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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
(AMENDMENT NO. 6)
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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)
---------------------
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.
The purpose of this amendment is to amend and supplement Items
8 and 9 in the Solicitation/ Recommendation Statement on Schedule 14D-9
previously filed by Dana Corporation, a Virginia corporation, on July 22,
2003, as thereafter amended, and to add an additional Exhibit and revise the
Exhibit Index accordingly.
Item 8. Additional Information to be Furnished.
Item 8 is hereby amended by adding the following paragraph to
the end of such Section:
On August 4, 2003, ArvinMeritor and the Offeror sought permission from
the court to amend their complaint in the State Action. ArvinMeritor's
and the Offeror's proposed amended complaint alleges, among other
things: (1) that Dana's directors violated their fiduciary duties by
failing to adequately consider ArvinMeritor's June proposals and the
Offer, and by failing to agree to negotiate with ArvinMeritor; (2) that
the Independent Committee was formed as a result of an undisclosed
conflict between Dana's management and its directors, and that such
conflict (and the resulting need to form the Independent Committee)
makes all actions taken by the Board prior to the formation of the
Independent Committee suspect and deficient; (3) that the members of
the Independent Committee violated their fiduciary duties by failing to
retain an independent financial advisor; (4) that Dana's directors
violated their fiduciary duties by relying on Deutsche Bank; (5) that
Dana's directors violated their fiduciary duties by not obtaining an
opinion on the Offer from Goldman Sachs; (6) that Dana's directors
violated their fiduciary duties by failing to redeem Dana's Rights
Agreement; and (7) that the Company's chief executive officer violated
his fiduciary duties by allegedly informing ArvinMeritor's chief
executive officer on June 4, 2003, that Dana was not for sale, and that
recent public statements by him in which he allegedly stated that there
is no price at which he would support a sale to ArvinMeritor
demonstrate that he is continuing to violate his fiduciary duties.
ArvinMeritor's proposed amended complaint seeks a judgment declaring
that Dana's directors breached their fiduciary duties to the Company's
shareholders by failing to properly consider the Offer and by refusing
to negotiate or meet with ArvinMeritor to discuss ArvinMeritor's
efforts to purchase the Company. 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. 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, the Proposed Merger, or the efforts of ArvinMeritor and the
Offeror to acquire the Company. The Company and the Board of Directors
believe the allegations in the proposed amended complaint in the State
Action are without merit.
A copy of ArvinMeritor's proposed amended complaint is attached hereto
as Exhibit (a)(14) and is hereby incorporated herein by reference. The
foregoing description is qualified in its entirety by reference to
Exhibit (a)(14).
Item 9. Exhibits.
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Exhibit No. Description
- ----------------- ----------------------------------------------------------
(a) (14) First Amended and Supplemental Complaint filed by
ArvinMeritor, Inc. on August 4, 2003 in the Circuit Court
for the City of Buena Vista, Virginia
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: August 5, 2003
-2-
INDEX OF EXHIBITS
Exhibit No. Description
- ------------------ ----------------------------------------------------------
(a) (14) First Amended and Supplemental Complaint filed by
ArvinMeritor, Inc. on August 4, 2003 in the Circuit Court
for the City of Buena Vista, Virginia
-3-
Exhibit (a) (14)
VIRGINIA:
IN THE CIRCUIT COURT FOR THE CITY OF BUENA VISTA
ARVINMERITOR, INC., )
)
and ) Chancery
) No. CH03000037-00
DELTA ACQUISITION CORP., )
)
Complainants, )
)
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. )
)
FIRST AMENDED AND
SUPPLEMENTAL 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," or the "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 $2.2 billion for the common equity of the
Company. The Tender Offer represents a 56 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 25 percent premium over the closing price of Dana's
common stock on July 7, 2003, the last trading day before ArvinMeritor and Delta
Acquisition Corp. commenced their Tender Offer.
2. Previously, Defendant Joseph M. Magliochetti, Chairman of Dana's Board
of Directors (the "Board") and the Company's Chief Executive Officer, President,
and Chief Operating Officer - who, upon information and belief, has not attended
a single annual meeting of Dana shareholders in his 15 years with the Company -
had rejected ArvinMeritor's initial proposal for a business combination without
consulting with the Board, any committees of the Board, any officers of the
Company, or any legal advisors, public accountants, or other professionals or
experts about the proposal.
3. Thereafter, in an apparent rubber-stamping of Defendant Magliochetti's
rejection of ArvinMeritor's proposal, Dana's Board also rejected the proposal
out of hand, without ever discussing it with ArvinMeritor. In fact, the Board
refused to meet with ArvinMeritor even once. Instead of protecting shareholder
value, Dana's 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.
