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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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GRUMMAN CORPORATION
(NAME OF SUBJECT COMPANY)
GRUMMAN CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $1 PAR VALUE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHT)
(TITLE OF CLASS OF SECURITIES)
40018110
(CUSIP NUMBER OF CLASS OF SECURITIES)
THOMAS L. GENOVESE
VICE PRESIDENT AND GENERAL COUNSEL
GRUMMAN CORPORATION
1111 STEWART AVENUE
BETHPAGE, NEW YORK 11714-3580
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSONS(S) FILING STATEMENT)
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Grumman Corporation, a New York
corporation (the "Company"), and the address of its principal executive offices
is 1111 Stewart Avenue, Bethpage, New York 11714-3580. The title of the class of
equity securities to which this statement relates is the Common Stock, par value
$1 per share (the "Common Stock"), of the Company, including the associated
rights to purchase Series A Junior Participating Preferred Stock of the Company
(the "Rights") issued pursuant to the Rights Agreement dated as of February 18,
1988 (the "Rights Agreement") between the Company and The Bank of New York, as
Rights Agent (such Common Stock and the Rights being collectively referred to
herein as the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer (the "Offer") by MMC Acquisition
Corp., a New York corporation ("Acquisition"), which is a newly formed, wholly
owned subsidiary of Martin Marietta Corporation, a Maryland corporation
("Parent"), to purchase all outstanding Shares at a price of $55.00 per Share
net to the seller in cash, as disclosed in the Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") dated March 8, 1994 filed by Acquisition
and Parent with the Securities and Exchange Commission (the "Commission"), upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
March 8, 1994 (the "Offer to Purchase") and the related Letter of Transmittal
(which together constitute the "Offer" and are referred to collectively herein
as the "Offer Documents"). A copy of the Offer to Purchase and the Letter of
Transmittal are attached hereto as Exhibit (a)(1) and Exhibit (a)(2),
respectively.
The Schedule 14D-1 states that the principal executive offices of
Acquisition and Parent are located at 6801 Rockledge Drive, Bethesda, Maryland
20817.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of March 6, 1994 (the "Merger Agreement") among Acquisition, Parent and
the Company. After the completion of the Offer, and upon the terms and subject
to the conditions of the Merger Agreement, Acquisition will be merged with and
into the Company (the "Merger"). Following the Merger, the Company will be the
surviving corporation ("Surviving Corporation"). The Company will thereby become
a wholly owned subsidiary of Parent and each Share outstanding immediately prior
to the Effective Time (other than Shares (i) held in the Company's treasury or
by any of the Company's subsidiaries, (ii) held by Acquisition, Parent or any
other subsidiary of Parent or (iii) held by any stockholder who has not voted in
favor of the Merger or consented thereto in writing and who has demanded
appraisal for such shares in accordance with Section 623 of the New York
Business Corporation Law (the "NYBCL"), unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal, in which case such Shares
will be treated as converted) will be converted at the effective time of the
Merger (the "Effective Time") into the right to receive the higher of (i) $55.00
in cash or (ii) any higher price paid pursuant to the Offer (the "Merger
Consideration"). The purchase of the Offer, the Merger Agreement and the Merger
is for Acquisition and Parent to acquire control of, and the entire equity
interest in, the Company. The Offer is intended to increase the likelihood that
the Merger will be effected. The Merger Agreement is filed as Exhibit (c)(1)
hereto and is hereby incorporated herein by reference in its entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED, AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER,
SHARES REPRESENTING NOT LESS THAN TWO-THIRDS OF THE THEN OUTSTANDING SHARES
DETERMINED ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION").
THE MERGER AGREEMENT.
The Merger Agreement provides that Acquisition will commence the Offer and
accept for payment, purchase and pay for Shares tendered pursuant to the Offer,
subject to the terms and conditions set forth in the Offer to Purchase. The
Merger Agreement further provides that Acquisition, upon purchase of Shares
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pursuant to the Offer, shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company (the "Board") as will give Acquisition representation on the Board equal
to the product of the number of directors on the Board (giving effect to any
increase in the number of directors pursuant to the Merger Agreement as set
forth below) and the percentage that the number of Shares purchased by
Acquisition bears to the total number of outstanding shares of Common Stock of
the Company on a fully-diluted basis, and that the Company will use its best
efforts, upon request by Acquisition, promptly, at the Company's election either
to increase the size of the Board (subject to the provisions of Article EIGHTH
of Company's certificate of incorporation) or secure the resignation of such
number of directors as is necessary to enable Acquisition's designees to be
elected to the Board. The Merger Agreement further provides that, at such times,
and subject to the agreement set forth in the next sentence, the Company will
use its best efforts to cause persons designated by Acquisition to constitute
the same percentage as is on the Board of (i) each committee of the Board (other
than any committee of the Board established to take action under the Merger
Agreement), (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board. The Merger Agreement further provides
that, notwithstanding the foregoing, the Company shall use its best efforts to
insure that three members of the Board as of the date of the Merger Agreement
shall remain members of the Board until the Effective Time. The Merger Agreement
further provides that the Merger shall occur as soon as practicable after May
18, 1994 (provided that Acquisition shall have purchased Shares pursuant to the
Offer) the satisfaction or waiver of the conditions in the Merger Agreement and
that, upon such Merger, the directors of Acquisition shall become the directors
of Surviving Corporation and that the officers of the Company shall become the
officers of Surviving Corporation.
With respect to outstanding stock options pursuant to the Company's 1981
Stock Option Plan, 1990 Stock Option Plan and 1992 Long-Term Incentive Plan
(collectively, the "Stock Plans"), the Merger Agreement provides that the
Company shall use all reasonable efforts to cause all holders of the options
("Options") granted under the Stock Plans which are outstanding immediately
prior to the Effective Time to exercise such Options prior to the Effective
Time. In addition, the Company has agreed in the Merger Agreement to take such
action as is necessary under the Stock Plans to cause any Options that remain
outstanding after the Merger to thereafter be exercisable for a short-term debt
instrument of Surviving Corporation in a face amount (and with an interest rate
and other terms designed to provide a fair value) equal to the amount determined
by multiplying the Merger Consideration by the number of Shares for which such
Option was theretofore exercisable. The Merger Agreement further provides that,
prior to the Effective Time, the Company shall use all reasonable efforts to (i)
obtain any consents from individuals who are entitled to awards under the
Company's Management Incentive Plan ("MIP") and (ii) make any amendments to the
terms of such Plan that are necessary to provide for future distributions
thereunder to be paid in the form of cash (and not in the form of shares of
Common Stock).
Representations and Warranties. The Merger Agreement contains customary
representations and warranties by the Company concerning: the organization and
qualification of the Company and its subsidiaries; the capitalization of the
Company and its subsidiaries; the Company's authority relative to the execution
and delivery of, and performance of its obligations under, the Merger Agreement,
and Board approval of the Merger Agreement and certain related transactions; the
accuracy of forms, reports and documents filed by the Company with the
Securities and Exchange Commission since January 1, 1990 and certain financial
statements of the Company; the accuracy of information supplied by the Company
for inclusion in the Offer Documents and the proxy statement relating to the
Merger; the absence of undisclosed liabilities or changes; obtaining necessary
approvals to consummate the transactions contemplated by the Merger Agreement
and the absence of any conflict with, or violations of, the corporate documents
and binding instruments of the Company or of its subsidiaries or with or of any
law, rule or regulation of the consummation of the transactions contemplated by
the Merger Agreement; there not being any current defaults under the corporate
documents and binding instruments of the Company and of its subsidiaries or
under any law, rule or regulation; the absence of material litigation involving
the Company or any of its subsidiaries; the Company and its subsidiaries having
necessary permits and licenses and the compliance therewith, and compliance with
all applicable laws; the legal compliance of employee benefit plans of the
Company and its subsidiaries; the Company and its subsidiaries complying with
environmental laws and regulations; and the amendment of the
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Rights Agreement. The Merger Agreement also contains customary representations
and warranties of Acquisition and Parent.
Covenants. The Merger Agreement obligates the Company until the designees
of Acquisition constitute a majority of the Board, to conduct its business in
the ordinary course consistent with past practice including specific covenants
as to permissible activities. Parent has agreed to guarantee the performance by
Acquisition of its obligations under the Merger Agreement.
Other Potential Bidders. The Merger Agreement provides that the Company,
its affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing discussions or
negotiations, if any, with any parties conducted prior to the Merger Agreement
with respect to any acquisition of all or any material portion of the assets of,
or any equity interest in, the Company or any of the Company's subsidiaries or
any business combination with the Company or any of its subsidiaries, other than
as described in the letter (the "Letter") from the Company to Parent dated the
date of the Merger Agreement. The Merger Agreement permits the Company to,
directly or indirectly, furnish information and access, in each case only in
response to unsolicited requests therefor, to another person pursuant to
confidentiality agreements and to participate in discussions and negotiations
with such person with respect to any merger, sale of assets, sale of shares of
capital stock or similar transaction involving the Company or any subsidiary or
division of the Company if such person has submitted a written proposal to the
Board relating to any such transaction and the Board by a majority vote
determines in its good faith judgment, based as to legal matters on the written
opinion of legal counsel, that failing to take such action would constitute a
breach of the Board's fiduciary duty. The Merger Agreement provides that the
Board shall provide a copy of any such written proposal to Parent or Acquisition
immediately after receipt thereof and thereafter keep Parent and Acquisition
promptly advised of any development with respect thereto. Otherwise, the Merger
Agreement prohibits the Company from directly or indirectly encouraging,
soliciting, participating in or initiating negotiations or discussions with, or
providing any information to, any person concerning any merger, sale of assets,
sale of shares of capital stock or similar transactions involving the Company or
any subsidiary or any division of the Company; provided, however, that nothing
in the Merger Agreement shall prevent the Board from taking, and disclosing to
the Company's shareholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") with regard to any tender offer; provided, further, that the Board shall
not recommend that the shareholders of the Company tender their shares in
connection with any such tender offer unless the Board by majority vote
determines in its good faith judgment, based as to legal matters on the written
opinion of legal counsel, that failing to take such action would constitute a
breach of the Board's fiduciary duty.
Conditions. Each party's obligations to effect the Merger are subject to:
the requisite approval of shareholders of the Company; there being no statute,
rule, regulation, executive order, decree, ruling or injunction prohibiting,
restraining, enjoining or restricting the consummation of the Merger; the
expiration of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act; and the purchase of Shares pursuant to the Offer.
Termination. The Merger Agreement provides that it may be terminated and
the Offer and the Merger may be abandoned at any time, but prior to the
Effective Time in the following circumstances: (i) by the mutual written consent
of Parent, Acquisition and the Company; (ii) by Parent and Acquisition or the
Company if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued a final order, decree or
ruling or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action is or
shall have become non-appealable; (iii) by Parent and Acquisition if, due to an
occurrence or circumstance which would result in a failure to satisfy any of the
conditions set forth in the Offer, Acquisition shall have (A) failed to commence
the Offer within five days following the date of the initial public announcement
of the Offer, (B) terminated the Offer or (C) failed to pay for Shares pursuant
to the Offer within 75 days following commencement of the Offer; (iv) by the
Company if (1) there shall not have been a material breach of any
representation, warranty or covenant or agreement on the part of the Company and
Acquisition shall have (A) failed to commence the Offer within five days
following the date of the initial public announcement of the Offer, (B)
terminated the Offer or (C) failed to pay for Shares pursuant to the Offer
within 75 days following the commencement of the
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Offer or (2) prior to the purchase of Shares pursuant to the Offer, a person
shall have made a bona fide offer that the Board by a majority vote determines
in its good faith judgment and in the exercise of its fiduciary duties, based as
to legal matters on the written opinion of legal counsel, is more favorable to
the Company's shareholders than the Offer and the Merger (any such termination
effected pursuant to clause (iv)(2) being referred to as an "Other Offer
Event"), provided that in the case of this clause (2) the Company shall have
paid the Termination Fee (as defined below); (v) by Parent and Acquisition prior
to the purchase of Shares pursuant to the Offer, if (1) there shall have been a
breach of any representation or warranty on the part of the Company having a
Material Adverse Effect on the Company (as defined below) or materially
adversely affecting (or materially delaying) the consummation of the Offer, (2)
there shall have been a breach of any covenant or agreement on the part of the
Company resulting in a Material Adverse Effect on the Company or materially
adversely affecting (or materially delaying) the consummation of the Offer,
which shall not have been cured prior to the earlier of (A) ten days following
notice of such breach and (B) two business days prior to the date on which the
Offer expires (any such termination effected pursuant to clause (v)(1) or (v)(2)
being referred to as a "Company Breach Event"), (3) the Company shall engage in
negotiations with any entity or group (other than Parent or Acquisition) that
has proposed a Third Party Acquisition (as defined below), (4) the Board shall
have withdrawn or modified (including by amendment to this Schedule 14D-9) in a
manner adverse to Acquisition its approval or recommendation of the Offer, the
Merger Agreement or the Merger or shall have recommended another offer or shall
have adopted any resolution to effect any of the foregoing, or (5) the Minimum
Condition shall not have been satisfied by the expiration date of the Offer and
on or prior to such date an entity or group (other than Parent or Acquisition)
shall have made and not withdrawn a proposal with respect to a Third Party
Acquisition; or (vi) by the Company if (1) there shall have been a material
breach of any representation or warranty on the part of Parent or Acquisition
which materially adversely affects (or materially delays) the consummation of
the Offer or (2) there shall have been a material breach of any covenant or
agreement or the part of Parent or Acquisition and which materially adversely
affects (or materially delays) the consummation of the Offer which shall not
have been cured prior to the earliest of (A) ten days following notice of such
breach and (B) two business days prior to the date on which the Offer expires.
"Material Adverse Effect," when used in connection with the Company or any
of its subsidiaries is defined in the Merger Agreement as any change or effect
(other than changes or effects disclosed in the Letter) that is or is reasonable
likely to be materially adverse to the business, results of operations or
condition (financial or otherwise) of the Company and its subsidiaries, taken as
whole, other than any change or effect arising out of general economic
conditions unrelated to any businesses in which the Company is engaged.
Fees and Expenses. The Merger Agreement provides that in the event Parent
and Acquisition terminate the Merger Agreement pursuant to a Company Covenant
Breach, Parent and Acquisition would suffer direct and substantial damages,
which damages cannot be determined with reasonable certainty. To compensate
Parent and Acquisition for such damages, the Company has agreed under the Merger
Agreement to pay to Parent the amount of $20 million as liquidated damages
immediately upon such a termination.
The Merger Agreement also provides that if (i) Parent and Acquisition
terminate the Merger Agreement pursuant to clause (v)(2), (3), (4) or (5) of the
first paragraph under Termination above and, within 12 months thereafter, the
Company enters into an agreement with respect to a Third Party Acquisition, or a
Third Party Acquisition occurs involving any party (or any affiliate thereof)
(x) with whom the Company (or its agents) had negotiations with a view to a
Third Party Acquisition, (y) to whom the Company (or its agents) furnished
information with a view to a Third Party Acquisition or (z) who had submitted a
proposal or expressed an interest in a Third Party Acquisition, in the case of
each of clauses (x), (y) and (z) after the date hereof and prior to such
termination, (ii) Parent and Acquisition terminate the Merger Agreement pursuant
to clause (v)(3), (4) or (5) of the first paragraph of Termination above, and
within 12 months thereafter a Third Party Acquisition shall occur involving a
consideration for Shares (including the value of any stub equity) in excess of
the amount per Share paid pursuant to the Offer, or (iii) the Company terminates
the Merger Agreement pursuant to an Other Offer Event, the Company shall pay to
Parent and Acquisition, within one business day following the execution and
delivery of such agreement or such occurrence, as the case may be, or
simultaneously with such termination by the Company, a fee, in cash, of
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$50,000,000 (the "Termination Fee"), provided, however, that the Company in no
event shall be obligated to pay more than one such $50,000,000 fee with respect
to all such agreements and occurrences and such termination. In case liquidated
damages shall have been paid pursuant to the first paragraph of this section, in
connection with such a termination, the amount so paid, minus an amount equal to
the fees and expenses that would have been collectible by Parent and Acquisition
pursuant to the second next succeeding paragraph but for the operation of clause
(ii) of the parenthetical of the first sentence thereof, shall be credited
against the amount pursuant to this paragraph.
"Third Party Acquisition" is defined in the Merger Agreement as the
occurrence of any of the following events: (i) the acquisition of the Company by
merger or otherwise by any person (which in includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) or entity other than Parent,
Acquisition or any affiliate thereof (a "Third Party"); (ii) the acquisition by
a Third Party of more than 30% of the total assets of the Company and its
subsidiaries, taken as a whole; (iii) the acquisition by a Third Party of 30% or
more of the outstanding shares of Common Stock; (iv) the adoption by the Company
of a plan of liquidation or the declaration or payment of an extraordinary
dividend; or (v) the repurchase by the Company or any of its subsidiaries of
more than 20% of the outstanding shares of Common Stock, other than a repurchase
which was not approved by the Company or publicly announced prior to the
termination of the Merger Agreement and which is not part of a series of
transactions resulting in a change of control.
The Merger Agreement provides that upon the termination of the Merger
Agreement for any reason prior to the purchase of Shares by Acquisition pursuant
to the Offer (other than (i) termination by the Company due to a breach of a
representation, warranty, covenant or agreement on the part of Parent or
Acquisition and (ii) termination in circumstances requiring the Company to pay
liqudated damages pursuant to a Company Breach Event), the Company shall
reimburse Parent, Acquisition and their affiliates (not later than one business
day after submission of statements therefor) for all actual documented
out-of-pocket fees and expenses, not to exceed $8,800,000, actually and
reasonably incurred by any of them or on their behalf in connection with the
Offer and the Merger and the consummation of all transactions contemplated by
the Merger Agreement (including, without limitation, fees payable to financing
sources, investment bankers, counsel to any of the foregoing, and accountants).
Parent and Acquisition have provided the Company with an estimate of the amount
of such fees and expenses and, if Parent or Acquisition shall have submitted a
request for reimbursement hereunder, will provide the Company in due course with
invoices or other reasonable evidence of such expenses upon request. The Company
shall in any event pay the amount requested (not to exceed $8,800,000) within
one business day of such request, subject to the Company's right to demand a
return of any portion as to which invoices are not received in due course.
Indemnification; Insurance. Under the Merger Agreement, Parent and
Acquisition have agreed that all rights to indemnification or exculpation
existing in favor of the directors, officers, employees and agents of the
Company and its subsidiaries as provided in their respective charters or by-laws
or otherwise in effect as of the date of the Merger Agreement with respect to
matters occurring prior the Effective Time shall survive the Merger and continue
in full force and effect. The Merger Agreement also provides that to the maximum
extent permitted by the NYBCL such indemnification shall be mandatory rather
than permissive and Surviving Corporation shall advance expenses in connection
with such indemnification. The Merger Agreement further provides that Parent
guarantees the indemnification obligations of Surviving Corporation.
Under the Merger Agreement, Parent has agreed to cause Surviving
Corporation to maintain in effect for not less than three years from the
Effective Time the policies of the directors' and officers' liability and
fiduciary insurance most recently maintained by the Company (provided that
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are not less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time to the extent available, provided, that in no event shall Surviving
Corporation be required to expend more than an amount per year equal to 200% of
the current annual premiums paid by the Company (the "Premium Amount") to
maintain or procure insurance coverage pursuant hereto and, further provided,
that if Surviving Corporation is unable to obtain the insurance called for by
this provision, Surviving Corporation will obtain as much comparable insurance
as is available for the Premium Amount per year.
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sa Redemption of Rights. The Merger Agreement provides that, at Parent's
request, the Company will take such action as Parent may request to effectuate
the redemption, at any time after the purchase of Shares pursuant to the Offer
of at least a majority of the outstanding Shares, of the Rights.
Amendment. The Merger Agreement provides that subject to the next
paragraph, the Merger Agreement may be amended by action taken by the Company,
Parent and Acquisition at any time before or after approval of the Merger by the
shareholders of the Company (if required by applicable law) but, after any such
approval, no amendment shall be made which requires the approval of such
shareholders under applicable law without such approval. The Merger Agreement
further provides that the Merger Agreement may not be amended except by an
instrument in writing signed on behalf of the parties hereto.
The Merger Agreement further provides that, following the election or
appointment of Acquisition's designees to the Company's Board of Directors
pursuant to the Merger Agreement and prior to the Effective Time, if there shall
be any directors of the Company who were directors as of the date hereof, any
amendment of the Merger Agreement, any termination of the Merger Agreement by
the Company, any extension by the Company of the time for the performance of any
of the obligations or other acts of Acquisition or Parent or waiver of any of
the Company's rights under the Merger Agreement, will require the concurrence of
a majority of such directors.
Extension; Waiver. The Merger Agreement provides that subject to the
second paragraph under "Amendment" above, at any time prior to the Effective
Time, each party to the Merger Agreement may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained in the Merger Agreement or in any document, certificate or writing
delivered pursuant to the Merger Agreement or (iii) waive compliance by the
other party with any of the agreements or conditions contained in the Merger
Agreement. Any agreement on the part of either party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of either party hereto to assert any
of its rights thereunder shall not constitute a waiver of such rights.
OTHER CONTRACTS, AGREEMENTS, ARRANGEMENTS OR UNDERSTANDINGS
Parent has indicated its desire to have Dr. Renso L. Caporali, Chairman of
the Board and Chief Executive Officer of the Company, serve on its Board of
Directors and the possibility of Parent considering one or two other
non-management directors of the Company for membership on the Parent Board of
Directors.
Parent has advised the Company that subsequent to the Merger it is its
present intention to review the implementation of agreements with those
executives of the Company who will continue to be employed in order to develop
arrangements which would be mutually satisfactory, including continuity of
management.
Certain contracts, agreements, arrangements and understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described under the heading "Executive Compensation"
at pages 9 through 17 of the Company's Notice of Annual Meeting of Shareholders
and Proxy Statement dated March 4, 1993 for its 1993 Annual Meeting of
Shareholders (the "1993 Proxy Statement"). Copies of such pages of the 1993
Proxy Statement are filed as Exhibit (c)(2) hereto and incorporated herein by
reference in its entirety.
At a meeting of the Board of Directors of the Company held on July 15,
1993, the Board, in connection with certain existing employee benefit plans and
arrangements of the Company, approved and adopted amendments, substantially in
the form of Exhibit (c)(3) hereto, which are incorporated herein by reference,
to the Company's 1981 and 1990 Stock Option Plans and its Long-Term Incentive
Plan, allowing a participant under any of such Plans to designate a beneficiary
or beneficiaries who would be entitled to exercise or surrender stock options
granted to the participant in the event of the participant's death.
