the Tender Offer in an effort to further deprive Dana's
shareholders of a full and fair opportunity to consider Dana's proposal.
7. By this action, Plaintiffs seek a declaratory judgment regarding the
legality of their statements and disclosures in conjunction with the Tender
Offer, including, but not limited to, the Tender Offer Materials. Specifically,
Plaintiffs ask this Court for a determination that their statements and
disclosures in conjunction with the Tender Offer, including, but not limited to,
the Tender Offer Materials, comply with applicable federal law.
2
JURISDICTION AND VENUE
8. This Court has jurisdiction over this action pursuant to 28
U.S.C. ss. 1331 and 15 U.S.C. ss. 77v of the Exchange Act.
9. This Court has jurisdiction over Defendant because it was incorporated
under the laws of the Commonwealth of Virginia.
10. Venue is proper in this District under 28 U.S.C. ss.ss. 139l(b) and (c)
and 15 U.S.C. ss. 77v of the Exchange Act. Dana conducts business in Buena
Vista, Virginia, at its branch located at 3200 Green Forest Avenue. This branch,
a division of Dana, manufacturers automotive and light truck axles. Upon
information and belief, Dana's branch in Buena Vista has approximately 300
employees.
THE PARTIES
11. Plaintiff ArvinMeritor is an Indiana corporation with its principal
place of business at 2135 West Maple Road, Troy, Michigan, 48084-7186.
ArvinMeritor is the beneficial holder of approximately 1,085,300 shares, or .73
percent, of Dana common stock. ArvinMeritor is a global supplier of integrated
systems, modules, components, and applications serving various industries.
ArvinMeritor also provides coil coating applications to the transportation,
appliance, construction and furniture industries.
12. Plaintiff Delta Acquisition Corp. was incorporated under the laws of
the Commonwealth of Virginia for the purpose of engaging in a business
combination with the Company. It is a wholly-owned subsidiary of ArvinMeritor.
Delta Acquisition Corp. has not, and is not expected to, engage in any business
other than in correction with its organization, the Tender Offer and the
Proposed Acquisition. Its principal executive offices and telephone number are
the same as those of ArvinMeritor.
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13. Defendant Dana is a corporation with its principal executive offices at
4500 Dorr Street, Toledo, Ohio, 43615. It was incorporated in Virginia.
According to its most recent Form 10-K, Dana is a global supplier of modules,
systems, and components serving various industries.
FACTUAL BACKGROUND
DANA'S CURRENT FINANCIAL CONDITION
14. Dana has encountered significant financial difficulties over the past
four years, as evidenced by a steady decline in its stock price. In June 1999,
Dana's stock was trading at more than $54 per share. Over the next four years,
Dana's stock lost substantial value, closing at $9.63 on June 3, 2003, the last
trading day before ArvinMeritor first submitted its proposal in writing to Dana,
and at $12.02 on July 7, 2003, the last trading day before ArvinMeritor
announced the Tender Offer.
15. Upon information and belief, due to its substantial financial
difficulties, Dana undertook a restructuring program nearly two years ago, in
September 2001. However, this restructuring program has led only to plant
closings, lost jobs for Dana employees, and a dramatic decrease in share value.
As of October 25, 2002, Dana had reduced its permanent workforce by
approximately 9 percent (Dana Corp., Press Release (Oct. 25, 2002)), and as of
February 12, 2003, Dana had been forced to close 28 of its facilities. (Dana
Corp., Press Release (Feb. 12, 2003)).
ARVINMERITOR'S PROPOSAL AND DANA'S RESPONSE
16. In June 2003, ArvinMeritor's Chairman and Chief Executive Officer, Mr.
Larry D. Yost, contacted Dana's Chairman, Chief Executive Officer, President,
and Chief Operating Officer, Joseph M. Magliochetti ("Dana's Chairman and CEO"),
about ArvinMeritor's interest in pursuing a business combination with Dana. Mr.