4. Following the Board's rejection of ArvinMeritor's proposal and its
repeated refusals even to talk with ArvinMeritor, the committee of independent
directors (the "Independent Committee") that the Board created on July 18, 2003,
apparently due to a conflict between management and the independent directors,
also stonewalled ArvinMeritor. Indeed, in response to a letter dated July 28,
2003 from Larry D. Yost, ArvinMeritor's Chairman and Chief Executive Officer,
seeking an opportunity to talk with the Independent Committee, the chairman
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of the Independent Committee sent Mr. Yost a letter stating that "[The
Independent Committee has] no desire to enter into discussions with you about an
offer that we have already concluded is inadequate."
5. The Independent Committee was not formed until a full 10 days after
ArvinMeritor and Delta Acquisition Corp. commenced their Tender Offer, more than
six weeks after ArvinMeritor first approached Dana, and more than five weeks
after the full Board, including Defendant Magliochetti, rebuffed ArvinMeritor's
proposal and refused to meet with ArvinMeritor even once to discuss its
proposal. In addition, the Independent Committee was not created until a mere
four days before Dana recommended that its shareholders reject the Tender Offer.
In any event, the Independent Committee's refusal to talk with ArvinMeritor
constitutes another breach of Defendants' fiduciary duties.
6. On the same day it was formed, the Independent Committee retained
Skadden, Arps, Slate, Meagher & Flom, LLP as special counsel to the Independent
Committee. Under the circumstances presented here, in which nearly the entire
Board - nine of its 11 members, and fully 10 of its 11 members if Defendant
Senderos' potential conflict is not counted - already consists of disinterested
directors, it is unusual for a board committee to incur the substantial
additional expense of retaining separate counsel absent a significant conflict
between certain members of the board and the company.
7. Regardless of the Board's precise reason for forming the Independent
Committee, the fact that it thought a separate committee was necessary - and
that the Independent Committee then thought that retaining its own counsel was
necessary - indicates that any process during the six weeks prior to July 18,
2003, when Defendant Magliochetti and the full Board
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were repeatedly rejecting ArvinMeritor's initial proposal and refusing to talk
even once with ArvinMeritor, was entirely suspect and deficient.
8. Significantly, upon information and belief, the formation of the
Independent Committee did not cleanse its members - fully nine of the eleven
directors on Dana's Board - of the taint from the conflict under which they had
labored for the previous six weeks.
9. Notwithstanding that it saw fit to retain separate legal counsel, upon
information and belief, the Independent Committee has not hired its own
financial advisor to assist it in considering ArvinMeritor and Delta Acquisition
Corp.'s Offer. Instead, the Independent Committee has relied on the opinion of
the very same investment bank that proposed to ArvinMeritor earlier this year a
possible transaction for Dana shares at no more than $15 per share, the price
that ArvinMeritor ultimately offered.
10. The Board and the Independent Committee, on information and belief,
also failed to obtain an opinion from Goldman, Sachs & Co. ("Goldman Sachs"), a
third financial advisor retained in connection with ArvinMeritor and Delta
Acquisition Corp.'s proposed acquisition (the "Proposed Acquisition") at
significant expense to Dana's shareholders.
11. During Dana's public earnings call on July 23, 2003, Defendant
Magliochetti effectively admitted that there is no price at which Dana would
even consider discussing a business combination with ArvinMeritor. In so doing,
Defendant Magliochetti made clear that (i) Defendants wish to ensure that Dana
will not be sold under any circumstances to ArvinMeritor; and that (ii) any
steps on the part of Defendant Magliochetti, the Board, and the Independent
Committee, ostensibly taken to uphold their fiduciary duties with respect to the
Offer, were in fact nothing more than a pretext for rejecting the Offer.
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12. ArvinMeritor seeks to acquire Dana through a transaction that is
noncoercive, non-discriminatory and entirely fair to Dana's shareholders. This
transaction will not pose a threat to the interests of Dana's shareholders.
13. If the Tender Offer is successful, ArvinMeritor intends to complete 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. In the meantime, long
before that point, the holders of Dana stock who tender their shares in response
to the Tender Offer will receive $15 per share in cash, which represents a
substantial premium over the price of Dana's stock prior to the commencement of
ArvinMeritor and Delta Acquisition Corp.'s Tender Offer.
14. Notwithstanding the fair and non-coercive nature of Complainants'
Proposed Acquisition and the substantial benefits that it offers to Dana
shareholders, on July 22, 2003, Dana submitted to the Securities and Exchange
Commission ("SEC") certain regulatory filings which recommended that Dana
shareholders reject ArvinMeritor and Delta Acquisition Corp.'s Offer.
