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CURTISS-WRIGHT CORPORATION
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CONTACT: Gary Benschip
(201) 896-1751
[email protected]
Stockholder Questions and Answers
Relating to
Agreement and Plan of Merger
dated as of November 6, 2000 among
Curtiss-Wright Corporation, Unitrin, Inc.
and CW Disposition Company
Rights Agreement dated as of November 6, 2000,
between Curtiss-Wright Corporation and Chase Mellon
Shareholder Services L.L.C.
1. Why is this transaction good for the Curtiss-Wright stockholders?
We believe that the distribution of Unitrin's Curtiss-Wright shares
will have the following long-term benefits:
The distribution of Unitrin's position will improve our stock's
liquidity, increase investor appeal, and result in a broader investor
base. Since 1977, Unitrin and its predecessor Teledyne have held, and
therefore "locked up," a significant portion of Curtiss-Wright stock
(currently approximately 44 percent of the shares outstanding).
Unitrin's large and stable ownership position has been an impediment to
other institutional investors, because this high percentage of
uncirculated stock has significantly impaired Curtiss-Wright's stock
liquidity.
The addition of Unitrin's approximately 8,000 stockholders will
essentially triple the Company's existing 3,800-stockholder base. A
broader shareholder base resulting in increase in liquidity, should
make the Company more appealing to sell-side research analysts.
Attracting additional sell-side research coverage will enhance the
markets' awareness of Curtiss-Wright's stock and should stimulate
demand from new investors.
The spin-off of Unitrin's ownership interest will considerably improve
the public float and make Curtiss-Wright more appealing to
institutional investors who place a high value on liquidity.
An increase in our stockholder base and broadened exposure in the
investment community is expected to improve our ability to raise public
capital in the future when the need arises. This would apply to both
debt and equity financing.
It is our understanding that other companies in sufficiently similar
situations that have completed similar transactions have experienced
improved stock price performance over the long-term. We expect this
transaction to similarly benefit our shareholders.
The absence of the highly concentrated ownership position of Unitrin
will improve overall stockholder representation on all voting matters
except the election of the board of directors. Non-Unitrin
shareholders' voting position on most matters will improve since
Unitrin's former concentrated voting influence will be widely dispersed
among its public stockholders. Non-Unitrin stockholders will own 56% of
the shares and have the majority interest in all voting matters except
the election of directors
2. Why is it necessary to have two classes of stock and how do they differ?
Unitrin, acting on behalf of its shareholders, will complete the
distribution only if it can be done in a tax-efficient manner, and
establishing two classes of stock is the only option that will allow
Unitrin to effect the spin-off in a tax-efficient manner. The two
classes of stock differ in voting rights. The class B stock, which will
be distributed to Unitrin shareholders, will have the right to elect 80
percent of the Board of Directors. The classes of stock have identical
economic and voting rights on all other matters.
3. Why do we have to give superior voting rights to Class B stockholders?
Again the voting rights structure is necessary to effect the spin in a
tax-efficient manner. However, in a sense, the influence that common
shareholder have on other voting matters actually improves. Currently
Unitrin holds 44% of Curtiss-Wright's outstanding shares. As a result,
it can exert substantial influence on the outcome of all issues that go
to a shareholder vote, including the election of the Board of
Directors. The distribution of Unitrin's shares to its 8,000
stockholders on a pro-rata basis broadly distributes that voting power.
While these shares have the voting rights to elect 80% of the Board, in
all other respects, the voting rights of the two classes of stock are
equal. Effectively the position of the non-Unitrin stockholders will be
improved in that Unitrin will no longer be in a position to influence
the voting and its shares will be widely dispersed among its public
stockholders. Instead the non-Unitrin stockholders, who will own 56% of
the shares, will control the vote on all matters other than the
election of directors.
4. Will the stock distribution to Unitrin shareholders create selling pressure
on Curtiss-Wright stock and temporarily depress its stock price?