Yost followed-up this telephone conversation
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with two letters, including one addressed to both Mr. Magliochetti and Dana's
Board, noting that ArvinMeritor's offer of $14 per share in cash represented a
premium of 45 percent over the closing price of Dana's common stock on June 3,
2003. (Letters dated June 4 and June 16, 2003, from Mr. Yost to Dana's Chairman
and CEO.) The letters further stated that, as an alternative to this proposal,
ArvinMeritor was "prepared to consider a mix of cash and stock consideration if
it will facilitate a transaction" and that ArvinMeritor "may be prepared to
analyze further whether a higher value is warranted." (ID.)
17. Mr. Yost also explained the significant benefits to both companies'
shareholders of a merger between ArvinMeritor and Dana:
The combination of ArvinMeritor and Dana will create a stronger and more
admired Tier One supplier company providing numerous technological and
service benefits for [ArvinMeritor's] worldwide light vehicle, commercial
truck and aftermarket customers. This transaction will bring together the
right combination of innovation, capabilities and resources to establish a
more significant global enterprise. Together, ArvinMeritor and Dana will
become a true industry leader with the strategic position, size and scope
of operations that will allow us to better serve our customers, employees
and shareholders. . .
In addition to the compelling strategic fit of our respective product
portfolios, the transaction will also create significant financial
benefits, including considerable sales, operating and cost synergies
beyond what either company could achieve on its own. We believe these
benefits will better position us to compete and succeed in the
increasingly competitive automotive supply industry.
(June 16, 2003 Letter.)
18. By letters dated June 12 and June 19, 2003, Dana's Chairman and CEO
rejected ArvinMeritor's proposal and stated that Dana did not have any interest
whatsoever in pursuing a sale transaction with ArvinMeritor. (Letters date June
12 and 19, 2003 from Dana's Chairman and CEO to Mr. Yost.) Dana made this
decision without ever having met with ArvinMeritor or discussed the details of
ArvinMeritor's proposal with ArvinMeritor.
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19. On July 8, 2003, ArvinMeritor announced its intention to commence the
Tender Offer. ArvinMeritor intends, as soon as is practicable following
consummation of the Tender Offer, to propose and seek to have Dana consummate
the Proposed Acquisition. The purpose of the Proposed Acquisition is to acquire
any Dana shares that are not tendered and purchased pursuant to the Tender Offer
or otherwise.
20. The Proposed Acquisition cannot be consummated unless Dana's
stockholders have a full and fair opportunity to consider ArvinMeritor's Tender
Offer Materials and decide for themselves whether to accept ArvinMeritor's
offer. In light of the resistance to ArvinMeritor's proposal that Dana and its
Board already have shown, Plaintiffs believe that Dana will bring a Section
14(e) challenge to its statements and disclosures in conjunction with the Tender
Offer in an effort to further deprive Dana's shareholders of the opportunity to
consider Dana's proposal.
COUNT I
(DECLARATORY RELIEF)
21. Plaintiffs repeat and reallege each and every allegation set forth in
paragraphs 1 through 20 as if fully set forth herein.
22. Section 14(d)(1) of the Exchange Act provides that
[i]t shall be unlawful for any person ... to make a tender offer for ...
any class of equity security ... unless at the time copies of the offer ...
are first published or sent or given to security holders such person has
filed with the Commission a statement containing ... information as the
Commission may by rules and regulations prescribe as necessary or
appropriate in the public interest or for the protection of investors. All
requests or invitations for tenders ... shall be filed as part of such
statement and shall contain such of the information contained in such
statement as the Commission may by rules and regulations prescribe.
The rules and Regulations referenced in Section 14(d)(1) are set forth in
Regulation 14D, which was promulgated by the SEC under The Exchange Act.
23. Section 14(e) of the Exchange Act makes it unlawful
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for any person to make any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements made, in
the light of the circumstances under which they are made, not misleading,
or to engage in any fraudulent, deceptive, or manipulative acts or
practices, in connection with any tender offer . . .