At a meeting of the Board of Directors of the Company held on August 19,
1993, the Board, in connection with certain existing employee benefit plans and
arrangements of the Company, approved and adopted amendments, substantially in
the form of Exhibit (c)(4) hereto, which are incorporated herein by
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reference, to the Company's 1981 and 1990 Stock Option Plans, Long-Term
Incentive Plan, and Restricted Stock Award Plan as follows:
(i) providing for mandatory stock withholding in order to satisfy tax
withholding requirements under each of such Plans; and
(ii) with respect to the 1981 and 1990 Stock Option Plans, providing
that the Compensation Committee of the Board may authorize the surrender of
Options granted under either of such Plans, for Shares with a fair market
value consideration equal to the difference between the exercise price of
the Options being surrendered and the fair market value of Shares subject
to the Options on the date of surrender.
At a meeting of the Board of Directors of the Company held on February 17,
1994, the Board, in connection with certain existing employee benefit plans and
arrangements of the Company:
(i) approved and adopted amendments, substantially in the forms of
Exhibit (c)(5) and Exhibit (c)(6) hereto which are incorporated herein by
reference, to the Company's Restricted Stock Award Plan and the Company's
Special Severance Pay Plan to conform the definition of "Change in Control"
in those plans to the definition of "Change in Control" in the Company's
Long-Term Incentive Plan (the transaction described herein would constitute
a "Change in Control" under either definition);
(ii) approved and adopted amendments to, and restated, the Company's
Excess Benefit Plan described in the 1993 Proxy Statement substantially in
the form of Exhibit (c)(7) hereto which are incorporated herein by
reference; the amendment, (a) extend it to provide benefits to participants
in the Company's Pension Plan whose benefits thereunder are limited by the
statutory ceilings on the amount of compensation which may be utilized for
purposes of computing benefits payable under the Pension Plan, as imposed
pursuant to Section 401(a)(17) of the Internal Revenue Code and (b) provide
for establishment of a trust to assist the Company in meeting its
obligations under the Plan;
(iii) approved and adopted amendments to, and restated, the Company's
Supplemental Retirement Plan described in the 1993 Proxy Statement
substantially in the form of Exhibit (c)(8) hereto which are incorporated
herein by reference; the amendments, (a) provide that following a Change in
Control (as defined therein) a participant will be entitled to benefits
under the Plan upon termination of employment on or after the participant's
50th birthday and completion of 20 years of continuous service, without the
necessity of Compensation Committee approval; (b) provide that a
participant may, with the consent of the Compensation Committee, defer
receipt of benefits payable under the Plan; (c) delete the provisions of
the Plan which provide that if the Company elects to purchase life
insurance contracts to provide for its obligations under the plan, a
participant will not be entitled to receive benefits under the Plan if the
participant dies as a result of suicide within the 2-year period commencing
on the date a life insurance policy is issued on his or her life, or if the
insurance company declines to issue insurance on his or her life; (d)
clarify that benefits payable under the Supplemental Retirement Plan are
not offset by benefits under the Company's Employee Incentive Plan and
Management Incentive Plan; (e) provide that no benefits shall be payable to
a participant who is convicted of a felony involving theft, fraud,
embezzlement or other similar unlawful acts committed against the Company
or its interests; and (f) provide for establishment of a trust to assist
the Company in meeting its obligations under the plan;
(iv) approved and adopted amendments, substantially in the form of
Exhibit (c)(9) and Exhibit (c)(10) hereto which are incorporated herein by
reference, to the Company's Non-Employee Director Pension Plan and the
Company's Management Incentive Plan described in the 1993 Proxy Statement
to provide for establishment of a trust to assist the Company in meeting
its obligations under the plans; and
(v) authorized the Company to enter into (and fund on a current basis)
trust agreements, the assets of which will be subject to the claims of
creditors in the event of Insolvency (as defined therein) of the Company,
to assist the Company in meeting its obligations under the Company's Excess
Benefit Plan, Supplemental Retirement Plan, Non-Employee Director Pension
Plan and Management Incentive Plan. At the present time, the Company has
not entered into or funded such trust agreements.
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<PAGE> 9
At a meeting of the Board of Directors of the Company held on March 6,
1994, the Board approved and adopted an amendment, substantially in the form of
Exhibit (c)(11) hereto which is incorporated herein by reference, to the
Company's Management Incentive Plan to clarify that in the event the Company is
consolidated with or merged into another corporation, amounts credited into the
Company stock account in respect of amounts deferred under the plan will,
following the merger or consolidation, instead be credited in the form of the
stock, securities or other consideration given in exchange for an equivalent
number of shares of Company stock in the merger or consolidation.
The Company has entered into indemnity agreements with its directors,
certain officers and certain employees who held fiduciary positions in respect
of employee benefit plans or who serve as directors of other entities at the
Company's request. The agreements provide for mandatory indemnification and
mandatory advancement of expenses to the fullest extent authorized or permitted
by the New York Business Corporation Law or any other applicable law. The
agreements provide that, in certain circumstances, an indemnitee must meet
specified standards of conduct in order to be entitled to indemnification. A
copy of the form of indemnity agreement is filed as Exhibit (c)(12) hereto and
is incorporated herein by reference.
Therefore, such directors and officers may be deemed to have a financial
interest in the Offer and Merger.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation. At a meeting of the Board held on March 6, 1994, the
Board unanimously adopted resolutions that the Board had, in light of and
subject to the terms and conditions set forth in the Merger Agreement,
determined that the Offer and the Merger are fair to, and in the best interests
of, the shareholders of the Company; authorizing the execution and delivery of
the Merger Agreement substantially in the form presented to it; and recommending
that the shareholders of the Company accept the Offer and tender their shares to
Acquisition and approve and adopt the Merger Agreement.
The letter to Stockholders of the Company, dated March 8, 1994, from Dr.
Renso L. Caporali, Chairman of the Board and Chief Executive Officer of the
Company, containing the recommendation of the Board is filed as Exhibit (a)(9)
hereto and is incorporated herein by reference in its entirety. A copy of the
text of the press release issued jointly by Parent and the Company announcing
the Merger Agreement, the Merger and the Offer is filed as Exhibit (a)(7) hereto
and is incorporated herein by reference in its entirety.
(b) Background and Reasons for the Recommendation. The following includes
disclosure regarding discussions and other arrangements between the Company and
each of Northrop Corporation ("Northrop") and Parent. The disclosure set forth
below is provided to satisfy legal requirements applicable to the Company.
In light of past and anticipated decreases in military spending and
consolidations in the defense/aerospace industries over the last several years
and other market factors, the Board has from time to time reviewed the Company's
strategic planning, including the possibility of making acquisitions or entering
into a business combination with a company engaged in similar or related
businesses. In late 1992, members of management of the Company had conversations
with members of management of Northrop and others regarding the possibility of
engaging in discussions related to a possible business combination, which
discussions were brought to the attention of members of the Board. These
conversations did not result in further discussions at that time. In early 1993,
members of management of the Company and Northrop discussed again the
possibility of a business combination between the companies. On January 21,
1993, the companies entered into a confidentiality agreement, misdated January
21, 1992, a copy of which, as subsequently amended, is attached hereto as
Exhibit (c)(13) and incorporated by reference herein in its entirety, pursuant
to which, among other things, each agreed that if either party received
confidential non-public information concerning the other party, the party
receiving such information would keep such information confidential and not use
such information other than in connection with negotiated transactions between
the parties. In addition, pursuant to such confidentiality agreement, each
company agreed that, unless specifically invited by the other party, they would
not acquire any securities of the other party or seek to effectuate
extraordinary transactions involving the other party for a period of three years
from the date of such confidentiality agreement. Pursuant to the confidentiality
agreement, the companies exchanged certain confidential non-financial
information, but did not engage in extensive discussions.
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<PAGE> 10
In the fall of 1993, management of Northrop indicated to the Company a
renewed interest in discussing a possible business combination, resulting in
discussions between members of the companies' managements, which discussions
were brought to the Board's attention.
In late December 1993, the Company retained Goldman, Sachs & Co.
("Goldman") as its financial advisor in connection with the Company's review of
its strategic and financial alternatives. The Company also retained Cahill
Gordon & Reindel as its legal advisor in connection with such review.
On January 5, 1994, a special meeting of the Board was held to discuss,
among other things, the Company's strategic planning as well as the recent
communications between representatives of the Company and representatives of
Northrop. At the meeting, management reviewed communications with Northrop, the
respective technological abilities of Northrop and the Company as well as the
potential synergies of a combination of the Company with Northrop and other
matters related thereto. Representatives of Goldman then reviewed the
environment faced by aerospace and defense industry contractors and the
consolidation pressures facing industry participants, the strategies undertaken
by other industry participants, the reaction of the stock market to major
industry consolidation transactions, public market trading values of industry
members, private market valuations, a summary of certain strategic alternatives
available to the Company, the process which Goldman would follow in developing
its advice to the Board and Goldman's understanding of the Company's strategic
objectives. The Company's stated strategic objectives as concurred with by the
Board at the meeting were as follows: maximize long-term shareholder value as a
continuing entity; address declining revenue base; bolster competition in core
businesses; leverage core competencies; understand available options; and move
deliberately.
On January 19, 1994, Northrop forwarded to the Company a proposed document
that would afford Northrop a 30-day exclusive period to engage in discussions
with the Company regarding a possible business combination and a typed version
of proposed "understandings" that might apply in connection with a possible
business combination of the companies which had been previously delivered in
handwritten form. Northrop also indicated that it would not exchange any
confidential financial information with the Company unless the Company agreed to
such an exclusivity arrangement. The Company declined the opportunity to enter
into the exclusivity agreement and did not sign any agreement with Northrop,
other than the confidentiality agreement (Exhibit (c)(13)), but discussions
continued between the two companies.
On January 20, 1994, a regular meeting of the Board was held to discuss
further, among other things, the Company's strategic objectives. At the meeting,
representatives of Goldman discussed with the Board various stated strategic
alternatives, including growth of the Company through acquisitions as well as
potential business combinations. Members of management discussed the status of
contacts between the Company and Northrop. Representatives of Goldman then
discussed with the Board potential acquisitions, noting that it might be
difficult for the Company to execute an acquisition strategy to achieve the
critical mass necessary to compete effectively in its businesses while still
achieving its financial objectives, and also analyzed and discussed a number of
potential merger candidates. Representatives of Goldman also presented a review
of a possible business combination between the Company and Northrop, including
summary business and financial information and historical stock trading
information about Northrop and an analysis of the relative contribution of each
company based on sales, operating profit and free cash flow. At the conclusion
of such meeting, the Board determined that it would be consistent with the
Company's stated strategic objectives and the interests of the shareholders of
the Company to continue to investigate possible acquisition opportunities as
well as discuss other possible strategic alternatives for the Company.
On January 28, at the request of the Board, representatives of Goldman met
with representatives of the financial advisor of Northrop and stated that any
business combination between the companies should involve a premium for the
shareholders of the Company and that cash should constitute a significant
portion of the consideration. In response, the representatives of Goldman were
advised that Northrop had no interest in a transaction that would result in the
payment of a disproportionate premium to the shareholders of the Company as
compared to the shareholders of Northrop, and that Northrop preferred
transaction structures that minimized the amount of cash consideration.
In late January 1994, at the request of the Board, representatives of
Goldman initiated contact with Parent to determine if Parent had any interest in
exploring a possible business combination with the Company.
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<PAGE> 11
Senior executives of Parent and the Company and a representative of Goldman met
on February 3, 1994 and agreed to have their respective representatives explore
a possible business combination. On February 7, 1994, Parent and the Company
executed a confidentiality agreement, similar in form to the confidentiality
agreement entered into between the Company and Northrop, a copy of which is
attached hereto as Exhibit (c)(14) and incorporated herein by reference in its
entirety, pursuant to which, among other things, the Company and Parent agreed
that if either party received confidential, non-public information concerning
the other party, the party receiving such information would keep such
information confidential and not use such information other than in connection
with negotiated transactions between the parties. In addition, each of Parent
and the Company agreed that, unless specifically invited by the other party,
they would not acquire any securities of the other party or seek to effectuate
extraordinary transactions involving the other party for a period of three
years.
Between February 8 and February 15, representatives of the Company and
representatives of Parent met and held discussions in connection with Parent's
due diligence investigation of the Company. In the course of such investigation,
the Company provided Parent with certain non-public information regarding the
Company pursuant to the Confidentiality Agreement. During this period, Parent
informed the Company that if there were to be a business combination between the
companies, Parent would be able to provide maximum value to the shareholders of
the Company in a cash transaction.
On February 10, 1994, Northrop's financial advisors presented
representatives of Goldman with the outline of a possible stock-for-stock
transaction which involved a cash election merger in which shareholders of each
of the Company and Northrop would have the option to convert up to 34% of the
shares of each company at an approximately 20% premium to market trading value
and to exchange the remaining shares for shares of a new holding company on the
basis of current market trading values.
On February 16, 1994, Parent and the Company and their financial advisors
met to discuss structuring alternatives, including whether a transaction would
involve stock or cash, and to review financial and valuation issues. Goldman
told Parent that the Board would consider at a meeting the next day whether the
Company should consider a combination with Parent. Goldman reiterated the
Board's position that the Company was not for sale but encouraged Parent to
consider an offer with respect to a strategic combination. Parent expressed its
view that an auction process was not in the best interests of the Company or its
employees and that Parent did not want to participate in such a process due to
the damage Parent felt it would cause to the Company. Parent then reiterated its
view that it would only proceed on an exclusive basis. At the close of the
meeting, Goldman asked Parent to make its highest offer.
On February 17, 1994, the Board held its regular meeting, at which
management reviewed discussions with Parent and Northrop. Representatives of
management discussed with the Board the respective capabilities of Parent and
the Company as well as the potential benefits of a combination of the Company
with Parent, the effects thereof on the constituencies of the Company and other
matters related thereto. Representatives of Goldman then presented to and
discussed with the Board the latest proposal communicated by representatives of
Northrop. Representatives of Goldman also discussed with the Board certain
summary business and financial information and historical stock trading
information about Parent and an analysis of the fit between the businesses of
Parent and the Company, comparison of the Company with other publicly-traded
aerospace/defense companies, a review of analysts' estimates and an analysis of
a share repurchase program by the Company. Based upon, among other things, the
presentations of representatives of management and Goldman, the Board then
determined that it was not interested in pursuing a transaction with Northrop
under the terms outlined in its proposal, and representatives of Goldman were
asked to communicate that determination to Northrop.
Following the Board meeting, discussions continued between representatives
of the Company and representatives of Parent at which Parent indicated a serious
interest in pursuing a business combination with the Company and also repeated
that a higher value would be paid in a transaction in which only cash
consideration would be paid to the shareholders of the Company. During the
course of these meetings, the participants also discussed a wide range of issues
relating to, among other things, the structure, timing and contractual terms and
conditions that could be involved in formulating a process that could result in
a business
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<PAGE> 12
combination between the companies. In order to induce Parent to make the highest
offer possible, representatives of Goldman, among other things, stated that the
Company could effect a share repurchase program that, with certain improvements
in operations, could result in twelve to eighteen months in a trading value in
excess of the mid-$50s per share for shares of its common stock that would
remain outstanding after the share repurchase and that a transaction financed
entirely with debt at even higher prices per share would not necessarily be
dilutive to the earnings of Parent. Representatives of the Company indicated to
Parent that Parent, based on all relevant factors, should consider submitting
its highest offer to the Company.
On February 21, 1994, Parent sent the Company a letter, a copy of which is
attached hereto as Exhibit (c)(16) and incorporated in its entirety herein by
reference, stating that on the basis of the information provided to date, a
projection of potential synergies and subject to the conditions outlined
therein, Parent would be prepared to place a cash value on shares of the Company
of $55.00 each. The letter emphasized that any discussions between the Company
and Parent should proceed quickly and on an exclusive and orderly basis.
Specifically, the letter stated that while Parent was interested in pursuing the
possibilities of a business combination, Parent was prepared to do so only with
the proviso that until the Company told Parent that the Company no longer wished
to continue discussions, neither the Company nor any of its representatives
could engage in discussions with another party regarding a business transaction
with the Company or in any way invite or solicit such a transaction, nor
disclose any information concerning Parent's discussions with the Company. The
letter further emphasized that should any of the foregoing circumstances occur
before the Company and Parent signed a definitive business agreement, any
then-pending indication of interest or proposal from Parent would be withdrawn
and discussions between Parent and the Company would be ended. The letter
further emphasized that the letter contained Parent's best proposal and if
Parent did not receive a positive response prior to Parent's Board meeting on
the morning of February 24, 1994, the offer would permanently expire with no
possibility of renewal.
In addition to the foregoing, the letter stated that although Parent's
valuation of the Company and use of cash as consideration was aimed at ensuring
closure of a business combination, Parent recognized that, assuming Parent and
Company agreed upon and announced a business combination, competition from
others would be at least possible and would not be precluded. The letter stated
that, in light of this consideration, Parent would only be prepared to proceed
with discussions based on an understanding that any definitive agreement between
Parent and the Company would embody the provisions in Appendix I to the letter.
Appendix I set forth certain terms to be included in a proposed definitive
agreement, including provisions to the effect that (i) the Company and its
representatives (a) must cease existing discussions and (b) may not thereafter
solicit offers relating to a competing transaction or participate in discussions
or negotiations or furnish information in connection with any third party
interest expressed regarding such a transaction, except that the Company and its
representatives could (x) engage in negotiations with and provide information to
a third party who submitted a written proposal relating to a competing
transaction to the extent required for the Board to meet its fiduciary duty,
based on a determination by the Board after receiving the written opinion of
outside counsel to such effect that failing to take such action would constitute
a breach of fiduciary duty by the Board and (y) recommend to its shareholders a
competing acquisition transaction, or withdraw or modify its recommendation of
Parent's transaction, if the Board determines, with the written concurrence of
outside counsel, that failing to do so would constitute a breach of fiduciary
duty by the Board; (ii) Parent would receive copies of any proposals relating to
competing transactions and would be kept apprised promptly of developments; and
(iii) if the Company engaged in negotiations or furnished information to a third
party or withdrew or modified its recommendation or made another one, pursuant
to subclause (i) above, then Parent would have the right to terminate the Merger
Agreement and collect its break-up fee and expenses described in the next
sentence. Appendix I further provided that (i) the break-up fee would consist of
a reasonable percentage of the per-share merger consideration; (ii) the break-up
fee would be payable by the Company to Parent if (a) Parent exercised its right
to terminate the agreement due to the entering into of discussions with or the
provision of information by the Company to a third party consistent with the
terms of the provisions described in the preceding sentence; (b) the Company
breached the Merger Agreement and Parent exercised its right to terminate; (c)
the Company modified or withdrew its recommendation concerning Parent's tender
offer or the Merger Agreement or recommended a competing transaction; (d) a
third party acquired a significant percentage of the Company's stock or assets;
(e) the minimum condition of Parent's tender offer
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<PAGE> 13
2/3 of the Company's outstanding shares tendered and not withdrawn) was not
satisfied at the offer's expiration date and, at that time, a third party had
expressed and not withdrawn interest in making a competing acquisition
transaction; and (f) the Company entered into an agreement relating to a
competing transaction or a competing acquisition transaction was consummated
within twelve months of the termination of the Merger Agreement (unless the fee
had been previously paid); and (iii) Parent's expenses would be reimbursed in
full by the Company if the Merger Agreement was terminated for any reason.
At a meeting of the Board convened on February 23, 1994, to discuss, among
other things, the letter from Parent, representatives of Goldman discussed with
the Board matters related to Parent's proposal, including historical and
projected Department of Defense budget authority trends, a summary of the
Company's historical and projected financial performance, the Company's recent
stock market performance, a review of selected comparable publicly-traded
companies, a comparison of recent transactions in the aerospace/defense
industry, a discounted cash-flow analysis of the Company, an analysis of a
Company share repurchase program, an analysis of pro forma financial information
giving effect to the proposed merger, a review of possible strategic purchasers
and merger partners, an analysis of transaction multiples based on Parent's
proposal, and an estimated time line for consummation of Parent's tender offer.
At that time, representatives of Goldman informed the Board that the $55.00
price per share was at the high end of the various valuation ranges used in
their analysis and that, based upon the analyses described below and noting that
no assurances could be given, it was Goldman's view that accepting the $55.00
price per share, assuming that the terms of the transaction were otherwise
acceptable, was likely to produce a higher value for the shareholders of the
Company than what the Company could achieve if it were not to accept Parent's
offer. Representatives of Goldman told the Board that representatives of Parent
were insistent that, if an attempt was made to negotiate a higher price from
Parent, Parent would probably withdraw the offer. Representatives of Goldman
also advised the Board that representatives of Parent and its financial advisor
had informed them it was their view that the offer was Parent's best offer. As
to Northrop, representatives of management and Goldman stated that Northrop's
representatives had indicated that Northrop was not prepared in any transaction
to pay a premium to the shareholders of the Company that was disproportionate to
the premium, if any, that would be received by Northrop's shareholders and that
Northrop preferred transaction structures that minimized the amount of cash
consideration. At the conclusion of the meeting, the Board authorized management
to call Parent and inform Parent that the Company was authorized to proceed with
discussions with Parent on the basis of Parent's letter for the negotiation of
an agreement as follows: (i) a price of $55.00 per share in cash as set forth in
the letter; (ii) until the Company tells Parent that the Company no longer
wishes to continue discussions, the Company does not intend to engage in
discussions with another party regarding a business combination or invite or
solicit such a transaction or disclose information as to the Company's
discussions with Parent; and (iii) with respect to Appendix I to the letter, the
Board was prepared to do what was reasonable and consistent with the Board's
fiduciary obligations, but there were issues raised by the provisions of
Appendix I which would require discussion and negotiation between the parties'
legal counsel so that the Board could be satisfied that it was acting in a
manner consistent with its fiduciary obligations.
Following the meeting of the Board, counsel for the Company and counsel for
the Parent met to begin to negotiate the terms of the Merger Agreement. Such
negotiations continued through March 6, 1994, at the same time that
representatives of the Parent continued to meet and hold discussions with
representatives of the Company in connection with Parent's on-going due
diligence investigation of the Company.
On February 24, 1994, representatives of Northrop's financial advisor
telephoned representatives of Goldman. Representatives of Goldman told the
representatives of Northrop that the Board had instructed the representatives of
Goldman to state that the Board had no interest in pursuing discussions with
Northrop at that time. Later in the day, representatives of Northrop's financial
advisor again telephoned representatives of Goldman and stated that they
believed Northrop would now be prepared to submit an offer at a price per share
of not less than $50.00. Representatives of Goldman communicated this statement
to management of the Company.
On February 25, 1994, the Company received a letter from Northrop, a copy
of which is attached hereto as Exhibit (c)(16) and incorporated in its entirety
herein by reference. The letter stated that, based upon the facts known to
Northrop, Northrop would be prepared to submit an offer at a price per share of
not less than
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<PAGE> 14
$50.00, a premium in excess of 35% over the trading level of the Company's stock
as of the close on February 24, 1994. The letter stated that Northrop would also
be prepared to consider an offer at a higher level, if warranted, based upon any
additional information or analysis the Company might wish to provide Northrop.
The letter also stated that Northrop was willing to proceed expeditiously to the
completion of a definitive acquisition agreement, and that there was no reason,
from Northrop's point of view, that such an agreement could not be signed within
21 days or sooner.