15. In sum, over the past two months, ArvinMeritor has faced:
o a spontaneous, uninformed rejection of its initial proposal by
Defendant Magliochetti, during the very same telephone
conversation in which Mr. Yost first raised it;
o an emphatic rejection out of hand by the Board, without ever
having met with ArvinMeritor about its proposal;
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o an adamant refusal on the part of the Independent Committee -
which was not even formed until Defendant Magliochetti and the
full Board already had repeatedly rejected ArvinMeritor's
proposal, which unreasonably relied on a financial consultant
that proposed to ArvinMeritor earlier this year a possible
transaction for Dana shares at no more than $15 per share, and
which has failed to retain its own financial advisor or to obtain
an opinion from Goldman Sachs - to talk even once with
ArvinMeritor; and
o Defendant Magliochetti's startling admission to the effect that
Dana will not even talk with ArvinMeritor no matter what price
ArvinMeritor and Delta Acquisition Corp. offer.
Defendants' refusal to negotiate or to talk even once with ArvinMeritor about
the Offer constitutes an unreasonable response to the Proposed Acquisition, in
violation of Defendants' fiduciary duties to the Company's shareholders. By this
action, ArvinMeritor and Delta Acquisition Corp. seek to compel Defendants to
fulfill their fiduciary duties to Dana's shareholders.
JURISDICTION AND VENUE
16. 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. 8.01-328.1. This action is not removable.
17. 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
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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
18. 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 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.
19. 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.
20. Defendant Dana is a corporation with its principal executive offices at
4500 Dorr Street, Toledo, Ohio, 43615. It was incorporated under the laws of the
Commonwealth of Virginia. According to its most recent Form 10-K, Dana is a
global supplier of modules, systems, and components serving various industries.
21. 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
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a number of foreign countries. Dana stock trades on the New York Stock Exchange
and the Pacific Exchange.
22. 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.
23. Dana maintains operations in 30 countries worldwide and 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.
24. Upon information and belief, Dana does not own any real property in
Virginia.
25. Defendant Joseph M. Magliochetti is Chairman of the Dana Board and the
Company's Chief Executive Officer, President, and Chief Operating Officer.
Defendant Magliochetti is the only member of Dana's management on the Board.
26. Defendant Benjamin F. Bailar is a director of Dana and a member of the
Independent Committee.
27. Defendant A. Charles Baillie is a director of Dana and a member of the
Independent Committee.
28. Defendant Edmund M. Carpenter is a director of Dana and a member of the
Independent Committee.
29. Defendant Eric Clark is a director of Dana and a member of the
Independent Committee.
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30. Defendant Glen H. Hiner is a director of Dana and the chairman of the
Independent Committee.
31. Defendant James P. Kelly is a director of Dana and a member of the
Independent Committee.
32. Defendant Marilyn R. Marks is a director of Dana and a member of the
Independent Committee.
33. Defendant Richard B. Priory is a director of Dana and a member of the
Independent Committee.
34. Defendant Fernando M. Senderos is a director of Dana.
35. Defendant Cheryl W. Grise is a director of Dana and a member of the
Independent Committee.
36. Defendants named in paragraphs 25 through 35 above are sometimes
collectively referred to herein as the "Individual Defendants."
FACTUAL BACKGROUND
Dana's Current Financial Condition
- ----------------------------------
37. 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.
38. Upon information and belief, Dana sustained net losses of $182 million
in 2002 and $298 million in 2001.
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39. 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 acknowledged:
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)).
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 (Oct. 25, 2002)).
40. 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)).
41. 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 56 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 25 percent
premium over the closing price of Dana's common stock on July 7, 2003.
Defendants' History of Disregard for the Interests of Dana's Shareholders
- -------------------------------------------------------------------------
42. Dana's directors, particularly Defendant Magliochetti, have long
disregarded their obligations to Dana's shareholders. In fact, upon information
and belief, not a single member of
10
the Board attended the annual meeting of Dana's shareholders in April 2003, in
breach of Defendants' fiduciary duties to protect and act in the best interests
of Dana's shareholders.
43. Worse, according to Dana's own attorney in this action, Defendant
Magliochetti has not attended even one annual meeting of Dana's shareholders in
his fifteen years with Dana. (See "Can Meetings Restore Trust," New York Times,
May 11, 2003). Yet during that same period, upon information and belief,
Defendant Magliochetti attended the shareholder meetings of the other companies
for which he has served as a director, including BellSouth and CIGNA.
44. Defendant Magliochetti's repeated failure to attend Dana's annual
shareholder meetings evidences a blatant disregard for, and a wholesale failure
to consider and protect the interests of, Dana's shareholders.