24. ArvinMeritor and Delta Acquisition Corp. have filed their Tender Offer
Materials with the SEC. Given Dana's actions to defeat the Proposed Acquisition,
ArvinMeritor and Delta Acquisition Corp. need this Court's assistance to prevent
any challenge to the legality of Plaintiffs' statements and disclosures in
conjunction with the Tender Offer from further interfering with the right of
Dana's shareholders to consider ArvinMeritor's offer.
25. Accordingly, ArvinMeritor and Delta Acquisition Corp. seek a
declaration that their statements and disclosures in conjunction with the Tender
Offer, including, but not limited to, the Tender Offer Materials, comply with
applicable federal law and are not subject to attack by Dana under Section 14(e)
of the Exchange Act.
26. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs respectfully request that this Court:
a) declare that Plaintiffs' Tender Offer Materials comply with applicable
federal law;
b) award Plaintiffs their costs and disbursements in this action, including
reasonable attorneys' and experts' fees; and
c) grant Plaintiffs such other and further relief as this Court may deem
just and proper.
Respectfully Submitted,
ARVINMERITOR, INC. and
DELTA ACQUISITION CORP.
By Counsel
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McGUIREWOODS, LLP
Court Square Building
310 Fourth Street, N.E., Suite 300
Charlottesville, Virginia 22902
Telephone: (434) 977-2500
Facsimile: (434) 980-2222
By: /S/
--------------------------
Richard Cullen (VSB No. 16765)
Thomas E. Spahn (VSB No. 17411)
Charles W. McIntyre (VSB No. 27480)
Michael E. Derdeyn (VSB No. 40240)
OF COUNSEL
Wesley G. Howell
Adam H. Offenhartz
Jennifer H. Rearden
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue
47th Floor
New York, New York 10166-0193
Telephone: (212) 351-4000
Facsimile: (212) 351-4035
8
EXHIBIT (a)(6)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF VIRGINIA
Lynchburg Division
ROGER RYAN, On Behalf Of Himself And )
All Others Similarly Situated, )
)
Plaintiff, )
)
v. ) Civil Action No. 6:03CV00051
)
DANA CORPORATION; BENJAMIN F. )
BAILAR; A. CHARLES BAILLIE; )
EDMUND M. CARPENTER; ERIC )
CLARK; CHERYL W. GRISE; GLEN H. )
HINER; JAMES P. KELLY; JOSEPH M. )
MAGLIOCHETTI; MARILYN R MARKS; )
RICHARD B. PRIORY; and FERNANDO )
M. SENEROS, )
)
Defendants. )
)
CLASS ACTION COMPLAINT
Plaintiff, Roger Ryan ("Plaintiff"), by his attorneys, for causes of
action against Defendants above-named, alleges and avers as follows:
NATURE OF THE ACTION
1. Plaintiff brings this action individually and as a class action on
behalf of all persons, other than Defendants, who own the common stock of Dana
Corporation ("Dana" or the "Company") and who are similarly situated, for money
damages, injunctive, and/or declaratory relief.
2. As more fully described below, the actions of Dana's directors
complained of herein lack any legitimate corporate or business purpose and
instead were and are designed for the sole purpose of entrenching themselves as
officers and directors of the Company. Defendants' conspiracy to remain in
control of the Company has cost and continues to cost Dana's
public shareholders the opportunity to entertain substantial premium
offers for their shares. Defendants' continued impairment of the shareholder
franchise is improper and unlawful and must be enjoined by the Court.
JURISDICTION AND VENUE
3. This Court has jurisdiction of the subject matter of this action
pursuant to 28 U.S.C. ss. 1332, as plaintiff and defendants are citizens of
different states, and the amount in controversy exceeds the sum or value of
$75,000, exclusive of interest and costs.
4. Defendants are subject to personal jurisdiction in this judicial
district, and transact business in this judicial district.
5. The Court also has jurisdiction of the subject matter of this action
pursuant to 28 U.S.C. ss. 1367(a).
6. Venue is proper in this judicial district pursuant to 28 U.S.C. ss.ss.
1391(a)-(c), as a substantial part of the events and omissions giving rise to
this action occurred in this district.
