<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1999
REGISTRATION NUMBER 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GENERAL DYNAMICS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3731 13-1673581
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3190 FAIRVIEW PARK DRIVE
FALLS CHURCH, VIRGINIA 22042-4523
(703) 876-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID A. SAVNER, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
GENERAL DYNAMICS CORPORATION
3190 FAIRVIEW PARK DRIVE
FALLS CHURCH, VIRGINIA 22042-4523
(703) 876-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
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<S> <C>
CRAIG A. ROEDER, ESQ. STEPHEN FRAIDIN, P.C.
JENNER & BLOCK AVIVA DIAMANT, ESQ.
601 THIRTEENTH STREET, N.W. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
WASHINGTON, D.C. 20005 ONE NEW YORK PLAZA
(202) 639-6000 NEW YORK, NEW YORK 10004
(212) 859-8000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effectiveness of this Registration Statement and the
satisfaction or waiver of all other conditions to the merger of a wholly-owned
subsidiary of the Registrant with and into Gulfstream Aerospace Corporation
pursuant to the Merger Agreement described in the Joint Proxy
Statement/Prospectus forming a part of this Registration Statement.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED (1) PRICE PER SHARE OFFERING PRICE(2) FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per share......... 76,352,789 Not applicable $4,800,681,608 $1,334,590
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the maximum number of shares expected to be issued in connection
with the merger transaction described herein (assuming exercise of all
outstanding options prior to the effective time of the merger).
(2) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(c) and Rule 457(f)(1) under the Securities Act of
1933, as amended, based on an average of the high and low sales prices on
the New York Stock Exchange of the Common Stock, par value $.01 per share,
of Gulfstream Aerospace Corporation on June 1, 1999, which was $62.875 per
share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a)OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
The information in this Joint Proxy Statement/Prospectus will be amended or
completed.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WHICH INCLUDES THIS JOINT
PROXY STATEMENT/PROSPECTUS, IS EFFECTIVE. THIS JOINT PROXY STATEMENT/PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
[GENERAL DYNAMICS LETTERHEAD]
[ ], 1999
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders to be
held at , Virginia on , 1999
beginning at 10:00 a.m. At the special meeting you will be asked to approve an
amendment to General Dynamics' charter to increase the number of authorized
shares of common stock to 300,000,000 from the currently authorized 200,000,000
shares, and to approve the issuance of shares of General Dynamics' common stock
to the stockholders of Gulfstream Aerospace Corporation in connection with the
merger of a subsidiary of General Dynamics Corporation and Gulfstream.
On [ ], 1999, the last trading day before the date of this
document, General Dynamics common stock, which is listed on the New York Stock
Exchange under the symbol "GD," closed at $[ ] per share and Gulfstream
common stock, which is listed on the New York Stock Exchange under the symbol
"GAC," closed at $[ ]. In the merger, Gulfstream will become a
wholly-owned subsidiary of General Dynamics. Each outstanding share of
Gulfstream common stock will be converted into one share of General Dynamics'
common stock, and the stockholders of Gulfstream will become stockholders of
General Dynamics and own approximately 37% of General Dynamics common stock
immediately after the merger.
This document is a proxy statement for use by both Gulfstream and General
Dynamics in soliciting proxies for their special meetings of stockholders. It is
also a prospectus for General Dynamics relating to the issuance of up to
76,352,789 General Dynamics shares in connection with the merger. It gives you
detailed information about the merger, and includes a copy of the merger
agreement. You are urged to read the entire proxy statement before deciding how
to vote. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATING TO THE MERGER,
WHICH ARE DESCRIBED BEGINNING ON PAGE [ ] OF THIS DOCUMENT.
We cannot complete the merger unless the stockholders of General Dynamics
vote to approve the charter amendment and the issuance of shares in the merger.
YOUR VOTE IS VERY IMPORTANT. IF YOU FAIL TO VOTE, THE EFFECT WILL BE A VOTE
AGAINST THE MERGER.
The Board of Directors of General Dynamics has unanimously concluded that
the acquisition of Gulfstream represents a significant opportunity for General
Dynamics and contributes to stockholder value. General Dynamics has consistently
pursued business acquisition opportunities that are related to our core
competencies and business operations. Gulfstream is a clear market leader in the
design, development, manufacture and marketing of long range business jet
aircraft. General Dynamics' core competencies of systems integration,
large-scale manufacturing and computer-based design and manufacturing
technologies can enhance the profitable operations of Gulfstream. Moreover,
there are strong cultural similarities between our managements as evidenced by
our mutual dedication to building stockholder value.
When the merger is complete, General Dynamics will be an even better and
stronger company positioned to take advantage of market opportunities.
Your Board of Directors has reviewed the proposed charter amendment and the
issuance of shares and believe they are fair to, and in the best interests of,
the stockholders of General Dynamics. We unanimously recommend that you vote for
each of the proposals.
Sincerely yours,
Nicholas D. Chabraja
Chairman of the Board and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the General Dynamics common stock to be
issued in connection with the merger, nor have they determined if this Joint
Proxy Statement/Prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
This Joint Proxy Statement/Prospectus is dated [ ], 1999 and is
first being mailed to stockholders on or about [ ], 1999.
<PAGE> 3
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about our companies from documents that we have filed with the Securities and
Exchange Commission but have not included or delivered with this document. If
you call or write us, we will send you these documents, excluding exhibits,
without charge. You can contact us at:
<TABLE>
<S> <C>
General Dynamics Corporation Gulfstream Aerospace Corporation
3190 Fairview Park Drive 500 Gulfstream Road
Falls Church, Virginia 22042-4523 Savannah, Georgia 31408
Attention: Corporate Secretary Attention: Investor Relations
(703) 876-3000 (912) 965-3700
</TABLE>
Please request documents from either company no later than [ ], 1999.
If you request any documents, we will mail the documents to you by first class
mail, or another equally prompt means, by the next business day after we receive
your request.
See "Where You Can Find More Information" on page [ ] for more
information about the documents referred to in this document.
<PAGE> 4
[GENERAL DYNAMICS LOGO]
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A special meeting of stockholders of General Dynamics Corporation, a
Delaware corporation, will be held at [ ] on [ ] , 1999, at 10:00 a.m.,
local time, for the following purposes:
1. To consider and vote on a proposal to amend the Certificate of
Incorporation of General Dynamics to increase the number of
authorized shares of General Dynamics common stock, par value $1.00
per share, from 200,000,000 shares to 300,000,000 shares.
2. To consider and vote on a proposal to approve the issuance by
General Dynamics of shares of its common stock pursuant to the
terms of the Agreement and Plan of Merger dated as of May 16, 1999
among General Dynamics, Tara Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of General Dynamics, and
Gulfstream Aerospace Corporation, a Delaware corporation.
3. To transact all other business that may properly come before the
meeting or any adjournment thereof.
THE BOARD OF DIRECTORS OF GENERAL DYNAMICS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF BOTH PROPOSALS.
We are enclosing a copy of the Joint Proxy Statement/Prospectus which
describes the transactions contemplated by the merger agreement.
The Board of Directors has fixed the close of business on [ ] , 1999 as
the record date for the determination of stockholders entitled to notice of and
to vote at the General Dynamics special meeting. It is important that your
shares be represented and voted at the meeting. Please complete, sign, date and
mail promptly the enclosed proxy, whether or not you plan to attend the General
Dynamics special meeting. An addressed return envelope, which requires no
postage if mailed in the United States, is enclosed for your convenience. You
may revoke your proxy at any time before it is voted at the General Dynamics
special meeting by delivering a later dated executed proxy or a written notice
of revocation to General Dynamics, or by voting in person at the meeting.
By Order of the Board of Directors,
/s/ DAVID SAVNER
David A. Savner
Secretary
Falls Church, Virginia, [ ] , 1999
<PAGE> 5
[Gulfstream letterhead]
[ ], 1999
Dear Stockholder:
Your board of directors has unanimously approved a merger of Gulfstream
Aerospace Corporation with General Dynamics Corporation. If the merger is
completed, you will receive one share of General Dynamics common stock for each
share of Gulfstream common stock which you own, and Gulfstream will be a
wholly-owned subsidiary of General Dynamics.
On [ ], 1999, the last trading day before the date of this
document, Gulfstream common stock, which is listed on the New York Stock
Exchange under the symbol "GAC," closed at $[ ] per share and General
Dynamics common stock, which is listed on the New York Stock Exchange under the
symbol "GD," closed at $[ ]. Immediately after the merger, Gulfstream
stockholders will own approximately 37%, and General Dynamics stockholders will
own approximately 63%, of General Dynamics' outstanding common stock.
This document is a proxy statement for use by both Gulfstream and General
Dynamics in soliciting proxies for their special meetings of stockholders. It is
also a prospectus for General Dynamics relating to the issuance of up to
76,352,789 General Dynamics shares in connection with the merger. It gives you
detailed information about the merger, and includes a copy of the merger
agreement. You are urged to read the entire proxy statement before deciding how
to vote. YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATING TO THE MERGER,
WHICH ARE DESCRIBED BEGINNING ON PAGE [ ] OF THIS DOCUMENT.
We cannot complete the merger unless the shareholders of Gulfstream vote to
approve the merger. YOUR VOTE IS VERY IMPORTANT. IF YOU FAIL TO VOTE, THE EFFECT
WILL BE A VOTE AGAINST THE MERGER.
The merger is an important step for Gulfstream and its stockholders. I
believe Gulfstream, as part of a larger company, will be able to take full
advantage of its enormous growth potential as it continues to set the standard
in business aviation. I join all the other members of Gulfstream's board of
directors in recommending that you vote FOR the merger.
Sincerely yours,
Theodore J. Forstmann
Chairman and Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the General Dynamics common stock to be
issued in connection with the merger, nor have they determined if this Joint
Proxy Statement/Prospectus is accurate or adequate. Any representation to the
contrary is a criminal offense.
This Joint Proxy Statement/Prospectus is dated [ ], 1999 and is first
being mailed to stockholders on or about [ ] , 1999.
<PAGE> 6
[GULFSTREAM LOGO]
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A special meeting of stockholders of Gulfstream Aerospace Corporation, a
Delaware corporation, will be held at [ ] on [ ] , 1999, at 10:00 a.m.,
local time, for the following purposes:
1. To consider and vote on a proposal to adopt and approve the Agreement
and Plan of Merger dated May 16, 1999 among Gulfstream, General Dynamics
Corporation, a Delaware corporation, and Tara Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of General Dynamics
Corporation, and to approve the proposed merger; and
2. To transact such other business as may properly come before the meeting.
THE BOARD OF DIRECTORS OF GULFSTREAM UNANIMOUSLY RECOMMENDS THAT YOU VOTE
IN FAVOR OF THE PROPOSAL TO ADOPT AND APPROVE THE MERGER AGREEMENT AND APPROVE
THE MERGER.
Stockholders of record as of the close of business on [ ] , 1999 will
be entitled to vote at the Gulfstream special meeting.
We are enclosing a copy of the Joint Proxy Statement/Prospectus which
describes the transactions contemplated by the merger agreement.
Whether or not you plan to attend the meeting, please complete, sign and
date the enclosed proxy card and promptly return it in the accompanying
envelope, which requires no postage if mailed in the United States. You may
revoke your proxy at any time before it is voted at the Gulfstream special
meeting by delivering a later dated executed proxy or a written notice of
revocation to Gulfstream or by voting in person at the meeting.
By Order of the Board of Directors,
/s/ CHRIS A. DAVIS
Chris A. Davis
Secretary
Savannah, Georgia, [ ] , 1999
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Questions and Answers About The Merger...................... 1
Summary..................................................... 3
Risk Factors................................................ 15
Fluctuation of Market Price of General Dynamics Common
Stock..................................................
Integration of General Dynamics and Gulfstream
Businesses.............................................
Operation of Commercial Business..........................
Business Risks of Combined Company........................
Termination Fee...........................................
Interests of Gulfstream Directors and Executive
Officers...............................................
Cautionary Statement Regarding Forward-Looking
Information............................................... 17
The Special Meetings........................................ 18
Matters to Be Considered at the Special Meetings.......... 18
Votes Required to Complete the Merger..................... 18
How Proxies Will Be Voted at the Special Meetings......... 19
How to Revoke a Proxy..................................... 19
Solicitation of Proxies................................... 20
The Companies............................................... 20
General Dynamics Corporation.............................. 20
Gulfstream Aerospace Corporation.......................... 22
The Merger.................................................. 25
General Information about the Merger...................... 25
Background of the Merger.................................. 25
Reasons for the Merger; Recommendations of the Boards of
Directors.............................................. 28
Opinion of Financial Advisor to General Dynamics.......... 31
Opinion of Financial Advisor to Gulfstream................ 38
Fee Arrangement of Goldman Sachs.......................... 45
Interests of Members of Gulfstream's Board of Directors
and Executive Officers in the Merger................... 45
No Appraisal Rights....................................... 47
Accounting Treatment...................................... 47
Federal Income Tax Consequences........................... 47
Regulatory Matters........................................ 49
Resale Restrictions....................................... 49
The Merger Agreement........................................ 49
The Merger................................................ 49
Effective Time of the Merger.............................. 50
Exchange Procedures....................................... 50
Representations and Warranties............................ 51
Covenants................................................. 52
Conduct of Business....................................... 52
No Solicitation of Transactions........................... 53
Boards' Covenant to Recommend............................. 54
Compensation and Benefit Plans............................ 54
Governance................................................ 54
</TABLE>
i
<PAGE> 8
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PAGE
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<S> <C>
Indemnification and Insurance............................. 55
Registration Agreement.................................... 55
Financial Statements...................................... 56
Other Covenants........................................... 56
Conditions................................................ 56
Termination............................................... 57
Termination Fee........................................... 58
Other Expenses............................................ 58
Amendment, Extension and Waiver........................... 58
The Voting Agreement........................................ 58
Management and Operations After The Merger.................. 59
Unaudited Pro Forma Combined Financial Data................. 60
Notes to Unaudited Pro Forma Combined Financial Data........ 65
Description of General Dynamics Capital Stock............... 66
Authorized Capital Stock.................................. 66
General Dynamics Common Stock............................. 66
General Dynamics Preferred Stock.......................... 66
Comparative Rights of Stockholders.......................... 67
General................................................... 67
Classified Board of Directors............................. 67
Number of Directors....................................... 67
Removal of Directors...................................... 67
Vacancies................................................. 68
Special Meetings.......................................... 68
Consent of Stockholders in Lieu of a Meetings............. 68
Advanced Notice Provision for Stockholder Nominations..... 68
Advanced Notice Provision for Stockholder Proposals....... 69
Transactions with Interested Stockholders................. 70
Liability and Indemnification............................. 70
Amendments to Charter Documents........................... 71
Legal Matters............................................... 72
Experts..................................................... 72
Stockholder Proposals for 2000 Annual Meetings.............. 72
Where You Can Find More Information......................... 73
LIST OF APPENDICES
Appendix A -- Agreement and Plan of Merger.................. A-1
Appendix B -- Voting Agreement.............................. B-1
Appendix C -- Form of Registration Agreement................ C-1
Appendix D -- Opinion of Bear, Stearns & Co. Inc. .......... D-1
Appendix E -- Opinion of Merrill Lynch & Co. ............... E-1
</TABLE>
ii
<PAGE> 9
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL GULFSTREAM STOCKHOLDERS RECEIVE FOR THEIR GULFSTREAM SHARES IN THE
MERGER?
A: When the merger is completed, Gulfstream stockholders will receive one share
of General Dynamics common stock in exchange for each of their shares of
Gulfstream common stock. This one-for-one exchange ratio will not change.
Because the market price of the General Dynamics common stock may change
from day to day, Gulfstream stockholders cannot be sure of the market value
of the General Dynamics common stock they will receive in the merger at the
time they vote their shares.
The closing price of General Dynamics common stock on May 14, 1999, the last
trading day before the announcement of the merger, was $71.44, and the
closing price of Gulfstream common stock on that day was $55.63. The closing
price of General Dynamics common stock on [ ], 1999, the day before this
document was mailed to stockholders, was $[ ]. Either General Dynamics or
Gulfstream may decide not to proceed with the merger if the average market
price of a share of General Dynamics common stock for the 15 trading day
period ending on the fifth trading day before the Gulfstream special meeting
is less than $63.
Q: WHAT WILL GENERAL DYNAMICS STOCKHOLDERS RECEIVE IN THE MERGER?
A: After the merger, the holders of shares of General Dynamics common stock
will continue to hold their shares.
Q: WILL THE MERGER BE TAXABLE TO ME?
A: The merger generally will not be taxable to either Gulfstream or General
Dynamics stockholders.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this document, please indicate on your proxy
card how you want to vote. Sign and date the proxy card and mail it in the
enclosed prepaid return envelope marked "Proxy" as soon as possible, so that
your shares may be represented and voted at the appropriate special meeting
as indicated below:
General Dynamics Special Meeting
[ ], 1999
10:00 a.m., local time
[Location of General Dynamics Special Meeting]
Gulfstream Special Meeting
[ ], 1999
10:00 a.m., local time
[Location of Gulfstream Special Meeting]
In order for us to complete the merger, the holders of a majority of the
outstanding shares of General Dynamics common stock must vote to approve an
amendment to General Dynamics' charter to increase the number of shares of
common stock General Dynamics is authorized to issue and the holders of a
majority of the shares of General Dynamics common stock present in person or
by proxy at the General Dynamics special meeting must approve the issuance
of shares of General Dynamics common stock in connection with the merger. In
addition, the holders of a majority of the outstanding shares of Gulfstream
common stock must vote to adopt and approve the merger agreement and approve
the merger. THE BOARD OF DIRECTORS OF EACH COMPANY UNANIMOUSLY RECOMMENDS
VOTING "FOR" EACH OF THE PROPOSALS REQUIRED TO COMPLETE THE MERGER.
1
<PAGE> 10
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker cannot vote your shares without specific instructions from you.
Unless you follow the directions your broker provides to you regarding how
to instruct your broker to vote your shares, your shares will not be voted.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at your
company's special meeting. Just send in a later dated, signed proxy card or
a written notice of revocation to your company's Secretary before your
meeting or attend your meeting in person and vote.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A: No. After we complete the merger, General Dynamics will send Gulfstream
stockholders written instructions for exchanging their certificates. General
Dynamics stockholders will not need to exchange their certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working toward completing the merger as quickly as possible. We
anticipate completing the merger shortly after the two stockholders meetings
are held, assuming that the stockholders of both companies approve the
transaction.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Both companies file reports and other information with the SEC. You may read
and copy this information at the SEC's public reference facilities. Please
call the SEC at 1-800-SEC-0330 for information about these facilities. This
information is also available at the Internet site the SEC maintains at
www.sec.gov and at the offices of the New York Stock Exchange. You can also
request copies of these documents from us.
Q: WHO CAN ANSWER ANY OTHER QUESTIONS I MAY HAVE?
A: If you have questions, you may contact our information agent:
Innisfree M & A Incorporated
501 Madison Avenue
20th Floor
New York, New York 10022
(800)[ ]
2
<PAGE> 11
SUMMARY
This summary highlights selected information from this document. It does
not contain all of the information that may be important to you. We urge you to
read carefully the entire document and the other documents referred to in this
document to fully understand the merger. For a guide as to where you can obtain
more information on General Dynamics and Gulfstream generally, see "Where You
Can Find More Information" on page [ ].
GENERAL
We propose a merger between General Dynamics and Gulfstream. As a result of
the proposed merger, Gulfstream will become a wholly-owned subsidiary of General
Dynamics. Based on financial results for 1998, the combined company would have
had annual net sales of $7.4 billion and annual net earnings of $589 million for
1998. The combined company would have had approximately 38,800 employees.
THE COMPANIES
GENERAL DYNAMICS CORPORATION (SEE PAGE [ ])
3190 Fairview Park Drive
Falls Church, Virginia 22042-4523
(703) 876-3000
General Dynamics' primary business is supplying sophisticated defense
systems to the United States and its allies. General Dynamics operates in three
primary business segments. The Marine Systems segment designs, builds and
supports nuclear submarines, surface combatants and auxiliary ships for the
United States Navy, including the new Virginia-class nuclear attack submarine
and the DDG 51 Flight IIA Aegis destroyer, and provides ship management services
for the United States government on prepositioning and ready-reserve ships. The
Combat Systems segment develops, produces and supports land and amphibious
combat systems, including the United States Army's M1A2 main battle tank and the
Advanced Amphibious Assault Vehicle for the United States Marine Corps, other
armored vehicles and a broad range of power trains, turrets and gun subsystems
for the United States armed forces and international customers. It also is a
leader in the production of ammunition products. General Dynamics' Information
Systems and Technology segment provides expertise in signal and information
processing, the use of commercial technologies for military applications,
battlespace information management and intelligence data acquisition and
processing within the defense and intelligence branches of the United States
government and its allies.
In 1998, General Dynamics had net sales of $5.0 billion and net earnings of
$364 million. General Dynamics has approximately 31,000 employees.
GULFSTREAM AEROSPACE CORPORATION (SEE PAGE [ ])
500 Gulfstream Road
Savannah, Georgia 31408
(912) 965-3000
Gulfstream is recognized worldwide as a leading designer, developer,
manufacturer and marketer of advanced long range and ultra-long range business
aircraft. Gulfstream has manufactured and sold over 1,000 large business
aircraft since the introduction of the Gulfstream I. Since 1966, when Gulfstream
created the large cabin business jet category with the introduction of the
Gulfstream II, Gulfstream has dominated this segment of the market, capturing a
cumulative market share of approximately 60%.
Gulfstream operates principally in three segments: New Aircraft, Aircraft
Services and Pre-Owned Aircraft. Within New Aircraft, Gulfstream's current
product offerings are the Gulfstream IV-
3
<PAGE> 12
SP, the Gulfstream V, Gulfstream Shares(R) (fractional ownership interest in
Gulfstream IV-SPs and Gulfstream Vs), and Gulfstream Lease(SM). Within its
Aircraft Services segment, Gulfstream offers aftermarket maintenance services,
spare parts, engine overhaul and auxiliary power unit service and overhaul for
both Gulfstream and other business aircraft. Gulfstream's Pre-Owned Aircraft
segment markets and sells pre-owned Gulfstream aircraft and other business
aircraft, acquired in trade, to a worldwide market.
In 1998, Gulfstream had net sales of $2.4 billion and net earnings of $225
million. Gulfstream has approximately 7,800 employees.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (SEE PAGE [ ])
General Dynamics common stock and Gulfstream common stock are listed on the
New York Stock Exchange. For the five trading days before May 17, 1999, the date
of the announcement of the merger, the average closing price of the General
Dynamics common stock was $72.90 per share. For the same five trading days, the
average closing price of the Gulfstream common stock was $54.60 per share. On
[ ], 1999, the last trading day before the date of this document, General
Dynamics common stock closed at $[ ] per share and Gulfstream common stock
closed at $[ ] per share.
If the merger had occurred on [ ], 1999, the market value of a share
of General Dynamics common stock that Gulfstream stockholders would have
received in the merger for each share of Gulfstream common stock would have been
$[ ]. While the exchange ratio is fixed, the market price of General
Dynamics common stock will fluctuate before the merger. You should obtain
current stock price quotations.
As of June 4, 1999, 127,575,741 shares of General Dynamics common stock
were outstanding. As of May 28, 1999, 71,649,493 shares of Gulfstream common
stock were outstanding and options to purchase 4,703,296 shares of Gulfstream
common stock were outstanding. Immediately after the merger, former Gulfstream
stockholders will own approximately 37% and current General Dynamics
stockholders will own approximately 63% of the outstanding shares of General
Dynamics.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGE [ ])
General Dynamics Stockholders. Bear, Stearns & Co. Inc. delivered a
written opinion to the General Dynamics board of directors to the effect that,
as of May 13, 1999 (the date of the General Dynamics board meeting), and subject
to the assumptions, qualifications and limitations set forth therein, the
purchase price per share to be paid to the Gulfstream stockholders in the merger
was fair, from a financial point of view, to General Dynamics. This opinion is
not a recommendation to any General Dynamics stockholder as to how to vote. We
have attached this opinion to this document as Appendix D. You should read it
completely.
Gulfstream Stockholders. Merrill Lynch & Co. delivered a written opinion
to the Gulfstream board of directors that, as of May 16, 1999 (the date of the
Gulfstream board meeting), and subject to the assumptions, qualifications and
limitations set forth therein, the exchange ratio provided in the merger
agreement was fair, from a financial point of view, to the stockholders of
Gulfstream, other than General Dynamics and its affiliates. This opinion is not
a recommendation to any Gulfstream stockholder as to how to vote. We have
attached this opinion to this document as Appendix E. You should read it
completely.
VOTES REQUIRED; RECORD DATE FOR VOTING (SEE PAGE [ ])
General Dynamics Stockholders. You can vote at the General Dynamics
special meeting in person or by proxy if you owned General Dynamics common stock
at the close of business on
4
<PAGE> 13
[ ], 1999. In order for us to complete the merger, the holders of a
majority of the outstanding shares of General Dynamics common stock must vote to
approve an amendment to General Dynamics' charter to increase the number of
shares of common stock General Dynamics is authorized to issue and the holders
of a majority of the shares of General Dynamics common stock present in person
or by proxy at the General Dynamics special meeting must approve the issuance of
General Dynamics shares in connection with the merger. If you do not vote your
shares, the effect will be a vote against the proposal to amend General
Dynamics' charter. If the proposal to amend the charter is not approved, the
merger cannot proceed because General Dynamics does not presently have enough
shares available to issue in the merger.
On [ ], 1999, General Dynamics directors, executive officers and
affiliates may be deemed to beneficially own [ ] shares of General
Dynamics common stock, excluding shares which may be acquired upon exercise of
options. This is approximately [ ]% of the outstanding shares of General
Dynamics common stock. Each of the directors, executive officers and affiliates
of General Dynamics has indicated that such stockholder intends to vote in favor
of each of the proposals to be voted on at the General Dynamics special meeting.
Gulfstream Stockholders. You can vote at the Gulfstream special meeting in
person or by proxy if you owned Gulfstream common stock at the close of business
on [ ], 1999. In order for us to complete the merger, the holders of a
majority of outstanding shares of Gulfstream common stock must vote to adopt and
approve the merger agreement and approve the merger. If you do not vote your
shares, the effect will be a vote against the approval of the merger agreement
and the merger.
Three investment partnerships affiliated with Forstmann Little & Co. have
entered into a voting agreement with General Dynamics in which they have agreed
to vote all 16,554,375 of their shares of Gulfstream common stock in favor of
the merger. These shares represent approximately 23% of the outstanding shares
of Gulfstream common stock on May 28, 1999. On May 28, 1999, Gulfstream
directors and executive officers may be deemed to beneficially own 29,157 shares
of Gulfstream common stock, excluding 1,661,054 shares which may be acquired
upon exercise of options, and excluding shares owned by the Forstmann Little
investment partnerships (which may be deemed to be beneficially owned by three
directors). These 29,157 shares represent less than one percent of the
outstanding shares of Gulfstream common stock. Each of the directors and
executive officers of Gulfstream has indicated that he or she intends to vote
for the adoption and approval of the merger agreement and approval of the
merger.
RECOMMENDATIONS TO STOCKHOLDERS (SEE PAGE [ ])
General Dynamics Stockholders. The board of directors of General Dynamics
unanimously recommends that you vote "FOR" the proposal to amend General
Dynamics' charter to increase the number of shares of common stock General
Dynamics is authorized to issue and "FOR" the proposal to approve the issuance
of General Dynamics shares in connection with the merger.
Gulfstream Stockholders. The board of directors of Gulfstream unanimously
recommends that you vote "FOR" the proposal to approve the merger agreement and
the merger.
GULFSTREAM STOCK OPTIONS (SEE PAGE [ ])
In the merger, each outstanding option to buy Gulfstream common stock that
Gulfstream has granted under its stock option plans or agreements will become an
option to buy the same number of shares of General Dynamics common stock on the
same terms as were applicable to the Gulfstream options.
5
<PAGE> 14
NO APPRAISAL RIGHTS (SEE PAGE [ ])
Under Delaware law, Gulfstream and General Dynamics stockholders will not
have any appraisal or dissenters' rights in connection with the merger.
ACCOUNTING TREATMENT (SEE PAGE [ ])
We expect the merger to qualify as a pooling of interests for accounting
purposes. Under this method, General Dynamics and Gulfstream will be treated as
if they had always been combined for accounting and financial reporting
purposes.
FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE [ ])
Gulfstream stockholders generally will not recognize taxable gain or loss
for federal income tax purposes in exchanging Gulfstream common stock for
General Dynamics common stock in the merger. General Dynamics stockholders
generally will not recognize taxable gain or loss for federal income tax
purposes in the proposed merger. You should consult your own tax advisor for a
full understanding of the tax consequences of the merger.
REGULATORY APPROVALS REQUIRED FOR THE MERGER (SEE PAGE [ ])
On May 21, 1999, we filed the required information with the Antitrust
Division of the Department of Justice and the Federal Trade Commission. [On
[ ], 1999, the waiting period under the pre-merger notification
requirements of the federal antitrust laws expired.] The Antitrust Division of
the Department of Justice and the Federal Trade Commission have the authority to
challenge the merger on antitrust grounds at any time. We are not aware of any
other significant regulatory approvals required for the merger.
COMPLETION OF THE MERGER (SEE PAGE [ ])
Before we can complete the merger, we must satisfy a number of conditions.
These include:
- approval of each of the stockholder proposals required to complete the
merger;
- the absence of any legal prohibitions against the merger; and
- material compliance by General Dynamics and Gulfstream with their
obligations under the merger agreement.
We will merge shortly after all of the conditions to the merger have been
satisfied or waived. We anticipate completing the merger shortly after the two
stockholder meetings are held, assuming that the stockholders of both companies
approve the transaction.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE [ ])
We may agree in writing to terminate the merger agreement at any time
without completing the merger, even after the stockholders of both companies
have approved it.
In addition, either General Dynamics or Gulfstream may decide to terminate
the merger agreement if:
- a court or other governmental agency issues a final order, decree or
ruling prohibiting the merger;
- the merger has not been completed by December 31, 1999;
- the stockholders of the other company fail to approve the merger
agreement;
6
<PAGE> 15
- the other company breaches its representations or obligations under the
merger agreement in a material manner and does not cure the breach within
45 days after being notified of the breach; or
- the average market price of a share of General Dynamics common stock for
the 15 trading day period ending on the fifth trading day before the
Gulfstream special meeting is less than $63.
TERMINATION FEE PAYABLE IF MERGER NOT COMPLETED (SEE PAGE [ ])
If the merger is not completed because of another possible acquisition
involving Gulfstream, Gulfstream may be required to pay a $150 million
termination fee to General Dynamics. This fee could discourage other companies
from trying to acquire Gulfstream before the merger.
VOTING AGREEMENT (SEE PAGE [ ])
Three investment partnerships controlled by Forstmann Little have entered
into a voting agreement with General Dynamics. Under this agreement, the
partnerships have agreed to vote all of their shares of Gulfstream common stock
in favor of the merger. The voting agreement covers shares representing
approximately 23% of Gulfstream's total outstanding shares as of May 28, 1999.
REGISTRATION AGREEMENT (SEE PAGE [ ])
General Dynamics has agreed to enter into a registration agreement with the
three investment partnerships affiliated with Forstmann Little and certain
directors and executive officers of Gulfstream. The registration agreement
provides, among other things, that General Dynamics will, upon request, register
for resale the shares of General Dynamics which the investment partnerships and
these directors and executive officers will receive in the merger. Without this
registration, the shares of General Dynamics common stock received by these
persons in the merger would be subject to restrictions on resale under the
federal securities laws that do not apply to the other stockholders of
Gulfstream. It is anticipated that the three investment partnerships may
register and sell all or a significant portion of the General Dynamics common
stock they receive in the merger shortly after such resales are permitted under
the accounting rules governing pooling of interests transactions (see "The
Merger -- Resale Restrictions"), subject, however, to the market price of
General Dynamics common stock, prevailing market conditions and other factors.
INTERESTS OF MEMBERS OF GULFSTREAM'S BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
IN THE MERGER (SEE PAGE [ ])
Some of Gulfstream's directors and executive officers may have interests in
the merger that are different from, or in addition to, your interests as
stockholders. For at least one year following the merger, General Dynamics will
elect Theodore J. Forstmann, who is the Chairman and Chief Executive Officer of
Gulfstream and a general partner of Forstmann Little, as a director and the non-
executive Chairman of the board of directors of Gulfstream and will elect Sandra
J. Horbach, who is a director of Gulfstream and a general partner of Forstmann
Little, as a director of Gulfstream. Forstmann Little is affiliated with the
three investment partnerships that together own approximately 23% of
Gulfstream's common stock. Under the terms of their existing option agreements,
all holders of options to acquire Gulfstream common stock (including the
directors and executive officers of Gulfstream) will have the opportunity to
exercise those options prior to the completion of the merger, whether or not
those options are vested at the time of exercise, and unvested options held by
certain optionholders (including certain directors and executive officers) will
become fully vested and exercisable by reason of the completion of the merger.
In addition, under the terms of the existing
7
<PAGE> 16
option agreements, certain transfer restrictions applicable to shares issuable
upon the exercise of options will lapse upon completion of the merger.
COMPARISON OF RIGHTS OF GULFSTREAM STOCKHOLDERS AND GENERAL DYNAMICS
STOCKHOLDERS
(SEE PAGE [ ])
After the merger, Gulfstream stockholders will become stockholders of
General Dynamics and their rights as stockholders will be governed by the
certificate of incorporation and bylaws of General Dynamics. There are some
differences between the certificates of incorporation and bylaws of Gulfstream
and General Dynamics. However, since General Dynamics and Gulfstream are both
Delaware corporations, the rights of Gulfstream stockholders will continue to be
governed by Delaware law after the merger.
SELECTED FINANCIAL DATA AND UNAUDITED COMPARATIVE PER SHARE DATA
The following tables show summary historical financial data, earnings per
share and book value per share for each of our companies and also show similar
information reflecting the merger of our two companies (which we refer to as
"pro forma" information). In presenting the comparative pro forma information
for certain time periods, we assumed that our companies had been merged
throughout those periods.
We also assumed that we would treat our companies as if they had always
been combined for accounting and financial reporting purposes (a method known as
pooling of interests accounting). We computed the information listed as
"equivalent pro forma" for Gulfstream by multiplying the pro forma amounts by
the exchange ratio of 1:1. Since the exchange ratio for the merger is one share
of General Dynamics common stock for each share of Gulfstream common stock, the
resulting equivalent pro forma basis for Gulfstream is the same as General
Dynamics' pro forma basis.
The pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
attempt to predict or suggest future results. The pro forma information also
does not attempt to show how the combined company would actually have performed
had the companies been combined throughout these periods.
The combining companies have different quarterly reporting periods. General
Dynamics' interim financial data is based on a 13-week period. Gulfstream's
interim financial data is as of and for the three months ended March 31. Both
companies have the same fiscal year ending December 31.
We base certain of the information in the following tables on the
historical financial information of our companies that we have presented in our
prior filings with the SEC. When you read the summary financial information we
provide in the following tables, you should also read the historical financial
information and the more detailed financial information we provide in this
document, which you can find beginning at page [ ]. See "Where You Can Find
More Information" on page [ ] for instructions on how to obtain documents
each of our companies has filed with the SEC. General Dynamics' historical
financial statements were audited by Arthur Andersen LLP, independent public
accountants, and Gulfstream's historical financial statements were audited by
Deloitte & Touche LLP, independent auditors.
GENERAL DYNAMICS SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents summary selected historical consolidated
financial data for General Dynamics for each of the five years in the period
ended December 31, 1998 and for the three-month periods ended April 4, 1999 and
March 29, 1998. You should read this information in conjunction with the audited
consolidated financial statements and related notes thereto and other financial
information contained in the General Dynamics Annual Report on Form 10-K for the
year ended
8
<PAGE> 17
December 31, 1998. We derived the consolidated historical financial data for
fiscal years 1994 through 1998 from the consolidated financial statements of
General Dynamics, audited by Arthur Andersen LLP, independent public
accountants. The statement of earnings data for fiscal years 1996 through 1998
and the balance sheet data for 1997 and 1998 are incorporated by reference into
this document. The statement of earnings data for fiscal years 1994 and 1995,
and the balance sheet data for fiscal years 1994, 1995 and 1996, are not
incorporated by reference into this document.
We derived the General Dynamics consolidated historical financial data for
the three months ended April 4, 1999 and March 29, 1998 from General Dynamics'
unaudited consolidated interim financial statements which are incorporated by
reference into this document (except for the balance sheet data for the 1998
interim period). In the opinion of General Dynamics management, the unaudited
consolidated interim historical financial statements contain all adjustments
(consisting only of normal recurring accruals, except as otherwise noted)
necessary for a fair statement of the results for these periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------- YEAR ENDED DECEMBER 31,
APRIL 4, MARCH 29, ---------------------------------------------
1999 1998 1998(b) 1997(c) 1996 1995(d) 1994
-------- --------- ------- ------- ------ ------- ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales.................................. $1,377 $1,154 $4,970 $4,062 $3,581 $3,067 $3,058
Earnings from continuing operations........ 265(a) 82 364 316 270 247 223
Earnings per share from continuing
operations:
Basic.................................... 2.09(a) .65 2.88 2.51 2.14 1.96 1.77
Diluted.................................. 2.07(a) .65 2.86 2.50 2.13 1.95 1.76
Cash dividends on common stock............. .24 .22 .88 .82 .82 .75 .70
FINANCIAL POSITION:
Total assets............................... $5,106 $4,145 $4,572 $4,091 $3,299 $3,164 $2,673
Long-term debt, including current
portion.................................. 162 268 169 265 38 38 40
Long-term debt -- finance operations,
including current portion................ 137 97 140 118 135 146 161
</TABLE>
- ---------------
(a) Includes after-tax income of $165, or $1.29 per diluted share, from the
settlement of refund claims for research and experimentation tax credits for
the years 1981 through 1989.
(b) The operating results of the following acquired businesses are included from
their respective closing dates:
<TABLE>
<S> <C>
CLOSING DATE
-----------------
NASSCO Holdings Incorporated........................... November 10, 1998
Caldwell Cable Ventures Inc............................ August 31, 1998
Computer Systems & Communications Corporation.......... June 30, 1998
</TABLE>
Each of these acquisitions has been accounted for under the purchase method
of accounting. For more information, see Note C to the Consolidated
Financial Statements of the 1998 General Dynamics Annual Report on Form 10-K
incorporated by reference into this document.
9
<PAGE> 18
(c) The operating results of the following acquired businesses are included from
their respective closing dates:
<TABLE>
<S> <C>
CLOSING DATE
-----------------
Computing Devices International........................ December 31, 1997
(includes General Dynamics Information Systems,
Computing Devices Canada Ltd. and Computing
Devices Company Limited)
Advanced Technology Systems............................ October 1, 1997
Defense Systems & Armament Systems..................... January 1, 1997
(formerly operating units of Lockheed Martin)
</TABLE>
Each of these acquisitions has been accounted for under the purchase method
of accounting. For more information, see Note C to the Consolidated
Financial Statements of the 1998 General Dynamics Annual Report on Form 10-K
incorporated by reference into this document.
(d) Includes Bath Iron Works, acquired on September 13, 1995, and accounted for
under the purchase method of accounting.
GULFSTREAM AEROSPACE CORPORATION SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents summary selected historical consolidated
financial data for Gulfstream for each of the five years in the period ended
December 31, 1998 and for the three months ended March 31, 1999 and 1998. You
should read this information in conjunction with the audited consolidated
financial statements and related notes thereto and other financial information
contained in the Gulfstream Annual Report on Form 10-K for the year ended
December 31, 1998. We derived the consolidated historical financial data for
fiscal years 1994 through 1998 from the consolidated financial statements of
Gulfstream audited by Deloitte & Touche LLP, independent auditors. The statement
of earnings data for fiscal years 1996 through 1998 and the balance sheet data
for 1997 and 1998 are incorporated by reference into this document. The
statement of earnings data for fiscal years 1994 and 1995, and the balance sheet
data for fiscal years 1994, 1995 and 1996, are not incorporated by reference
into this document.
We derived the Gulfstream consolidated historical financial data for the
three months ended March 31, 1999 and 1998 from Gulfstream's unaudited
consolidated interim financial statements which are incorporated by reference
into this document (except for the balance sheet data for the 1998 interim
period). In the opinion of Gulfstream management, the unaudited consolidated
interim
10
<PAGE> 19
historical financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary for a fair statement of results for these
periods.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------------
1999 1998 1998(A) 1997(B) 1996(C),(D) 1995(C) 1994
------ ------ ------- ------- ----------- ------- ----
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales............................... $ 625 $ 503 $2,428 $1,904 $1,064 $1,042 $902
Earnings from continuing operations..... 58 41 225 243 47 29 24
Earnings per share from continuing
operations:
Basic................................. .81 .56 3.08 3.28 .64 .39 n/a
Diluted............................... .79 .54 3.00 3.12 .60 .37 n/a
Cash dividends on common stock.......... -- -- -- -- -- -- --
FINANCIAL POSITION:
Total assets............................ $1,723 $1,370 $1,614 $1,474 $1,313 $ 981 $746
Long-term debt, including current
portion............................... 342 361 361 380 400 146 178
</TABLE>
- ---------------
(a) The operating results of an acquired business, K-C Aviation, Inc., are
included from the date of closing, August 19, 1998. The acquisition was
accounted for under the purchase method of accounting. For more information,
see Note 2 to the Consolidated Financial Statements of the 1998 Gulfstream
Annual Report on Form 10-K incorporated by reference into this document.
(b) As a result of numerous factors, including Gulfstream's recent earnings
trends and the size of its contractual backlog, Gulfstream determined that
its net deferred tax asset was likely to be realized and, in the quarter
ended September 30, 1997, released its deferred tax valuation allowance,
totaling $94. Of this amount, $29 related to the exercise of stock options
and was credited to additional paid-in capital and $65 was recorded as a
one-time, non-cash income tax benefit. In the quarter ended December 31,
1997, Gulfstream recorded an income tax provision based on an estimated
effective tax rate of 37.5%.
(c) Earnings per share (EPS) information for 1996 and 1995 is based on
historical unadjusted net income divided by pro forma weighted average
number of shares. On October 16, 1996, Gulfstream issued and selling
stockholders sold shares of common stock in an initial public offering. In
connection and simultaneously with the closing of the initial public
offering, Gulfstream effected a recapitalization plan. Shares included for
basic EPS give retroactive effect to the recapitalization plan, the shares
issued to option holders upon the exercise of options at the date of the
initial public offering, and the shares issued pursuant to the initial
public offering as if such transactions had occurred at the beginning of the
period. See Note 11 to the Consolidated Financial Statements of the 1998
Gulfstream Annual Report on Form 10-K incorporated by reference into this
document. Diluted EPS further includes the effects of options granted in
1996 and 1995 as if such options had been outstanding for all periods
presented.
(d) Long-term debt at December 31, 1996 gives effect to the recapitalization
plan and initial public offering which occurred during the fourth quarter of
1996. See Note 11 to the Consolidated Financial Statements of the 1998
Gulfstream Annual Report on Form 10-K incorporated by reference into this
document.
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The table below sets forth selected unaudited pro forma combined financial
data for the combined company and is based on adjustments to the historical
consolidated financial statements of General Dynamics and Gulfstream to give
effect to the merger using the pooling of interests method of accounting for
business combinations. We have derived the unaudited pro forma combined
financial data from the Unaudited Pro Forma Combined Financial Data included
elsewhere in this
11
<PAGE> 20
document. The combining companies have different quarterly reporting periods.
General Dynamics' interim financial data is based on a 13-week period.
Gulfstream's interim financial data is as of and for the three months ended
March 31. Both companies have the same fiscal year ending December 31. You
should read this information in conjunction with the "Unaudited Pro Forma
Combined Financial Data" on page [ ].
The unaudited pro forma combined statements of earnings do not reflect any
cost savings or merger-related expenses anticipated as a result of the merger.
These pro forma statements are not necessarily indicative of the financial
performance which would have occurred had the merger been consummated at the
beginning of the earliest period presented, nor are they necessarily indicative
of the combined company's future financial performance.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------- YEAR ENDED DECEMBER 31,
APRIL 4, MARCH 29, ------------------------
1999 1998 1998 1997 1996
-------- --------- ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales......................................... $2,002 $1,657 $7,398 $5,966 $4,645
Net earnings...................................... 323 123 589 559 317
Net earnings per share:
Basic........................................... 1.62 .62 2.95 2.80 1.58
Diluted......................................... 1.60 .61 2.91 2.73 1.54
Cash dividends on common stock.................... .24 .22 .88 .82 .82
FINANCIAL POSITION:
Total assets...................................... $6,829
Long-term debt, including current portion......... 504
Long-term debt -- finance operations, including
current portion................................. 137
</TABLE>
COMPARATIVE PER SHARE DATA
The following table sets forth the earnings from operations, cash dividends
and book value per common share data for General Dynamics and Gulfstream on an
historical and a pro forma basis. No common stock cash dividends were paid by
Gulfstream for the periods presented. We derived the pro forma earnings data
from the Unaudited Pro Forma Combined Statements of Earnings appearing elsewhere
in this document, which give effect to the merger as a pooling of interests as
if the merger had been consummated at the beginning of the earliest period
presented. The pro forma dividend data assume dividend payments consistent with
General Dynamics' historical payments. The exchange ratio for the merger is one
share of General Dynamics common stock for each share of Gulfstream common
stock. Accordingly, the equivalent pro forma basis for Gulfstream is the same as
the General Dynamics pro forma basis.
The combining companies have different quarterly reporting periods. General
Dynamics' interim financial data is based on a 13-week period. Gulfstream's
interim financial data is as of and for the three months ended March 31. Both
companies have the same fiscal year ending December 31.
You should read the respective audited and unaudited consolidated financial
statements and related notes of General Dynamics and Gulfstream incorporated by
reference into this document. The unaudited pro forma data set forth below may
not necessarily reflect the financial condition or results
12
<PAGE> 21
of operations of General Dynamics that would have actually resulted had the
merger occurred as of the date and for the periods indicated or reflect the
future earnings of General Dynamics.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------- YEAR ENDED DECEMBER 31,
APRIL 4, MARCH 29, ----------------------------
1999 1998 1998 1997 1996
-------- --------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
General Dynamics historical earnings per share:
Basic................................................. $ 2.09(a) $.65 $ 2.88 $2.51 $2.14
Diluted............................................... 2.07(a) .65 2.86 2.50 2.13
Cash dividends paid per share........................... .24 .22 .88 .82 .82
Book value per share.................................... 19.53 17.51
Gulfstream historical earnings per share:
Basic................................................. $ .81 $.56 $ 3.08 $3.28(b) $ .64
Diluted............................................... .79 .54 3.00 3.12(b) .60
Book value per share.................................... 3.00 2.70
General Dynamics unaudited pro forma earnings per share:
Basic................................................. $ 1.62 $.62 $ 2.95 $2.80 $1.58
Diluted............................................... 1.60 .61 2.91 2.73 1.54
Cash dividends paid per share........................... .24 .22 .88 .82 .82
Book value per share.................................... 13.57
Gulfstream equivalent unaudited pro forma earnings per
share:
Basic................................................. $ 1.62 $.62 $ 2.95 $2.80 $1.58
Diluted............................................... 1.60 .61 2.91 2.73 1.54
Cash dividends paid per share........................... .24 .22 .88 .82 .82
Book value per share.................................... 13.57
</TABLE>
- ---------------
(a) Includes after-tax income of $165 million, or $1.29 per diluted share, from
the settlement of refund claims for research and experimentation tax credits
for the years 1981 through 1989.
(b) As a result of numerous factors, including Gulfstream's recent earnings
trends and the size of its contractual backlog, Gulfstream determined that
its net deferred tax asset was likely to be realized and, in the quarter
ended September 30, 1997, released its deferred tax valuation allowance,
totaling $94 million. Of this amount, $29 million related to the exercise of
stock options and was credited to additional paid-in capital and $65 million
was recorded as a one-time, non-cash income tax benefit. In the quarter
ended December 31, 1997, Gulfstream recorded an income tax provision based
on an estimated effective tax rate of 37.5%.
MARKET PRICES AND DIVIDENDS
General Dynamics common stock is listed for trading on the New York Stock
Exchange, Chicago Stock Exchange and Pacific Stock Exchange under the trading
symbol "GD." Gulfstream common stock is listed for trading on the New York Stock
Exchange under the symbol "GAC." The following table sets forth, for the periods
indicated, the range of the high and low sale prices of General Dynamics common
stock and Gulfstream common stock, and the dividends paid per share of General
Dynamics common stock. No common stock cash dividends were declared or paid by
13
<PAGE> 22
Gulfstream for the periods presented. All information gives effect to the
General Dynamics two-for-one stock split effected in April 1998.
<TABLE>
<CAPTION>
GENERAL DYNAMICS GULFSTREAM
COMMON STOCK COMMON STOCK
---------------------------- ---------------
HIGH LOW DIVIDEND HIGH LOW
------- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
1996:
First Quarter................................. $31.438 $28.813 $.205 n/a n/a
Second Quarter................................ 32.625 28.500 .205 n/a n/a
Third Quarter................................. 34.813 28.750 .205 n/a n/a
Fourth Quarter (a)............................ 37.750 33.375 .205 $26.00 $20.75
1997:
First Quarter................................. 36.125 32.813 .205 24.13 21.25
Second Quarter................................ 38.938 31.563 .205 32.75 21.75
Third Quarter................................. 45.750 37.000 .205 31.13 26.00
Fourth Quarter................................ 44.438 37.969 .205 32.06 26.50
1998:
First Quarter................................. 45.750 41.781 .22 44.44 28.75
Second Quarter................................ 48.375 40.250 .22 46.94 41.25
Third Quarter................................. 55.000 42.875 .22 51.50 31.13
Fourth Quarter................................ 62.000 49.250 .22 57.44 29.00
1999:
First Quarter................................. 66.750 53.000 .24 59.75 40.75
Second Quarter (through June 7, 1999)......... 75.438 63.250 .24 64.44 40.31
</TABLE>
- ---------------
(a) Gulfstream's fourth quarter high and low stock price is for the period from
October 10, 1996, the date of its initial public offering, through December
31, 1996.
Set forth below are the closing prices for shares of General Dynamics
common stock and Gulfstream common stock on May 14, 1999, the last trading day
prior to public announcement of the execution of the merger agreement, and on
[ ], 1999, the last trading day prior to the date of this document. Also
set forth below for each of those prices is the equivalent pro forma price of
Gulfstream common stock (as determined by multiplying the applicable price of
General Dynamics common stock by the one-for-one exchange ratio). Because the
exchange ratio is fixed and because the market price of General Dynamics common
stock is subject to fluctuation, the market value of the General Dynamics common
stock that holders of Gulfstream common stock will receive in the merger may
increase or decrease prior to and following the completion of the merger.
Holders of General Dynamics common stock and Gulfstream common stock are urged
to obtain current market quotations.
<TABLE>
<CAPTION>
GULFSTREAM PRO FORMA
GENERAL DYNAMICS GULFSTREAM COMMON STOCK EQUIVALENT
COMMON STOCK COMMON STOCK (1:1)
---------------- ------------ -----------------------
<S> <C> <C> <C>
May 14, 1999............................... $71.4375 $55.625 $71.4375
[ ], 1999............................ $ $ $
</TABLE>
14
<PAGE> 23
RISK FACTORS
You should consider the following matters in deciding how to vote. You also
should consider the other information included or incorporated by reference in
this document.
