<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
SCHEDULE 14D-9(*)
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
Amendment No. 1
-----------------------------------
CRAY RESEARCH, INC.
(Name of Subject Company)
CRAY RESEARCH, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Including Associated Common Share Purchase Rights)
(Title of Class of Securities)
225224 10 4
(CUSIP Number of Class of Securities)
JOHN L. SULLIVAN
GENERAL COUNSEL
CRAY RESEARCH, INC.
655A LONE OAK DRIVE
EAGAN, MN 55121
(612) 452-6650
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person(s) filing statement).
COPY TO:
DANIEL R. KAPLAN, ESQ.
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, NY 10036
(212) 969-3200
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(*) This Solicitation/Recommendation Statement on Schedule 14D-9 relates to an
offer for 19,218,735 shares of common stock of Cray Research, Inc. by a
wholly-owned subsidiary of Silicon Graphics, Inc.
<PAGE>
This Amendment No. 1 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, dated February 29, 1996 (the "Schedule 14D-9"),
with respect to the tender offer by C Acquisition Corporation, a Delaware
corporation, and wholly-owned subsidiary of Silicon Graphics, Inc., a Delaware
corporation (the "Parent"), to acquire 19,218,735 Shares, at a price of $30.00
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated February 29, 1996, and the
related letter of transmittal. Capitalized terms used herein and not defined
herein shall have the meanings ascribed to them in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 is hereby amended and supplemented as follows:
STOCKHOLDER LITIGATION. On March 1, 1996, a putative class action was
filed in the Court of Chancery in the State of Delaware on behalf of the
stockholders of the Company alleging causes of action arising out of the
Offer and the proposed Merger. SHADELINE V. CRAY RESEARCH, INC., ET AL.,
Civil Action No. 14868. On March 5, 1996, an amended complaint was filed in
the Court of Chancery in the State of Delaware (the "Amended Complaint").
The defendants in this action include the Company, its directors, Parent and
Purchaser. The Amended Complaint alleges that the Board breached its fiduciary
duties and that Parent and Purchaser aided and abetted the breach of fiduciary
duties and specifically alleges that the Board breached its fiduciary duties by
failing to undertake an adequate evaluation of the Company as a potential
acquisition candidate and to take adequate steps to enhance the Company's value
as an acquisition candidate. The Amended Complaint also alleges that the
Schedule 14D-1 and Schedule 14D-9 omitted information which is material to
stockholders' assessments of the transaction and available alternatives. The
Amended Complaint seeks, INTER ALIA, to enjoin the defendants from taking steps
to accomplish the Offer and the proposed Merger under their present terms. The
Company believes that the putative class action suit is without merit and
intends to defend it vigorously.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No. Document
- ----------- --------
Exhibit 1 Agreement and Plan of Merger dated as of February 25, 1996
between Cray Research, Inc., Silicon Graphics, Inc. and C
Acquisition Corporation.(*)
Exhibit 2 Pages 6-13 of the Company's Proxy Statement dated
May 16, 1995.(*)
Exhibit 3 Schedule of Stock Options Granted to Executive Officers on
February 6, 1996.(*)
Exhibit 4 Employment Agreement, dated May 17, 1995 between Cray
Research, Inc. and J. Phillip Samper.(*)
Exhibit 5 Confidentiality Agreement dated December 15, 1995 between Cray
Research, Inc. and Silicon Graphics, Inc.(*)
2
<PAGE>
Exhibit 6 Letter to Stockholders of Cray Research, Inc. dated February
29, 1996.(*)
Exhibit 7 Press Release issued by Silicon Graphics, Inc. and Cray
Research, Inc. dated February 26, 1996.(*)
Exhibit 8 Opinion, dated February 25, 1996, of Salomon Brothers Inc.(*)
Exhibit 9 Amended Complaint, SHADELINE V. CRAY RESEARCH, INC., ET AL.,
filed in the Court of Chancery in the State of Delaware.
- -------------
(*) Previously filed.
3
<PAGE>
SIGNATURE
After reasonable 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.
CRAY RESEARCH, INC.