ArvinMeritor's Initial Proposal and Dana's Response
- ---------------------------------------------------
45. Dana's Board, most especially Defendant Magliochetti, has acted with
similar disregard for the interests of Dana's shareholders with respect to both
ArvinMeritor's initial proposal for a business combination and Complainants'
Tender Offer. 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 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.
46. 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 had first conveyed its interest in acquiring Dana for $14 per share
in cash to Defendant Magliochetti during a telephone conversation on June 4,
2003 (the "June 4, 2003 Conversation"), nearly five weeks earlier.
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47. 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."
48. This rejection out of hand 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, public accountants, or other professionals or experts
regarding ArvinMeritor's proposal. Accordingly, Defendant Magliochetti's
rejection of ArvinMeritor's proposal during the June 4, 2003 Conversation
constitutes a breach of his fiduciary duty to the Company's shareholders.
49. 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, Mr. Yost 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.
50. 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."
51. 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 proposal,
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however, has Defendant Magliochetti or any member of Dana's Board called Mr.
Yost to raise questions about ArvinMeritor's proposal.
52. 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 Defendants' fiduciary duties 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.
53. The June 12, 2003 Letter also stated that Dana was aggressively
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.
54. In addition, the June 12, 2003 Letter stated that Dana "[h]as been
advised by able and experienced financial and legal advisors." Upon information
and belief, any financial or legal advisors who reviewed ArvinMeritor's proposal
were retained by Dana's Board specifically to justify and obscure the
off-the-cuff decision that Defendant Magliochetti and the rest of Dana's Board
already had made - the decision that Defendant Magliochetti expressed when Mr.
Yost first contacted him about ArvinMeritor's proposal, and that he repeated
during Dana's recent investor call (SEE para 74, INFRA) - That Dana was simply
not for sale.
55. 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
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transaction with Dana. The June 16, 2003 Letter 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." 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 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....
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).
In the meantime, long before that point, the holders of Dana stock who tender
their shares in response to the Tender Offer will receive $15 per share in cash,
which represents a substantial premium over the price of Dana's stock prior to
the commencement of ArvinMeritor and Delta Acquisition Corp.'s Tender Offer.
56. The June 16, 2003 Letter further indicated that ArvinMeritor was "ready
to meet at a moment's notice." Yet again, in further derogation of its fiduciary
duties, Dana's Board refused to meet with ArvinMeritor or even simply to discuss
ArvinMeritor's proposal with ArvinMeritor by telephone.
57. Dana's wholesale refusal to consider ArvinMeritor's proposal or to
attempt to negotiate the terms of the deal clearly is inconsistent with the
Board's fiduciary duty to protect
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the interests of Dana's shareholders. 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 in a second-step merger, for the same price of $15 per share in cash,
any shares not tendered in response to the Tender Offer. The Tender Offer
provides Dana shareholders with the opportunity to realize a 56 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 25
percent premium over the closing price of their shares on July 7, 2003.
58. Notwithstanding the fair and non-coercive nature of the Proposed
Acquisition and Dana's impaired financial condition under its current
management, on June 19, 2003 - only three days after Mr. Yost sent his 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." Defendant
Magliochetti's June 19, 2003 Letter further stated that "no other combination of
our companies would be in the best interests of Dana's shareholders."
59. In addition, despite ArvinMeritor's clear offer to negotiate the terms
of the Proposed Acquisition, the June 19, 2003 Letter asserted that "any meeting
or discussion as to a sale transaction or any other combination would not be
productive." Upon information and belief, this knee-jerk reaction arose 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.
60. 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
15
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, are simply unwilling 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: Dana's shareholders.
61. 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.
ArvinMeritor's Tender Offer and Dana's Response
- -----------------------------------------------
62. Following the commencement of the Tender Offer, Defendants, most
especial Defendant Magliochetti, further breached their fiduciary duties to
Dana's shareholders by failing to properly consider the Tender Offer.
63. On July 8, 2003, after ArvinMeritor and Delta Acquisition Corp. had
commenced their Tender Offer, the Board met and "discussed the process for
performing a thorough analysis of the anticipated tender offer when additional
information became available." Yet surprisingly, the Board did not view a
"thorough analysis" as including even one discussion with
16
ArvinMeritor, even though ArvinMeritor could have provided the Board with
whatever "additional information" it desired.