SINCE THE MARKET PRICE OF GENERAL DYNAMICS COMMON STOCK FLUCTUATES, GULFSTREAM
STOCKHOLDERS CANNOT BE SURE OF THE MARKET VALUE OF THE GENERAL DYNAMICS COMMON
STOCK THEY WILL RECEIVE IN THE MERGER.
- At the time the merger is completed, each share of Gulfstream common
stock will be converted into the right to receive one share of General
Dynamics common stock. This exchange ratio will not be adjusted in the
event of any increase or decrease in the price of the General Dynamics
common stock or the Gulfstream common stock. As a result, the value of
the General Dynamics common stock received by Gulfstream stockholders in
the merger may be higher or lower than the market value of the General
Dynamics common stock at the time you vote on the merger. Either General
Dynamics or Gulfstream may decide not to proceed with the merger if the
average market price of a share of General Dynamics common stock for the
15 trading day period ending on the fifth trading day before the
Gulfstream special meeting is less than $63. Neither party is obligated
to exercise this right, however, and the parties could decide to proceed
with the merger even though the average market price for that period is
less than $63 per share.
WE CANNOT ASSURE YOU THAT GENERAL DYNAMICS AND GULFSTREAM WILL BE ABLE TO
SUCCESSFULLY INTEGRATE THEIR BUSINESSES.
- General Dynamics currently intends to operate Gulfstream as a separate
subsidiary after the merger under the management of its present executive
officers. The merger will nevertheless require some integration of the
management and operations of companies that have previously operated
separately. This involves a number of risks, including the possible loss
of key management personnel and additional demands on management
resulting from the increase in the size of General Dynamics after the
merger.
WE MAY NOT BE SUCCESSFUL IN OPERATING A COMMERCIAL BUSINESS.
- The businesses currently operated by General Dynamics are primarily in
the defense industry. After the merger, Gulfstream will be General
Dynamics' only major commercial business. The operation of a commercial
business presents challenges that are different from the challenges faced
in operating in the defense industry. General Dynamics may not be
successful in adapting its management practices to operate a commercial
business or in retaining key personnel with experience in managing
Gulfstream's business.
THE COMBINED COMPANY WILL FACE RISKS THAT ARE DIFFERENT FROM THOSE NOW FACED
ONLY BY GENERAL DYNAMICS AND GULFSTREAM INDIVIDUALLY.
- Gulfstream's principal business is the design, development, manufacture
and marketing of long range and ultra-long range business jet aircraft. A
downturn in general economic conditions could result in a reduction in
the orders received by Gulfstream for its new and pre-owned aircraft.
Adverse business and economic conditions could also cause customers to be
unable or unwilling to consummate the purchase of aircraft and could,
therefore, result in order cancellations. If one or a number of
catastrophic events were to occur with the Gulfstream fleet, and it was
determined to be related to the aircraft manufacturer, Gulfstream's
reputation and sales of Gulfstream aircraft could be adversely affected.
Since Gulfstream relies on the sales of a relatively small number of new
aircraft to provide the substantial portion of its
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revenues, a decrease in the number of deliveries could have a material adverse
effect on the results of Gulfstream's operations.
- General Dynamics' primary business is supplying sophisticated defense
systems to the United States and its allies. Although increases in the
United States defense budget have recently been proposed, the defense
procurement budgets of the United States and many of its principal allies
have been significantly reduced in recent years. These reductions have
led to consolidation and increased competition in the defense industry.
Major defense procurement programs in which General Dynamics is currently
involved may be delayed or reduced in scope in the future as a result of
budgetary constraints. Future programs may also be awarded to competing
companies rather than General Dynamics.
THE TERMINATION FEE MAY DISCOURAGE OTHER COMPANIES FROM TRYING TO ACQUIRE
GULFSTREAM EVEN IF THE OTHER ACQUISITION WOULD OFFER HIGHER IMMEDIATE VALUE TO
GULFSTREAM STOCKHOLDERS.
- We have agreed to a termination fee that could discourage other companies
from trying to acquire Gulfstream. Other acquisitions may be superior to
the merger for Gulfstream's stockholders. If this termination fee were to
be paid, Gulfstream would experience a material negative impact on its
financial condition and results of operations. This may discourage other
companies from trying to acquire Gulfstream.
DIRECTORS AND EXECUTIVE OFFICERS OF GULFSTREAM MAY HAVE INTERESTS THAT ARE
DIFFERENT FROM OR IN ADDITION TO YOUR INTERESTS AS A STOCKHOLDER.
- When considering the recommendations of the board of directors of each
company, you should be aware that some members of the Gulfstream board of
directors and some executive officers of Gulfstream may have interests in
the merger that are different from, or in addition to, your interests as
stockholders.
- For at least one year following the merger, General Dynamics will
elect Theodore J. Forstmann, who is the Chairman and Chief Executive
Officer of Gulfstream and a general partner of Forstmann Little, as a
director and the non-executive Chairman of the board of directors of
Gulfstream and will elect Sandra J. Horbach, who is a director of
Gulfstream and a general partner of Forstmann Little, as a director of
Gulfstream. Forstmann Little is affiliated with three investment
partnerships that together own approximately 23% of Gulfstream's
common stock.
- Under the terms of their existing option agreements, all holders of
options to acquire Gulfstream common stock (including the directors
and executive officers of Gulfstream) will have the opportunity to
exercise those options prior to the completion of the merger, whether
or not those options are vested at the time of exercise, and unvested
options held by certain optionholders (including certain directors and
executive officers) will become fully vested and exercisable by reason
of the completion of the merger. In addition, under the terms of the
existing option agreements, certain transfer restrictions applicable
to shares issuable upon the exercise of options will lapse upon
completion of the merger.
- General Dynamics has agreed to enter into a registration agreement
with the three investment partnerships affiliated with Forstmann
Little and certain directors and executive officers of Gulfstream. The
registration agreement provides, among other things, that General
Dynamics will, upon request, register for resale the shares of General
Dynamics which the partnerships and these directors and executive
officers will receive in the merger. Without this registration, the
shares of General Dynamics common stock received by these persons in
the merger would be subject to restrictions on resale under the
federal securities laws that do not apply to the other stockholders of
Gulfstream.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document contains forward-looking statements about the merger and
about our financial condition, results of operations, plans, objectives, future
performance and business. This includes information relating to:
- benefits, revenues and earnings estimated to result from the merger;
- estimated costs of combining our companies; and
- the expected refinancing of Gulfstream's debt.
It also includes statements using words like "believes," "expects,"
"intends," "anticipates" or "estimates" or similar expressions.
These forward-looking statements involve risks and uncertainties. Actual
results may differ materially from those predicted by the forward-looking
statements because of various factors and possible events, including those
discussed under "Risk Factors" above and the following:
- sales following the merger are lower than expected;
- the defense procurement budgets of the United States and its allies are
reduced;
- future defense procurement programs are delayed or reduced in scope or
contracts relating to these programs are awarded to competing companies;
- the costs of providing compensation and benefits to our employees
increase;
- competition increases in our industry or markets;
- costs or difficulties related to the integration of our businesses or
other acquired businesses are greater than expected;
- changes in general economic conditions or in political or competitive
forces;
- technological changes, including "Year 2000" data systems compliance
issues, are more difficult or expensive to implement than anticipated;
- there are changes in the securities markets; and
- we suffer the loss of key personnel.
There is also the risk that we incorrectly analyze these risks and forces,
or that the strategies we develop to address them are unsuccessful.
For additional information regarding risks relating to Gulfstream, see
Exhibit 99.1 to Gulfstream's Annual Report on Form 10-K for the year ended
December 31, 1998, which is incorporated into this document by reference.
Because these forward-looking statements involve risks and uncertainties,
actual results may differ significantly from those predicted in these
forward-looking statements. You should not place a lot of weight on these
statements. These statements speak only as of the date of this document or, in
the case of any document incorporated by reference, the date of that document.
All subsequent written and oral forward-looking statements attributable to
General Dynamics or Gulfstream or any person acting on our behalf are qualified
by the cautionary statements in this section. We will have no obligation to
revise these forward-looking statements.
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THE SPECIAL MEETINGS
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
If we meet the terms and conditions of the merger agreement, Tara
Acquisition Corporation, a wholly-owned subsidiary of General Dynamics, will
merge with and into Gulfstream. After the merger, Gulfstream will be a
wholly-owned subsidiary of General Dynamics. In the merger, each share of
Gulfstream common stock, par value $.01 per share, issued and outstanding
immediately before the merger will convert into the right to receive one share
of General Dynamics common stock, par value $1.00 per share. You are urged to
read the copy of the merger agreement attached to this document as Appendix A.
General Dynamics. At the General Dynamics special meeting, stockholders of
General Dynamics will vote on a proposal to approve an amendment to General
Dynamics' charter to increase the number of shares of common stock General
Dynamics is authorized to issue and a proposal to approve the issuance of shares
in connection with the merger. THE GENERAL DYNAMICS BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY
RECOMMENDS THAT STOCKHOLDERS OF GENERAL DYNAMICS VOTE "FOR" EACH OF THE
PROPOSALS REQUIRED TO COMPLETE THE MERGER.
Gulfstream. At the Gulfstream special meeting, stockholders of Gulfstream
will vote on a proposal to adopt and approve the merger agreement and approve
the merger. THE GULFSTREAM BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
OF GULFSTREAM VOTE "FOR" THE ADOPTION AND APPROVAL OF THE MERGER AGREEMENT AND
APPROVAL OF THE MERGER.
VOTES REQUIRED TO COMPLETE THE MERGER
General Dynamics. The affirmative vote of the holders of a majority of the
outstanding shares of General Dynamics common stock is required to approve the
proposal to amend General Dynamics' charter to increase the number of shares of
common stock General Dynamics is authorized to issue. The affirmative vote of
the holders of a majority of the shares of General Dynamics common stock present
in person or by proxy at the General Dynamics special meeting is required to
approve the issuance of shares in connection with the merger. Each share of
General Dynamics common stock is entitled to one vote. If the proposal to amend
the charter is not approved, the merger cannot proceed because General Dynamics
does not presently have enough shares available to issue in the merger. If you
abstain or fail to vote your shares on that proposal, it will have the same
effect as voting against that proposal and the merger.
Only holders of record of General Dynamics common stock at the close of
business on [ ], 1999 are entitled to receive notice of and
vote at the General Dynamics special meeting. As of [ ],
1999, there were [ ] shares of General Dynamics common stock
outstanding. Holders of a majority of the outstanding shares of General Dynamics
common stock entitled to vote, present in person or represented by proxy, will
constitute a quorum for the transaction of business at the General Dynamics
special meeting.
On [ ], 1999, General Dynamics directors and executive
officers and its affiliates may be deemed to beneficially own [ ]
shares of General Dynamics common stock, excluding shares which may be acquired
upon exercise of options. This is approximately [ ]% of the outstanding
shares of General Dynamics common stock. Each of the directors, executive
officers and affiliates of General Dynamics has indicated that such stockholder
intends to vote in favor of each of the proposals to be voted on at the General
Dynamics special meeting.
We will have a list of General Dynamics stockholders entitled to vote at
the General Dynamics special meeting available during normal business hours at
the offices of General Dynamics, 3190
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Fairview Park Drive, Falls Church, Virginia 22042-4523, for the ten day period
before the General Dynamics special meeting.
Gulfstream. The affirmative vote of the holders of a majority of the
outstanding shares of Gulfstream common stock is required to adopt and approve
the merger agreement and approve the merger. Each share of Gulfstream common
stock entitles the holder to one vote. If you abstain or fail to vote your
shares on this proposal, it will have the same effect as voting against the
proposal and the merger.
Only holders of record of Gulfstream common stock at the close of business
on [ ], 1999 are entitled to receive notice of and vote at
the Gulfstream special meeting. As of May 28, 1999, there were 71,649,493 shares
of Gulfstream common stock entitled to vote. Holders of a majority of the
outstanding shares of Gulfstream common stock entitled to vote, present in
person or represented by proxy, will constitute a quorum for the transaction of
business at the Gulfstream special meeting.
Three investment partnerships affiliated with Forstmann Little have entered
into a voting agreement with General Dynamics in which they have agreed to vote
all 16,554,375 of their shares of Gulfstream common stock in favor of the
merger. These shares represent approximately 23% of the outstanding shares of
Gulfstream common stock on May 28, 1999. On May 28, 1999, Gulfstream directors
and executive officers may be deemed to beneficially own 29,157 shares of
Gulfstream common stock, excluding 1,661,054 shares which may be acquired upon
exercise of options, and excluding shares owned by the Forstmann Little
investment partnerships (which may be deemed to be beneficially owned by three
of the directors). These 29,157 shares represent less than one percent of the
outstanding shares of Gulfstream common stock. Each of the directors and
executive officers of Gulfstream has indicated that he or she intends to vote
for the adoption and the approval of the merger agreement and the approval of
the merger.
We will have a list of Gulfstream stockholders entitled to vote at the
Gulfstream special meeting available during normal business hours at the offices
of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New
York 10004, for the ten day period before the Gulfstream special meeting.
HOW PROXIES WILL BE VOTED AT THE SPECIAL MEETINGS
Shares represented by a proxy will be voted at the special meeting as
specified in the proxy. Properly executed proxies that do not contain voting
instructions will be voted "FOR" each of the proposals to be considered at the
special meetings.
We will count properly executed proxies marked "Abstain" for purposes of
determining whether there is a quorum, but the shares that any of these proxies
represent will not be voted at the special meeting.
Under New York Stock Exchange rules, your broker cannot vote your shares of
General Dynamics common stock or shares of Gulfstream common stock without
specific instructions from you. Unless you follow the directions your broker
provides to you regarding how to instruct your broker to vote your shares, your
shares will not be voted.
HOW TO REVOKE A PROXY
Your grant of a proxy on the enclosed proxy card does not prevent you from
voting in person at your stockholders meeting (which will automatically revoke
your proxy).
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In addition, a General Dynamics stockholder may revoke a proxy at any time
before it is voted at the General Dynamics special meeting by delivering a later
dated executed proxy or a written notice of revocation to David A. Savner,
Senior Vice President, General Counsel and Secretary of General Dynamics, 3190
Fairview Park Drive, Falls Church, Virginia 22042-4523.
A Gulfstream stockholder may also revoke a proxy at any time before it is
voted at the Gulfstream special meeting by delivering a later dated executed
proxy or a written notice of revocation to Chris A. Davis, Executive Vice
President, Chief Financial and Administrative Officer and Secretary of
Gulfstream, 500 Gulfstream Road, Savannah, Georgia 31408.
SOLICITATION OF PROXIES
We will each bear the cost of soliciting proxies from our own holders of
common stock, including the cost of printing and mailing this document to each
of our stockholders. In addition to solicitation by mail, our directors,
officers and employees may solicit proxies from holders of common stock by
telephone, in person or through other means. We will not compensate these people
for this solicitation, but we will reimburse them for reasonable out-of-pocket
expenses they have in connection with this solicitation. We will also arrange
for brokerage firms, fiduciaries and other custodians to send solicitation
materials to the beneficial owners of shares held of record by those persons. We
will reimburse these brokerage firms, fiduciaries and other custodians for their
reasonable out-of-pocket expenses. Innisfree M&A Incorporated will assist both
General Dynamics and Gulfstream in the solicitation of proxies for a fee of up
to $10,000, plus reimbursement of reasonable out-of-pocket expenses, the costs
of which will be shared by us. In addition, we will each indemnify the firm
against specific liabilities, including liabilities under the federal securities
laws.
THE COMPANIES
GENERAL DYNAMICS CORPORATION
General Dynamics' primary business is supplying sophisticated defense
systems to the United States and its allies. General Dynamics operates in three
primary business segments: Marine Systems, Combat Systems and Information
Systems and Technology.
Marine Systems. The Marine Systems segment of General Dynamics designs,
builds and supports nuclear submarines, surface combatants and auxiliary ships
for the United States Navy. The group also manages ready-reserve and
prepositioning ships and builds commercial vessels. It has the broadest range of
integration, design, engineering and production skills in naval shipbuilding.
The Marine Systems segment has three shipyards: Electric Boat Corporation in
Groton, Connecticut; Bath Iron Works in Bath, Maine; and National Steel and
Shipbuilding Company, or NASSCO, in San Diego, California.
Electric Boat designs and builds nuclear submarines and is the prime
contractor for the United States Navy's new 30-boat Virginia-class attack
submarine. In addition, Electric Boat is designing the nuclear propulsion plant
for the Navy's next generation aircraft carrier and, along with Bath Iron Works,
is leading an industry team in the development of an advanced electric-drive
system to power the Navy's surface, submarine and possibly aircraft carrier
fleets in the next century.
Bath Iron Works designs and builds surface combatants for the Navy,
including the DDG 51 Flight IIA Aegis destroyer and the LPD 17 amphibious
assault transport class. Bath is also leading one of two industry teams
competing on design concepts for the DD 21 land destroyer, the Navy's next
generation of surface combatants. Bath is currently updating its facilities with
a $218 million modernization project which is expected to make Bath one of the
most efficient shipyards in the country.
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NASSCO designs and builds auxiliary ships for the United States Navy and
tankers and other vessels for the commercial ship market and is a principal West
Coast repair facility for the Navy. NASSCO is currently building large-capacity
medium speed roll-on/roll-off strategic sealift ships for the United States Navy
and is well positioned to win at least half of a new program for Navy auxiliary
dry cargo ships. Since 1972, NASSCO has delivered 36 commercial ships including
40% of the United States' flag tanker fleet.
American Overseas Marine Corporation, also part of the Marine Systems
segment of General Dynamics, manages ready-reserve and prepositioning ships for
the United States Navy, Marine Corps and Army.
Combat Systems. The Combat Systems segment of General Dynamics develops,
produces and supports land and amphibious combat systems, including the United
States Army's M1A2 main battle tank, other armored vehicles, wheeled
reconnaissance vehicles, suspensions, engines, transmissions, guns and
ammunition handling systems, turrets and turret drive systems, and ordnance for
the United States armed forces and international customers. The Combat Systems
segment has two business units: Land Systems in Warren, Michigan and Armament
Systems in Burlington, Vermont.
Land Systems is focused on four segments of the ground combat systems
market: modernization of heavy combat vehicles, the Advanced Amphibious Assault
Vehicle and its potential variants, lightweight, wheeled vehicles and power
packs. Under a multiyear contract with the United States Army, Land Systems is
modernizing 240 M1 main battle tanks to the M1A2 SEP configuration with delivery
beginning in August, 1999. Land Systems has also reached an agreement in
principle with the United States Army to extend delivery of M1A2 tanks through
2005 and has received a contract to refurbish additional M1A1 tanks. Moreover,
under an agreement with the United States Army, Land Systems has begun to
jointly pursue foreign sales of M1 series tanks.
With respect to new combat systems, Land Systems recently secured a
contract to produce Wolverine heavy assault bridges for the Army, rolled-out the
first Advanced Amphibious Assault Vehicle prototype for the Marine Corps and
completed construction, integration and final assembly of the first Crusader
prototype for the Army. In addition, Land Systems won a contract to build four
demonstrators of a hybrid electric drive reconnaissance, surveillance and
targeting vehicle for the Marine Corps.
Armament Systems develops and produces multi-based gun systems for the
United States government. It continues to develop advanced lightweight weapons
systems for several new programs, including the F-22 fighter jet and the new
single barrel Objective Crew Served Weapon system. It is also a subcontractor on
the Crusader program and on the Advanced Gun System for the Navy. Armament
Systems is also the prime contractor for the Hydra-70 air-to-ground rocket
system for the Army. At the end of 1998, Armament Systems launched American
Ordnance, a joint venture that consolidated the two largest United States Army
ammunition production facilities and bolsters General Dynamics' position in the
ordnance production market.
Information Systems and Technology. The Information Systems and Technology
segment of General Dynamics provides expertise in signal and information
processing, the use of commercial technologies for military applications,
battlespace information management and intelligence data acquisition and
processing within the defense and intelligence branches of the United States
government and its allies. The group is also a premier integrator of marine and
ground combat systems. The Information Systems and Technology segment has six
business units: Advanced Technology Systems in Greensboro, North Carolina;
Information Systems in Bloomington, Minnesota; Computing Devices Canada in
Nepean, Ontario; Computing Devices Company in Hastings, England; Computer
Systems and Communications Company in Arlington, Virginia; and Defense Systems
in Pittsfield, Massachusetts.
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Advanced Technology Systems has designed a command, control, communications
and intelligence system for the Navy's new 30-boat Virginia-class attack
submarine, is designing an advanced networking solution for the Navy's LPD 17
amphibious assault ships and was recently named a prime contractor of a Navy
program for a tactical networking and advanced communications system that links
together sea and shore units.
Information Systems provides low-cost, radiation-tolerant, high-throughput
space computers for Low Earth Orbit satellites, recently delivered the first
advanced commercial-based computer for the Navy's F-18 E/F aircraft and has made
advances in hardware and software technologies that are providing low-cost,
enhanced performance benefits to a wide array of programs, including Joint
STARS, AWACS and V-22 aircraft and Aegis-equipped ships.
Computing Devices Canada is a supplier of command and control and acoustic
processing products to Canada's Department of National Defense, the United
States Army and the United Kingdom's Ministry of Defense. In addition, Computing
Devices Canada works on chemical-biological and land mine detection programs for
Canada's Department of National Defense and has delivered Iris, a new digital
battlefield communication system, to the Canadian Army. Computing Devices Canada
is also the sonar system integrator for a Swedish Navy frigate program, has a
similar role for a Belgian Navy frigate program and provides acoustic processors
for a Royal Australian Air Force aircraft modernization program.
Computing Devices Company is a partner in the production of the Eurofighter
aircraft and recently won a contract to upgrade the weapons stores management
system of the AV-8 Harrier.
Computer Systems and Communications Company has designed and manages a
network to link more than 250 intelligence workstations in 15 NATO countries. It
also oversees a data and communications network for 27 partner nations in
Eastern and Central Europe and Asia.
Defense Systems continues to be a leading provider of fire control systems
for the United States Navy's Trident ballistic missile submarine fleet and
recently won a modernization contract for the program. Defense Systems is also
developing a computer-based, automated, diagnostic maintenance and training
product.
GULFSTREAM AEROSPACE CORPORATION
Gulfstream is recognized worldwide as a leading designer, developer,
manufacturer and marketer of advanced long range and ultra-long range business
aircraft. Gulfstream operates principally in three segments: New Aircraft,
Aircraft Services and Pre-Owned Aircraft.
New Aircraft
Gulfstream's New Aircraft segment operates in the business aircraft market
which is generally divided into four market segments: light, medium, large and
ultra-long range. These market segments are defined on the basis of range, cabin
volume and gross operating weight. Gulfstream sells new aircraft on a completed
basis, including exterior paint, installation of customer selected interiors and
optional avionics. Gulfstream's principal product offerings are discussed below:
- Gulfstream V
Gulfstream's newest aircraft product is the Gulfstream V, which serves the
ultra-long range market. Gulfstream believes the Gulfstream V provides the
longest range, fastest cruising speed and most technologically advanced avionics
of any ultra-long range business jet aircraft currently in operation. The
Gulfstream V received final type certification from the Federal Aviation
Administration on April 11, 1997. Deliveries of the first outfitted aircraft to
customers began in 1997. As of June 1, 1999, the Gulfstream V has set 57 world
and national records. Gulfstream had received a
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total of 121 orders, 136 including options, for the Gulfstream V and had
manufactured and delivered 61 Gulfstream Vs through December 31, 1998. As
confirmation of the product's innovative design and outstanding performance, the
Gulfstream V received the 1997 Robert J. Collier Trophy for aeronautical
achievement and was selected by the United States Air Force to provide
intercontinental transportation for senior government officials and dignitaries.
The Gulfstream V has a maximum operating speed of Mach .885. It can accommodate
up to 19 passengers and has a range of up to 6,500 nautical miles. The
Gulfstream V is versatile enough to fly long-range missions, such as New York to
Tokyo in approximately 14 hours, as well as high-speed missions, such as New
York to London in less than six hours.
- Gulfstream IV-SP
The New Aircraft segment's other principal aircraft product is the
Gulfstream IV-SP, serving the large cabin business jet market. Gulfstream
believes that the Gulfstream IV-SP offers the best combination of large cabin
size, long range, fast cruising speed and technologically advanced avionics of
any large business jet aircraft in its market segment. The Gulfstream IV-SP is
an enhanced version of the Gulfstream IV. In total, Gulfstream has manufactured
and sold 359 Gulfstream IV/IV-SPs from 1985 to 1998, making it the best selling
large cabin business jet in the history of business aviation. The Gulfstream
IV-SP can accommodate up to 19 passengers, and has a range of up to 4,220
nautical miles and a cruising speed of up to Mach .85. As of June 1, 1999, the
Gulfstream IV/IV-SP was the holder of over 70 distance, altitude and speed
records for aircraft of its class, including east-bound and west-bound
around-the-world speed records (36 hours and 8 minutes (east-bound) and 45 hours
and 25 minutes (west-bound)).
- Gulfstream Shares(R)
Since 1995, Gulfstream has offered customers fractional ownership in
Gulfstream IV-SP aircraft through a program established by Gulfstream in
conjunction with Executive Jet. In 1998, Gulfstream and Executive Jet announced
the expansion of that program to include Gulfstream V aircraft. This program is
designed to provide customers with the benefits of aircraft ownership at a
substantially lower cost than the purchase of an entire aircraft. The program
significantly expands the market for Gulfstream IV-SP and Gulfstream V aircraft
to include those customers whose aircraft usage patterns or financial resources
do not justify or permit the direct purchase of an entire Gulfstream aircraft.
As of December 31, 1998, Gulfstream had contracted to deliver 44 Gulfstream
IV-SPs and 12 Gulfstream Vs to Executive Jet in connection with the North
American Gulfstream Shares program, plus options for an additional 12 Gulfstream
Vs. As of June 1, 1999, 20 Gulfstream IV-SPs were in service, and the remaining
48 Gulfstream IV-SPs and Gulfstream Vs are scheduled for delivery through 2007.
In 1998, Gulfstream expanded the Shares Program into the Middle East, with a 12
aircraft $335 million contract with a group of Middle East investors. The first
Middle East Shares aircraft was delivered "green" (that is, before exterior
painting and installation of customer selected interiors and avionics) in the
third quarter of 1998 and will enter service in the summer of 1999.
- Special Mission Aircraft
Gulfstream has designed and manufactured several derivatives of the
Gulfstream V and Gulfstream IV-SP which are utilized for military and government
Special Mission applications. These derivatives include the cargo door equipped
Gulfstream IV/IV-SP aircraft in service with the United States Navy and Japanese
Air Force which are designated the C-20G and U-4, respectively, and the long
established United States Air Force C-20H Special Air Mission Gulfstream IV-SPs.
Additional Special Mission derivatives are in military and government use
throughout the world in diverse roles including signal intelligence,
reconnaissance, medical evacuation, hurricane tracking, airways flight
inspection and priority transport.
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In 1997, a Gulfstream V derivative was selected by the United States Air
Force for its C-37A high priority transport program. With the 1998 order for a
Gulfstream V for the United States Army and the additional C-37A option
exercised in February 1999, the program currently includes four firm orders and
three options for Gulfstream C-37A aircraft. The C-37A aircraft will be operated
by the Air Force Special Air Mission Wing and the Army.
There are currently 49 Gulfstream IV/IV-SP and four Gulfstream V aircraft
in military or government service in 34 countries, with an additional 13 Special
Mission aircraft to be delivered.
- Gulfstream Lease
In 1998, Gulfstream announced Gulfstream Lease, a venture between
Gulfstream and GATX Capital. Gulfstream Lease has signed a contract to purchase
six aircraft (five Gulfstream Vs and one Gulfstream IV-SP) and options to
purchase an additional three Gulfstream Vs and three Gulfstream IV-SPs.
Gulfstream Lease is owned 85% by GATX Capital and 15% by Gulfstream. This
program is expected to provide an important vehicle for new Gulfstream aircraft
sales by offering customers an additional solution for their interim aircraft
operating needs and introducing customers with less initial capital to
Gulfstream's product offerings.
- Aircraft Financing
Gulfstream, through its wholly-owned subsidiary Gulfstream Financial
Services Corporation, provides customers with access to customized financial
products to facilitate the worldwide sale of Gulfstream new and pre-owned
aircraft. Company representatives typically consult with potential customers to
develop the most effective means of financing the purchase of a Gulfstream
aircraft for the customer's specialized needs.
Aircraft Services
Within its Aircraft Services segment, Gulfstream offers aftermarket
maintenance services, spare parts, engine overhaul and auxiliary power unit
service and overhaul for both Gulfstream and other business jets.
As part of its customer-oriented strategy, Gulfstream is committed to
supporting and servicing the Gulfstream jet aircraft fleet, which presently
numbers over 900 aircraft in service. Gulfstream provides worldwide service and
support by integrating a network of Gulfstream-owned service centers, three
levels of authorized third-party service providers, worldwide parts depots,
worldwide service representatives and 24 hour-a-day technical/AOG (aircraft on
the ground) support.
Gulfstream also provides airframe and engine service and parts support for
non-Gulfstream aircraft. As a result of the acquisition of K-C Aviation, Inc. in
1998, Gulfstream now offers services for Challenger, Hawker, Falcon and other
aircraft types at completion and service facilities in Appleton, Wisconsin;
Dallas, Texas; and Westfield, Massachusetts.
Gulfstream has license agreements with Marshalls of Cambridge (Cambridge,
England), DaimlerChrysler Aviation (Ypsilanti, Michigan) and Jet Aviation
(Geneva and Basel, Switzerland and Singapore) to provide service, maintenance,
repairs and warranty work for Gulfstream aircraft. The licensees provide
additional geographic service locations for the expanding Gulfstream fleet. In
addition, Jamco (Japan) and Linden Airtaxi (Sao Paulo, Brazil) serve as line
service facilities.
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<PAGE> 33
THE MERGER
GENERAL INFORMATION ABOUT THE MERGER
The merger agreement provides for a merger of a subsidiary of General
Dynamics into Gulfstream. As a result of the proposed merger, Gulfstream will
become a wholly-owned subsidiary of General Dynamics. Based on the closing price
of General Dynamics common stock on May 14, 1999, the last trading day
immediately before we publicly announced the signing of the merger agreement,
had the merger then taken place, each Gulfstream share would have been converted
into a share of General Dynamics common stock with a value of $71.44. This
represented a 28.4% premium over the closing price of Gulfstream common stock on
that date. Had the merger taken place on [ ], 1999 (the last
trading day before we mailed this Joint Proxy Statement/Prospectus), based on
that day's closing price of General Dynamics common stock on the New York Stock
Exchange, each Gulfstream share would have been converted into a share of
General Dynamics common stock with a value of $[ ]. When we complete
the merger, the General Dynamics common stock may have a market value that is
more or less than either of these amounts depending on the market price of
General Dynamics common stock at that time. If the average market price of
General Dynamics common stock is less than $63 per share for the 15 trading day
period ending on the fifth trading day before the Gulfstream special meeting,
either company can terminate the merger agreement.
As a result of the merger, former Gulfstream stockholders will hold
approximately 37% and General Dynamics stockholders immediately before the
merger will hold approximately 63% of the shares of General Dynamics common
stock outstanding immediately after the merger. These percentages are based on
the number of shares of General Dynamics common stock and Gulfstream common
stock outstanding on [ ], 1999.
The discussion in this document of the merger and the description of the
principal terms and conditions of the merger agreement and the merger is a
summary only. You should refer to the merger agreement for the details of the
merger and the terms of the merger agreement. We have attached a copy of the
merger agreement to this document as Appendix A. See "The Merger Agreement."
BACKGROUND OF THE MERGER
Since 1995, General Dynamics has completed a series of acquisitions in the
defense industry intended to strengthen and expand its existing business
segments and maintain and increase its revenues and earnings in an environment
of industry consolidation and reduced defense spending. In identifying and
pursuing acquisition candidates in the defense industry, General Dynamics has
chosen businesses that it believes can be operated more profitably by applying
General Dynamics' core competencies in development, design and production and
its broad experience in establishing efficient manufacturing environments.
While General Dynamics' previous acquisitions have focused on the defense
industry, General Dynamics has also considered the acquisition of commercial
businesses that satisfy the operational, financial and other criteria it applies
when reviewing potential acquisition candidates.
Events During the Fall of 1998. In the early fall of 1998, Gulfstream
retained Merrill Lynch & Co. and Goldman Sachs & Co. to assist Gulfstream in
exploring strategic alternatives. In late September, 1998, General Dynamics was
contacted by representatives of Goldman Sachs regarding its possible interest in
exploring a business combination with Gulfstream. On September 24, 1998, General
Dynamics entered into a confidentiality agreement under which it agreed to
maintain the confidentiality of all non-public information provided by
Gulfstream and its representatives and further agreed not to propose or attempt
any business combination involving Gulfstream without the
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<PAGE> 34
prior written approval of Gulfstream's board of directors. During the first week
of October, 1998, General Dynamics received a confidential memorandum containing
information regarding Gulfstream and its business.
On October 6, 1998, General Dynamics retained Teal Group, an aviation
consulting firm, to perform a market study of the business aviation market and
began an internal analysis of the financial information and other data provided
by Gulfstream. On October 12, 1998, senior management of General Dynamics
received a briefing on the results of the market study and financial analysis
relating to Gulfstream.
On October 13, 1998, Nicholas D. Chabraja, the Chairman and Chief Executive
Officer of General Dynamics, attended a meeting with Theodore J. Forstmann, the
Chairman of Gulfstream, and Sandra J. Horbach, a Gulfstream director. The
parties had preliminary discussions regarding the possibility of a business
combination between General Dynamics and Gulfstream but did not discuss the
price or structure of a potential transaction.
Following the initial meeting, on October 27, 1998, Mr. Chabraja spoke by
phone with representatives of Merrill Lynch and provided his preliminary view on
the financial terms upon which General Dynamics might be willing to enter into a
business combination with Gulfstream. During a subsequent phone conversation
later that day, representatives of Merrill Lynch indicated to Mr. Chabraja that
Gulfstream believed the financial terms proposed by General Dynamics were not
acceptable and that Gulfstream did not wish to proceed with further discussions
with General Dynamics regarding a potential business combination.
At a meeting of the executive committee of Gulfstream's board of directors
held on November 9, 1998, Mr. Forstmann and Ms. Horbach reported their
discussions with General Dynamics to the executive committee. After a
discussion, the executive committee determined to discontinue efforts to
identify potential parties interested in a business combination with Gulfstream,
including General Dynamics, and instructed Merrill Lynch and Goldman Sachs to
cease their activities.
Events During the Spring of 1999. On March 15, 1999, Mr. Chabraja, while
speaking at the Global Manufacturing Conference sponsored by Merrill Lynch,
discussed Gulfstream briefly with a representative of Merrill Lynch. In
mid-April, Mr. Chabraja was contacted by phone by the Merrill Lynch
representative, who stated that Merrill Lynch was not then authorized to discuss
a possible business combination involving Gulfstream but that the representative
believed that Gulfstream might be willing to consider proposals regarding a
business combination with General Dynamics.
Mr. Chabraja placed a phone call to Mr. Forstmann's office during the week
of April 19, 1999 and was informed that Mr. Forstmann was out of his office and
would be returning on April 26, 1999. Mr. Forstmann returned Mr. Chabraja's call
on April 27, 1999. During this call, Mr. Chabraja and Mr. Forstmann discussed
the financial and other terms relating to a potential business combination
between General Dynamics and Gulfstream. On the basis of this discussion, the
parties agreed to exchange additional financial and other information and to
request that their respective legal, financial and other advisors further define
the terms and conditions of a potential transaction.
On May 5, 1999, the General Dynamics board of directors, at a
regularly-scheduled board meeting, for the first time discussed the possibility
of a business combination between General Dynamics and Gulfstream. At this
meeting, Mr. Chabraja reviewed with the board the discussions that had been held
with Gulfstream and the terms of the potential transaction that had been
discussed by the parties. The General Dynamics board of directors authorized and
directed General Dynamics management to proceed with negotiations with
Gulfstream and its representatives based on the transaction terms outlined by
Mr. Chabraja.
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<PAGE> 35
On May 7, 1999, Jenner & Block, counsel to General Dynamics, provided a
merger agreement and voting agreement to Gulfstream and its counsel, Fried,
Frank, Harris, Shriver & Jacobson. Beginning May 10, 1999, members of General
Dynamics management and attorneys from Jenner & Block initiated a due diligence
review of Gulfstream and its business, including an evaluation of various tax,
employee benefits, environmental, litigation and other issues relating to
Gulfstream. Members of Gulfstream management and attorneys from Fried, Frank,
Harris, Shriver & Jacobson similarly commenced a due diligence review of General
Dynamics. Also on May 10, 1999, Fried, Frank, Harris, Shriver & Jacobson
provided a markup reflecting Gulfstream's comments on the merger agreement and
voting agreement submitted on behalf of General Dynamics.
During the week of May 10, 1999, the parties and their financial and legal
advisors conducted due diligence and negotiated the terms and conditions of the
merger agreement, the voting agreement, the registration agreement, schedules,
opinions and other agreements and documents to be signed or delivered in
connection with the transaction.
On May 13, 1999, the General Dynamics board of directors again met to
review the status of the negotiations regarding the transaction and to approve
the merger agreement and the merger. During this meeting, Mr. Chabraja and other
members of General Dynamics' senior management involved in the transaction
negotiations outlined the principal terms and conditions of the merger
agreement, the voting agreement, the registration agreement and the related
documents and summarized the results of the due diligence investigation
conducted by General Dynamics and its financial and legal advisors.
Representatives from Bear, Stearns & Co. Inc., financial advisor to the General
Dynamics board of directors, also participated in the meeting and made a
presentation which included the delivery of an oral fairness opinion
(subsequently confirmed in writing) to the effect that, as of May 13, 1999, and
subject to the assumptions, qualifications and limitations set forth therein,
the purchase price per share to be paid to the Gulfstream stockholders in the
merger was fair, from a financial point of view, to General Dynamics.
Subject to the resolution of remaining contractual matters in a manner
satisfactory to the management of General Dynamics, at its May 13 meeting the
board of directors of General Dynamics unanimously:
- determined that the terms and conditions of the merger, the merger
agreement and the other transactions contemplated thereby are fair to and
in the best interest of General Dynamics and its stockholders;
- voted to approve the merger agreement, the merger and the other
transactions contemplated thereby;
- approved the proposed amendment to General Dynamics' charter increasing
the number of shares of common stock General Dynamics is authorized to
issue; and
- recommended that the General Dynamics stockholders adopt and approve the
amendment to General Dynamics' charter and approve the issuance of shares
of General Dynamics common stock in the merger.
On May 16, 1999, the Gulfstream board of directors met to review the status
of the negotiations regarding the transaction and consider whether to approve
the merger agreement and the merger. During the meeting, senior management of
Gulfstream reviewed the financial performance of Gulfstream through the first
quarter of 1999 and delivered an update of Gulfstream's projected financial
performance for the whole of 1999 and for the five years ending December 31,
2003. Representatives of Merrill Lynch made a presentation as to the fairness of
the transaction and delivered its written opinion that, as of May 16, 1999 and
subject to the assumptions, qualifications and limitations set forth therein,
the exchange ratio provided in the merger agreement was fair, from
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<PAGE> 36
a financial point of view, to the stockholders of Gulfstream, other than General
Dynamics and its affiliates. Representatives of Goldman Sachs made a
presentation regarding the historical performance of General Dynamics stock, the
composition of the stockholder groups for both General Dynamics and Gulfstream,
and the possible market reaction upon announcement of the transaction.
Representatives of Fried, Frank, Harris, Shriver & Jacobson then reviewed with
the board the terms of the merger agreement, the voting agreement, the
registration agreement and the related documents. After further discussion, the
board of directors of Gulfstream, by unanimous vote, determined that the merger
agreement, the merger and the other transactions contemplated thereby are fair
to and in the best interests of Gulfstream and its stockholders, approved the
merger agreement and the merger, and recommended that the stockholders of
Gulfstream adopt and approve the merger agreement and approve the merger.
Following the adjournment of Gulfstream's board of directors meeting,
counsel for General Dynamics and Gulfstream exchanged signature pages to the
merger agreement and the voting agreement. A joint press release announcing the
merger was issued by the parties prior to the commencement of trading on the New
York Stock Exchange on the morning of May 17, 1999.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
General Dynamics. The General Dynamics board of directors has unanimously
approved the merger agreement and the merger and recommends that the
stockholders of General Dynamics vote "FOR" each of the proposals required to
complete the merger. In reaching its determination, the General Dynamics board
of directors consulted with General Dynamics management, as well as Bear Stearns
and Jenner & Block, and considered the following important factors that
supported the board's recommendation:
- the merger combines well-run companies with strong positions in
attractive markets;
- the ability of General Dynamics to apply its core competencies in the
development, design and production of sophisticated products to the
Gulfstream business in order to continue to improve Gulfstream's
production efficiency and profitability;
- through greater industry diversification, the merger should permit the
combined company to reduce the risks from business downturns affecting
the defense or commercial aircraft industries;
- the merger is expected to be immediately accretive to General Dynamics'
cash flow and earnings from operations;
- the merger should allow the combined company to benefit, over the long
term, from increased financial strength and more alternatives in the
financial markets as compared to either company on a stand-alone basis;
- information concerning the business, earnings, operations, financial
condition and prospects of General Dynamics and Gulfstream, both
individually and on a combined basis, including information with respect
to the past earnings performance of each of General Dynamics and
Gulfstream;
- the recent and past trading prices of Gulfstream common stock and General
Dynamics common stock relative to those of other industry participants,
and the potential for appreciation in the value of the General Dynamics
common stock following the merger resulting from opportunities for
enhanced revenue growth and accelerated earnings growth of the combined
company;
- that pooling of interests accounting treatment should be available for
the merger;
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<PAGE> 37
- that the merger would be a tax-free reorganization for federal income tax
purposes;
- the termination fee payable by Gulfstream under certain circumstances,
including the potential effect that the termination fee might have on
competing offers for Gulfstream;
- the ownership by current General Dynamics stockholders of approximately
63% of the combined company immediately following the merger based upon
the outstanding shares of both companies;
- the long-term interests of General Dynamics and its stockholders, as well
as the interests of General Dynamics' employees, customers, creditors,
suppliers and the communities in which General Dynamics operates; and
- the presentation Bear Stearns made at the May 13, 1999 meeting of the
General Dynamics board of directors, and the opinion of Bear Stearns to
the effect that, as of May 13, 1999, and subject to the assumptions,
qualifications and limitations set forth therein, the purchase price per
share to be paid to the Gulfstream stockholders in the merger was fair,
from a financial point of view, to General Dynamics. The opinion and
analyses underlying the opinion are described below under "-- Opinions of
Financial Advisors -- General Dynamics."
The board of directors of General Dynamics also considered a variety of
risks and other potentially negative factors in the deliberations concerning the
merger. In particular, the board of directors of General Dynamics considered:
- the risk that a downturn in general economic conditions could result in a
reduction in the new orders received by Gulfstream and could cause
customers to be unable or unwilling to consummate the purchase of
aircraft, resulting in order cancellations;
- the risks associated with acquiring and operating a company in a
commercial industry when General Dynamics' other businesses are primarily
in the defense industry;
- the risks associated with integrating the operations of Gulfstream with
General Dynamics' existing operations, including the potential loss of
key personnel of Gulfstream and difficulty in integrating corporate,
accounting, financial reporting and management information systems of the
two companies;
- the risks associated with a fixed exchange ratio, including the
possibility that the value of the General Dynamics common stock that the
Gulfstream stockholders receive in the merger could vary depending on
changes in market price of General Dynamics common stock; and
- the risks associated with the resale by Gulfstream stockholders of the
shares of General Dynamics common stock they receive in the merger,
including any resale of shares pursuant to the registration agreement
with certain major stockholders, directors and executive officers of
Gulfstream.
The board of directors of General Dynamics did not receive a quantitative
analysis of all the factors listed above. However, the board of directors of
General Dynamics concluded that the anticipated benefits of the merger
outweighed the possible detriments.
This discussion is not intended to be exhaustive but includes the material
information and factors considered by the General Dynamics board of directors in
its consideration of the merger. In view of the wide variety of factors
considered, the General Dynamics board of directors did not assign relative
weights to the specific factors considered in reaching its determination. The
determination was made after consideration of all of the factors as a whole. In
addition, individual members of the General Dynamics board of directors may have
given different weights to different factors.
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<PAGE> 38
THE GENERAL DYNAMICS BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT GENERAL
DYNAMICS STOCKHOLDERS VOTE "FOR" EACH OF THE PROPOSALS REQUIRED TO COMPLETE THE
MERGER.
Gulfstream. Gulfstream's board of directors, at its meeting on May 16,
1999, unanimously approved the merger agreement and the merger as fair to and in
the best interests of Gulfstream and its stockholders and unanimously
recommended that Gulfstream stockholders vote "FOR" the adoption and approval of
the merger agreement and the approval of the merger.
In making its decision, the board of directors consulted with its legal and
financial advisors and considered a number of factors, including the following
principal factors that were material to its decision:
- the presentation by management of Gulfstream about the financial
performance of Gulfstream through the first quarter of 1999 and
Gulfstream's projected financial performance for 1999 and for the five
years ending December 31, 2003;
- the presentation of Merrill Lynch, and its written opinion that the
exchange ratio provided in the merger agreement was fair, from a
financial point of view, to the stockholders of Gulfstream, other than
General Dynamics and its affiliates. The written opinion is attached as
Appendix E to this document;
- the presentation by Goldman Sachs regarding the historical performance of
General Dynamics stock, the composition of the stockholder groups for
both General Dynamics and Gulfstream, and the possible market reaction
upon announcement of the transaction;
- the fact that the merger would provide Gulfstream stockholders a 28.4%
premium for their shares of Gulfstream common stock based on the closing
prices of Gulfstream common stock and General Dynamics common stock on
May 14, 1999, the last trading day before the day of the board meeting;
- the fact that Gulfstream stockholders would own approximately 37% of the
combined company and therefore would have the opportunity to share in any
increase in the value of General Dynamics and in the value of Gulfstream
through their ownership of General Dynamics stock. The board of directors
considered:
- that the merger would be immediately accretive to the earnings from
operations and cash flow of General Dynamics;
- that Gulfstream would benefit from being part of a larger enterprise
and, in particular, from General Dynamic's experience in the
development, design and production of high-technology equipment;
- General Dynamics' past experience in the commercial airplane industry;
- General Dynamics' significant experience in selling products to
governments both in the United States and abroad, which the board
believed is a growth area for Gulfstream;
- the various alternatives to the merger, including remaining independent,
and the risks associated with those alternatives;
- that General Dynamics intended to make no changes to Gulfstream's
existing management, operations, facilities or work force and that
Theodore J. Forstmann would continue as the non-executive Chairman of the
board of directors, W.W. Boisture, Jr. would continue as President and
Chief Operating Officer and Chris A. Davis would continue as Executive
Vice President and Chief Financial and Administrative Officer of
Gulfstream;
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- the terms of the merger agreement, including:
- either party's ability to terminate the merger agreement if the
average trading price of a share of General Dynamics common stock for
the fifteen trading days ending on the fifth trading day before the
Gulfstream special meeting were less than $63;
- Gulfstream's ability to terminate the merger agreement if the
Gulfstream board were presented with a superior offer on or prior to
June 30, 1999 upon the payment of a fee of $150 million to General
Dynamics;
- the fact that the beneficial owners of approximately 23% of Gulfstream's
outstanding common stock favored the transaction and would agree to vote
those shares in favor of the merger;
- the likelihood of completing the merger, including Gulfstream's and
General Dynamics' ability to obtain the necessary governmental approvals;
- that pooling of interests accounting treatment should be available for
the merger; and
- that the merger would be a tax-free reorganization for federal income tax
purposes.
The board of directors also considered a variety of risks and other
potentially negative factors concerning the merger. These included the
following:
- the challenges and costs of integrating two large corporations;
- the potential conflicts of interests of some Gulfstream officers and
directors; and
- the fact that Gulfstream's obligation to pay a termination fee to General
Dynamics in certain circumstances might deter other parties from
proposing an alternative transaction that might be more advantageous to
Gulfstream stockholders. In considering this provision, the board of
directors sought to balance the concerns of General Dynamics, which it
believed had made an attractive acquisition proposal conditioned on the
receipt of a termination fee, against the likelihood of there being a
subsequent better offer which might be deterred by such payment.
The above factors are not intended to be exhaustive but are intended to
include all material factors considered by Gulfstream's board of directors. In
reaching its decision to approve the merger agreement and the merger, and to
recommend that Gulfstream stockholders vote to adopt and approve the merger
agreement and approve the merger, the Gulfstream board did not view any single
factor as determinative and did not find it necessary or practicable to assign
any relative or specific weights to the various factors considered. Furthermore,
individual directors may have given differing weights to different factors.
OPINION OF FINANCIAL ADVISOR TO GENERAL DYNAMICS
General Dynamics engaged Bear Stearns as its financial advisor based on
Bear Stearns' experience and expertise. Bear Stearns is an internationally
recognized investment banking firm that has substantial experience in
transactions similar to the merger. Bear Stearns, as part of its investment
banking business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
At the May 13, 1999 meeting of the General Dynamics board of directors,
Bear Stearns delivered its oral opinion and a draft of its written opinion
(subsequently delivered in final form) to the effect that, as of the date
thereof, and subject to the assumptions, qualifications and limitations set
forth therein, the purchase price per share to be paid to the Gulfstream
stockholders in the merger was fair, from a financial point of view, to General
Dynamics.
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The full text of the opinion, which sets forth the assumptions made,
matters considered and qualifications and limitations on the review undertaken
by Bear Stearns, is incorporated herein by reference. THE SUMMARY OF THE BEAR
STEARNS OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF THE OPINION WHICH IS ATTACHED AS APPENDIX D TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. General Dynamics stockholders are urged to read carefully
the Bear Stearns opinion in its entirety. In reading the discussion of the
fairness opinion set forth below, General Dynamics stockholders should be aware
that Bear Stearns' opinion:
- was provided to the General Dynamics board of directors for its
information and is directed only to the fairness, from a financial point
of view, of the purchase price to General Dynamics;
- did not constitute a recommendation to the General Dynamics board of
directors in connection with the merger;
- did not address the merits of the underlying decision by General Dynamics
to engage in the merger or the price or range of prices at which shares
of General Dynamics common stock may trade subsequent to the announcement
or consummation of the merger; and
- does not constitute a recommendation to any holder of General Dynamics
common stock as to how such stockholder should vote on the General
Dynamics merger proposal, or any matter related thereto.
Although Bear Stearns evaluated the fairness, from a financial point of
view, of the purchase price to General Dynamics, the purchase price itself was
determined by Gulfstream and General Dynamics through arm's-length negotiations.
Bear Stearns provided advice to General Dynamics during the course of such
negotiations. General Dynamics did not provide specific instructions to, or
place any limitations on, Bear Stearns with respect to the procedures to be
followed or factors to be considered by it in performing its analyses or
providing its opinion.