On February 28, 1994, the Board held a telephonic meeting. At this meeting,
management of the Company reported to the Board on the contacts since the last
meeting of the Board with Northrop (particularly the letter dated February 25,
1994 from Northrop) and with Parent. The Board, with representatives of
management and Goldman, discussed the letter from Northrop and the
considerations relevant to the letter, including the possible effect that
pursuing discussions with Northrop could have on Parent's offer. In responding
to a question, a representative of Goldman confirmed the view stated at the
February 23, 1994 Board meeting that accepting the $55.00 price per share,
assuming that the terms of the transaction were otherwise acceptable, was likely
to produce a higher value for the shareholders of the Company under current
market conditions than what the Company could achieve if it were not to accept
Parent's offer. Following discussion, the Board unanimously determined that
representatives of Goldman should telephone the financial advisor to Northrop
and advise it that the Company was not prepared at that time to pursue the
Northrop letter. On March 1, representatives of Goldman telephoned the financial
advisor of Northrop as directed by the Board.
On March 6, 1994, a special meeting of the Board was held. At such meeting,
the Board reviewed with its senior management, legal counsel and financial
advisors the discussions and negotiations between the Company and Parent.
Following such discussion, the Board heard presentations by its legal counsel on
the terms and conditions contained in the proposed Merger Agreement and by
Goldman on its analysis of the proposed transaction. The termination provisions,
as modified through negotiations, were described to the Board and matters
related to the effects of the termination provisions were discussed with the
Board. Representatives of Goldman discussed with the Board matters related to
the proposed transaction with Parent, including historical and projected
Department of Defense budget authority trends, a summary of the Company's
historical and projected financial performance, the Company's recent stock
market performance, a review of selected comparable publicly-traded companies, a
comparison of recent transactions in the aerospace/defense industry, a
discounted cash-flow analysis of the Company, an analysis of a Company share
repurchase program, an analysis of pro forma financial information giving effect
to the proposed transaction, a review of possible strategic purchasers and
merger partners and an analysis of transaction multiples based on the proposed
transaction. Representatives of Goldman said that, in their view, based on
discussions with representatives of Parent and its financial advisor, the
proposed transaction was Parent's best offer and that the $55.00 price per share
offered by Parent was at the high end of the various valuation ranges used in
their analyses and that, based upon the analyses described below and noting that
no assurances could be given, it was Goldman's view that the $55.00 price per
share offered by Parent under the terms of the Merger Agreement was likely to
produce a higher value for the shareholders of the Company under current market
conditions than what the Company could achieve if the Board did not approve the
Merger Agreement. At the conclusion of their presentation, Goldman delivered its
oral opinion to the Board (subsequently confirmed by a written opinion) that, as
of such date, the $55.00 in cash to be received by the holders of Shares in the
Offer and the Merger is fair to such holders. Following further discussion, the
Board unanimously adopted resolutions that the Board has, in light of and
subject to the terms and conditions set forth in the Merger Agreement,
determined that the Offer and the Merger are fair to, and in the best interests
of, the shareholders of the Company; authorizing the execution and delivery of
the Merger Agreement substantially in the form presented to it; and recommending
that the shareholders of the Company accept the Offer and tender their Shares to
Acquisition and approve and adopt the Merger Agreement.
In determining to approve the Merger Agreement and to recommend acceptance
of the Offer, the Board considered a number of factors, including, without
limitation, the following:
(i) The Board's understanding of the strategic options available to
the Company in light of past and anticipated decreases in military spending
and consolidations in the defense/aerospace industries;
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<PAGE> 15
(ii) The Board's conclusion, based on presentations from
representatives of Goldman and other considerations, that it would be
difficult for the Company to execute an acquisition strategy to achieve the
critical mass necessary to compete effectively in its businesses while
still achieving its financial objectives;
(iii) The Board's review of presentations from, and discussion of the
terms and conditions of the Offer and the Merger with, senior executive
offers of the Company, representatives of its legal counsel and
representatives of Goldman;
(iv) The Board's consideration of, among other things, information
with respect to the financial condition, results of operations and business
of the Company, on both an historical and a prospective basis, and current
industry, economic and market conditions, as well as other constituencies
of the Company;
(v) The Board's review of the historical market prices of the Shares
compared to the price of $55.00 per Share (including such price being a
premium of approximately 37.9% to the March 4, 1994 closing price and
approximately a 28.9% premium to the all time high price for the Shares);
(vi) The Board's consideration of alternatives to a sale of the
Company at the present time, including the advisability of continuing to
operate as an independent entity and its previous consideration of the
analysis by the Company's management, with the assistance and advice of the
Company's advisors, including Goldman, of a possible share repurchase
designed to optimize shareholder values and consideration of possible
candidates to effect a business combination with the Company;
(vii) The Board's consideration of the advice of its financial advisor
that the $55.00 price was at the high end of the various valuation ranges
used in their analysis and that, based upon the analyses described below
and noting that no assurances could be given, it was Goldman's view and
that the $55.00 price per share offered by Parent under the terms of the
Merger Agreement was likely to produce a higher value for the shareholders
of the Company under current market conditions than what the Company could
achieve if the Board did not approve the Merger Agreement; and
(viii) The Board's receipt of a presentation by representatives of
Goldman, which included, among other things, a review with the Board of the
analyses described below and the oral opinion of Goldman (subsequently
confirmed by a written opinion) that, as of March 6, 1994, the $55.00 per
Share in cash to be received by the holders of Shares in the Offer and the
Merger is fair to such holders.
The Board did not assign relative weights to the factors discussed above.
In rendering its opinion and making its presentation to the Board on March
6, 1994, Goldman discussed the strategic rationale for a combination with Parent
and presented financial, operating and stock market information regarding the
Company, Parent and certain other companies. Goldman also discussed with the
Board the effect that historical declines from 1988-1993 and widely assumed
projected declines from 1994-1998 in the United States Department of Defense
budget for research and development and for procurement has had and will likely
continue to have on companies in the aerospace and defense industry, including
the Company.
Goldman also performed a variety of financial and comparative analyses for
the purposes of its opinion, including (i) analyses of selected comparable
publicly-traded companies, (ii) comparable transaction analyses, (iii)
discounted cash flow analyses and (iv) share repurchase analyses. The basic
analyses used by Goldman and the primary factors discussed during its
presentations to the Board are summarized in greater detail below. This summary,
however, does not purport to be a complete description of Goldman's written
analyses or its presentations to the Board.
Valuation Summary of Selected Publicly-Traded Companies. Goldman reviewed
certain financial, operating and stock market information of the Company and
selected publicly-traded companies engaged in the aerospace and defense industry
and of the S&P 400 Industrials Index. Although such other companies were
comparable to the Company based on certain characteristics of their businesses,
none of these companies possessed characteristics identical to those of the
Company.
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Goldman examined and compared various valuation methods and calculated
various financial multiples and ratios based on certain publicly available
information. The multiples for the Company were calculated using a price of
$39.875 per share, which was the closing price on the New York Stock Exchange on
March 4, 1994, the last trading day before the Board meeting on March 6, 1994.
The multiples and ratios for the latest 12 months ("LTM") for the Company and
Parent were based on information provided by them and the multiples for each of
the other companies were based on publicly available information as of September
30, 1993. The multiples were as follows: (i) 1994 estimates for the price to
earnings ratio (which ratio was based on analysts' estimates) -- 10.9x for the
Company, which compared to a high of 22.2x (which ratio representatives of
Goldman explained to the Board was not meaningful because it was based on the
applicable company's cyclically depressed earnings) and a low of 9.1x for the
other companies; (ii) LTM sales -- .38x for the Company, which compared to a
high of 1.12x and a low of .43x for the other companies; and (iii) stated book
value -- 1.6x for the Company, which compared to a high of 2.5x and a low of
1.3x for the other companies. The ratios were: (i) LTM earnings before interest
and taxes ("EBIT") margin -- 5.9% for the Company, which compared to a high of
14.0% and a low of 6.0% for the other companies; and (ii) LTM return on
equity -- 14.4% for the Company, which compared to a high of 17.6% and a low of
4.0% for the other companies. Goldman also presented a comparison of ratios of
total indebtedness less cash and marketable securities ("net debt") to capital
for the Company, Parent and other selected publicly traded companies engaged in
the aerospace and defense industry based on information provided by the Company
and Parent, as to themselves, and based on publicly available information for
the other companies as of September 30, 1993, as adjusted for one company to
reflect the pro forma effect of the financing of an announced major acquisition.
The net debt to capital percentage for the Company was -15.9%, which compared to
a high of 58.1% and a low of -6.9% for the other companies.
Comparable Transaction Analyses. Goldman reviewed and compared the prices
paid in selected merger and acquisition transactions in the aerospace and
defense industries and the price proposed to be paid by Parent in the Offer and
the Merger. Goldman calculated the aggregate consideration and various financial
multiples from available actual and estimated information for each transaction.
The aggregate consideration for the selected transactions ranged from $3,050
million to $450 million. The financial multiples, in each case (other than the
book value multiple) based on the sum of the consideration paid for the equity
of the acquired company plus the amount of net debt assumed in the transaction,
were as follows, assuming for these purposes that the Offer and Merger had been
announced in 1993: (i) sales for the calendar year the transaction was
announced -- .56x for the Company, which compared to a high of .69x to a low of
.26x for the acquired companies in the other transactions; (ii) EBIT for the
calendar year the transaction was announced -- 9.6x for the Company, which
compared to a high of 9.5x to a low of 2.9x for the acquired companies in the
other transactions; (iii) sales for the calendar year after the transaction was
announced -- .58x for the Company, which compared to a high of .69x to a low of
.26x for the acquired companies in the other transactions; (iv) EBIT for the
calendar year after the transaction was announced -- 8.7x for the Company, which
compared to a high of 8.5x to a low of 4.0x for the acquired companies in the
other transactions; and (v) book value for the time the transaction was
announced -- 2.2x for the Company, which compared to a high of 3.0x to a low of
0.8x for the acquired companies in the other transactions.
Discounted Cash Flow Analysis. Goldman performed a discounted cash flow
analysis using the Company's management projections. Using a discounted cash
flow analysis, Goldman estimated the present value of the future cash flows set
forth in the Company's management projections.
Goldman calculated a net present value of free cash flows for the years
1994 through 1998 using discount rates ranging from 9% to 12%. Goldman
calculated the Company's terminal values in the year 1998 based on multiples
ranging from 5x operating income to 7x operating income and also based on
capitalizing the Company's projected 1988 cash flow (consisting of earnings
before interest, taxes, depreciation and amortization, less taxes (assuming the
Company had no interest income or expense), capital expenditures and changes in
working capital) at the rates then used to discount such terminal values to
present value. These terminal values were then discounted to present value using
discount rates ranging from 9% to 12%. Various ranges of discount rates and
terminal value multiples were chosen to reflect theoretical analyses of costs of
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<PAGE> 17
capital. The Company's net debt and the costs of exercise of all outstanding
stock options were also factored into implied per share values.
Using the discounted cash flow methodology described above and management's
projections of future cash flows, the implied per share values ranged from
$43.86 to $57.81.
Share Repurchase Analyses. Goldman presented an analysis of the financial
impact of three hypothetical share repurchase programs by the Company, which
differed solely in the total amount of consideration paid by the Company for the
shares. The analysis was based on certain assumptions, including (i) a 4%
opportunity cost of cash and an interest rate on borrowings of 7.5% per annum,
(ii) the Company's stock trading at the same price to earnings ratio before and
after the repurchase and (iii) a purchase price of $47.85 per share,
representing a 20% repurchase premium above $39.875, the closing price per share
on the New York Stock Exchange on March 4, 1994. For each share repurchase,
Goldman assumed that all shareholders participated in the repurchase and
presented the estimated per share value to shareholders as a combination of cash
consideration from the repurchase and continuing stock ownership in the Company,
in each case as though the repurchase had been effected on March 4, 1994.
Goldman also presented the post-repurchase net debt to capitalization ratio of
the Company, assuming that the pre-repurchase net debt to capitalization ratio
of the Company was -15.9%. The analysis indicated that at a repurchase amount of
$364 million, 22.2% of the Company's outstanding stock would have been
repurchased, and the total per share value to shareholders would have been
$47.54 and the resulting net debt to capitalization ratio would have been 34.6%.
At a repurchase amount of $535 million, 32.7% of the Company's outstanding stock
would have been repurchased, and the total per share value to shareholders would
have been $49.92 and the resulting net debt to capitalization ratio would have
been 58.3%. At a repurchase amount of $750 million, 45.8% of the Company's
outstanding stock would have been repurchased, and the total per share value to
shareholders would have been $52.90 and the resulting net debt to capitalization
ratio would have been 88.1%.
Pro Forma Financial Impact of Acquisition. Goldman also prepared a pro
forma analysis of the financial impact of the acquisition of the Company by
Parent at the purchase price of $55.00 per share in cash, assuming financing
either (i) entirely by debt to be incurred by Parent in a principal amount equal
to the total cash consideration to be paid by Parent net of cash and marketable
securities reflected on the respective balance sheets of Parent and Company at
December 31, 1993, and bearing interest at 7.0% per annum, or (ii) partially by
common stock issued by Parent at $44.75 per share (the closing price per share
of Parent's common stock on the New York Stock Exchange on March 4, 1994) in an
amount equal to 25% of the total cash consideration to be paid by Parent, and
partially by debt to be incurred by Parent in a principal amount equal to the
balance of the total cash consideration to be paid by Parent, net of such cash
and marketable securities, and bearing interest at 7.0% per annum. The analysis
used Parent's and management's financial projections for 1994 and 1995 and
calculated earnings per share ("EPS"), the net debt to capital ratio and the net
interest coverage of Parent, assuming for this purpose that stock of Parent had
a value of $44.75 per share. The analysis indicated potential accretion to
Parent's 1994 EPS of 3.8% for a debt only financed transaction and a dilution to
Parent's 1994 EPS of 0.4% for a combined debt and equity financed transaction
and a potential accretion to Parent's 1995 EPS of 5.5% and 1.1%, respectively,
for the two different financing structures. Goldman also reviewed the net debt
to capital ratios of Parent, based on Parent's estimates or projections, as the
case may be, for December 31, 1993, 1994, 1995 and 1996, after giving effect to
the debt only financed transaction and the combined debt and equity financed
transaction. Goldman also reviewed the EBIT to net interest coverage ratios of
Parent, based on Parent's projections, for 1994, 1995 and 1996, after giving
effect to each such financing structure.
Review of Strategic Purchasers and Merger Partners. Goldman reviewed the
fit between the businesses of the Company and the businesses of certain other
strategic purchasers and merger partners. Goldman reviewed the relative
contribution of the Company and each of the other companies based on LTM sales,
LTM operating profit, 1993 estimated net income and 1994 projected net income
(based on projections by Goldman's equity research analyst for the aerospace and
defense industry). Goldman also prepared pro forma analyses of acquisitions of
the Company by certain of these companies, in each case assuming that the
purchase price per share was $55.00 in cash, that the acquisition would be
financed by debt only or by a combination of debt and equity, in the manner
described above with respect to the acquisition of the Company
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<PAGE> 18
by Parent, and that the stock of the acquiring company had the value of its
closing price per share on the New York Stock Exchange on March 4, 1994. The
analyses made substantially similar assumptions and presented the same ratios as
set out above in the comparable analysis of the debt only financed transaction
and the combined debt and equity financed transactions analyzed with respect to
the acquisition of the Company by Parent.
Analysis at Transaction Price. Goldman prepared a financial analysis of the
proposed acquisition of the Company by Parent and calculated the aggregate
consideration and various financial multiples based upon the cash consideration
of $55.00 per share, or approximately $1,940 million in the aggregate. The
multiples for 1993 and 1994, respectively, were based on information provided by
the Company. The multiples were as follows, in each case for 1993 and 1994,
respectively: (i) sales -- .56x and .58x; (ii) earnings before interest, taxes
and depreciation -- 6.9x and 6.4x; (iii) EBIT -- 9.6x and 8.7x; and (iv)
EPS -- 15.7x and 15.2x. In addition, the $55.00 per share price represented a
37.9% premium to the Company's $39.875 per share closing price on March 4, 1994,
a 28.9% premium to the Company's all time high closing price per share on
January 18, 1994 and a 76.7% premium to the Company's preceding 52 week low
closing price per share on March 4, 1993. The $55.00 per share purchase price
was 2.2x the Company's tangible book value per share at December 31, 1993.
At the March 6, 1994 meeting, Goldman rendered its oral opinion (confirmed
by its written opinion dated March 8, 1994) to the Board that, as of such date,
the price of $55.00 in cash per Share to be received by the holders of the
Shares in the Offer and the Merger is fair to such holders.
In arriving at its opinion, Goldman reviewed, among other things: the
Merger Agreement; the Tender Offer Statement on Schedule 14D-1, dated March 8,
1994, of Purchaser, including the Offer to Purchase; the
Solicitation/Recommendation Statement on Schedule 14D-9 dated March 8, 1994 of
the Company; Annual Reports to Shareholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1992; a draft of the Annual
Report to Shareholders of the Company for the year ended December 31, 1993;
certain interim reports to Shareholders and Quarterly Reports on Form 10-Q;
certain other communications from the Company to its Shareholders; and certain
internal financial analyses and forecasts for the Company prepared by its
management. Goldman also held discussions with members of the senior management
of the Company regarding the Company's past and current business operations,
financial condition and future prospects. In addition, Goldman reviewed the
reported price and trading activity for the stock, compared certain financial
and stock market information for the Company with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the aerospace and
defense industry specifically and in other industries generally and performed
such other studies and analyses as Goldman considered appropriate.
In arriving at its opinion, Goldman relied upon and assumed the accuracy
and completeness of the financial and other information reviewed by it and did
not independently verify such information. In addition, Goldman did not perform
an independent evaluation or appraisal of the assets and liabilities of the
Company or any of its subsidiaries and was not furnished with any such
evaluation or appraisal.
In connection with its opinion, Goldman performed a variety of financial
analyses. The preparation of fairness opinions is a complex process and is not
susceptible to partial analysis or summary description. Any estimates contained
in its analyses are not necessarily indicative of actual past or future results
or values, which may be significantly more or less favorable than such
estimates.
Goldman is an internationally recognized investment banking firm engaged in
the evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated primary and secondary underwritings, private placements
and valuations for corporate and other purposes. The Company selected Goldman as
its financial advisor based upon Goldman' familiarity with the Company and the
industry in which the Company operates and its experience, ability and
reputation with respect to mergers and acquisitions.
A copy of the written opinion of Goldman dated March 8, 1994, confirming
its oral opinion as of March 6, 1994 and describing the assumptions made,
matters considered and the scope of the review
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<PAGE> 19
undertaken and procedures followed by Goldman, is filed as Exhibit (a)(10)
hereto and is incorporated herein by reference. SHAREHOLDERS ARE ENCOURAGED TO
READ SUCH OPINION IN ITS ENTIRETY.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Goldman is acting as the Company's financial advisor in connection with the
Offer and the Merger. Pursuant to an engagement letter dated December 23, 1993,
the Company retained Goldman for a twelve month period to assist the Company in
its review of strategic and financial alternatives and paid Goldman a fee of
$250,000. On February 17, 1994, the Company entered into a second engagement
letter to retain Goldman to provide financial advice in connection with a
possible strategic combination, including assisting in negotiating the financial
aspects of such transaction. Under the terms of such engagement letter, the
Company has agreed to pay Goldman a transaction fee (against which the prior
$250,000 payment would be credited) in an amount equal to 0.50% of the aggregate
consideration, payable only upon the acquisition of 50% or more of the Company's
outstanding common stock by any entity other than the Company. The Company also
agreed to reimburse Goldman for its reasonable out-of-pocket expenses, including
the fees and disbursements of its counsel, plus any sales, use or similar taxes
arising in connection with its engagement, and to indemnify Goldman against
certain liabilities relating to or arising out of its engagement, including
liability under the federal securities laws.
Goldman has advised the Company's Board that in 1993 and 1994 and at other
times it rendered financial advisory and investment banking services to Parent
and its subsidiaries. Goldman has also advised the Company's Board that it may
provide such services to Parent and its subsidiaries in the future.
Neither the Company nor any person acting on its behalf intends to employ,
retain or compensate any other person to make solicitations or recommendations
to the Company's Stockholders in connection with the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of the Company, no transactions in the Shares
have been effected within the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company, except for the
following: on January 28, 1994, Edward Balinsky, Vice President -- Mergers and
Acquisitions, sold 272 Shares on the open market for $41.125 per Share; on
January 28, 1994, Michael Solomita, Vice President -- Controller of the
Aerospace and Electronics Group, sold 506 Shares on the open market for $41.50
per Share; on January 31, 1994, Robert Simon, Vice President -- Corporate
Procurement, sold 1,149 Shares on the open market for $41.00 per Share; and on
February 17, 1994, J.R. Anderson, Vice Chairman and Chief Financial Officer,
acquired 5,751 Share equivalents as a deferred stock award under the Management
Incentive Plan, such Share equivalents having a fair market value on such date
of $39.125 each.
(b) To the best knowledge of the Company, all of the Company's executive
officers, directors and affiliates presently intend to tender to Acquisition or
present to the Exchange Agent after the Merger all Shares which are currently
held of record or beneficially owned by such persons, subject to applicable tax
and securities laws and personal considerations.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described under Item 3(b), the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in:
(1) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company;
(2) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company;
(3) a tender offer for or other acquisition of securities by or of the
Company; or
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<PAGE> 20
(4) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described under Item 4, there are no transactions, Board
resolutions, agreements in principle, or signed contracts in response to the
Offer, other than those described under Item 3(b), which relate to or would
result in one or more of the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The audited financial statements of the Company for the fiscal year ended
December 31, 1993 are filed as Exhibit (c)(18) hereto and are incorporated
herein by reference in their entirety.
The information statement attached hereto as Annex I is being furnished in
connection with the possible designation by Acquisition, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board other than at a
meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) -- Offer to Purchase dated March 8, 1994*
(a)(2) -- Letter of Transmittal*
(a)(3) -- Notice of Guaranteed Delivery*
(a)(4) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees*
(a)(5) -- Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees*
(a)(6) -- IRS Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9*
(a)(7) -- Press release issued by the Company and Martin Marietta
Corporation on March 7, 1994.
(a)(8) -- Summary Advertisement dated March 8, 1994*
(a)(9) -- Letter to the Company's Shareholders, dated March 8, 1994.
(a)(10) -- Opinion of Goldman, Sachs & Co., dated March 8, 1994.
(b) -- None.