The stock of Curtiss-Wright could come under some selling pressure as
Unitrin shareholders become direct owners of Curtiss-Wright.
Shareholders of Unitrin, an insurance company, are likely to own the
stock because of Unitrin's specific equity characteristics. To the
extent that Curtiss-Wright's characteristics do not meet the investment
parameters or criteria established by the Unitrin shareholders, some
selling is likely to occur.
5. What will Curtiss Wright do to offset possible temporary selling pressure?
Curtiss-Wright intends to mitigate the effect of this issue by
personally meeting with Unitrin's major stockholders to introduce
Curtiss-Wright and its management team and to explain the company's
previously disclosed business plan and growth prospects which may not
currently be reflected in the company's market share price.
Curtiss-Wright believes that an explanation of its business plan and
growth prospects is an effective and appropriate method to help retain
distributed holdings and/or stimulate additional demand from Unitrin
shareholders. In addition, Management expects to have additional
authorization to repurchase shares under its share buy-back program.
6. Do you expect to have a stock buy back program in place?
The Board of Directors authorized and implemented a buyback program in
1998, which authorized the repurchase of up to 300,000 shares. The
buy-back program is periodically reviewed and we would expect to review
it again when the current authorization is exhausted, and in connection
with the closing of the recapitalization. We are limited, however, in
the amount of shares that we can repurchase under applicable tax laws.
Management does anticipate that it will recommend to the Board of
Directors that the authorization be increased with the boundaries of
the applicable tax laws. We believe that our stock represents a very
good long-term investment.
7. Why did you adopt the rights plan?
A shareholder rights plan can enhance the ability of the Board to
protect the interest of its stockholders in the event of an unsolicited
proposal to acquire a significant position in the company, especially
at a price that may not reflect the company's fair value. Our rights
plan was adopted because of the increased vulnerability that will
result from the proposed stock distribution. The rights plan will help
to ensure that a threatened hostile take-over attempt is properly
managed, offers are given proper evaluation in serving the best
interest of all stockholders, and that result in a price, which
maximizes stockholder value.
8. Is it beneficial to have Unitrin as a corporate holder to protect
shareholders interest in the event of an attempted takeover, rather than
adopting a shareholder rights plan and placing that responsibility with
management?
The rights plan places the responsibility of deciding whether an offer
is in the best interests of Curtiss-Wright's stockholders with
Curtiss-Wright's Board, not its management team. The Board has sole
responsibility to use its discretion in deciding whether an offer
should be brought before the stockholders for approval. Unitrin does
not have an obligation to act in a manner that benefits the long-term
interest of Curtiss-Wright's stockholders as a whole and is free to
dispose of its shares as it feels appropriate..
9. Do you really believe that the 25-cent special dividend provides fair
compensation for the dilution of stockholders' voting rights?
There are other benefits to the recapitalization in addition to the
special dividend that is being paid to the non-Unitrin stockholders. We
believe the long term and most significant value will come from the
improvement in liquidity and the increase in our investor base that
should result in increased coverage by analysts and improved visibility
in the market place. We believe that these factors should ultimately
lead to a higher valuation of our stock.
10. Will it be possible for someone to buy up a majority of the Class B stock
and thus control 80 percent of the Board without paying for the whole
company?
Unitrin today has 44% of the voting power, which already gives it the
ability to have substantial influence on the outcome of any matter
which it casts its stockholder vote. We expect that our board will
adopt a new stockholders rights plan at the time of the
Recapitalization which will preclude any person or group from buying
more a substantial amount of the Class B stock unless the Board of
Directors determines it to be in the best interests of all
stockholders. The exact terms of the Class B rights plan has not been
determined. We believe that this will guard against someone trying to
buy control at a low price, without acting in the best interest of all
the stockholders. In addition, the Board of Directors has a
responsibility to act in the best interests of all the stockholders.