BEAR STEARNS OPINION
In arriving at its opinion, Bear Stearns, among other things:
- reviewed the merger agreement;
- reviewed each of General Dynamics' and Gulfstream's Annual Reports to
Stockholders and Annual Reports on Form 10-K for the years ended December
31, 1997 and 1998;
- reviewed certain operating and financial information, including
projections, provided to Bear Stearns by the senior managements of
General Dynamics and Gulfstream relating to their respective businesses
and prospects;
- met with selected members of the senior managements of General Dynamics
and Gulfstream to discuss each company's operations, historical financial
statements and future prospects;
- reviewed the historical prices and trading volume of General Dynamics
common stock and Gulfstream common stock;
- reviewed publicly available financial data, stock market performance data
and valuation parameters of companies which Bear Stearns deemed generally
comparable to Gulfstream;
- reviewed the terms of recent acquisitions of companies which it deemed
generally comparable to Gulfstream and the merger; and
- conducted such other studies, analyses, inquiries and investigations as
it deemed appropriate.
In preparing its opinion, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of all financial and
other projections provided to it by General
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Dynamics and Gulfstream. With respect to General Dynamics' and Gulfstream's
projected financial results, Bear Stearns assumed that they had been reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the senior managements of General Dynamics and Gulfstream,
respectively, as to the anticipated future performance of their respective
companies. Bear Stearns did not assume any responsibility for the independent
verification of any such information or of the projections provided to Bear
Stearns, and relied upon the assurances of the senior managements of General
Dynamics and Gulfstream that they were unaware of any facts that would make the
information or projections provided to Bear Stearns incomplete or misleading.
In arriving at its opinion, Bear Stearns did not perform or obtain any
independent appraisal of the assets or liabilities of General Dynamics or
Gulfstream, nor was it furnished with any such appraisals. The Bear Stearns
opinion is necessarily based on economic, market and other conditions, and the
information made available to Bear Stearns, as of the date of its opinion.
FINANCIAL ANALYSIS OF BEAR STEARNS
The following is a brief summary of the material valuation, financial and
comparative analyses considered by Bear Stearns in connection with the rendering
of the Bear Stearns opinion. This summary does not purport to be a complete
description of the analyses underlying the Bear Stearns opinion and is qualified
in its entirety by reference to the full text of the Bear Stearns opinion.
In performing its analysis, Bear Stearns made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Bear Stearns, Gulfstream and General Dynamics. Any estimates contained in the
analysis performed by Bear Stearns are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable than
suggested by such analysis. Additionally, estimates of the value of businesses
or securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities may actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. In addition, as
described above, the Bear Stearns opinion was among several factors taken into
consideration by the General Dynamics board of directors in making its
determination to approve the merger agreement and the merger.
Implied Exchange Ratio Analyses. Bear Stearns performed a comparison
between the exchange ratio for the merger and the ranges of exchange ratios
implied by several valuation methodologies: (a) stock price trading history and
(b) relative contribution analyses relating to revenues, EBITDA, EBIT and net
income. The exchange ratio ranges implied by these methodologies were compared
to the negotiated exchange ratio for the merger of 1.000x.
At an exchange ratio of 1.000x, Bear Stearns observed that General Dynamics
stockholders would own approximately 63% of the combined company, while
Gulfstream stockholders would own approximately 37%. In calculating the exchange
ratio implied by each relative contribution analysis, Bear Stearns determined
the exchange ratio that would have been required if the stockholders of each
company were to own the percentage of the combined company corresponding to the
percentage that the respective company was expected to contribute to the
designated financial measure.
The implied exchange ratios derived from these methodologies are included
in the following table. THIS TABLE SHOULD BE READ TOGETHER WITH THE MORE
DETAILED DESCRIPTIONS BELOW. These methodologies and the implied exchange ratios
derived from them must be considered as a whole and
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<PAGE> 42
in the context of the narrative description of the financial analyses, including
the assumptions underlying these analyses.
<TABLE>
<CAPTION>
IMPLIED EXCHANGE
VALUATION METHODOLOGY DESCRIPTION OF VALUATION METHODOLOGY RATIO RANGE
- --------------------- ------------------------------------ ----------------
<S> <C> <C>
Stock price trading history......... Analysis of the relative daily
historical closing prices of each
company over selected time periods 0.58 - 1.11
Contribution of revenues............ Measures relative contribution of
each company to the combined company
total for revenues 0.76 - 0.87
Contribution of EBITDA.............. Measures relative contribution of
each company to the combined company
total for EBITDA 1.26 - 1.47
Contribution of EBIT................ Measures relative contribution of
each company to the combined company
total for EBIT 1.37 - 1.61
Contribution of net income.......... Measures relative contribution of
each company to the combined company
total for net income 1.19 - 1.45
</TABLE>
- Stock Price Trading History -- Based on the historical closing stock
prices of General Dynamics common stock and Gulfstream common stock over
the period from May 1, 1998 through May 10, 1999, Bear Stearns calculated
that the implied market exchange ratio determined by dividing the price
per share of Gulfstream common stock by the price per share of General
Dynamics common stock ranged from 0.58 to 1.11 over this period.
Bear Stearns noted that the prices of General Dynamics common stock and
Gulfstream common stock closed at $74.81 and $53.13, respectively, on May
10, 1999, and that such closing stock prices resulted in an implied
market exchange ratio of 0.71.
- Contribution of Revenues -- Using the Gulfstream and General Dynamics
revenue figures based on the projections for the years 1999 to 2001, Bear
Stearns calculated that Gulfstream's relative contribution to the
combined company's revenues ranged from 30.7% to 33.7%, which implied a
range of exchange ratios of 0.76 to 0.87.
- Contribution of EBITDA -- Using the Gulfstream and General Dynamics
EBITDA figures based on the projections for the years 1999 to 2001, Bear
Stearns calculated that Gulfstream's relative contribution to the
combined company's EBITDA ranged from 42.5% to 46.3%, which implied a
range of exchange ratios of 1.26 to 1.47.
- Contribution of EBIT -- Using the Gulfstream and General Dynamics EBIT
figures based on the projections for the years 1999 to 2001, Bear Stearns
calculated that Gulfstream's relative contribution to the combined
company's EBIT ranged from 44.5% to 48.5%, which implied a range of
exchange ratios of 1.37 to 1.61.
- Contribution of Net Income -- Using the Gulfstream and General Dynamics
net income figures based on the projections for the years 1999 to 2001,
Bear Stearns calculated that Gulfstream's relative contribution to the
combined company's net income ranged from 41.1% to 45.9%, which implied a
range of exchange ratios of 1.19 to 1.45.
Transaction Value. Based on the $74.81 closing price per share of General
Dynamics common stock on May 10, 1999 and an exchange ratio of 1.000x,
Gulfstream had a total transaction equity value, on a fully diluted basis, of
$5,681.9 million. After giving effect to outstanding indebtedness as
34
<PAGE> 43
of March 31, 1999, Gulfstream had a total transaction enterprise value of
$5,967.9 million. These values were then compared by Bear Stearns to a reference
range of values for Gulfstream which Bear Stearns developed after considering
values of Gulfstream under the following valuation methodologies: (a) discounted
cash flow, (b) comparable companies and (c) comparable acquisitions. The value
of Gulfstream determined by each of these methodologies is discussed below.
The enterprise value reference range developed by Bear Stearns, after
considering the values of Gulfstream under the valuation methodologies referred
to at the end of the preceding paragraph, was $5,500 to $6,250 million. After
giving effect to the aggregate exercise price of outstanding stock options as of
December 31, 1998, and Gulfstream's cash balances and outstanding indebtedness
as of March 31, 1999, the implied equity value of Gulfstream ranged from $5,345
to $6,095 million or an implied equity value per share, on a fully diluted
basis, of $68.79 to $78.44. Bear Stearns noted that the Bear Stearns reference
range of values compared favorably with the implied transaction equity value of
$5,681.9 million.
Bear Stearns noted, however, that the actual value of the consideration
paid to holders of Gulfstream common stock would depend on various factors
including the future prices for the shares of General Dynamics common stock.
Discounted Cash Flow. Based on financial projections for Gulfstream
through 2003, Bear Stearns calculated a range of implied enterprise values for
Gulfstream. The discounted cash flow analysis assumed, solely for purposes of
this analysis, a range of discount rates from 9.5% to 11.0%, and ranges of exit
multiples as follows: (i) revenues (1.40x to 1.60x), (ii) EBITDA (8.5x to 9.5x),
(iii) EBIT (9.5x to 10.5x) and (iv) unlevered net income (15.0x to 17.0x). Based
on such assumptions, Bear Stearns calculated, utilizing a discounted cash flow
analysis, an implied range of enterprise values for Gulfstream of $5,500 to
$6,250 million. Bear Stearns noted that the implied transaction enterprise value
was within this range.
Comparable Company Analysis. Bear Stearns compared certain operating,
financial, trading and valuation information for Gulfstream's operations to
certain publicly available operating, financial, trading and valuation
information of nine selected component, military aerospace and commercial
aerospace companies, which, in Bear Stearns' judgment, were comparable to
Gulfstream's operations for purposes of this analysis. These companies included:
- The BF Goodrich Company Inc.
- Howmet International Inc.
- Precision Castparts Corporation
- Aerospatiale (Ste Nationale Industrielle)
- British Aerospace PLC
- Lockheed Martin Corporation
- Northrop Grumman Corporation
- The Boeing Company
- Bombardier Inc.
A summary of the projected multiples of equity value to net income based on
estimates of net income for calendar years 1999 and 2000 and projected multiples
of enterprise value to revenues,
35
<PAGE> 44
EBITDA and EBIT based on estimates of revenues, EBITDA and EBIT for calendar
year 2000 is set forth below:
<TABLE>
<CAPTION>
EQUITY VALUE/NET INCOME ENTERPRISE VALUE/CY 2000E
-------------------------- -----------------------------------------
CY 1999E CY 2000E REVENUES EBITDA EBIT
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gulfstream.............. 20.5x 16.4x 2.13x 9.7x 10.6x
Comparable companies.... 9.7x - 29.5x 9.0x - 24.1x 0.81x - 1.52x 5.0x - 10.4x 6.1x - 18.1x
</TABLE>
Bear Stearns noted that based on implied transaction equity and enterprise
values for Gulfstream of approximately $5,681.9 and $5,967.9 million,
respectively, the implied transaction multiples reflect a slight acquisition
premium to the trading multiples of comparable companies, as illustrated above.
Under a comparable companies analysis, Bear Stearns derived a range of
enterprise values for Gulfstream of $5,000 to $5,250 million.
Bear Stearns also noted that none of the comparable companies is identical
to Gulfstream and that, accordingly, any analysis of comparable companies
necessarily involved complex considerations and judgments concerning differences
in financial and operating characteristics and other factors that would
necessarily affect the relative trading and acquisition values of Gulfstream
versus the companies to which Gulfstream was being compared.
Comparable Acquisitions Analysis. Bear Stearns reviewed and analyzed the
publicly available financial terms of seven selected merger and acquisition
transactions in the component, military aerospace and commercial aerospace
industry which, in Bear Stearns' judgment, were reasonably comparable to the
merger, and compared the financial terms of such transactions to those of the
merger. The seven transactions were:
- The BF Goodrich Company's acquisition of Coltec Industries Inc.
- The BF Goodrich Company's acquisition of Rohr Aero Services Inc.
- General Electric Co. PLC's acquisition of Tracor Inc.
- United Technologies Corporation's acquisition of Sundstrand Corporation
- The Boeing Company's acquisition of McDonnell Douglas Corporation
- Martin Marietta Corporation's acquisition of Lockheed Corporation
- Northrop Corp.'s acquisition of Grumman Corp.
Bear Stearns reviewed the prices paid in such transactions and analyzed
various operating and financial information and imputed valuation multiples and
ratios. Bear Stearns' analysis of the comparable acquisitions indicated that the
range of equity value multiples and enterprise value multiples for the projected
current fiscal year, the projected next fiscal year and the latest 12 months as
of such acquisition agreements was as indicated below:
<TABLE>
<CAPTION>
EQUITY VALUE ENTERPRISE VALUE
-------------------------- ------------------------------------------
NET INCOME BOOK VALUE REVENUES EBITDA EBIT
------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
The merger............. 16.4x - 23.4x 26.4x 2.13x - 2.34x 9.7x - 13.6x 10.6x - 14.9x
Comparable
acquisitions......... 10.3x - 24.1x 1.9x - 7.1x 0.53x - 2.25x 4.9x - 10.2x 8.0x - 13.4x
</TABLE>
Bear Stearns noted that the transaction multiples based on forward EBIT and
net income, upon which stocks in the aerospace industry trade, are generally in
line with multiples paid in the industry. Under a comparable acquisitions
analysis, Bear Stearns derived a range of enterprise values for Gulfstream of
between $5,500 to $6,250 million.
36
<PAGE> 45
Bear Stearns also noted that none of the comparable acquisitions was
identical to the merger and that, accordingly, any analysis of the comparable
acquisitions necessarily involved complex consideration and judgments concerning
the differences in financial and operating characteristics and other factors
that would necessarily affect the acquisition value of Gulfstream versus the
acquisition values of the companies in the comparable acquisitions.
Pro Forma Merger Analysis. Bear Stearns reviewed and analyzed certain pro
forma financial impacts of the merger on holders of General Dynamics common
stock based on the following:
- the purchase price;
- the projected financial results of each of General Dynamics and
Gulfstream;
- an assumption for analytical purposes that the merger would be
consummated on June 30, 1999; and
- pooling of interests accounting treatment for the merger.
The results of this analysis indicated that the merger, even without giving
effect to any synergies or cost savings which may be derived as a result of the
merger, would result in immediate accretion to the projected earnings per share
and cash earnings per share of General Dynamics common stock in each of 1999,
2000, 2001 and 2002.
Breakeven P/E Analysis. As of May 10, 1999, General Dynamics was trading
at a forward price/earnings ratio (P/E) of 24.4x 1999 earnings, while Gulfstream
was trading at a forward P/E of 14.4x 1999 earnings. As of such date, the
weighted average forward P/E of General Dynamics and Gulfstream was 20.3x. Bear
Stearns calculated the breakeven P/E to be 22.8x. Bear Stearns noted that the
difference between the weighted average P/E and the breakeven P/E is due to the
fact that a premium is being paid to Gulfstream in the merger and that Bear
Stearns had not included the effect of any synergies or cost savings which may
be derived as a result of the merger.
The breakeven P/E is the multiple at which General Dynamics common stock
must trade after the merger is consummated in order for the merger not to have
an effect on the trading price of the General Dynamics common stock.
Accordingly, a P/E multiple after consummation of the merger which is higher
than the breakeven P/E would indicate an increased trading price for the General
Dynamics common stock, and a P/E multiple which is lower than the breakeven P/E
would indicate a decreased trading price for the General Dynamics common stock.
The preparation of a fairness opinion is a complex process and involves
various judgments and determinations as to the most appropriate and relevant
assumptions and financial analyses and the application of these methods to the
particular circumstances involved. Such an opinion is therefore not readily
susceptible to partial analysis or summary description, and taking portions of
the analyses set out above, without considering the analysis as a whole, would,
in the view of Bear Stearns, create an incomplete and misleading picture of the
processes underlying the analyses considered in rendering the Bear Stearns
opinion. Bear Stearns did not form an opinion as to whether any individual
analysis or factor (positive or negative), considered in isolation, supported or
failed to support the Bear Stearns opinion. In arriving at its opinion, Bear
Stearns considered the results of its separate analyses and did not attribute
particular weight to any one analysis or factor considered by that firm. The
analyses performed by Bear Stearns, particularly those based on estimates and
projections, are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. Such analyses were prepared solely as part of the Bear Stearns
analysis of the fairness, from a financial point of view, of the purchase price
to General Dynamics.
37
<PAGE> 46
FEE ARRANGEMENTS
Pursuant to the terms of its engagement letter with Bear Stearns, General
Dynamics has agreed to pay Bear Stearns a total fee of $9.0 million, $5.0
million of which became payable to Bear Stearns upon the delivery of its opinion
and $4.0 million of which will become payable upon consummation of the merger.
In addition, General Dynamics has agreed to reimburse Bear Stearns for all
reasonable out-of-pocket expenses incurred by it in connection with the merger,
including reasonable fees and disbursements of its legal counsel. General
Dynamics has also agreed to indemnify Bear Stearns against certain liabilities
in connection with its engagement, including certain liabilities under the
federal securities laws.
In the ordinary course of its business, Bear Stearns may actively trade the
securities of General Dynamics and/or Gulfstream for its own account and for
accounts of its customers and, accordingly, Bear Stearns may at any time hold a
long or short position in such securities. Bear Stearns may provide financial
advisory and financing services to the combined company and/or its affiliates
and may receive fees for the rendering of such services.
OPINION OF FINANCIAL ADVISOR TO GULFSTREAM
Gulfstream retained Merrill Lynch to act as its primary financial advisor
in connection with the merger. On May 16, 1999, Merrill Lynch delivered to the
Gulfstream board a written opinion to the effect that, as of such date, and
based upon and subject to the factors and assumptions set forth therein, the
exchange ratio provided in the merger agreement was fair from a financial point
of view to the holders of shares of Gulfstream, other than General Dynamics and
its affiliates.
The full text of the Merrill Lynch opinion, which sets forth the
assumptions made, matters considered, and qualifications and limitations on the
review undertaken by Merrill Lynch, is attached as Appendix E to this Joint
Proxy Statement/Prospectus and is incorporated herein by reference. THE SUMMARY
OF THE MERRILL LYNCH OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE MERRILL LYNCH
OPINION WHICH IS ATTACHED AS APPENDIX E TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. Gulfstream stockholders are urged to read carefully the
Merrill Lynch opinion in its entirety.
Merrill Lynch is an internationally recognized investment banking firm and,
as part of its investment banking business, is continuously engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, distributions of securities, and similar
activities. Merrill Lynch was retained by Gulfstream on the basis of its
qualifications, reputation and experience and its familiarity with Gulfstream
and its business.
In reading the discussion of the Merrill Lynch opinion set forth below,
Gulfstream stockholders should be aware that the Merrill Lynch opinion:
- was provided to the Gulfstream board for its information and is directed
only to the fairness from a financial point of view of the exchange ratio
provided in the merger agreement to the holders of Gulfstream common
stock, other than General Dynamics and its affiliates;
- does not address any other aspect of the merger, including the merits of
the underlying decision by Gulfstream to engage in the merger or the
price or range of prices at which shares of Gulfstream or General
Dynamics common stock may trade subsequent to the announcement or
consummation of the merger;
- did not constitute a recommendation to the Gulfstream board in connection
with the merger; and
- does not constitute a recommendation to any Gulfstream stockholder as to
how such stockholder should vote on the merger agreement or any matter
related thereto.
38
<PAGE> 47
In preparing its opinion to the Gulfstream board, Merrill Lynch performed a
variety of financial and comparative analyses, including those described below.
The summary set forth below does not purport to be a complete description of the
analyses underlying the Merrill Lynch opinion or the presentation made by
Merrill Lynch to the Gulfstream board. The preparation of a fairness opinion is
a complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances, and therefore a fairness opinion
is not readily susceptible to partial analysis or summary description. In
arriving at its opinion, Merrill Lynch did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses, without considering all of
the analyses, would create an incomplete view of the process underlying its
opinion.
In performing its analyses, numerous assumptions were made with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Merrill
Lynch, Gulfstream or General Dynamics. Any estimates contained in the analyses
performed by Merrill Lynch are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than suggested
by such analyses. Additionally, estimates of the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
such businesses or securities might actually be sold. Accordingly, such analyses
and estimates are inherently subject to substantial uncertainty. The Merrill
Lynch opinion was among several factors taken into consideration by the
Gulfstream board in making its determination to approve the merger agreement and
the merger. Consequently, the Merrill Lynch analyses described below should not
be viewed as determinative of the decision of the Gulfstream board or
Gulfstream's management with respect to the fairness of the exchange ratio
provided in the merger agreement. The exchange ratio was determined through
arm's-length negotiations between Gulfstream and General Dynamics and was
approved by the Gulfstream board.
MERRILL LYNCH OPINION
In arriving at its opinion, Merrill Lynch, among other things:
- reviewed selected publicly available business and financial information
relating to Gulfstream and General Dynamics which Merrill Lynch deemed to
be relevant;
- reviewed certain information relating to the business, earnings, cash
flow, assets, liabilities and prospects of each of Gulfstream and General
Dynamics, furnished to Merrill Lynch by Gulfstream and General Dynamics,
respectively;
- conducted discussions with members of senior management and
representatives of Gulfstream and General Dynamics concerning the
information described in the clauses above, as well as the businesses and
prospects of these companies before and after giving effect to the
merger;
- reviewed the market prices and valuation multiples for Gulfstream and
General Dynamics common stock and compared them with those of selected
publicly traded companies that Merrill Lynch deemed to be relevant;
- reviewed the results of operations of Gulfstream and General Dynamics and
compared them with those of selected publicly traded companies which
Merrill Lynch deemed to be relevant;
- compared the proposed financial terms of the merger with the financial
terms of certain other transactions which Merrill Lynch deemed to be
relevant;
- participated in discussions and negotiations among representatives of
Gulfstream and General Dynamics and their financial and legal advisors;
39
<PAGE> 48
- reviewed the potential pro forma impact of the merger;
- reviewed a draft of the merger agreement; and
- reviewed such other financial studies and analyses and took into account
such other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on, without
independent verification, the accuracy and completeness of all information
supplied or otherwise made available to Merrill Lynch, discussed with or
reviewed by or for Merrill Lynch, or publicly available. In addition, Merrill
Lynch did not assume any obligation to conduct, nor did it conduct, any physical
inspection of the properties or facilities of Gulfstream or General Dynamics.
With respect to the financial forecast information furnished to or discussed
with Merrill Lynch by Gulfstream and General Dynamics, Merrill Lynch assumed
that it had been reasonably prepared and reflected the best currently available
estimates and judgment of Gulfstream's or General Dynamics' management as to the
expected future financial performance of Gulfstream or General Dynamics, as the
case may be. Merrill Lynch further assumed that (i) the merger would be
accounted for as a pooling of interests under United States generally accepted
accounting principles and would qualify as a tax-free reorganization for United
States federal income tax purposes and (ii) the final form of the merger
agreement would be substantially similar to the May 14, 1999 draft reviewed by
Merrill Lynch.
The Merrill Lynch opinion is necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and the information
made available to Merrill Lynch as of, the date of its opinion. Merrill Lynch
assumed that in the course of obtaining the necessary regulatory or other
consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, would be imposed that will have a material adverse effect on the
contemplated benefits of the merger.
SUMMARY OF MATERIAL ANALYSES
The following is a summary of the material financial and comparative
analyses performed by Merrill Lynch in arriving at the Merrill Lynch opinion.
GULFSTREAM
Historical Trading Analysis. Merrill Lynch reviewed the daily closing per
share prices of Gulfstream common stock during the 12-month period ending May
14, 1999 (the last trading day prior to the public announcement of the merger)
and calculated the following:
<TABLE>
<CAPTION>
HIGH - LOW
PERIOD SHARE CLOSING PRICE
- ------ -------------------
<S> <C>
52 week................................................. $59.75 - $29.00
6 month................................................. $59.75 - $40.31
3 month................................................. $59.75 - $40.31
</TABLE>
These ranges were compared with the $71.44 per share price for Gulfstream
common stock implied by the exchange ratio provided in the merger agreement on
May 14, 1999.
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of financial results (i) published by First
Call, an industry service provider of earnings estimates based on an average of
earnings estimates published by various investment banking firms, and (ii) taken
from research reports, Merrill Lynch compared certain financial and operating
information for a group of publicly traded companies in the aerospace-defense
industry
40
<PAGE> 49
which Merrill Lynch deemed to be reasonably comparable to Gulfstream based upon
a variety of operating and financial criteria. These companies included:
- The Boeing Company
- British Aerospace PLC
- Lockheed Martin Corporation
- Northrop Grumman Corporation
- Raytheon Company
Merrill Lynch's calculations resulted in the following relevant ranges for
the comparable aerospace-defense companies and for Gulfstream as of May 10,
1999:
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A MULTIPLE OF
PRICE AS A MULTIPLE OF EPS --------------------------
--------------------------- LTM FYE 1999
FYE 1999 FYE 2000 EBITDA EBITDA
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gulfstream............................ 14.1x 12.4x 10.2x 8.0x
Comparable Aerospace-Defense
Companies........................... 10.4x - 23.4x 9.9x - 24.1x 6.2x - 14.5x 6.0x - 10.7x
</TABLE>
Merrill Lynch also compared certain financial and operating information for
a group of publicly traded companies in the diversified aerospace-commercial
industry which Merrill Lynch deemed to be reasonably comparable to Gulfstream
based upon a variety of operating and financial criteria. The companies
included:
- Honeywell Inc.
- Rockwell International Corporation
- Textron Inc.
- United Technologies Corporation
Merrill Lynch's calculations resulted in the following relevant ranges for
the diversified aerospace commercial comparable companies and for Gulfstream as
of May 10, 1999:
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A MULTIPLE OF
PRICE AS A MULTIPLE OF EPS ---------------------------
--------------------------- LTM FYE 1999
FYE 1999 FYE 2000 EBITDA EBITDA
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Gulfstream......................... 14.1x 12.4x 10.2x 8.0x
Comparable Aerospace-Commercial
Companies........................ 19.7x - 25.3x 17.7 - 22.2x 10.8x - 15.3x 9.2x - 12.1x
</TABLE>
Applying these ranges and selected multiples in these ranges for the
comparable aerospace-defense companies and the comparable diversified
aerospace-commercial companies to corresponding financial data for Gulfstream
common stock, Merrill Lynch calculated an implied average equity range for
Gulfstream common stock of approximately $46.25 to $60.25.
None of the companies utilized in the above analysis for comparative
purposes is, of course, identical to Gulfstream. Accordingly, a complete
understanding of the results of the foregoing calculations cannot be limited to
a quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable aerospace-defense companies and the comparable diversified
aerospace-commercial companies and other factors that could affect the public
trading market of these companies, as well as
41
<PAGE> 50
that of Gulfstream. In addition, the ranges for the comparable aerospace-defense
companies and the comparable diversified aerospace-commercial companies are
based on projections prepared by research analysts using only publicly available
information. Accordingly, such estimates may or may not prove to be accurate.
Analysis of Selected Comparable Acquisition Transactions. Using publicly
available information, Merrill Lynch reviewed the financial terms of thirteen
acquisitions in the aerospace industry considered relevant by Merrill Lynch for
purposes of its analysis. Merrill Lynch calculated the following for the
comparable acquisition transactions:
<TABLE>
<CAPTION>
TRANSACTION
OFFER VALUE VALUE
AS A MULTIPLE OF AS A MULTIPLE OF
LTM NET INCOME LTM EBITDA
---------------- ----------------
<S> <C>
14.8x - 39.6x..................................... 8.5x - 18.9x
</TABLE>
Applying these ranges and selected multiples in these ranges for the
comparable acquisitions to corresponding financial data for Gulfstream common
stock, Merrill Lynch calculated an implied average equity range for Gulfstream
common stock of approximately $53.25 to $67.25.
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis of the present value of the projected unlevered cash flow of
Gulfstream for the calendar years 1999 through 2003, based upon (i) a base case
model provided by Gulfstream's management and (ii) projections developed using
EPS as estimated by First Call and publicly available equity research on
Gulfstream. Each model used relevant discount rates reflecting a weighted
average cost of capital and selected terminal value multiples of calendar year
2003 EBITDA. The forecasts were estimates only and inherently subject to known
and unknown risks, uncertainties, and other factors, many of which are outside
of Gulfstream's and Merrill Lynch's control. The analysis indicated the
following ranges of values per share of Gulfstream common stock:
<TABLE>
<CAPTION>
IMPLIED VALUE PER
SHARE OF GULFSTREAM
COMMON STOCK
----------------------
<S> <C>
Based on Management Forecasts................. $55.25 - $73.00
Based on Analyst Forecasts.................... $51.25 - $68.00
</TABLE>
Leveraged Buyout Analysis. Merrill Lynch performed an analysis of the
value per share of Gulfstream common stock on a leveraged buyout basis assuming
(i) contributed equity of 30%, 32.5% and 35% and (ii) total debt/EBITDA of 5.0x,
5.5x and 6.0x. This analysis indicated a range of implied values per share of
Gulfstream common stock of $37.50 to $49.50.
GENERAL DYNAMICS
Historical Trading Performance. Merrill Lynch reviewed the daily closing
per share prices of General Dynamics for the 12-month period ending May 14, 1999
(the last trading day prior to the public announcement of the merger) and
calculated the following:
<TABLE>
<CAPTION>
HIGH - LOW
PERIOD SHARE CLOSING PRICE
- ------ ----------------------
<S> <C>
52 week....................................... $75.44 - $41.38
6 month....................................... $75.44 - $52.13
3 month....................................... $75.44 - $57.50
</TABLE>
These ranges were compared with the $71.44 price for General Dynamic's
common stock on May 14, 1999.
42
<PAGE> 51
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of financial results (i) published by First
Call and (ii) taken from research reports, Merrill Lynch compared certain
financial and operating information for a group of publicly traded companies in
the defense contracting industry which Merrill Lynch deemed to be reasonably
comparable to General Dynamics based upon a variety of operating and financial
criteria. These companies included:
- Alliant Techsystems, Inc
- Avondale Industries Inc.
- Litton Industries, Inc.
- Lockheed Martin Corporation
- Newport News Shipbuilding, Inc.
- Northrop Grumman Corporation
- Raytheon Company
- The Boeing Company
Merrill Lynch's calculations resulted in the following relevant ranges for
the defense contracting industry and for General Dynamics as of May 10, 1999.
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A MULTIPLE OF
PRICE AS A MULTIPLE OF EPS --------------------------
--------------------------- LTM FYE 1999
FYE 1999 FYE 2000 EBITDA EBITDA
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
General Dynamics.................... 23.3x 21.3x 14.4x 13.1x
Comparable Defense Contracting
Companies......................... 10.4x - 23.4x 9.9x - 24.1x 6.1x - 14.5x 6.0x - 10.7x
</TABLE>
Merrill Lynch also compared certain financial and operating information for
a group of publicly traded companies in diversified industrial businesses which
Merrill Lynch deemed to be reasonably comparable to General Dynamics based upon
a variety of operating and financial criteria. These companies included:
- AlliedSignal Inc.
- Danaher Corporation
- Illinois Tools Works Inc.
- Emerson Electric Co.
- General Electric Company
- Honeywell Inc.
- Rockwell International Corporation
- Textron Inc.
- Tyco International Ltd.
- United Technologies Corporation
43
<PAGE> 52
Merrill Lynch's calculations resulted in the following relevant ranges for
the comparable diversified industrial companies and for General Dynamics as of
May 10, 1999:
<TABLE>
<CAPTION>
MARKET CAPITALIZATION
AS A MULTIPLE OF
PRICE AS A MULTIPLE OF EPS ---------------------------
---------------------------- LTM FYE 1999
FYE 1999 FYE 2000 EBITDA EBITDA
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
General Dynamics.................. 23.3x 21.3x 14.4x 13.1x
Comparable Diversified Industrial
Companies....................... 19.7x - 36.1x 17.7x - 31.7x 10.8x - 27.3x 9.2x - 28.2x
</TABLE>
Applying these ranges and selected multiples in these ranges for the
comparable defense contracting companies and the diversified industrial
companies to corresponding financial data for General Dynamics common stock,
Merrill Lynch determined an implied average equity range for General Dynamics
common stock of approximately $64.25 to $80.25.
None of the companies utilized in the above analysis for comparative
purposes is, of course, identical to General Dynamics. Accordingly, a complete
understanding of the results of the foregoing calculations cannot be limited to
a quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable defense contracting companies and the comparable diversified
industrial companies and other factors that could affect the public trading
market of these companies, as well as that of General Dynamics. In addition, the
ranges for the comparable defense contracting companies and the comparable
diversified industrial companies, are based on projections prepared by research
analysts using only publicly available information. Accordingly, such estimates
may or may not prove to be accurate.
Discounted Cash Flow Analysis. Merrill Lynch performed discounted cash
flow analyses of General Dynamics based upon a model provided by General
Dynamics' management for the calendar years 1999 through 2003, inclusive, using
relevant discount rates reflecting a weighted average cost of capital and
selected terminal value multiples of calendar year 2003 EBITDA. The forecasts
were estimates only and inherently subject to known and unknown risks,
uncertainties, and other factors, many of which are outside of General Dynamics'
and Merrill Lynch's control. The implied value per share of General Dynamics
based on the management forecasts produced a range of values per share of
General Dynamics common stock of $60.75 to $81.00.
Pro Forma Merger Analysis. Merrill Lynch reviewed and analyzed certain pro
forma financial impacts of the merger on holders of General Dynamics common
stock based on the following:
- the exchange ratio;
- the projections provided by General Dynamics and Gulfstream;
- an assumption for analytical purposes that the merger had been
consummated on December 31, 1998;
- pooling of interests accounting treatment for the merger; and
- alternative sets of assumptions reflecting (i) Gulfstream and General
Dynamics managements' expectations and (ii) projections developed using
estimates of First Call and publicly available research on Gulfstream.
The results of this analysis indicated that the merger would result in
moderate accretion to the projected earnings per share of General Dynamics
common stock in each of 1999, 2000 and 2001.
In performing its analyses, Merrill Lynch did not express any opinion as to
the price or range of prices at which General Dynamics common stock may trade
subsequent to the consummation of the
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merger. The prices at which General Dynamics common stock ultimately trades in
the stock market will be determined by a variety of quantitative and qualitative
factors (for example, the price-earnings multiple at which General Dynamics
common stock is actually valued by potential investors, which may be
significantly more or less favorable than the illustrative ranges of
price/earnings multiples used by Merrill Lynch for their analytical purposes),
none of which can be predicted.
FEE ARRANGEMENTS OF MERRILL LYNCH
Pursuant to a letter agreement, Gulfstream has agreed to pay Merrill Lynch
a transaction fee of $12.0 million if the merger is consummated. In addition,
Gulfstream has agreed to reimburse Merrill Lynch for all reasonable
out-of-pocket expenses incurred by Merrill Lynch in connection with the merger,
including reasonable fees and disbursements of its legal counsel. Gulfstream has
also agreed to indemnify Merrill Lynch and certain related persons against
certain liabilities arising out of or in conjunction with its rendering of
services under its engagement, including certain liabilities under the federal
securities laws.
Merrill Lynch has in the past provided financial advisory and financing
services to Gulfstream and financing services to General Dynamics and may
continue to do so and has received, and may receive, customary fees for such
services. In the ordinary course of its business, Merrill Lynch and its
affiliates may actively trade the debt and equity securities of Gulfstream and
General Dynamics for their own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
FEE ARRANGEMENTS OF GOLDMAN SACHS
Pursuant to a letter agreement, Gulfstream has agreed to pay a transaction
fee of $2.0 million to Goldman Sachs if the merger is consummated. In addition,
Gulfstream has also agreed to indemnify Goldman Sachs and certain related
persons against certain liabilities arising out of or in conjunction with its
rendering of services under its engagement, including certain liabilities under
the federal securities laws.
INTERESTS OF MEMBERS OF GULFSTREAM'S BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
IN THE MERGER
When you consider the recommendations of our boards of directors, you
should be aware that some members of the Gulfstream board of directors and
executive officers may have interests in the merger that are different from, or
in addition to, your interests. These interests may create potential conflicts
of interest. Our directors were aware of these interests when they approved the
merger and the merger agreement. To our knowledge, the directors and executive
officers of Gulfstream do not have any material interest in the merger, apart
from their interests as holders of Gulfstream common stock, other than those
described below.
Registration Agreement. General Dynamics has agreed to enter into a
registration agreement with three investment partnerships affiliated with
Forstmann Little and certain directors and executive officers of Gulfstream. The
registration agreement provides, among other things, that General Dynamics will,
upon request, register for resale the shares of General Dynamics which the
partnerships and these directors and executive officers will receive in the
merger. Without this registration, the shares of General Dynamics common stock
received by these persons in the merger are subject to restrictions on resale
under the federal securities laws that do not apply to the other stockholders of
Gulfstream. It is anticipated that the three investment partnerships may
register and sell all or a significant portion of the General Dynamics common
stock they receive in the merger shortly after such resales are permitted under
the accounting rules governing pooling of interests transactions (see "The
Merger -- Resale Restrictions"), subject, however, to the market price of
General Dynamics common stock, prevailing market conditions and other factors.
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Gulfstream Stock Options. Certain directors and executive officers of
Gulfstream hold options to acquire Gulfstream common stock. Under the terms of
their existing option agreements, all holders of options to acquire Gulfstream
common stock (including the directors and executive officers of Gulfstream) will
have the opportunity to exercise those options prior to the completion of the
merger, whether or not those options are vested at the time of exercise, and
unvested options held by certain optionholders (including certain directors and
executive officers) will become fully vested and exercisable by reason of the
completion of the merger. In addition, under the terms of the existing option
agreements, certain transfer restrictions applicable to shares issuable upon the
exercise of options will lapse upon completion of the merger.
All options to acquire Gulfstream common stock which are unexercised on
completion of the merger will be converted in the merger into options to acquire
the same number of shares of General Dynamics common stock at the same exercise
price, and the converted options will be subject to the same terms and
conditions as are applicable to the Gulfstream options. General Dynamics has
agreed to register all shares subject to the converted stock options on an
appropriate registration statement, and to deliver prospectuses to option
holders, within one day following completion of the merger.
Employee Benefits. General Dynamics has agreed that, until December 31,
2000, it will not reduce the current base salary and hourly wage rate of
Gulfstream employees. Until December 31, 2000, General Dynamics will also
maintain employee benefits, other than equity-based compensation, that are
substantially comparable to the employee benefits provided to Gulfstream
employees before the merger. As a result of these arrangements, the current
executive officers and all other employees of Gulfstream will continue to
receive salaries and employee benefits, other than equity-based compensation,
that are comparable to those they currently receive from Gulfstream through the
year 2000. See "The Merger Agreement -- Compensation and Benefit Plans."
Indemnification and Insurance. General Dynamics has agreed to indemnify
the officers and directors of Gulfstream and its present or former subsidiaries
or parents from and against all losses arising out of their actions or omissions
occurring at or prior to the merger. General Dynamics has also agreed to
maintain, for six years after the merger, the provisions of Gulfstream's
certificate of incorporation and bylaws regarding indemnification of directors
and officers and the limitation of liability of directors and officers. In
addition, General Dynamics has agreed to continue, for six years after the
merger, the coverage of the directors and officers of Gulfstream and its
subsidiaries under directors and officers and fiduciary liability insurance
policies equivalent to the policies currently maintained by Gulfstream. As a
result of these arrangements, the current directors and officers of Gulfstream
may continue to be entitled to payment or reimbursement of their expenses,
including court judgments, settlements and legal fees and expenses, in
connection with claims and suits arising out of their activities before the
merger, including their activities relating to the approval of the merger
agreement and the merger. See "The Merger Agreement -- Indemnification and
Insurance."
Continuing Directors; Executive Officers. Under the merger agreement, for
at least one year following the merger, General Dynamics will elect Theodore J.
Forstmann, who is the Chairman and Chief Executive Officer of Gulfstream and a
general partner of Forstmann Little, as a director and the non-executive
Chairman of the board of directors of Gulfstream and will elect Sandra J.
Horbach, who is a director of Gulfstream and a general partner of Forstmann
Little, as a director of Gulfstream. In addition, each of the other executive
officers of Gulfstream is expected to continue to serve in the same capacity
after the merger. See "Management and Operations After the Merger."
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NO APPRAISAL RIGHTS
Under Delaware law, Gulfstream and General Dynamics stockholders will not
have any appraisal or dissenters' rights in connection with the merger.
ACCOUNTING TREATMENT
We believe that the merger will qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting,
our assets and liabilities will be combined based on the respective carrying
values of the accounts in the historical financial statements of each entity.
Results of operations of General Dynamics will include incomes of both General
Dynamics and Gulfstream for the entire fiscal period in which the combination
occurs. The historical results of operations of the separate companies for
fiscal years before the merger will be combined and reported as General
Dynamics' results of operations. Pooling of interests accounting treatment of
the merger is a condition to the completion of the merger. See "The Merger
Agreement -- Conditions" and "Unaudited Pro Forma Combined Financial Data."
FEDERAL INCOME TAX CONSEQUENCES
In the opinions of Jenner & Block, counsel to General Dynamics, and Fried,
Frank, Harris, Shriver & Jacobson, counsel to Gulfstream, the material federal
income tax consequences of the merger to General Dynamics, Gulfstream and the
holders of Gulfstream common stock who are citizens or residents of the United
States or who are domestic corporations are discussed below. The discussion
below is based upon current provisions of the Internal Revenue Code, currently
applicable Treasury regulations and judicial and administrative decisions, all
of which are subject to change, possibly with retroactive effect. The discussion
below is for general information only and does not purport to address all
aspects of federal income taxation that may affect particular stockholders in
light of their particular circumstances, that are generally assumed to be known
by investors or that may affect stockholders subject to special treatment under
the federal income tax laws. See "-- Qualifications" below. The discussion
assumes that the stockholders of Gulfstream hold their Gulfstream common stock
as capital assets. In addition, no information is being provided with respect to
the tax consequences of the merger under foreign, state or local laws.
Neither Gulfstream nor General Dynamics has requested a ruling from the
Internal Revenue Service with regard to any of the federal income tax
consequences of the merger, and the opinions of counsel described below to be
delivered as conditions to the merger will not be binding on the IRS. There can
be no assurance that the IRS or the courts will not take a contrary view.
Tax Opinions. As conditions to the merger, which General Dynamics and
Gulfstream agree may not be waived, General Dynamics must receive an opinion of
Jenner & Block, counsel to General Dynamics, and Gulfstream must receive an
opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel to Gulfstream,
subject to the assumptions set forth below, to the effect that, based upon
present federal income tax law, the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. These opinions will be based
on, among other things:
- certain representations and statements of General Dynamics and
Gulfstream;
- the assumption that such representations and statements will be complete
and accurate as of the effective time of the merger; and
- the assumption that the merger and related transactions will take place
in accordance with all of the terms of the merger agreement and as
described in this Joint Proxy Statement/ Prospectus.
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Federal Income Tax Consequences. Assuming that the merger qualifies as a
reorganization, the federal income tax consequences of the merger will be as
follows:
- none of Gulfstream, General Dynamics or Tara Acquisition Corporation will
recognize gain or loss as a result of the merger;
- Gulfstream stockholders who exchange their shares of Gulfstream common
stock for shares of General Dynamics common stock will not recognize gain
or loss as a result of the merger;
- the tax basis of the shares of General Dynamics common stock received by
the Gulfstream stockholders in exchange for their Gulfstream common stock
in the merger will be the same as the tax basis of the shares of
Gulfstream common stock surrendered in the exchange; and
- the holding period of the shares of General Dynamics common stock
received in the merger will include the holding period of the shares of
Gulfstream common stock surrendered in the exchange.
Tax Returns. A Gulfstream stockholder who exchanges Gulfstream common
stock for General Dynamics common stock will be required to retain records and
file with the stockholder's federal income tax return for the taxable year in
which the merger takes place a statement including all relevant facts relating
to the nonrecognition of gain or loss upon the exchange. The statement is
required to include:
- the stockholder's basis in the shares of Gulfstream common stock
surrendered in the merger; and
- the value of the General Dynamics common stock received in the merger,
using fair market value as of the effective time.
Qualifications. The preceding discussion does not address aspects of
federal income taxation that may be relevant to some Gulfstream stockholders who
are subject to special provisions of federal income tax law. For example, the
discussion does not address aspects of federal income taxation that may be
relevant to:
- dealers in securities or currencies;
- traders in securities;
- financial institutions;
- tax-exempt organizations;
- insurance companies;
- persons holding shares of Gulfstream common stock as part of a hedging,
"straddle," conversion or other integrated transaction;
- non-United States persons; or
- persons who acquired their shares of Gulfstream common stock by
exercising employee stock options or as some other form of compensation.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL POTENTIALLY RELEVANT TAX EFFECTS. GULFSTREAM
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO THEM, INCLUDING TAX RETURN REPORTING REQUIREMENTS,
THE APPLICABILITY AND EFFECTS OF FEDERAL, STATE, LOCAL AND OTHER TAX LAWS AND
THE EFFECTS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
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REGULATORY MATTERS
In order to complete the merger, we are required to give notification and
furnish information to the Federal Trade Commission and the Antitrust Division
of the Department of Justice and a specified waiting period requirement must be
satisfied. We filed the required notification and report forms with the Federal
Trade Commission and the Antitrust Division on May 21, 1999. [On
[ ], 1999, the waiting period under the pre-merger
notification requirements of the federal antitrust laws expired.] We are not
aware of any other significant regulatory approvals required for the merger.
At any time before or after completion of the merger, the Federal Trade
Commission, the Antitrust Division, a state governmental authority or a private
person or entity could seek under the antitrust laws to enjoin the merger or to
cause General Dynamics to divest, in whole or in part, any of its assets or
businesses, including assets and businesses of Gulfstream. Although we do not
believe that the merger presents any significant antitrust issues, we cannot
guarantee that a challenge to the merger will not be made or, if a challenge is
made, that we will prevail. Our obligations to complete the merger are dependent
on the condition that there be no final order, decree or ruling issued by any
court or other governmental agency that prohibits the merger.
RESALE RESTRICTIONS
All General Dynamics common stock received by Gulfstream stockholders in
the merger will be freely transferable, except those shares received by
Gulfstream "affiliates," as that term is defined under the Securities Act of
1933, at the time of the Gulfstream special meeting. General Dynamics common
stock received in the merger by affiliates of Gulfstream may be resold by them
only in transactions permitted by the resale provisions of Rule 144 or Rule 145
under the Securities Act, or as otherwise permitted under the Securities Act. An
individual or entity may be considered an affiliate of a company if it controls,
is controlled by, or is under common control with, that company and may include
that company's directors, executive officers and principal stockholders. In
addition, in order for the merger to qualify for pooling of interests accounting
treatment, affiliates of Gulfstream or General Dynamics may generally not sell,
transfer or dispose of, or in any other way reduce their risk relative to, their
shares of General Dynamics common stock or Gulfstream common stock during the
period beginning 30 days before the merger and ending when General Dynamics
publishes results covering at least 30 days of our post-merger combined
operations. Under the merger agreement, General Dynamics is obligated to publish
these results within 10 business days after the end of the first accounting
month ending at least 30 days after the merger. The merger agreement requires
each of us to use our best efforts to cause each of our respective affiliates to
execute a written agreement to comply with these requirements. Under the terms
of the merger agreement, certificates surrendered for exchange by an affiliate
of Gulfstream will not be exchanged for shares of General Dynamics common stock
until the affiliate has furnished such an executed agreement to General
Dynamics. General Dynamics has received these agreements from the affiliates of
Gulfstream.
THE MERGER AGREEMENT
This is a summary of the material provisions of the merger agreement, a
copy of which is attached as Appendix A to this document. You should refer to
the full text of the merger agreement for details of the merger and the terms
and conditions of the merger agreement.
THE MERGER
When the merger occurs, Tara Acquisition Corporation, a wholly-owned
subsidiary of General Dynamics, will be merged with and into Gulfstream. As a
result, Gulfstream will be a wholly-owned
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subsidiary of General Dynamics. The merger will have the effects specified in
the Delaware General Corporation Law.
Each share of Gulfstream common stock outstanding immediately before the
merger will be canceled and converted into the right to receive one share of
General Dynamics common stock. Each holder of a certificate representing shares
of Gulfstream common stock will no longer have any rights with respect to the
shares of Gulfstream common stock, except for the right to receive shares of
General Dynamics common stock. Each share of Gulfstream common stock held in
Gulfstream's treasury or by a subsidiary of Gulfstream or held by General
Dynamics or its subsidiaries at the time of the merger will be canceled and
retired without any payment.
In the merger, each outstanding and unexercised option to buy shares of
Gulfstream common stock will become an option to buy the same number of shares
of General Dynamics common stock at the same price and on the same terms as were
applicable to the Gulfstream option.
If, before the merger becomes effective, the number of outstanding shares
of General Dynamics or Gulfstream common stock is changed into a different
number of shares or a different class of shares as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification, combination,
exchange, recapitalization or similar transaction, the number of shares of
General Dynamics common stock into which each share or option to buy shares of
Gulfstream common stock will be converted in the merger will be adjusted
appropriately.
EFFECTIVE TIME OF THE MERGER
The merger will become effective when we file a certificate of merger with
the Secretary of State of the State of Delaware. However, we may agree to a
later time and specify that time in the certificate of merger. The parties
expect to file the certificate of merger and complete the merger shortly after
the two stockholders meetings, assuming the stockholders of both companies
approve the transaction and the other conditions in the merger agreement are
satisfied or waived. We cannot assure you when, or if, all the conditions to
consummation of the merger will be satisfied or waived. See "-- Conditions."
EXCHANGE PROCEDURES
Promptly after the merger, First Chicago Trust Company of New York, a
division of EquiServe L.P., as exchange agent, will mail a letter of transmittal
to each person who holds shares of Gulfstream common stock at the time of the
merger. The letter will include instructions for the exchange of Gulfstream
stock certificates for General Dynamics stock certificates. Gulfstream
stockholders must use this letter of transmittal to forward their Gulfstream
stock certificates. After surrendering his or her Gulfstream stock certificate
together with a completed letter of transmittal to the exchange agent, the
holder of a Gulfstream stock certificate will receive a General Dynamics stock
certificate. First Chicago will cancel the surrendered Gulfstream certificates.
GULFSTREAM STOCKHOLDERS SHOULD NOT SEND IN THEIR GULFSTREAM STOCK CERTIFICATES
UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
In addition to a certificate representing General Dynamics common stock,
the holder of a surrendered Gulfstream common stock certificate will receive any
dividends or other distributions on the General Dynamics common stock that have
a record date after the merger and a payment date before the holder surrenders
the Gulfstream common stock certificate. However, General Dynamics will not pay
any dividends until the holder of the Gulfstream stock certificate surrenders
that certificate. Taxes will be withheld as required.
After the merger, Gulfstream will not record any further transfers of
shares of Gulfstream common stock.
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Any General Dynamics common stock certificates issued in the merger and any
dividends or distributions deposited by General Dynamics with the exchange agent
that remain unclaimed by the former Gulfstream stockholders one year after the
merger will be delivered to General Dynamics. Any former Gulfstream stockholders
who have not complied with the exchange procedures before the first anniversary
of the merger may after that time look only to General Dynamics for payment of
the General Dynamics common stock, and any unpaid dividends and distributions on
the General Dynamics common stock. Neither Gulfstream nor General Dynamics will
be liable to former Gulfstream stockholders for any amount properly delivered to
a public official pursuant to applicable abandoned property, escheat or similar
laws.
No interest will be paid or accrued on unpaid dividends and distributions,
if any, which will be paid on surrender of Gulfstream common stock certificates.