7. On or about July 8, 2003, ArvinMeritor, Inc. and Delta Acquisition Corp.
filed against defendants in state court in this district a Bill of Complaint for
Injunctive and Declaratory Relief (Buena Vista Cir. Ct. docket no. CH03-000037),
alleging in four counts, INTER ALIA, various breaches by defendants of their
fiduciary duties. This is a related case.
PARTIES
8. Plaintiff ("Plaintiff") is the owner of common stock of Dana and has
been the owner of such shares continuously since prior to the wrongs complained
of herein. Plaintiff is a resident of the State of Kentucky.
9. Defendant Dana is incorporated under the laws of Virginia with its
principal executive offices located at 4500 Dorr Street, Toledo, Ohio. Dana's
common stock trades on
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the New York Stock Exchange under the symbol "DCN." Dana engineers, manufactures
and distributes components and systems for the worldwide vehicular and
industrial manufacturers and related aftermarkets.
10. The individual Defendants (the "Individual Defendants") all currently
serve as directors of the Board of Dana.
a. Defendant Joseph M. Magliochetti ("Magliochetti") is and at
all relevant times has been Chairman of the Board of
Directors, Chief Executive Officer, and President of Dana.
Magliochetti, based upon information and belief, is a
resident of the State of Ohio;
b. Defendant Benjamin F. Bailar ("Bailar") is and at all
relevant times has been a director of Dana. Bailar, based
upon information and belief, is a resident of the State of
Illinois;
c. Defendant A. Charles Baillie ("Baillie") is and at all
relevant times has been a director of Dana. Baillie, based
upon information and belief, is a resident of Canada;
d. Defendant Edmund M. Carpenter ("Carpenter") is and at all
relevant times has been a director of Dana. Carpenter, based
upon information and belief, is a resident of the State of
Connecticut;
e. Defendant Eric Clark ("Clark") is and at all relevant times
has been a director of Dana. Clark, based upon information
and belief, is a resident of the United Kingdom;
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f. Defendant Cheryl W. Grise ("Grise") is and at all relevant
times has been a director of Dana. Grise is a resident of
the state of Massachusetts;
g. Defendant Glen H. Hiner ("Hiner") is and at all relevant
times has been a director of Dana. Hiner, based upon
information and belief, is a resident of the State of West
Virginia;
h. Defendant James P. Kelly ("Kelly") is and at all relevant
times has been a director of Dana. Kelly, based upon
information and belief, is a resident of the State of
Georgia;
i. Defendant Marilyn R. Marks ("Marks") is and at all relevant
times has been a director of Dana. Marks, based upon
information and belief, is a resident of the State of
Georgia,
j. Defendant Richard B. Priory ("Priory") is and at all
relevant times has been a director of Dana. Priory, based
upon information and belief, is a resident of the State of
North Carolina;
k. Defendant Fernando M. Senderos ("Senderos") is and at all
relevant times has been a director of Dana. Senderos, based
upon information and belief, is a resident of Mexico.
11. By virtue of their positions as directors and/or officers of Dana and
their exercise of control over the business and corporate affairs of Dana, the
Individual Defendants have, and at all relevant times had, the power to control
and influence, and did control and influence and cause Dana to engage in the
practices complained of herein. Each Individual Defendant owed and owes Dana and
its common stockholders fiduciary duties and were and are
4
required to: (i) use their ability to control and manage Dana in a fair, just
and equitable manner, (ii) act in furtherance of the best interests of Dana and
its stockholders; (iii) refrain from abusing their positions of control; and
(iv) not favor their own interests at the expense of Dana's stockholders. By
reason of their fiduciary relationships, these defendants owed and owe plaintiff
and other members of the Class (as herein defined) the highest obligations of
good faith, fair dealing, loyalty and due care.
CLASS ACTION ALLEGATIONS
12. Plaintiff brings this action on his own behalf and as a class action on
behalf of himself and holders of Dana common stock (the "Class") pursuant to
Federal Rule of Civil Procedure 23. Excluded from the Class are Defendants
herein and any person, firm, trust, corporation or other entity related to or
affiliated with any of the Defendants.