Dated: March 6, 1996 By /s/ J. Phillip Samper
------------------------
Chairman and Chief
Executive Officer
4
<PAGE>
Schedule I
Cray Research, Inc.
655A Lone Oak Drive
Eagan, MN 55121
-------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This information Statement is being mailed on or about February 29, 1996 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"). You are receiving this Information Statement in
connection with the possible election of persons designated by Purchaser to a
majority of the seats on the Board of Directors of the Company (the
"Purchaser Designees"). The Merger Agreement requires the Company to take
all action necessary to cause the Purchaser Designees to be elected to the
Board of Directors under the circumstances described therein. This
Information Statement is required by Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder. You are urged to read this Information Statement
carefully. You are not, however, required to take any action. Capitalized
terms used and not otherwise defined herein shall have the meaning set forth
in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Parent commenced the Offer on February 29,
1996. The Offer is scheduled to expire at 12:00 Midnight on March 27, 1996,
unless the Offer is extended.
The information contained in this Information Statement (including information
incorporated by reference) concerning Parent, Purchaser and the Purchaser
Designees has been furnished to the Company by the Parent, and the Company
assumes no responsibility for the accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
The Shares are the only class of voting securities of the Company. Each Share
entitles its record holder to one vote. As of February 22, 1996, there were
25,624,980 Shares issued and outstanding.
ELECTION OF DIRECTORS
The Merger Agreement provides that, promptly upon the purchase by Purchaser of a
majority of the outstanding Shares pursuant to the Offer, and from time to time
thereafter as Shares are acquired by Purchaser, Purchaser shall be entitled,
subject to compliance with Section 14(f) of the Exchange Act, to designate such
number of directors, rounded up to the next greatest whole number, on the Board
as will give Purchaser representation on the Board equal to that number of
directors which equals the product of the total number of directors on the Board
(giving effect to the directors appointed or elected
II-1
<PAGE>
pursuant to this sentence and including current directors serving as officers of
the Company) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Purchaser or any affiliate of Purchaser (including such
Shares as are accepted for payment pursuant to the Offer, but excluding Shares
held by the Company or any of its affiliates) bears to the number of Shares
outstanding. The Merger Agreement also provides that, at such times, the
Company will also cause (i) each committee of the Board of Directors, (ii) if
requested by Purchaser, the board of directors of each of the Company's
subsidiaries and (iii) if requested by Purchaser, each committee of such board
to include persons designated by Purchaser constituting the same percentage of
each such committee or board as the Purchaser Designees are of the Board. The
Company shall, upon request by Purchaser, promptly increase the size of the
Board or exercise its best efforts to secure the resignations of such number of
directors as is necessary to enable the Purchaser Designees to be elected to the
Board and shall cause the Purchaser Designees to be so elected.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by Purchaser of a majority of the outstanding Shares on a
fully diluted basis pursuant to the Offer, which purchase cannot be earlier than
March 28, 1996, and that, upon assuming office, the Purchaser Designees together
with the continuing directors of the Company will thereafter constitute the
entire Board of Directors of the Company.
Biographical information concerning each of the Purchaser Designees is presented
below.
PURCHASER DESIGNEES
Purchaser has informed the Company that the Purchaser Designees shall be the
persons set forth in the following table. The following table sets forth the
name, age, present principal occupation or employment and five-year employment
history for each of the persons who the Purchaser has designated as the
Purchaser Designees.
The current business address of each person is 2011 North Shoreline
Boulevard, Mountain View, California 94043-1389. Unless otherwise indicated,
each such person is a citizen of the United States of America and has held
his or her present position as set forth below for the past five years.
Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Parent.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP AND MATERIAL POSITIONS HELD DURING THE PAST FIVE
CURRENT BUSINESS ADDRESS YEARS AND BUSINESS ADDRESSES THEREOF
- ------------------------ ------------------------------------
Edward R. McCracken Director
Chairman and Chief Executive Officer
Mr. McCracken became Chairman of Parent in 1994.