If your Gulfstream stock certificate has been lost, stolen or destroyed,
you will only be entitled to obtain General Dynamics common stock by making an
affidavit and, if required by General Dynamics, posting a bond in an amount
sufficient to protect General Dynamics against claims related to your Gulfstream
stock certificate. The letter of transmittal and instructions will have more
details in this regard.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains essentially reciprocal representations and
warranties made by each of us to the other, including representations and
warranties relating to:
- due organization, power and standing, and other corporate matters;
- authorization, execution, delivery and enforceability of the merger
agreement;
- merger consents, filings and approvals and noncontravention of laws and
of certain corporate documents and other agreements;
- capital structure and outstanding securities;
- documents filed with the SEC and the accuracy of the information in those
documents;
- the absence of undisclosed liabilities;
- the absence of adverse changes;
- litigation and legal compliance;
- contract matters;
- tax matters;
- employee benefit matters;
- environmental matters;
- title to real and personal property;
- intellectual property matters;
- year 2000 compliance matters;
- labor matters;
- state takeover laws;
- Gulfstream ownership of General Dynamics common stock and General
Dynamics ownership of Gulfstream common stock;
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- the absence of actions that would prevent pooling treatment for the
merger or prevent the merger from being tax free; and
- brokers' and finders' fees with respect to the merger.
COVENANTS
Mutual Covenants. In the merger agreement, we have both agreed to:
- use our best efforts to take all actions necessary or advisable to
complete the merger;
- cooperate to give all required notices to third parties and the
government and use our best efforts to obtain all required third party
and governmental consents;
- grant each other reasonable access to our premises, properties, books,
records and documents;
- give each other prompt written notice of any material development
affecting us or our subsidiaries or affecting our ability to complete the
merger;
- consult with each other before issuing any press releases or making any
public announcements regarding the merger except as required by law;
- not enter into any agreement which we know or have reason to know is
reasonably likely to cause a major customer of the other party or one of
its subsidiaries to terminate a material program or agreement;
- use our best efforts to overturn or lift any court order or injunction
which prohibits the merger, provided that doing so does not require
General Dynamics to divest or hold any assets separate or take any other
action that would have a material adverse effect on General Dynamics;
- deliver to each other lists of names and addresses of individuals who are
affiliates under the securities laws as well as letters from each of the
affiliates acknowledging certain legal restrictions;
- use our best efforts to cause the merger to be accounted for as a pooling
of interests and to constitute a tax free reorganization and not
knowingly take or omit to take any action that would prevent this
accounting and tax treatment; and
- use our best efforts to cause customary comfort letters from our
accountants to be delivered to the other party.
CONDUCT OF BUSINESS
Gulfstream. Gulfstream has agreed to conduct its business in the ordinary
course before the merger. Gulfstream has also agreed to use its best efforts to
keep its business organization intact in all material respects, keep available
the services of its officers and employees as a group and maintain its existing
business relations. In addition, Gulfstream has agreed that until we complete
the merger, unless General Dynamics agrees in writing or as otherwise permitted
by the merger agreement, Gulfstream will not:
- amend its charter or bylaws or file any certificate of designation or
similar document with respect to any authorized but unissued capital
stock;
- split, combine or reclassify its outstanding shares of capital stock;
- declare any dividend or distribution;
- issue or authorize the issuance of any shares of its capital stock other
than in connection with the exercise of outstanding stock options;
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- repurchase, redeem or otherwise acquire any shares of its capital stock;
- merge or consolidate with any entity;
- sell, lease or otherwise dispose of any stock of its subsidiaries or any
capital asset other than in the ordinary course of business;
- liquidate, dissolve, recapitalize or reorganize its business;
- acquire an interest in a business or enter into a joint venture;
- incur any indebtedness for borrowed money other than existing debt,
normal borrowings under existing credit lines and normal intercompany
debt;
- allow any lien, other than certain permitted liens, to exist with respect
to any material assets;
- change its accounting principles, practices or methods or revalue its
assets except as required by generally accepted accounting principles and
except for normal write-downs of inventory and accounts receivable;
- grant any general or uniform increase in employee pay rates or benefits
except as required by a current collective bargaining agreement;
- increase the compensation payable or to become payable to, or the bonus,
insurance, pension or other benefits, payments or arrangements of, an
officer or salaried employee earning more than $75,000 annually, except
as required by agreements in existence on the date of the merger
agreement;
- enter into a material contract or commitment or engage in a material
transaction with an affiliated person, other than a subsidiary, or with
an unaffiliated person if, to Gulfstream's knowledge, the contract,
commitment or transaction is reasonably likely to result in a material
financial loss;
- make a material tax election or settle or compromise a material tax
liability;
- pay any claims, liabilities or obligations other than normal obligations
that are reflected or reserved for in the consolidated financial
statements or were otherwise incurred in the ordinary course of business;
- settle or compromise a material pending or threatened lawsuit, action or
proceeding; or
- commit to do any of the acts listed above.
General Dynamics. General Dynamics has agreed not to declare or pay any
dividend or distribution with respect to its capital stock until we complete the
merger, other than a regular quarterly cash dividend, unless Gulfstream agrees
in writing or as otherwise permitted by the merger agreement.
NO SOLICITATION OF TRANSACTIONS
Gulfstream agreed in the merger agreement that it and its subsidiaries
would immediately cease any discussions being conducted with respect to any
proposal made by a party to acquire all or a material portion of the assets of,
or any material equity interest in, Gulfstream and its subsidiaries taken as a
whole. Gulfstream also agreed not to initiate or solicit the making of such
proposal and, except as described below, not to engage in any discussions with,
furnish any information to, or enter into any agreement with, a party making
such a proposal.
The merger agreement permits Gulfstream to enter into discussions with,
furnish information to, or withdraw or modify its recommendation and approval of
the merger and enter into any agreement
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with, a party making such a proposal on or prior to June 30, 1999, if the board
of directors of Gulfstream determines that the proposal could reasonably be
likely to result in a written proposal which the board of directors of
Gulfstream believes is reasonably capable of being completed, taking into
account all aspects of the proposal, and presents to Gulfstream and its
stockholders more favorable financial and other terms, taken as a whole, than
the merger.
BOARDS' COVENANT TO RECOMMEND
Each of our boards of directors has agreed to recommend to our stockholders
that they vote in favor of each of the proposals required to complete the
merger.
COMPENSATION AND BENEFITS PLANS
Subject to the terms of any Gulfstream collective bargaining agreement,
General Dynamics has agreed that until December 31, 2000, it will:
- cause salary levels and hourly wages of all Gulfstream employees to be
maintained at levels not less than the salary and wage levels provided by
Gulfstream before the merger; and
- cause the benefits and benefits levels, excluding equity-based
compensation, of all Gulfstream employees to be maintained at levels that
are substantially comparable to those provided before the merger.
Employees of Gulfstream and its subsidiaries will also receive:
- credit for years of service with Gulfstream for purposes of eligibility
and vesting, but not for benefit accrual, under any General Dynamics
benefit plans in which they may participate after the merger;
- a waiver of any pre-existing condition exclusions, waiting periods and
actively at work requirements under any General Dynamics medical, dental,
vision or other welfare benefit plan in which they may participate after
the merger; and
- credit under any General Dynamics medical, dental, vision or other
welfare benefit plan in which they may participate after the merger for
eligible expenses incurred on or before the merger for the purpose of
satisfying all deductible and similar requirements for the applicable
plan year.
Gulfstream has also agreed that an independent trustee will act with
respect to the merger on behalf of each Gulfstream benefit plan that holds
shares of Gulfstream common stock, in accordance with the terms of the benefit
plan.
GOVERNANCE
For at least one year following the merger, General Dynamics will elect
Theodore J. Forstmann, who is the Chairman and Chief Executive Officer of
Gulfstream and a general partner of Forstmann Little, as a director and the
non-executive Chairman of the board of directors of Gulfstream and will elect
Sandra J. Horbach, who is a director of Gulfstream and a general partner of
Forstmann Little, as a director of Gulfstream.
After the merger, Mr. Forstmann and Ms. Horbach will be entitled as
directors of Gulfstream to exculpation, indemnification and reimbursement of
expenses pursuant to terms and conditions identical to the terms and conditions
applicable to the directors of General Dynamics included in the certificate of
incorporation and bylaws of General Dynamics. They will also be entitled to
coverage under the directors' and officers' liability and fiduciary liability
insurance policies and any
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indemnification agreements of General Dynamics on the same terms and conditions
applicable to the directors of General Dynamics. See "Management and Operations
After the Merger."
INDEMNIFICATION AND INSURANCE
General Dynamics has agreed that, after the merger, it will cause
Gulfstream to indemnify each present and former director and officer of
Gulfstream or any of its subsidiaries or corporate parents against all losses,
claims, damages and expenses in connection with any action or omission, or
alleged action or omission, existing or occurring at or before the merger, to
the fullest extent permitted under the Delaware General Corporation Law or other
applicable law. Any determination with respect to whether an indemnified party
is entitled to indemnification will, if requested by such indemnified party, be
made by independent legal counsel selected by the indemnified party and
reasonably acceptable to Gulfstream.
In addition, General Dynamics has agreed, for a period of six years after
the merger, to maintain a policy of directors' and officers' liability insurance
and fiduciary liability insurance for actions and omissions occurring at or
before the merger with coverage in amount and scope at least as favorable as
Gulfstream's existing directors' and officers' liability insurance and fiduciary
liability insurance coverage, except that it need not spend more than 200% of
the last annualized premium paid before the date of the merger agreement in
doing so.
General Dynamics will pay on an as-incurred basis the reasonable fees and
expenses of each indemnified party (including reasonable fees and expenses of
counsel) in advance of the final disposition of the action that is subject to
indemnification, but the indemnified party must reimburse those amounts if the
indemnified party is not entitled to indemnification.
For six years after the merger, General Dynamics will cause Gulfstream to
maintain the same provisions in its certificate of incorporation and bylaws with
respect to exculpation and indemnification of directors and officers as are in
effect on the date of the merger agreement.
In the event of any action, suit, investigation or proceeding, the
indemnified party will be entitled to control the defense of the action, suit,
investigation or proceeding with counsel reasonably acceptable to General
Dynamics.
REGISTRATION AGREEMENT
General Dynamics has agreed to enter into a registration agreement with
three investment partnerships affiliated with Forstmann Little and the directors
and executive officers of Gulfstream who own stock of Gulfstream. The
registration agreement provides, among other things, that General Dynamics will,
upon request, register for resale the shares of General Dynamics common stock
which the partnerships and the directors and executive officers will receive in
the merger. Without this registration, the shares of General Dynamics common
stock received by these persons in the merger would be subject to restrictions
on resale under the federal securities laws that do not apply to the other
stockholders of Gulfstream. It is anticipated that the three investment
partnerships may register and sell all or a significant portion of the General
Dynamics common stock they receive in the merger shortly after such resales are
permitted under the accounting rules governing pooling of interests transactions
(see "The Merger -- Resale Restrictions"), subject, however, to the market price
of General Dynamics common stock, prevailing market conditions and other
factors. A copy of the form of the registration agreement is attached as
Appendix C to this document. You should refer to the full text of the
registration agreement for the details of the terms and conditions of the
registration agreement.
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<PAGE> 64
FINANCIAL STATEMENTS
General Dynamics has agreed that it will prepare and publicly release, as
soon as practicable, and in any event within 10 business days after the end of
the first full accounting month ending at least 30 days after the closing date
of the merger, a report filed with the SEC or any other public filing which
includes the combined financial results (including combined net sales and net
earnings) of General Dynamics and Gulfstream for a period of at least 30 days of
combined operations following the merger.
OTHER COVENANTS
Gulfstream has agreed to grant any approvals and take any other required
actions to complete the merger as promptly as practicable on the terms contained
in the merger agreement if a fair price, moratorium, control share acquisition
or other form of anti-takeover statute, rule or regulation is or becomes
applicable to the merger.
Gulfstream has agreed to waive the restrictions on General Dynamics
contained in certain standstill provisions in the confidentiality agreement
between Gulfstream and General Dynamics to the extent required to allow General
Dynamics to comply with its obligations and enforce its rights under the merger
agreement.
General Dynamics has agreed to use its best efforts to cause the shares of
General Dynamics common stock issuable in the merger to be approved for listing
on the New York Stock Exchange as soon as practicable.
CONDITIONS
We may complete the merger only if the following conditions are met:
- the holders of Gulfstream common stock and the holders of General
Dynamics common stock have approved each of the proposals required to
complete the merger;
- the registration statement on Form S-4 of which this document is a part
is effective under the Securities Act and we have satisfied all state
securities or "blue sky" laws;
- the General Dynamics common stock to be issued pursuant to the merger is
approved for listing on the New York Stock Exchange;
- the waiting period applicable to the consummation of the merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 expires or
terminates;
- all material consents, authorizations, orders and approvals of and
filings with governmental authorities required in connection with the
merger, if any, are obtained or made; and
- there is no court order or injunction which prohibits the completion of
the merger.
Additionally, the merger agreement obligates each party to complete the
merger only if, before the merger, the following conditions are satisfied:
- the representations and warranties of the other party in the merger
agreement are true and correct in all material respects as of the closing
date;
- the other party has complied in all material respects with all agreements
and covenants required by the merger agreement to be complied with by it
on or before the merger;
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<PAGE> 65
- the party's independent public accountants have delivered a written
opinion dated the closing date stating:
- in the case of the opinion that Gulfstream receives, that Gulfstream's
independent accountants concur with Gulfstream's conclusion that no
conditions exist that would preclude Gulfstream's ability to be a
party in a business combination to be accounted for as a pooling of
interests; and
- in the case of the opinion that General Dynamics receives, that the
merger should be treated as a pooling of interests in accordance with
generally accepted accounting principles as described in Opinion 16 of
the Accounting Principles Board; and
- the party has received an opinion of its counsel that the merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
TERMINATION
We may terminate the merger agreement and abandon the merger at any time
before we complete the merger by our mutual written consent.
Either of us may terminate the merger agreement if:
- a court or other government agency issues a final, nonappealable order,
decree or ruling or takes any other final action prohibiting the merger;
- any of the representations, warranties, covenants or agreements of the
other party contained in the merger agreement is materially breached and
the breach has not been cured within 45 days after written notice is
received by the party alleged to be in breach;
- the merger does not occur by December 31, 1999, but a party may not
terminate for this reason if the failure of the merger to be consummated
results primarily from that party's breach of any representation or
agreement in the merger agreement;
- the stockholders of the other party fail to approve each of the proposals
required to complete the merger; or
- the average market price of a share of General Dynamics common stock for
the 15 trading day period ending on the fifth trading day before the
Gulfstream special meeting is less than $63.
General Dynamics may also terminate the merger agreement if the board of
directors of Gulfstream withdraws or amends in any manner adverse to General
Dynamics its recommendation and approval of the merger.
Gulfstream may also terminate the merger agreement if it receives, on or
before June 30, 1999, a competing acquisition proposal which Gulfstream's board
of directors determines to be a "superior acquisition proposal" as defined in
the merger agreement and Gulfstream enters into a letter of intent, agreement in
principle, acquisition agreement or other agreement with respect to that
proposal.
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<PAGE> 66
TERMINATION FEE
Gulfstream has agreed to pay a termination fee of $150 million to General
Dynamics if:
- General Dynamics terminates the merger agreement:
- as a result of the withdrawal or modification of the recommendation of
the merger by Gulfstream's board of directors or because Gulfstream's
stockholders do not approve the merger; and within 12 months after the
date of termination, Gulfstream enters into an agreement involving a
"third party acquisition" as defined in the merger agreement or a
third party acquisition occurs, and the agreement was entered into, or
the third party acquisition was publicly announced, on or before the
date of the termination of the merger agreement; or
- Gulfstream terminates the merger agreement because it has received, on or
before June 30, 1999, a competing acquisition proposal which Gulfstream's
board of directors determines to be a "superior acquisition proposal" as
defined in the merger agreement and Gulfstream enters into a letter of
intent, agreement in principle, acquisition agreement or other agreement
with respect to that proposal.
If Gulfstream is obligated to but does not promptly pay the termination fee
to General Dynamics, Gulfstream must pay all of General Dynamics' reasonable
costs and expenses, including reasonable attorney's fees, in enforcing its
rights to collect the termination fee.
OTHER EXPENSES
Each of us has agreed to pay and be responsible for the expenses incurred
by us in connection with the merger agreement.
AMENDMENT, EXTENSION AND WAIVER
We may amend the merger agreement at any time before or after our
stockholders have approved the proposals required to complete the merger.
However, after the Gulfstream stockholders have approved the merger, no
amendment will be effective unless approved by the Gulfstream stockholders to
the extent such approval is required under the Delaware General Corporation Law.
All amendments to the merger agreement must be in writing.
At any time before the merger becomes effective, either party may waive any
requirement that the merger agreement imposes on the other party or may grant
the other party more time to complete its obligations. Each party may waive any
breach or violation by the other party of its representations and warranties
made in the merger agreement. A waiver or extension will be effective only if it
is in writing.
THE VOTING AGREEMENT
This is a summary of the material provisions of the voting agreement, a
copy of which is attached as Appendix B to this document. You should refer to
the full text of the voting agreement for details of its terms and conditions.
As an inducement to General Dynamics to enter into the merger agreement,
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-IV, L.P., Gulfstream Partners, L.P., Gulfstream Partners II, L.P.,
Nicholas C. Forstmann and Theodore J. Forstmann have entered into a voting
agreement with General Dynamics under which they have agreed to vote all shares
of Gulfstream common stock owned by them in favor of the merger and, if
applicable, give consents with respect to those shares. Forstmann Little & Co.
Subordinated Debt and Equity Management
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<PAGE> 67
Buyout Partnership-IV, L.P., Gulfstream Partners, L.P. and Gulfstream Partners
II, L.P. are investment partnerships that are affiliates of Forstmann Little.
Nicholas C. Forstmann and Theodore J. Forstmann are general partners of the
general partners of those partnerships and are principals of Forstmann Little.
Together, the three partnerships hold a total of 16,554,375 shares of Gulfstream
common stock, representing approximately 23% of the outstanding common stock of
Gulfstream. The parties to the voting agreement have granted to General Dynamics
an irrevocable proxy to vote the shares of Gulfstream common stock held by them
in favor of the merger.
MANAGEMENT AND OPERATIONS AFTER THE MERGER
The merger agreement provides that for at least one year following the
merger, General Dynamics will elect Theodore J. Forstmann, who is the Chairman
and Chief Executive Officer of Gulfstream and a general partner of Forstmann
Little, as a director and the non-executive Chairman of the board of directors
of Gulfstream and will elect Sandra J. Horbach, who is a director of Gulfstream
and a general partner of Forstmann Little, as a director of Gulfstream. In
addition, each of the other executive officers of Gulfstream is expected to
continue to serve in the same capacity after the merger. None of the directors
of Gulfstream is expected to become a director of General Dynamics after the
merger.
General Dynamics currently intends to operate Gulfstream as a separate
subsidiary after the merger under the management of its present executive
officers. Changes in certain administrative functions, such as accounting,
financial reporting and management information systems, may be made in order to
integrate the businesses of General Dynamics and Gulfstream. General Dynamics
also intends to apply its core competencies in the development, design and
production of sophisticated products to the Gulfstream business in order to
continue to improve Gulfstream's production efficiency and profitability.
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UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial statements give effect
to the merger using the pooling of interests method of accounting. For a
description of pooling of interests accounting with respect to the merger, see
"The Merger -- Accounting Treatment." The unaudited pro forma combined financial
statements have been prepared from, should be read in conjunction with and are
qualified in their entirety by reference to the historical consolidated
financial statements and notes thereto for General Dynamics and Gulfstream,
which are incorporated by reference into this document. See "Where You Can Find
More Information".
The unaudited pro forma combined financial information gives effect to the
merger as if it had been consummated, with respect to the statements of
earnings, at the beginning of the periods presented or, with respect to the
balance sheet, as of the date presented.
The following merger-related items are based on preliminary estimates and
certain assumptions that the management of General Dynamics and Gulfstream
believe are reasonable, and are not included as pro forma adjustments because
they will be recognized in the period immediately following the consummation of
the merger:
1) General Dynamics and Gulfstream estimate that they will incur direct
transaction costs of approximately $33 million associated with the
merger. These costs consist primarily of investment banking, legal,
bank fees, accounting, printing and regulatory filing fees.
2) In connection with the implementation of the merger, General Dynamics
expects to initiate actions to refinance certain of Gulfstream's debt
instruments. As a result of these actions, General Dynamics
anticipates recording a one-time non-cash charge of approximately $8
million for the unamortized debt costs associated with these
instruments.
The unaudited pro forma combined financial information has been included
for illustrative purposes only and is not necessarily indicative of the actual
or future financial position or results of operations that would have occurred
or will occur upon consummation of the merger.
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<PAGE> 69
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED APRIL 4, 1999
--------------------------------------------------
GENERAL PRO FORMA
DYNAMICS GULFSTREAM(A) ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $1,377 $625 $2,002
Operating costs and expenses................... 1,234 528 1,762
------ ------ ------
Operating earnings............................. 143 97 240
Interest (expense) income, net............... (1) (5) (6)
Other income, net............................ 9 -- 9
------ ------ ------
Earnings before income taxes................... 151 92 243
(Benefit)/provision for income taxes
R&E tax credit............................... (165) -- (165)
Provision.................................... 51 34 85
------ ------ ------
(114) 34 (80)
------ ------ ------
Net earnings................................... $265 $ 58 $ 323
====== ====== ======
Net earnings per share:
Basic........................................ $ 2.09 $ .81 $ 1.62
Diluted...................................... 2.07 .79 1.60
Weighted average shares outstanding (in
millions):
Basic........................................ 127.0 72.5 199.5
Diluted...................................... 128.3 73.9 202.2
</TABLE>
See notes to unaudited pro forma combined financial data on page [ ].
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 29, 1998
--------------------------------------------------
GENERAL PRO FORMA
DYNAMICS GULFSTREAM(A) ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $1,154 $ 503 $1,657
Operating costs and expenses................... 1,030 434 1,464
------ ------ ------
Operating earnings............................. 124 69 193
Interest (expense) income, net............... 1 (4) (3)
Other income (expense), net.................. (1) -- (1)
------ ------ ------
Earnings before income taxes................... 124 65 189
Provision for income taxes..................... 42 24 66
------ ------ ------
Net earnings................................... $ 82 $ 41 $ 123
====== ====== ======
Net earnings per share:
Basic........................................ $ .65 $ .56 $ .62
Diluted...................................... .65 .54 .61
Weighted average shares outstanding (in
millions):
Basic........................................ 125.9 72.5 198.4
Diluted...................................... 126.9 75.4 202.3
</TABLE>
See notes to unaudited pro forma combined financial data on page [ ].
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<PAGE> 70
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------
GENERAL PRO FORMA
DYNAMICS GULFSTREAM ADJUSTMENTS COMBINED
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $4,970 $2,428 $7,398
Operating costs and expenses..................... 4,428 2,055 6,483
------ ------ ------
Operating earnings............................... 542 373 915
Interest (expense) income, net................. 4 (21) (17)
Other income, net.............................. 3 -- 3
------ ------ ------
Earnings before income taxes..................... 549 352 901
Provision for income taxes....................... 185 127 312
------ ------ ------
Net earnings..................................... $ 364 $ 225 $ 589
====== ====== ======
Net earnings per share:
Basic.......................................... $ 2.88 $ 3.08 $ 2.95
Diluted........................................ 2.86 3.00 2.91
Weighted average shares outstanding (in
millions):
Basic.......................................... 126.4 73.1 199.5
Diluted........................................ 127.2 75.0 202.2
</TABLE>
See notes to unaudited pro forma combined financial data on page [ ].
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------
GENERAL PRO FORMA
DYNAMICS GULFSTREAM ADJUSTMENTS COMBINED
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $4,062 $1,904 $5,966
Operating costs and expenses..................... 3,616 1,675 5,291
------ ------ ------
Operating earnings............................... 446 229 675
Interest income (expense), net................. 36 (20) 16
Other income (expense), net.................... (3) -- (3)
------ ------ ------
Earnings before income taxes..................... 479 209 688
Provision/(benefit) for income taxes............. 163 (34) 129
------ ------ ------
Net earnings..................................... $ 316 $ 243 $ 559
====== ====== ======
Net earnings per share:
Basic.......................................... $ 2.51 $ 3.28 $ 2.80
Diluted........................................ 2.50 3.12 2.73
Weighted average shares outstanding (in
millions):
Basic.......................................... 125.7 74.1 199.8
Diluted........................................ 126.6 77.9 204.5
</TABLE>
See notes to unaudited pro forma combined financial data on page [ ].
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<PAGE> 71
UNAUDITED PRO FORMA COMBINED STATEMENT OF EARNINGS
(Dollars in millions, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------
GENERAL PRO FORMA
DYNAMICS GULFSTREAM ADJUSTMENTS COMBINED
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales........................................ $3,581 $1,064 $4,645
Operating costs and expenses..................... 3,228 1,014 4,242
------ ------ ------
Operating earnings............................... 353 50 403
Interest (expense) income, net................. 55 (3) 52
Other income, net.............................. 1 -- 1
------ ------ ------
Earnings before income taxes..................... 409 47 456
Provision for income taxes....................... 139 -- 139
------ ------ ------
Net earnings..................................... $ 270 $ 47 $ 317
====== ====== ======
Net earnings per share:
Basic.......................................... $ 2.14 $ .64 $ 1.58
Diluted........................................ 2.13 .60 1.54
Weighted average shares outstanding (in
millions):
Basic.......................................... 126.3 73.9 200.2
Diluted........................................ 126.9 78.5 205.4
</TABLE>
See notes to unaudited pro forma combined financial data on page [ ].
63
<PAGE> 72
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Dollars in millions)
<TABLE>
<CAPTION>
AS OF APRIL 4, 1999
--------------------------------------------------------
GENERAL PRO FORMA
DYNAMICS GULFSTREAM(a) ADJUSTMENTS COMBINED
-------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents..................... $ 133 $ 75 $ 208
Marketable securities.................... 52 -- 52
------ ------ ------
185 75 260
Accounts receivable...................... 314 330 644
Contracts in process..................... 1,186 -- 1,186
Inventories.............................. -- 787 787
Other current assets..................... 729 13 742
------ ------ ------
Total Current Assets........................ 2,414 1,205 3,619
NONCURRENT ASSETS
Leases receivable -- finance
operations............................. 181 -- 181
Real estate held for development......... 63 -- 63
Property, plant and equipment, net....... 718 166 884
Intangible assets........................ 1,528 256 1,784
Other assets............................. 202 96 298
------ ------ ------
Total Noncurrent Assets..................... 2,692 518 3,210
------ ------ ------
$5,106 $1,723 $6,829
====== ====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt........ $ -- $ 76 $ 76
Short-term debt -- finance operations.... 58 -- 58
Accounts payable......................... 215 210 425
Customer deposits........................ -- 566 566
Other current liabilities................ 1,301 177 1,478
------ ------ ------
Total Current Liabilities................... 1,574 1,029 2,603
NONCURRENT LIABILITIES
Long-term debt........................... 162 266 428
Long-term debt -- finance operations..... 79 -- 79
Other liabilities........................ 802 213 1,015
------ ------ ------
Total Noncurrent Liabilities................ 1,043 479 1,522
SHAREHOLDERS' EQUITY
Common Stock, par........................ 169 1 75 (b) 245
Additional paid-in capital............... 143 449 (366)(b) 226
Retained earnings........................ 2,875 58 2,933
Treasury stock........................... (695) (291) 291 (b) (695)
Accumulated other comprehensive income... (3) (2) (5)
------ ------ ---- ------
Total Shareholders' Equity.................. 2,489 215 -- 2,704
------ ------ ---- ------
$5,106 $1,723 -- $6,829
====== ====== ==== ======
</TABLE>
See notes to unaudited pro forma combined financial data on page [ ].
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<PAGE> 73
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(a) Gulfstream information is as of and for the three months ended March
31, 1999 and 1998. Certain Gulfstream balance sheet captions have been
combined to conform with General Dynamics' presentation.
(b) Represents the retirement of treasury stock and the conversion of
Gulfstream common stock into General Dynamics common stock.
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<PAGE> 74
DESCRIPTION OF GENERAL DYNAMICS CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
General Dynamics' authorized capital stock consists of 200,000,000 shares
of common stock, par value $1.00 per share, and 50,000,000 shares of preferred
stock, par value $1.00 per share. At the General Dynamics special meeting,
General Dynamics stockholders will be asked to approve an increase in the number
of authorized shares of common stock to 300,000,000.
GENERAL DYNAMICS COMMON STOCK
The holders of General Dynamics common stock are entitled to one vote for
each share on all matters voted on by stockholders. The holders of General
Dynamics common stock do not have any conversion, redemption or preemptive
rights. The holders of General Dynamics common stock are entitled to dividends
as declared by the General Dynamics board of directors. On liquidation, holders
are entitled to receive on a pro rata basis all assets of General Dynamics
available for distribution to stockholders. The rights and dividends upon
liquidation may be junior to the rights of holders of any outstanding preferred
stock.
GENERAL DYNAMICS PREFERRED STOCK
There are no shares of General Dynamics preferred stock outstanding as of
[ ], 1999. The General Dynamics board of directors is permitted,
without further authorization by General Dynamics' stockholders, to provide for
the issuance of General Dynamics preferred stock, in one or more series, and to
fix for each series, among other things:
- the designation and number of shares;
- the dividend rate;
- the limitations, restrictions or conditions on the payment of dividends;
- the redemption rights of General Dynamics and the price or prices at
which shares may be redeemed;
- the amount payable on any voluntary or involuntary liquidation,
dissolution or winding up of General Dynamics;
- the amount of the sinking fund, if any, to be applied to the purchase or
redemption of shares and the manner of its application;
- whether the shares will be convertible into, or exchangeable for, shares
of any other class or classes or of any other series of the same class of
stock of General Dynamics and, if so, on what terms;
- whether the issue of any additional shares of this series or any future
series or any other class of stock will have any restrictions and, if so,
the nature of these restrictions;
- the voting powers, if any, of the shares and, if so granted, the extent
of such voting powers; and
- any other designations, powers, preferences, rights, qualifications,
limitations and restrictions as are permitted by the Delaware General
Corporation Law and the General Dynamics certificate of incorporation.
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<PAGE> 75
COMPARATIVE RIGHTS OF STOCKHOLDERS
GENERAL
After the merger, stockholders of Gulfstream will become stockholders of
General Dynamics. Their rights will then be governed by the General Dynamics
certificate of incorporation and bylaws. Presently, Gulfstream stockholders'
rights are governed by the Gulfstream certificate of incorporation and bylaws.
Both companies are incorporated in Delaware, so the Delaware General Corporation
Law will continue to govern the rights of Gulfstream stockholders after the
merger. The following summary discusses differences between the Gulfstream
certificate of incorporation and bylaws and the General Dynamics certificate of
incorporation and bylaws. This summary is not a complete statement of all
differences between rights of the holders of General Dynamics common stock and
Gulfstream common stock and is qualified by the full text of each document and
the Delaware General Corporation Law. For information as to how to get those
documents, see "Where You Can Find More Information."
CLASSIFIED BOARD OF DIRECTORS
The Gulfstream certificate of incorporation provides that its board of
directors is classified into three classes with each class elected in staggered
elections and serving a three-year term. Classification of directors makes it
more difficult for stockholders to change the composition of the board of
directors. At least two annual meetings of stockholders, instead of one, are
generally required to change who represents the majority of the board of
directors. If a company were confronted by a holder attempting to force a proxy
contest, a tender or exchange offer or other extraordinary corporate
transaction, this classification and time period would allow the board
sufficient time to review the proposal. The board would also have the
opportunity to review any available alternatives to the proposal and to act in
what it believes to be the best interests of the stockholders.
The classification provisions could also discourage a third party from
starting a proxy contest, making a tender offer or otherwise attempting to
obtain control of Gulfstream. That transaction could be beneficial to Gulfstream
or its stockholders.
The General Dynamics board of directors is not classified into different
classes. Each director serves a one-year term.
NUMBER OF DIRECTORS
Gulfstream's certificate of incorporation provides that the Gulfstream
board of directors will consist of not less than three directors. The Gulfstream
board of directors currently consists of 22 directors. The number of directors
is determined by resolution of the Gulfstream board of directors adopted by a
majority of the authorized number of directors at the time.
The General Dynamics bylaws provide that the number of directors will not
be less than five nor more than 15. The General Dynamics board of directors
currently consists of ten directors. The number of directors is determined by
resolution of the General Dynamics board of directors approved by two-thirds of
the directors in office at the time.
REMOVAL OF DIRECTORS
The Gulfstream certificate of incorporation provides that stockholders may
remove any director or the entire board of directors from office only for cause
and by the affirmative vote of the holders of a majority of the voting power of
the issued and outstanding shares of Gulfstream common stock entitled to elect
directors. Gulfstream's certificate of incorporation does not define the term
"for cause."
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<PAGE> 76
The General Dynamics certificate of incorporation and bylaws do not include
provisions limiting the removal of directors.
VACANCIES
Gulfstream's certificate of incorporation provides that vacancies in the
board of directors and newly created directorships may be filled by a majority
of the directors then in office, even if less than a quorum, or by a sole
remaining director. Any director so elected will serve for the remainder of the
full term of the class of directors in which the new directorship was created or
the vacancy occurred and until that director's successor has been elected and
qualified.
The General Dynamics bylaws provide that, except as required by the General
Dynamics certificate of incorporation, vacancies in the board of directors and
newly created directorships may be filled by either the stockholders entitled to
vote for the election of directors or by a vote of two-thirds of the directors
then in office, although less than a quorum. Any director so elected will serve
until the next annual meeting and until that director's successor has been
elected and qualified, or until that director dies or resigns.
SPECIAL MEETINGS
The Gulfstream bylaws provide that the board of directors, chairman of the
board of directors or president of Gulfstream may call a special meeting of
stockholders. The Gulfstream bylaws also provide that the secretary of
Gulfstream will call a special meeting of stockholders upon the written request
of a stockholder or stockholders holding of record a majority of the voting
power of the issued and outstanding Gulfstream common stock entitled to vote at
a special meeting.
The General Dynamics bylaws provide that the chairman of the board of
directors or a majority of the directors of General Dynamics may call a special
meeting of stockholders.
CONSENT OF STOCKHOLDERS IN LIEU OF A MEETING
The Gulfstream bylaws provide that except as required by Gulfstream's
certificate of incorporation or by law, any action required or permitted to be
taken at an annual meeting or special meeting of the Gulfstream stockholders may
also be taken without a meeting of the Gulfstream stockholders. This is possible
if a written consent that describes the action taken is signed by the holders of
outstanding Gulfstream common stock having at least the minimum number of votes
that would be necessary to authorize the action at an annual meeting or special
meeting of the Gulfstream stockholders.
Because the General Dynamics certificate of incorporation and bylaws do not
specifically prohibit the taking of action by the General Dynamics stockholders
by written consent of stockholders without a meeting, under the Delaware General
Corporation Law, General Dynamics stockholders have the same right to act by
written consent as do the stockholders of Gulfstream.
ADVANCED NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS
The Gulfstream bylaws require that in the case of an annual meeting of
stockholders, a stockholder who wishes to nominate a person for election to the
board of directors, must deliver a nomination to the secretary of Gulfstream on
a timely basis. To be timely, a stockholder must give notice that is received by
Gulfstream's principal executive offices not less than 60 days nor more than 90
days before the annual meeting. However, if Gulfstream gives its stockholders
less than 70 days' notice of the annual meeting, Gulfstream must receive the
stockholder's notice no later than the tenth day after Gulfstream notifies the
stockholders of the meeting. In the case of any special meeting of Gulfstream
stockholders called to elect directors, stockholders must give notice to
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Gulfstream's principal office no later than the close of business on the tenth
day after Gulfstream mailed notice or publicly disclosed the date of the special
meeting, whichever came first.
Unlike Gulfstream, with respect to timely notice procedures, the General
Dynamics bylaws do not differentiate between annual and special meetings. In the
case of all annual and special meetings of General Dynamics stockholders at
which the stockholders will elect directors, the General Dynamics bylaws include
notice procedures and deadlines similar to those contained in Gulfstream's
bylaws with respect to annual meetings.
The Gulfstream bylaws require that a Gulfstream stockholder giving the
required notice provide Gulfstream with his or her name and address, the class
and number of shares of Gulfstream common stock beneficially owned by the
stockholder, a description of all arrangements or understandings between the
stockholder and his or her nominee for the Gulfstream board of directors, a
representation that the stockholder intends to appear in person or by proxy at
the annual or special meeting in order to nominate such candidate for election
to the board of directors and any other information relating to the stockholder
that would be required under the securities laws to be disclosed in a proxy
statement or other federal securities law filing by Gulfstream. The Gulfstream
stockholder must also provide the nominee's name, age, business and residence
addresses and principal occupation or employment, the class and number of shares
of Gulfstream common stock beneficially owned by the nominee and any other
information relating to the nominee that would be required to be disclosed by
Gulfstream in connection with its federal securities law filings.
The General Dynamics bylaws require that a General Dynamics stockholder
giving notice provide General Dynamics with his or her name and address, the
class and number of General Dynamics common shares beneficially owned by the
stockholder and all information about a nominee that would be required to be
disclosed by General Dynamics in connection with its federal securities law
filings.
ADVANCED NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS
The Gulfstream bylaws require that a stockholder wishing to have any matter
discussed at an annual meeting of stockholders must give a notice to the
secretary of Gulfstream. To be timely, a stockholder must deliver notice that is
received by Gulfstream not less than 60 days nor more than 90 days before the
annual meeting. If Gulfstream gives its stockholders less than 70 days' notice
of the annual meeting, Gulfstream must receive the stockholder's notice no later
than the tenth day after Gulfstream notified the stockholders of the annual
meeting or publicly disclosed the annual meeting of stockholders. Neither the
Gulfstream bylaws nor certificate of incorporation contains any provision with
respect to advance notice of stockholder proposals for discussion at special
meetings of stockholders.
In the case of all annual and special meetings of General Dynamics
stockholders at which the stockholders will elect directors, the General
Dynamics bylaws include notice procedures and deadlines similar to those
contained in Gulfstream's bylaws with respect to annual meetings of Gulfstream's
stockholders.
The Gulfstream bylaws require that a stockholder giving notice of business
to be discussed at an annual meeting of stockholders provide Gulfstream with a
brief description of such business and the reason for proposing to discuss such
business at the meeting, the stockholder's name and address, the class and
number of shares of Gulfstream common stock beneficially owned, any material
interest of the stockholder in the business proposed to be discussed, a
description of all arrangements or understandings between the stockholder and
any other person in connection with such business and a representation that the
stockholder intends to appear in person or by proxy at such annual meeting in
order to bring such business before the meeting.
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The General Dynamics bylaws require that a stockholder giving notice of
business to be discussed at an annual or special meeting of stockholders provide
General Dynamics with a brief description of such business, the stockholder's
name and address, the class and number of General Dynamics common shares
beneficially owned, and any material interest of the stockholder in the business
proposed to be discussed.
TRANSACTIONS WITH INTERESTED STOCKHOLDERS
The Gulfstream bylaws provide that the fact that a director or officer of
Gulfstream has a financial interest in a contract or other transaction between
Gulfstream and any other entity, or the fact that a director or officer of
Gulfstream is also a director or officer of the other entity involved, will not
make the contract or transaction void or voidable as long as the disinterested
directors on the board of directors or committee of the board of directors who
approved the contract or transaction, if the contract or transaction was
approved by the board or a committee, knew the material facts relating to the
Gulfstream director's or officer's financial interest or other involvement with
the other entity at the time a majority of them approved in good faith the
contract or transaction or, alternatively, so long as the Gulfstream
stockholders, if the contract or transaction was approved by the stockholders,
knew the material facts relating to the Gulfstream director's or officer's
financial interest or other involvement with the other entity at the time they
approved in good faith the contract or transaction or, alternatively, so long as
the contract or transaction was fair to Gulfstream when it was authorized,
approved or ratified by the Gulfstream board of directors or committee of the
board of directors, or by the Gulfstream stockholders. An interested Gulfstream
director may be counted in determining the existence of a quorum at any meeting
of the Gulfstream board of directors or committee of the board of directors.
The General Dynamics certificate of incorporation provides that the fact
that a director of General Dynamics has a financial interest in a contract or
other transaction between General Dynamics and any other corporation, or the
fact that a director of General Dynamics is also an officer or director of the
other corporation involved, will not affect or invalidate the contract,
transaction or act involving General Dynamics as long as a majority of the
General Dynamics board of directors was aware of these facts when it approved
the contract, transaction or act. An interested General Dynamics director may be
counted in determining the existence of a quorum at any meeting of the General
Dynamics board of directors and may vote on the contract, transaction or act in
which he has a financial interest or with a corporation of which he is an
officer or director.
LIABILITY AND INDEMNIFICATION
Gulfstream's certificate of incorporation and bylaws provide that
Gulfstream will indemnify and hold harmless its current and former directors and
officers against all expenses, liabilities, losses and claims including
attorneys' fees, judgments, fines, certain excise taxes, penalties and amounts
to be paid in settlement actually incurred or suffered by the director or
officer in connection with any threatened, pending or completed action, suit,
arbitration, alternative dispute resolution mechanism, investigation,
administrative hearing or any other proceeding, whether civil, criminal,
administrative or investigative, including stockholder derivative actions, to
the full extent permitted by law. Gulfstream's bylaws provide that Gulfstream
will automatically indemnify a director or officer who is wholly successful in
connection with a matter. If the director or officer is not wholly successful,
Gulfstream will indemnify the director or officer against losses actually
incurred in connection with each successfully resolved claim, issue or matter.
Whether a director or officer will be entitled to indemnification is determined
by the disinterested Gulfstream directors, by independent legal counsel if there
are no disinterested directors or by the Gulfstream stockholders. Prior to the
final disposition of a matter, Gulfstream will advance expenses incurred by a
current or former director or officer if the director or officer provides
Gulfstream evidence of the expenses incurred and with an undertaking
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to repay the amount advanced if he or she is not entitled to indemnification
after the final disposition of the matter.
The General Dynamics certificate of incorporation similarly provides that
General Dynamics will indemnify its current and former directors and officers
from and against all liabilities and reasonable expenses that they incur in
connection with or resulting from any claims, actions, suits or proceedings to
the extent that indemnification is not inconsistent with Delaware law. In order
to be entitled to indemnification under the provisions of the certificate of
incorporation, a General Dynamics director or officer must be wholly successful
with respect to the claim, action, suit or proceeding or have acted in good
faith in what he or she reasonably believed to be the best interests of General
Dynamics, or with respect to a criminal action or proceeding, must have had no
reasonable cause to believe that his or her conduct was unlawful. Like
Gulfstream, prior to the final disposition of a claim, action, suit or
proceeding, General Dynamics will advance expenses incurred by a current or
former director or officer if the director or officer provides General Dynamics
with an undertaking to repay the amount advanced if he or she is not entitled to
indemnification after the final disposition of the matter.
Gulfstream's certificate of incorporation provides that, to the fullest
extent permitted under the law of the State of Delaware, a director will not be
personally liable to Gulfstream or its stockholders for damages for any breach
of fiduciary duty as a director.
General Dynamics' certificate of incorporation similarly provides that a
director will not be personally liable to General Dynamics or its stockholders
for monetary damages for breach of fiduciary duty as a director except for
breach of the director's duty of loyalty to General Dynamics or its
stockholders, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for unlawful payment of a
dividend or unlawful stock purchase or redemption under the Delaware General
Corporation Law or for any transaction from which the director derived an
improper personal benefit. While this provision provides directors with
protection from awards for monetary damages for breaches of their duty of care,
it does not eliminate that duty.
General Dynamics and Gulfstream each maintain directors' and officers'
liability insurance on behalf of their directors, officers, employees and
agents. Additionally, the merger agreement requires General Dynamics to maintain
insurance covering present and former directors and officers of Gulfstream for a
period of six years following the merger, with some limitations. See "The Merger
Agreement -- Indemnification and Insurance."
AMENDMENTS TO CHARTER DOCUMENTS
Gulfstream's certificate of incorporation permits the repeal, alteration,
amendment or rescission of any provision of the certificate of incorporation
pursuant to the Delaware General Corporation Law, except that the terms of any
series of Gulfstream preferred stock may be amended without the consent of the
holders of any other series of Gulfstream preferred stock or class of common
stock. Gulfstream's bylaws may be partially or completely repealed, altered,
amended or rescinded, or new bylaws may be adopted, either by a majority vote of
the Gulfstream board of directors or by the affirmative vote of the holders of a
majority of the voting power of the issued and outstanding Gulfstream common
stock entitled to vote.
The General Dynamics certificate of incorporation permits the amendment,
alteration, repeal or addition to any provision of the certificate of
incorporation pursuant to the Delaware General Corporation Law. The General
Dynamics bylaws may be altered, amended or repealed by a majority vote of either
the General Dynamics board of directors or stockholders, except that a
two-thirds affirmative vote of the board of directors is required to amend
provisions of the General Dynamics bylaws relating to the number, qualifications
and term of office of directors, vacancies in the board of
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directors, regular and special meetings of the board of directors and quorum,
manner of acting and agendas at those meetings.
LEGAL MATTERS
The validity of the issuance of the General Dynamics common stock being
offered by this document will be passed upon for General Dynamics by Jenner &
Block, counsel for General Dynamics. Jenner & Block and Fried, Frank, Harris,
Shriver & Jacobson, counsel for Gulfstream, will each be delivering an opinion
concerning the federal income tax consequences of the merger. See "The
Merger -- Federal Income Tax Consequences."
EXPERTS
The December 31, 1998 consolidated financial statements of General
Dynamics, incorporated by reference and referred to elsewhere in this document,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated by
reference in this document in reliance upon the authority of Arthur Andersen LLP
as experts in accounting and auditing giving said reports.
The consolidated financial statements of Gulfstream incorporated in this
document by reference to Gulfstream's 1998 Annual Report on Form 10-K, and which
are referred to and made a part of the registration statement of which this
document is a part, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports which are incorporated by reference and
have been so incorporated in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETINGS
As described in General Dynamics' proxy statement on Schedule 14A relating
to its 1999 annual meeting of stockholders, any proposals that stockholders of
General Dynamics wish to be considered for inclusion in the proxy statement for
its 2000 annual meeting of stockholders must be received by General Dynamics at
its principal executive offices no later than November 28, 1999. Any stockholder
proposals included in General Dynamics' proxy solicitation materials for its
2000 annual meeting or otherwise to be considered at the meeting will be subject
to the requirements of the General Dynamics bylaws and the proxy rules
promulgated under the Securities Exchange Act.
As described in Gulfstream's proxy statement on Schedule 14A relating to
its 1999 annual meeting of stockholders, in order for a proposal of stockholders
of Gulfstream to be considered for inclusion in the proxy statement for its 2000
annual meeting of stockholders (if the merger is not completed before the
meeting) the proposal must be received by Gulfstream at its principal executive
offices no later than December 1, 1999. Any stockholder proposals included in
Gulfstream's proxy solicitation materials for its 2000 annual meeting or
otherwise to be considered at the meeting will be subject to the requirements of
the Gulfstream bylaws and the proxy rules promulgated under the Securities
Exchange Act.
Representatives of Arthur Andersen LLP are expected to be present at the
General Dynamics special meeting, and representatives of Deloitte & Touche LLP
are expected to be present at the Gulfstream special meeting. In each case,
their representatives will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
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WHERE YOU CAN FIND MORE INFORMATION
General Dynamics has filed with the SEC a registration statement under the
Securities Act that registers the distribution to Gulfstream stockholders of the
General Dynamics common stock to be issued in the merger. The registration
statement, including the attached exhibits and schedules, contains additional
relevant information about General Dynamics and Gulfstream. The rules and
regulations of the SEC allow us to omit some information included in the
registration statement from this document.
In addition, we each file reports, proxy statements and other information
with the SEC under the Securities Exchange Act. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. You may
read and copy this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, including General Dynamics and Gulfstream, who file electronically with
the SEC. The address of that site is www.sec.gov. You can also inspect reports,
proxy statements and other information about each of us at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005.
The SEC allows us to "incorporate by reference" information into this
document. This means that the companies can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is considered to be a part of this
document, except for any information that is superseded by information that is
included directly in this document.
This document incorporates by reference the documents listed below that we
have previously filed with the SEC. They contain important information about our
companies and their financial condition.
<TABLE>
<CAPTION>
GENERAL DYNAMICS GULFSTREAM
---------------- ----------
<S> <C>
Annual Report on Form 10-K for the fiscal Annual Report on Form 10-K for the fiscal
year ended December 31, 1998. year ended December 31, 1998.
Quarterly Report on Form 10-Q for the Quarterly Report on Form 10-Q for the
quarter ended April 4, 1999. quarter ended March 31, 1999.
Description of the common stock of General
Dynamics contained in its Registration
Statement on Form 8-A dated
[ ], which registers the
common stock under Section 12(b) of the
Securities Exchange Act.
</TABLE>
We incorporate by reference additional documents that either company may
file with the SEC between the date of this document and the dates of the General
Dynamics special meeting and the
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Gulfstream special meeting. These documents include periodic reports, including
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
You can obtain any of the documents incorporated by reference in this
document through General Dynamics or Gulfstream or from the SEC through the
SEC's web site at the address provided above. Documents incorporated by
reference are available from us without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by reference as an
exhibit in this document. You can obtain documents incorporated by reference in
this document by requesting them in writing or by telephone from the appropriate
company at the following addresses:
<TABLE>
<S> <C>
General Dynamics Corporation Gulfstream Aerospace Corporation
3190 Fairview Park Drive 500 Gulfstream Road
Falls Church, Virginia 20042-4523 Savannah, Georgia 31408
Attention: Corporate Secretary Attention: Investor Relations
Telephone: (703) 876-3000 Telephone: (912) 965-3700
</TABLE>
If you would like to request documents, please do so by [ ],
1999 to assure that you will receive them before the special meetings. If you
request any incorporated documents from us, we will mail them to you by first
class mail, or another equally prompt means, within one business day after we
receive your request.
We have not authorized anyone to give any information or make any
representation about the merger or our companies that differs from, or adds to,
the information in this document or in our documents that are publicly filed
with the SEC. Therefore, if anyone does give you different or additional
information, you should not rely on it.
If you are in a jurisdiction where it is unlawful to offer to exchange or
sell, or to ask for offers to exchange or buy, the securities offered by this
document or to ask for proxies, or if you are a person to whom it is unlawful to
direct these activities, then the offer presented by this document does not
extend to you.
The information contained in this document speaks only as of its date
unless the information specifically indicates that another date applies.