64. On July 18, 2003, Dana's Board formed the Independent Committee for the
purpose of reviewing and discussing matters relevant to the Board's response to
the Offer. On the same day, notwithstanding the Board's prior representations
that it had been consulting with "able and experienced advisors," including its
legal advisor, Wachtell, Lipton, Rosen & Katz, about ArvinMeritor's initial
proposal and the Offer, the Independent Committee retained Skadden, Arps, Slate,
Meagher & Flom LLP as its special counsel. Because all members of the Board
other than Defendant Magliochetti are independent directors, the Independent
Committee was formed, upon information and belief, due to a significant conflict
of interest among the Board members. Dana's (i) failure to disclose such a
conflict; (ii) failure to explain the need to hire separate legal counsel at
significant expense to Dana's shareholders; (iii) failure to explain the delay
in forming the Independent Committee; and (iv) recommendation regarding the
Tender Offer in the face of the apparent conflict between Dana's management and
its independent directors constitute a breach of the Defendants' fiduciary duty
to act in the best interest of Dana's shareholders.
65. The Independent Committee was not formed until a full 10 days after
ArvinMeritor and Delta Acquisition Corp. commenced their Tender Offer, more than
six weeks after ArvinMeritor first approached Dana, and more than five weeks
after the full Board, including Defendant Magliochetti, rebuffed ArvinMeritor's
proposal and refused to meet with ArvinMeritor even once to discuss its
proposal. In addition, the Independent Committee was not created until a mere
four days before Dana recommended that its shareholders reject the Tender
17
Offer. In any event, the Independent Committee's refusal to talk with
ArvinMeritor constitutes another breach of Defendants' fiduciary duties.
66. Regardless of the Board's precise reason for forming the Independent
Committee, the fact that it thought a separate committee was necessary - and
that the Independent Committee then thought that retaining its own counsel was
necessary - indicates that any process during the six weeks prior to July 18,
2003, when Defendant Magliochetti and the full Board were repeatedly rejecting
ArvinMeritor initial proposal and refusing to talk even once with ArvinMeritor,
was entirely suspect and deficient.
67. Significantly, upon information and belief, the formation of the
Independent Committee did not cleanse its members - fully nine of the eleven
directors on Dana's Board - of the taint from the conflict under which they had
labored for the previous six weeks.
68. The Board formed the Independent Committee to, among other things,
"consider and evaluate ... possible strategic alternatives" to the Tender Offer.
Moreover, Dana's Board has acknowledged its obligation to consider "other
business or strategic alternatives" to the Tender Offer and Dana's current
business plan. Thus, despite ArvinMeritor's numerous attempts to negotiate with
the Board regarding a business combination, and notwithstanding its express
willingness to "consider whether a higher price is warranted" (SEE Letters from
Mr. Yost to Defendant Magliochetti dated June 4 and June 16, 2003 and Letter
from Mr. Yost to Defendant Hiner and the Independent Committee dated July 28,
2003), Dana's Board and the Independent Committee have refused even to discuss
ArvinMeritor and Delta Acquisition Corp.'s Offer with ArvinMeritor, while
apparently all the while exploring alternative deals. Against this backdrop,
such a refusal on the part of the Board and the Independent Committee
demonstrates patent
18
disregard for Dana's shareholders and constitutes another significant breach of
Defendants' fiduciary duties.
69. Notwithstanding that it saw fit to retain separate legal counsel, upon
information and belief, the Independent Committee has not hired its own
financial advisor to assist it in considering ArvinMeritor and Delta Acquisition
Corp.'s Offer. Instead, the Independent Committee has relied on the opinion of
the very same investment bank, Deutsche Bank Securities Inc. ("Deutsche Bank"),
that proposed to ArvinMeritor earlier this year a possible transaction for Dana
shares at no more than $15 per share, the price that ArvinMeritor ultimately
offered Dana's shareholders.
70. Deutsche Bank presented its analyses to ArvinMeritor regarding a
business combination with Dana, in which the offer price for Dana's shares would
be "less than or equal to the [$15.00] Offer Price per Share...," only a few
months ago, between February and April of this year.
71. Nevertheless, Dana's Board and the Independent Committee relied on
Deutsche Bank's financial analyses, presentations, and opinion in deciding to
reject the Tender Offer. By relying on the financial advice of Deutsche Bank in
rejecting the Offer, with full knowledge that Deutsche Bank previously had
proposed to ArvinMeritor a possible transaction with Dana at no more than $15
per share - the price that ArvinMeritor ultimately offered Dana's shareholders,
the Board and the Independent Committee failed to properly consider the Tender
Offer and breached their fiduciary duties to Dana's shareholders.