(c)(1) -- Agreement and Plan of Merger between Acquisition, the Parent and
the Company dated March 6, 1994*
(c)(2) -- Proxy Statement, dated March 4, 1993, of the Company*
(c)(3) -- Amendments to 1981 Stock Option Plan, 1990 Stock Option Plan and
Long-Term Incentive Plan*
(c)(4) -- Amendments to 1981 Stock Option Plan, 1990 Stock Option Plan,
Long-Term Incentive Plan and Restricted Stock Award Plan*
(c)(5) -- Amendment to Restricted Stock Award Plan*
(c)(6) -- Amendment to Special Severance Pay Plan*
(c)(7) -- Amendment to Excess Benefit Plan*
(c)(8) -- Amendment to Supplemental Retirement Plan*
(c)(9) -- Amendment to Non-Employee Director Pension Plan*
(c)(10) -- Amendment to Management Incentive Plan*
(c)(11) -- Amendment to Management Incentive Plan*
(c)(12) -- Form of Indemnification Agreement*
(c)(13)
(a) -- Confidentiality Agreement between the Company and Northrop
Corporation*
(b) -- Amendment to Confidentiality Agreement between the Company and
Northrop Corporation*
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<PAGE> 21
(c)(14) -- Confidentiality Agreement between the Company and Martin
Marietta Corporation*
(c)(15) -- Letter dated February 21, 1994 from Martin Marietta Corporation
to the Company*
(c)(16) -- Letter dated February 25, 1994 from Northrop Corporation to the
Company*
(c)(17) -- Audited Financial Statements of the Company for the Fiscal Year
Ended December 31, 1993
- ---------------
* Not included in copies mailed to stockholders.
20
<PAGE> 22
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
GRUMMAN CORPORATION
By:
Name:
Title:
Date: March 8, 1994
21
<PAGE> 23
ANNEX I
GRUMMAN CORPORATION
1111 STEWART AVENUE
BETHPAGE, NEW YORK 11714-3580
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
_________________________
This Information Statement is being mailed on or about March
8, 1994, as part of the Grumman Corporation's (the "Company")
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
to the holders of record of the Company's Common Stock, $1 par value.
Capitalized terms used and not otherwise defined herein shall have the meaning
set forth in the Schedule 14D-9. You are receiving this Information Statement
in connection with the possible election of persons designated by Acquisition
to a majority of the seats on the Board. The Merger Agreement provides that
Acquisition, upon purchase of Shares pursuant to the Offer, shall be entitled
to designate up to such number of directors, rounded up to the next whole
number, on the Board as well as give Acquisition representation on the Board
equal to the product of the number of directors on the Board (giving effect to
any increase in the number of directors pursuant to the Merger Agreement as set
forth below) and the percentage that the number of shares of Common Stock
purchased by Acquisition bears to the total number of outstanding shares of
Common stock of the Company on a fully-diluted basis, and that the Company will
use its best efforts, upon request by Acquisition, promptly at the Company's
election either to increase the size of the Board (subject to the Company's
certificate of incorporation) or secure the resignation of such number of
directors as is necessary to enable Acquisition's designees to be elected to
the Board. The Merger Agreement further provides that, at such times and
subject to the agreement set forth in the next sentence, the Company will use
its best efforts to cause persons designated by Acquisition to constitute the
same percentage as is on the Board of (i) each committee of the Board (other
than any committee of the Board established to take action under the Merger
Agreement, (ii) each board of directors of each subsidiary of the Company and
(iii) each committee of each such board. The Merger Agreement further provides
that, notwithstanding the foregoing, the Company shall use its best efforts to
ensure that three members of the Board as of the date of the Merger Agreement
shall remain members of the Board until the Effective Time. This Information
Statement is required by Section 14(f) of the Securities Exchange Act of 1934,
as amended, and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully.
You are not, however, required to take any action.
<PAGE> 24
-2-
Pursuant to the Merger Agreement, on March 8, 1994,
Acquisition commenced the Offer. The Offer is scheduled to expire at 12:00
midnight, New York City time, on April 4, 1994, at which time, if all
conditions to the Offer have been satisfied or waived, Acquisition has informed
the Company that it intends to purchase all of the Shares validly tendered
pursuant to the Offer and not withdrawn.
The information contained in this Information Statement
concerning Acquisition and Parent has been furnished to the Company by Parent,
and the Company assumes no responsibility for the accuracy, completeness or
fairness of any such information.
Acquisition has informed the Company that it will choose the
designees (the "Acquisition Designees") it has the right to designate to the
Board pursuant to the Merger Agreement from the directors and officers listed
in Schedule I of the Offer to Purchase, a copy of which is being mailed to
shareholders together with the Schedule 14D-9. The information on such
Schedule I is hereby incorporated herein by reference in its entirety.
It is expected that the Acquisition Designees may assume
office at any time following the purchase by Acquisition of a specified minimum
number of Shares pursuant to the Offer, which purchase cannot be earlier than
April 4, 1994, and that, upon assuming office, the Acquisition Designees will
thereafter constitute at least a majority of the Board. This step will be
accomplished at a meeting or by written consent of the Board providing that the
size of the Board will be increased and/or sufficient numbers of current
directors will resign such that, immediately following such action, the number
of vacancies to be filled by the Acquisition Designees will constitute at least
a majority of the available positions on the Board. It is currently not known
which, if any, of the current directors of the Company will resign.
Acquisition has informed the Company that each of the directors and officers
listed in Schedule I of the Offer to Purchase has consented to act as a
director, if so designated.
None of the executive officers and directors of Parent or
Acquisition currently is a director of, or holds any position with, the
Company. The Company has been advised that, to the best knowledge of Parent
and Acquisition, none of Parent's or Acquisition's directors, executive
officers, affiliates or associates beneficially owns any equity securities, or
rights to acquire any equity securities, of the Company and none has been
involved in any transactions with the Company or any of its directors,
executive officers, affiliates or associates which are required to be disclosed
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC").
<PAGE> 25
-3-
INFORMATION WITH RESPECT TO THE COMPANY
As of February 28, 1994, there were issued and outstanding
33,935,448 shares of Common Stock, each of which entitles the holder to one
vote.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Bylaws of the Company provide that the Board of Directors
of the Company shall consist of nine to fifteen members, with the exact number
of directors within such minimum and maximum to be determined by the Board of
Directors. The Board of Directors currently consists of 11 members.
ACQUISITION DESIGNEES
It is expected that the Acquisition Designees may assume
office at any time following the purchase by Acquisition of a specified minimum
number of shares pursuant to the Offer and that, upon assuming office, the
Acquisition Designees will thereafter constitute at least a majority of the
Board.
CURRENT DIRECTORS
The persons named below are the current members of the Board.
The following sets forth as to each director, his or her age and principal
occupation and business experience, and the period during which each has served
as a director of the Company.
VICTOR HAO LI. Age: 52 years; Co-Chairman, Asia-Pacific
Consulting Group. Director since 1984, and a nominee, whose term will expire
in 1997. Mr. Li graduated from Columbia University in 1961 with a B.A. degree
in mathematics. He received his J.D. degree from Columbia Law School in 1964.
In 1965 he received an L.L.M. degree from Harvard Law School and an S.J.D.
degree in 1971. Mr. Li taught law at Columbia Law School and the University of
Michigan and in 1972 joined the faculty of Stanford Law School where he was
Shelton Professor of International Legal Studies until 1981 and also director
for the Center of East Asian Studies from 1974 through 1976. He continues to
teach there as Acting Professor of Law. From 1981 until 1990 he was President
of the East-West Center, a public, nonprofit corporation established in 1960 by
the U.S. Congress as an educational institution. Internationally Mr. Li is
known for his research and writing on China's legal system and has been a
consultant to the U.S. Senate Foreign Relations Committee. He is a member of
the Board of Hawaiian Electric Industries, Inc. and the Hawaiian Electric
Industries Charitable Foundation, Applied Energy Systems China Generating Co.
Ltd., the Advisory Board of the Freedom Forum
<PAGE> 26
-4-
First Amendment Center and the Advisory Council of the Asia Foundations Center
for Asia Pacific Affairs. Other activities include service as a Board Member
of Mid-Pacific Institute, The Queen's International Corporation, the Immigrant
Center, and the Japan America Society of Honolulu. He also is a member of the
United States Trade and Development Program Advisory Committee, and senior
advisor to Friends of the Future. He is a member of the American Academy of
Foreign Law, the Council on Foreign Relations of New York, the National
Committee on U.S.-China Relations, the U.S. National Committee for Pacific
Economic Cooperation, the American Society of International Law, and the
Association for Asian Studies.
ROBERT J. MYERS. Age: 59 years; President and Chief
Operating Officer, Grumman Corporation. Director since 1991, and a nominee,
whose term will expire in 1997. Mr. Myers received his Bachelor of Civil
Engineering from N.Y. University's College of Engineering in 1955. After
serving in the U.S. Army Corps of Engineers from 1955 to 1957, Mr. Myers joined
the Grumman Aircraft Engineering Corporation as an engineering administrator.
He left Grumman in 1961 to become division controller/administrator for
Giannini Controls Corporation. In 1964, he returned to Grumman as program
control manager for the Apollo Lunar Module Program. From 1968 to 1969, Mr.
Myers was corporate planning, control and budgets manager, and was named
program control manager for the F-14 Program in 1969. In 1972, after
completing a management program at the Harvard Business School, he became
deputy director of planning, control and budgets, and then served in various
positions of increasing responsibility until 1980, when he was elected vice
president, business and resource management, Grumman Aerospace Corporation. In
1983, he was elected Senior Vice President-Resources. In February 1985, Mr.
Myers was elected a corporate senior vice president with responsibility for the
Services Division, and in May 1986, was elected president of Grumman's Data
Systems Division. He was elected President and Chief Operating Officer of
Grumman Corporation in January 1991. He is currently a director of the
American Defense Preparedness Association and a Trustee of Polytechnic
University and of Huntington Hospital.
JAMES F. ORR III. Age: 51 years; Chairman and Chief
Executive Officer, UNUM Corporation; Director since 1991, and a nominee whose
term will expire in 1997. Mr. Orr received his bachelor's degree from
Villanova University in 1965 and an M.B.A. from Boston University in 1970.
Mr. Orr has over 25 years of experience in the financial services industry. He
began his career with a major Boston bank and spent several years in the
securities industry in New York and Boston. Mr. Orr was a principal in a
Boston-based, privately-held investment firm from 1969 to 1974. Prior to
joining UNUM, he spent over 10 years with Connecticut Bank & Trust, most
recently as Executive Vice President and Treasurer. Mr. Orr joined UNUM
Corporation in 1986 as President and Chief Operating Officer and was named
President and Chief Executive Officer in September 1987. He was appointed
Chairman in January 1988. He became a member of the Grumman Corporation Board
of Directors in July 1991. Currently, Mr. Orr is chairman of the American
Council of Life Insurance and past chairman of the Maine Coalition
<PAGE> 27
-5-
for Excellence in Education where he now serves as a director. He is a trustee
of Bates College, Maine Medical Center, New England Colleges Fund, the
Committee for Economic Development, and is a member of the Business Roundtable.
Mr. Orr is a director of the Nashua Corporation, the National Alliance of
Business, the S.S. Heubner Foundation for Insurance Education, and the Council
for Aid to Education.
EDDIE N. WILLIAMS. Age: 61 years; President, Joint Center
for Political and Economic Studies; Director since 1993, and a nominee whose
term will expire in 1997. Mr. Williams received his B.S. in Journalism from
the University of Illinois in 1954 and took graduate courses at Atlanta
University in 1958 and Howard University in 1960. He received an honorary DHL
from Bowie State University in 1980 and an honorary LL.D. from the University
of the District of Columbia in 1986. He was selected as a Congressional Fellow
by the American Political Science Association where, in 1958, he worked for
then Senator Hubert H. Humphrey. In 1959, he was Staff Assistant for the
Senate Committee on Foreign Relations' Subcommittee on Disarmament. Mr.
Williams then served as foreign service reserve officer with the U.S.
Department of State from 1961 to 1968. During the Johnson Administration, he
directed the Office of Equal Employment Opportunity and served as special
assistant to the Deputy Undersecretary of State for Administration. In 1969,
he became Vice President for Public Affairs at the University of Chicago, where
he directed the university's Center for Policy Studies. Also during that time,
he was a columnist for the Chicago Sun Times. In 1972, Mr. Williams joined the
Joint Center for Political Studies. Mr. Williams is a member of the Advisory
Committee, Centers for Disease Control; The Pew Partnerships for Civic Change;
National Commission on State and Local Public Service; Black Leadership Forum;
Council on Foreign Relations; and the Overseas Development Council. Currently,
Mr. Williams serves on the Board of Directors of the National Coalition on
Black Voter Participation; The Institute for Educational Leadership; National
Endowment for Democracy; Washington Educational Television Association-TV
Channel 26; Independent Sector; National Opinion Research Center; Riggs
National Bank of Washington, D.C.; Japan America Society of Washington, D.C.;
and the Promus Companies, Inc. He became a member of the Grumman Corporation
Board of Directors in March 1993.
LUCY WILSON BENSON. Age: 66 years; Consultant to Business and
Government; Director since 1980, whose term will expire in 1995. Mrs. Benson,
President of Benson and Associates, has been an active leader in civil,
academic, corporate, and governmental circles, both in the United States and
abroad. A graduate of Smith College, she received her A.B. (1949) and an M.A.
in History (1955). For six years, Mrs. Benson was national President of the
League of Women Voters and Chairman of its Education Fund. She has served the
government in a number of capacities, including Undersecretary of State for
Security Assistance, Science and Technology during the Carter Administration,
Secretary of Human Services for the Commonwealth of Massachusetts, and as a
public member, appointed by the Speaker of the House, of the Select Committee
on the Administration of the Congress. Presently, Mrs. Benson is a Trustee
<PAGE> 28
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of the Alfred P. Sloan Foundation and Vice Chairman, Board of Trustees of
Lafayette College, and a member of the Council on Foreign Relations, the
International Institute of Strategic Studies and the National Committee on
U.S.-China Relations. She is Vice Chairman of the Citizens Network for Foreign
Affairs and a member of the Board of Directors of Communications Satellite
Corporation, Logistics Management Institute, International Executive Service
Corps, and of several funds of the Dreyfus Corporation, including the Dreyfus
Fund, Inc., Dreyfus Liquid Assets, Inc., and the Dreyfus Third Century Fund,
Inc.
J. ROBERT ANDERSON. Age: 57 years; Vice Chairman and Chief
Financial Officer, Grumman Corporation; Director since 1991, whose term will
expire in 1995. Mr. Anderson received his B.A. degree from the University of
South Carolina in 1958, his M.B.A. from Stanford University in 1963, and in the
intervening years, served as a line officer in the U.S. Navy, from 1958 to
1961. After graduate school, Mr. Anderson joined the Ford Motor Company and in
1972 became Assistant Controller. He became Assistant Treasurer in 1974, and
in 1977 joined the Office of the President as Finance Operations Planning
Director. In 1978, he was named President of the Ford Motor Land Development
Corporation. In 1983, Mr. Anderson joined the Firestone Tire & Rubber Company
as Senior Vice President, Chief Financial Officer and Director, and became Vice
Chairman, Chief Financial Officer, Chief Administrative Officer and a Director
of the newly formed Bridgestone/Firestone, Inc. in 1989. Mr. Anderson joined
Grumman Corporation in July 1991 as Vice Chairman, Chief Financial Officer, and
a Director. Presently, Mr. Anderson is a director of Telxon Corporation and is
a Vice Chair and Trustee of the National Planning Association and is a member
of the Association's Committee on Changing International Realities.
RICHARD DULUDE. Age: 60 years; Retired Vice Chairman, Corning
Incorporated; Director since 1991, whose term will expire in 1995. Mr. Dulude
received his B.M.E. from Syracuse University in 1954, and did postgraduate work
at M.I.T. in 1969. From 1957 to his retirement in 1993, he was with Corning
Incorporated, where he served in a number of sales, marketing, engineering and
general management positions. He was elected a Vice President in 1971,
President of Corning Europe in 1978, Senior Vice President in 1980, Group
President responsible for the Telecommunications Products Sector in 1983, and
became Vice Chairman in 1990. Mr. Dulude joined the Grumman Corporation Board
of Directors in September 1991. In addition, Mr. Dulude currently serves on
the Board of Directors of Raychem Corporation and AMBAC Inc. He is also a
Trustee of Syracuse University. Mr. Dulude is on the Board of Directors,
Council of Governing Boards of the Independent Universities of New York State
and is a member of the British-North American Committee of the National
Planning Association.
KENNETH S. AXELSON. Age: 71 years; Director of various
corporations; Director since 1974, whose term will expire in 1996. Mr. Axelson
graduated from the University of Chicago in 1944 with an A.B. degree. He
served in the U.S. Army as a Warrant Officer from
<PAGE> 29
-7-
1943 to 1946. Before joining J.C. Penney Company, Inc. in 1963, he served as a
Partner with Peat, Marwick & Co., C.P.A.'s, New York City, from 1952 to 1963.
Previously, he was a management consultant with McKinsey & Company in Chicago
from 1950 to 1952, Controller of Columbia Lumber Company of Alaska from 1948 to
1950, and staff accountant with Arthur Andersen & Co. in Seattle from 1946 to
1948. Mr. Axelson retired from Penney in 1982 as Executive Vice President and
a director of the company. He is a director or trustee of The Chicago Dock and
Canal Trust, UNUM Corporation, Zurn Industries, Inc., Protection Mutual
Insurance Company and several Merrill Lynch funds. From 1975 to 1976, he
served as Deputy Mayor for Finance of New York City and subsequently served as
a member of the Emergency Financial Control Board, New York City.
RENSO L. CAPORALI. Age: 60 years; Chairman and CEO, Grumman
Corporation; Director since 1986, whose term will expire in 1996. Dr. Caporali
received his Bachelor of Civil Engineering degree and his Master of Mechanical
Engineering degree from Clarkson College of Technology. He earned three
additional degrees from Princeton University; Master of Aeronautical
Engineering, Master of Arts in Aeronautical Engineering, and Doctor of
Philosophy in Aeronautical Engineering. Dr. Caporali served as a naval aviator
from 1954 to 1958 and after leaving active service remaining in the reserve
until 1973. Dr. Caporali began his career at Grumman as a Structural Flight
Test Engineer in 1959. In 1963, he became Assistant to the Director of Flight
Test for Advanced Development and in 1966 he became Assistant to the Vice
President of Engineering. From 1968 through 1973, Dr. Caporali held various
positions on the F-14 program including project engineer responsible for
configuration design and deputy engineering manager responsible for vehicle
flight test development. Subsequently, he advanced to Director of Design
Engineering, Director of Advanced USAF Tactical Aircraft and Director of
Advanced Systems Technology. In 1980 he was elected Vice President-Development
and in 1983 was elected Senior Vice President-Technical Operations of Grumman
Aerospace Corporation. In 1985, Dr. Caporali was appointed President of
Aircraft Systems, an Operating Division of Grumman Corporation and in July
1988, he was elected Vice Chairman-Corporate Technology of Grumman Corporation.
In July 190 he was elected Chairman and Chief Executive Officer of Grumman
Corporation. Dr. Caporali was awarded an ALAA Flight Test Fellowship, he is a
Trustee of Clarkson University, a licensed professional engineer in New York
State, a Fellow of the American Institute of Aeronautics and Astronautics, and
was elected into the National Academy of Engineering in February 1993. He is a
director of the Long Island Lighting Company.
CHARLES MARSHALL. Age: 64 years; Former Vice Chairman of the
Board, AT& T; Director since 1989, whose term will expire in 1996. Mr.
Marshall graduated from the University of Illinois. He joined Illinois Bell
Telephone Company in 1953 as a service engineer. During his early career with
the Bell System, he held numerous positions in Illinois Bell and with American
Telephone and Telegraph Company in New York. In 1976, he became Vice President
<PAGE> 30
-8-
and Treasurer of AT&T in New York and in 1977 was named President and CEO of
Illinois Bell. He returned to AT&T in 1981 as President and in 1983 became
Chairman and CEO of AT&T Information Systems. Mr. Marshall was named Vice
Chairman of the Board of AT&T in 1985, a position he held until he retired in
1989. Mr. Marshall is a director of Ceridian Corporation, GATX Corporation,
HARTMARX, Sonat, Inc. Sunstrand, Inc., Zenith Electronics, and the University
of Illinois Foundation. He also serves as a Trustee of the Newberry Library,
University of Chicago.
JOHN T. SARGENT. Age: 69 years; Mr. Sargent joined Doubleday
& Company in 1945. In 1961, he was elected President of Doubleday & Company,
Inc. In 1978 he became Chairman of the Board and in 1985 Chairman of Executive
Committee. He retired from Doubleday in 1987. He is a director of River Bank
America, the Centennial Insurance Company and the Alger Fund, as well as a
Trustee of the Atlantic Mutual Insurance Company.
BOARD MEETINGS AND COMMITTEE
The Board of Directors of Grumman Corporation held 12 meetings
in 1993 and presently consists of 11 members, three of whom are officers of the
Corporation.
In 1993, the Board of Directors had six standing committees
that dealt with special responsibilities. Other than James F. Orr III, no
director attended less than 75 percent of both Board and Committee meetings
held during 1993. Following are brief descriptions of each Committee, the
frequency of its meetings and its composition in 1993.
The Audit Committee, composed entirely of non-employee
directors, meets periodically with representatives of management, the
independent public accountants, and the Corporation's internal auditors to
review matters relating to financial reporting, internal accounting controls
and auditing. It also has a responsibility for the oversight of ethical
business conduct. Both internal auditors and independent public accountants
have unrestricted access to the Audit Committee to discuss the results of their
examinations. The Committee also recommends to the Board, for approval by the
shareholders, the engagement of the independent public accountants. The
Committee met seven times in 1993, and its members were Lucy Wilson Benson,
Chairman; Kenneth S. Axelson, Richard Dulude, Charles Marshall and John T.
Sargent. Ellis L. Phillips, Jr. was a member of this Committee through and
including his retirement, effective February 28, 1993.
The Compensation Committee, composed entirely of non-employee
directors, establishes policies for, and reviews, executive compensation plans
and benefit programs, establishes salary review policies for officers of the
Corporation, its operating Groups and its operating subsidiary corporations,
and determines compensation for selected senior officers. The
<PAGE> 31
-9-
Committee held five meetings in 1993, and its members were Charles Marshall,
Chairman; Richard Dulude and James F. Orr III.
The Corporate Governance Committee, currently composed
entirely of non-employee directors, establishes criteria for the selection of
directors, seeks out and interviews director-candidates, including those
submitted by shareholders, employees, or others, and recommends to the Board
those director candidates who shall stand for election at the Annual Meeting of
Shareholders and those who shall fill interim vacancies. The Committee also
recommends to the Board at the annual organization meeting the selection of
officers of the Corporation. It ensures annual reviews of: the Corporation's
management succession plan; the performance of top management by all outside
directors; and director performance and, when appropriate, recommends
corrective action. The Committee periodically reviews overall Board committee
responsibilities and assignments and makes recommendations to the Board of
Directors for approval. Shareholders may submit recommendations for
director-candidates to the Corporate Governance Committee in care of the
Corporation's Secretary, 1111 Stewart Avenue, Bethpage, New York 11714-3580.
The Committee met two times in 1993, and its members were John T. Sargent,
Chairman; Kenneth S. Axelson, Victor Hao Li and Lucy Wilson Benson. Ellis L.
Phillips, Jr. served as a member of this Committee through and including
February 28, 1993. Renso L. Caporali served as a member of this Committee
through and including April 15, 1993.