Information in this document about General Dynamics has been supplied by General
Dynamics, and information about Gulfstream has been supplied by Gulfstream.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
AMONG
GENERAL DYNAMICS CORPORATION,
TARA ACQUISITION CORPORATION
AND
GULFSTREAM AEROSPACE CORPORATION
MAY 16, 1999
A-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 THE MERGER........................................ A -7
Section 1.1 The Merger................................... A- 7
Section 1.2 The Closing.................................. A- 7
Section 1.3 Effective Time............................... A- 7
Section 1.4 Effects of the Merger........................ A- 7
Section 1.5 Certificate of Incorporation and Bylaws...... A- 8
Section 1.6 Directors.................................... A- 8
Section 1.7 Officers..................................... A- 8
Section 1.8 Conversion of Company Common Stock........... A- 8
Section 1.9 Stock Options................................ A- 9
Section 1.10 Conversion of Acquisition Corporation Common
Stock.................................................. A-10
ARTICLE 2 STOCKHOLDER APPROVAL.............................. A-10
Section 2.1 Company Actions.............................. A-10
Section 2.2 Parent Corporation Actions................... A-10
Section 2.3 Cooperation.................................. A-11
ARTICLE 3 EXCHANGE OF CERTIFICATES.......................... A-11
Section 3.1 Exchange of Certificates..................... A-11
Section 3.2 Exchange Agent; Exchange Procedures.......... A-11
Section 3.3 Transfer Books............................... A-12
Section 3.4 Termination of Exchange Fund................. A-12
Section 3.5 Lost Certificates............................ A-12
Section 3.6 No Rights as Stockholder..................... A-12
Section 3.7 Withholding.................................. A-13
Section 3.8 Escheat...................................... A-13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..... A-13
Section 4.1 Organization................................. A-13
Section 4.2 Authorization of Transaction;
Enforceability......................................... A-13
Section 4.3 Noncontravention; Consents................... A-14
Section 4.4 Capitalization............................... A-14
Section 4.5 Company Reports; Joint Proxy Statement....... A-15
Section 4.6 No Undisclosed Liabilities................... A-16
Section 4.7 Absence of Material Adverse Change........... A-16
Section 4.8 Litigation and Legal Compliance.............. A-16
Section 4.9 Contract Matters............................. A-16
Section 4.10 Tax Matters.................................. A-16
Section 4.11 Employee Benefit Matters..................... A-17
Section 4.12 Environmental Matters........................ A-19
Section 4.13 Title........................................ A-20
Section 4.14 Intellectual Property Matters................ A-20
Section 4.15 Year 2000 Compliance Matters................. A-21
Section 4.16 Labor Matters................................ A-21
Section 4.17 State Takeover Laws.......................... A-21
Section 4.18 Parent Common Stock Ownership................ A-22
Section 4.19 Accounting and Tax Matters................... A-22
Section 4.20 Brokers' Fees................................ A-22
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PARENT
CORPORATION....................................... A-22
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 5.1 Organization................................. A-22
Section 5.2 Authorization of Transaction;
Enforceability......................................... A-22
Section 5.3 Noncontravention; Consents................... A-23
Section 5.4 Capitalization............................... A-23
Section 5.5 Parent Corporation Reports; Joint Proxy and
Registration Statements................................ A-24
Section 5.6 No Undisclosed Liabilities................... A-25
Section 5.7 Absence of Material Adverse Change........... A-25
Section 5.8 Litigation and Legal Compliance.............. A-25
Section 5.9 Contract Matters............................. A-26
Section 5.10 Tax Matters.................................. A-26
Section 5.11 Employee Benefit Matters..................... A-26
Section 5.12 Environmental Matters........................ A-28
Section 5.13 Title........................................ A-29
Section 5.14 Intellectual Property Matters................ A-29
Section 5.15 Year 2000 Compliance Matters................. A-29
Section 5.16 Labor Matters................................ A-29
Section 5.17 Company Common Stock Ownership............... A-30
Section 5.18 Accounting and Tax Matters................... A-30
ARTICLE 6 COVENANTS......................................... A-30
Section 6.1 General...................................... A-30
Section 6.2 Notices and Consents......................... A-30
Section 6.3 Interim Conduct of the Company............... A-30
Section 6.4 Interim Conduct of the Parent Corporation.... A-32
Section 6.5 Preservation of Organization................. A-32
Section 6.6 Full Access.................................. A-32
Section 6.7 Notice of Developments....................... A-32
Section 6.8 Acquisition Proposals........................ A-32
Section 6.9 Indemnification.............................. A-34
Section 6.10 Public Announcements......................... A-35
Section 6.11 Preservation of Programs and Agreements...... A-35
Section 6.12 Actions Regarding Antitakeover Statutes...... A-36
Section 6.13 Standstill Provisions........................ A-36
Section 6.14 Defense of Orders and Injunctions............ A-36
Section 6.15 Affiliate Letters............................ A-36
Section 6.16 Preservation of Accounting and Tax
Treatment.............................................. A-36
Section 6.17 Accountant's Comfort Letters................. A-36
Section 6.18 Registration Agreement....................... A-37
Section 6.19 New York Stock Exchange Quotation............ A-37
Section 6.20 Publishing Financial Results................. A-37
Section 6.21 Employee Benefit Matters..................... A-37
Section 6.22 Directors of the Surviving Corporation....... A-38
ARTICLE 7 CONDITIONS TO THE CONSUMMATION OF THE MERGER...... A-38
Section 7.1 Conditions to the Obligations of Each
Party.................................................. A-38
Section 7.2 Conditions to the Obligation of the
Company................................................ A-39
Section 7.3 Conditions to the Obligation of the Parent
Corporation and the Acquisition
Corporation.................................. A-39
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER................. A-40
Section 8.1 Termination.................................. A-40
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 8.2 Effect of Termination........................ A-41
Section 8.3 Termination Fee.............................. A-41
ARTICLE 9 MISCELLANEOUS..................................... A-42
Section 9.1 Nonsurvival of Representations............... A-42
Section 9.2 Remedies..................................... A-42
Section 9.3 Successors and Assigns....................... A-42
Section 9.4 Amendment.................................... A-42
Section 9.5 Extension and Waiver......................... A-43
Section 9.6 Severability................................. A-43
Section 9.7 Counterparts................................. A-43
Section 9.8 Descriptive Headings......................... A-43
Section 9.9 Notices...................................... A-43
Section 9.10 No Third Party Beneficiaries................. A-44
Section 9.11 Entire Agreement............................. A-44
Section 9.12 Construction................................. A-44
Section 9.13 Submission to Jurisdiction................... A-44
Section 9.14 Governing Law................................ A-44
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A-1 Form of Company Affiliate Letter
Exhibit A-2 Form of Parent Corporation Affiliate Letter
Exhibit B-1 Form of Company Tax Representations
Exhibit B-2 Form of Parent Corporation Tax Representations
</TABLE>
A-4
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TABLE OF DEFINED TERMS
<TABLE>
<S> <C>
Acquisition Corporation Preamble
Acquisition Proposal Section 6.8(g)
Applicable Period Section 6.8(b)
Average Stock Price Section 8.1(f)
Certificate Section 3.1(a)
Charter Amendment Section 2.2(a)
Closing Section 1.2
Closing Date Section 1.2
Code Section 4.10(f)
Company Preamble
Company Common Stock Section 1.8(a)
Company Disclosure Letter Section 4
Company Form 10-Q Section 4
Company Material Adverse Effect Section 4.1
Company Plans Section 4.11(a)
Company SEC Documents Section 4.5(a)
Company Stockholder Approval Section 2.1(a)
Company Stockholders Meeting Section 2.1(a)
Confidentiality Agreement Section 6.6
Continuing Employees Section 6.21(a)
Daily Per Share Price Section 8.1(f)
Delaware Act Section 1.1
Effective Time Section 1.3
Employee Pension Benefit Plan Section 4.11(a)
Employee Welfare Benefit Plan Section 4.11(a)
Environmental Law Section 4.12(b)
ERISA Section 4.11(a)
Exchange Agent Section 3.1
Exchange Fund Section 3.2(a)
Hazardous Materials Section 4.12(c)
HSR Act Section 4.3
Indemnified Parties Section 6.9(a)
Intellectual Property Section 4.14(b)
Joint Proxy Statement Section 2.1(b)
Lien Section 4.3
Merger Section 1.1
Merger Consideration Section 1.8(c)
Multiemployer Plan Section 4.11(a)
Parent Common Stock Section 1.8(a)
Parent Corporation Preamble
Parent Corporation Disclosure Letter Section 5
Parent Corporation Form 10-Q Section 5
Parent Corporation Material Adverse Effect Section 5.1
Parent Corporation Plans Section 5.11(a)
Parent Corporation Stockholder Approval Section 2.2(a)
Parent Corporation Stockholders Meeting Section 2.2(a)
Permitted Liens Section 4.13
Registration Statement Section 2.2(b)
</TABLE>
A-5
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<TABLE>
<S> <C>
SEC Section 2.1(b)
Securities Act Section 2.1(b)
Securities Exchange Act Section 1.9(d)
Standstill Provisions Section 6.8(e)
Stock Options Section 1.9(a)
Stock Plans Section 1.9(a)
Subsidiary Section 1.8(d)
Superior Acquisition Proposal Section 6.8(h)
Surviving Corporation Section 1.1
Taxes Section 4.10(a)
Tax Returns Section 4.10(a)
Termination Fee Section 8.3(a)
Third Party Acquisition Section 8.3(b)
</TABLE>
A-6
<PAGE> 89
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of May 16, 1999 among General
Dynamics Corporation, a Delaware corporation (the "Parent Corporation"), Tara
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
the Parent Corporation (the "Acquisition Corporation"), and Gulfstream Aerospace
Corporation, a Delaware corporation (the "Company").
The Boards of Directors of the Parent Corporation and the Company have each
determined that a business combination between the Parent Corporation and the
Company is desirable and in the best interests of the Parent Corporation and the
Company and their respective stockholders. The Boards of Directors of the Parent
Corporation and the Company accordingly have each duly adopted resolutions
approving this Agreement and the transactions contemplated hereby.
It is intended that the merger provided for in this Agreement will qualify
as a reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended, and that for financial accounting purposes the merger
will be accounted for as a pooling of interests.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the value, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as defined in Section 1.3) the
Acquisition Corporation will be merged (the "Merger") with and into the Company
in accordance with the provisions of the Delaware General Corporation Law (the
"Delaware Act"). Following the Merger, the Company will continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of the Acquisition Corporation will cease.
Section 1.2 The Closing. Upon the terms and subject to the conditions set
forth in this Agreement, the consummation of the Merger and the other
transactions contemplated by this Agreement (the "Closing") will take place at
the offices of Jenner & Block, 601 13th Street, N.W., Washington, D.C. 20005, at
10:00 a.m., local time, on the first business day following the satisfaction or
waiver of the conditions set forth in Article 7 (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
satisfaction or, where permitted, waiver of those conditions), or at such other
date, time or place as the Parent Corporation and the Company may agree. The
date upon which the Closing occurs is referred to in this Agreement as the
"Closing Date."
Section 1.3 Effective Time. The Merger will be consummated by the filing
of a certificate of merger with the Secretary of State of the State of Delaware
in accordance with Section 251(c) of the Delaware Act. The time the Merger
becomes effective in accordance with Sections 103 and 251 of the Delaware Act is
referred to in this Agreement as the "Effective Time."
Section 1.4 Effects of the Merger. The Merger will have the effects set
forth in the Delaware Act. Without limiting the generality of the foregoing, as
of the Effective Time, all properties, rights, privileges, powers and franchises
of the Company and the Acquisition Corporation will vest in the Surviving
Corporation and all debts, liabilities and duties of the Company and the
Acquisition Corporation will become debts, liabilities and duties of the
Surviving Corporation.
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Section 1.5 Certificate of Incorporation and Bylaws. At the Effective
Time, the Certificate of Incorporation and Bylaws of the Acquisition Corporation
in the respective forms delivered by the Parent Corporation to the Company prior
to the date of this Agreement will be amended and restated to change the name of
the Acquisition Corporation to "Gulfstream Aerospace Corporation" or such other
name as the Parent Corporation may determine. The Certificate of Incorporation
and Bylaws of the Acquisition Corporation, as so amended and restated, will be
the Certificate of Incorporation and Bylaws of the Surviving Corporation.
Section 1.6 Directors. Subject to the provisions of Section 6.22, the
directors of the Acquisition Corporation at the Effective Time will be the
initial directors of the Surviving Corporation and will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation and
Bylaws of the Surviving Corporation or as otherwise provided by law.
Section 1.7 Officers. The officers of the Company at the Effective Time
will be the initial officers of the Surviving Corporation and will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation or as otherwise provided
by law.
Section 1.8 Conversion of Company Common Stock.
(a) Subject to the provisions of Section 1.8(b), each share of the
Company's Common Stock, par value $.01 per share (the "Company Common
Stock"), issued and outstanding immediately prior to the Effective Time
(other than shares of Company Common Stock held in the treasury of the
Company, held by any Subsidiary (as defined in Section 1.8(d)) of the
Company or held by the Parent Corporation or any Subsidiary of the Parent
Corporation) will, by virtue of the Merger and without any action on the
part of the holder thereof, be canceled and converted into the right to
receive, upon the surrender of the certificate formerly representing such
share, one share of the Parent Corporation's Common Stock, par value $1.00
per share (the "Parent Common Stock"). In the event that, subsequent to the
date of this Agreement but prior to the Effective Time, the outstanding
shares of Parent Common Stock or Company Common Stock are changed into a
different number of shares or a different class as a result of a stock
split, reverse stock split, stock dividend, subdivision, reclassification,
combination, exchange, recapitalization or similar transaction, the number
of shares of Parent Common Stock into which each share of Company Common
Stock will be converted as a result of the Merger will be adjusted
appropriately and provisions will be made for appropriate payments of cash
in lieu of the issuance of fractional shares of Parent Common Stock.
(b) Each share of Company Common Stock held in the treasury of the
Company, held by any Subsidiary of the Company or held by the Parent
Corporation or any Subsidiary of the Parent Corporation immediately prior
to the Effective Time will, by virtue of the Merger and without any action
on the part of the holder thereof, be canceled and retired and will cease
to exist. For purposes of this Section 1.8(b), shares of Company Common
Stock owned beneficially or held of record by any plan, program or
arrangement sponsored or maintained for the benefit of any current or
former employee of the Company, the Parent Corporation or any of their
respective Subsidiaries will not be deemed to be held by the Company, the
Parent Corporation or any such Subsidiary, regardless of whether the
Company, the Parent Corporation or any such Subsidiary has the power,
directly or indirectly, to vote or control the disposition of such shares.
(c) The shares of Parent Common Stock to be issued upon the conversion
of shares of Company Common Stock pursuant to Section 1.8(a) and any cash
to be paid in lieu of fractional shares of Parent Common Stock pursuant to
Section 1.8(a) are referred to in this Agreement collectively as the
"Merger Consideration."
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(d) The term "Subsidiary" as used in this Agreement means any
corporation, partnership, limited liability company or other business
entity 50 percent or more of the outstanding voting equity securities of
which are owned, directly or indirectly, by the Company or the Parent
Corporation, as applicable.
Section 1.9 Stock Options.
(a) The Parent Corporation and the Company will take all necessary
actions to cause each option to purchase shares of Company Common Stock (a
"Stock Option") granted under any stock option plan, program, agreement or
arrangement of the Company or any of its Subsidiaries (collectively, the
"Stock Plans") which is outstanding and unexercised immediately prior to
the Effective Time to be converted at the Effective Time into an option to
purchase the same number of shares of Parent Common Stock that could have
been obtained upon the exercise of such Stock Option immediately prior to
the Effective Time and the conversion and exchange of the shares of Company
Common Stock issued upon such exercise for shares of Parent Common Stock as
provided in Section 1.8(a). The exercise price per share applicable to each
such converted stock option will be the same as was applicable to such
Stock Option immediately prior to the Effective Time (subject to adjustment
pursuant to the last sentence of Section 1.8(a)). Upon and following the
conversion of the Stock Options pursuant to this Section 1.9(a), each
converted stock option will be subject to the same terms and conditions as
in effect immediately prior to the Effective Time; provided that (i) if a
form of agreement evidencing the Stock Option provides for acceleration of
vesting of the Stock Option upon the Merger, the converted stock option
will be so vested following the Merger and (ii) consistent with the forms
of stockholder's agreements in use by the Company prior to the date hereof,
upon exercise of any converted stock option, there will be no obligation
that the holder thereof execute a stockholder's agreement.
(b) The Company and the Parent Corporation acknowledge that,
consistent with the terms of such stockholder's agreements, any
stockholder's agreement entered into prior to the Effective Time by reason
of the exercise of a Stock Option or otherwise will cease to be of any
force or effect upon and following the Effective Time.
(c) The Parent Corporation will take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock
for delivery upon exercise of all of the Stock Options converted into
options to purchase Parent Common Stock pursuant to Section 1.9(a). Not
later than one day following the Effective Time, the Parent Corporation
will file a registration statement on Form S-8 (or any successor or other
appropriate form) with respect to the shares of Parent Common Stock subject
to the converted stock options and will deliver prospectuses to the holders
of such stock options. Following the Effective Time, the Parent Corporation
will use all reasonable efforts to maintain the effectiveness of the
foregoing registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as any of the
converted stock options remain outstanding and unexercised.
(d) At the Effective Time, the Parent Corporation will assume the
obligations of the Company under the Stock Plans as in effect at the
Effective Time. No additional Stock Options will be granted pursuant to the
Stock Plans after the Effective Time.
(e) The Board of Directors or Compensation Committee of the Company
and the Parent Corporation will each grant all approvals and take all other
actions required pursuant to Rules 16b-3(d) and 16b-3(e) under the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations of the SEC thereunder, the "Securities Exchange Act"), to cause
the disposition in the Merger of Company Common Stock and Stock Options and
the acquisition
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in the Merger of Parent Common Stock and options to acquire Parent Common
Stock to be exempt from the provisions of Section 16(b) of the Securities
Exchange Act.
Section 1.10 Conversion of Acquisition Corporation Common
Stock. Each share of the Common Stock, par value $1.00 per share, of the
Acquisition Corporation issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into one share of the Common
Stock, par value $1.00 per share, of the Surviving Corporation.
ARTICLE 2
STOCKHOLDER APPROVAL
Section 2.1 Company Actions. The Company, acting through its Board of
Directors, in accordance with applicable law, its Certificate of Incorporation
and Bylaws and the rules of the New York Stock Exchange, will:
(a) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Company Stockholders Meeting"), to be held as soon
as practicable after the date of this Agreement, for the purpose of
submitting this Agreement for adoption and approval by the holders of a
majority of the outstanding shares of Company Common Stock (the "Company
Stockholder Approval");
(b) cooperate with the Parent Corporation in preparing and filing with
the Securities and Exchange Commission (the "SEC") as promptly as
practicable after the date of this Agreement a Joint Proxy
Statement/Prospectus and related materials (the "Joint Proxy Statement")
with respect to the Company Stockholders Meeting satisfying the
requirements of the Securities Act of 1933, as amended (together with the
rules and regulations of the SEC thereunder, the "Securities Act"), and the
Securities Exchange Act, respond promptly to any comments raised by the SEC
with respect to the preliminary version of the Joint Proxy Statement, and
cause the definitive version of the Joint Proxy Statement to be mailed to
its stockholders as soon as it is legally permitted to do so;
(c) subject to the provisions of Section 6.8, include in the Joint
Proxy Statement (i) the recommendation of the Board of Directors of the
Company that the stockholders of the Company vote in favor of the adoption
and approval of this Agreement and the transactions contemplated hereby and
(ii) the written opinion dated as of the date of this Agreement of Merrill
Lynch & Co., financial advisor to the Board of Directors of the Company, to
the effect that as of the date of this Agreement the Merger Consideration
is fair to the stockholders of the Company, other than the Parent
Corporation and its affiliates, from a financial point of view; and
(d) provide the Parent Corporation with the information concerning the
Company required to be included in the Joint Proxy Statement and the
Registration Statement (as defined in Section 2.2(b)).
Section 2.2 Parent Corporation Actions. The Parent Corporation, acting
through its Board of Directors, in accordance with applicable law, its
Certificate of Incorporation and Bylaws and the rules of the New York Stock
Exchange, will:
(a) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Parent Corporation Stockholders Meeting"), to be
held as soon as practicable after the date of this Agreement, for the
purpose of submitting for the approval of the holders of a majority of the
outstanding shares of Parent Common Stock (the "Parent Corporation
Stockholder Approval") the proposals adopted by the Board of Directors of
the Parent Corporation to (i) amend and restate the Certificate of
Incorporation of the Parent Corporation to increase the number of
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shares of Parent Common Stock the Parent Corporation is authorized to issue
to 300,000,000 shares (the "Charter Amendment") and (ii) issue shares of
Parent Common Stock pursuant to the Merger;
(b) file with the SEC as promptly as practicable after the date of
this Agreement a Registration Statement on Form S-4 (which will include the
Joint Proxy Statement) complying in all material respects with the
Securities Act and the Securities Exchange Act registering the issuance of
the Parent Common Stock proposed to be issued by the Parent Corporation
pursuant to the Merger (the "Registration Statement"), respond promptly to
any comments raised by the SEC with respect to the preliminary version of
the Joint Proxy Statement or the Registration Statement, use its best
efforts to cause the Registration Statement to be declared effective by the
SEC as promptly as practicable and cause the definitive version of the
Joint Proxy Statement to be mailed to its stockholders as soon as it is
legally permitted to do so;
(c) provide the Company with the information concerning the Parent
Corporation and the Acquisition Corporation required to be included in the
Joint Proxy Statement; and
(d) include in the Joint Proxy Statement (i) the recommendation of the
Board of Directors of the Parent Corporation that the stockholders of the
Parent Corporation vote in favor of the Charter Amendment and the issuance
of shares of Parent Common Stock pursuant to the Merger and (ii) the
written opinion dated as of May 13, 1999 of Bear Stearns & Co., financial
advisor to the Board of Directors of the Parent Corporation, to the effect
that the Merger is fair, from a financial point of view, to the Parent
Corporation and its stockholders.
Section 2.3 Cooperation. Each party will promptly advise the other of its
receipt of, and will promptly furnish the other party with copies of, all
comments received from the SEC with respect to the Registration Statement and
the Joint Proxy Statement and will consult with the other party in responding to
such comments.
ARTICLE 3
EXCHANGE OF CERTIFICATES
Section 3.1 Exchange of Certificates. From and after the Effective Time,
each holder of a certificate that immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (a "Certificate") will be
entitled to receive in exchange therefor, upon surrender thereof to an exchange
agent to be designated by the parties (the "Exchange Agent"), the Merger
Consideration into which the shares of Company Common Stock evidenced by such
Certificate were converted pursuant to the Merger. No interest will be payable
on the Merger Consideration to be paid to any holder of a Certificate
irrespective of the time at which such Certificate is surrendered for exchange.
Certificates surrendered for exchange by any holder that is an "affiliate" of
the Company for purposes of Rule 145(c) under the Securities Act will not be
exchanged until the Parent Corporation has received a letter from such holder as
provided in Section 6.15.
Section 3.2 Exchange Agent; Exchange Procedures.
(a) As soon as reasonably practicable following the Effective Time,
the Parent Corporation will deposit, or cause to be deposited, with the
Exchange Agent, in trust for the benefit of holders of Certificates,
certificates representing the Merger Consideration and the amount of any
dividends or distributions payable in accordance with the provisions of
Section 3.2(b) (the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time, the
Parent Corporation will instruct the Exchange Agent to mail to each record
holder of a Certificate (i) a letter of transmittal (which will specify
that delivery will be effected, and risk of loss and title to such
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Certificates will pass, only upon delivery of the Certificate to the
Exchange Agent and will be in such form and have such other provisions as
the Parent Corporation will reasonably specify) and (ii) instructions for
use in effecting the surrender of Certificates for certificates
representing shares of Parent Common Stock. Commencing immediately after
the Effective Time, upon the surrender to the Exchange Agent of such
Certificate or Certificates, together with a duly executed and completed
letter of transmittal and all other documents and other materials required
by the Exchange Agent to be delivered in connection therewith, the holder
will be entitled to receive a certificate or certificates representing the
number of shares of Parent Common Stock into which the Certificate or
Certificates so surrendered have been converted in accordance with the
provisions of Section 1.8. Unless and until any Certificate or Certificates
are so surrendered, no dividend or other distribution, if any, payable to
the holders of record of shares of Parent Common Stock as of any date
subsequent to the Effective Time will be paid to the holders of such
Certificate or Certificates in respect of the shares of Parent Common Stock
into which such Certificates are convertible. Upon the surrender of any
Certificate or Certificates, the record holder of the certificate or
certificates representing shares of Parent Common Stock issued in exchange
therefor will be entitled to receive (i) at the time of surrender, the
amount of any dividends or other distributions (net of any applicable tax
withholdings) having a record date after the Effective Time and a payment
date prior to the surrender date, payable in respect of such shares of
Parent Common Stock and (ii) at the appropriate payment date, the amount of
dividends or other distributions (net of any applicable tax withholdings)
having a record date after the Effective Time and a payment date subsequent
to the date of such surrender, payable in respect of such shares of Parent
Common Stock.
Section 3.3 Transfer Books. The stock transfer books of the Company will
be closed at the Effective Time and no transfer of any shares of Company Common
Stock will thereafter be recorded on any of the stock transfer books. In the
event of a transfer of ownership of any Company Common Stock prior to the
Effective Time that is not registered in the stock transfer records of the
Company at the Effective Time, a certificate or certificates representing the
number of shares of Parent Common Stock into which such Company Common Stock has
been converted in the Merger will be issued to the transferee together with a
cash payment in respect of dividends and distributions, if any, in accordance
with the provisions of Section 3.2(b), only if the Certificate is surrendered as
provided in Section 3.1, accompanied by all documents required to evidence and
effect such transfer and by evidence of payment of any applicable stock transfer
taxes.
Section 3.4 Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed one year after the Effective Time will be
delivered to the Parent Corporation upon demand, and each holder of Company
Common Stock who has not theretofore surrendered Certificates in accordance with
the provisions of this Article 3 will thereafter look only to the Parent
Corporation for satisfaction of such holder's claims for shares of Parent Common
Stock and any dividends or distributions payable in accordance with the
provisions of Section 3.2(b).
Section 3.5 Lost Certificates. If any Certificate has been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
certificate the shares of Parent Common Stock issuable pursuant to Section 1.8,
and unpaid dividends and distributions, if any, on shares of Parent Common Stock
deliverable in respect thereof, pursuant to this Agreement.
Section 3.6 No Rights as Stockholder. From and after the Effective Time,
the holders of Certificates will cease to have any rights as a stockholder of
the Surviving Corporation except as
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otherwise provided in this Agreement or by applicable law and the Parent
Corporation will be entitled to treat each Certificate that has not yet been
surrendered for exchange solely as evidence of the right to receive the Merger
Consideration into which the shares of Company Common Stock evidenced by such
Certificate have been converted pursuant to the Merger and the right to receive
dividends and distributions, if any, in accordance with the provisions of
Section 3.2(b).
Section 3.7 Withholding. The Parent Corporation will be entitled to
deduct and withhold from the Merger Consideration otherwise payable to any
former holder of Company Common Stock all amounts required by law to be deducted
or withheld therefrom.
Section 3.8 Escheat. Neither the Parent Corporation, the Acquisition
Corporation nor the Company will be liable to any former holder of Company
Common Stock for any portion of the Merger Consideration delivered to any public
official pursuant to any applicable abandoned property, escheat or similar law.
In the event any Certificate has not been surrendered for exchange prior to the
sixth anniversary of the Closing Date, or prior to such earlier date as of which
such Certificate or the Merger Consideration payable upon the surrender thereof
would otherwise escheat to or become the property of any governmental entity,
then the Merger Consideration otherwise payable upon the surrender of such
Certificate will, to the extent permitted by applicable law, become the property
of the Surviving Corporation, free and clear of all rights, interests and
adverse claims of any person.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent Corporation and the
Acquisition Corporation that except as disclosed in the reports, schedules,
forms, statements and other documents filed by the Company with the SEC and
publicly available prior to the date of this Agreement, as disclosed in the
draft of the Quarterly Statement on Form 10-Q for the Company's fiscal quarter
ended March 31, 1999 (the "Company Form 10-Q") delivered to the Parent
Corporation prior to the date of this Agreement or as disclosed in the letter
dated as of the date of this Agreement from the Company to the Parent
Corporation (the "Company Disclosure Letter"):
Section 4.1 Organization. The Company and each of its Subsidiaries is a
corporation duly organized and validly existing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority to
own, lease and operate its properties and to carry on its business as presently
being conducted. The Company and each of its Subsidiaries is in good standing
under the laws of the jurisdiction of its incorporation and is duly qualified to
conduct business as a foreign corporation in each other jurisdiction where such
qualification is required, except where the failure to be so qualified and in
good standing would not have a material adverse effect on the business,
financial condition, operations or results of operations of the Company and its
Subsidiaries taken as a whole or the ability of the Company to consummate the
Merger and to perform its obligations under this Agreement (a "Company Material
Adverse Effect"). The Company has delivered to the Parent Corporation correct
and complete copies of its charter and bylaws, as presently in effect, and will
make available to the Parent Corporation after the date of this Agreement
correct and complete copies of the charter and bylaws, as presently in effect,
of each of its Subsidiaries.
Section 4.2 Authorization of Transaction; Enforceability. Subject to
obtaining the Company Stockholder Approval, the Company has full corporate power
and authority and has taken all requisite corporate action to enable it to
execute and deliver this Agreement, to consummate the Merger and the other
transactions contemplated hereby and to perform its obligations hereunder. The
Board of Directors of the Company, at a meeting thereof duly called and held,
has duly adopted resolutions by the requisite majority vote approving this
Agreement, the Merger and the other transactions contemplated hereby,
determining that the terms and conditions of this Agreement, the
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Merger and the other transactions contemplated hereby are fair to and in the
best interests of the Company and its stockholders and recommending that the
Company's stockholders adopt and approve this Agreement. The foregoing
resolutions of the Board of Directors of the Company have not been modified,
supplemented or rescinded and remain in full force and effect as of the date of
this Agreement. In connection with its adoption of the foregoing resolutions,
the Board of Directors of the Company received the written opinion of Merrill
Lynch & Co., financial advisor to the Board of Directors of the Company, dated
as of the date of this Agreement to the effect that, as of such date, the Merger
Consideration is fair to the stockholders of the Company, other than the Parent
Corporation and its affiliates, from a financial point of view. The foregoing
opinion has not been modified, supplemented or rescinded prior to the date of
this Agreement. The Company will deliver to the Parent Corporation promptly
after the date of this Agreement correct and complete copies of the foregoing
resolutions and opinion. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms and conditions.
Section 4.3 Noncontravention; Consents. Except for (a) certain filings
and approvals necessary to comply with the applicable requirements of the
Securities Act, the Securities Exchange Act and the "blue sky" laws and
regulations of various states, (b) certain filings and approvals necessary to
comply with the requirements of the New York Stock Exchange with respect to the
delisting of the Company Common Stock, (c) the filing of a Notification and
Report Form and related material with the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice under the
Hart-Scott-Rodino Act of 1976, as amended (the "HSR Act"), (d) certain filings
and approvals which may be necessary to comply with the rules and regulations of
the Federal Aviation Administration and (e) the filing of a certificate of
merger pursuant to the Delaware Act, neither the execution and delivery of this
Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby, will constitute a violation of, be in conflict
with, constitute or create (with or without notice or lapse of time or both) a
default under, give rise to any right of termination, cancellation, amendment or
acceleration with respect to, or result in the creation or imposition of any
lien, encumbrance, security interest or other claim (a "Lien") upon any property
of the Company or any of its Subsidiaries pursuant to (i) the charter or bylaws
of the Company or any of its Subsidiaries, (ii) any constitutional provision,
law, rule, regulation, permit, order, writ, injunction, judgment or decree to
which the Company or any of its Subsidiaries is subject or (iii) any agreement
or commitment to which the Company or any of its Subsidiaries is a party or by
which the Company, any of its Subsidiaries or any of their respective properties
is bound or subject, except, in the case of clauses (ii) and (iii) above, for
such matters which, individually or in the aggregate, would not have a Company
Material Adverse Effect.
Section 4.4 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of
the Company consists of 300,000,000 shares of Company Common Stock. As of
May 2, 1999, 71,607,043 shares of Company Common Stock were issued and
outstanding, 18,212,231 shares were held by the Company as treasury shares
and 4,715,946 shares were reserved for issuance upon the exercise of
outstanding Stock Options. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized and are validly
issued, fully paid and nonassessable.
(b) Other than Stock Options to acquire an aggregate of 4,715,946
shares of Company Common Stock granted by the Company to current and former
directors, officers, employees and advisors of the Company and its
Subsidiaries pursuant to the Stock Plans, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights or other contracts or commitments that
could require the Company or any of its Subsidiaries to issue, sell or
otherwise cause to become outstanding any of its capital
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stock. There are no outstanding stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company or any of its
Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries is a party to any
voting trust, proxy or other agreement or understanding with respect to the
voting of any capital stock of the Company or any of its Subsidiaries.
(d) The Board of Directors of the Company has not declared any
dividend or distribution with respect to the Company Common Stock the
record or payment date for which is on or after the date of this Agreement.
(e) All of the outstanding shares of the capital stock of each of the
Company's Subsidiaries have been validly issued, are fully paid and
nonassessable and are owned by the Company or one of its Subsidiaries, free
and clear of any Lien. Except for its Subsidiaries set forth in the Company
Disclosure Letter, the Company does not control directly or indirectly or
have any direct or indirect equity participation in any corporation,
partnership, limited liability company, joint venture or other entity.
Section 4.5 Company Reports; Joint Proxy Statement.
(a) The Company has since October 9, 1996 filed all reports, forms,
statements and other documents (collectively, together with all financial
statements included or incorporated by reference therein and the Company
Form 10-Q, the "Company SEC Documents") required to be filed by the Company
with the SEC pursuant to the provisions of the Securities Act or the
Securities Exchange Act. Each of the Company SEC Documents, as of its
filing date, complied in all material respects with the applicable
requirements of the Securities Act and the Securities Exchange Act. None of
the Company SEC Documents, as of their respective filing dates, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is required to file any reports,
forms, statements or other documents pursuant to the Securities Act or the
Securities Exchange Act.
(b) Each of the consolidated financial statements (including related
notes) included in the Company SEC Documents presented fairly in all
material respects the consolidated financial condition, cash flows and
results of operations of the Company and its Subsidiaries for the
respective periods or as of the respective dates set forth therein. Each of
the financial statements (including related notes) included in the Company
SEC Documents has been prepared in accordance with United States generally
accepted accounting principles, consistently applied during the periods
involved, except (i) as noted therein, (ii) to the extent required by
changes in United States generally accepted accounting principles or (iii)
in the case of unaudited interim financial statements, normal recurring
year-end audit adjustments.
(c) The Company has delivered to the Parent Corporation correct and
complete copies of any proposed or contemplated amendments or modifications
to the Company SEC Documents (including any exhibit documents included
therein) that have not yet been filed by the Company with the SEC. The
Company has delivered to the Parent Corporation a correct and complete copy
of the most recent draft of the Company Form 10-Q.
(d) The Joint Proxy Statement will comply in all material respects
with the applicable requirements of the Securities Exchange Act and will
not, at the time the definitive Joint Proxy Statement is filed with the SEC
and mailed to the stockholders of the Company, contain any untrue statement
of material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which
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they were made, not misleading. No representation or warranty is made
herein by the Company with respect to any information supplied by the
Parent Corporation for inclusion in the Joint Proxy Statement. For purposes
of this Section 4.5(d), all information included in the Joint Proxy
Statement concerning or related to the Parent Corporation and its
Subsidiaries, including the Acquisition Corporation, will be deemed to have
been supplied by the Parent Corporation.
Section 4.6 No Undisclosed Liabilities. The Company and its Subsidiaries
have no liabilities or obligations (whether absolute or contingent, liquidated
or unliquidated, or due or to become due) except for (a) liabilities and
obligations reflected in the Company SEC Documents and (b) other liabilities and
obligations which, individually or in the aggregate, would not have a Company
Material Adverse Effect.
Section 4.7 Absence of Material Adverse Change. Since December 31, 1998,
there has not occurred any event, change, effect or development which,
individually or in the aggregate, would have a Company Material Adverse Effect.
Section 4.8 Litigation and Legal Compliance.
(a) The Company Disclosure Letter sets forth each instance in which
the Company or any of its Subsidiaries is (i) subject to any material
unsatisfied judgment order, decree, stipulation, injunction or charge or
(ii) a party to or, to the Company's knowledge, threatened to be made a
party to any material charge, complaint, action, suit, proceeding, hearing
or, to the Company's knowledge, investigation of or in any court or
quasi-judicial or administrative agency of any federal, state, local or
foreign jurisdiction, except for judgments, orders, decrees, stipulations,
injunctions, charges, complaints, actions, suits, proceedings, hearings and
investigations which, individually or in the aggregate, would not have a
Company Material Adverse Effect. There are no judicial or administrative
actions, proceedings or, to the Company's knowledge, investigations pending
or, to the Company's knowledge, threatened that question the validity of
this Agreement or any action taken or to be taken by the Company in
connection with this Agreement which would have a Company Material Adverse
Effect.
(b) Except for instances of noncompliance which, individually or in
the aggregate, would not have a Company Material Adverse Effect, the
Company and its Subsidiaries have complied with each constitutional
provision, law, rule, regulation, permit, order, writ, injunction, judgment
or decree to which the Company or any of its Subsidiaries is subject.
Section 4.9 Contract Matters.
(a) Neither the Company nor any of its Subsidiaries is in default or
violation of (and no event has occurred which with notice or the lapse of
time or both would constitute a default or violation) of any term,
condition or provision of any note, mortgage, indenture, loan agreement,
other evidence of indebtedness, guarantee, license, lease, agreement or
other contract, instrument or contractual obligation to which the Company
or any of its Subsidiaries is a party or by which any of their respective
assets is bound or subject, except for defaults and violations which,
individually or in the aggregate, would not have a Company Material Adverse
Effect.
Section 4.10 Tax Matters.
(a) The Company and each of its Subsidiaries have timely filed all
required returns, declarations, reports, claims for refund or information
returns and statements, including any schedule or attachment thereto
(collectively "Tax Returns"), relating to any federal, state, local or
foreign net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, customs, duties or other tax, fee,
assessment or charge, including any interest, penalty or addition thereto
and including any
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liability for the taxes of any other person or entity under Treasury
Regulation Section 1.1502-6 (or any similar state, local or foreign law,
rule or regulation), and any liability in respect of any tax as a
transferee or successor, by law, contract or otherwise (collectively
"Taxes"), and all such Tax Returns are accurate and complete in all
respects, except to the extent any such failure to file or any such
inaccuracy in any filed Tax Return, individually or in the aggregate, would
not have a Company Material Adverse Effect. All Taxes owed by the Company
or any of its Subsidiaries (whether or not shown on any Tax Return) have
been paid or adequately reserved for in accordance with generally accepted
accounting principles in the financial statements of the Company, except to
the extent any such failure to pay or reserve, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(b) The most recent financial statements contained in the Company SEC
Documents reflect adequate reserves in accordance with generally accepted
accounting principles for all Taxes payable by the Company and its
Subsidiaries for all Tax periods and portions thereof through the date of
such financial statements, except to the extent that any failure to so
reserve, individually or in the aggregate, would not have a Company
Material Adverse Effect. No deficiency with respect to Taxes has been
proposed, asserted or assessed against the Company or any of its
Subsidiaries and no requests for waivers of the time to assess any such
Taxes are pending, except to the extent any such deficiency or request for
waiver, individually or in the aggregate, would not have a Company Material
Adverse Effect.
(c) None of the federal income Tax Returns of the Company or any of
its Subsidiaries consolidated in such Tax Returns have been examined by and
settled with the Internal Revenue Service.
(d) Except for Liens for current Taxes not yet due and payable or
which are being contested in good faith, there is no Lien affecting any of
the assets or properties of the Company or any of its Subsidiaries that
arose in connection with any failure or alleged failure to pay any Tax,
except for Liens which, individually or in the aggregate, would not have a
Company Material Adverse Effect.
(e) Neither the Company nor any of its Subsidiaries is a party to any
Tax allocation or Tax sharing agreement.
(f) Neither the Company nor any of its Subsidiaries has made any
payments, is obligated to make any payments or is a party to any agreement
that under any circumstances could obligate it to make any payments that
will not be fully deductible under Sections 280G or 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code").
Section 4.11 Employee Benefit Matters.
(a) The Company Disclosure Letter lists each plan, program or
arrangement constituting a material employee welfare benefit plan (an
"Employee Welfare Benefit Plan") as defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or a material
employee pension benefit plan (an "Employee Pension Benefit Plan") as
defined in Section 3(2) of ERISA, and each other material employee benefit
plan, program or arrangement or employment practice maintained by the
Company or any of its Subsidiaries with respect to any of its current or
former employees or to which the Company or any of the Company Subsidiaries
contributes or is required to contribute with respect to any of its current
or former employees (collectively, the "Company Plans"). With respect to
each Company Plan:
(i) such Company Plan (and each related trust, insurance contract
or fund) has been administered in a manner consistent in all respects
with its written terms and complies in form and operation with the
applicable requirements of ERISA, the Code and other
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applicable laws, except for failures of administration or compliance
that would not have a Company Material Adverse Effect;
(ii) all required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's and Summary Plan
Descriptions) have been filed or distributed appropriately with respect
to such Company Plan, except for failures of filing or distribution that
would not have a Company Material Adverse Effect;
(iii) the requirements of Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code have been met with respect to each such
Company Plan which is an Employee Welfare Benefit Plan, except for
failures that would not have a Company Material Adverse Effect;
(iv) all material contributions, premiums or other payments
(including all employer contributions and employee salary reduction
contributions) that are due have been paid to each such Company Plan;
(v) each such Company Plan which is an Employee Pension Benefit
Plan intended to be a "qualified plan" under Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue
Service and no event has occurred which could reasonably be expected to
cause the loss or denial of such qualification under Section 401(a) of
the Code;
(vi) the Company has made available or prior to the Closing Date
will make available to the Parent Corporation, upon its request, correct
and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue
Service, the most recent Form 5500 Annual Report, the most recent
actuarial report, the most recent audited financial statements, and all
related trust agreements, insurance contracts and other funding
agreements that implement such Company Plan (but excluding the failure
to make available any such document which is not material). The
valuation summaries provided by the Company to the Parent Corporation
reasonably represent the assets and liabilities attributable to Company
Plans calculated in accordance with the Company's past practices, but
excluding any failure that would not have a Company Material Adverse
Effect;
(vii) no Company Plan which is an Employee Pension Benefit Plan has
been amended in any manner which would require the posting of security
under Section 401(a)(29) of the Code or Section 307 of ERISA; and
(viii) neither the Company nor any of its Subsidiaries has
communicated to any employee (excluding internal memoranda to
management) any plan or commitment, whether or not legally binding, to
create any additional material employee benefit plan or to materially
modify or change any Company Plan affecting any employee or terminated
employee of the Company or any of its Subsidiaries, but excluding any
such action that does not materially increase the liability of the
Company or its Subsidiaries.
(b) With respect to each Employee Welfare Benefit Plan or Employee
Pension Benefit Plan that the Company or any of its Subsidiaries maintains
or ever has maintained, or to which any of them contributes, ever has
contributed or ever has been required to contribute:
(i) no such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially terminated (other
than any termination that would not have a Company Material Adverse
Effect), no reportable event (as defined in Section 4043 of ERISA) as to
which notices would be required to be filed with the Pension Benefit
Guaranty Corporation has occurred but has not yet been so reported (but
excluding any failure to report which would not have a Company Material
Adverse Effect), and no
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proceeding by the Pension Benefit Guaranty Corporation to terminate such
Employee Pension Benefit Plan (other than any Multiemployer Plan) has
been instituted; and
(ii) there have been no non-exempt prohibited transactions (as
defined in Section 406 of ERISA and Section 4975 of the Code) with
respect to such plan, no fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of such plan, and no
action, suit, proceeding, hearing or, to the Company's knowledge,
investigation with respect to the administration or the investment of
the assets of such plan (other than routine claims for benefits) is
pending or, to the Company's knowledge, threatened, but excluding, from
each of the foregoing, events or circumstances that would not have a
Company Material Adverse Effect.
(c) Neither the Company nor any of its Subsidiaries contributes to or
has any liability (including withdrawal liability) under any Multiemployer
Plan, which liability would have a Company Material Adverse Effect. None of
the transactions contemplated by this Agreement will trigger any withdrawal
or termination liability under any Multiemployer Plan set forth in the
Company Disclosure Letter, which liability would have a Company Material
Adverse Effect.
(d) Other than pursuant to a Company Plan, neither the Company nor any
of its Subsidiaries has any obligation to provide medical, health, life
insurance or other welfare benefits for current or future retired or
terminated employees, their spouses or their dependents (other than in
accordance with Section 4980B of the Code), except for obligations that
would not have a Company Material Adverse Effect.
(e) No Company Plan contains any provision that would prohibit the
transactions contemplated by this Agreement, would give rise to any
severance, termination or other payments as a result of the transactions
contemplated by this Agreement (alone or together with the occurrence of
any other event), or would cause any payment, acceleration or increase in
benefits provided by any Company Plan as a result of the transactions
contemplated by this Agreement (alone or together with the occurrence of
any other event), but excluding from this paragraph (e) any payment,
acceleration or increase which is not material.
(f) Any individual who is classified as a non-employee for purposes of
receiving benefits (such as an independent contractor, leased employee,
consultant or special consultant) regardless of treatment for other
purposes, is not unintentionally eligible to participate in any Company
Plan, except where such treatment would not have a Company Material Adverse
Effect.
Section 4.12 Environmental Matters.
(a) With respect to the current and former operations and properties
of the Company and its Subsidiaries, and in each case except for matters
which, individually or in the aggregate, would not have a Company Material
Adverse Effect, (i) the Company and its Subsidiaries have complied in all
respects with all Environmental Laws (as defined in Section 4.12(b)) in
connection with the ownership, use, maintenance and operation of all real
property owned or leased by them and otherwise in connection with their
operations, (ii) neither the Company nor any of its Subsidiaries has any
liability, whether contingent or otherwise, under any Environmental Law,
(iii) no notices of any violation or alleged violation of, non-compliance
or alleged noncompliance with or any liability under, any Environmental Law
have been received by the Company or any of its Subsidiaries since January
1, 1994, (iv) there are no administrative, civil or criminal writs,
injunctions, decrees, orders or judgments outstanding or any
administrative, civil or criminal actions, suits, claims, proceedings or,
to the Company's knowledge, investigations pending or, to the Company's
knowledge, threatened, relating to compliance with or liability under any
Environmental Law affecting the Company or any of its Subsidiaries and (v)
to the knowledge of the Company, no material changes or alterations in the
practices or
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operations of the Company or any of its Subsidiaries as presently conducted
are anticipated to be required in the future in order to permit the Company
and its Subsidiaries to continue to comply in all material respects with
all applicable Environmental Laws.
(b) The term "Environmental Law" as used in this Agreement means any
law, rule, regulation, permit, order, writ, injunction, judgment or decree
with respect to the preservation of the environment or the promotion of
worker health and safety, including any law, rule, regulation, permit,
order, writ, injunction, judgment or decree relating to Hazardous Materials
(as defined in Section 4.12(c)), drinking water, surface water,
groundwater, wetlands, landfills, open dumps, storage tanks, underground
storage tanks, solid waste, waste water, storm water run-off, noises,
odors, air emissions, waste emissions or wells. Without limiting the
generality of the foregoing, the term will encompass each of the following
statutes and the regulations promulgated thereunder, and any similar
applicable state, local or foreign law, rule or regulation, each as amended
(i) the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, (ii) the Solid Waste Disposal Act, (iii) the Hazardous
Materials Transportation Act, (iv) the Toxic Substances Control Act, (v)
the Clean Water Act, (vi) the Clean Air Act, (vii) the Safe Drinking Water
Act, (viii) the National Environmental Policy Act of 1969, (ix) the
Superfund Amendments and Reauthorization Act of 1986, (x) Title III of the
Superfund Amendments and Reauthorization Act, (xi) the Federal Insecticide,
Fungicide and Rodenticide Act and (xii) the provisions of the Occupational
Safety and Health Act of 1970 relating to the handling of and exposure to
Hazardous Materials and similar substances.
(c) The term "Hazardous Materials" as used in this Agreement means
each and every element, compound, chemical mixture, contaminant, pollutant,
material, waste or other substance that is defined, determined or
identified as hazardous or toxic under any Environmental Law or the
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, storing, escaping, leaching, dumping, discarding, burying,
abandoning or disposing into the environment of which is prohibited under
any Environmental Law. Without limiting the generality of the foregoing,
the term will include (i) "hazardous substances" as defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, or Title
III of the Superfund Amendments and Reauthorization Act and regulations
promulgated thereunder, each as amended, (ii) "hazardous waste" as defined
in the Solid Waste Disposal Act and regulations promulgated thereunder,
each as amended, (iii) "hazardous materials" as defined in the Hazardous
Materials Transportation Act and the regulations promulgated thereunder,
each as amended, (iv) "chemical substance or mixture" as defined in the
Toxic Substances Control Act and regulation promulgated thereunder, each as
amended, (v) petroleum and petroleum products and byproducts and (vi)
asbestos.
Section 4.13 Title. The Company and its Subsidiaries now have and at the
Effective Time will have good and, in the case of real property, marketable
title to all the properties and assets purported to be owned by them, free and
clear of all Liens except (a) Liens for current Taxes or assessments not
delinquent, (b) builder, mechanic, warehousemen, materialmen, contractor,
workmen, repairmen, carrier or other similar Liens arising and continuing in the
ordinary course of business for obligations that are not delinquent, (c) the
rights, if any, of vendors having possession of tooling of the Company and its
Subsidiaries, (d) liens arising from the receipt by the Company and its
Subsidiaries of progress payments by the United States government, (e) Liens
securing rental payments under capital lease arrangements and (f) other Liens
which, individually or in the aggregate, would not have a Company Material
Adverse Effect (collectively, "Permitted Liens").
Section 4.14 Intellectual Property Matters.
(a) The Company and its Subsidiaries own or have the right to use
pursuant to valid license, sublicense, agreement or permission all items of
Intellectual Property (as defined in
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Section 4.14(b)) necessary for their operations as presently conducted and
as presently proposed to be conducted, except where the failure to have
such rights, individually or in the aggregate, would not have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries
has received any charge, complaint, claim, demand or notice alleging any
interference, infringement, misappropriation or violation of the
Intellectual Property rights of any third party, except for interferences,
infringements, misappropriations and violations which, individually or in
the aggregate, would not have a Company Material Adverse Effect. To the
Company's knowledge, no third party has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property rights of the Company or any of its Subsidiaries, except for
misappropriations and violations which, individually or in the aggregate,
would not have a Company Material Adverse Effect.
(b) The term "Intellectual Property" as used in this Agreement means,
collectively, patents, patent disclosures, trademarks, service marks, trade
dress, logos, trade names, copyrights and mask works, and all
registrations, applications, reissuances, continuations, continuations-in-
part, revisions, extensions, reexaminations and associated good will with
respect to each of the foregoing, computer software (including source and
object codes), computer programs, computer data bases and related
documentation and materials, data, documentation, trade secrets,
confidential business information (including ideas, formulas, compositions,
inventions, know-how, manufacturing and production processes and
techniques, research and development information, drawings, designs, plans,
proposals and technical data, financial, marketing and business data and
pricing and cost information) and other intellectual property rights (in
whatever form or medium).
Section 4.15 Year 2000 Compliance Matters. Except for matters which,
individually and in the aggregate, would not have a Company Material Adverse
Effect, all computer systems and computer software used by the Company and its
Subsidiaries and all computer systems and computer software incorporated in
products manufactured by the Company and its Subsidiaries (a) recognize, or are
being adapted so that, prior to December 31, 1999, they will recognize, the
advent of the year 2000 without any material adverse change in operation
associated with such recognition, (b) can correctly recognize and manipulate, or
are being adapted so that, prior to December 31, 1999, they can recognize and
manipulate, date information relating to dates prior to, on and after January 1,
2000 and (c) to the Company's knowledge, can suitably interact with other year
2000 compliant computer systems and computer software in a way that does not
compromise their ability to correctly recognize the advent of the year 2000 or
to recognize and manipulate date information relating to dates prior to, on or
after January 1, 2000. The costs of the adaptations to computer systems and
computer software being made by the Company and its Subsidiaries in order to
achieve year 2000 compliance are not presently expected to have a Company
Material Adverse Effect.