II-2
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP AND MATERIAL POSITIONS HELD DURING THE PAST FIVE
CURRENT BUSINESS ADDRESS YEARS AND BUSINESS ADDRESSES THEREOF
- ------------------------ ------------------------------------
Thomas A. Jermoluk Director
President and Chief Operating Officer
Mr. Jermoluk became an Executive Vice
President of Parent in 1991 and was named Chief
Operating Officer in 1992, and President in 1994.
Stanley J. Meresman Senior Vice President, Finance and Chief Financial
Officer
Gary L. Lauer Executive Vice President, Worldwide Field
Operations. President, Silicon Graphics World
Trade Corporation.
Mr. Lauer joined Parent in 1988 as a Vice
President, was named Senior Vice President, North
American Field Operations in 1991 and became
Executive Vice President of Parent and President
of Silicon Graphics World Trade Corporation in
1995.
Kenneth L. Coleman Senior Vice President, Administration
William M. Kelly Vice President, Business Development, General
Counsel and Secretary.
Mr. Kelly joined Parent in 1994 as Vice President,
Business Development, General Counsel and
Secretary. Prior to joining Parent, Mr. Kelly had
practiced law since 1978 with the firm of Shearman
& Sterling, most recently as co-managing partner
of that firm's San Francisco office, located at
555 California Street, Suite 2000, San Francisco,
California 94104.
Dennis P. McBride Vice President, Controller.
II-3
<PAGE>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME, CITIZENSHIP AND MATERIAL POSITIONS HELD DURING THE PAST FIVE
CURRENT BUSINESS ADDRESS YEARS AND BUSINESS ADDRESSES THEREOF
- ------------------------ ------------------------------------
Robert W. Saltmarsh Vice President, Treasurer.
Mr. Saltmarsh joined Parent in February 1996 as
Vice President, Treasurer. Between 1994 and 1995,
Mr. Saltmarsh served as Chief Financial Officer of
Radius, Inc. (215 Moffett Park Drive, Sunnyvale,
CA 94089) and prior to that spent 12 years with
Apple Computer, Inc. (20525 Mariani Avenue,
Cupertino CA 95014) in several executive
positions, most recently serving as Vice President
of Finance.
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DOCUMENT
- ----------- --------
Exhibit 1 Agreement and Plan of Merger dated as of February
25, 1996 between Cray Research, Inc., Silicon
Graphics, Inc. and C Acquisition Corporation.(*)
Exhibit 2 Pages 6-13 of the Company's Proxy Statement dated
May 16, 1995.(*)
Exhibit 3 Schedule of Stock Options Granted to Executive
Officers on February 6, 1996.(*)
Exhibit 4 Employment Agreement, dated May 17, 1995 between
Cray Research, Inc. and J. Phillip Samper.(*)
Exhibit 5 Confidentiality Agreement dated December 15, 1995
between Cray Research, Inc. and Silicon Graphics,
Inc.(*)
Exhibit 6 Letter to Stockholders of Cray Research, Inc.
dated February 29, 1996.(*)
Exhibit 7 Press Release issued by Silicon Graphics, Inc. and
Cray Research, Inc. dated February 26, 1996.(*)
Exhibit 8 Opinion, dated February 25, 1996, of Salomon
Brothers Inc.(*)
Exhibit 9 Amended Complaint, SHADELINE V. CRAY RESEARCH,
INC., ET AL., filed in the Court of Chancery in
the State of Delaware.
- -----------------
(*) Previously filed.
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
- --------------------------------------x
LAWRENCE L. SHADELINE, :
:
Plaintiff, :
v. : C.A. No. 14868
:
CRAY RESEARCH, INC., J. PHILLIP :
SAMPER, LAWRENCE E. EATON, ROBERT :
H. EWALD, CATHERINE M. HAPKA, :
PHILIP G. HEASLEY, ROBERT G. :
POTTER, ANDREW SCOTT, JAN H. :
SUWINSKI, SILICON GRAPHICS, INC., :
and C ACQUISITION CORPORATION, :
:
Defendants. :
- --------------------------------------x
AMENDED CLASS ACTION COMPLAINT
Plaintiff, by his attorneys, alleges upon information and belief,
except with respect to his ownership of common stock of Cray Research, Inc.