The Corporate Responsibility Committee, composed of both
employee and non-employee directors, inquires into corporate activities that
relate to employee relations and public policy and recommends goals and
objectives to assure that corporate actions are consistent with the
responsibilities of a good citizen. The Committee held two meetings in 1993,
and its members were Victor Hao Li, Chairman; Robert J. Myers, John T. Sargent,
and Eddie N. Williams, who became a member of the Committee effective March 1,
1993. Ellis L. Phillips, Jr. served as Chairman of this Committee through and
including February 28, 1993.
The Executive Committee is composed of employee directors and
non-employee directors. During the intervals when the Board is not in session,
it exercises all the powers and duties of the Board in the management of the
business and affairs of the Corporation with respect to matters or transactions
within the ordinary course of business or in furtherance of transactions of the
Corporation previously authorized and approved by the Board, except those
matters limited by Board resolution or by the New York Business Corporation Law
to action by the full Board. The Committee did not meet in 1993. It members
were Renso L. Caporali, Chairman; Kenneth S. Axelson; Victor Hao Li and John T.
Sargent. Ellis L. Phillips, Jr. served as a member of this Committee through
and including February 28, 1993.
The Investment Review and Finance Committee, which includes
employee and non-employee directors, reviews with senior corporate management
current and proposed significant
<PAGE> 32
-10-
investments of corporate resources for any product development, acquisitions,
dispositions, mergers, and for corporate expansion, long-term business and
financial plans, and proposed financing strategies and arrangements. This
Committee also reviews, at least annually, the management of the funds of the
Corporation's pension and employee investment plans. The Committee held four
meetings in 1993, and its members were Kenneth S. Axelson, Chairman; J. Robert
Anderson, Lucy Wilson Benson, Victor Hao Li, James F. Orr III and John T.
Sargent.
DIRECTOR COMPENSATION
Directors who are not employees receive an annual retainer of
$20,000 and fees of $800 for each Board and Committee meeting attended;
however, Committee Chairmen receive $1,500 for each meeting over which they
preside. Directors may elect to defer all or a portion of the annual retainer
and meeting fees otherwise payable in the year(s) following such election.
Deferred amounts are credited to a cash account which is paid after the
individual ceases to be a director. No amounts were credited under this plan
during the past year. Those directors who are also employees receive no
remuneration for serving as directors.
Non-employee directors who provide consulting services to the
Corporation or any of its subsidiaries or affiliates are entitled to receive
$1,000 per day (or any part thereof) when such services are in addition to
services performed as a member of the Board of Directors or a committee
thereof. No director received or earned such compensation in 1993.
Non-employee directors are granted options to purchase shares
of the Corporation's Common Stock in accordance with the terms of the
Corporation's 1990 Stock Option Plan, which provides automatic grants of 2,000
shares when the individual is first elected a director, and 600 shares per year
each year thereafter. Grants to each such non-employee director are limited to
no more than 10,000 shares.
Non-employee directors who have served on the Board of
Directors at least three years and have attained at least age sixty-five are
eligible to participate in the non-employee director pension plan adopted by
the Board of Directors on August 21, 1986, as amended from time to time, and
administered by the Compensation Committee of the Board of Directors. An
eligible director shall receive annually for life, a sum equal to the product
of (i) 10% of his or her final annual retainer fee plus the sum of board and
committee meeting fees paid during the 12-month period immediately preceding
his or her retirement as a director and (ii) the number of full years he or she
served on the board, provided that the maximum annual benefit shall be 100% of
his or her final annual retainer fee plus the sum of board and committee
meeting fees paid during the 12-month period immediately preceding retirement.
<PAGE> 33
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The Corporation is authorized to enter into a trust agreement
(the assets of which would be subject to the claims of the Corporation's
creditors in the event of insolvency of the Corporation) to assist it in
meeting its obligations under the non- employee director pension plan. At the
present time, the Corporation has not entered into or funded such a trust
agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee's report on executive compensation
is set forth below. No member of the Compensation Committee is a former or
current officer or employee of the Corporation or any of its subsidiaries, nor
does any Executive Officer of the Corporation sit on a committee which
determines the salary of any member of the Compensation Committee.
The Committee sets the guidelines for all Executive Officer
compensation and determines the salaries of the Chairman and Chief Executive
Officer, President and Chief Operating Officer, Vice Chairman and Chief
Financial Officer, Executive Vice Presidents, Senior Vice Presidents, and
Presidents, Executive Vice Presidents and Vice Presidents, of the Corporation's
operating groups. Currently there are ten individuals whose salaries are
determined by the Committee. As to all other Executive Officers, salaries are
determined by the Chairman of the Board based upon recommendations he receives
from the individual's supervisors, in accordance with policies and guidelines
established by the Committee. The Compensation Committee of the Board of
Directors (the "Committee") as stated above, is composed entirely of
non-employee directors. The Committee has responsibility for the
administration of the Corporation's Management Incentive Plan, as adopted by
the Board of Directors on January 20, 1972, and as subsequently amended from
time to time, and the Long-Term Incentive Plan, as approved by shareholders on
April 16, 1992.
The Committee believes that competitive base salary levels
provide an essential foundation for an effective and motivational Executive
Officer compensation program when coupled with both annual and longer-term
incentives. The Committee has structured the total compensation program for
the Executive Officers so that a substantial component of each of their total
compensation is dependent upon, and directly related to, the Corporation's
annual and longer-term earnings, return on equity, return on capital, and total
returns realized by the Corporation's shareholders.
The Committee seeks to ensure that the total compensation of
Executive Officers is competitive with the compensation programs of incumbents
of comparable positions in selected U.S. corporations of comparable revenue
size, as well as selected U.S. aerospace and defense contractors, including
those which comprise the aerospace peer group shown on the stock performance
graph herein. Grumman Corporation, as well as those corporations which the
Committee uses to benchmark Executive Officer compensation, participates in
several nationally
<PAGE> 34
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recognized compensation surveys. These surveys, conducted by independent
professionals, provide the basis for establishing, monitoring and
administering the competitiveness of the Corporation's total Executive Officer
compensation program.
In 1993, as done previously from time to time, the Committee
retained a compensation expert to determine whether the Corporation's Executive
Officer compensation program adheres to the Committee's Executive Officer
compensation philosophy, to evaluate the competitiveness of the level and mix
of Executive Officer base salary, annual bonuses and long-term incentives, and
to assist the Committee in benchmarking the competitiveness of the Executive
Officers' total compensation program. The Committee has restructured certain
of its Executive Officer compensation practices to conform with improvements
recommended by the consultant.
BASE SALARY
Executive Officer salaries are based on the incumbent's
position responsibilities, experience and performance and are administered
within the competitive ranges to which they have been assigned. The midpoints
of the salary ranges approximate the 50th percentile of practice for the
comparator corporations after taking into account position responsibility
factors and annual revenue size in relation to the Corporation's. Dr.
Caporali's base salary was last adjusted by the Committee on April 1, 1993 to
88 percent of his midpoint. In reaching its determination, the Committee
considered his then current position in his salary range, his performance and
his continuing successful efforts in substantially improving the financial
condition of the Corporation.
ANNUAL INCENTIVE
The Management Incentive Plan ("MIP") is an annual incentive
bonus designed and administered to ensure that a significant portion of each
Executive Officer's annual cash compensation is based upon the Corporation's
annual performance. The maximum award pool that may be used for payment of
bonuses earned in 1993 under this Plan, including those paid to Executive
Officers, is seven percent of the Corporation's after-tax net income, before
unusual and non-recurring items. The Plan further provides that awards may not
be paid unless Common Stock dividend payments for the year total at least $1.00
per share.
The MIP target bonus for 1993 was calculated as a percentage
of the participant's base salary based upon the responsibility level of the
participant's position. The actual MIP bonus which can be earned ranges from
zero to two times the target bonus, with 50% of the award calculated on
individual and/or organizational performance ("Individual Factors") and the
other 50% calculated on corporate performance relative to the Corporation's
Focus Factors.
<PAGE> 35
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Ratings for Individual Factors varied in 1993 by participant but on average
approximated target bonus levels, while organizational ratings for 1993
averaged slightly better than target bonus levels. Ratings related to the 1993
Focus Factors, namely profit margins and return on capital, exceeded
substantially the target bonus levels. The Chairman reviews all proposed
awards, except his own, and adjusts awards as appropriate to ensure fairness
and equity across all operating units. Those proposed awards are then
submitted to the Committee for approval.
The Committee has the responsibility to determine Dr.
Caporali's award and in 1993 used as its criteria the performance of the
Corporation with respect to the Focus Factors and their discretionary
assessment of the Corporation's performance. Dr. Caporali's target MIP award
for 1993 was 50% of his 1993 base compensation and his 1993 MIP award paid in
1994 was $375,000. The Committee believes this award is consistent with the
methodology described above and reflects his continued outstanding efforts in
substantially improving the financial condition of the Corporation in 1993.
Under the MIP, award recipients may, subject to certain conditions,
elect to defer their awards over a period of years, or until after retirement.
The Corporation is authorized to enter into a trust agreement (the assets of
which would be subject to the claims of the Corporation's creditors in the
event of insolvency of the Corporation) to assist it in meeting its obligations
under the MIP. At the present time, the Corporation has not entered into or
funded such a trust agreement.
LONG-TERM INCENTIVES
The Committee believes also that a significant portion of Executive
Officer total compensation should be related to the Corporation's longer-term
earnings per share growth and return on equity--both of which directly
influence the total returns realized by the Corporation's shareholders. The
Long-Term Incentive Plan ("LTIP"), which the shareholders approved at the April
16, 1992 Annual Meeting, is designed to achieve this goal. Pursuant to this
plan, in 1993, the Committee granted performance shares and issued stock option
awards.
Participants, including Executive Officers, can earn from zero to
twice the number of performance shares granted based upon (1) a comparison of
the Corporation's three-year average earnings per share growth (25% of award)
and return on equity (25% of award) with standards established by the Committee
during the first year of the measurement period covered by the award; and (2) a
comparison of such three-year average earnings per share growth (25% of the
award) and return on equity (25% of award) with those of the six aerospace
industry peer corporations identified on the performance graph on herein.
<PAGE> 36
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The performance share grants have been structured so the number of
performance shares earned for each three-year measurement period is directly
related to the Corporation's earnings per share growth and return on equity
performance during the measurement period, while the value to the participant
of the performance shares that have been earned is directly related to the
price of the Corporation's Common Stock at the end of the performance
measurement period when the shares are distributed. Dividend equivalents are
credited during the performance period, on a share reinvestment basis, and are
distributed at the end of the performance measurement period consistent with
the number of performance shares actually earned.
The Committee approved the grant of performance shares under LTIP in
November 1993 covering the measurement period January 1, 1994 through December
31, 1996. The 1993 performance share grants, and an equivalent number of stock
option grants, were made following the target guidelines calibrated to the 50th
percentile of comparator company practice. The comparator group included those
companies used in evaluating the competitiveness of Executive Officer salary
range midpoints for which long-term compensation survey data was available.
The number of performance shares granted to Dr. Caporali for this measurement
period was based on the application of these guidelines. The named Executive
Officers' November 1993 performance share and associated stock option grants
were substantially larger than the grants they received in November 1992.
These adjustments were made based on the findings of the Committee's 1993
evaluation of the competitiveness of the Corporation's Executive Officer total
compensation program and are fully consistent with its compensation philosophy
of relating a significant component of Executive Officer total compensation to
the total returns realized by the Corporation's shareholders.
The Committee has also granted stock options under the LTIP. The
options were granted in November 1993, at the same time as the performance
share awards for the 1994-1996 performance period, and were equal in size to
the target number of performance shares awarded. Options were granted with an
exercise price equal to the fair market value of Grumman Corporation Common
Stock on the date of grant and have a ten-year exercise term. To further
reinforce the linkage between long-term incentive compensation and increases in
shareholder value, stock option grants cannot be exercised until after the
third anniversary of the date of grant. Thereafter, the options can be
exercised partially, or in their entirety, at any time during the remaining
seven year term. The 1993 stock option grants to Dr. Caporali were, as
discussed above, equal in amount to the target number of performance shares
granted in November 1993 and were made following the target guidelines
calibrated to the 50th percentile of comparator company practice.
* * * * *
<PAGE> 37
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The 1993 Omnibus Budget Reduction Act (OBRA) imposed a $1
million limitation on the tax deductibility of compensation paid to an
Executive Officer in any year, starting in 1994, unless such compensation meets
specific criteria qualifying such payments for continued tax deductibility.
Since clarifying regulations were only released in the fourth quarter of 1993,
and more are expected, the Committee will monitor developments in this area
before adopting a policy position.
COMPENSATION COMMITTEE
Charles Marshall, Chairman
Richard Dulude
James F. Orr III
<PAGE> 38
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SECURITY OWNERSHIP OF MANAGEMENT
The following table shows all shares of the Corporation's
Common Stock held beneficially, directly or indirectly, by each director or
nominee, the named executive officers, and by all directors and executive
officers as a group. For purposes of this chart, beneficial ownership includes
those shares owned on January 31, 1994 and those shares which could have been
acquired by the exercise of options within sixty days of January 31, 1994.
<TABLE>
<CAPTION>
Common Stock owned as
of January 31, 1994
------------------------------------------------
Percent of
Name Number of Shares(1) class(2)
---- ------------------- ----------
<S> <C> <C>
J. Robert Anderson 55,215
Kenneth S. Axelson 4,305
Lucy Wilson Benson 5,423
Renso L. Caporali 120,793
Richard Dulude 3,200
Victor Hao Li 1,800
Charles Marshall 5,400
Robert J. Myers 57,387
James F. Orr III 4,200
Ellis L. Philips Jr.(3) 10,391
Gerald H. Sandler 22,856
John T. Sargent 4,999
Albert Verderosa 42,034
Eddie N. Williams 2,600
All 37 directors and executive
officers as a group (4)(5) 722,547 2.13%
</TABLE>
(1) Includes shares which may be purchased through the exercise of
stock options held on January 31, 1994 by the following
persons: Mr. Anderson, 21,000 shares; Mr. Axelson, 2,400
shares; Mrs. Benson, 3,600 shares; Dr. Caporali, 54,062
shares; Mr. Dulude, 3,200 shares; Mr. Li, 600 shares; Mr.
Marshall, 1,200 shares; Mr. Myers 18,060 shares; Mr. Orr,
3,200 shares; Mr. Sandler, 4,000 shares; Mr. Sargent, 3,000
shares; Mr. Verderosa, 16,050 shares; Mr. Williams, 2,600
shares; all directors and executive officers as a group,
217,272 shares.
<PAGE> 39
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In addition to the shares of Common Stock beneficially owned
by the directors, the wife of a director owns 7,866 shares of
Common Stock. Beneficial ownership of such shares has been
disclaimed by this director.
(2) No director or named executive officer owned more than 1%.
(3) Mr. Phillips retired from the Board effective February 28,
1993. Mr. Phillips' membership on the Audit, Corporate
Governance, Corporate Responsibility and Executive Committees
terminated simultaneously with his retirement from the Board
of Directors.
(4) These 37 directors and executive officers include: 2
executive officers who retired in 1993, and the director
identified in footnote (3).
(5) Due to administrative errors, Mr. Fred L. Thompson, Vice
President - Quality, did not timely file his initial Form 3
report required by the Securities Exchange Act of 1934, and
Mr. Richard G. Anderson, Vice President - Corporate
Technology, did not disclose on Form 5 filings due February
1992 and February 1993, Common Stock equivalents and dividend
equivalents attributable thereto credited to a deferred award
account under the Management Incentive Plan. Mr. Thompson's
Form 3 report and Mr. Anderson's Common Stock equivalents and
dividend equivalents have since been duly filed and reported,
respectively.
<PAGE> 40
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SECURITY OWNERSHIP OF RECORD OWNERS
As of January 31, 1994, the following shareholder was the
record owner of five percent or more of the outstanding shares of the
Corporation's Common Stock.
<TABLE>
<CAPTION>
Amount of Percent Title
Name and Address ownership of class of class
--------- -------- --------
<S> <C> <C> <C>
Employee Investment Plan
of Grumman Corporation(1) 11,229,061 33.09% Common
c/o Grumman Corporation Stock
1111 Stewart Avenue
Bethpage, N.Y. 11714-3580
</TABLE>
(1) Each Employee Investment Plan participant instructs the Trustees of
the Plan how to vote his or her shares. As to shares with respect to which the
Trustees receive no voting instructions, the Trustees, pursuant to the Plan,
vote these shares in the same proportion as they vote all of the shares with
respect to which they have received voting instructions. All Common Stock held
by the Plan is fully vested in the participants. Each participant instructs
the Trustees whether none or some of such participant's contributions to the
Plan are to be invested in Common Stock. The Plan requires that all employer
contributions to the Plan be invested in Common Stock during the period of each
respective employee's service with the Corporation; an employee may under
certain circumstances elect to transfer, in installments, a percentage of the
employer contribution in that employee's account to another fund within the
Plan.
<PAGE> 41
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STOCK PERFORMANCE GRAPH
The following performance graph compares the five-year
cumulative total shareholder returns (assuming reinvestment of dividends)
realized by Grumman Corporation's Common Stock shareholders with the S&P 500
index and an aerospace company peer group comprised of the following six
companies: General Dynamics, Lockheed, Martin Marietta, McDonnell Douglas,
Northrop and Rockwell International. This peer group's performance enters into
the computation of the actual number of performance shares to be distributed to
participants under the Long-Term Incentive Plan following the three-year
measurement period, in that 50% of the ultimate distribution is based on a
comparison of the Corporation's three-year average earnings per share growth
and return on equity with those averages of the six peer companies. The
performance graph assumes $100 is invested in Grumman Corporation Common Stock,
the S&P 500 index, and a composite index for the peer companies on December 31,
1988, and that dividends paid during the December 31, 1988 through December 31,
1993 period were reinvested to purchase additional shares during this
performance period.
Comparison Of 5-Year Cumulative Total Return1
Among Grumman Corporation, S&P 500 and
Aerospace/Defense Peer Group
300
250
200 BNY TO DO
150
100
50
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92
12/31/93
Grumman S & P 500 Aerospace Peer Group
____________________
1 Companies in peer groups weighted by market
capitalization, indexed to 100 at 12/31/88. Dividends
reinvested over period.
<PAGE> 42
-20-
The table below sets forth all compensation paid by the
Corporation and its subsidiaries for services in all capacities in the past
three fiscal years to each of the five most highly compensated executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
---------------------------------
Name and Principal Position Year Salary($) Bonus($)(1)
- --------------------------- ---- --------- -----------
<S> <C> <C> <C>
Renso L. Caporali 1993 525,000 375,000
Chairman of the Board and 1992 450,000 310,000
Chief Executive Officer 1991 375,000 220,000
Robert J. Myers 1993 381,250 275,000
President and Chief 1992 325,000 215,000
Operating Officer 1991 257,000 150,000
J. Robert Anderson(5) 1993 337,500 225,000
Vice Chairman and 1992 300,000 190,000
Chief Financial Officer 1991 150,000 90,000
Albert Verderosa 1993 251,250 145,000
President 1992 190,000 100,000
Grumman Aerospace 1991 185,833 80,000
Corporation
Gerald H. Sandler 1993 208,750 100,000
President 1992 187,508 80,000
Grumman Data Systems 1991 155,500 60,000
Corporation
</TABLE>
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Awards
----------------------------------------------------
Securities
Other Annual Restricted Underlying All Other
Compensation Stock Award Options/SARs Compensation
Name and Principal Position ($)(2) ($)(3) (#) ($)(2)(4)
- --------------------------- ------ ------ --- ---------
<S> <C> <C> <C> <C>
Renso L. Caporali -0- 16,700 4,540
Chairman of the Board and -0- 6,800 5,135
Chief Executive Officer 79,875 9,000
Robert J. Myers -0- 8,800 4,860
President and Chief -0- 5,000 5,168
Operating Officer 56,800 6,400
J. Robert Anderson(5) -0- 6,000 4,960
Vice Chairman and -0- 4,600 5,193
Chief Financial Officer 232,000 21,000
Albert Verderosa -0- 5,200 5,140
President 53,677(6) -0- 3,000 4,370
Grumman Aerospace 31,950 3,600
Corporation
Gerald H. Sandler -0- 4,000 4,580
President -0- 2,400 4,500
Grumman Data Systems 28,400 3,200
Corporation
</TABLE>
<PAGE> 43
-21-
(1) Reflects Management Incentive Plan awards earned in specified calendar
year, but paid in either the following February or March. For
example, Dr. Caporali's award of $375,000 for 1993 performance was
paid in February 1994. Officers and key employees of the Corporation
and of most of its subsidiaries are eligible to participate in the
Management Incentive Plan adopted by the Board of Directors. The
maximum amounts available for total awards under the Plan are equal to
7% of the after tax net income before adjustments for unusual and
non-recurring items, provided dividend payments for the year in
question on Grumman Corporation Common Stock total at least $1.00 per
share. The Corporation is authorized to enter into a trust agreement
(the assets of which would be subject to the claims of the
Corporation's creditors in the event of insolvency of the Corporation)
to assist it in meeting its obligations under the Management Incentive
Plan. At the present time, the Corporation has not entered into or
funded such a trust agreement.
(2) While each of the five named individuals received perquisites or other
personal benefits in 1993 and in 1992, in accordance with SEC
regulations, the value of these benefits is not indicated for anyone
other than Mr. Verderosa, since the benefits did not exceed in the
aggregate the lesser of $50,000 or 10% of the individual's salary and
bonus in either 1993 or 1992. In accordance with the transitional
provisions applicable to the revised rules on executive officer and
director compensation disclosure adopted by the Securities and
Exchange Commission, as informally interpreted by the Commission's
Staff, amounts of Other Annual Compensation and All Other Compensation
are excluded for the Corporation's 1991 fiscal year.
(3) Amounts represent the aggregate fair market value of Restricted Stock
on November 20, 1991, the date of grant. Additionally, the aggregate
number and fair market value of all Restricted Stock held by the named
individuals on December 31, 1993 are as follows: R. Caporali, 15,000
shares, $599,062; R. Myers, 9,980 shares, $398,576; J.R. Anderson,
13,000 shares, $519,187; A. Verderosa, 6,688 shares, $266,782; and G.
Sandler, 6,649 shares, $265,185. Dividend equivalents are paid on
Restricted Stock. Restrictions automatically lapse in the event of a
"change in control" of the Corporation. For this purpose a "change in
control" is defined in the Change in Control Arrangements Section.
(4) This column includes the Corporation's contribution to the Grumman
Corporation Employee Investment Plan. All employees of the
Corporation and of most of its subsidiaries become eligible to
participate in the Employee Investment Plan after three months of
employment. Employer contributions, which can match up to 4% of the
employee's annual basic compensation rate, are invested in a
Corporation Stock Fund for the employee's benefit.
(5) Mr. Anderson joined the Corporation on July 1, 1991.
(6) Of this sum, $52,088 represents Mr. Verderosa's housing and meal
allowance while serving at the Corporation's request at a location
away from his normal residence.