Section 4.16 Labor Matters. There are no controversies pending or, to the
Company's knowledge, threatened between the Company or any of its Subsidiaries
and any of their current or former employees or any labor or other collective
bargaining unit representing any such employee that could reasonably be expected
to result in a material labor strike, dispute, slow-down or work stoppage or
otherwise which, individually or in the aggregate, would have a Company Material
Adverse Effect. The Company is not aware of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company or any of its Subsidiaries. To the Company's knowledge,
as of the date of this Agreement no executive, key employee or group of
employees of the Company or any of its Subsidiaries has any plan to terminate
employment with the Company and its Subsidiaries, which termination would have a
Company Material Adverse Effect.
Section 4.17 State Takeover Laws. The resolutions adopted by the Board of
Directors of the Company approving this Agreement are sufficient to cause the
provisions of Section 203 of the
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Delaware Act to be inapplicable to this Agreement, the Merger and the other
transactions contemplated hereby. To the Company's knowledge, no other fair
price, moratorium, control share acquisition or other form of antitakeover
statute, rule or regulation of any state or jurisdiction applies or purports to
apply to this Agreement, the Merger or the other transactions contemplated
hereby.
Section 4.18 Parent Common Stock Ownership. Neither the Company nor any
of its Subsidiaries owns any shares of Parent Common Stock or any securities
exercisable or exchangeable for or convertible into shares of Parent Common
Stock.
Section 4.19 Accounting and Tax Matters. Neither the Company nor any of
its Subsidiaries has taken or agreed to take any action that would prevent
accounting for the Merger in accordance with the pooling of interests method of
accounting under the requirements of APB No. 16 or prevent the Merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
Section 4.20 Brokers' Fees. Except for the fees and expenses payable by
the Company to Merrill Lynch & Co. and Goldman Sachs & Co., neither the Company
nor any of its Subsidiaries has any liability or obligation to pay any fees or
commissions to any financial advisor, broker, finder or agent with respect to
the transactions contemplated by this Agreement. The Company has delivered to
the Parent Corporation a correct and complete copy of the engagement letter
between the Company and Merrill Lynch & Co. relating to the transactions
contemplated by this Agreement. The Company Disclosure Letter sets forth the
fees payable to Merrill Lynch & Co. and Goldman Sachs & Co. in connection with
this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PARENT CORPORATION
The Parent Corporation represents and warrants to the Company that except
as disclosed in the reports, schedules, forms, statements and other documents
filed by the Parent Corporation with the SEC and publicly available prior to the
date of this Agreement, as disclosed in the draft of the Quarterly Statement on
Form 10-Q for the Parent Corporation's fiscal quarter ended March 31, 1999 (the
"Parent Corporation Form 10-Q") delivered to the Parent Corporation prior to the
date of this Agreement or as disclosed in the letter dated as of the date of
this Agreement from the Parent Corporation to the Company (the "Parent
Corporation Disclosure Letter"):
Section 5.1 Organization. The Parent Corporation and each of its
Subsidiaries is a corporation duly organized and validly existing under the laws
of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as presently being conducted. The Parent Corporation and each of its
Subsidiaries is in good standing under the laws of the jurisdiction of its
incorporation and is duly qualified to conduct business as a foreign corporation
in each other jurisdiction where such qualification is required, except where
the failure to be so qualified and in good standing would not have a material
adverse effect on the business, financial condition, operations or results of
operations of the Parent Corporation and its Subsidiaries taken as a whole or
the ability of the Parent Corporation to consummate the Merger and to perform
its obligations under this Agreement (a "Parent Corporation Material Adverse
Effect"). The Parent Corporation has delivered to the Company correct and
complete copies of its charter and bylaws, as presently in effect, and will make
available to the Company after the date of this Agreement correct and complete
copies of the charter and bylaws, as presently in effect, of each of its
Subsidiaries.
Section 5.2 Authorization of Transaction; Enforceability. Subject to
obtaining the Parent Corporation Stockholder Approval, each of the Parent
Corporation and the Acquisition Corporation has full corporate power and
authority and has taken all requisite corporate action to enable it to execute
and deliver this Agreement, to consummate the Merger and the other transactions
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contemplated hereby and to perform its obligations hereunder. The Parent
Corporation has executed a written consent in lieu of a special meeting of the
sole stockholder of the Acquisition Corporation in accordance with Section 228
of the Delaware Act adopting and approving this Agreement. The Board of
Directors of the Parent Corporation, at a meeting thereof duly called and held,
has duly adopted resolutions by the requisite majority vote approving this
Agreement, the Merger and the other transactions contemplated hereby,
determining that the terms and conditions of this Agreement, the Merger and the
other transactions contemplated hereby are fair to and in the best interests of
the Parent Corporation and its stockholders, approving and setting forth the
Charter Amendment and declaring its advisability, and recommending that the
Parent Corporation's stockholders approve and adopt the Charter Amendment and
the issuance of the Parent Common Stock in the Merger. The foregoing resolutions
of the Board of Directors of the Company have not been modified, supplemented or
rescinded and remain in full force and effect as of the date of this Agreement.
In connection with its adoption of the foregoing resolutions, the Board of
Directors of the Parent Corporation received the written opinion of Bear Stearns
& Co. Inc., financial advisor to the Board of Directors of the Parent
Corporation, that the Merger is fair, from a financial point of view, to the
Parent Corporation and its stockholders. The foregoing opinion has not been
modified, supplemented or rescinded prior to the date of this Agreement. The
Parent Corporation will deliver to the Company promptly after the date of this
Agreement correct and complete copies of the foregoing resolutions and opinion.
This Agreement constitutes the valid and legally binding obligation of each of
the Parent Corporation and the Acquisition Corporation, enforceable against the
Parent Corporation and the Acquisition Corporation in accordance with its terms
and conditions.
Section 5.3 Noncontravention; Consents. Except for (a) certain filings
and approvals necessary to comply with the applicable requirements of the
Securities Act, the Securities Exchange Act and the "blue sky" laws and
regulations of various states, (b) the approval by the New York Stock Exchange
of the listing, upon official notice of issuance, of the shares of Parent Common
Stock proposed to be issued pursuant to the Merger, (c) the filing of a
Notification and Report Form and related material with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the HSR Act, (d) certain filings and approvals which may be necessary to
comply with the rules and regulations of the Federal Aviation Administration and
(e) the filing of a certificate of merger pursuant to the Delaware Act, neither
the execution and delivery of this Agreement by the Parent Corporation or the
Acquisition Corporation, nor the consummation by the Parent Corporation or the
Acquisition Corporation of the transactions contemplated hereby, will constitute
a violation of, be in conflict with, constitute or create (with or without
notice or lapse of time or both) a default under, give rise to any right of
termination, cancellation, amendment or acceleration with respect to, or result
in the creation or imposition of any Lien upon any property of the Parent
Corporation or any of its Subsidiaries pursuant to (i) the charter or bylaws of
the Parent Corporation or any of its Subsidiaries, (ii) any constitutional
provision, law, rule, regulation, permit, order, writ, injunction, judgment or
decree to which the Parent Corporation or any of its Subsidiaries is subject or
(iii) any agreement or commitment to which the Parent Corporation or any of its
Subsidiaries is a party or by which the Parent Corporation, any of its
Subsidiaries or any of their respective properties is bound or subject, except,
in the case of clauses (ii) and (iii) above, for such matters which,
individually or in the aggregate, would not have a Parent Corporation Material
Adverse Effect.
Section 5.4 Capitalization.
(a) As of the date of this Agreement, the authorized capital stock of
the Parent Corporation consists of 250,000,000 shares divided into
200,000,000 shares of Parent Common Stock and 50,000,000 shares of
Preferred Stock, par value $1.00 per share. As of May 11, 1999, 127,569,456
shares of Parent Common Stock were issued and outstanding, 41,205,216
shares were held by the Parent Corporation as treasury shares and 4,926,641
shares were reserved for
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issuance upon the exercise of options or other rights to purchase or
otherwise acquire shares of Parent Common Stock granted by the Parent
Corporation to current and former directors, officers and employees of the
Parent Corporation and its Subsidiaries. No shares of the Parent
Corporation's Preferred Stock are issued or outstanding. All of the issued
and outstanding shares of capital stock of the Parent Corporation have been
duly authorized and are validly issued, fully paid and nonassessable.
(b) Other than options and other rights to purchase or otherwise
acquire an aggregate of 4,926,641 shares of Parent Common Stock granted by
the Parent Corporation to current and former directors, officers and
employees of the Parent Corporation and its Subsidiaries pursuant to
various stock option, restricted stock and similar plans, programs and
arrangements of the Parent Corporation and its Subsidiaries, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights or other contracts or
commitments that could require the Parent Corporation or any of its
Subsidiaries to issue, sell or otherwise cause to become outstanding any of
its capital stock. There are no outstanding stock appreciation, phantom
stock, profit participation or similar rights with respect to the Parent
Corporation or any of its Subsidiaries.
(c) Neither the Parent Corporation nor any of its Subsidiaries is a
party to any voting trust, proxy or other agreement or understanding with
respect to the voting of any capital stock of the Parent Corporation or any
of its Subsidiaries.
(d) All of the outstanding shares of the capital stock of each of the
Parent Corporation's Subsidiaries have been validly issued, are fully paid
and nonassessable and are owned by the Parent Corporation or one of its
Subsidiaries, free and clear of any Lien. Except for its Subsidiaries set
forth in the Parent Corporation Disclosure Letter, the Company does not
control directly or indirectly or have any direct or indirect equity
participation in any corporation, partnership, limited liability company,
joint venture or other entity. The Acquisition Corporation has been formed
solely for purposes of the transactions contemplated by this Agreement and
has not conducted any business or engaged in any activities prior to the
date of this Agreement.
Section 5.5 Parent Corporation Reports; Joint Proxy and Registration
Statements.
(a) The Parent Corporation has since January 1, 1994 filed all
reports, forms, statements and other documents (collectively, together with
all financial statements included or incorporated by reference therein and
the Parent Corporation Form 10-Q, the "Parent Corporation SEC Documents")
required to be filed by the Parent Corporation with the SEC pursuant to the
provisions of the Securities Act or the Securities Exchange Act. Each of
the Parent Corporation SEC Documents, as of its filing date, complied in
all material respects with the applicable requirements of the Securities
Act and the Securities Exchange Act. None of the Parent Corporation SEC
Documents, as of their respective filing dates, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
No Subsidiary of the Parent Corporation is required to file any reports,
forms, statements or other documents pursuant to the Securities Act of the
Securities Exchange Act.
(b) Each of the consolidated financial statements (including related
notes) included in the Parent Corporation SEC Documents presented fairly in
all material respects the consolidated financial condition, cash flows and
results of operations of the Parent Corporation and its Subsidiaries for
the respective periods or as of the respective dates set forth therein.
Each of the financial statements (including related notes) included in the
Parent Corporation SEC Documents has been prepared in accordance with
United States generally accepted accounting principles, consistently
applied during the periods involved, except (i) as noted therein, (ii) to
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the extent required by changes in United States generally accepted
accounting principles or (iii) in the case of unaudited interim financial
statements, normal recurring year-end audit adjustments.
(c) The Parent Corporation has delivered to the Company correct and
complete copies of any proposed or contemplated amendments or modifications
to the Parent Corporation SEC Documents (including any exhibit documents
included therein) that have not yet been filed by the Parent Corporation
with the SEC. The Parent Corporation has delivered to the Company a correct
and complete copy of the most recent draft of the Parent Corporation Form
10-Q.
(d) The Joint Proxy Statement and the Registration Statement will
comply in all material respects with the applicable requirements of the
Securities Act and the Securities Exchange Act and will not, at the time
the definitive Joint Proxy Statement is filed with the SEC and mailed to
the stockholders of the Parent Corporation and at the time the Registration
Statement is declared effective by the SEC, contain any untrue statement of
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. No
representation or warranty is made herein by the Parent Corporation with
respect to any information supplied by the Company for inclusion in the
Joint Proxy Statement or the Registration Statement. For purposes of this
Section 5.5(d), all information included in the Joint Proxy Statement and
the Registration Statement concerning or related to the Company and its
Subsidiaries will be deemed to have been supplied by the Company.
Section 5.6 No Undisclosed Liabilities. The Parent Corporation and its
Subsidiaries have no liabilities or obligations (whether absolute or contingent,
liquidated or unliquidated, or due or to become due) except for (a) liabilities
and obligations reflected in the Parent Corporation SEC Documents and (b) other
liabilities and obligations which, individually or in the aggregate, would not
have a Parent Corporation Material Adverse Effect.
Section 5.7 Absence of Material Adverse Change. Since December 31, 1998,
there has not occurred any event, change, effect or development which,
individually or in the aggregate, would have a Parent Corporation Material
Adverse Effect.
Section 5.8 Litigation and Legal Compliance.
(a) The Parent Corporation Disclosure Letter sets forth each instance
in which the Parent Corporation or any of its Subsidiaries is (i) subject
to any material unsatisfied judgment order, decree, stipulation, injunction
or charge or (ii) a party to or, to the Parent Corporation's knowledge,
threatened to be made a party to any material charge, complaint, action,
suit, proceeding, hearing or, to the Parent Corporation's knowledge,
investigation of or in any court or quasi-judicial or administrative agency
of any federal, state, local or foreign jurisdiction, except for judgments,
orders, decrees, stipulations, injunctions, charges, complaints, actions,
suits, proceedings, hearings and investigations which, individually or in
the aggregate, would not have a Parent Corporation Material Adverse Effect.
There are no judicial or administrative actions, proceedings or, to the
Parent Corporation's knowledge, investigations pending or, to the Parent
Corporation's knowledge, threatened that question the validity of this
Agreement or any action taken or to be taken by the Parent Corporation in
connection with this Agreement which would have a Parent Corporation
Material Adverse Effect.
(b) Except for instances of noncompliance which, individually or in
the aggregate, would not have a Parent Corporation Material Adverse Effect,
the Parent Corporation and its Subsidiaries have complied with each
constitutional provision, law, rule, regulation, permit, order, writ,
injunction, judgment or decree to which the Parent Corporation or any of
its Subsidiaries is subject.
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Section 5.9 Contract Matters.
(a) Neither the Parent Corporation nor any of its Subsidiaries is in
default or violation of (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of any note, mortgage, indenture, loan agreement,
other evidence of indebtedness, guarantee, license, lease, agreement or
other contract, instrument or contractual obligation to which the Parent
Corporation or any of its Subsidiaries is a party or by which any of their
respective assets is bound or subject, except for defaults and violations
which, individually or in the aggregate, would not have a Parent
Corporation Material Adverse Effect.
Section 5.10 Tax Matters.
(a) The Parent Corporation and each of its Subsidiaries have timely
filed all required Tax Returns and all such Tax Returns are accurate and
complete in all respects, except to the extent any such failure to file or
any such inaccuracy in any filed Tax Return, individually or in the
aggregate, would not have a Parent Corporation Material Adverse Effect. All
Taxes owed by the Parent Corporation or any of its Subsidiaries (whether or
not shown on any Tax Return) have been paid or adequately reserved for in
accordance with generally accepted accounting principles in the financial
statements of the Parent Corporation, except to the extent any such failure
to pay or reserve, individually or in the aggregate, would not have a
Parent Corporation Material Adverse Effect.
(b) The most recent financial statements contained in the Parent
Corporation SEC Documents reflect adequate reserves in accordance with
generally accepted accounting principles for all Taxes payable by the
Parent Corporation and its Subsidiaries for all Tax periods and portions
thereof through the date of such financial statements, except to the extent
that any failure to so reserve, individually or in the aggregate, would not
have a Parent Corporation Material Adverse Effect. No deficiency with
respect to Taxes has been proposed, asserted or assessed against the Parent
Corporation or any of its Subsidiaries and no requests for waivers of the
time to assess any such Taxes are pending, except to the extent any such
deficiency or request for waiver, individually or in the aggregate, would
not have a Parent Corporation Material Adverse Effect.
(c) The federal income Tax Returns of the Parent Corporation and each
of its Subsidiaries consolidated in such Tax Returns have been examined by
and settled with the Internal Revenue Service for all Tax years through
1989.
(d) Except for Liens for current Taxes not yet due and payable or
which are being contested in good faith, there is no Lien affecting any of
the assets or properties of the Parent Corporation or any of its
Subsidiaries that arose in connection with any failure or alleged failure
to pay any Tax, except for Liens which, individually or in the aggregate,
would not have a Parent Corporation Material Adverse Effect.
(e) Neither the Parent Corporation nor any of its Subsidiaries is a
party to any Tax allocation or Tax sharing agreement.
Section 5.11 Employee Benefit Matters.
(a) The Parent Corporation Disclosure Letter lists each plan, program
or arrangement constituting a material Employee Welfare Benefit Plan or a
material Employee Pension Benefit Plan and each other material employee
benefit plan, program or arrangement or employment practice maintained by
the Parent Corporation or any of its Subsidiaries with respect to any of
its current or former employees or to which the Parent Corporation or any
of the Parent Corporation Subsidiaries contributes or is required to
contribute with respect to any of its current
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or former employees (collectively, the "Parent Corporation Plans"). With
respect to each Parent Corporation Plan:
(i) such Parent Corporation Plan (and each related trust, insurance
contract or fund) has been administered in a manner consistent in all
respects with its written terms and complies in form and operation with
the applicable requirements of ERISA, the Code and other applicable
laws, except for failures of administration or compliance that would not
have a Parent Corporation Material Adverse Effect;
(ii) all required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1's and Summary Plan
Descriptions) have been filed or distributed appropriately with respect
to such Parent Corporation Plan, except for failures of filing or
distribution that would not have a Parent Corporation Material Adverse
Effect;
(iii) the requirements of Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code have been met with respect to each such
Parent Corporation Plan which is an Employee Welfare Benefit Plan,
except for failures that would not have a Parent Corporation Material
Adverse Effect;
(iv) all material contributions, premiums or other payments
(including all employer contributions and employee salary reduction
contributions) that are due have been paid to each such Parent
Corporation Plan;
(v) each such Parent Corporation Plan which is an Employee Pension
Benefit Plan intended to be a "qualified plan" under Section 401(a) of
the Code has received a favorable determination letter from the Internal
Revenue Service and no event has occurred which could reasonably be
expected to cause the loss or denial of such qualification under Section
401(a) of the Code;
(vi) the Parent Corporation has made available or prior to the
Closing Date will make available to the Company, upon its request,
correct and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report, the
most recent actuarial report, the most recent audited financial
statements, and all related trust agreements, insurance contracts and
other funding agreements that implement such Parent Corporation Plan
(but excluding the failure to make available any such document which is
not material). The valuation summaries provided by the Parent
Corporation to the Company reasonably represent the assets and
liabilities attributable to the Parent Corporation Plans calculated in
accordance with the Parent Corporation's past practices, but excluding
any failure that would not have a Parent Corporation Material Adverse
Effect;
(vii) no Parent Corporation Plan which is an Employee Pension
Benefit Plan has been amended in any manner which would require the
posting of security under Section 401(a)(29) of the Code or Section 307
of ERISA; and
(viii) neither the Parent Corporation nor any of its Subsidiaries
has communicated to any employee (excluding internal memoranda to
management) any plan or commitment, whether or not legally binding, to
create any additional material employee benefit plan or to materially
modify or change any Parent Corporation Plan affecting any employee or
terminated employee of the Parent Corporation or any of its
Subsidiaries, but excluding any such action that does not materially
increase the liability of the Parent Corporation or its Subsidiaries.
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(b) With respect to each Employee Welfare Benefit Plan or Employee
Pension Benefit Plan that the Parent Corporation or any of its Subsidiaries
maintains or ever has maintained, or to which any of them contributes, ever
has contributed or ever has been required to contribute:
(i) no such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been completely or partially terminated (other
than any termination that would not have a Parent Corporation Material
Adverse Effect, no reportable event (as defined in Section 4043 of
ERISA) as to which notices would be required to be filed with the
Pension Benefit Guaranty Corporation has occurred but has not yet been
so reported (excluding any such failure to report which would not have a
Parent Corporation Material Adverse Effect), and no proceeding by the
Pension Benefit Guaranty Corporation to terminate such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been instituted;
and
(ii) there have been no non-exempt prohibited transactions (as
defined in Section 406 of ERISA and Section 4975 of the Code) with
respect to such plan, no fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of such plan, and no
action, suit, proceeding, hearing or, to the Parent Corporation's
knowledge, investigation with respect to the administration or the
investment of the assets of such plan (other than routine claims for
benefits) is pending or, to the Parent Corporation's knowledge,
threatened, but excluding, from each of the foregoing, events or
circumstances that would not have a Parent Corporation Material Adverse
Effect.
(c) None of the transactions contemplated by this Agreement will
trigger any withdrawal or termination liability under any Multiemployer
Plan set forth in the Parent Corporation Disclosure Letter, which liability
would have a Parent Corporation Material Adverse Effect.
(d) Other than pursuant to a Parent Corporation Plan, neither the
Parent Corporation nor any of its Subsidiaries has any obligation to
provide medical, health, life insurance or other welfare benefits for
current or future retired or terminated employees, their spouses or their
dependents (other than in accordance with Section 4980B of the Code),
except for obligations that would not have a Parent Corporation Material
Adverse Effect.
(e) No Parent Corporation Plan contains any provision that would
prohibit the transactions contemplated by this Agreement, would give rise
to any severance, termination or other payments as a result of the
transactions contemplated by this Agreement (alone or together with the
occurrence of any other event), or would cause any payment, acceleration or
increase in benefits provided by any Parent Corporation Plan as a result of
the transactions contemplated by this Agreement (alone or together with the
occurrence of any other event), but excluding from this paragraph (e) any
payment, acceleration or increase which is not material.
(f) Any individual who is classified as a non-employee for purposes of
receiving benefits (such as an independent contractor, leased employee,
consultant or special consultant) regardless of treatment for other
purposes, is not unintentionally eligible to participate in any Parent
Corporation Plan, except where such treatment would not have a Parent
Corporation Material Adverse Effect.
Section 5.12 Environmental Matters. With respect to the current and
former operations and properties of the Parent Corporation and its Subsidiaries,
and in each case except for matters which, individually or in the aggregate,
would not have a Parent Corporation Material Adverse Effect, (a) the Parent
Corporation and its Subsidiaries have complied in all respects with all
Environmental Laws in connection with the ownership, use, maintenance and
operation of all real property owned or leased by them and otherwise in
connection with their operations, (b) neither the Parent Corporation nor any of
its Subsidiaries has any liability, whether contingent or otherwise, under any
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Environmental Law, (c) no notices of any violation or alleged violation of,
non-compliance or alleged noncompliance with or any liability under, any
Environmental Law have been received by the Parent Corporation or any of its
Subsidiaries since January 1, 1994, (d) there are no administrative, civil or
criminal writs, injunctions, decrees, orders or judgments outstanding or any
administrative, civil or criminal actions, suits, claims, proceedings or, to the
Parent Corporation's knowledge, investigations pending or, to the Parent
Corporation's knowledge, threatened, relating to compliance with or liability
under any Environmental Law affecting the Parent Corporation or any of its
Subsidiaries and (e) to the knowledge of the Parent Corporation, no material
changes or alterations in the practices or operations of the Parent Corporation
or any of its Subsidiaries as presently conducted are anticipated to be required
in the future in order to permit the Parent Corporation and its Subsidiaries to
continue to comply in all material respects with all applicable Environmental
Laws.
Section 5.13 Title. The Parent Corporation and its Subsidiaries now have
and at the Effective Time will have good and, in the case of real property,
marketable title to all the properties and assets purported to be owned by them,
free and clear of all Liens except Permitted Liens.
Section 5.14 Intellectual Property Matters. The Parent Corporation and
its Subsidiaries own or have the right to use pursuant to valid license,
sublicense, agreement or permission all items of Intellectual Property necessary
for their operations as presently conducted and as presently proposed to be
conducted, except where the failure to have such rights, individually or in the
aggregate, would not have a Parent Corporation Material Adverse Effect. Neither
the Parent Corporation nor any of its Subsidiaries has received any charge,
complaint, claim, demand or notice alleging any interference, infringement,
misappropriation or violation of the Intellectual Property rights of any third
party, except for interferences, infringements, misappropriations and violations
which, individually or in the aggregate, would not have a Parent Corporation
Material Adverse Effect. To the Parent Corporation's knowledge, no third party
has interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property rights of the Parent Corporation or any
of its Subsidiaries, except for misappropriations and violations which,
individually or in the aggregate, would not have a Parent Corporation Material
Adverse Effect.
Section 5.15 Year 2000 Compliance Matters. Except for matters which,
individually and in the aggregate, would not have a Parent Corporation Material
Adverse Effect, all computer systems and computer software used by the Parent
Corporation and its Subsidiaries and all computer systems and computer software
incorporated in products manufactured by the Parent Corporation and its
Subsidiaries (a) recognize, or are being adapted so that, prior to December 31,
1999, they will recognize, the advent of the year 2000 without any material
adverse change in operation associated with such recognition, (b) can correctly
recognize and manipulate, or are being adapted so that, prior to December 31,
1999, they can recognize and manipulate, date information relating to dates
prior to, on and after January 1, 2000 and (c) to the Parent Corporation's
knowledge, can suitably interact with other year 2000 compliant computer systems
and computer software in a way that does not compromise their ability to
correctly recognize the advent of the year 2000 or to recognize and manipulate
date information relating to dates prior to, on or after January 1, 2000. The
costs of the adaptations to computer systems and computer software being made by
the Parent Corporation and its Subsidiaries in order to achieve year 2000
compliance are not presently expected to have a Parent Corporation Material
Adverse Effect.
Section 5.16 Labor Matters. There are no controversies pending or, to the
Parent Corporation's knowledge, threatened between the Parent Corporation or any
of its Subsidiaries and any of their current or former employees or any labor or
other collective bargaining unit representing any such employee that could
reasonably be expected to result in a material labor strike, dispute, slow-down
or work stoppage or otherwise which, individually or in the aggregate, would
have a Parent Corporation Material Adverse Effect. The Parent Corporation is not
aware of any organizational effort
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presently being made or threatened by or on behalf of any labor union with
respect to employees of the Parent Corporation or any of its Subsidiaries. To
the Parent Corporation's knowledge, as of the date of this Agreement no
executive, key employee or group of employees of the Parent Corporation or any
of its Subsidiaries has any plan to terminate employment with the Parent
Corporation and its Subsidiaries, which termination would have a Parent
Corporation Material Adverse Effect.
Section 5.17 Company Common Stock Ownership. Neither the Parent
Corporation nor any of its Subsidiaries owns any shares of Company Common Stock
or any securities exercisable or exchangeable for or convertible into shares of
Company Common Stock.
Section 5.18 Accounting and Tax Matters. Neither the Parent Corporation
nor any of its Subsidiaries has taken or agreed to take any action that would
prevent accounting for the Merger in accordance with the pooling of interests
method of accounting under the requirements of APB No. 16 or prevent the Merger
from constituting a reorganization within the meaning of Section 368(a) of the
Code.
ARTICLE 6
COVENANTS
Section 6.1 General. Each of the parties will use its respective best
efforts to take all action and to do all things necessary, proper or advisable
to consummate and make effective the transactions contemplated by this
Agreement.
Section 6.2 Notices and Consents. Each of the parties prior to the
Closing Date will give all notices to third parties and governmental entities
and will use its respective best efforts to obtain all third party and
governmental consents and approvals that are required in connection with the
transactions contemplated by this Agreement. Within five business days following
the execution and delivery of this Agreement, each of the parties will file a
Notification and Report Form and related material with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice
under the HSR Act, will use its respective best efforts to obtain early
termination of the applicable waiting period and will make all further filings
pursuant thereto that may be necessary, proper or advisable. The foregoing will
not be deemed to require the Parent Corporation to enter into any agreement,
consent decree or other commitment requiring the Parent Corporation or any of
its Subsidiaries to divest or hold separate any assets (including any assets of
the Company or any of its Subsidiaries) or to take any other action that would
have a Parent Corporation Material Adverse Effect.
Section 6.3 Interim Conduct of the Company. Except as expressly
contemplated by this Agreement, as set forth in the Company Disclosure Letter,
as required by law or by the terms of any contract in effect on the date of this
Agreement or as the Parent Corporation may approve, which approval will not be
unreasonably withheld, from and after the date of this Agreement through the
Closing Date, the Company will, and will cause each of its Subsidiaries to,
conduct its operations in accordance with its ordinary course of business,
consistent with past practice, and in accordance with such covenant will not,
and will not cause or permit any of its Subsidiaries to:
(a) amend its charter or bylaws or file any certificate of designation
or similar instrument with respect to any shares of its authorized but
unissued capital stock;
(b) authorize or effect any stock split or combination or
reclassification of shares of its capital stock;
(c) declare or pay any dividend or distribution with respect to its
capital stock (other than dividends payable by a Subsidiary of the Company
to the Company or another Subsidiary), issue or authorize the issuance of
any shares of its capital stock (other than in connection with the
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exercise of currently outstanding Stock Options and any other Stock Options
issued in accordance with this Agreement) or any other securities
exercisable or exchangeable for or convertible into shares of its capital
stock, or repurchase, redeem or otherwise acquire for value any shares of
its capital stock or any other securities exercisable or exchangeable for
or convertible into shares of its capital stock;
(d) merge or consolidate with any entity;
(e) sell, lease or otherwise dispose of any of its capital assets,
including any shares of the capital stock of any of its Subsidiaries, other
than sales, leases or other dispositions of machinery, equipment, tools,
vehicles and other operating assets no longer required in its operations
made in the ordinary course of business, consistent with past practice;
(f) liquidate, dissolve or effect any recapitalization or
reorganization in any form;
(g) acquire any interest in any business (whether by purchase of
assets, purchase of stock, merger or otherwise) or enter into any joint
venture;
(h) create, incur, assume or suffer to exist any indebtedness for
borrowed money (including capital lease obligations), other than
indebtedness existing as of the date of this Agreement, borrowings under
existing credit lines in the ordinary course of business, consistent with
past practice, and intercompany indebtedness among the Company and its
Subsidiaries arising in the ordinary course of business, consistent with
past practice;
(i) create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) affecting any of its material assets or properties;
(j) except as required as the result of changes in United States
generally accepted accounting principles, change any of the accounting
principles or practices used by it or revalue in any material respect any
of its assets or properties, other than write-downs of inventory or
accounts receivable in the ordinary course of business, consistent with
past practice;
(k) except as required under the terms of any collective bargaining
agreement in effect as of the date of this Agreement, grant any general or
uniform increase in the rates of pay of its employees or grant any general
or uniform increase in the benefits under any bonus or pension plan or
other contract or commitment;
(l) except for any increase required under the terms of any collective
bargaining agreement or consulting or employment agreement in effect on the
date of this Agreement, increase the compensation payable or to become
payable to officers and salaried employees with a base salary in excess of
$75,000 per year or increase any bonus, insurance, pension or other benefit
plan, payment or arrangement made to, for or with any such officers or
salaried employees;
(m) enter into any material contract or commitment or engage in any
material transaction with any affiliated person or entity (other than the
Company or its Subsidiaries) or enter into any material contract or
commitment or engage in any material transaction with any unaffiliated
person or entity which, to the Company's knowledge, is reasonably likely to
result in a material financial loss to the Company and its Subsidiaries
taken as a whole;
(n) make any material Tax election or settle or compromise any
material Tax liability;
(o) pay, discharge or satisfy any claims, liabilities or obligations
other than the payment, discharge and satisfaction in the ordinary course
of business of liabilities reflected or reserved for in the consolidated
financial statements of the Company or otherwise incurred in the ordinary
course of business, consistent with past practice;
(p) settle or compromise any material pending or threatened suit,
action or proceeding; or
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(q) commit to do any of the foregoing.
Section 6.4 Interim Conduct of the Parent Corporation. Except as the
Company may approve, which approval will not be unreasonably withheld, from and
after the date of this Agreement through the Closing Date, the Parent
Corporation will not declare or pay any dividend or distribution with respect to
its capital stock (other than the declaration and payment of regular quarterly
cash dividends in amounts consistent with past practice).
Section 6.5 Preservation of Organization. Subject to compliance with the
provisions of Section 6.3, the Company will, and will cause each of its
Subsidiaries to, use its best efforts to preserve its business organization
intact in all material respects, to keep available to the Company and its
Subsidiaries after the Closing Date the present officers and employees of the
Company and its Subsidiaries as a group and to preserve the present
relationships of the Company and its Subsidiaries with suppliers and customers
and others having business relations with the Company and its Subsidiaries, in
each case so that there will not be a Company Material Adverse Effect.
Section 6.6 Full Access. Each party will, and will cause its Subsidiaries
and its and their representatives to, afford the other party and the
representatives of the other party reasonable access, upon reasonable notice at
all reasonable times to all premises, properties, books, records, contracts and
documents of or pertaining to such party and its Subsidiaries. Without limiting
the generality of the foregoing, the Company acknowledges and agrees that the
Parent Corporation and its representatives and agents may, with prior notice to
the Company and subject to the prior approval of the Company (which will not be
unreasonably withheld or delayed), conduct customary environmental assessments
of the real property and facilities owned or leased by the Company and its
Subsidiaries. Notwithstanding the foregoing, neither party will be required to
provide access or to disclose information where such access or disclosure would
contravene any law or contract or would result in the waiver of any legal
privilege or work-product protection. Any information disclosed will be subject
to the provisions of the Confidentiality Agreement between the Company and the
Parent Corporation (the "Confidentiality Agreement").
Section 6.7 Notice of Developments. Each party will give prompt written
notice to the other party of any material development affecting such party or
any of its Subsidiaries. Each party will give prompt written notice to the other
of any material development affecting the ability of the parties to consummate
the transactions contemplated by this Agreement. No such written notice of a
material development will be deemed to have amended any of the disclosures set
forth in the Company Disclosure Letter or the Parent Disclosure Letter, to have
qualified the representations and warranties contained herein and to have cured
any misrepresentation or breach of warranty that otherwise might have existed
hereunder by reason of such material development.
Section 6.8 Acquisition Proposals.
(a) The Company and each of its Subsidiaries, and each of their
respective directors, officers, employees, agents and representatives, will
immediately cease any discussions or negotiations presently being conducted
with respect to any Acquisition Proposal (as defined in Section 6.8(g)).
The Company and its Subsidiaries will not and will use their best efforts
to cause their respective directors, officers, employees, agents and
representatives not to (i) initiate or solicit, directly or indirectly, any
inquiries with respect to, or the making of, any Acquisition Proposal or
(ii) except as expressly permitted in accordance with Section 6.8(b),
engage in any negotiations or discussions with, furnish any information or
data to or enter into any letter of intent, agreement in principle,
acquisition agreement or similar agreement with any party relating to any
Acquisition Proposal. The Company will be responsible for any breach of the
provisions of this Section 6.8 by any director, officer, employee, agent or
representative of the Company or any of its Subsidiaries.
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(b) Notwithstanding the provisions of Section 6.8(a) but subject to
the other provisions of this Section 6.8, the Company may engage in
discussions or negotiations with, furnish information and data to,
withdraw, modify or amend its recommendation and approval of the Merger and
enter into a letter of intent, agreement in principle, acquisition
agreement or similar agreement with any party that submits an Acquisition
Proposal to the Company after the date of this Agreement and on or prior to
June 30, 1999 (the "Applicable Period") which the Board of Directors of the
Company by majority vote determines in its good faith judgment could
reasonably be expected to result in a Superior Acquisition Proposal (as
defined in Section 6.8(h)).
(c) Nothing in this Section 6.8 will prevent the Board of Directors of
the Company from taking, and disclosing to the Company's stockholders, a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the
Securities Exchange Act with respect to any publicly announced unsolicited
tender offer or otherwise from making any disclosure to its stockholders
if, in its good faith judgment based on the opinion of outside legal
counsel, failure to so disclose would be inconsistent with its obligations
under applicable law; provided that the Board of Directors will not
recommend that the stockholders of the Company tender their shares of
Company Common Stock in connection with any such tender offer unless (i)
such tender offer is determined to be a Superior Acquisition Proposal in
accordance with the provisions of Section 6.8(h) and (ii) the Company has
provided the Parent Corporation with not less than five business days prior
written notice of any such action.
(d) The Company will within 24 hours after its receipt of any
Acquisition Proposal provide the Parent Corporation with a copy of such
Acquisition Proposal or, in connection with any non-written Acquisition
Proposal, a written statement setting forth in reasonable detail the terms
and conditions of such Acquisition Proposal, including the identity of the
acquiring party. The Company will promptly inform the Parent Corporation of
the status and content of any discussions or negotiations involving any
Acquisition Proposal. In connection with any determination by the Board of
Directors of the Company that an Acquisition Proposal is a Superior
Acquisition Proposal, the Company will within 24 hours after the making of
such determination provide the Parent Corporation with a written summary in
reasonable detail of the reasons for such determination.
(e) In no event will the Company provide any non-public information
regarding the Company or any of its Subsidiaries to any party making an
Acquisition Proposal unless such party enters into a written
confidentiality agreement containing confidentiality provisions
substantially similar to those contained in the Confidentiality Agreement.
In the event the Company enters into any confidentiality agreement with a
party pursuant to the provisions of this Section 6.8(e) that does not
include terms and conditions that are substantially similar to those
contained in the sixth paragraph of the Confidentiality Agreement (the
"Standstill Provisions"), then the Parent Corporation and its Subsidiaries
will be released from their obligations under the Standstill Provisions to
the same extent as such party.
(f) The Company will not enter into any letter of intent, agreement in
principle, acquisition agreement or similar agreement with respect to any
Superior Acquisition Proposal unless (i) the Company has provided the
Parent Corporation with not less than five business days prior written
notice of such action and (ii) such action is taken by the Company
concurrently with or after the termination of this Agreement in accordance
with the provisions of Section 8.1(e).
(g) The term "Acquisition Proposal" as used in this Agreement means
any bona fide proposal, whether or not in writing, made by a party to
acquire beneficial ownership (as defined under Rule 13(d) promulgated under
the Securities Exchange Act) of all or a material portion of the assets of,
or any material equity interest in, the Company and Subsidiaries taken as a
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whole pursuant to a merger, consolidation or other business combination,
sale of shares of capital stock, sale of assets, tender or exchange offer
or similar transaction involving the Company or any of its Subsidiaries,
including any single or multi-step transaction or series of related
transactions that is structured to permit such party to acquire such
beneficial ownership.
(h) The term "Superior Acquisition Proposal" as used in this Agreement
means an unsolicited written Acquisition Proposal that the Board of
Directors of the Company by majority vote determines in its good faith
judgment after consulting with the Company's outside financial and legal
advisors (i) is reasonably capable of being completed, taking into account
all legal, financial, regulatory and other aspects of such proposal, and
(ii) presents to the Company and its stockholders more favorable financial
and other terms, taken as a whole, than the Merger.
(i) No action taken in respect of an Acquisition Proposal or a
Superior Acquisition Proposal which is permitted by the provisions of this
Section 6.8, including any withdrawal, modification or amendment of the
recommendation and approval of the Merger by the Board of Directors of the
Company and the public announcement thereof permitted by the provisions of
this Section 6.8, will constitute a breach of any other provision of this
Agreement.
Section 6.9 Indemnification.
(a) From and after the Closing Date, the Parent Corporation will cause
the Surviving Corporation to indemnify, defend and hold harmless each
person who is now, or has been at any time prior to the Effective Time, an
officer or director of the Company or any of its present or former
Subsidiaries or corporate parents (collectively, the "Indemnified Parties")
from and against all losses, claims, damages and expenses (including
reasonable attorney's fees and expenses) arising out of or relating to
actions or omissions, or alleged actions or omissions, occurring at or
prior to the Effective Time to the fullest extent permitted from time to
time by the Delaware Act or any other applicable laws as presently or
hereafter in effect.
(b) Any determination required to be made with respect to whether any
Indemnified Party may be entitled to indemnification will, if requested by
such Indemnified Party, be made by independent legal counsel selected by
the Indemnified Party and reasonably satisfactory to the Surviving
Corporation.
(c) For a period of six years after the Closing Date, the Parent
Corporation will cause to be maintained in effect the policies of directors
and officers liability insurance and fiduciary liability insurance
currently maintained by the Company with respect to claims arising from or
relating to actions or omissions, or alleged actions or omissions,
occurring on or prior to the Closing Date. The Parent Corporation may at
its discretion substitute for such policies currently maintained by the
Company directors and officers liability insurance and fiduciary liability
insurance policies with reputable and financially sound carriers providing
for no less favorable coverage. Notwithstanding the provisions of this
Section 6.9(c), the Parent Corporation will not be obligated to make annual
premium payments with respect to such policies of insurance to the extent
such premiums exceed 200 percent of the annual premiums paid by the Company
as of the date of this Agreement. If the annual premium costs necessary to
maintain such insurance coverage exceed the foregoing amount, the Parent
Corporation will maintain the most advantageous policies of directors and
officers liability insurance and fiduciary liability insurance obtainable
for an annual premium equal to the foregoing amount.
(d) To the fullest extent permitted from time to time under the law of
the State of Delaware, the Parent Corporation will cause the Surviving
Corporation to pay on an as-incurred basis the reasonable fees and expenses
of each Indemnified Party (including reasonable fees and expenses of
counsel) in advance of the final disposition of any action, suit,
proceeding or
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investigation that is the subject of the right to indemnification, subject
to reimbursement in the event such Indemnified Party is not entitled to
indemnification.
(e) The certificate of incorporation and bylaws of the Surviving
Corporation will contain the same provisions providing for exculpation of
director and officer liability and indemnification on the same basis as set
forth in the certificate of incorporation and bylaws of the Company in
effect on the date of this Agreement. For a period of six years after the
Closing Date, the Parent Corporation will cause the Surviving Corporation
to maintain in effect such provisions in the certificate of incorporation
and bylaws of the Surviving Corporation providing for exculpation of
director and officer liability and indemnification to the fullest extent
permitted from time to time under the law of the State of Delaware, which
provisions will not be amended, except as required by applicable law or
except to make changes permitted by applicable law that would enlarge the
scope of the Indemnified Parties' indemnification rights thereunder. The
foregoing will not be deemed to restrict the right of the Surviving
Corporation to modify the provisions of its certificate of incorporation or
bylaws relating to exculpation of director and officer liability or
indemnification with respect to events or occurrences after the Closing
Date so long as such modifications do not adversely affect the rights of
the Indemnified Parties hereunder.
(f) In the event of any action, suit, investigation or proceeding, the
Indemnified Party will be entitled to control the defense thereof with
counsel of its own choosing reasonably acceptable to the Parent
Corporation, and the Parent Corporation and the Surviving Corporation will
cooperate in the defense thereof; provided that neither the Parent
Corporation nor the Surviving Corporation will be liable for the fees of
more than one counsel for all Indemnified Parties, other than local
counsel, unless the use of a single counsel would present conflict of
interest issues which would make it impracticable for all Indemnified
Parties to be represented by a single counsel, and provided further that
neither the Parent Corporation nor the Surviving Corporation will be liable
for any settlement effected without its written consent (which consent will
not be unreasonably withheld).
(g) The rights of each Indemnified Party hereunder will be in addition
to any other rights such Indemnified Party may have under the certificate
of incorporation or bylaws of the Surviving Corporation or any of their
respective Subsidiaries, under the law of the State of Delaware or
otherwise. Notwithstanding anything to the contrary contained in this
Agreement or otherwise, the provisions of this Section 6.9 will survive the
consummation of the Merger, and each Indemnified Party will, for all
purposes, be a third party beneficiary of the covenants and agreements
contained in this Section 6.9 and, accordingly, will be treated as a party
to this Agreement for purposes of the rights and remedies relating to
enforcement of such covenants and agreements and will be entitled to
enforce any such rights and exercise any such remedies directly against the
Parent Corporation and the Surviving Corporation. The Parent Corporation
will cause the Surviving Corporation to pay all reasonable expenses,
including reasonable attorneys' fees, that may be incurred by an
Indemnified Party in enforcing the indemnity and other obligations provided
for in this Section 6.9.
Section 6.10 Public Announcements. The initial press release announcing
the transactions contemplated by this Agreement will be a joint press release.
Thereafter, the Parent Corporation and the Company will consult with one another
before issuing any press releases or otherwise making any public announcements
with respect to the transactions contemplated by this Agreement and, except as
may be required by applicable law or by the rules and regulations of the New
York Stock Exchange, will not issue any such press release or make any such
announcement prior to such consultation.
Section 6.11 Preservation of Programs and Agreements. From and after the
date of this Agreement through the Closing Date, neither party nor any of its
Subsidiaries will enter into any
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agreement which such party knows or has reason to know is reasonably likely to
cause a major customer of the other party or any of its Subsidiaries to
terminate any material program or agreement.
Section 6.12 Actions Regarding Antitakeover Statutes. If any fair price,
moratorium, control share acquisition or other form of antitakeover statute,
rule or regulation is or becomes applicable to the transactions contemplated by
this Agreement, the Board of Directors of the Company will grant such approvals
and take such other actions as may be required so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
and conditions set forth in this Agreement.
Section 6.13 Standstill Provisions. The restrictions on the Parent
Corporation and the Acquisition Corporation contained in the Standstill
Provisions are hereby waived by the Company to the extent reasonably required to
permit the Parent Corporation and the Acquisition Corporation to comply with
their obligations or enforce their rights under this Agreement.
Section 6.14 Defense of Orders and Injunctions. In the event either party
becomes subject to any order or injunction of a court of competent jurisdiction
which prohibits the consummation of the transactions contemplated by this
Agreement, each party will use its best efforts to overturn or lift such order
or injunction. The foregoing will not be deemed to require the Parent
Corporation to enter into any agreement, consent decree or other commitment
requiring the Parent Corporation or any of its Subsidiaries to divest or hold
separate any assets or to take any other action that would have a Parent
Corporation Material Adverse Effect.
Section 6.15 Affiliate Letters. Promptly following the date of this
Agreement, the Company will deliver to the Parent Corporation a list of the
names and addresses of those persons who were, or will be, in the Company's
reasonable judgment, "affiliates" of the Company within the meaning of Rule
145(c) under the Securities Act as of the record date for the Company
Stockholders Meeting. The Company will use its best efforts to deliver to the
Parent Corporation a letter, in substantially the form of Exhibit A-1 attached
to this Agreement, from each person identified in the foregoing list. Promptly
following the date of this Agreement, the Parent Corporation will deliver to the
Company a list of the names and addresses of those persons who were or will be,
in the Parent Corporation's reasonable judgment, "affiliates" of the Parent
Corporation within the meaning of Rule 145(c) under the Securities Act as of the
record date for the Parent Corporation Stockholders Meeting. The Parent
Corporation will use its best efforts to deliver to the Company a letter, in
substantially the form of Exhibit A-2 attached to this Agreement, from each
person identified in the foregoing list. The Parent Corporation will be entitled
to place appropriate legends on the certificates evidencing the Parent Common
Stock held by or issued to persons delivering such letters and to issue stop
transfer instructions to the transfer agent for the Parent Common Stock
consistent with the terms of such letters.
Section 6.16 Preservation of Accounting and Tax Treatment. From and after
the date of this Agreement (a) the Parent Corporation and the Company and their
respective Subsidiaries will use their best efforts to cause the Merger to be
accounted for as a pooling of interests in accordance with APB No. 16 and to
constitute a reorganization within the meaning of Section 368(a) of the Code and
(b) neither the Parent Corporation nor the Company, nor any of their respective
Subsidiaries, will knowingly take or omit to take any action that would prevent
the accounting for the Merger in accordance with the pooling of interests method
of accounting under the requirements of APB No. 16 or prevent the Merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
Section 6.17 Accountant's Comfort Letters. Each party will use its best
efforts to cause to be delivered to the other party two letters from its
independent public accountants, one dated a date
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within two business days before the date on which the Registration Statement
becomes effective and one dated the Closing Date, in form and substance
reasonably satisfactory to the recipient and customary in scope and substance
for comfort letters delivered by independent accountants in connection with
registration statements similar to the Registration Statement.
Section 6.18 Registration Agreement. On or prior to the Closing Date, the
Parent Corporation will enter into an agreement, in the form of the Registration
Agreement attached to the Company Disclosure Letter, with certain stockholders
of the Company to provide such stockholders with registration rights with
respect to the Parent Common Stock to be received in the Merger and will have
complied with the provisions thereof referring to actions to be taken prior to
the date of such Registration Agreement.
Section 6.19 New York Stock Exchange Quotation. The Parent Corporation
will use its best efforts to cause the Parent Common Stock issuable in the
Merger or otherwise pursuant to the terms of this Agreement to be approved for
listing on the New York Stock Exchange, subject to official notice of issuance,
as promptly as practicable after the date of this Agreement and in any event
prior to the Closing Date.
Section 6.20 Publishing Financial Results. The Parent Corporation will
prepare and publicly release, as soon as practicable and in any event within 10
business days following the end of the first accounting month ending at least 30
days after the Closing Date, a report filed with the SEC on Form 8-K or any
other public filing, statement or announcement which includes the combined
financial results (including combined sales and net income) of the Parent
Corporation and the Company for a period of at least 30 days of combined
operations of the Parent Corporation and the Company following the Closing Date.
Section 6.21 Employee Benefit Matters.
(a) Subject to the provisions of any collective bargaining agreement
to which the Company or any of its Subsidiaries is a party as of the date
of this Agreement, until (or in respect of the period ending on) December
31, 2000, the Parent Corporation will cause to be maintained for the
employees of the Company and its Subsidiaries as of the Closing Date
(collectively, the "Continuing Employees") salary levels not less than the
salary levels provided by the Company and its Subsidiaries as of the
Closing Date and benefits and benefit levels (including cash incentive
compensation benefits and benefit levels) which are substantially
comparable to the benefits and benefit levels provided by the Company and
its Subsidiaries through the Company Plans as of the Closing Date. The
foregoing covenant will not apply to any equity-based compensation plan or
arrangement.
(b) The Continuing Employees will be credited with their years of
service with the Company and its Subsidiaries for purposes of determining
eligibility and vesting (but not benefit accrual) under any employee
benefit plans, programs, arrangements and employment practices of the
Parent Corporation and its Subsidiaries in which the Continuing Employees
participate following the Closing Date. To the extent that any such
employee benefit plan, program, arrangement or employment practice in which
a Continuing Employee participates following the Closing Date provides
medical, dental, vision or other welfare benefits, the Parent Corporation
will cause all pre-existing condition exclusions, waiting periods and
actively at work requirements thereunder to be waived for such Continuing
Employee and his or her covered dependents and the Parent Corporation will
cause any eligible expenses incurred by such Continuing Employee on or
before the Closing Date to be taken into account thereunder for purposes of
satisfying any deductible, coinsurance and maximum out-of-pocket
requirements applicable to such Continuing Employee and his or her covered
dependents for the applicable plan year.
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(c) The Company agrees that an independent trustee, either a bank or a
trust company, will act with respect to the Merger on behalf of each
Company Plan (and its participants) that holds Company Common Stock in
accordance with the terms and conditions of such Plan.