("Cray"), as follows:
PARTIES
1. Plaintiff is the owner of shares of common stock of defendant
Cray.
2. Cray Research, Inc. is a Delaware corporation with executive
offices at 655A Lone Oak Drive, Eagan, Minnesota 55121-1560. Cray designs,
manufactures, markets and supports powerful computer systems, software and
peripherals, and leases computers. As of February 22, 1996, Cray had
approximately 25,624,980 shares of common stock outstanding, which are held by
over 5,000 shareholders of record. On or about March 1, 1996, Cray disseminated
to Cray shareholders its Schedule 14D-9
<PAGE>
Solicitation/Recommendation Statement Pursuant to Section 14(D)(4) of the
Securities Exchange Act of 1934 (the "Schedule 14D-9"), in connection with the
Transaction (defined below).
3. Defendant J. Phillip Samper is Chairman, Chief Executive Officer
and a Director of Cray.
4. Defendant Lawrence E. Eaton is a Director of Cray.
5. Defendant Robert H. Ewald is President, Chief Operating Officer
and a Director of Cray.
6. Defendant Catherine M. Hapka is a Director of Cray.
7. Defendant Phillip G. Heasley is a Director of Cray.
8. Defendant Robert G. Potter is a Director of Cray.
9. Defendant Andrew Scott is Vice Chairman of the Board and a
Director of Cray.
10. Defendant Jan H. Suwinski is a Director of Cray.
11. The foregoing Directors of Cray (collectively the "Director
Defendants"), owe fiduciary duties to Cray and its public shareholders.
12. Silicon Graphics, Inc. ("SGI") is a Delaware corporation with
executive offices at 2011 North Shoreline Boulevard, Mountain View, California
94043-1389. SGI designs, manufactures and provides services for computer
products. As of January 31, 1996, SGI had approximately 162,025,947 shares of
common stock outstanding.
13. C Acquisition Corporation ("CAC") is a Delaware corporation and
wholly-owned subsidiary of SGI formed for the acquisition of Cray.
2
<PAGE>
14. On or about March 1, 1996, SGI and CAC disseminated to Cray
shareholders their Schedule 14D-1 Tender Offer Statement Pursuant to Section
14(D)(1) of the Securities Exchange Act of 1934, and Offer to Purchase for Cash
19,218,735 Shares of Common Stock (including The Common Share Purchase Rights)
of Cray Research Inc. at $30.00 Net Per Share (collectively the "Schedule 14D-
1"), in connection with the Transaction (defined below). SGI and CAC have
knowingly and substantially participated in, and are benefitting by , breaches
of fiduciary duties alleged herein, and therefore are liable as aiders and
abettors thereof.
CLASS ACTION ALLEGATIONS
15. Plaintiff brings this action on his own behalf and as a class
action on behalf of all shareholders of defendant Cray (except defendants herein
and their affiliates) or their successors in interest, who have been or will be
adversely affected by the conduct of defendants alleged herein.
16. This action is properly maintainable as a class action for the
following reasons:
(a) The class of shareholders for whose benefit this action is
brought is so numerous that joinder of all class members is impracticable. As
of October 31, 1995, there were over 25 million shares of defendant Cray common
stock outstanding owned by over 5,000 shareholders scattered throughout the
United States.
(b) There are questions of law and fact which are common to
members of the Class and which predominate over any
3
<PAGE>
questions affecting any individual members. The common questions include, INTER
ALIA, the following:
i. Whether one or more of the defendants has engaged in
conduct to entrench and/or enrich themselves at the expense of Cray's public
stockholders;
ii. Whether the Director Defendants have engaged in a
proper process to maximize shareholder value, including whether the Director
Defendants have failed to conduct an adequate process to explore the viability
and existence of alternatives in the sale of Cray at the highest available price
with an appropriate premium;
iii. Whether the defendants have breached fiduciary duties
owed by them to plaintiff and members of the Class, and/or have aided and
abetted in such breaches;
iv. Whether the structure of the Transaction (defined
below) is wrongfully coercive;
v. Whether plaintiff and the other members of the Class
will be irreparably damaged by the conduct complained of herein; and
vi. Whether defendants have commenced the Tender Offer
(defined below) pursuant to materially deficient disclosures.
17. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The claims
of plaintiff are typical of the claims of the other members of the Class and
plaintiff has the same interest as the other members of the Class. Accordingly,
plaintiff is an
4
<PAGE>
adequate representative of the Class and will fairly and adequately protect the
interests of the Class.
18. Defendants have acted or refused to act on grounds generally
applicable to the Class, thereby making appropriate injunctive relief with
respect to the Class as a whole.
19. The prosecution of separate actions by individual members of the
Class would create a risk of inconsistent or varying adjudications with respect
to individual members of the Class which would establish incompatible standards
of conduct for defendants or adjudications with respect to individual members of
the Class which would as a practical matter be dispositive of the interests of
the other members not parties to the adjudications.
20. Plaintiff anticipates that there will not be any difficulty in
the management of this litigation.
21. For the reasons stated herein, a class action is superior to
other available methods for the fair and efficient adjudication of this action.
SUBSTANTIVE ALLEGATION
22. According to the Schedule 14D-9 and the Schedule 14D-1, the
Executive Committee of the Cray Board determined in October 1995 "to take an
active approach in pursuing opportunities with other companies." According to
the Schedule 14D-9, Cray retained Salomon Brothers, Inc. ("Salomon Brothers")
in October 1995 "in connection with a possible combination with, or sale of a
controlling interest in the Company to, another corporation or
5
<PAGE>
other business entity." According to the Schedule 14D-9, in December 1995 Cray
communicated with several unnamed companies interested in exploring
opportunities for collaboration, strategic alliance or some other form of
business combination, and "[d]iscussions and negotiations with certain of these
companies followed."
23. According to the Schedule 14D-9 and the Schedule 14D-1, Cray
management contacted SGI in late 1995 to explore "a possible strategic alliance
or business combination with Cray," following which, in mid-December 1995, Cray
and SGI entered into a confidentiality agreement for the exchange of
information. On February 3, 1996, according to the Schedule 14D-9 and the
Schedule 14D-1, SGI representatives expressed an interest in pursuing a business
combination with Cray. On February 5, 1996 the Cray board met purportedly to
discuss, among other things, Cray's "strategic partnering efforts" and the
communications between SGI and Cray. The Cray Board purportedly determined at
the conclusion of the February 5 meeting that it would be consistent with Cray's
objectives to continue to investigate a possible business combination with SGI
"as well as other possible strategic alternatives" for Cray.
24. The very next day, on February 6, 1996, according to the Schedule
14D-9, the Compensation and Development Committee of the Cray Board granted
Samper options to purchase 100,000 shares of Cray common stock at an exercise
price of $25.50 per share. Robert
6
<PAGE>
Ewald was apparently granted an option for 50,000 Cray shares on the same day,
as well.
25. According to the Schedule 14D-9 and the Schedule 14D-1, on
February 18, 1996, at a special meeting of the Cray Board, Cray management
advised the Cray Board that SGI was interested in acquiring Cray pursuant to a
cash offer for 75% of the outstanding shares of Cray's common stock at $30 per
share, followed by a merger in which each remaining Cray share would be
exchanged for one SGI share. At the conclusion of the meeting, the Board
purportedly determined that the Company should continue to negotiate the terms
of a business combination with SGI. Although the Cray Board apparently had
instructed management at the February 5 meeting to continue to investigate other
alternatives, there is no discussion in either the Schedule 14D-9 or the
Schedule 14D-1 of any such investigation or the Board's or management's
consideration of any alternatives to a transaction involving SGI, after the
February 5 Board meeting.