72. In connection with the Offer and the Proposed Acquisition, Dana's Board
retained Goldman Sachs in addition to Deutsche Bank and Credit Suisse First
Boston LLC ("Credit Suisse First Boston"). Upon information and belief, neither
Dana's Board nor the Independent
19
Committee has sought or received an opinion from Goldman Sachs regarding the
Offer. In light of Deutsche Bank's previous proposal to ArvinMeritor for a
possible transaction for Dana shares for no more than $15 per share - the price
that ArvinMeritor ultimately offered Dana's shareholders, the Board and the
Independent Committee's failure to obtain an opinion from Goldman Sachs
constitutes an egregious breach of its fiduciary duty to Dana's shareholders.
73. Notwithstanding the significant benefits of the Tender Offer to Dana's
shareholders, on July 22, 2003, Dana submitted to the SEC certain regulatory
filings which recommended that Dana's shareholders decline to tender their
shares in response to the Offer.
74. Significantly, during Dana's July 23, 2003 public earnings call,
Defendant Magliochetti announced that there was effectively no share price that
ArvinMeritor could offer that would lead Dana to consider discussing a possible
business combination with ArvinMeritor:
Questioner: . . . Is there a reasonable price at which you think you would
allow ArvinMeritor to look at your books or is it just such a non-sensible
combination in your opinion that it doesn't make sense for them to look at
your books?
Magliochetti: If someone came to your home, knocked on the door and said I
would like to buy your house at a price that's less than the market with no
financing and, you know, there's a possibility that it could never occur.
Why would you even bother to extend the effort in the conversation?
Questioner: So I take that as a no?
Magliochetti: Absolutely.
(July 23, 2003 Dana Earnings Call.)
75. In so stating, Defendant Magliochetti admitted to a flagrant breach of
the fiduciary duties that he, the Board, and the Independent Committee owe to
Dana's shareholders. Specifically, Defendant Magliochetti's statement reflects
that he and the rest of Defendants wish to ensure that Dana is not sold under
any circumstances to ArvinMeritor. Defendant
20
Magliochetti's statement to the market on July 23, 2003 also indicates that
Defendants never properly considered ArvinMeritor's proposal and Complainants'
Tender Offer.
76. On July 28, 2003, Mr. Yost sent a letter to the Independent Committee
stating that ArvinMeritor would like to "meet with ... the Committee to discuss
[ArvinMeritor and Delta Acquisition Corp.'s] all cash offer that will provide
[Dana's] shareowners with the opportunity to realize significant value without
bearing the risks of Dana's long-term serial restructuring efforts." Mr. Yost
noted his confidence that if the Independent Committee and its advisors met with
ArvinMeritor, ArvinMeritor could resolve their concerns about the Proposed
Acquisition. Mr. Yost further stated that "As I have expressed several times
before, if Dana is willing to work with us to consummate a transaction, we are
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."
77. Nevertheless, on July 30, 2003, Defendant Hiner, the Chairman of the
Independent Committee, and Defendant Magliochetti sent a letter to Mr. Yost
stating that the Independent Committee "ha[s] no desire to enter into
discussions with [ArvinMeritor] about an offer that we have already concluded is
inadequate."
Dana's Rights Plan
- ------------------
78. The Proposed Acquisition cannot be consummated unless Defendants
voluntarily or by direction of the Court - remove or render inapplicable Dana's
antitakeover devices, including Dana's shareholder rights plan (the "Rights
Plan" or "Poison Pill").
79. 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
21
predecessor in interest to Bank of New York). The term of the Rights Plan
extends until July 25, 2006.
80. On April 15, 1996, the Company's Board declared 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.
81. 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 offer or
exchange offer for, 15 percent or more of the outstanding shares of Dana's
common stock.
82. 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 Certificates") 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
22
outstanding shares of common stock of the Company (the
"Share Acquisition Date"); 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.
83. 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 value equal to twice the Right's exercise price. Thus, for
the exercise price 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.
84. If and when Dana engages m 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.
23
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.
85. On July 11, 2003, the Board took action to postpone the date on which
the Rights Certificates will be distributed until the earlier to occur of:
a) ten days after the Share Acquisition Date; or
b) such date as may be subsequently determined by the Board.
86. The existence of the Rights has the practical effect 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.
87. 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.
88. 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.
89. 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.
24
90. 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;
Violation of Virginia Stock Corporation Act ("VSCA")ss.690)
-----------------------------------------------------------
91. ArvinMeritor and Delta Acquisition Corp. repeat and reallege each and
every allegation set forth in paragraphs 1 through 90 as if fully set forth
herein.
92. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
93. In light of the superior value offered to Dana shareholders by the
Proposed Acquisition, there is no legitimate reason for the Dana Board and the
Independent Committee to refuse to meet with ArvinMeritor or even to discuss
ArvinMeritor and Delta Acquisition Corp.'s Offer with ArvinMeritor. The Board's
failure to discuss the details of ArvinMeritor's initial proposal with
ArvinMeritor and to negotiate or even meet with ArvinMeritor, and the Board and
the Independent Committee's failure to discuss Complainants' Offer 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.