Section 6.22 Directors of the Surviving Corporation. Until at least the
first anniversary of the Closing Date, the Parent Corporation will, and will
cause the Surviving Corporation to, take all actions necessary to cause Theodore
J. Forstmann to be elected as a director and the non-executive Chairman of the
Board of Directors of the Surviving Corporation and to cause Sandra J. Horbach
to be elected as a member of the Board of Directors of the Surviving Corporation
effective as of the Effective Time. Notwithstanding that they will be directors
of the Surviving Corporation and not directors of the Parent Corporation, the
foregoing individuals will be entitled as directors of the Surviving Corporation
after the Effective Time to exculpation, indemnification and reimbursement of
expenses pursuant to terms and conditions identical to the terms and conditions
applicable to the directors of the Parent Corporation included in the
Certificate of Incorporation and Bylaws of the Parent Corporation and will be
entitled to coverage under the directors and officers liability and fiduciary
liability insurance policies and any indemnification agreements maintained or
entered into by the Parent Corporation on the same terms as applicable to the
directors of the Parent Corporation.
ARTICLE 7
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Section 7.1 Conditions to the Obligations of Each Party. The respective
obligation of each party to effect the Merger is subject to the satisfaction at
or prior to the Closing Date of each of the following conditions:
(a) the Company will have obtained the Company Stockholder Approval;
(b) the Parent Corporation will have obtained the Parent Corporation
Stockholder Approval;
(c) the Registration Statement will have been declared effective in
accordance with the provisions of the Securities Act, and no stop order
suspending such effectiveness will have been issued and remain in effect,
and the Parent Corporation will have received all state securities law
authorizations necessary to issue the Parent Common Stock pursuant to the
Merger;
(d) the Parent Common Stock to be issued to the stockholders of the
Company pursuant to the Merger will have been approved for listing on the
New York Stock Exchange, subject only to official notice of issuance;
(e) all applicable waiting periods under the HSR Act will have
terminated or expired;
(f) all other consents, authorizations, orders and approvals of or
filings with any governmental commission, board or other regulatory
authority (other than in its capacity as a customer of the Company or its
Subsidiaries) required in connection with the consummation of the
transactions contemplated by this Agreement will have been obtained or
made, except where the failure to obtain or make such consents,
authorizations, orders, approvals or filings would not, from and after the
Closing Date, individually or in the aggregate have a Company Material
Adverse Effect; and
(g) neither party will be subject to any order or injunction of a
court of competent jurisdiction in the United States which prohibits the
consummation of the transactions contemplated by this Agreement.
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Section 7.2 Conditions to the Obligation of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction at or prior
to the Closing Date of each of the following conditions:
(a) the representations and warranties of the Parent Corporation set
forth in Section 5 will be true and correct in all material respects at and
as of the Closing Date as though then made, except as contemplated by this
Agreement and except that any representation or warranty made as of a date
other than the date of this Agreement will continue on the Closing Date to
be true and correct in all material respects as of the specified date;
(b) each of the Parent Corporation and the Acquisition Corporation
will have in all material respects performed and complied with all of its
obligations under this Agreement required to be performed by it at or prior
to the Closing Date;
(c) the Company will have received a written opinion, dated as of the
Closing Date, from Deloitte & Touche LLP, the Company's independent public
accountants, to the effect that they concur with the Company's conclusion
that no conditions exist that would preclude the Company's ability to be a
party to a business combination with the Parent Corporation to be accounted
for using the pooling of interests method of accounting in accordance with
the requirements of APB No. 16; and
(d) the Company will have received a written opinion, dated as of the
Closing Date, from Fried, Frank, Harris, Shriver & Jacobson, counsel to the
Company, to the effect that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section 368(a) of
the Code. In rendering the foregoing opinion, counsel will be permitted to
rely upon and assume the accuracy of representations provided by the
parties in substantially the forms attached as Exhibits B-1 and B-2 to this
Agreement.
The Parent Corporation and the Acquisition Corporation will furnish the
Company with a customary bring down certificate with respect to the satisfaction
of the conditions set forth in Sections 7.2(a) and (b).
Section 7.3 Conditions to the Obligation of the Parent Corporation and the
Acquisition Corporation. The obligation of the Parent Corporation and the
Acquisition Corporation to effect the Merger is subject to the satisfaction at
or prior to the Closing Date of each of the following conditions:
(a) the representations and warranties of the Company set forth in
Section 4 will be true and correct in all material respects at and as of
the Closing Date as though then made, except as contemplated by this
Agreement and except that any representation or warranty made as of a date
other than the date of this Agreement will continue on the Closing Date to
be true and correct in all material respects as of the specified date;
(b) the Company will have in all material respects performed and
complied with all of its obligations under this Agreement required to be
performed by it at or prior to the Closing Date;
(c) the Parent Corporation will have received a written opinion, dated
as of the Closing Date, from Arthur Andersen LLP, the Parent Corporation's
independent public accountants, to the effect that the business combination
between the Parent Corporation and the Company contemplated by this
Agreement should be treated as a "pooling of interests" in conformity with
generally accepted accounting principles as described in APB No. 16; and
(d) the Parent Corporation will have received a written opinion, dated
as of the Closing Date, from Jenner & Block, counsel to the Parent
Corporation, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering the foregoing opinion, counsel will be
permitted to rely
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upon and assume the accuracy of representations provided by the parties in
substantially the forms attached as Exhibits B-1 and B-2 to this Agreement.
The Company will furnish the Parent Corporation with a customary bring down
certificate with respect to the satisfaction of the conditions set forth in
Sections 7.3(a) and (b).
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding the
receipt of the Company Stockholder Approval or the Parent Corporation
Stockholder Approval):
(a) with the written consent of the Parent Corporation and the
Company;
(b) by the Parent Corporation or the Company if any court of competent
jurisdiction or other governmental agency has issued a final order, decree
or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the consummation of the Merger, and such order,
decree, ruling or other action is or has become nonappealable;
(c) by the Parent Corporation if (i) the Company has materially
breached any of its representations or warranties set forth in this
Agreement and such breach is not cured within 45 days after the date
written notice of such breach is given by the Parent Corporation to the
Company, (ii) the Company has materially breached any of its covenants or
agreements contained in this Agreement and such breach is not cured within
45 days after the date written notice of such breach is given by the Parent
Corporation to the Company, (iii) the Board of Directors of the Company has
withdrawn or amended in any manner adverse to the Parent Corporation and
the Acquisition Corporation its recommendation and approval of the Merger,
(iv) the Company Stockholder Approval has not been obtained at a meeting
duly called for such purpose or (v) the Merger has not been consummated on
or before December 31, 1999 (unless the failure of the Merger to have been
consummated results primarily from the Parent Corporation or the
Acquisition Corporation breaching any representation, warranty, covenant or
agreement contained in this Agreement);
(d) by the Company if (i) the Parent Corporation has materially
breached any of its representations or warranties set forth in this
Agreement and such breach is not cured within 45 days after the date
written notice of such breach is given by the Company to the Parent
Corporation, (ii) the Parent Corporation or the Acquisition Corporation has
materially breached any of its covenants or agreements contained in this
Agreement and such breach is not cured within 45 days after the date
written notice of such breach is given by the Company to the Parent
Corporation, (iii) the Parent Stockholder Approval has not been obtained at
a meeting duly called for such purpose or (iv) the Merger has not been
consummated on or before December 31, 1999 (unless the failure of the
Merger to have been consummated results primarily from the Company
breaching any representation, warranty, covenant or agreement contained in
this Agreement); or
(e) by the Company if a party has made a Superior Acquisition Proposal
and the Company enters into any letter of intent, agreement in principle,
acquisition agreement or other agreement with respect to such Superior
Acquisition Proposal in accordance with the provisions of Section 6.8;
provided that termination of this Agreement pursuant to this Section 8.1(e)
will not become effective until the payment by the Company to the Parent
Corporation of the termination fee provided in Section 8.3.
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(f) by the Parent Corporation or the Company prior to the third
trading day preceding the Company Stockholders Meeting if the Average Stock
Price of the Parent Common Stock is less than $63 per share. The "Average
Stock Price" means the average of the Daily Per Share Prices (as
hereinafter defined) for the fifteen consecutive trading days ending on the
fifth trading day prior to the Company Stockholders Meeting. The "Daily Per
Share Price" for any trading day means the weighted average of the per
share selling prices (as reported on the New York Stock Exchange Composite
Transaction Tape) for that day.
Section 8.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement will
forthwith become void and will be deemed to have terminated without liability to
any party (except for any liability of any party then in wilful breach of any
covenant or agreement); provided that the provisions of the Confidentiality
Agreement and Section 8.3 of this Agreement will continue in full force and
effect notwithstanding such termination and abandonment.
Section 8.3 Termination Fee.
(a) If (i) the Parent Corporation terminates this Agreement pursuant
to the provisions of Section 8.1(c)(iii) or Section 8.1(c)(iv) and the
Company enters into an agreement with respect to a Third Party Acquisition
(as defined in Section 8.3(b)), or a Third Party Acquisition occurs within
12 months after the date of such termination, and such agreement was
entered into, or such Third Party Acquisition was publicly announced,
concurrently with or prior to the date of the termination of this Agreement
or (ii) the Company terminates this Agreement pursuant to the provisions of
Section 8.1(e), then, in each case, the Company will pay to the Parent
Corporation, within one business day following the occurrence of such event
(in the case of a termination under clause (i) above) or the delivery of
notice of such termination (in the case of a termination under clause (ii)
above), a termination fee equal to $150 million (the "Termination Fee"),
payable by wire transfer of immediately available funds to an account
designated by the Parent Corporation.
(b) The term "Third Party Acquisition" as used in this Agreement means
(i) the acquisition of the Company by merger or otherwise by any person
(including for purposes of this Section 8.3(b) any "person" or "group" as
defined in Section 13(d)(3) of the Securities Exchange Act) or entity other
than the Parent Corporation or the Acquisition Corporation, (ii) the
acquisition by any person or entity other than the Parent Corporation or
the Acquisition Corporation of more than 50 percent of the consolidated
assets (determined based on book or fair market value) of the Company and
its Subsidiaries, (iii) the acquisition by any person or entity other than
the Parent Corporation or the Acquisition Corporation of more than 50
percent of the outstanding shares of Company Common Stock, (iv) the
adoption by the Company of any plan of liquidation or the declaration by
the Company of any extraordinary dividend or distribution (including any
distribution of any shares of the capital stock of any material Subsidiary)
of cash or property constituting more than 50 percent of the consolidated
assets (determined based on book or fair market value) of the Company and
its Subsidiaries or (v) the purchase by the Company or any of its
Subsidiaries of more than 50 percent of the outstanding shares of Company
Common Stock.
(c) Except as specifically provided in this Section 8.3, each party
will bear its own expenses incurred in connection with the transactions
contemplated by this Agreement, whether or not such transactions are
consummated.
(d) In the event of any breach of the covenants set forth in Section
6.8, nothing contained in this Section 8.3 will prevent the Parent
Corporation or the Acquisition Corporation from challenging, by injunction
or otherwise, the termination or attempted termination of this
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Agreement pursuant to the provisions of Section 8.1 (e), but acceptance by
the Parent Corporation of the payment of the Termination Fee will
constitute a full and complete waiver by the Parent Corporation of all of
its rights under this Section 8.3(d) or otherwise.
(e) The Company acknowledges that the agreements regarding the payment
of fees contained in this Section 8.3 are an integral part of the
transactions contemplated by this Agreement and that, in the absence of
such agreements, the Parent Corporation and the Acquisition Subsidiary
would not have entered into this Agreement. The Company accordingly agrees
that in the event the Company fails to pay the Termination Fee promptly,
the Company will in addition to the payment of such amount also pay to the
Parent Corporation all of the reasonable costs and expenses (including
reasonable attorneys' fees and expenses) incurred by the Parent Corporation
in the enforcement of its rights under this Section 8.3, together with
interest on such amount at a rate of 10 percent per annum from the date
upon which such payment was due, to and including the date of payment.
Provided that the Company was not in breach of the provisions of Section
6.8, payment of the Termination Fee will constitute full and complete
satisfaction, and will constitute the Parent Corporation's sole and
exclusive remedy for any loss, liability, damage or claim arising out of or
in connection with any such termination of this Agreement or the facts and
circumstances resulting in or related to this Agreement.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Nonsurvival of Representations. The representations and
warranties contained in this Agreement will not survive the Merger or the
termination of this Agreement.
Section 9.2 Remedies. The parties agree that irreparable damage would
occur in the event that the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
will be entitled to specific performance of the terms of this Agreement, without
posting a bond or other security, this being in addition to any other remedy to
which they are entitled at law or in equity.
Section 9.3 Successors and Assigns. No party hereto may assign or
delegate any of such party's rights or obligations under or in connection with
this Agreement without the written consent of the other party hereto. Except as
otherwise expressly provided herein, all covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto or thereto will be
binding upon and enforceable against the respective successors and assigns of
such party and will be enforceable by and will inure to the benefit of the
respective successors and permitted assigns of such party.
Section 9.4 Amendment. This Agreement may be amended by the execution and
delivery of an written instrument by or on behalf of the Parent Corporation, the
Acquisition Corporation and the Company at any time before or after the Company
Stockholder Approval and the Parent Corporation Stockholder Approval; provided
that after the date of the Company Stockholder Approval, no amendment to this
Agreement will be made without the approval of stockholders of the Company to
the extent such approval is required under the Delaware Act.
Section 9.5 Extension and Waiver. At any time prior to the Effective
Time, the parties may extend the time for performance of or waive compliance
with any of the covenants or agreements of the other parties to this Agreement
and may waive any breach of the representations or warranties of such other
parties. No agreement extending or waiving any provision of this Agreement will
be valid or binding unless it is in writing and is executed and delivered by or
on behalf of the party against which it is sought to be enforced.
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Section 9.6 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
Section 9.7 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same Agreement.
Section 9.8 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
Section 9.9 Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally to
the recipient or when sent to the recipient by telecopy (receipt confirmed), one
business day after the date when sent to the recipient by reputable express
courier service (charges prepaid) or three business days after the date when
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
will be sent to the Parent Corporation and the Company at the addresses
indicated below:
If to the Parent Corporation:
General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, Virginia 22041-4523
Attention: David A. Savner, Esq.
Senior Vice President and
General Counsel
Facsimile No: (703) 876-3125
With a copy (which will not constitute notice) to:
Jenner & Block
601 13th Street, N.W.
Washington, D.C. 20005
Attention: Craig A. Roeder, Esq.
Facsimile No: (202) 639-6066
If to the Company:
Gulfstream Aerospace Corporation
500 Gulfstream Road
Savannah, Georgia 31402
Attention: Ira Berman, Esq.
Senior Vice President and General Counsel
Facsimile No: (912) 965-4764
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With a copy (which will not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Stephen Fraidin, P.C.
Aviva Diamant, Esq.
Facsimile No: (212) 859-4000
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party.
Section 9.10 No Third Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any person or entity other than the Parent
Corporation, the Acquisition Corporation and the Company and their respective
successors and permitted assigns, except that the respective beneficiaries of
the provisions of Sections 1.9, 6.9, 6.18, 6.20 and 6.22 will, for all purposes,
be third party beneficiaries of the covenants and agreements contained therein
and, accordingly, will be treated as a party to this Agreement for purposes of
the rights and remedies relating to enforcement of such covenants and agreements
and will be entitled to enforce any such rights and exercise any such remedies
directly against the Parent Corporation and the Surviving Corporation.
Section 9.11 Entire Agreement. This Agreement (including the
Confidentiality Agreement and the other documents referred to herein)
constitutes the entire agreement among the parties and supersedes any prior
understandings, agreements or representations by or among the parties, written
or oral, that may have related in any way to the subject matter hereof.
Section 9.12 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent
and no rule of strict construction will be applied against any party. The use of
the word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
Section 9.13 Submission to Jurisdiction. Each of the parties to this
Agreement submits to the jurisdiction of any state or federal court sitting in
Wilmington, Delaware, in any action or proceeding arising out of or relating to
this Agreement, agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court, and agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the parties to this Agreement waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives any
bond, surety or other security that might be required of any other party with
respect thereto.
Section 9.14 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT AND THE SCHEDULES HERETO WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
DELAWARE.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first written above.
GENERAL DYNAMICS CORPORATION,
By: /s/ NICHOLAS D. CHABRAJA
-------------------------------------------------------
Nicholas D. Chabraja
Chairman and Chief Executive Officer
TARA ACQUISITION CORPORATION
By: /s/ DAVID A. SAVNER
-------------------------------------------------------
David A. Savner
President
GULFSTREAM AEROSPACE
CORPORATION
By: /s/ THEODORE J. FORSTMANN
-------------------------------------------------------
Theodore J. Forstmann
Chairman and Chief Executive Officer
[END SIGNATURE PAGE]
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EXHIBIT A-1
FORM OF COMPANY AFFILIATE LETTER
General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, Virginia 22042-4523
Ladies and Gentlemen:
General Dynamics Corporation, a Delaware corporation, Tara Acquisition
Corporation, a Delaware corporation, and Gulfstream Aerospace Corporation, a
Delaware corporation, are parties to an Agreement and Plan of Merger dated as of
May 16, 1999 (the "Merger Agreement"). All capitalized terms used but not
defined in this letter will have the respective meanings give such terms in the
Merger Agreement.
The undersigned, a record holder and beneficial owner of shares of Company
Common Stock, is entitled to receive shares of Parent Common Stock in connection
with the Merger. The undersigned acknowledges that the undersigned may be deemed
an "affiliate" of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act or Accounting Series Releases 130 and 135,
as amended, of the SEC (the "Releases"). Nothing contained in this letter,
however, is intended or should be construed as an admission that the undersigned
is an affiliate of the Company or as a waiver of any rights that the undersigned
may have to object to any claim that the undersigned is such an affiliate on or
after the date of this letter.
If in fact the undersigned were an affiliate of the Company under the
Securities Act, the undersigned's ability to sell, assign or transfer the Parent
Common Stock received by the undersigned pursuant to the Merger may be
restricted unless such transaction is registered under the Securities Act or an
exemption from such registration is available. The undersigned (i) understands
that such exemptions are limited and that, except as provided for in the Merger
Agreement and the registration agreement referred to in the Merger Agreement,
the Parent Corporation is not under any obligation to effect any such
registration and (ii) has obtained advice of counsel to the extent the
undersigned has felt necessary as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such securities of Rules 144 and 145(d) promulgated under the Securities Act.
The undersigned agrees with the Parent Corporation that the undersigned
will not sell, assign or transfer any shares of Parent Common Stock received by
the undersigned in exchange for shares of Company Common Stock pursuant to the
Merger except (i) pursuant to an effective registration statement under the
Securities Act, (ii) in conformity with Rule 145 promulgated under the
Securities Act or (iii) in a transaction that, in the opinion of counsel
reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the staff of the SEC, is not required to be registered
under the Securities Act.
The undersigned further agrees with Parent Corporation that, until after
such time as a report including results covering at least 30 days of combined
operations of the Company and the Parent Corporation has been published by the
Parent Corporation or the Merger Agreement has been terminated in accordance
with its terms, the undersigned will not reduce its risk (within the meaning of
the Releases) with respect to (i) any shares of Company Common Stock held by it
or (ii) any shares of Parent Common Stock received by it in the Merger. The
Parent Corporation will promptly notify the undersigned when such report has
been published by the Parent Corporation.
The Parent Corporation will prepare and publicly release, as soon as
practicable and in any event within 10 business days following the end of the
first accounting month ending at least 30 days after
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the Closing Date, a report filed with the SEC on Form 8-K or any other public
filing, statement or announcement which includes the combined financial results
(including combined sales and net income) of the Parent Corporation and the
Company for a period of at least 30 days of combined operations of the Parent
Corporation and the Company following the Closing Date.
In the event of a sale or other disposition pursuant to Rule 145 of Parent
Common Stock received by the undersigned in the Merger, the undersigned will
supply the Parent Corporation with evidence of its compliance with Rule 145 by
delivering to the Parent Corporation a letter in the form of Annex I hereto. The
undersigned understands that the Parent Corporation may instruct its transfer
agent to withhold the transfer of any Parent Common Stock disposed of by the
undersigned, but that upon receipt of such evidence of compliance the transfer
agent will effectuate the transfer of the Parent Common Stock sold as indicated
in the letter.
The undersigned acknowledges and agrees that the Parent Common Stock issued
to the undersigned will all be in certificated form and that appropriate legends
will be placed on certificates representing Parent Common Stock received by the
undersigned in the Merger or held by a transferee thereof, which legends will be
removed by delivery of substitute certificates upon receipt of an opinion in
form and substance reasonably satisfactory to the Parent Corporation or a "no
action" or interpretive letter from the staff of the SEC to the effect that such
legends are no longer required for purposes of the Securities Act or upon the
receipt of the letters referred to in the preceding paragraph.
The Parent Corporation covenants that for so long and to the extent
necessary to permit the undersigned to sell the shares of Parent Common Stock
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, the Parent Corporation will (i) use its best efforts to file, on
a timely basis, all reports and data required to be filed by it with the SEC
pursuant to Section 13 of the Securities Exchange Act and to furnish to the
undersigned upon request a written statement as to whether the Parent
Corporation has complied with such reporting requirements during the 12 months
preceding any proposed sale of shares of Parent Common Stock by the undersigned
under Rule 145 and (ii) otherwise take such action as may be reasonably
available to permit the sale or other disposition of the Parent Common Stock by
the undersigned under Rule 145 in accordance with the terms thereof.
The undersigned acknowledges that the undersigned has carefully read this
letter and understands the requirements hereof and the limitations imposed upon
the distribution, sale, transfer or other disposition of Parent Common Stock and
that the receipt by the Parent Corporation of this letter is a material
inducement and a condition to the Parent Corporation's obligation to consummate
the Merger.
Very truly yours,
Dated:
A-1-2
<PAGE> 130
ANNEX I
TO EXHIBIT A-1
General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, Virginia 22042-4523
Ladies and Gentlemen:
On , the undersigned sold the shares of the Common Stock, par
value $1.00 per share, of General Dynamics Corporation (the "Parent
Corporation") described below (the "Shares"). The Shares were received by the
undersigned in connection with the merger of Tara Acquisition Corporation, a
subsidiary of the Parent Corporation, with and into Gulfstream Aerospace
Corporation.
Based upon the most recent report or statement filed by the Parent
Corporation with the Securities and Exchange Commission, the Shares sold by the
undersigned were within the prescribed limitations set forth in Rule 144(e)
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the Shares were sold in "brokers'
transactions" within the meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Shares, and that the undersigned has not made
any payment in connection with the offer or sale of the Shares to any person
other than to the broker who executed the order in respect of such sale.
Very truly yours,
Dated:
A-1-3
<PAGE> 131
EXHIBIT A-2
FORM OF PARENT CORPORATION AFFILIATE LETTER
Gulfstream Aerospace Corporation
500 Gulfstream Road
Savannah, Georgia 31402-2206
General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, Virginia 22042-4523
Ladies and Gentlemen:
General Dynamics Corporation, a Delaware corporation, Tara Acquisition
Corporation, a Delaware corporation, and Gulfstream Aerospace Corporation, a
Delaware corporation, are parties to an Agreement and Plan of Merger dated as of
May 16, 1999 (the "Merger Agreement"). All capitalized terms used but not
defined in this letter will have the respective meanings give such terms in the
Merger Agreement.
The undersigned is the record holder and beneficial owner of shares of
Parent Common Stock. The undersigned acknowledges that the undersigned may be
deemed an "affiliate" of the Parent Corporation within the meaning of Accounting
Series Releases 130 and 135, as amended, of the SEC (the "Releases"). Nothing
contained in this letter, however, is intended or should be construed as an
admission that the undersigned is an affiliate of the Parent Corporation or as a
waiver of any rights that the undersigned may have to object to any claim that
the undersigned is such an affiliate on or after the date of this letter.
The undersigned agrees with Parent Corporation that, until after such time
as a report including results covering at least 30 days of combined operations
of the Company and the Parent Corporation has been published by the Parent
Corporation or the Merger Agreement has been terminated in accordance with its
terms, the undersigned will not reduce its risk (within the meaning of the
Releases) with respect to any shares of Parent Common Stock held of record or
owned beneficially by the undersigned. The Parent Corporation will promptly
notify the undersigned when such report has been published by the Parent
Corporation.
The undersigned acknowledges that the undersigned has carefully read this
letter and understands the requirements hereof and the limitations imposed upon
the distribution, sale, transfer or other disposition of Parent Common Stock and
that the receipt by the Parent Corporation of this letter is a material
inducement and a condition to the Company's obligation to consummate the Merger.
Very truly yours,
Dated:
A-2-1
<PAGE> 132
EXHIBIT B-1
FORM OF COMPANY TAX REPRESENTATIONS
[LETTERHEAD OF THE COMPANY]
[ ], 1999
Jenner & Block
601 13th Street, N.W.
Washington, D.C. 20005
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Ladies and Gentlemen:
In connection with the legal opinions to be delivered pursuant to Sections
7.2(d) and 7.3(d)of the Agreement and Plan of Merger (the "Merger Agreement")
dated as of May 16, 1999, by and among General Dynamics Corporation, a Delaware
corporation (the "Parent Corporation"), Tara Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of the Parent Corporation (the
"Acquisition Corporation"), and Gulfstream Aerospace Corporation, a Delaware
corporation (the "Company"), and in connection with the filing with the
Securities Exchange Commission (the "SEC") of the registration statement on Form
S-4 (the "Registration Statement") relating to the Merger Agreement, which
includes the joint proxy statement/prospectus of the Parent Corporation and the
Company, the undersigned certifies and represents on behalf of the Parent
Corporation and the Acquisition Corporation, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Merger Agreement):
1. The facts relating to the contemplated merger (the "Merger") of the
Acquisition Corporation with and into the Company as described in the
Registration Statement and the documents described in the Registration
Statement, as amended through the date hereof, are, insofar as such facts
pertain to the Company, true, correct and complete in all material respects. The
Merger will be consummated in accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which each
issued and outstanding share of common stock of the Company, par value $.01 per
share ("Company Common Stock") will be converted into the right to receive
Common Stock, par value $1.00 per share, of the Parent Corporation ("Parent
Common Stock") is the result of arm's length bargaining and such formula was
designed to result in the fair market value of the Parent Common Stock received
by the stockholders of the Company approximately equaling the aggregate fair
market value of the Company Common Stock surrendered in the exchange.
3. Cash payments, if any, to be made to stockholders of the Company in lieu
of fractional shares of Parent Common Stock that would otherwise be issued to
such stockholders in the Merger represent a mere mechanical rounding off and
will be made solely for the purpose of saving the Parent Corporation the expense
and inconvenience of issuing and transferring fractional shares of Parent Common
Stock, and do not represent separately bargained for consideration. The total
cash consideration that will be paid in the Merger to stockholders of the
Company in lieu of fractional shares of Parent Common Stock will not exceed one
percent of the total consideration that will be issued in the Merger to
stockholders of the Company in exchange for their shares of Company Common
Stock. The fractional share interests of each stockholder of the Company will be
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<PAGE> 133
aggregated, and no stockholder of the Company, with the possible exception of
stockholders whose holdings are in separate accounts or with different brokers,
will receive cash in lieu of fractional shares in an amount greater than one
full share of Parent Common Stock.
4. Neither the Company nor any corporation related to the Company has
acquired or redeemed or has any present plan or intention to acquire or redeem
any Company Common Stock in contemplation of the Merger, after the Merger, or
otherwise as part of a plan of which the Merger is a part. To the best knowledge
of the management of the Company, neither the Parent Corporation nor any
corporation that is related to the Parent Corporation has a present plan or
intention to purchase Company Common Stock or any Parent Common Stock. For
purposes of this representation letter, two corporations will be treated as
related to one another if immediately prior to or immediately after the Merger
(a) the corporations are members of the same affiliated group (within the
meaning of Section 1504 of the Internal revenue Code of 1986, as amended (the
"Code"), but determined without regard to Section 1504(b) of the Code) or (b)
one corporation owns 50 percent or more of the total combined voting power of
all classes of stock of the other corporation that are entitled to vote or 50
percent or more of the total value of shares of all classes of stock of the
other corporation (applying the attribution rules of Section 318 of the Code, as
modified pursuant to Section 304(c)(3)(B) of the Code).
5. The Company has not made, and does not have any present plan or
intention to make, any distributions (other than regular, normal dividends made
in the ordinary course of business) prior to, in contemplation of or otherwise
in connection with, the Merger.
6. The Parent Corporation, the Acquisition Corporation, the Company and
holders of Company Common Stock will each pay their respective expenses, if any,
incurred in connection with the Merger.
7. Immediately following the Merger, the Company will hold (a) at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets that were held by the Company
immediately prior to the Merger and (b) at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets that were held by the Acquisition Corporation immediately prior to
the Merger. For purposes of this representation, amounts paid to stockholders
who receive cash or other property (including cash in lieu of fractional shares
of Parent Common Stock) in connection with the Merger, assets of the Company
used to pay its reorganization expenses and all redemptions and distributions
made by the Company (other than regular, normal dividends made in the ordinary
course of business) immediately preceding, or in contemplation of, the Merger
will be included as assets held by the Company immediately prior to the Merger.
8. At the Effective Time, the Company will not have outstanding any
warrants, options, convertible securities or any other type of right pursuant to
which any person could acquire Company Common Stock that, if exercised or
converted, would affect Parent Corporation's acquisition or retention of control
of the Company as defined in Section 368(c) of the Code.
9. In connection with the Merger, Company Common Stock will be converted
solely into Parent Common Stock (except for cash paid in lieu of fractional
shares of Parent Common Stock).
10. The Company is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
11. The Company will not take any position on any federal, state or local
income or franchise tax return, or take any other tax reporting position, that
is inconsistent with the treatment of the Merger as a reorganization within the
meaning of Section 368(a) of the Code, unless otherwise
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<PAGE> 134
required by a "determination" (as defined in Section 1313(a)(1) of the Code) or
by applicable state or local tax law (and then only to the extent required by
such applicable state or local tax law).
12. None of the compensation received by any stockholder-employee of the
Company in respect of periods at or prior to the Effective Time represents
separate consideration for, or is allocable to, any of its Company Common Stock.
None of the Parent Common Stock that will be received by stockholder-employees
in the Merger represents separately bargained for consideration or is allocable
to any employment agreement or arrangement. The compensation paid to any
stockholder-employees will be commensurate with amounts paid to third parties.
13. There is no intercorporate indebtedness existing between the Parent
Corporation (or any of its subsidiaries, including the Acquisition Corporation)
and the Company (or any of its subsidiaries) that was issued or acquired, or
will be settled, at a discount.
14. The Company is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
15. It is the Company's present intention to pay all transfer taxes
attributable to the Merger out of the Company's own funds (and not out of funds
provided, directly or indirectly, by the Parent Corporation).
16. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement, all as amended through the
date hereof, represent the entire understanding of the Company with respect to
the Merger.
17. No assets of the Company have been sold, transferred or otherwise
disposed of which would prevent the Parent Corporation from continuing the
"historic business" of the Company or from using a significant portion of the
"historic business assets" of the Company in a business following the Merger (as
such terms are defined in Treasury Regulations Section 1.368-1(d)).
18. Neither the Company nor any of its subsidiaries has constituted either
a "distributing corporation" or a "controlled corporation" (within the meaning
of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code and subject to 355(e) of the
Code (a) in the two years prior to the date of the Merger Agreement or (b) in a
distribution which could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
19. As of the time of the Merger, the fair market value of the assets of
the Company will equal or exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which such assets are subject.
20. The undersigned is authorized to make all the representations set forth
herein.
The undersigned acknowledges that (a) the opinions to be delivered pursuant
to Sections 7.2(d) and 7.3(d) of the Merger Agreement will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto and (b) such opinions will be subject to certain limitations and
qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any such covenants or
obligations are not satisfied in all material respects.
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<PAGE> 135
The undersigned acknowledges that such opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
GULFSTREAM AEROSPACE CORPORATION
By:
--------------------------------------
[Name and Title]
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<PAGE> 136
EXHIBIT B-2
FORM OF PARENT CORPORATION TAX REPRESENTATIONS
[LETTERHEAD OF THE PARENT CORPORATION]
[ ], 1999
Jenner & Block
601 13th Street, N.W.
Washington, D.C. 20005
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Ladies and Gentlemen:
In connection with the legal opinions to be delivered pursuant to Sections
7.2(d) and 7.3(d) of the Agreement and Plan of Merger (the "Merger Agreement")
dated as of May 16, 1999, by and among General Dynamics Corporation, a Delaware
corporation (the "Parent Corporation"), Tara Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of the Parent Corporation (the
"Acquisition Corporation"), and Gulfstream Aerospace Corporation, a Delaware
corporation (the "Company"), and in connection with the filing with the
Securities Exchange Commission (the "SEC") of the registration statement on Form
S-4 (the "Registration Statement") relating to the Merger Agreement, which
includes the joint proxy statement/prospectus of the Parent Corporation and the
Company, the undersigned certifies and represents on behalf of the Parent
Corporation and the Acquisition Corporation, after due inquiry and
investigation, as follows (any capitalized term used but not defined herein
having the meaning given to such term in the Merger Agreement):
1. The facts relating to the contemplated merger (the "Merger") of the
Acquisition Corporation with and into the Company as described in the
Registration Statement and the documents described in the Registration
Statement, as amended through the date hereof, are, insofar as such facts
pertain to the Parent Corporation and the Acquisition Corporation, true, correct
and complete in all material respects. The Merger will be consummated in
accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement pursuant to which each
issued and outstanding share of common stock of the Company, par value $.01 per
share ("Company Common Stock") will be converted into the right to receive
Common Stock, par value $1.00 per share, of the Parent Corporation ("Parent
Common Stock") is the result of arm's length bargaining and such formula was
designed to result in the fair market value of the Parent Common Stock received
by the stockholders of the Company approximately equaling the aggregate fair
market value of the Company Common Stock surrendered in the exchange.
3. Cash payments, if any, to be made to stockholders of the Company in lieu
of fractional shares of Parent Common Stock that would otherwise be issued to
such stockholders in the Merger represent a mere mechanical rounding off and
will be made solely for the purpose of saving the Parent Corporation the expense
and inconvenience of issuing and transferring fractional shares of Parent Common
Stock, and do not represent separately bargained for consideration. The total
cash consideration that will be paid in the Merger to stockholders of the
Company in lieu of fractional shares of Parent Common Stock will not exceed one
percent of the total consideration that will be issued in the Merger to
stockholders of the Company in exchange for their shares of Company Common
Stock. The fractional share interests of each stockholder of the Company will be
aggregated, and no stockholder of the Company, with the possible exception of
stockholders whose
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<PAGE> 137
holdings are in separate accounts or with different brokers, will receive cash
in lieu of fractional shares in an amount greater than one full share of Parent
Common Stock.
4. The Parent Corporation has no present plan or intention, following the
Merger, to reacquire, or to cause any corporation that is related to the Parent
Corporation to acquire, any Parent Common Stock. To the best knowledge of the
management of the Parent Corporation, no corporation that is related to the
Parent Corporation has a present plan or intention to purchase any Parent Common
Stock. For purposes of this representation letter, two corporations will be
treated as related to one another if immediately prior to or immediately after
the Merger (a) the corporations are members of the same affiliated group (within
the meaning of Section 1504 of the Internal Revenue Code of 1986, as amended
(the "Code"), but determined without regard to Section 1504(b) of the Code) or
(b) one corporation owns 50 percent or more of the total combined voting power
of all classes of stock of the other corporation that are entitled to vote or 50
percent or more of the total value of shares of all classes of stock of the
other corporation (applying the attribution rules of Section 318 of the Code, as
modified pursuant to Section 304(c)(3)(B) of the Code).
5. The Parent Corporation has no present plan or intention to make any
distributions after the Merger to holders of Parent Common Stock (other than
regular, normal dividends made in the ordinary course of business).
6. The Parent Corporation has no present plan or intention to cause
distributions with respect to the Company Common Stock (other than regular,
normal dividends made in the ordinary course of business.)
7. Neither the Parent Corporation nor the Acquisition Corporation (nor any
other subsidiary of the Parent Corporation) has acquired, or, except as a result
of the Merger, will acquire, or has owned in the past five years, any Company
Common Stock.
8. Prior to the Merger, the Parent Corporation will own all the capital
stock of the Acquisition Corporation and will be in control of Acquisition
Corporation within the meaning of Section 368(c) of the Code. The Parent
Corporation has no present plan or intention to cause the Company to issue
additional shares of its stock that would result in the Parent Corporation
owning less than all the capital stock of the Company after the Merger.
9. The Parent Corporation has no present plan or intention, following the
Merger, to liquidate the Company, to merge the Company with and into another
corporation, to sell or otherwise dispose of any of the stock of the Company, to
cause the Company to distribute to the Parent Corporation or any of its
subsidiaries any assets of the Company or the proceeds of any borrowings
incurred by the Company, or to cause the Company to sell or otherwise dispose of
any of the assets held by the Company at the time of the Merger, except for
dispositions of such assets in the ordinary course of business and transfers
described in Section 368(a)(2)(C) of the Code or Treasury Regulations Section
1.368-1(d).
10. Immediately following the Merger, the Company will hold (a) at least 90
percent of the fair market value of the net assets and at least 70 percent of
the fair market value of the gross assets that were held by the Company
immediately prior to the Merger and (b) at least 90 percent of the fair market
value of the net assets and at least 70 percent of the fair market value of the
gross assets that were held by the Acquisition Corporation immediately prior to
the Merger. For purposes of this representation, amounts paid to stockholders
who receive cash or other property (including cash in lieu of fractional shares
of Parent Common Stock) in connection with the Merger, assets of the Company
used to pay its reorganization expenses and all redemptions and distributions
made by the Company (other than regular, normal dividends made in the ordinary
course of business) immediately preceding, or in contemplation of, the Merger
will be included as assets held by the Company immediately prior to the Merger.
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11. The Parent Corporation, the Acquisition Corporation, the Company and
holders of Company Common Stock will each pay their respective expenses, if any,
incurred in connection with the Merger.
12. Following the Merger, the Parent Corporation will cause the Company to
continue its "historic business" or to use a significant portion of its
"historic business assets" in a business (as such terms are defined in Treasury
Regulations Section 1.368-1(d)).
13. Neither the Parent Corporation nor the Acquisition Corporation is an
investment company as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
14. Neither the Parent Corporation nor the Acquisition Corporation will
take any position on any federal, state or local income or franchise tax return,
or take any other tax reporting position, that is inconsistent with the
treatment of the Merger as a reorganization within the meaning of Section 368(a)
of the Code, unless otherwise required by a "determination" (as defined in
Section 1313(a)(1) of the Code) or by applicable state or local tax law (and
then only to the extent required by such applicable state or local tax law).
15. None of the compensation received by any stockholder-employee of the
Company in respect of periods after the Effective Time represents separate
consideration for, or is allocable to, any of their Company Common Stock. None
of the Parent Common Stock that will be received by any stockholder-employee in
the Merger represents separately bargained for consideration or is allocable to
any employment agreement or arrangement. The compensation paid to any
stockholder-employees will be for services actually rendered and will be
commensurate with amounts paid to third parties.
16. There is no intercorporate indebtedness existing between The Parent
Corporation (or any of its subsidiaries, including the Acquisition Corporation)
and the Company (or any of its subsidiaries) that was issued or acquired, or
will be settled, at a discount.
17. Neither the Parent Corporation nor the Acquisition Corporation is under
the jurisdiction of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
18. Neither the Parent Corporation nor the Acquisition Corporation (nor any
other subsidiary of the Parent Corporation) has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code and subject to Section 355(e)
of the Code (a) in the two years prior to the date of the Merger Agreement or
(b) in a distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
19. In connection with the Merger, Company Common Stock will be converted
solely into Parent Common Stock (except for cash paid in lieu of fractional
shares of Parent Common Stock). For purposes of this representation, Company
Common Stock redeemed for cash or other property furnished directly or
indirectly by the Parent Corporation will be considered as acquired by the
Parent Corporation for other than Parent Common Stock. Further, no liabilities
of the Company or any holders of Company Common Stock will be assumed by the
Parent Corporation, nor will any of the Company Common Stock acquired by the
Parent Corporation in connection with the Merger be subject to any liabilities.
20. The Merger Agreement, the Registration Statement and the other
documents described in the Registration Statement all as amended through the
date hereof represent the entire understanding of the Parent Corporation and the
Acquisition Corporation with respect to the Merger.
21. The Acquisition Corporation is a corporation newly formed for the
purpose of participating in the Merger and at no time prior to the Merger has
had assets or liabilities (other than nominal assets contributed upon the
formation of the Acquisition Corporation, which assets are not subject to
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any liabilities and will be held by Company as the surviving corporation
following the Merger) or business operations.
22. The Merger is being undertaken for purposes of enhancing the business
of the Parent Corporation and for other good and valid business purposes of the
Parent Corporation.
23. The undersigned is authorized to make all the representations set forth
herein on behalf of the Parent Corporation and the Acquisition Corporation.
The undersigned acknowledges that (a) the opinions to be delivered pursuant
to Sections 7.2(d) and 7.3(d) of the Merger Agreement will be based on the
accuracy of the representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the covenants and
obligations contained in the Merger Agreement and the various other documents
related thereto and (b) such opinions will be subject to certain limitations and
qualifications including that it may not be relied upon if any such
representations or warranties are not accurate or if any such covenants or
obligations are not satisfied in all material respects.
The undersigned acknowledges that such opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
GENERAL DYNAMICS CORPORATION
By:
--------------------------------------
[Name and Title]
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APPENDIX B
VOTING AGREEMENT
VOTING AGREEMENT dated as of May 16, 1999 between General Dynamics
Corporation, a Delaware corporation (the "Parent Corporation"), Forstmann Little
& Co. Subordinated Debt and Equity Management Buyout Partnership-IV, L.P. a New
York limited partnership ("MBO IV"), Gulfstream Partners, L.P., a New York
limited partnership ("Gulfstream Partners"), Gulfstream Partners II, L.P., a New
York limited partnership ("Gulfstream Partners II"), Nicholas C. Forstmann ("N.
Forstmann") and Theodore J. Forstmann ("T. Forstmann"). MBO IV, Gulfstream
Partners, Gulfstream Partners II, N. Forstmann and T. Forstmann are referred to
in this Agreement individually as a "Stockholder" and collectively as the
"Stockholders."
Each of the Stockholders is the record holder and beneficial owner of the
number of shares of the Common Stock, par value $.01 per share (the "Company
Common Stock"), of Gulfstream Aerospace Corporation, a Delaware corporation (the
"Company"), indicated on Schedule 1 to this Agreement.
The Parent Corporation, Tara Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Parent Corporation, and the
Company are parties to an Agreement and Plan of Merger dated as of the date of
this Agreement (as in effect as of the date hereof, the "Merger Agreement").
As a condition to its willingness to enter into the Merger Agreement, the
Parent Corporation has required that the Stockholders enter into this Agreement
for the purpose of evidencing certain agreements among the parties relating to
the voting and transfer of the Company Common Stock held by the Stockholders.
Except as otherwise provided herein, all capitalized terms used in this
Agreement will have the respective meanings provided in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the value, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Agreements Regarding Voting. Each of the Stockholders hereby agrees to
vote all of the shares of Common Stock held of record or owned beneficially by
such Stockholder on the date of this Agreement or hereafter acquired by such
Stockholder in favor of the adoption of the Merger Agreement and the approval of
the Merger. Each of the Stockholders acknowledges and agrees that its or his
obligations under this Section 1 are unconditional and will remain in full force
and effect for the period provided in this Agreement notwithstanding that the
Company may have received an Acquisition Proposal or that the Board of Directors
of the Company may have withdrawn or amended in a manner adverse to the Parent
Corporation its recommendation and approval of the Merger. Concurrently with the
execution of this Agreement, each of the Stockholders has executed and delivered
to the Parent Corporation an irrevocable proxy in the form of Exhibit A to this
Agreement appointing the officers of the Parent Corporation named therein as
proxy for such Stockholder to vote the shares of Company Common Stock held by
such Stockholder in accordance with the provisions of this Agreement.
2. Conflicting Agreements. Each of the Stockholders agrees that such
Stockholder will not grant any proxy or become party to any voting trust or
other agreement which is inconsistent with or conflicts with the provisions of
this Agreement or which grants to any other person or entity the right, directly
or indirectly, to vote or control the disposition of any of the shares of
Company Common Stock held by such Stockholder.
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3. Representations and Warranties. The Stockholders hereby represent and
warrant to the Parent Corporation as follows:
(a) Each of MBO IV, Gulfstream and Gulfstream II is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of New York. Each of MBO IV, Gulfstream and Gulfstream II
has full partnership power and authority and has taken all requisite action
to enable it to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations hereunder.
(b) Each of N. Forstmann and T. Forstmann has full power and authority
and has taken all requisite action to enable him to execute and deliver
this Agreement, to consummate the transactions contemplated hereby and to
perform his obligations hereunder.
(c) This Agreement constitutes the valid and legally binding
obligation of each of the Stockholders, enforceable against each of the
Stockholders in accordance with its terms and conditions.
(d) Neither the execution and delivery of this Agreement by the
Stockholders, nor the performance by the Stockholders of their obligations
hereunder, will constitute a violation of, be in conflict with, constitute
or create (with or without notice or lapse of time or both) a default
under, give rise to any right of termination, cancellation, amendment or
acceleration with respect to, or result in the creation or imposition of
any lien, encumbrance, security interest or other claim upon any property
of any Stockholder (including the Company Common Stock owned by any
Stockholder) pursuant to (i) the partnership agreement of any of the
Stockholders that is a partnership, (ii) any constitutional provision, law,
rule, regulation, permit, order, writ, injunction, judgment or decree to
which any of the Stockholders is subject or (iii) any agreement or
commitment to which any of the Stockholders is a party or by which any of
the Stockholders or any of their respective properties (including the
Company Common Stock owned by any Stockholder) is bound or subject.
(e) Each of the Stockholders is the record holder and full beneficial
owner of all of the shares of Company Common Stock indicated as being owned
by such Stockholder on Schedule 1 to this Agreement, no person or entity
other than such Stockholder has any right, whether not shared, to vote or
dispose of, or to control or direct the voting or disposition of, any of
such shares, and all such shares are owned by such Stockholder, free and
clear of any lien, encumbrance, security interest or other claim.
(f) Except for this Agreement, none of the Stockholders is a party to
any voting trust, proxy or other agreement or understanding with respect to
the voting of any capital stock of the Company.
4. Termination. The restrictions set forth in this Agreement will
terminate and will be of no further force or effect upon the first to occur of
(a) the Effective Time of the Merger or (b) the date of the effectiveness of the
termination of the Merger Agreement in accordance with the provisions of Section
8.1 thereof.
5. Miscellaneous.
(a) Any party having any rights under any provision of this Agreement
will have all rights and remedies set forth in this Agreement and all
rights and remedies that such party may have been granted at any time under
any other agreement or contract and all of the rights that such party may
have under any law. Any such party will be entitled to enforce such rights
specifically, without posting a bond or other security, to recover damages
by reason of any breach of any provision of this Agreement and to exercise
all other rights granted by law.
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(b) No party hereto may assign or delegate any of such party's rights
or obligations under or in connection with this Agreement without the
written consent of the other party hereto. Except as otherwise expressly
provided herein, all covenants and agreements contained in this Agreement
by or on behalf of any of the parties hereto or thereto will be binding
upon and enforceable against the respective successors and assigns of such
party and will be enforceable by and will inure to the benefit of the
respective successors and permitted assigns of such party.
(c) This Agreement may be amended by the execution and delivery of a
written instrument by or on behalf of the Parent Corporation and each of
the Stockholders. No agreement amending or waiving any provision of this
Agreement will be valid or binding unless it is in writing and is executed
and delivered by or on behalf of the party against which it is sought to be
enforced.
(d) Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
(e) This Agreement may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together will constitute one and
the same Agreement.
(f) The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
(g) All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to
the recipient or when sent to the recipient by telecopy (receipt
confirmed), one business day after the date when sent to the recipient by
reputable express courier service (charges prepaid) or three business days
after the date when mailed to the recipient by certified or registered
mail, return receipt requested and postage prepaid. Such notices, demands
and other communications will be sent to the Parent Corporation and the
Stockholders at the addresses indicated below:
If to the Parent Corporation:
General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, Virginia 22041-4523
Attention: David A. Savner, Esq.
Senior Vice President and General Counsel
Facsimile No: (703) 876-3125
With a copy (which will not constitute notice) to:
Jenner & Block
601 13th Street, N.W.
Washington, D.C. 20005
Attention: Craig A. Roeder, Esq.
Facsimile No: (202) 639-6066
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If to a Stockholder:
To the address indicated on Schedule 1
to this Agreement
With a copy (which will not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Stephen Fraidin, P.C.
Aviva Diamant, Esq.
Facsimile No: (212) 859-4000
or to such other address or to the attention of such other party as
the recipient party has specified by prior written notice to the sending
party.
(h) This Agreement (including the Merger Agreement and the other
documents referred to herein) constitutes the entire agreement among the
parties and supersedes any prior understandings, agreements or
representations by or among the parties, written or oral, that may have
related in any way to the subject matter hereof.
(i) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rule
of strict construction will be applied against any party. The use of the
word "including" in this Agreement means "including without limitation" and
is intended by the parties to be by way of example rather than limitation.
For purposes of this Agreement, the term "Company Common Stock" includes
any equity securities issued or issuable directly or indirectly with
respect to the outstanding shares of Company Common Stock by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization and any
other shares of any class or series of capital stock of the Company held by
a Stockholder.
(i) Each of the parties to this Agreement submits to the jurisdiction
of any state or federal court sitting in Wilmington, Delaware, in any
action or proceeding arising out of or relating to this Agreement, agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court, and agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court.
Each of the parties to this Agreement waives any defense of inconvenient
forum to the maintenance of any action or proceeding so brought and waives
any bond, surety or other security that might be required of any other
party with respect thereto.
(j) ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND
NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first written above.
GENERAL DYNAMICS CORPORATION
By: /s/ DAVID A. SAVNER
-------------------------------------------------------
David A. Savner
Senior Vice President and General Counsel
FORSTMANN LITTLE & CO.
SUBORDINATED DEBT AND
EQUITY MANAGEMENT
BUYOUT PARTNERSHIP -- IV, L.P.
By: FLC XXIX PARTNERSHIP, L.P.
Its General Partner
/s/ THEODORE J. FORSTMANN
-------------------------------------------------------
Theodore J. Forstmann
General Partner
GULFSTREAM PARTNERS, L.P.
By: FLC XXI PARTNERSHIP
Its General Partner
/s/ NICHOLAS C. FORSTMANN
-------------------------------------------------------
Nicholas C. Forstmann
General Partner
GULFSTREAM PARTNERS II, L.P.
By: FLC XXIV PARTNERSHIP
Its General Partner
/s/ THEODORE J. FORSTMANN
-------------------------------------------------------
Theodore J. Forstmann
General Partner
/s/ NICHOLAS C. FORSTMANN
-------------------------------------------------------
Nicholas C. Forstmann
/s/ THEODORE J. FORSTMANN
-------------------------------------------------------
Theodore J. Forstmann
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SCHEDULE I
<TABLE>
<CAPTION>
STOCKHOLDER SHARES OF COMPANY COMMON STOCK
----------- ------------------------------
<S> <C>
Forstmann Little & Co. Subordinated 10,265,915
Debt and Equity Management Buyout
Partnership IV, L.P.