DEFENDANTS AGREE TO A SALE OF CRAY TO SGI
PURSUANT TO A WRONGFULLY COERCIVE TRANSACTION
26. On February 25, 1996, the Cray Board approved the Agreement and
Plan of Merger, by and among Silicon Graphics, Inc., C Acquisitions Corporation
and Cray Research Inc., dated as of February 25, 1996, (the "Merger Agreement"),
pursuant to which SGI proposes to acquire the stock of Cray in a first step cash
tender offer at $30 per Cray share for 19,218,735 shares (the "Tender Offer"),
or approximately 75% of the outstanding common stock of Cray, and a second step
merger with the remaining Cray
7
<PAGE>
shares to be acquired in exchange for one share each of SGI common stock (the
"Merger"). The Transaction was publicly announced on February 26,1996. The
Tender Offer and Merger are collectively referred to herein as the Transaction.
Under the terms of the Merger Agreement, if fewer than 19,218,735 shares of Cray
are purchased in the Tender Offer, the remaining Cray shareholders will receive
SGI stock and cash for each Cray share such that the total cash and stock
consideration paid in the Merger will be the same as if the Tender Offer had
been fully subscribed. SGI and CAC apparently intend to effect the Merger as
promptly as practicable, and to vote the tendered shares in favor of the Merger.
27. However, the structure of the Transaction is wrongfully coercive.
The second step of the Transaction does not include any mechanism, such as a
collar, to protect even the present inadequate value of the SGI stock proposed
to be exchanged. In January 1996, SGI reported earnings well below
expectations, and reportedly faces long-term problems in its workstations
market. SGI's stock price has slipped significantly since the announcement of
the Transaction. The closing price of SGI and Cray common stock on
February 23, 1996, the last trading day prior to announcement of the
Transaction, was $27.50 and $25.25 per share, respectively. On the day of
announcement, February 26, 1996, Cray stock closed up to $28.50 per share,
while SGI stock closed down to $25.375 per share. On March 4, 1996, SGI stock
closed down at $24-1/8 per share. Thus, while the Tender Offer is at $30 cash
per Cray share, the current value of the SGI stock to be issued in the second
step
8
<PAGE>
of the Transaction is only $24-1/8 per Cray share. Further, the Salomon
Brothers opinion as to the fairness of the considerations is based upon the
conditions as they existed on February 25, 1996, and Salomon Brothers assumed no
responsibility to update the opinion. Thus, the terms of the Transaction are
wrongfully coercive and will wrongfully enable the SCI to obtain control of Cray
through the $30 cash tender offer and vote the tendered shares in favor of the
Merger.
28. Further, the Merger Agreement prohibits Cray from soliciting or
encouraging (including by way of furnishing information) the initiation of
any inquiries or proposals regarding any merger, takeover bid, sale of
substantial assets, sale of shares of capital stock or similar transactions
involving Cray or any Cray subsidiary unless the Cray Board, after receiving
an opinion of outside counsel to the effect that the Board was required to do
so in order to discharge properly its fiduciary duties, determines in food
faith after a consultation with its financial advisor that the proposal would
result in a transaction more favorable to Cray stockholders than the
transaction contemplated by the Merger Agreement, and that the proposal is
made by a person financially capable of consummating such a proposal. The
Merger Agreement also provides that the Cray Board has amended the Cray
Shareholder Rights Agreement to exclude the Transaction, and that Cray has
agreed to pay SGI a fee of $25 million plus up to an additional $2.5 million
in expenses if the Merger Agreement is terminated under certain
circumstances. Further, the Merger
9
<PAGE>
Agreement provides that promptly upon the purchase of the tendered shares SGI
and CAC may designate directors of Cray in equal proportion to their stock
ownership.
DEFENDANTS COMMENCE THE TENDER
OFFER PURSUANT TO MATERIALLY DEFICIENT DISCLOSURES
29. On or about February 29, 1996, SGI, through CAC, commenced the
Tender Offer, which is set to expire on March 27, 1996, unless extended.
However, as set forth below, the Tender offer was commenced pursuant to
materially deficient disclosures.
30. The Schedule 14D-9 and Schedule 14D-1 state that at the February
13, 1996 special meeting of the Cray Board, Salomon Brothers reviewed, among
other things, "valuations of the company and the methodology by which such
valuations were derived." However, the Schedule 14D-9 and the Schedule 14D-1
fail to include a description or summary of the valuations or methodology, such
as ranges of values, discounted cash flow analysis, comparable traded companies
analysis or comparable acquisition analysis. The omitted information is
material to shareholders' assessments of the Transaction and available
alternatives.