13. This action is properly maintainable as a class action.
14. The Class is so numerous that joinder of all members is impracticable.
As of July 11, 2003, there were approximately 148 million shares of Dana common
stock outstanding.
15. There are questions of law and fact which are common to the Class and
which predominate over questions affecting any individual Class members. The
common questions include, INTER ALIA, the following:
a. whether Defendants have breached their fiduciary and other
common law duties owed by them to Plaintiff and the other members of the Class;
b. whether Defendants are unlawfully entrenching themselves in
office and preventing the Company's shareholders from maximizing the value of
their holdings; and
5
c. whether the Class is entitled to injunctive relief or damages
as a result of the wrongful conduct committed by Defendants.
16. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and Plaintiff has
the same interests as the other members of the Class. Accordingly, Plaintiff is
an adequate representative of the Class and will fairly and adequately protect
the interests of the Class.
17. Plaintiff anticipates that there will be no difficulty in the
management of this litigation.
18. Defendants have acted on grounds generally applicable to the Class with
respect to the matters complained of herein, thereby making appropriate the
relief sought herein with respect to the Class as a whole.
SUBSTANTIVE ALLEGATIONS
19. On or about June 4, 2003, Larry D. Yost ("Yost"), President and Chief
Executive Officer of ArvinMeritor, Inc. ("ArvinMeritor"), contacted defendant
Magliochetti to express ArvinMeritor's willingness to enter into a merger
transaction pursuant to which ArvinMeritor would acquire Dana for $14.00 per
share in cash. Yost expressed that ArvinMeritor would also be willing to
consider alternative transactions involving a combination of ArvinMeritor common
stock and cash as consideration for a purchase of Dana. That same day, Yost sent
a letter to Magliochetti confirming ArvinMeritor's offer.
20. One week later, without engaging in any discussions with ArvinMeritor,
Magliochetti sent a letter to Yost stating, in part:
The Board is unanimous in concluding that Dana has no interest
whatsoever in pursuing a sale transaction with you, nor do we believe
that any other combination of our companies would be in the interests
of our
6
shareholders. Discussion as to a sale transaction or any other
combination would not be productive....
21. On or about June 16, 2003, Yost sent a follow up letter to the entire
Board of Dana. In that letter, Yost highlighted the fact that ArvinMeritor's
proposal represented a 45% premium to Dana's closing price the day before the
offer. Yost expressed surprise that Dana would "forgo even an initial meeting
with [ArvinMeritor] to discuss [ArvinMeritor's] proposal in light of the
significant value [ArvinMeritor] is prepared to offer [Dana's] shareholders."
Moreover, Yost reiterated that ArvinMeritor would consider changing the
consideration offered to a combination of stock and cash and even suggested that
ArvinMeritor would consider "whether a higher value is warranted" if Dana would
discuss a combination with ArvinMeritor.
22. On June 19, 2003, defendant Magliochetti sent Yost a letter repeating
that Dana had "no interest whatsoever in pursuing a sales transaction with
ArvinMeritor. Defendant Magliochetti stated "any meeting or discussion as to a
sales transaction or any other combination would not be productive."
23. On or about July 8, 2003, frustrated by Dana's unwillingness to even
discuss a possible business combination at any price, Yost sent a letter to
defendant Magliochetti stating ArvinMeritor's willingness to increase its offer
to $15.00 per share in cash. Further, Yost stated that ArvinMeritor intended to
take its new $15.00 per share offer directly to Dana's public shareholders via a
tender offer, with the hope that Dana's shareholders would be permitted to
assess the desirability of ArvinMeritor's offer. Yost repeated that ArvinMeritor
would be willing to consider even greater consideration if Dana would merely
enter into discussions with ArvinMeritor.
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24. On or about July 9, 2003, ArvinMeritor issued a press release publicly
announcing its $15.00 per share offer for the first time. On July 10, 2003,
ArvinMeritor commenced its offer.