25
94. The Board and the Independent Committee's 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.
95. Defendants' improper consideration and evaluation of ArvinMeritor's
proposal and Complainants' Tender Offer, along with Defendant Magliochetti's
admission that no price offered by ArvinMeritor for Dana's shares would bring
Dana to the negotiating table, demonstrate that any alleged consideration by the
Board of the proposal or Tender Offer, and any alleged consideration by the
Independent Committee of the Tender Offer, served solely to create a pretext
that the Board and Defendant Magliochetti were exercising their fiduciary duties
to Dana's shareholders. In fact, Defendant Magliochetti and the Board never
properly considered ArvinMeritor's combination proposal, and the Board and the
Independent Committee never properly considered Complainants' Tender Offer,
because they had already decided that Dana was not for sale. As such,
Defendants' actions are in breach of their fiduciary duties to Dana's
shareholders.
96. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
COUNT II
(Breach of Fiduciary Duty, Conflict of Interest,
Violation of VSCA ss.ss.CA 690, 691)
------------------------------------------------
97. ArvinMeritor and Delta Acquisition Corp. repeat and reallege each and
every allegation set forth in paragraphs 1 through 96 as if fully set forth
herein.
98. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
99. 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.
26
100. In light of the value offered to Dana shareholders by the Proposed
Acquisition, there was no legitimate reason for the Board to refuse to meet with
ArvinMeritor or even to discuss ArvinMeritor's proposal with ArvinMeritor, and
there is no legitimate reason now for the Board and the Independent Committee to
refuse to meet with ArvinMeritor or even to discuss Complainants' Offer with
ArvinMeritor. Defendants' failure to discuss the details of the proposed
business combination 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.
101. 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.
102. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
COUNT III
(Breach of Fiduciary Duly, Conflict of Interests;
Violation of VSCA ss.ss. 690, 691)
-------------------------------------------------
103. ArvinMeritor and Delta Acquisition Corp. repeat and reallege each and
every allegation set forth in paragraphs 1 through 102 as if fully set forth
herein.
104. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
105. 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.
27
106. The Independent Committee was not formed until a full 10 days after
ArvinMeritor and Delta Acquisition Corp. commenced their Tender Offer, and more
than six weeks after ArvinMeritor first approached Dana. In addition, the
Independent Committee was not created until a mere four days before Dana
recommended that its shareholders reject the Tender Offer.
107. On the same day it was formed, the Independent Committee retained
Skadden, Arps, Slate, Meagher & Flom, LLP as special counsel to the Independent
Committee. Under the circumstances presented here, in which nearly the entire
Board - nine of its 11 members, and fully 10 of its 11 members if Defendant
Senderos' potential conflict is not counted - already consists of disinterested
directors, it is unusual for a board committee to incur the substantial
additional expense of retaining separate counsel absent a significant conflict
between certain members of the board and the company.
108. Regardless of the Board's precise reason for forming the Independent
Committee, the fact that it thought a separate committee was necessary - and
that the Independent Committee then thought that retaining its own counsel was
necessary - indicates that any process.; during the six weeks prior to July 18,
2003, when Defendant Magliochetti and the full Board were repeatedly rejecting
ArvinMeritor's initial proposal and refusing to talk even once with
ArvinMeritor, was entirely suspect and deficient.
109. In light of the significant conflict between members of the Board and
the Company, there was no legitimate reason for the Board to delay in forming
the Independent Committee. Such a delay constitutes a breach of Defendants'
fiduciary duties to Dana's shareholders.
28
110. Moreover upon information and belief the formation of the Independent
Committee did not cleanse its members - fully nine of the eleven directors on
Dana's Board - of the taint from the conflict under which they had labored for
the previous six weeks.
111. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
COUNT IV
(Breach of Fiduciary Duty, Unwarranted Reliance
on An Advisor, Violation of VSCA ss. 690)
-----------------------------------------------
112. ArvinMeritor and Delta Acquisition Corp. repeat and reallege each and
every allegation set forth in paragraphs 1 through 111 as if fully set forth
herein.
113. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
114. In light of these duties, reliance on the analyses, presentations,
opinions, or advice of any advisor in the face of knowledge or information that
such reliance is unwarranted constitutes a breach of fiduciary duty.