<PAGE> 44
-22-
The Corporation has in effect plans pursuant to which options
to purchase Common Stock of the Corporation are granted to officers and other
selected employees as determined by the Compensation Committee. The tables
below identify the option grants awarded in the last fiscal year to the
individuals identified on the Summary Compensation Table and the aggregate
option values on December 31, 1993.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
Individual Grants Potential Realized Value of
- ----------------------------------------------------------------------- Assumed Annual Rates of
Number of % of Total Stock Price Appreciation Over
Securities Options/SARs 10 Year Option Term(2)
Underlying Granted to Exercise or --------------------------------
Options/SARs Employees Base Price Expiration
Name Granted(#) in Fiscal Year ($/Share) Date 0%($) 5%($) 10%($)
- ---- ---------- -------------- ----------- ----------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Renso L. Caporali . . . 16,700 6.58% $39.125 Nov. 17, 2003 $0 $411,634 $1,038,886
Robert J. Myers . . . . 8,800 3.47% $39.125 Nov. 17, 2003 $0 $216,909 $ 547,437
J. Robert Anderson . . 6,000 2.36% $39.125 Nov. 17, 2003 $0 $147,892 $ 373,252
Albert Verderosa . . . 5,200 2.05% $39.125 Nov. 17, 2003 $0 $128,173 $ 323,485
Gerald H. Sandler . . . 4,000 1.56% $39.125 Nov. 17, 2003 $0 $ 98,595 $ 248,835
</TABLE>
(1) All options were granted on November 17, 1993 under the 1992 Long-Term
Incentive Plan. Options must be held three years after the grant date
before they can be exercised. In the event of a change in control,
all restrictions lapse. For this purpose, a "change in control" is as
defined in the Change in Control Arrangements Section.
(2) The dollar amounts under these columns are the result of calculations
at 0% and the 5% and 10% rates set by the Commission and therefore are
not intended to forecast possible future appreciation, if any, of
Grumman Corporation's Common Stock price.
<PAGE> 45
-23-
AGGREGATE OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Acquired $ Value Options/SARs in In-the-Money Options/SARs at
on Exercise Realized December 31, 1993 December 31, 1993(1)
----------- -------- ----------------- --------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Renso L. Caporali 15,429(2) $288,448 54,062 23,500 $1,061,049 $141,918
Robert J. Myers 8,331(2) $159,173 18,060 13,800 $ 357,032 $101,525
J. Robert Anderson -0- -0- 21,000 10,600 $ 464,062 $ 91,700
Albert Verderosa 4,000 $ 25,375 16,050 8,200 $ 308,812 $ 60,850
Gerald H. Sandler 4,591(3) $122,717 4,000 6,400 $ 48,000 $ 48,550
</TABLE>
(1) Based on the fair market value on the New York Stock Exchange -
Composite Transactions of the Corporation's Common Stock on that date
($39.9375).
(2) 1,041 of such shares were acquired upon the exercise of the surrender
(SAR) feature of options on 6,000 shares at $28.7188 on April 23,
1993.
(3) 1,106 of such shares were acquired upon the exercise of the surrender
(SAR) feature of options on 3,200 shares at $17.75 on January 28,
1993, 296 shares acquired on surrender of option for 1,600 shares at
$28.7188 on April 26, 1993 and 1,089 shares acquired on surrender of
option for 3,000 shares at $25.5625 on July 26, 1993.
<PAGE> 46
-24-
The following table shows performance share awards made to the
individuals identified on the Summary Compensation table. The performance
share awards were in lieu of the traditional awards of Restricted Stock to
certain key employees. Payout of awards is tied to the Corporations achieving
certain pre-set performance targets. The measures chosen to establish those
targets are earnings per share growth and return on equity of the Corporation
standing alone and as compared to its selected peer group. The actual
distributions may be adjusted as described in footnote (3) below. In the event
of a change in control, all performance share awards will be fully vested,
deemed earned in full at the maximum performance level (which results in awards
equal to twice the number of target shares) and promptly paid entirely in cash.
For this purpose, a "change in control" is as defined in the Change in Control
Arrangements Section.
LONG-TERM INCENTIVE PLAN-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Estimated Future Payments
Number of Performance or Under Non-Stock
Shares, Other Period Price-Based Plans (3)
Units or until --------------------------------------------
Other Maturation or Threshold Target Maximum
Name Year(1) Rights(#) Payout(2) (#) (#) (#)
- ---- ------- --------- --------- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
R.L. Caporali . . . . . . . Nov-93 16,700 Mar-97 0 16,700 33,400
R. Myers . . . . . . . . . Nov-93 8,800 Mar-97 0 8,800 17,600
J.R. Anderson . . . . . . . Nov-93 6,000 Mar-97 0 6,000 12,000
A. Verderosa . . . . . . . Nov-93 5,200 Mar-97 0 5,200 10,400
G.H. Sandler . . . . . . . Nov-93 4,000 Mar-97 0 4,000 8,000
</TABLE>
(1) Awards issued in November 1993 are subject to a measurement period of
January 1, 1994-December 31, 1996.
(2) Date shown reflects anticipated date of distribution.
(3) For performance which falls below or above the pre-set target, awards
will be prorated between those shown under Threshold and Target or
Target and Maximum, respectively. Dividend equivalents in the form of
additional shares are credited during the performance period, and will
be distributed at the end of the period with respect to all
performance shares that have been earned.
<PAGE> 47
-25-
PENSION PLANS
All employees of the Corporation and of most of its
subsidiaries are admitted to membership in its noncontributory employee pension
plan after one year's service and attainment of age 21. The plan provides for
benefits upon retirement which are based upon a percentage of earnings per year
of membership service. Retirement is mandatory at age 65 for corporate
officers. Early retirement is allowed any time after a member reaches age 60
with at least one year of service or age 50 with at least 20 years of service.
The plan is a career average plan and provides an annual sum on account of
membership service. The calculation of the benefit is based upon a formula
level which varies by calendar year. For example, from January 1, 1989 to
date, the benefit is calculated based upon the following formula: for each
full or partial calendar year, 2.60% of the base compensation per year up to
the formula level plus 2.85% of any base compensation in excess of the formula
level for those participants with 35 years or less of membership service. For
each year of membership service in excess of 35 years, the benefit accrues at
2.60% of base compensation. The formula level is the social security wage base
used to calculate the maximum social security tax minus $16,700. Base
compensation is salary excluding bonus, special pay or pay for overtime. The
projected annual pension benefit for each of the individuals identified in the
Summary Compensation Table, assuming he retires at age 65, his current earnings
remain constant over this period and he elects a pension benefit for his life
only is: R.L. Caporali, $101,651; R.J. Myers, $92,814; J.R. Anderson, $43,407;
A. Verderosa, $86,571 and G.H. Sandler, $77,272.
Section 401(a)(17) of the Internal Revenue Code of 1986, as
amended (the "Code"), limits the amount of compensation that may be used to
calculate pension benefits under a tax qualified plan. Section 415 of the Code
limits the annual benefits which may be paid under such a plan. The
Corporation has a nonqualified unfunded excess benefit plan which provides for
the payment out of its general funds of any benefits calculated under the
provisions of the qualified noncontributory career average plan (discussed in
the paragraph above) that are above the limits allowed under Sections
401(a)(17) and 415. Benefits payable under this excess benefit plan are in
addition to those described above. The projected annual benefit payable under
this excess benefit plan for each of the individuals identified in the Summary
Compensation Table, assuming he retires at age 65, his current earnings will
remain constant over this period and he elects a benefit payable for his life
only is: R.L. Caporali, $66,753; R.J. Myers, $48,728; J.R. Anderson, $43,509;
A. Verderosa, $10,450; and G.H. Sandler, $9,538.
Further, the Corporation has a supplemental plan which
provides to certain officers of the Corporation, its subsidiaries and divisions
and key employees designated by the Compensation Committee of the Board of
Directors a supplemental pension up to 30% of final base compensation upon
retirement at age 60 with at least 10 years of service, which is payable in
monthly installments for a period certain of 180 months. The maximum 30%
supplemental payment is reduced for service of less than 25 years and/or
retirement before age 60 (entitlement is subject to approval of the
Compensation Committee of the Board of
<PAGE> 48
-26-
Directors if retirement is prior to age 60 but after age 50 with 20 years of
continuous service; approval is automatically deemed given if such retirement
occurs after a "change in control" (see the Change in Control Arrangements
Section below)) and may be further reduced or eliminated to make certain that
the sum of the annual pension calculated under the provisions of the above
described career average plan, excess benefit plan, when applicable, and annual
social security benefits, plus the supplemental benefit, do not exceed 60% of
final total compensation (base compensation at retirement or age 65 and the
average of the three highest bonuses before then). The plan also provides an
annual pre-retirement death benefit equal to 25% of the final base compensation
payable monthly for a period certain of 108 months in lieu of any supplemental
retirement benefits being payable. Pursuant to this plan, the projected annual
benefits payable for 15 years commencing at age 65 are: R.L. Caporali,
$165,000; R.J. Myers, $120,000; J.R. Anderson, $52,500; A. Verderosa, $78,000
and G.H. Sandler, $64,500.
The Corporation is authorized to enter into trust agreements
(the assets of which would be subject to the claims of the Corporation's
creditors in the event of insolvency of the Corporation) to assist it in
meeting its obligations under the Excess Benefit and Supplemental Retirement
Plans described above. At the present time, the Corporation has not entered
into or funded such trust agreements.
The Corporation has committed to provide Mr. Anderson with a
special retirement bonus, to be paid in the form of an annuity, the cost of
which will be the total of 20% of each of his management incentive plan
bonuses, and the payment terms of which will be consistent with Mr. Anderson's
pension election under the Grumman Corporation Pension Plan. The Corporation
also committed to provide him with a supplemental retirement pension
equivalent in lieu of the supplemental retirement benefit described above in
the event Mr. Anderson does not complete ten full years of service with the
Corporation.
CHANGE IN CONTROL ARRANGEMENTS
The Corporation in January 1990 adopted a plan which permits
it to enter into special severance agreements ("Agreements") with key
employees, such employees being designated from time to time by the
Compensation Committee of the Board of Directors. Currently, there are 31
designated key employees including Dr. Caporali and Messrs. Anderson, Myers,
Venderosa and Sandler. The purpose of the Agreements is to encourage the key
employees to continue to carry out their duties in the event of the possibility
of a change in control of the Corporation. Payments under the Agreements would
be made only if there is (i) a Change in Control of the Corporation, (ii) the
key employee is then in the employ of the Corporation, and (iii) the key
employee's employment is terminated other than for narrowly defined causes. A
"Change in Control" shall be deemed to have occurred upon the happening of any
of the following events: (i) the acquisition, other than from the Corporation,
by any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13(d)(3) promulgated under the
Exchange Act) of 30% or more of either
<PAGE> 49
-27-
the then outstanding voting shares of Common Stock of the Corporation or the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors, but
excluding, for this purpose, any such acquisition by the Corporation or any of
its subsidiaries, or any employee benefit plan (or related trust) of the
Corporation or its subsidiaries; (ii) individuals who, as of February 17, 1994,
constitute the Board of Directors of the Corporation (as of such date, the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board, provided that any individual becoming a director subsequent to such
date whose election, or nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of directors of the Corporation (as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act); or (iii) approval by
the stockholders of the Corporation of a reorganization, merger or
consolidation of the Corporation, in each case, with respect to which all or
substantially all of the individuals and entities who were the respective
beneficial owners of the Common Stock and voting securities of the Corporation,
immediately prior to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the then outstanding
shares of Common Stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such reorganization, merger
or consolidation, or a complete liquidation or dissolution of the Corporation
or the sale or other disposition of all or substantially all of the assets of
the Corporation.
Should an Agreement become operative, the key employee shall
receive his full base salary through the Date of Termination (as defined in the
Agreement); and after the Date of Termination, severance pay in a lump sum
equal to 2.99 times the key employee's base amount (as defined in Section 280G
of the Code). This severance pay shall be reduced by any severance pay
received pursuant to the Corporation's Termination Review policy (Personnel
Policy A 641) in effect at the date of Notice of Termination (as defined in the
Agreement). In addition, the Corporation would continue to provide certain
fringe benefits (i.e., medical, dental) and other employee benefits (as defined
in the Agreement) for up to 36 months.
In no event may the amount of any benefits payable under an
Agreement, when added together with any other benefits the key employee is
entitled to receive from the Corporation, exceed the total amount of payments
or benefits which could be received by the key employee without any portion
thereof constituting a non-deductible "excess parachute payment" within the
meaning of Section 280G of the Code, or being subject to the excise tax imposed
by Section 4999 of the Code. The payments or benefits payable to the key
employee shall be reduced to the extent necessary to comply with the
limitations. Such
<PAGE> 50
-28-
reduction shall be made in the order and manner determined by the key employee
as soon as administratively practicable following the Change in Control.
In January 1990, the Board of Directors authorized the
Corporation to provide that in the event of a "Change in Control," any employee
whose employment is involuntarily terminated within 30 months following such
"Change in Control" shall be entitled to receive the Corporation's severance
pay benefits in effect immediately prior to the "Change in Control." For
purposes of this policy, the definition of "Change in Control" is substantially
the same as that for the Agreements described above.
Grumman Corporation
March 8, 1994
<PAGE> 51
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
--------- -------------
<S> <C> <C>
(a) (1) -- Offer to Purchase dated March 8, 1994...........................
(a) (2) -- Letter of Transmittal...........................................
(a) (3) -- Notice of Guaranteed Delivery...................................
(a) (4) -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.................................................
(a) (5) -- Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.................................
(a) (6) -- IRS Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9......................................
(a) (7) -- Press release issued by the Company and Martin Marietta
Corporation on March 7, 1994.......................................
(a) (8) -- Summary Advertisement dated March 8, 1994.......................
(a) (9) -- Letter to the Company's Shareholders, dated March 8, 1994.......
(a) (10) -- Opinion of Goldman, Sachs & Co., dated March 8, 1994............
(b) -- None............................................................
(c) (1) -- Agreement and Plan of Merger between Acquisition, the Parent and
the Company dated March 1, 1994....................................
(c) (2) -- Proxy Statement, dated March 4, 1993, of the Company............
(c) (3) -- Amendments to 1981 Stock Option Plan, 1990 Stock Option Plan and
Long-Term Incentive Plan........................................
(c) (4) -- Amendments to 1981 Stock Option Plan, 1990 Stock Option Plan,
Long-Term Incentive Plan and Restricted Stock Award Plan...........
(c) (5) -- Amendment to Restricted Stock Award Plan........................
(c) (6) -- Amendment to Special Severance Pay Plan.........................
(c) (7) -- Amended and Restated Excess Benefit Plan........................
(c) (8) -- Amended and Restated Supplemental Retirement Plan...............
(c) (9) -- Amendment to Non-Employee Director Pension Plan.................
(c) (10) -- Amendment to Management Incentive Plan..........................
(c) (11) -- Amendment to Management Incentive Plan..........................
(c) (12) -- Form of Indemnification Agreement...............................
(c) (13)
(a) -- Confidentiality Agreement between the Company and Northrop
Corporation.....................................................
(b) -- Amendment to Confidentiality Agreement between the Company and
Northrop Corporation............................................
(c) (14) -- Confidentiality Agreement between the Company and Martin
Marietta Corporation...............................................
(c) (15) -- Letter dated February 21, 1994 from Martin Marietta Corporation
to the Company.....................................................
(c) (16) -- Letter dated February 25, 1994 from Northrop Corporation to the
Company.........................................................
(c) (17) -- Audited Financial Statements of the Company for the Fiscal Year
Ended December 31, 1993............................................
</TABLE>
<PAGE> 1
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Rights)
of
GRUMMAN CORPORATION
by
MMC Acquisition Corp.
a wholly owned subsidiary
of
MARTIN MARIETTA CORPORATION
AT
$55.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, APRIL 4, 1994, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND THE MERGER DESCRIBED HEREIN ARE FAIR TO, AND IN THE BEST INTERESTS OF,
THE COMPANY AND ITS SHAREHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND
RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK, PAR VALUE $1.00 PER SHARE (INCLUDING THE ASSOCIATED RIGHTS)
(COLLECTIVELY, THE "SHARES") OF GRUMMAN CORPORATION (THE "COMPANY") REPRESENTING
AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED
BASIS.
------------------------
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
March 8, 1994
IMPORTANT
IMPORTANT
Any shareholder desiring to tender Shares should either (1) complete and
sign the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and deliver it to the Depositary with
the certificate(s) representing tendered Shares and all other required documents
or tender such Shares pursuant to the procedures for book-entry transfer set
forth in Section 3 or (2) request his or her broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for him or her. A
shareholder having Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such person if he or she
desires to tender such Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
pursuant to the guaranteed delivery procedure set forth in Section 3.
<PAGE> 2
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may also be obtained from the Information Agent, the Dealer Manager or
from brokers, dealers, commercial banks or trust companies.
<PAGE> 3
shareholder having Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such person if he or she
desires to tender such Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis may tender such Shares
pursuant to the guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may also be obtained from the Information Agent, the Dealer Manager or
from brokers, dealers, commercial banks or trust companies.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<C> <S> <C>
Introduction.............................................................................
1. Terms of the Offer; Expiration Date............................................
2. Acceptance for Payment and Payment.............................................
3. Procedure for Tendering Shares.................................................
4. Withdrawal Rights..............................................................
5. Certain Tax Considerations.....................................................
6. Price Range of Shares; Dividends...............................................
7. Certain Information Concerning the Company.....................................
8. Certain Information Concerning the Purchaser and Parent........................
9. Source and Amounts of Funds....................................................
10. Background of the Offer; the Merger Agreement; the Rights Agreement............
11. Purpose of the Offer; Plans for the Company....................................
12. Effect of the Offer on the Market for the Shares; Stock Exchange Listing;
Registration under the Exchange Act............................................
13. Dividends and Distributions....................................................
14. Extension of Tender Period; Amendment; Termination.............................
15. Certain Conditions to the Offer................................................
16. Certain Legal Matters; Regulatory Approvals....................................
17. Fees and Expenses..............................................................
18. Miscellaneous..................................................................
</TABLE>
Schedule I -- Directors and Executive Officers of Parent and the Purchaser
Schedule II -- Certain Information About Parent Required by New York Law
Exhibit A -- Agreement and Plan of Merger
i
<PAGE> 5
To the Holders of Common Stock of
GRUMMAN CORPORATION:
INTRODUCTION
MMC Acquisition Corp., a New York corporation (the "Purchaser") and a
wholly owned subsidiary of Martin Marietta Corporation, a Maryland corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock
(the "Common Stock"), par value $1.00 per share, of Grumman Corporation, a New
York corporation (the "Company"), and the associated preferred stock purchase
rights (the "Rights"; and together with the Common Stock, the "Shares") issued
pursuant to the Rights Agreement, dated as of February 18, 1988, as amended as
of March 6, 1994, between the Company and The Bank of New York, as Rights Agent
(the "Rights Agreement") (until the Distribution Date (as such term is defined
in the Rights Agreement) the Rights will be evidenced by and trade with
certificates evidencing the Common Stock), at $55.00 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"). See Section 10 for a brief description of the Rights
Agreement and its application to the Offer and the Merger (as hereinafter
defined). Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of Bear,
Stearns & Co. Inc. ("Bear Stearns"), which is acting as Dealer Manager for the
Offer (in such capacity, the "Dealer Manager"), First Chicago Trust Company of
New York (the "Depositary") and Morrow & Co., Inc. (the "Information Agent")
incurred in connection with the Offer. See Section 17.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) A
NUMBER OF SHARES REPRESENTING AT LEAST TWO-THIRDS OF THE TOTAL NUMBER OF SHARES
OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). SEE SECTION 15.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD OF DIRECTORS" OR THE
"BOARD") UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE MERGER DESCRIBED
HEREIN ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT THE
COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 6, 1994 (the "Merger Agreement"), among Parent, the Purchaser and
the Company. The Merger Agreement provides, among other things, that upon the
terms and subject to the conditions therein, as soon as practicable after the
consummation of the Offer and the approval and adoption of the Merger Agreement
by the shareholders of the Company, the Purchaser will be merged with and into
the Company (the "Merger"), with the Company being the corporation surviving the
Merger (the "Surviving Corporation"). Each outstanding Share (other than
Dissenting Shares (as hereinafter defined)) not owned by Parent, the Purchaser,
the Company or any of their subsidiaries will be converted into and represent
the right to receive $55.00 in cash or any higher price that may be paid per
Share in the Offer, without interest. See Section 10.
Goldman, Sachs & Co. ("Goldman"), financial advisor to the Company, has
delivered to the Board of Directors of the Company its written opinion to the
effect that, as of the date of the Merger Agreement, the $55.00 in cash to be
received by the holders of Shares in the Offer and the Merger is fair to such
holders. A copy of such opinion is included with the Company's
Solicitation/Recommendation Statement on Schedule 14D-9, which is being mailed
to shareholders concurrently herewith, and shareholders are urged to read the
opinion in its entirety for a description of the assumptions made, factors
considered and procedures followed by Goldman.
<PAGE> 6
According to the Company, as of February 28, 1994, there were 33,935,448
Shares outstanding and not more than 1,131,732 Shares subject to issuance
pursuant to stock options under the Company's stock option and long term
incentive plans, and as deferred awards payable in Shares between the date
hereof and June 30, 1994 under the Company's management incentive plan. As a
result, the Purchaser believes that the Minimum Condition would be satisfied if
at least 23,378,120 Shares are validly tendered and not withdrawn prior to the
Expiration Date.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and pay for all
Shares that have been validly tendered prior to the Expiration Date and not
withdrawn as permitted by Section 4. The term "Expiration Date" means 12:00
Midnight, New York City time, on Monday, April 4, 1994, unless the Purchaser
shall have extended, in its sole discretion, the period of time for which the
Offer is open, in which event the term "Expiration Date" means the latest time
and date at which the Offer, as so extended by the Purchaser, shall expire.
The Offer is subject to certain conditions set forth in Section 15,
including satisfaction of the Minimum Condition and the expiration or
termination of the waiting period applicable to the Purchaser's acquisition of
Shares pursuant to the Offer under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"). If any such condition is not satisfied,
the Purchaser may (i) terminate the Offer and return all tendered Shares to
tendering shareholders, (ii) extend the Offer and, subject to withdrawal rights
as set forth in Section 4, retain all such Shares until the expiration of the
Offer as so extended, (iii) waive such condition and, subject to any requirement
to extend the period of time during which the Offer is open, purchase all Shares
validly tendered by the Expiration Date and not withdrawn or (iv) delay
acceptance for payment of or payment for Shares, subject to applicable law,
until satisfaction or waiver of the conditions to the Offer; provided, however,
that, unless previously approved by the Company in writing, no change may be
made which decreases the price per Share payable in the Offer, which changes the
form of consideration to be paid in the Offer, which reduces the maximum number
of Shares to be purchased in the Offer, which imposes conditions to the Offer in
addition to those set forth in Section 15 hereto or which broadens the scope of
such conditions. In the Merger Agreement, the Purchaser has agreed, subject to
the conditions in Section 15 and its rights under the Offer, to accept for
payment Shares as soon as practicable after the latest of (i) the date on which
the waiting period under the HSR Act has expired or been terminated, (ii) the
date on which the conditions in Section 15 are fulfilled and there is no right
to terminate the Offer under Section 15 (subject to the Purchaser's rights to
extend the Offer) and (iii) the earliest date on which the Offer can expire
under Federal law. For a description of the Purchaser's right to extend the
period of time during which the Offer is open, and to amend, delay or terminate
the Offer, see Section 14.