25. Regardless of the desires of Dana's shareholders to explore a
transaction with ArvinMeritor, ArvinMeritor's lucrative offer to acquire the
Company is effectively futile without the Individual Defendants' approval.
Specifically, Dana maintains a rights agreement commonly referred to as a
"poison pill" which makes it highly unlikely that Dana could consummate a merger
transaction without the Individual Defendants' approval.
26. Dana adopted its poison pill on April 25, 1996, pursuant to a rights
agreement with Chemical Mellon Shareholder Services, L.L.C. The rights plan does
not expire until July 25, 2006.
27. Dana's poison pill effectively precludes a hostile bid for the Company
by permitting existing shareholders to dilute the hostile acquirer's holdings
through the purchase of additional shares of Dana common stock at half their
market price. In effect, the poison pill makes it prohibitively expensive for a
hostile acquirer to purchase the Company, under any circumstances. ArvinMeritor
has stated that it cannot consummate its tender offer until Dana redeems or
exempts ArvinMeritor from Dana's poison pill.
COUNT I
BREACH OF FIDUCIARY DUTY AGAINST THE INDIVIDUAL DEFENDANTS
28. Plaintiff repeats and realleges each and every allegation set forth
above.
29. The individual Defendants were and are under a duty to:
(i) act in the interests of the equity owners;
(ii) maximize shareholder value;
8
(iii) undertake an appropriate evaluation of the Company's net worth
as a merger/acquisition candidate; and
(iv) act in accordance with their fundamental duties of due care and
loyalty. At a minimum, this includes the duty to communicate with ArvinMeritor
in order to obtain the information necessary to evaluate the offer and make an
informed decision.
30. By the acts, transaction and courses of conduct alleged herein,
Defendants, individually and as part of a common plan and scheme or in breach of
their fiduciary duties to Plaintiff and the other members of the Class, are
attempting unfairly to deprive Plaintiff and other members of the Class the true
value of their investment in Dana.
31. The Individual Defendants have refused to seriously consider premium
offers for the Company's common stock in an attempt to entrench themselves in
their positions with the Company and to protect their substantial salaries and
prestigious positions. The Individual Defendants' placement of their own
interests ahead of the interests of Dana's public shareholders is in direct
violation of their fiduciary duties.
32. As a result of the actions of the Individual Defendants, Plaintiff and
the other members of the Class will be prevented from obtaining appropriate
consideration for their shares of common stock.
33. Unless enjoined by this Court, the Individual Defendants will continue
to breach their fiduciary duties and may prevent the Class from receiving its
fair share of Dana's valuable assets and businesses as a result of the proposal
by ArvinMeritor or some other bona fide offeror.
34. Plaintiff and the Class have no adequate remedy at law.
9
WHEREFORE, Plaintiff demands judgment and preliminary and permanent relief,
including injunctive relief, in his favor and in favor of the Class and against
Defendants as follows:
1. Declaring that this action is properly maintainable as a class action;
2. Directing the Defendants to exercise their duty of care by giving due
consideration to any proposed business combination;
3. Directing the Defendants to adequately ensure that no conflicts of
interest exist between the Individual Defendants and their fiduciary
obligations, or if such conflicts exist, to ensure that all conflicts are
resolved in the best interests of Dana's public stockholders;
4. Awarding Plaintiff the costs and disbursements of this action, including
reasonable attorneys' and experts' fees; and
10
5. Granting such other and further relief as this Court may deem just and
proper.
DATED: July 14, 2003.
--------------------------------------------
Garrett M. Smith (Va. Bar # 34162)
MICHIE, HAMLETT, LOWRY, RASMUSSEN & TWEEL
P.C.
500 Court Square, Suite 300
P.O. Box 298
Charlottesville, VA 22902
(434) 951-7222; (434) 951-7242 fax
OF COUNSEL:
SCHIFFRIN & BARROWAY, LLP
Marc A. Topaz
Gregory M. Castaldo
Three Bala Plaza East
Suite 400
Bala Cynwyd, PA 19004
(610) 667-7706
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