115. The Board and the Independent Committee's reliance on the analyses,
presentations, opinion, and/or advice of Deutsche Bank in recommending that
Dana's shareholders reject the Tender Offer, notwithstanding their full
awareness of Deutsche Bank's earlier advice to ArvinMeritor which contradicts
and undercuts the opinion it provided to Dana, constitutes a violation of
Defendants' fiduciary duties.
116. Arvin Meritor and Delta Acquisition Corp. have no adequate remedy at
law.
COUNT V
(Breach of Fiduciary Duty; Failure to Obtain an Opinion
From a Financial Advisor; Violation of VSCA ss. 690)
-------------------------------------------------------
117. ArvinMeritor and Delta Acquisition Corp. repeat and reallege each and
every allegation set forth in paragraphs 1 through 116 as if fully set forth
herein.
29
118. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
119. In light of these duties, the Independent Committee's failure to
obtain an opinion from a separately-retained financial advisor constitutes a
breach of fiduciary duty.
120. Moreover, in light of Deutsche Bank's previous proposal to
ArvinMeritor for a possible transaction for Dana shares at no more than $15 per
share - the price that ArvinMeritor ultimately offered Dana's shareholders, the
failure of Dana's Board and the Independent Committee to obtain an opinion
regarding the Offer from Goldman Sachs - a third financial advisor retained at
significant expense to Dana's shareholders - constitutes a breach of the
fiduciary duties owed to Dana's shareholders.
121. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
COUNT VI
(Breach of Fiduciary Duty; the Rights Plan)
-------------------------------------------
122. ArvinMeritor and Delta Acquisition Corp. repeat and reallege each and
every allegation set forth in paragraphs 1 through 121 as if fully set forth
herein.
123. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
124. 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.
125. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
30
COUNT VII
(Declaratory and Injunctive Relief; Anti-Takeover Devices)
----------------------------------------------------------
126. ArvinMeritor and Delta Acquisition Corp. repeat and reallege each and
every allegation set forth in paragraphs 1 through 125 as if fully set forth
herein.
127. Defendants owe Dana's shareholders the highest duties of care, loyalty
and good faith.
128. 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.
129. 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.
130. ArvinMeritor and Delta Acquisition Corp. have no adequate remedy at
law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, ArvinMeritor and Delta Acquisition Corp. 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;
31
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) declare that Defendants have breached their fiduciary
obligations to Dana's shareholders by failing to address,
prior to July 18, 2003, the conflict that led the Board to
form the Independent Committee, led the Independent
Committee to retain its own counsel, and tainted the members
of the Independent Committee;
d) declare that Defendants have breached their fiduciary
obligations to Dana's shareholders by relying on the
analyses, presentations, opinion, and/or advice of Deutsche
Bank notwithstanding Deutsche Bank's earlier proposal to
ArvinMeritor for a possible transaction for Dana shares at
no more than $15 per share - the price of the Offer, of
which Defendants were fully aware;
e) declare that the members of the Independent Committee have
breached their fiduciary obligations by failing to retain,
and to obtain an opinion from, a separate financial advisor;
f) declare that Defendants have breached their fiduciary
obligations to Dana's shareholders by failing to obtain an
opinion from Goldman Sachs regarding the Offer;
g) declare that Defendants have breached their fiduciary
obligations to Dana's shareholders by failing to properly
consider the proposal for a business combination and Tender
Offer.
32
h) 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.
i) 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;
j) enjoin Defendants from taking any action to delay, impede,
postpone or thwart the voting or other rights of Dana's
shareholders;
k) award ArvinMeritor and Delta Acquisition Corp. their costs
and disbursements in connection with the Tender Offer,
including reasonable attorneys' and financial advisor fees,
which ArvinMeritor and Delta Acquisition Corp. would not
have been forced to commence if Defendants had not
improperly rejected ArvinMeritor's initial proposal;
1) award ArvinMeritor and Delta Acquisition Corp. their costs
and disbursements in this action, including reasonable
attorneys' and experts' fees; and
m) grant ArvinMeritor and Delta Acquisition Corp. such other
and further relief as this Court may deem just and proper.
33
ARVINMERITOR, INC.
and
DELTA ACQUISITION CORP.
By /s/
-----------------------------------
Of Counsel
William B. Poff (VSB #03477)
Michael F. Urbanski (VSB #20700)
James R. Creekmore (VSB 436246)
Woods, Rogers & Hazlegrove, PLC
10 S. Jefferson Street, Suite 1400
P. 0. Box 14125
Roanoke, VA 24038-4125
Wesley G. Howell
Adam H. Offenhartz
Jennifer H. Rearden
Gibson, Dunn & Crutcher LLP
200 Park Avenue, 47th Floor
New York, NY 10166-0193
Counsel for Plaintiffs
34