The Company has provided or will provide the Purchaser with the Company's
shareholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
The Company has advised Parent that as of January 31, 1994, 11,229,061
Shares were held by the Grumman Corporation Employees' Investment Plan ("EIP").
The Offer is being made to the trustees of the EIP for such Shares at the same
price and in accordance with the same terms as for Shares held by other
shareholders. The EIP provides that the trustees of the EIP will exercise their
fiduciary obligations and determine whether to tender such shares. The trustees
may consider a variety of factors set forth in the EIP in making such decision
and may determine what procedures to follow in obtaining instructions from EIP
participants with respect to the Shares held in their accounts (obtaining such
instructions is permitted but not required). Any further information concerning
the procedures that will be followed with respect to the EIP will be provided to
EIP participants by the EIP trustees or other EIP fiduciaries.
2
<PAGE> 7
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer, the Purchaser will accept for payment and pay for all
Shares validly tendered by the Expiration Date and not properly withdrawn as
soon as practicable after the later of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions set forth in Section 15. For a
description of the Purchaser's right to terminate the Offer and not accept for
payment or pay for Shares or to delay acceptance for payment or payment for
Shares, see Section 14.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment tendered Shares when, as and if the Purchaser gives oral or written
notice to the Depositary of its acceptance of the tenders of such Shares.
Payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
the tendering shareholders for the purpose of receiving payments from the
Purchaser and transmitting such payments to tendering shareholders. In all
cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of certificates for such Shares
(or of a confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined in
Section 3)), a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other required documents. For a description of the
procedure for tendering Shares pursuant to the Offer, see Section 3. Accordingly
payment may be made to tendering shareholders at different times if delivery of
the Shares and other required documents occur at different times. Under no
circumstances will interest be paid by the Purchaser on the consideration paid
for Shares pursuant to the Offer, regardless of any delay in making such
payment.
If the Purchaser increases the consideration to be paid for Shares pursuant
to the Offer, the Purchaser will pay such increased consideration for all Shares
purchased pursuant to the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its affiliates the right to purchase
Shares tendered pursuant to the Offer, but any such transfer or assignment will
not relieve the Purchaser of its obligations under the Offer or prejudice the
rights of tendering shareholders to receive payment for Shares validly tendered
and accepted for payment.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained at one of the Book-Entry Transfer Facilities), without
expense to the tendering shareholder, as promptly as practicable following the
expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES. To tender Shares pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by the Letter of Transmittal
must be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase and either (i) certificates for the Shares to be
tendered must be received by the Depositary, at one of such addresses or (ii)
such Shares must be delivered pursuant to the procedures for book-entry transfer
described below (and a confirmation of such delivery received by the Depositary
including an Agent's Message (as defined below) if the tendering shareholder has
not delivered a Letter of Transmittal), in each case prior to the Expiration
Date, or (b) the guaranteed delivery procedure described below must be complied
with. The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
book-entry confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgement from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such book-entry
confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant.
The Depositary will establish an account with respect to the Shares at each
of The Depository Trust Company, Midwest Securities Trust Company and
Philadelphia Depository Trust Company (collectively referred to as the
"Book-Entry Transfer Facilities") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
that is a participant in the system of any Book-Entry Transfer Facility may make
delivery of Shares by causing such Book-Entry Transfer Facility to transfer such
Shares into the Depositary's account in accordance with the procedures of such
Book-Entry Transfer
3
<PAGE> 8
Facility. However, although delivery of Shares may be effected through
book-entry transfer, the Letter of Transmittal (or facsimile thereof) properly
completed and duly executed together with any required signature guarantees or
an Agent's Message and any other required documents must, in any case, be
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date, or the guaranteed
delivery procedure described below must be complied with. Delivery of the Letter
of Transmittal and any other required documents to a Book-Entry Transfer
Facility does not constitute delivery to the Depositary.
Except as otherwise provided below, all signatures on a Letter of
Transmittal must be guaranteed by a firm which is a member of a registered
national securities exchange or the National Association of Securities Dealers,
Inc., or by a commercial bank or trust company having an office or correspondent
in the United States (each, an "Eligible Institution"). Signatures on a Letter
of Transmittal need not be guaranteed (a) if the Letter of Transmittal is signed
by the registered holder of the Shares tendered therewith and such holder has
not completed the box entitled "Special Payment Instructions" on the Letter of
Transmittal or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instructions 1 and 5 of the Letter of Transmittal.
If a shareholder desires to tender Shares pursuant to the Offer and such
shareholder's certificates evidencing such Shares are not immediately available
or such shareholder cannot deliver such Shares and all other required documents
to the Depositary by the Expiration Date, or such shareholder cannot complete
the procedure for delivery by book-entry transfer on a timely basis, such Shares
may nevertheless be tendered if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser is received by
the Depositary (as provided below) by the Expiration Date; and
(iii) the certificates for such Shares (or a confirmation of a
book-entry transfer of such Shares into the Depositary's account at one of
the Book-Entry Transfer Facilities), together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any
required signature guarantee or an Agent's Message and any other documents
required by the Letter of Transmittal, are received by the Depositary
within five New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE OPTION
AND RISK OF THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Under the federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain shareholders pursuant
to the Offer. In order to avoid such backup withholding, each tendering
shareholder must provide the Depositary with such shareholder's correct taxpayer
identification number and certify that such shareholder is not subject to such
backup withholding by completing the Substitute Form W-9 included in the Letter
of Transmittal. (See paragraph 8 of the Terms and Conditions of the Offer set
forth in the Letter of Transmittal or by filing a Form W-9 with the Depositary
prior to any such payments). If the shareholder is a nonresident alien or
foreign entity not subject to back-up withholding, the shareholder must give the
Depositary a completed Form W-8 Certificate of Foreign Status prior to receipt
of any payments.
4
<PAGE> 9
By executing a Letter of Transmittal, a tendering shareholder irrevocably
appoints designees of the Purchaser as such shareholder's proxies in the manner
set forth in the Letter of Transmittal to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by the Purchaser (and any and all other Shares or other securities
issued or issuable in respect of such Shares on or after March 6, 1994). All
such proxies shall be irrevocable and coupled with an interest in the tendered
Shares. Such appointment is effective only upon the acceptance for payment of
such Shares by the Purchaser. Upon such acceptance for payment, all prior
proxies and consents granted by such shareholder with respect to such Shares and
other securities will, without further action, be revoked, and no subsequent
proxies may be given nor subsequent written consents executed by such
shareholder (and, if given or executed, will be deemed ineffective). Such
designees of the Purchaser will be empowered to exercise all voting and other
rights of such shareholder as they, in their sole discretion, may deem proper at
any annual, special or adjourned meeting of the Company's shareholders, by
written consent or otherwise. The Purchaser reserves the right to require that,
in order for Shares to be validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser is able to exercise full
voting rights with respect to such Shares and other securities (including voting
at any meeting of shareholders then scheduled or acting by written consent
without a meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering shareholder's acceptance of the terms and
conditions of the Offer, as well as the tendering shareholder's representation
and warranty that (a) such shareholder owns the Shares being tendered within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (b) the tender of such Shares complies with Rule
14e-4, and (c) such shareholder has the full power and authority to tender and
assign the Shares tendered, as specified in the Letter of Transmittal. The
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the tendering shareholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which determination
shall be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders of Shares determined by it not to be in proper form or the
acceptance for payment of or payment for which may, in the opinion of the
Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right
to waive any defect or irregularity in any tender of Shares. No tender of Shares
will be deemed to have been properly made until all defects and irregularities
relating thereto have been cured or waived. The Purchaser's interpretation of
the terms and conditions of the Offer in this regard will be final and binding.
None of the Purchaser, the Dealer Manager, the Depositary, the Information Agent
or any other person will be under any duty to give notification of any defect or
irregularity in tenders or incur any liability for failure to give any such
notification.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are
irrevocable, except that they may be withdrawn after May 6, 1994 unless
theretofore accepted for payment as provided in this Offer to Purchase.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must specify
the name of the person who tendered the Shares to be withdrawn and the number of
Shares to be withdrawn and the name of the registered holder of the Shares, if
different from that of the person who tendered such Shares. If the Shares to be
withdrawn have been delivered to the Depositary, a signed notice of withdrawal
with (except in the case of Shares tendered by an Eligible Institution)
signatures guaranteed by an Eligible Institution must be submitted prior to the
release of such Shares. In addition, such notice must specify, in the case of
Shares tendered by delivery of certificates, the name of the registered holder
(if different from that of the tendering shareholder) and the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn or,
in the case of Shares tendered by book-entry transfer, the name and number of
the account at one of the Book-Entry Transfer Facilities to be credited with the
withdrawn Shares. Withdrawals may not be rescinded, and Shares withdrawn will
thereafter be deemed not validly tendered for
5
<PAGE> 10
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 3 at any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination shall be final and binding. None of the
Purchaser, the Dealer Manager, the Depositary, the Information Agent or any
other person will be under any duty to give notification of any defect or
irregularity in any notice of withdrawal or incur any liability for failure to
give any such notification.
5. CERTAIN TAX CONSIDERATIONS. Sales of Shares by shareholders of the
Company pursuant to the Offer will be taxable transactions for federal income
tax purposes and may also be taxable transactions under applicable state and
local and other tax laws.
In general, a shareholder will recognize gain or loss equal to the
difference between the tax basis of his Shares and the amount of cash received
in exchange therefor. Such gain or loss will be a capital gain or loss if the
Shares are capital assets in the hands of the shareholder and will be long-term
gain or loss if the holding period for the Shares is more than one year as of
the date of the sale of such Shares.
The foregoing discussion may not apply to shareholders who acquired their
Shares pursuant to the exercise of stock options or other compensation
arrangements with the Company or who are not citizens or residents of the United
States or who are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended.
New York State imposes a 10% tax upon gains realized by a transferor upon
the transfer of an interest in real property (including leases) located within
New York State, including certain transfers of stock in corporations that own
appreciated interests in such real property (the "Gains Tax"), and an additional
tax on the gross value of such real estate or stock in such corporations equal
to approximately 0.4% (the "State Transfer Tax"). The acquisition by the
Purchaser of the Shares pursuant to the Offer and the Merger will constitute a
taxable transfer of an interest in any real property owned or leased by the
Company and located in New York State and may result in a Gains Tax, State
Transfer Tax, or any combination of the foregoing being imposed upon the selling
shareholders. The Purchaser will file all necessary returns on behalf of the
Company's shareholders in connection with such Gains Tax and/or State Transfer
Tax and will pay any taxes due thereon. The amount of such taxes paid by the
Purchaser may result in the deemed receipt of additional consideration by each
shareholder in proportion to the number of Shares sold by such shareholder.
However, the Purchaser believes that in such a case, under Section 164(a) of the
Internal Revenue Code of 1986, as amended, a shareholder would reduce his amount
realized on the sale by the amount of the tax treated as additional
consideration to such shareholder.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY
AND IS BASED UPON PRESENT LAW. SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER TO THEM, INCLUDING
THE APPLICATION AND EFFECT OR THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND
FOREIGN TAX LAWS.
6
<PAGE> 11
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and traded on
The New York Stock Exchange, Inc. (the "NYSE") under the Symbol "GQ". The
following table sets forth, for the periods indicated, the reported high and low
sales prices and dividends paid per share for the Shares on the NYSE as
published in financial sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
---- ---- --------
<S> <C> <C> <C>
Year Ended December 31, 1992:
First Quarter........................................ $20 1/4 $17 3/8 $.25
Second Quarter....................................... $22 7/8 $17 3/8 $.25
Third Quarter........................................ $23 3/8 $20 3/4 $.25
Fourth Quarter....................................... $25 $19 5/8 $.25
Year Ended December 31, 1993:
First Quarter........................................ $35 7/8 $24 1/8 $.25
Second Quarter....................................... $41 3/4 $34 $.30
Third Quarter........................................ $41 7/8 $33 $.30
Fourth Quarter....................................... $41 3/8 $34 1/2 $.30
</TABLE>
- ---------------
The Merger Agreement prohibits the Company from declaring or paying any
dividend or distribution on the Shares.
The closing sales price of the Shares as reported by the NYSE was $39 7/8
per share on March 4, 1994, the last full day of trading prior to the first
public announcement of the Offer.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The Company is a New York
corporation organized in 1929 under the name Grumman Aircraft Engineering
Corporation. The Company's principal executive offices are located at 1111
Stewart Avenue, Bethpage, New York. The activities of the Company and its
subsidiaries are described in the following four industry segments:
Aerospace -- Includes the design and production of military aircraft, space
systems and commercial aircraft components and subassemblies, as well as the
modernization or conversion of previously completed aircraft.
Electronics Systems -- Includes the design, manufacture and integration of
sophisticated electronics for aircraft, computerized test equipment and other
defense related products, such as airborne surveillance systems.
Information and Other Services -- Includes electronic data processing
services for affiliates and other customers as well as real estate and leasing
services. It also includes technical services that help ready the space shuttle
for flight, provide space station program support, service and maintain flight
simulators and trainers and support Grumman aircraft.
Special Purpose Vehicles -- Includes fabrication of Long Life Vehicles for
the U.S. Postal Service and aluminum truck bodies.
7
<PAGE> 12
Set forth below is certain summary consolidated financial information with
respect to the Company and its consolidated subsidiaries excerpted or derived
from the Company's audited consolidated financial statements for the fiscal year
ended December 31, 1993 (the "1993 Financial Statements") provided to Parent and
the Purchaser by the Company. More comprehensive financial information is
included in the 1993 Financial Statements as well as documents filed by the
Company with the Securities and Exchange Commission (the "Commission"). The
following summary is qualified in its entirety by reference to the 1993
Financial Statements, a copy of which is an exhibit to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Copies of the 1993
Financial Statements may be examined at or obtained from the Commission in the
manner set forth below.
CONSOLIDATED STATEMENT OF INCOME
GRUMMAN CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Revenues
Sales................................................ $3,224,535 $3,492,075 $3,963,492
Other income......................................... 24,589 11,875 10,359
---------- ---------- ----------
Total sales and other income................. 3,249,124 3,503,950 3,973,851
---------- ---------- ----------
Costs and expenses
Cost of sales........................................ 2,929,987 3,189,035 3,620,895
Restructuring charge................................. 85,000 -- --
Loss on Tracor Aviation Inc. settlement.............. -- -- 46,500
Selling, administrative and other.................... 115,928 113,289 124,049
---------- ---------- ----------
Interest............................................. 31,702 55,065 85,236
---------- ---------- ----------
Total costs and expenses..................... 3,162,617 3,357,389 3,876,680
---------- ---------- ----------
Income before income taxes............................. 86,507 146,561 97,171
Provision for federal income taxes..................... 21,000 26,700 2,000
---------- ---------- ----------
Income from continuing operations.................... 65,507 119,861 95,171
Income (loss) from discontinued operations............. (6,700) (45,035) 4,166
Cumulative effect of change to accrual method of
accounting for postretirement benefits............... -- (198,000) --
---------- ---------- ----------
Net income (loss)............................ $ 58,807 $ (123,174) $ 99,337
---------- ---------- ----------
---------- ---------- ----------
Primary earnings per common share:
Income from continuing operations.................... $ 1.90 $ 3.49 $ 2.75
Income (loss) from discontinued operations........... (.19) (1.34) .13
Cumulative effect of accounting change............... -- (5.88) --
---------- ---------- ----------
Net income (loss)............................ $ 1.71 $ (3.73) $ 2.88
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
8
<PAGE> 13
CONSOLIDATED BALANCE SHEET
GRUMMAN CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1993 1992
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents......................................... $ 346,090 $ 299,077
Marketable securities (at cost, approximating market)............. 18,034 --
Accounts receivable............................................... 518,731 534,260
Inventories, less progress payments............................... 499,436 612,424
Prepaid expenses.................................................. 40,992 41,280
----------- -----------
Total current assets...................................... 1,423,283 1,487,041
----------- -----------
Property, plant and equipment, less accumulated depreciation........ 372,723 399,421
----------- -----------
Non-current assets
Deferred income taxes............................................. 120,028 94,856
Long-term receivables............................................. 6,009 9,079
Investments....................................................... 52,505 28,678
Other............................................................. 49,901 69,941
----------- -----------
228,443 202,554
----------- -----------
Total..................................................... $ 2,024,449 $ 2,089,016
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt................................................... $ 6,571 $ 83,399
Accounts payable.................................................. 147,576 128,610
Wages and benefits payable........................................ 90,229 95,519
Income taxes...................................................... 88,932 145,353
Advances and deposits............................................. 95,340 30,251
Other current liabilities......................................... 89,699 127,902
----------- -----------
Total current liabilities................................. 518,347 611,034
----------- -----------
Long-term debt...................................................... 243,106 355,244
----------- -----------
Accrued retirement benefits......................................... 304,752 306,500
----------- -----------
Restructuring reserve............................................... 85,000 --
----------- -----------
Other liabilities................................................... 37,191 23,348
----------- -----------
Common stock -- $1.00 par value, authorized 80,000 shares;
outstanding 34,049 and 33,519 shares (net of treasury stock)...... 344,589 321,038
Retained earnings................................................... 491,464 471,852
----------- -----------
Total..................................................... $ 2,024,449 $ 2,089,016
----------- -----------
----------- -----------
</TABLE>
The Company is subject to the information requirements of the Exchange Act
and is required to file reports and other information with the Commission
relating to its business, financial condition and other matters. Information, as
of particular dates, concerning the Company's directors and officers, their
remuneration, options granted to them, the principal holders of the Company's
securities and any material interest of such persons in transactions with the
Company is required to be described in proxy statements distributed to the
Company's shareholders and filed with the Commission. These reports, proxy
statements and other information, including the 1993 Financial Statements
included as an exhibit to the Company's Solicita-
9
<PAGE> 14
tion/Recommendation Statement on Schedule 14D-9, should be available for
inspection and copying at the Commission's office at 450 Fifth Street, N.W.,
Washington D.C. 20549, and at the regional offices of the Commission located at
75 Park Place, New York, New York 10007 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of this material may
also be obtained by mail, upon payment of the Commission's customary fees, from
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549.
The above information concerning the Company has been taken from or based
upon the 1993 Financial Statements and other publicly available documents on
file with the Commission and other publicly available information. Although
neither the Purchaser nor Parent has any knowledge that would indicate that such
information contained herein based upon such documents is untrue, neither the
Purchaser nor Parent takes any responsibility for, or makes any representation
with respect to, the accuracy or completeness of the information contained in
such documents or for any failure by the Company to disclose events that may
have occurred any may affect the significance or accuracy of any such
information but which are unknown to the Purchaser or Parent.
In the course of the discussions between representatives of Parent and the
Company (see Section 10) certain projections of future operating performance
were furnished to Parent's representatives. These projections were not prepared
with a view to public disclosure or compliance with published guidelines of the
Commission or the guidelines established by the American Institute of Certified
Public Accountants regarding projections, and are included in this Offer to
Purchase only because they were provided to Parent. Neither Parent, the
Purchaser nor the Company, nor either of their financial advisors nor the Dealer
Manager assumes any responsibility for the accuracy of these projections. While
presented with numerical specificity, these projections are based upon a variety
of assumptions relating to the businesses of the Company which may not be
realized and are subject to significant uncertainties and contingencies, many of
which are beyond the control of the Company. There can be no assurance that the
projections will be realized, and actual results may vary materially from those
shown.
Set forth below is a summary of the projections. The projections should be
read together with the financial statements of the Company referred to herein.
GRUMMAN CORPORATION
PROJECTED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales.................................. $3,149.0 $3,270.8 $3,471.0 $3,505.8 $3,657.0
Earnings before interest and taxes..... 210.3 220.0 244.4 245.7 256.1
Net Income............................. 123.5 139.1 158.1 162.4 172.6
Earnings Per Share..................... 3.61 4.08 4.64 4.76 5.06
</TABLE>
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT. The Purchaser
is a newly incorporated New York corporation and a wholly owned subsidiary of
Parent. To date, Purchaser has not conducted any business other than in
connection with the Offer. Until immediately prior to the time the Purchaser
purchases Shares pursuant to the Offer, it is not anticipated that the Purchaser
will have any significant assets or liabilities or engage in activities other
than those incident to its formation and capitalization and the transactions
contemplated by the Offer. Because the Purchaser is a newly formed corporation
and has minimal assets and capitalization, no meaningful financial information
regarding the Purchaser is available.
Parent is a diversified enterprise principally engaged in the conception,
design, manufacture and integration of advanced technology products and services
for the United States Government and private industry. Parent manages
significant facilities for the Department of Energy and also produces
construction aggregates and specialty chemical products.
10
<PAGE> 15
In April 1993, Parent consummated a transaction in which its businesses and
the Aerospace businesses of the General Electric Company were combined (the
"Combination"). As a result of the Combination, which was approved by Parent's
stockholders on March 25, 1993, the then existing Parent, which was formed in
1961 by the consolidation of the Glenn L. Martin Company (founded in 1909) and
the American-Marietta Company (founded in 1913), was renamed Martin Marietta
Technologies, Inc. ("Technologies"). In the Combination, Technologies became a
wholly-owned subsidiary of a new corporation which assumed the Martin Marietta
Corporation name.
The name, citizenship, business address, principal occupation or employment
and five year employment history of each of the directors and executive officers
of the Purchaser and Parent are set forth in Schedule I hereto. The principal
executive offices of Parent and the Purchaser are located at 6801 Rockledge
Drive, Bethesda, Maryland 20817. Schedule II hereto contains certain additional
information about Parent required by New York State law.
Set forth below is a summary of certain consolidated financial information
with respect to Parent and its consolidated subsidiaries excerpted or derived
from the information contained in or incorporated by reference into Parent's
Annual Report on Form 10-K for the year ended December 31, 1993 (the "Parent
10-K"). More comprehensive financial information is included in or incorporated
by reference into the Parent 10-K and other documents filed by Parent with the
Commission, and the financial information summary set forth below is qualified
in its entirety by reference to the Parent 10-K and such other documents and all
the financial information and related notes contained therein.