31. The Schedule 14D-9 and Schedule 14D-1 states that at the
February 25, 1996 Cray Board meeting, the Board heard a presentation by
Salomon Brothers on its analysis of the proposed transaction. Further, the
Schedule 14D-9 states that in approving the Merger, the Tender Offer and the
Merger Agreement and recommending that all stockholders tender their shares
pursuant to the Tender Offer, the Cray Board considered, among other factors,
10
<PAGE>
the Salomon Brothers presentation at the February 25, 1996 Board meeting.
However, the Schedule 14D-9 does not include any summary or description of the
Salomon Brothers analyses beyond the standard generalized statements contained
in the Salomon Brothers written opinion itself. The omitted information is
material to shareholders' assessments of the Transaction and available
alternatives.
32. The Schedule 14D-9 states that in December 1995, Cray
communicated to representatives of several unnamed companies that Cray was
interested in exploring opportunities for a collaboration, strategic alliance or
some form of business combination, and that "[d]isscussions and negotiations
with certain of these companies followed." Further, the written opinion of
Salomon Brothers, attached as an exhibit to the Schedule 14D-9, states that in
rendering its opinion Salomon Brothers "also considered the process that
resulted in the negotiation of the Proposed Transaction, including discussions
with other potential acquirors." However, the Schedule 14D-9 omits the subject
of the discussions and negotiations with the unnamed companies, including the
terms, structure or timing of any proposals or counter-proposals made to or by
any of the unnamed companies. The omitted information is material to
shareholders' assessments of the Transaction and available alternatives.
33. Similarly, the Schedule 14D-9 and Schedule 14D-1 state that the
February 5, 1996 regular meeting of the Cray Board of Directors was held to
discuss, among other things, "the
11
<PAGE>
Company's strategic partnering efforts, "and that at the conclusion of the
meeting the Board determined that it would be consistent with the Company's
objectives to continue to investigate a possible business combination with SGI
as well as "other possible strategic alternatives" for Cray. However, the
Schedule 14D-9 and Schedule 14D-1 do not describe the "strategic partnering
efforts" or the "other possible strategic alternatives." The omitted
information is material to shareholders' assessments of the Transaction and
available alternatives.
34. The Schedule 14D-9 and Schedule 14D-1 state that on February 14,
1996, representatives of Cray and SGI discussed "several possible transaction
structures and values," and that after "discussions and negotiations," the
parties agreed to discuss with their Boards of Directors a transaction valued at
$30 per share in cash for 75% of the shares and one share of SGI common stock
for each remaining Cray share. However, the Schedule 14D-9 and Schedule 14D-1
do not identify the structure and values discussed or the substance of the
discussions and negotiations that apparently led to the structure proposed to
the Boards of Directors. The omitted information is material to shareholders'
assessments of the Transaction and available alternatives.
35. The Schedule 14D-9 states that in approving the Merger, the
Tender Offer and the Merger Agreement and recommending that all stockholders
tender their shares, the Cray Board of Directors considered, among other
factors, the possible alternatives to the Tender Offer and Merger, including,
without
12
<PAGE>
limitation, continuing to operate the Company as an independent entity and the
risks associated therewith. However, the Schedule 14D-9 does not identify any
of the other alternatives or the basis for the Board's apparent preference for
the Transaction, or the risks associated with remaining as an independent
entity. The omitted information is material to shareholders' assessments of the
Transaction and available alternatives.
36. The Transaction constitutes a sale of Cray. As such, the Cray
Board of Directors has an obligation to explore the viability and existence of
alternatives to obtain the highest value reasonably available for Cray
shareholders. The Director Defendants apparently failed to (1) undertake an
adequate evaluation of Cray's worth as a potential merger/acquisition candidate;
(2) take adequate steps to enhance Cray's value and/or attractiveness as a
merger/acquisition candidate; or (3) effectively expose Cray to the marketplace
in an effort to create an active and open auction for Cray. Instead, defendants
have agreed to a sale of Cray to SGI pursuant to the terms of a two-tiered
coercive transaction which will coerce Cray shareholders to tender into the $30
per share cash tender offer, without any collar to protect even the present
inadequate value of the second step consideration, and permit SGI to acquire
control for Cray and the ability to vote the tendered shares in favor of the
Merger.