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, New York 10153
Attention: Theodore J. Forstmann
Facsimile No: 212/759-9059
Gulfstream Partners, L.P 2,674,325
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, New York 10153
Attention: Theodore J. Forstmann
Facsimile No: 212/759-9059
Gulfstream Partners II, L.P. 3,614,135
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, New York 10153
Attention: Theodore J. Forstmann
Facsimile No: 212/759-9059
</TABLE>
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EXHIBIT A
IRREVOCABLE PROXY
The undersigned, as the record holder and beneficial owner of the below
indicated shares of the Common Stock, par value $.01 per share (the "Company
Common Stock"), of Gulfstream Aerospace Corporation, a Delaware corporation (the
"Company"), hereby revokes all previous proxies and appoints Michael J. Mancuso
and David A. Savner, and each of such persons acting alone, as the true and
lawful proxy and attorney-in-fact for the undersigned to vote all shares of the
Company Common Stock held by the undersigned in favor of the adoption of the
Agreement and Plan of Merger dated as of May 16, 1999 among General Dynamics
Corporation, a Delaware corporation (the "Parent Corporation"), Tara Acquisition
Corporation, a Delaware corporation and a wholly-owned subsidiary of the Parent
Corporation, and the Company (as in effect as of the date hereof, the "Merger
Agreement") and the merger contemplated thereby (the "Merger") at any and all
meetings of the stockholders of the Company called to consider the Merger
Agreement and/or the Merger, and at any adjournments thereof, held on or after
the date of the giving of this proxy and prior to the date of the effectiveness
of the termination of the Merger Agreement in accordance with the provisions of
Section 8.1 thereof, and to execute on behalf of the undersigned any and all
written consents of stockholders of the Company to be executed on or after the
date of the giving of this proxy and prior to the date of the effectiveness of
the termination of the Merger Agreement in accordance with the terms of Section
8.1 thereof, with the same effect as if the undersigned had personally voted
such shares or had personally signed such written consent.
The undersigned authorizes and directs the proxy holder to file this proxy
with the Secretary of the Company and authorizes the proxy holder to substitute
another person as proxy holder and to file the substitution instrument with the
Secretary of the Company.
This proxy is given pursuant to a Voting Agreement dated as of this date
among the undersigned, the Parent Corporation and certain other stockholders of
the Company (as in effect as of the date hereof, the "Voting Agreement") and is
being delivered as an inducement for the Parent Corporation to enter into the
Merger Agreement. This proxy is therefore coupled with an interest and may not
be revoked without the written consent of the Parent Corporation unless and
until the Voting Agreement is terminated in accordance with the provisions of
Section 5 thereof.
Date: May 16, 1999
Number of Shares of
Company Common Stock:
---------------
--------------------------------------
Signature
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APPENDIX C
REGISTRATION AGREEMENT
REGISTRATION AGREEMENT dated as of [ ], 1999 between General Dynamics
Corporation, a Delaware corporation (the "Parent Corporation"), and each of the
persons whose names are set forth on the signature page of this Agreement
(referred to in this Agreement individually as a "Stockholder" and collectively
as the "Stockholders")
The Parent Corporation, Tara Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of the Parent Corporation, and
Gulfstream Aerospace Corporation, a Delaware corporation (the "Company"), are
parties to an Agreement and Plan of Merger dated as of May 16, 1999 (as in
effect as of the date hereof, the "Merger Agreement"). Pursuant to the Merger
Agreement, each of the Stockholders will be issued shares of the Common Stock,
par value $1.00 per share (the "Parent Common Stock"), of the Parent
Corporation.
The Parent Corporation and the Stockholders have entered into this
Agreement for the purpose of evidencing certain agreements among the parties
relating to the grant of registration rights by the Parent Corporation to the
Stockholders.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and for other good and valuable consideration, the value, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions. For purposes of this Agreement, the following
terms have the meanings set forth below:
"Majority Holders" means the holders of a majority of the Registrable
Securities included in the relevant registration statement at the time the
particular action is taken.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Registrable Securities" means (a) any Parent Common Stock issued to the
Stockholders pursuant to the Merger Agreement and (b) any securities issued or
issuable with respect to the securities referred to in clause (a) by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Registrable Securities, such securities will cease to be Registrable
Securities when they have been distributed to the public pursuant to a offering
registered under the Securities Act or sold to the public in compliance with
Rule 144 under the Securities Act (or any similar rule then in force).
"Registration Expenses" means all expenses incident to the registration and
disposition of the Registrable Securities pursuant to this Agreement, including
all registration, filing and applicable national securities exchange fees, all
fees and expenses of complying with state securities or blue sky laws (including
fees and disbursements of counsel to the underwriters or the Stockholders in
connection with "blue sky" qualification of the Registrable Securities and
determination of their eligibility for investment under the laws of the various
jurisdictions), all word processing, duplicating and printing expenses, all
messenger and delivery expenses, the fees and disbursements of counsel for the
Parent Corporation and of counsel for any other Person reasonably requested by
the Majority Holders, the fees and expenses of the Parent Corporation's
independent public accountants and any other independent public accountants
whose opinions are included in the registration statement, including the
expenses of "cold comfort" letters or any special audits required by, or
incident to, such registration, all fees and disbursements of underwriters
(other than underwriting discounts and
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commissions), all transfer taxes, and the reasonable fees and expenses of
counsel and accountants to the Stockholders; provided that Registration Expenses
will exclude, and the Stockholders will pay, all underwriting discounts and
commissions in respect of the Registrable Securities being registered by such
Stockholders. In connection with any registration pursuant to this Agreement,
the Parent Corporation will not be obligated to pay the fees and expenses for
more than one counsel, other than local and special counsel, or for more than
one firm of accountants representing the Stockholders.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Shelf Registration Statement" means any registration statement that
provides for the offering of Registrable Securities on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act (or any similar or successor
rule then in force).
Except as otherwise provided herein, all capitalized terms used in this
Agreement will have the respective meanings provided in the Merger Agreement.
SECTION 2. Initial Registration.
2.1 Filing of Initial Registration Statement. No later than June 16, 1999,
the Parent Corporation filed [a registration statement] [a Shelf Registration
Statement](1) on Form S-3 (the "Initial Registration Statement") with the
Securities and Exchange Commission relating to the proposed underwritten
secondary public offering by the Stockholders of Registrable Securities (the
"Initial Offering"). In accordance with the provisions of Section 6 of this
Agreement, the Parent Corporation will use its best efforts to cause the Initial
Registration Statement to become effective as of the date of the public release
of the combined financial results of the Parent Corporation and the Company
contemplated pursuant to Section 6.20 of the Merger Agreement (the "Earnings
Release"). The Parent Corporation will use its best efforts to maintain the
effectiveness of the Initial Registration Statement for a period of time, not to
exceed 120 days after the date of the Earnings Release or such longer period as
the Parent Corporation and the Majority Holders may agree (the "Initial
Registration Period"), in order to permit the completion of the Initial Offering
in the manner contemplated by the Initial Registration Statement.
2.2 Postponement of Effectiveness. At any time and from time to time prior
to the effectiveness of the Initial Registration Statement, the Majority Holders
may, by delivery of written notice to the Parent Corporation, request that the
Parent Corporation delay the effectiveness of the Initial Registration Statement
or withdraw the Initial Registration Statement. Thereafter, at any time prior to
the expiration of the Initial Registration Period, the Majority Holders may, by
delivery of written notice to the Parent Corporation, request that the Parent
Corporation use its best efforts to cause the Initial Registration Statement to
become effective as soon as practicable after the date of such notice. Any
Registrable Securities not included in the Initial Registration Statement when
filed will be included in the Initial Registration Statement upon the request of
the holder thereof, such request to be made not later than five days prior to
the effective date of the Initial Registration Statement.
2.3 Registration Expenses. The Parent Corporation will pay all
Registration Expenses incurred in connection with the Initial Registration
Statement and the Initial Offering.
2.4 Prohibited Activities. Until the expiration of the Initial
Registration Period, the Parent Corporation will not effect any public sale or
distribution of its equity securities or any securities convertible into or
exchangeable or exercisable for such securities, or make any filing with the
- ---------------
(1) Such alternative to be determined by the Majority Holders. If the
Initial Registration Statement is not a Shelf Registration Statement, the Parent
Corporation may file up to two additional registration statements during the
Initial Registration Period.
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Securities and Exchange Commission with respect to such sale or distribution
(including on Form S-4 or any similar or successor form), except pursuant to
registrations on Form S-8 or any similar or successor form. The Parent
Corporation has not entered into, and until the end of the Initial Registration
Period will not enter into, any agreement or transaction (a) which would allow
any Person to request registration of its equity securities or any securities
convertible into or exchangeable or exercisable for such securities prior to the
expiration of the Initial Registration Period or (b) the effect of which would
be to adversely affect the ability of the Initial Registration Statement to be
declared effective on the date of the Earnings Release and through the
expiration of the Initial Registration Period.
SECTION 3. Subsequent Demand Registrations.
3.1 Requests for Demand Registrations. At any time after the expiration of
the Initial Registration Period, the holders of at least 40 percent of the
Registrable Securities will have the right to require the Parent Corporation to
effect, and the Parent Corporation will be required to use its best efforts to
effect, two, or if the Initial Registration Statement has not become effective,
three, registrations under the Securities Act (the "Demand Registrations") of
all or part of their Registrable Securities. Each Demand Registration will be on
Form S-2 or S-3 or any similar or successor short-form registration, if
available, or if such forms are not available to effect a Demand Registration,
such other form of the Securities and Exchange Commission as is available. If
requested by the Majority Holders, and the Parent Corporation is then eligible
to use such a registration, the Demand Registration will be made on a Shelf
Registration Statement. Each request for a Demand Registration will specify the
approximate number of Registrable Securities requested to be registered and the
anticipated per share price range for such offering. Within five business days
after receipt of any such request, the Parent Corporation will give written
notice of such requested registration to all other holders of Registrable
Securities and will include in such registration all Registrable Securities with
respect to which the Parent Corporation has received written requests for
inclusion therein no later than five days prior to the effective date of the
registration statement.
3.2 Priority on Demand Registrations; Right to Withdraw. The Parent
Corporation will not include in any Demand Registration any securities which are
not Registrable Securities without the prior written consent of the Majority
Holders. If a Demand Registration is an underwritten offering and the managing
underwriters advise the Parent Corporation that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities requested
to be included in such offering exceeds the number of Registrable Securities and
other securities, if any, which can be sold in an orderly manner in such
offering within a price range acceptable to the Majority Holders, the Parent
Corporation will include in such registration prior to the inclusion of any
securities which are not Registrable Securities the number of Registrable
Securities requested to be included which in the opinion of such underwriters
can be sold in an orderly manner within the acceptable price range of such
offering, pro rata among the respective holders thereof on the basis of the
amount of Registrable Securities owned by each such holder. If, as a result of
the proration provisions set forth in the previous sentence, any holder of
Registrable Securities is not entitled to include all Registrable Securities
previously requested to be included in such registration, such holder may elect
to withdraw such holder's request to include Registrable Securities in such
registration or may reduce the number requested to be included; provided that
such request must be made in writing prior to the execution of the underwriting
agreement.
3.3 Restrictions on Demand Registrations. The Parent Corporation will not
be obligated to effect a Demand Registration within 90 days after the effective
date of the previous Demand Registration. The Parent Corporation may postpone
for up to 90 days the filing or effectiveness of a registration statement for a
Demand Registration, and may terminate the effectiveness of and withdraw for a
period of up to 90 days any Shelf Registration Statement filed pursuant to a
Demand
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Registration, if the Parent Corporation promptly notifies the holders of
Registrable Securities in writing that the Board of Directors of the Parent
Corporation has determined in good faith that effecting such Demand
Registration, or continuing the effectiveness of such registration statement,
would reasonably be expected to have a material adverse effect on any proposal
or plan by the Parent Corporation or any of its Subsidiaries to engage in any
material acquisition of assets, merger, consolidation, tender offer or other
material transaction the public disclosure of which the Board of Directors of
the Parent Corporation has determined in good faith is not in the best interests
of the Parent Corporation and provides an approximation of the anticipated
duration of the postponement. In such event, the requested Demand Registration,
or the Demand Registration pursuant to which the withdrawn registration was
filed, will not count for purposes of the requests for Demand Registrations to
which the Stockholders are entitled under this Agreement. The Parent Corporation
may exercise its rights under this Section 3.3 only one time in any six-month
period and the exercise of one right under this Section 3.3 in any six-month
period will preclude the exercise of any other right under this Section 3.3
during the same six-month period. The Parent Corporation acknowledges that its
rights under this Section 3.3 may not be exercised at any time during the
Initial Registration Period.
3.4 Registration Expenses. All Registration Expenses incurred in
connection with any Demand Registration will be borne by the Parent Corporation.
3.5 Selection of Underwriters. The Majority Holders will have the right to
select the investment bankers and managers to administer each underwritten
Demand Registration. Such investment bankers and managers will be of national
prominence.
3.6 Effective Registration Statement. A registration requested pursuant to
Section 3.1 will not be deemed to have been effected (a) unless a registration
statement with respect thereto has become effective and has been kept
continuously effective for a period of at least 180 days (or such shorter period
terminating when all the Registrable Securities covered by such registration
statement have been sold pursuant thereto), (b) if after it has become
effective, such registration is interfered with by any stop order, injunction or
other order or requirement of the Securities and Exchange Commission or other
governmental agency or court for any reason not attributable to the holders
registering Registrable Securities and has not thereafter become effective or
(c) if the conditions to closing specified in the underwriting agreement, if
any, entered into in connection with such registration are not satisfied or
waived.
3.7 Right to Withdraw. If the managing underwriter of any underwritten
offering advise the holders of Registrable Securities included in such offering
that the Registrable Securities covered by the registration statement cannot be
sold in an orderly manner in such offering within a price range acceptable to
the Majority Holders, then the Majority Holders will have the right to notify
the Parent Corporation in writing that they have determined that the
registration statement be abandoned or withdrawn, in which event the Parent
Corporation will abandon or withdraw such registration statement. In the event
of such abandonment or withdrawal, the Demand Registration pursuant to which the
registration was abandoned or withdrawn will not count for purposes of the
requests for Demand Registrations to which the Stockholders are entitled under
this Agreement.
3.8 Termination of Rights. The right to request Demand Registrations
pursuant to this Section 3 will terminate as of the date the outstanding
Registrable Securities in the aggregate represent less than 0.25 percent of the
issued and outstanding shares of Parent Common Stock.
SECTION 4. Piggyback Registrations.
4.1 Right to Piggyback. Whenever the Parent Corporation proposes to
register any shares of Parent Common Stock under the Securities Act (other than
pursuant to a Demand Registration and other than registrations on Form S-4, Form
S-8 or any similar or successor forms) and the registration form to be used may
be used for the registration of Registrable Securities (a "Piggyback
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Registration"), the Parent Corporation will give prompt written notice to all
holders of Registrable Securities of its intention to effect such a registration
and of such holders' rights under this Section 4 and will include in such
registration all Registrable Securities with respect to which the Parent
Corporation has received written requests for inclusion therein no later than
five days prior to the effective date of the registration statement. Subject to
the provisions of this Section 4, the Parent Corporation will use its best
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Parent Corporation has been so requested to register by the
holders of Registrable Securities. No registration effected under this Section
4.1 will relieve the Parent Corporation of its obligation to effect any
registration upon request under Section 3.1
4.2 Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Parent Corporation, and the
managing underwriters advise the Parent Corporation that in their opinion the
number of securities requested to be included in such registration exceeds the
number which can be sold in an orderly manner in such offering within a price
range acceptable to the Parent Corporation, the Parent Corporation will include
in such registration (a) first, the securities the Parent Corporation proposes
to sell, (b) second, the Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (c) third, other
securities requested to be included in such registration.
4.3 Priority on Secondary Registrations. If a Piggyback Registration is an
underwritten secondary registration on behalf of holders of the Parent
Corporation's securities, and the managing underwriters advise the Parent
Corporation that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in an orderly
manner in such offering within a price range acceptable to the holders initially
requesting such registration, the Parent Corporation will include in such
registration (a) first, the securities requested to be included therein by the
holders requesting such registration and the Registrable Securities requested to
be included in such registration, pro rata among the holders of such securities
on the basis of the number of shares owned by each such holder, and (b) second,
other securities requested to be included in such registration.
4.4 Piggyback Expenses. All Registration Expenses incurred in connection
with any Piggyback Registration will be borne by the Parent Corporation.
4.5 Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the selection of investment bankers and managers for the
offering must be approved by the Majority Holders; provided that Registrable
Securities constitute at least 10 percent of the securities to be sold pursuant
to such Piggyback Registration. Such approval will not be unreasonably withheld.
4.6 Right to Withdraw. Any holder of Registrable Securities will have the
right to withdraw its request for inclusion of its Registrable Securities in any
registration statement pursuant to Section 4.1 at any time prior to the
execution of any underwriting agreement with respect thereto by giving written
notice to the Parent Corporation of its request to withdraw. Any such request
for withdrawal will be irrevocable.
SECTION 5. Holdback Agreement of the Parent Corporation. The Parent
Corporation agrees not to effect any public sale or distribution of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and during the 180-day
period beginning on the effective date of any underwritten Demand Registration
or underwritten Piggyback Registration (except as part of such underwritten
registration or pursuant to registrations on Form S-4, Form S-8 or any similar
or successor forms), unless the underwriters managing the registered public
offering otherwise agree in writing.
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SECTION 6. Registration Procedures. In connection with the Initial
Registration and whenever the holders of Registrable Securities have otherwise
requested that any Registrable Securities be registered pursuant to this
Agreement, the Parent Corporation will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Parent
Corporation, except as otherwise provided in this Agreement, will as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use
its best efforts to cause such registration statement to become effective;
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Parent Corporation will furnish
copies of all such documents proposed to be filed to the counsel selected
by the Majority Holders (the "Holders' Counsel") and, in an underwritten
offering, to counsel for the underwriters;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and prospectus as
may be necessary to keep such registration statement effective for a period
of not less than 180 days (or, in the case of the Initial Registration
Statement, upon the expiration of the Initial Registration Period) and
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(c) furnish, without charge, to each seller of Registrable Securities
and each underwriter such number of copies of such registration statement,
each amendment and supplement thereto (in each case including all
exhibits), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller or underwriter may reasonably request in order to facilitate the
disposition of the Registrable Securities;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests, keep such registration or
qualification in effect for so long as such registration statement remains
in effect, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition
in such jurisdictions of the Registrable Securities owned by such seller;
provided that the Parent Corporation will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(e) promptly notify each seller of such Registrable Securities (i)
when the registration statement covering such Registrable Securities, any
pre-effective amendment, the prospectus or any prospectus supplement
related thereto or post-effective amendment to such registration statement
has been filed, and, with respect to such registration statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Securities and Exchange Commission for amendments or
supplements to such registration statement or the prospectus related
thereto or for additional information, (iii) of the issuance by the
Securities and Exchange Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Parent Corporation
of any notification with respect to the suspension of the qualification of
any of the Registrable Securities for sale under the securities or blue sky
laws of any jurisdiction or the initiation of any proceeding for such
purpose and (v), at any time when a prospectus relating thereto is required
to be delivered under the Securities Act, of the discovery or happening of
any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
required to be stated therein or necessary to
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make the statements therein not misleading, and, at the request of any such
seller, the Parent Corporation will prepare and furnish to each seller of
Registrable Securities a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact required to be stated therein or
necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Parent
Corporation are then listed;
(g) enter into such customary agreements (including underwriting
agreements in customary form) in accordance with the provisions of Sections
6.5 and 8.1;
(h) otherwise comply with all applicable rules and regulations of the
Securities and Exchange Commission;
(i) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement
for sale in any jurisdiction, the Parent Corporation will use its best
efforts promptly to obtain the withdrawal of such order; and
(j) obtain a cold comfort letter from the Parent Corporation's
independent public accountants, and any other accountants whose opinions
are included in such registration statement, in customary form and covering
such matters of the type customarily covered by cold comfort letters as the
Majority Holders reasonably request.
(k) make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months beginning with the first full calendar month after the effective
date of such registration statement, which earnings statement will satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder, and promptly furnish to each seller of Registrable
Securities a copy of any amendment or supplement to such registration
statement or prospectus;
(l) obtain an opinion of the Parent Corporation's and any other
counsel reasonably requested by the Majority Holders in customary form and
covering such matters of the type customarily covered by opinions of
counsel as the Majority Holders reasonably request; provided that such
Registrable Securities constitute at least 10 percent of the securities
covered by such registration statement;
(m) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be
necessary in the opinion of counsel to the Parent Corporation and Holders'
Counsel to consummate the disposition of such Registrable Securities;
(n) deliver promptly to Holders' Counsel and each underwriter, if any,
participating in the offering of the Registrable Securities, copies of all
correspondence between the Securities and Exchange Commission and the
Parent Corporation, its counsel or auditors and all memoranda relating to
(and allow the Holders' Counsel and any underwriters counsel to participate
in) discussions with the Securities and Exchange Commission or its staff
with respect to such registration statement; and
(o) make available its employees and personnel and otherwise provide
reasonable assistance to the underwriters (including by participating in
meetings, drafting sessions, due diligence sessions and road shows) in
their marketing of Registrable Securities.
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If any such registration or comparable statement refers to any holder by
name or otherwise as the holder of any securities of the Parent Corporation and
if, in its good faith judgment, such holder is or might be deemed to be a
controlling person of the Parent Corporation, such holder will have the right to
require (i) the insertion therein of language, in form and substance reasonably
satisfactory to such holder and presented to the Parent Corporation in writing,
to the effect that the holding by such holder of such securities is not to be
construed as a recommendation by such holder of the investment quality of the
Parent Corporation's securities covered thereby and that such holding does not
imply that such holder will assist in meeting any future financial requirements
of the Parent Corporation or (ii) in the event that such reference to such
holder by name or otherwise is not required by the Securities Act or any similar
federal statute then in force, the deletion of the reference to such holder;
provided that with respect to this clause (ii) such holder will furnish to the
Parent Corporation an opinion of counsel to such effect, which opinion and
counsel will be reasonably satisfactory to the Parent Corporation.
6.2 Unlegended Certificates. In connection with the offering of any
Registrable Securities registered pursuant to this Agreement, the Parent
Corporation will promptly after the sale of such Registrable Securities (a)
facilitate the timely preparation and delivery to holders and the underwriters,
if any, participating in such offering, of unlegended certificates representing
ownership of such Registrable Securities being sold in such denominations and
registered in such names as requested by such holders or such underwriters and
(b) instruct any transfer agent and registrar of such Registrable Securities to
release any stop transfer orders with respect to any such Registrable
Securities.
6.3 No Required Sale. Nothing in this Agreement will be deemed to create
an independent obligation on the part of any holder of Registrable Securities to
sell any Registrable Securities pursuant to any effective registration
statement.
6.4 Rule 144. The Parent Corporation will take all actions reasonably
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 or any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission including, without limiting
the generality of the foregoing, filing on a timely basis all reports required
to be filed by the Securities Exchange Act. Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such requirements.
6.5 Underwriting Agreement. If the Initial Offering or any Demand
Registration is an underwritten offering, the Parent Corporation will enter into
a customary underwriters agreement with a managing underwriter or underwriters
which will be reasonably satisfactory in form and substance to the Majority
Holders and will contain such representations and warranties by, and such other
agreements on the part of, the Parent Corporation and such other terms as are
generally prevailing in agreements of that type, including customary provisions
relating to indemnification and contribution. The holders of Registrable
Securities in such offering may, at their option, be parties to such
underwriting agreement and require that any or all of the representations and
warranties by, and other agreements on behalf of, the Parent Corporation to and
for the benefit of the underwriters also be made to and for the benefit of such
holders and that any and all of the conditions precedent to the obligations of
such underwriters be conditions precedent to the obligations of such holders.
SECTION 7. Indemnification.
7.1 Parent Corporation Indemnification. The Parent Corporation agrees to
indemnify, to the fullest extent permitted by law, each holder of Registrable
Securities, its directors, officers, partners (and the partners thereof,
collectively, "Partners"), agents and affiliates and each Person who controls
such holder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities
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and expenses, joint or several, caused by (a) any untrue or alleged untrue
statement of material fact contained in any registration statement, prospectus,
summary prospectus or preliminary prospectus or any amendment thereof or
supplement thereto, (b) any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or (c) any violation by the Parent Corporation of any federal, state
or common law, rule or regulation applicable to the Parent Corporation or
relating to action required of or inaction by the Parent Corporation in
connection with such registration, except insofar as such loss, claim, damage,
liability or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, prospectus, summary prospectus, preliminary prospectus,
amendment or supplement which is contained in written information furnished to
the Parent Corporation through an instrument duly executed by or on behalf of
such holder, specifically stating that it is for use in the preparation thereof,
or by such holder's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Parent Corporation
has furnished such holder with a sufficient number of copies of the same. In
connection with an underwritten offering, the Parent Corporation will indemnify
the underwriters, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.
7.2 Holder Indemnification. In connection with any registration statement
in which a holder of Registrable Securities is participating, each such holder
will furnish to the Parent Corporation in writing such information and
affidavits as the Parent Corporation reasonably requests for use in connection
with any such registration statement or prospectus and, to the extent permitted
by law, will indemnify the Parent Corporation, its directors and officers and
each Person who controls the Parent Corporation (within the meaning of the
Securities Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact contained
in the registration statement, prospectus, summary prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished by such holder through an instrument duly executed by or on behalf of
such holder, specifically stating that it is for use in the preparation thereof,
or resulting from such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Parent Corporation has furnished such holder with a sufficient number of copies
of the same; provided that the liability of each indemnifying party will be
limited to the amount of proceeds (net of expenses and underwriting discounts
and commissions) received by such indemnifying party in the offering giving rise
to such liability.
7.3 Resolution of Claims. Any Person entitled to indemnification hereunder
will (a) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure of any
indemnified party to give notice as provided herein will not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and will not relieve the indemnifying
party from any liability which it may have to the indemnified party otherwise
than under this Section 7) and (b) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to
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pay the fees and expenses of more than one counsel, other than local and special
counsel, for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim. No indemnifying party will,
without the consent of the indemnified party, consent to entry of any judgment
or enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
7.4 Survival. The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any director, officer, Partner, agent,
affiliate or controlling Person of such indemnified party and will survive the
transfer of securities.
7.5 Contribution. If the indemnification provided for in this Section 7 is
for any reason held by a court to be unavailable to an indemnified party under
Section 7.1 or 7.2 hereof in respect of any loss, claim, damage, liability and
expenses, or any action in respect thereof, then, in lieu of the amount paid or
payable under Section 7.1 or 7.2 hereof, the indemnified party and the
indemnifying party under Section 7.1 or 7.2 hereof will contribute to the
aggregate losses, claims, damages, liabilities and expenses (including legal or
other expenses reasonably incurred in connection with investigating the same),
(a) in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand, and the indemnified party on the other,
which resulted in such loss, claim, damage, liability or expense, or action in
respect thereof, with respect to the statements or omissions which resulted in
such loss, claim, damage, liability or expense, or action in respect thereof, as
well as any other relevant equitable considerations, or (b) if the allocation
provided by clause (a) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault but also the
relative benefits received by the indemnifying party and the indemnified party
from the offering of the securities covered by such registration statement as
well as any other relevant equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 7.5 were to be determined by pro rata allocation or by any other method
of allocation which does not take into account the equitable considerations
referred to in the preceding sentence of this Section 7.5. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. In addition, no Person will be
obligated to contribute hereunder any amounts in payment for any settlement of
any action or claim effected without such Person's consent, which consent will
not be unreasonably withheld. Notwithstanding anything in this Section 7.5 to
the contrary, no indemnifying party (other than the Parent Corporation) will be
required to contribute any amount in excess of the proceeds (net of expenses and
underwriting discounts and commissions) received by such party from the sale of
the Registrable Securities in the offering to which the losses, claims, damages,
liabilities or expenses of the indemnified parties relate.
7.6 Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subsections of this Section 7 (with appropriate
modifications) will be given by the Parent Corporation and holders of
Registrable Securities participating in a registered offering with respect to
any required registration or other qualification of securities under any
federal, state or blue sky law or regulation of any governmental authority other
than the Securities Act. The indemnification agreements contained in this
Section 7 will be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or contract.
7.7 Indemnification Payments. The indemnification and contribution
required by this Section 7 will be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
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SECTION 8. Participation in Registrations.
8.1 Required Actions. No Person may participate in any registration
hereunder which is underwritten unless such Person (a) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents consistent
with the terms of this Agreement; provided that no holder of Registrable
Securities included in any underwritten registration will be required to make
any representations or warranties to the Parent Corporation or the underwriters
other than representations and warranties regarding such holder and such
holder's intended method of distribution and any liability of such holder to any
underwriter or other Person under such underwriting agreement will be limited to
liability arising from breach of its representations and warranties and will be
limited to an amount equal to the proceeds (net of expenses and underwriting
discounts and commissions) that it derives from such registration..
8.2 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Parent Corporation will give each holder
participating in such registration, its underwriters, if any, and its respective
counsel, accountants and other representatives and agents the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Securities and Exchange Commission, and each
amendment thereof or supplement thereto, and give each of them such reasonable
access to its books and records and such reasonable opportunities to discuss the
business of the Parent Corporation with its officers and employees and the
independent public accountants who have certified its financial statements, and
supply all other information reasonably requested by each of them, as is
necessary or appropriate, in the opinion of each such registering holder and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
SECTION 9. Miscellaneous.
9.1 No Inconsistent Agreements. The Parent Corporation has not previously
entered into any agreement with respect to its securities granting any
registration rights to any Person. The rights granted to the Stockholders
hereunder do not in any way conflict with and are not inconsistent with any
other agreements to which the Parent Corporation is a party or by which it is
bound. The Parent Corporation is not a party to and will not hereafter enter
into any agreement with respect to its securities which is inconsistent with or
violates the rights granted to the holders of Registrable Securities in this
Agreement. If the Parent Corporation enters into any other registration rights
agreement after the date of this Agreement with respect to any of its securities
containing terms which are more favorable to, or less restrictive on, the other
party thereto than the terms and conditions contained in this Agreement are to
the Stockholders, then the terms and conditions of this Agreement will
immediately be deemed to have been amended without further action by the Parent
Corporation or the Stockholders so that the Stockholders will be entitled to the
benefit of any such more favorable or less restrictive terms or conditions.
9.2 Remedies. The parties agree that irreparable damage would occur in the
event that the provisions of this Agreement were not performed in accordance
with their specific terms. It is accordingly agreed that the parties will be
entitled to specific performance of the terms of this Agreement, without posting
a bond or other security, this being in addition to any other remedy to which
they are entitled at law or in equity.
9.3 Consent to Amendments. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended and the Parent Corporation may
take any action herein prohibited, or omit to perform any act herein required to
be performed by it, only if the Parent Corporation has
C-11
<PAGE> 158
obtained the written consent of the holders of a majority of the Registrable
Securities or, if the consent relates to a particular registration statement, by
the Majority Holders. No other course of dealing between the Parent Corporation
and the holder of any Registrable Securities or any delay in exercising any
rights hereunder or under the Certificate of Incorporation will operate as a
waiver of any rights of any such holders. For purposes of this Agreement, shares
of Registrable Securities held by the Parent Corporation or any of its
Subsidiaries will not be deemed to be outstanding.
9.4 Successors and Assigns. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not. In
addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for the Stockholders' benefit as holders
of Registrable Securities are also for the benefit of, and enforceable by, any
subsequent holder of such Registrable Securities, each of which will be deemed a
Stockholder for all purposes under this Agreement.
9.5 Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
9.6 Counterparts; Effectiveness. This Agreement may be executed
simultaneously in two or more counterparts, any one of which need not contain
the signatures of more than one party, but all such counterparts taken together
will constitute one and the same Agreement. This Agreement will be effective as
to a holder of Registrable Securities when this Agreement has been executed by
the Parent Corporation and such holder.
9.7 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
9.8 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to the
recipient or when sent to the recipient by telecopy (receipt confirmed), one
business day after the date when sent to the recipient by reputable express
courier service (charges prepaid) or three business days after the date when
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices, demands and other communications
will be sent to the Parent Corporation and the Stockholders at the addresses
indicated below:
If to the Parent Corporation:
General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, Virginia 22041-4523
Attention: David A. Savner, Esq.
Senior Vice President and General Counsel
Facsimile No: (703) 876-3125
With a copy (which will not constitute notice) to:
Jenner & Block
601 13th Street, N.W.
Washington, D.C. 20005
Attention: Craig A. Roeder, Esq.
Facsimile No: (202) 639-6066
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<PAGE> 159
If to a Stockholder:
c/o Forstmann Little & Co.
767 Fifth Avenue
New York, New York 10153
Attention: Sandra J. Horbach
Facsimile No: (212) 759-9059
With a copy (which will not constitute notice) to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Stephen Fraidin, P.C.
Aviva Diamant, Esq.
Facsimile No: (212) 859-4000
or to such other address or to the attention of such other party as the
recipient party has specified by prior written notice to the sending party.
9.9 No Third-Party Beneficiaries. This Agreement will not confer any
rights or remedies upon any Person other than the Parent Corporation and the
Stockholders and their respective successors and permitted assigns.
9.10 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the parties and supersedes any
prior understandings, agreements, or representations by or among the parties,
written or oral, that may have related in any way to the subject matter hereof.
9.11 Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party. Any reference to
any federal, state, local, or foreign statute or law will be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The use of the word "including" in this Agreement means
"including without limitation" and is intended by the parties to be by way of
example rather than limitation.
8.12 Consent to Jurisdiction. Each of the parties to this Agreement
submits to the jurisdiction of any state or federal court sitting in Wilmington,
Delaware, in any action or proceeding arising out of or relating to this
Agreement, agrees that all claims in respect of the action or proceeding may be
heard and determined in any such court, and agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the parties to this Agreement waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other party with respect
thereto.
8.13 GOVERNING LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND
NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
* * * * *
C-13
<PAGE> 160
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the date first written above.
GENERAL DYNAMICS CORPORATION
By
--------------------------------------
[Name and Title]
FORSTMANN LITTLE & CO.
SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP--IV,
L.P.
By FLC XXIX PARTNERSHIP, L.P.
Its General Partner
By
--------------------------------------
Theodore J. Forstmann
General Partner
GULFSTREAM PARTNERS, L.P.
By FLC XXI PARTNERSHIP
Its General Partner
By
--------------------------------------
Nicholas C. Forstmann
General Partner
GULFSTREAM PARTNERS II, L.P.
By FLC XXIV PARTNERSHIP
Its General Partner
By
--------------------------------------
Theodore J. Forstmann
General Partner
[Other Stockholders--All affiliates of
the Company referred to in Section
6.15 of the Merger Agreement who
receive Parent Common Stock in the
Merger]
C-14
<PAGE> 161
APPENDIX D
BEAR
STEARNS
BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
(212) 272-2000
ATLANTA - BOSTON - CHICAGO - DALLAS
LOS ANGELES - NEW YORK - SAN FRANCISCO
GENEVA - HONG KONG
LONDON - PARIS - TOKYO
May 13, 1999
Board of Directors
General Dynamics Corporation
3190 Fairview Park Drive
Falls Church, VA 22042-4523
Attention: Nicholas D. Chabraja
Chairman and Chief Executive Officer
Gentlemen:
We understand that General Dynamics Corporation ("General Dynamics") and
Gulfstream Aerospace Corporation ("Gulfstream") have entered into an Agreement
and Plan of Merger dated May 13, 1999 (the "Merger Agreement"), pursuant to
which General Dynamics has agreed to acquire the outstanding common stock of
Gulfstream (the "Transaction"). Pursuant to the terms of the Agreement, each
outstanding share of common stock, par value $0.01 per share, of Gulfstream will
be converted into 1.000 share of common stock, par value $1.00 per share, of
General Dynamics, subject to adjustment in accordance with the terms of the
Agreement (the "Purchase Price").
You have asked us to render our opinion as to whether the Purchase Price is
fair, from a financial point of view to General Dynamics.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Merger Agreement in substantially final form;
2. reviewed General Dynamics' Annual Reports to Shareholders and Annual
Reports on Form 10-K for the fiscal years ended December 31, 1997
through 1998;
3. reviewed certain operating and financial information, including
projections, provided to us by management relating to General Dynamics'
business and prospects;
4. met with certain members of General Dynamics' senior management to
discuss its operations, historical financial statements and future
prospects;
5. reviewed the historical prices and trading volume of the common shares
of General Dynamics;
6. reviewed Gulfstream's Annual Reports to Shareholders and Annual Reports
on Form 10-K for the fiscal years ended December 31, 1997 through 1998;
7. reviewed certain operating and financial information, including
projections, provided to us by management relating to Gulfstream's
business and prospects;
D-1
<PAGE> 162
8. met with certain members of Gulfstream's senior management to discuss
its operations, historical financial statements and future prospects;
9. reviewed the historical prices and trading volume of the common shares
of Gulfstream;
10. reviewed publicly available financial data, stock market performance
data and valuation parameters of companies which we deemed generally
comparable to Gulfstream;
11. reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Gulfstream and the Transaction; and
12. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other projections provided to us by General Dynamics and Gulfstream. With
respect to General Dynamics' and Gulfstream's projected financial results, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the senior managements of
General Dynamics and Gulfstream as to the expected future performance of General
Dynamics and Gulfstream, respectively. We have not assumed any responsibility
for the independent verification of any such information or of the projections
provided to us and we have further relied upon the assurances of the senior
managements of General Dynamics and Gulfstream that they are unaware of any
facts that would make the information or projections provided to us incomplete
or misleading. In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets or liabilities of General Dynamics and
Gulfstream, nor have we been furnished with any such appraisals. Our opinion is
necessarily based on economic, market and other conditions, and the information
made available to us, as of the date hereof.
We have acted as a financial advisor to General Dynamics in connection with the
Transaction and will receive a fee for such services.
In the ordinary course of business, Bear Stearns may actively trade the equity
securities of General Dynamics for its own account and for the account of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is intended for the benefit and use of the
Board of Directors of General Dynamics and does not constitute a recommendation
to the Board of Directors of General Dynamics. This opinion does not address
General Dynamics' underlying business decision to pursue the Transaction. This
letter is not to be used for any other purpose, or reproduced, disseminated,
quoted to or referred to at any time, in whole or in part, without our prior
written consent.
Based on and subject to the foregoing, it is our opinion that the Purchase Price
is fair, from a financial point of view, to General Dynamics.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ MICHAEL J. URFIRER
----------------------------------
Senior Managing Director
D-2
<PAGE> 163
[MERRILL LYNCH LETTERHEAD]
APPENDIX E
OPINION OF MERRILL LYNCH & CO.
May 16, 1999
Board of Directors
Gulfstream Aerospace Corporation
500 Gulfstream Road
Savannah, GA 31402
Members of the Board of Directors:
Gulfstream Aerospace Corporation (the "Company"), General Dynamics
Corporation (the "Acquiror") and Tara Acquisition Corporation, a wholly-owned
subsidiary of Acquiror ("Acquisition Corporation") propose to enter into the
Agreement and Plan of Merger dated as of May 16, 1999 (the "Agreement") pursuant
to which Acquisition Corporation will be merged with and into the Company in a
transaction (the "Merger") in which each outstanding share of the Company's
common stock, par value $.01 per share (the "Company Shares"), will be converted
into the right to receive 1.000 share (the "Exchange Ratio") of the common stock
of the Acquiror, par value $1.00 per share (the "Acquiror Shares").
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view to the holders of the Company Shares, other than the
Acquiror and its affiliates. In arriving at the opinion set forth below, we
have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and the Acquiror that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Company and the Acquiror, furnished to us by the Company
and the Acquiror, respectively;
(3) Conducted discussions with members of senior management of the
Company and the Acquiror concerning the matters described in clauses 1 and
2 above, as well as their respective businesses and prospects before and
after giving effect to the Merger;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror
and compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions that we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed a draft dated May 14, 1999 of the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
E-1
<PAGE> 164
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company of the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Acquiror. With respect to the financial forecast information furnished to
or discussed with us by the Company or the Acquiror, we have assumed that they
have been reasonably prepared and reflect the best currently available estimates
and judgment of the Company's or the Acquiror's management as to the expected
future financial performance of the Company or the Acquiror, as the case may be.
We have further assumed that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles and that it will
qualify as a tax-free reorganization for U.S. federal income tax purposes. We
have also assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In addition,
the Company has agreed to indemnify us for certain liabilities arising out of
our engagement. We have, in the past, provided financial advisory and financing
services to the Company and the Acquiror and/or their respective affiliates and
may continue to do so and have received, and may receive, fees for the rendering
of such services. In addition, in the ordinary course of our business, we may
actively trade the Company Shares and other securities of the Company, as well
as the Acquiror Shares and other securities of the Acquiror, for our own account
and for the accounts of customers and, accordingly, may at any time hold a long
or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger or
any matter related thereto.
We are not expressing any opinion herein as to the prices at which the
Company Shares or the Acquiror Shares will trade following the announcement or
consummation of the Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair from a financial point of view
to the holders of the Company Shares, other than the Acquiror and its
affiliates.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
E-2
<PAGE> 165
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Dynamics certificate of incorporation provides that General
Dynamics will indemnify its current and former directors and officers from and
against all liabilities and reasonable expenses that they incur in connection
with or resulting from any claims, actions, suits or proceedings to the extent
that indemnification is not inconsistent with Delaware law. General Dynamics
also provides directors' and officers' liability insurance coverage for the acts
and omissions of its directors and officers. In order to be entitled to
indemnification under the provisions of the certificate of incorporation, a
General Dynamics director or officer must be wholly successful with respect to
the claim, action, suit or proceeding or have acted in good faith in what he or
she reasonably believed to be the best interests of General Dynamics, or with
respect to a criminal action or proceeding, must have had no reasonable cause to
believe that his or her conduct was unlawful. Prior to the final disposition of
a claim, action, suit or proceeding, General Dynamics will advance expenses
incurred by a current or former director or officer if the director or officer
provides General Dynamics with an undertaking to repay the amount advanced if he
or she is not entitled to indemnification after the final disposition.
General Dynamics' certificate of incorporation provides that a director
will not be personally liable to General Dynamics or its stockholders for
monetary damages for breach of fiduciary duty as a director except for breach of
the director's duty of loyalty to General Dynamics or its stockholders, for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, for unlawful payment of a dividend or unlawful stock
purchase or redemption under the Delaware General Corporation Law or for any
transaction from which the director derived an improper personal benefit. While
this provision provides directors with protection from awards for monetary
damages for breaches of their duty of care, it does not eliminate that duty.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of May 16, 1999 among
General Dynamics Corporation, Tara Acquisition Corporation
and Gulfstream Aerospace Corporation (included in the Joint
Proxy Statement/Prospectus as Appendix A)
*5.1 Opinion of Jenner & Block, counsel to General Dynamics
Corporation, regarding the legality of the shares being
issued in the Merger
*8.1 Opinion of Jenner & Block, counsel to General Dynamics
Corporation, as to certain federal income tax consequences
described in the Joint Proxy Statement/Prospectus
*8.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
to Gulfstream Aerospace Corporation, as to certain federal
income tax consequences described in the Joint Proxy
Statement/Prospectus
10.1 Voting Agreement dated as of May 16, 1999 between General
Dynamics Corporation, Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership-IV, L.P.,
Gulfstream Partners, L.P., Gulfstream Partners II, L.P.,
Nicholas C. Forstmann and Theodore J. Forstmann (included in
the Joint Proxy Statement/Prospectus as Appendix B)
10.2 Form of Registration Agreement to be entered into among
General Dynamics Corporation, Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-
IV, L.P., Gulfstream Partners, L.P., Gulfstream Partners II,
L.P. and certain directors and executive officers of
Gulfstream (included in the Joint Proxy Statement/Prospectus
as Appendix C)
</TABLE>
- ------------------
* To be filed by amendment.
II-1
<PAGE> 166
<TABLE>
<C> <S>
*23.1 Consent of Jenner & Block (included in Exhibit 5.1)
*23.2 Consent of Jenner & Block (included in Exhibit 8.1)
*23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 8.2)
23.4 Consent of Arthur Andersen LLP
23.5 Consent of Deloitte & Touche LLP
*23.6 Consent of Bear, Stearns & Co. Inc.
*23.7 Consent of Merrill Lynch & Co.
24.1 Power of Attorney of Directors of Registrant
*99.1 Form of Proxy of General Dynamics Corporation
*99.2 Form of Proxy of Gulfstream Aerospace Corporation
</TABLE>
- ------------------
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES.
All supporting schedules have been omitted because they are not required or
the information required to be set forth therein is included in the consolidated
financial statements or in the notes thereto or are incorporated by reference
from the 1998 Annual Report on Form 10-K.
ITEM 22. UNDERTAKINGS.
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act of 1933, if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(B) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-2
<PAGE> 167
(C) The undersigned Registrant hereby undertakes:
(1) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other items of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(D) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(E) The undersigned Registrant hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 and 13 of this Form
S-4, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
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<PAGE> 168
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Falls Church, Virginia, on the 8th
day of June, 1999.
GENERAL DYNAMICS CORPORATION
By: /s/ NICHOLAS D. CHABRAJA
------------------------------------
Nicholas D. Chabraja
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the 8th day of June, 1999.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ NICHOLAS D. CHABRAJA Chairman, Chief Executive Officer and
- ----------------------------------------------------- Director
Nicholas D. Chabraja (Principal Executive Officer)
/s/ JAMES E. TURNER, JR. President and Chief Operating Officer
- -----------------------------------------------------
James E. Turner, Jr.
/s/ MICHAEL J. MANCUSO Senior Vice President and Chief Financial
- ----------------------------------------------------- Officer
Michael J. Mancuso (Principal Financial Officer)
/s/ JOHN W. SCHWARTZ Vice President and Controller
- ----------------------------------------------------- (Principal Accounting Officer)
John W. Schwartz
* Director
- -----------------------------------------------------
Julius W. Becton, Jr.
Director
- -----------------------------------------------------
James S. Crown
* Director
- -----------------------------------------------------
Lester Crown
* Director
- -----------------------------------------------------
Charles H. Goodman
Director
- -----------------------------------------------------
George A. Joulwan
Director
- -----------------------------------------------------
Paul G. Kaminski
* Director
- -----------------------------------------------------
James R. Mellor
</TABLE>
<PAGE> 169
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
* Director
- -----------------------------------------------------
Carl E. Mundy, Jr.
Director
- -----------------------------------------------------
Carlisle A.H. Trost
</TABLE>
- ---------------
* By David A. Savner pursuant to Power of Attorney executed by the directors
listed above, which Power of Attorney has been filed with the Securities and
Exchange Commission.
/s/ DAVID A. SAVNER
--------------------------------------
David A. Savner
Secretary
<PAGE> 170
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
------- -------------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of May 16, 1999 among
General Dynamics Corporation, Tara Acquisition Corporation
and Gulfstream Aerospace Corporation (included in the Joint
Proxy Statement/Prospectus as Appendix A)
*5.1 Opinion of Jenner & Block, counsel to General Dynamics
Corporation, regarding the legality of the shares being
issued in the Merger
*8.1 Opinion of Jenner & Block, counsel to General Dynamics
Corporation, as to certain federal income tax consequences
described in the Joint Proxy Statement/Prospectus
*8.2 Opinion of Fried, Frank, Harris, Shriver & Jacobson, counsel
to Gulfstream Aerospace Corporation, as to certain federal
income tax consequences described in the Joint Proxy
Statement/Prospectus
10.1 Voting Agreement dated as of May 16, 1999 between General
Dynamics Corporation, Forstmann Little & Co. Subordinated
Debt and Equity Management Buyout Partnership - IV, L.P,
Gulfstream Partners, L.P., Gulfstream Partners II, L.P.,
Nicholas C. Forstmann and Theodore J. Forstmann (included in
the Joint Proxy Statement/Prospectus as Appendix B)
10.2 Form of Registration Agreement to be entered into among
General Dynamics Corporation, Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership -
IV, L.P., Gulfstream Partners, L.P., Gulfstream Partners II,
L.P. and certain directors and executive officers of
Gulfstream (included in the Joint Proxy Statement/Prospectus
as Appendix C)
*23.1 Consent of Jenner & Block (included in Exhibit 5.1)
*23.2 Consent of Jenner & Block (included in Exhibit 8.1)
*23.3 Consent of Fried, Frank, Harris, Shriver & Jacobson
(included in Exhibit 8.2)
23.4 Consent of Arthur Andersen LLP
23.5 Consent of Deloitte & Touche LLP
*23.6 Consent of Bear, Stearns & Co. Inc.
*23.7 Consent of Merrill Lynch & Co
24.1 Power of Attorney of Directors of Registrant
*99.1 Form of Proxy of General Dynamics Corporation
*99.2 Form of Proxy of Gulfstream Aerospace Corporation
</TABLE>
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* To be filed by amendment.
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our report dated March 2, 1999
incorporated by reference in General Dynamics Corporation's Form 10-K for the
year ended December 31, 1998 and to all references to our Firm included in or
made part of this Registration Statement.
ARTHUR ANDERSEN LLP
Washington, D.C.
June , 1999
<PAGE> 1
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
General Dynamics Corporation on Form S-4 of our reports dated February 1, 1999
(March 1, 1999 as to Note 16), appearing in and incorporated by reference in
the Annual Report on Form 10-K of Gulfstream Aerospace Corporation for the year
ended December 31, 1998 and the reference to us under the headings "Selected
Financial Data" and "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
June 4, 1999
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Directors
and/or Officers of GENERAL DYNAMICS CORPORATION, a Delaware corporation, hereby
constitute and appoint each of NICHOLAS D. CHABRAJA, MICHAEL J. MANCUSO and
DAVID A. SAVNER, as his true and lawful attorney and agent, in the name and on
behalf of the undersigned, to do any and all acts and things and execute any
and all instruments which the attorney and agent may deem necessary or
advisable to enable General Dynamics Corporation to comply with the Securities
Act of 1933, as amended, and any rules and regulations promulgated thereunder
and any requirements of the Securities and Exchange Commission in connection
with the registration statement and proxy materials and any amendments thereto
to be filed with the commission on Forms S-4 and S-3, and any other documents
required to be filed in connection therewith, including specifically, but
without limiting the generality of the foregoing, the full power and authority
to sign the name of the undersigned in his capacity as a Director and/or
Officer of General Dynamics Corporation to any such documents, and any and all
amendments, and the undersigned hereby ratifies and confirms all that the
attorneys and agents, or any of them, has done, shall do or shall cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
this 8th day of June, 1999.
/s/ JULIUS W. BECTON, JR.
- -------------------------- --------------------------
Julius W. Becton, Jr. George A. Joulwan
/s/ NICHOLAS D. CHABRAJA
- -------------------------- --------------------------
Nicholas D. Chabraja Paul G. Kaminski
/s/ JAMES R. MELLOR
- -------------------------- --------------------------
James S. Crown James R. Mellor
/s/ LESTER CROWN /s/ CARL E. MUNDY, JR.
- -------------------------- --------------------------
Lester Crown Carl E. Mundy, Jr.
/s/ CHARLES H. GOODMAN
- -------------------------- --------------------------
Charles H. Goodman Carlisle A. H. Trost