37. The Cray Board also has a duty to disseminate completely all
material information to Cray shareholders to enable Cray shareholders to make
informed decisions whether to accept or
13
<PAGE>
reject the Transaction or whether to seek appraisal of their shares under
Delaware law.
38. While the Director Defendants should continue to seek out other
possible purchasers of the assets of Cray or its stock in a manner designed to
obtain the best transaction reasonably available for Cray's shareholders, should
renegotiate with SGI at least to change the terms of the Transaction to all-cash
or equivalent protected value, and/or should seek to enhance the value of Cray
for all its current shareholders, they have instead wrongfully agreed to allow
SGI to obtain the valuable assets of Cray through a coercive transaction at an
inadequate price which disproportionately benefits SGI.
39. These tactics pursued by the defendants are, and will continue to
be, wrongful, unfair and harmful to Cray's public shareholders, and will deny
members of the Class an appropriate premium in the sale of Cray and the
opportunity to share appropriately in the true value of Cray's assets, future
earnings and businesses.
40. In contemplating, planning and/or affecting the foregoing,
defendants are not acting in good faith toward plaintiff and the Class, and
defendants have breached, and are breaching, their fiduciary duties to plaintiff
and the Class.
41. Because the Director Defendants (and those acting in concert with
them) dominate and control the business and corporate affairs of Cray and
because they are in possession of private corporate information concerning
Cray's businesses and future
14
<PAGE>
prospects, there exists an imbalance and disparity of knowledge and economic
power between the defendants and the public shareholders of Cray. Further, SGI
has apparently been given access to such information regarding Cray.
42. By reason of the foregoing acts, practices and course of conduct,
the Director Defendants have failed to exercise loyalty, good faith and due care
toward Cray and its public shareholders.
43. As a result of the actions of the Defendants, plaintiff and the
Class have been and will be damaged.
44. Unless enjoined by this Court, the Director Defendants will
continue to breach fiduciary duties owed to plaintiff and the Class, all to the
irreparable harm of the Class.
45. Plaintiff has no adequate remedy at law.
WHEREFORE, plaintiff demands judgment as follows:
A. Declaring that this action may be maintained as a class action;
B. Declaring that the proposed Transaction is unfair, unjust and
inequitable to plaintiff and the other members of the Class;
C. Enjoining preliminarily and permanently the defendants from taking any
steps necessary to accomplish or implement the proposed Transaction under its
present terms, pending a proper process to maximize shareholder value including
but not limited to renegotiation of the terms of any sale to SGI, and enjoining
any improper device or transaction which will impede maximization of shareholder
value;
15
<PAGE>
D. Ordering defendants to disseminate completely all material information
in connection with the Transaction, and enjoining the closing of the Tender
offer pending dissemination of such information;
E. Requiring defendants to compensate plaintiff and the members of the
Class for all losses and damages suffered and to be suffered by them as a result
of the acts and transactions complained of herein, together with prejudgment and
post-judgment interest;
F. Awarding plaintiff the costs and disbursements of this action,
including reasonable attorneys', accountants', and experts' fees; and
G. Granting such other and further relief as may be just and proper.
Dated: March 5, 1996 CHIMICLES, JACOBSEN & TIKELLIS
/s/ Robert J. Kriner, Jr.
------------------------------
Pamela S. Tikellis
James C. Strum
Robert J. Kriner, Jr.
One Rodney Square
P.O. Box 1035
Wilmington, DE 19899
(302) 656-2500
Attorneys for Plaintiff
OF COUNSEL:
WOLF HALDENSTEIN ADLER FREEMAN & HERZ, LLP
270 Madison Avenue
New York, New York 10016
LAW OFFICES OF CHARLES J. PIVEN
111 S. Calvert Street
Suite 2700
Baltimore, Maryland 21202
16