11
<PAGE> 16
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE) 1993 1992 1991
- -------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
OPERATING RESULTS
Net sales............................................... $9,435,689 $5,954,292 $6,075,415
Cost of sales, other costs and expenses................. 8,647,224 5,405,123 5,537,926
--------- --------- ---------
Earnings from Operations................................ 788,465 549,169 537,489
Other income and expenses, net.......................... 46,997 21,144 (58,980)
--------- --------- ---------
835,462 570,313 478,509
Interest expense on debt................................ 110,173 57,890 57,660
--------- --------- ---------
Earnings before taxes on income and cumulative effect of
accounting changes.................................... 725,289 512,423 420,849
Taxes on income......................................... 275,000 167,000 107,700
--------- --------- ---------
Earnings before Cumulative Effect of Accounting
Changes............................................... 450,289 345,423 313,149
Cumulative effect of changes in accounting for
post-retirement benefits other than pensions and for
post-employment
benefits.............................................. (429,432) -- --
--------- --------- ---------
Net Earnings............................................ $ 20,857 $ 345,423 $ 313,149
--------- --------- ---------
--------- --------- ---------
PER COMMON SHARE
Net earnings (loss)
Assuming no dilution:
Before cumulative effect of accounting changes........ $ 4.25 $ 3.60 $ 3.15
Cumulative effect of accounting changes............... (4.51) -- --
--------- --------- ---------
$ (.26) $ 3.60 $ 3.15
--------- --------- ---------
--------- --------- ---------
Assuming full dilution:
Before cumulative effect of accounting changes........ $ 3.80 $ 3.60 $ 3.15
Cumulative effect of accounting changes............... * -- --
--------- --------- ---------
* $ 3.60 $ 3.15
--------- --------- ---------
--------- --------- ---------
Cash Dividends.......................................... $ .87 $ .795 $ .75
--------- --------- ---------
--------- --------- ---------
* Anti-dilutive
CONDENSED BALANCE SHEET DATA
Current assets.......................................... $2,448,240 $1,434,341
Other noncurrent assets................................. 707,772 800,445
Noncurrent deferred income taxes........................ 206,119 --
Property, plant and equipment, net...................... 1,692,753 1,257,139
Cost in excess of net assets acquired................... 1,914,894 26,224
Other intangibles....................................... 775,113 81,456
--------- ---------
Total......................................... $7,744,891 $3,599,605
--------- ---------
--------- ---------
Current liabilities -- other............................ $1,491,591 $ 582,422
Current maturities of long-term debt.................... 318,525 3,814
Long-term debt.......................................... 1,479,571 474,726
Post-retirement benefits................................ 740,630 101,978
Other noncurrent liabilities............................ 838,222 194,195
Noncurrent deferred income taxes........................ -- 297,254
Series A preferred stock.............................. 1,000,000 --
Common stock.......................................... 95,697 47,229
Additional paid in capital............................ 123,999 85,992
Retained earnings..................................... 1,656,656 1,811,995
Shareowners' equity..................................... 2,876,352 1,945,216
--------- ---------
Total......................................... $7,744,891 $3,599,605
--------- ---------
--------- ---------
</TABLE>
Parent is subject to the informational filing requirements of the Exchange
Act and is required to file reports and other information with the Commission
relating to its business, financial condition and other
12
<PAGE> 17
matters. Information, as of particular dates, concerning Parent's directors and
officers, their remuneration, the principal holder of Parent's securities and
any material interest of such persons in transactions with Parent is required to
be described in periodic statements filed with the Commission. Such reports and
other information, including the Parent 10-K, may be inspected and copies may be
obtained from the offices of the Commission in the same manner as set forth in
Section 7.
Except as set forth in this Offer to Purchase, none of Parent, the
Purchaser or any of their affiliates (collectively the "Purchaser Entities"),
or, to the best knowledge of any of the Purchaser Entities, any of the persons
listed on Schedule I, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any securities of the
Company, joint ventures, loan or option arrangements, puts or calls, guarantees
of loans, guarantees against loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, none of the Purchaser Entities,
or, to the best knowledge of any of the Purchaser Entities, any of the persons
listed on Schedule I, has had, since January 1, 1991, any business relationships
or transactions with the Company or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase, since January 1, 1991, there have
been no contacts, negotiations or transactions between the Purchaser Entities,
or their respective subsidiaries or, to the best knowledge of any of the
Purchaser Entities, any of the persons listed on Schedule I, and the Company or
its affiliates, concerning a merger, consolidation or acquisition, tender offer
or other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets. None of the Purchaser Entities or, to
the best knowledge of any of the Purchaser Entities, any of the persons listed
on Schedule I, beneficially owns any Shares or has effected any transactions in
the Shares in the past 60 days.
9. SOURCE AND AMOUNTS OF FUNDS. The total amount of funds required by the
Purchaser to acquire all outstanding Shares pursuant to the Offer and the
Merger, to consummate the transactions contemplated by the Merger Agreement, and
to pay fees and expenses related to the Offer and the Merger is estimated to be
approximately $2 billion. These funds are expected to be provided to the
Purchaser in the form of equity or debt by Parent. Parent intends to obtain the
funds from loans to be provided initially by Bank of America National Trust and
Savings Association ("Bank of America") and Morgan Guaranty Trust Company of New
York ("Morgan Guaranty"; together with Bank of America, the "Co-Agents"). Bank
of America and Morgan Guaranty have committed to provide additional financing of
up to approximately $400 million for general corporate purposes. All of the
foregoing loans will be fully and unconditionally guaranteed by Technologies and
Purchaser. The loans to be provided by Bank of America, Morgan Guaranty, and the
Banks are collectively referred to as the "Bank Financing." It is anticipated
that subsequent to the initial funding of these loans, affiliates of Bank of
America and Morgan Guaranty (collectively, the "Co-Arrangers") will syndicate
the
loans to a group of commercial banks (collectively with Bank of America and
Morgan Guaranty, the "Banks").
The existing revolving credit facilities of Parent and Technologies will be
terminated in connection with the closing of the Offer.
Set forth below is a summary description of the Bank Financing.
Consummation of the Bank Financing is subject to, among other things, the
negotiation and execution of definitive financing agreements on terms
satisfactory to Parent, Technologies, the Purchaser, and the Co-Agents. The
summary description does not purport to be complete, and there can be no
assurance that the terms set forth below will be contained in such agreements or
that such agreements will not contain additional provisions.
Parent has received commitments from Bank of America and Morgan Guaranty
pursuant to which each has agreed to provide up to $1.2 billion of the Bank
Financing. The Co-Agents also have agreed to act as agents for an anticipated
commercial bank syndicate (including the Co-Agents). It is not anticipated that
the syndication of the Bank Financing will be consummated prior to the closing
of the Offer.
Parent has agreed to pay arrangement, underwriting, and syndication fees to
the Co-Agents and the Co-Arrangers, and has agreed to pay Bank of America, as
Administrative Agent under the Credit Facilities, an annual administrative fee.
Parent also has agreed to pay certain of the expenses of the Co-Agents and the
Co-Arrangers incurred in connection with the Bank Financing and to provide the
Co-Agents, the
13
<PAGE> 18
Co-Arrangers and the Banks and their respective directors, officers, employees,
and affiliates with customary indemnification.
The Bank Financing will consist of two facilities which will be entered
into prior to or concurrently with the consummation of the Offer. The credit
facilities will consist of a 364-day unsecured revolving credit facility in the
amount of $1.2 billion (the "Short-Term Facility") and a five-year unsecured
revolving credit facility in the amount of $1.2 billion (the "Five-Year
Facility"). The Short-Term Facility and the Five-Year Facility are collectively
referred to as the "Credit Facilities." The Short-Term Facility will have a
final maturity 364 days after the date of execution of the definitive financing
agreement for the Short-Term Facility. There will be no required prepayments or
scheduled reductions of availability of loans under the Credit Facilities.
Revolving loans under the Credit Facilities will bear interest, at the
option of Parent, at (i) a base equal to the higher of the rate announced from
time to time by Bank of America as its reference rate or the daily Federal Funds
rate plus 0.5%; (ii) the London interbank offered rate ("LIBOR") for one-, two-,
three-, six-(or subject to the Banks' unanimous written consent) twelve-month
periods plus an interest rate margin based on the rating for senior, unsecured
long-term debt of Technologies guaranteed by Parent (or for Parent if its
senior, unsecured long-term debt is rated) announced from time to time by
Standard & Poor's Corporation ("S&P"), Moody's Investor Services, Inc.
("Moody's"), and Duff & Phelps Inc. ("D&P"); (iii) a reserve-and FDIC
insurance-adjusted rate for 30-, 60-, 90-, or 180-day certificates of deposit
(the "CD Rate") plus an interest rate margin based on the rating for senior,
unsecured long-term debt of Technologies guaranteed by Parent (or for Parent if
its senior, unsecured long-term debt is rated) announced from time to time by
S&P, Moody's, and D&P; or (iv) a money market bid rate based on competitive bids
solicited of the Banks and accepted by Parent pursuant to an auction mechanism
under the Credit Facilities. The interest rate margins over LIBOR range from
.475% to .25% for the Short-Term Facility and from .425% to .25% for the
Five-Year Facility depending on the level of such ratings. The interest rate
margins over the CD Rate range from .60% to .375% for the Short-Term Facility
and from .55% to .375% for the Five-Year Facility depending on the level of such
ratings. Interest will be payable quarterly in arrears based on a 365/366-day
year for base rate loans and will be payable quarterly in arrears or at the end
of the relevant interest period, whichever is sooner, based on a 360-day year
and the actual number of days elapsed for LIBOR and CD Rate loans. Money market
bid rate loans will bear interest at rates established on the basis of a bidding
procedure and interest will be payable at such times as are determined by such
procedures.
Commitment fees under the Credit Facilities will be payable to each Bank on
the amount of its available but unused commitment based on the rating for
senior, unsecured long-term debt of Technologies guaranteed by Parent (or for
Parent if its senior, unsecured long-term debt is rated) announced from time to
time by S&P, Moody's, and D&P. The commitment fees for the Short-Term Facility
will range from .025% to 0%, and the commitment fee for the Five-Year Facility
will range from .05% to 0%, depending on the level of such ratings. Parent also
will pay facility fees under the Credit Facilities on the amount of each Bank's
commitment, whether used or unused, based on the rating for senior, unsecured
long-term debt of Technologies guaranteed by Parent (or for Parent if its
senior, unsecured long-term debt is rated) announced from time to time by S&P,
Moody's, and D&P. The facility fees for the Short-Term Facility will range from
.15% to .08% and the facility fees for the Five-Year Facility will range from
.20% to .125%, depending on the level of such ratings.
Each Bank's obligation to make loans under the Credit Facilities will be
subject to, among other things, the negotiation, execution, and delivery of
definitive financing agreements (collectively, the "Bank Financing Agreements"),
and the compliance by Parent, Technologies, and the Purchaser with conditions
and covenants contained therein. The covenants in the Bank Financing Agreements
will include but not be limited to covenants limiting the ability of Parent and
certain of its subsidiaries to encumber certain of their assets or to enter into
certain sale-leaseback transactions, a covenant not to exceed a maximum leverage
ratio, and a covenant to maintain a minimum fixed charge coverage ratio under
certain circumstances. It is anticipated that the Bank Financing Agreements will
include terms, conditions, representations, warranties, covenants, indemnities,
events of default, and other provisions customary in such agreements.
14
<PAGE> 19
Following closing of the Offer, it is anticipated that Parent or
Technologies may replace borrowings under the Credit Facilities with funds
raised in the public or private debt and equity markets. The method or methods
by which Parent or Technologies might access these markets have not yet been
determined, but these may include public offerings of shares of Common Stock of
Parent, public offerings of debt securities, and the issuance of commercial
paper.
10. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT; THE RIGHTS AGREEMENT.
BACKGROUND OF THE OFFER
On February 1, 1994, Goldman, acting at the direction of the Company,
contacted Parent concerning Parent's interest in a strategic combination with
the Company. Goldman indicated to Parent that the Company was not for sale but
was interested in exploring strategic alternatives. Parent indicated to Goldman
that Parent had not considered a combination with the Company but that Parent
would talk with the Company regarding a transaction. Parent told Goldman that
Parent had no interest in becoming involved in an auction process and would only
negotiate with the Company on an exclusive basis.
On February 3, 1994, at a meeting in New York attended by Norman R.
Augustine, Chairman and Chief Executive Officer of Parent, A. Thomas Young,
President and Chief Operating Officer of Parent, and R.W. Tieken, Vice President
of Parent, R.L. Caporali, Chairman of the Board and Chief Executive Officer of
the Company, and J.R. Anderson, Vice Chairman and Chief Financial Officer of the
Company and a representative of Goldman, Parent and the Company agreed to
explore the possibility of a combination between the two companies. Parent
agreed to sign a confidentiality agreement, after which operations and financial
personnel of the two companies would meet.
On February 8 and 9, 1994, operations and financial personnel of the two
companies met in New York to review a five year plan for the Company and
Parent's five year plan. After this meeting, Parent decided to further explore a
strategic combination with the Company and to retain a financial advisor in
connection with a possible transaction with the Company. On February 10, 1994,
Parent retained Bear Stearns.
Mr. Young and Dr. Caporali met again on February 14, 1994 to review the
status of Parent's investigation of the Company and to discuss Parent's level of
interest in pursuing a transaction. Dr. Caporali told Mr. Young that if Parent's
interest was sufficient, the Board of Directors would be told of Parent's
interest and would discuss the merits of a strategic combination with Parent.
Operations and financial personnel of the two companies held a follow up
meeting in New York on February 15, 1994. At this meeting operations issues were
discussed.
On February 16, 1994, Parent and the Company and their financial advisors
met to discuss structuring alternatives, including whether a transaction would
involve stock or cash, and to review financial and valuation issues. Goldman
told Parent that the Board would consider at a meeting the next day whether the
Company should consider a combination with Parent. Goldman reiterated that the
Company was not for sale but encouraged Parent to consider an offer with respect
to a strategic combination. Parent expressed its view that an auction process
was not in the best interests of the Company or its employees and that Parent
did not want to participate in such a process due to the damage Parent felt it
would cause to the Company. Parent then reiterated its view that it would only
proceed on an exclusive basis. At the close of the meeting, Goldman asked Parent
to make its highest offer. Parent provided the Company with copies of Parent's
recent filings with the Commission for the Board to review at its meeting.
On February 18, 1994, the day after the Company's Board meeting, Mr.
Augustine, Mr. Young, Marcus C. Bennett, Vice President and Chief Financial
Officer of Parent, and Frank H. Menaker, Jr., Vice President and General Counsel
of Parent, met in New York with senior management of the Company along with the
respective financial advisors for Parent and the Company. At this meeting, the
Company informed Parent that the Board was receptive to a transaction with
Parent, would consider an indication of interest from Parent and would agree to
provide Parent with an exclusive negotiating period but that time was of the
essence. Parent indicated a willingness to consider a stock offer or a cash
offer but stated that a cash offer would provide a
15
<PAGE> 20
higher value. In response, the Company indicated to Parent that the Board would
be interested in the higher value offer.
On February 21, 1994, Parent sent a letter to the Company containing a
proposal for Parent to acquire all of the outstanding Shares at a price per
share of $55.00 and requesting a response before Parent's scheduled board of
directors meeting on February 24, 1994. If the Company's response was favorable,
Parent's board of directors would consider the transaction at that meeting.
After Parent's proposal was considered by the Board on February 23, 1994, the
Company agreed to proceed with a transaction on the terms outlined in Parent's
proposal letter, including dealing with Parent on an exclusive basis.
On February 24, 1994, Parent's Board of directors met and gave management
authority to proceed with a due diligence investigation of the Company and to
negotiate the terms and conditions of a definitive agreement. On February 26,
1994, Parent provided the Company with a preliminary draft of the Merger
Agreement. During the period that followed, Parent and its financial and legal
advisors conducted a due diligence investigation of the Company and its
subsidiaries. In addition, senior management of Parent and its advisors met with
senior management of the Company and its advisors to discuss the Company and to
negotiate the terms and conditions of the Merger Agreement. On March 6, 1994,
the Board and Parent's board of directors each held a meeting and approved the
Merger Agreement. Immediately following those meetings, the parties executed and
delivered the Merger Agreement.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is attached hereto as Exhibit A and is incorporated herein by
reference. Such summary is qualified in its entirety by reference to the Merger
Agreement.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions that are described in Section 15. The
Purchaser has agreed that, without the written consent of the Company, no change
in the Offer may be made which changes the form of consideration to be paid or
decreases the price per Share or the number of Shares sought in the Offer or
which imposes conditions to the Offer in addition to the Minimum Condition and
those conditions described in Section 15.
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, the approval of the Merger Agreement by the
shareholders of the Company and the satisfaction or waiver of the other
conditions to the Merger, the Purchaser will be merged with and into the
Company. The Merger shall become effective at such time, after May 18, 1994, as
a certificate of merger is filed by the Department of State of the State of New
York, or at such later time as is specified in such certificate of merger (the
"Effective Time"). As a result of the Merger, all of the properties, rights,
privileges and franchises of the Company and the Purchaser shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
the Purchaser shall become the debts, liabilities and duties of the Surviving
Corporation.
At the Effective Time, (i) each issued and outstanding Share held in the
treasury of the Company, by any of the Company's subsidiaries or by Parent, the
Purchaser or any other subsidiary of Parent shall be cancelled, and no payment
shall be made with respect thereto; (ii) each share of common stock of the
Purchaser then outstanding shall be converted into and become one share of
common stock of the Surviving Corporation; and (iii) each Share outstanding
immediately prior to the Effective Time shall, except as otherwise provided in
(i) above and except for Shares held by any holder who has not voted in favor of
the Merger or consented thereto in writing and who has demanded appraisal for
such Shares in accordance with Section 623 of the New York Business Corporation
Law (the "NYBCL") ("Dissenting Shares"), be converted into the right to receive
$55.00 in cash or any higher price per Share that may be paid pursuant to the
Offer, without interest.
16
<PAGE> 21
The Merger Agreement provides that the certificate of incorporation and
by-laws of the Company at the Effective Time will be the certificate of
incorporation of the Surviving Corporation. The Merger Agreement also provides
that the directors of the Purchaser at the Effective Time will be the directors
of the Surviving Corporation and the officers of the Company at the Effective
Time will be the officers of the Surviving Corporation.
Recommendation. The Merger Agreement states that the Board of Directors has
(i) determined that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are fair to and in the best
interests of the Company and its shareholders, (ii) approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger and (iii) resolved to recommend acceptance of the Offer and approval and
adoption of the Merger Agreement and the Merger by the Company's shareholders.
This recommendation of the Board of Directors may be withdrawn, modified or
amended if the Board by a majority vote determines in its good faith judgment,
based as to legal matters on the written opinion of legal counsel, that such
withdrawal, amendment or modification is required by the Board in the exercise
of its fiduciary duties. Any such withdrawal, modification or amendment will not
constitute a breach of the Merger Agreement but may give rise to certain
termination rights on the part of Parent and the Purchaser, as described below.
Interim Agreements of Parent, Purchaser and the Company. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, during the period
from the date of the Merger Agreement to the date the Board of Directors of the
Company is reorganized as provided in the Merger Agreement (the "Board
Reorganization"), the Company and its subsidiaries will each conduct its
operations according to its ordinary and usual course of business consistent
with past practice. Pursuant to the Merger Agreement, without limiting the
generality of the foregoing, and except as otherwise expressly provided in the
Merger Agreement, prior to the Board Reorganization, neither the Company nor any
of its subsidiaries will, without the prior written consent of Parent or
Purchaser: (a) amend or propose to amend its charter or by-laws; (b) authorize
for issuance, issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or equity equivalents (including, without limitation, any stock
options or stock appreciation rights), except as required by agreements with the
Company's employees under the Company's stock plans as in effect as of the date
hereof or pursuant to the Rights Agreement, and except deliveries of
certificates for Shares issued prior to the date hereof pursuant to the
Company's Restricted Stock Award Plan, or amend any of the terms of any such
securities or agreements outstanding as of the date hereof, except as
specifically contemplated by the Merger Agreement; (c) split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock, or redeem or otherwise
acquire any of its securities or any securities of its subsidiaries; (d) (1)
incur or assume any long-term debt or, except in the ordinary course of business
under existing lines of credit and in amounts not material to the Company and
its subsidiaries taken as a whole, incur or assume any short-term debt, except
in the ordinary course of business; (2) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course of business
and consistent with past practices and in amounts not material to the Company
and its subsidiaries, taken as a whole and except for obligations of wholly
owned subsidiaries of the Company; or (3) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company or customary loans or advances to employees in
the ordinary course of business consistent with past practice and in amounts not
material to the maker of such loan or advance); (4) pledge or otherwise encumber
shares of capital stock of the Company or any of its subsidiaries; or (5)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon, subject to certain exceptions;
(e) except as may be required by law or as contemplated by the Merger Agreement,
enter into, adopt or amend or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any director, officer or employee in any manner, or (except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not
17
<PAGE> 22
result in a material increase in benefits or compensation expense to the
Company, and as required under existing agreements or in the ordinary course of
business generally consistent with past practice) increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any plan and arrangement as in effect as of the date
hereof (including, without limitation, the granting of stock appreciation rights
or performance units); (f) subject to certain exceptions, acquire, sell, lease
or dispose of any assets outside the ordinary course of business or any assets
which in the aggregate are material to the Company and its subsidiaries taken as
a whole, or enter into any commitment or transaction outside the ordinary course
of business consistent with past practice which would be material to the Company
and its subsidiaries taken as a whole; (g) except as may be required as a result
of a change in law or in generally accepted accounting principles, change any of
the accounting principles or practices used by it; (h) revalue in any material
respect any of its assets, including, without limitation, writing down the value
of inventory or writing off notes or accounts receivable other than in the
ordinary course of business; (i) (1) acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (2) enter into
any contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to the Company and its
subsidiaries taken as a whole; (3) authorize any new capital expenditure or
expenditures which, individually, is in excess of $2,500,000 or, in the
aggregate, are in excess of $25,000,000; provided, that none of the foregoing
shall limit any capital expenditure already included in the Company's 1994
capital expenditure budget previously provided to Parent or Purchaser; or (4)
enter into or amend any contract, agreement, commitment or arrangement to take
any action that would be prohibited under the Merger Agreement; (j) make any tax
election or settle or compromise any income tax liability material to the
Company and its subsidiaries taken as a whole; (k) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities reflected or reserved against in,
or contemplated by, the consolidated financial statements (or the notes thereto)
of the Company and its subsidiaries or incurred in the ordinary course of
business consistent with past practice; (l) settle or compromise any pending or
threatened suit, action or claim relating to the transactions contemplated by
the Merger Agreement; or (m) take, or agree in writing or otherwise to take, any
of the actions described in this paragraph or any action which would make any of
the representations or warranties of the Company contained in the Merger
Agreement untrue or incorrect as of the date when made or would result in any of
the conditions set forth in Section 15 not being satisfied.
Other Agreements of Parent, the Purchaser and the Company. Pursuant to the
Merger Agreement, Parent and Purchaser will each hold and will each cause its
consultants and advisors to hold in confidence, unless compelled to disclose by
judicial or administrative process or, in the written opinion of its legal
counsel, by other requirements of law, all documents and information concerning
the Company and its subsidiaries furnished to Parent or Purchaser in connection
with the transactions contemplated by the Merger Agreement (except to the extent
that such information can be shown to have been (i) previously known by Parent
or Purchaser from sources other than the Company, or its directors, officers,
representatives or affiliates, (ii) in the public domain through no fault of
Parent or Purchaser or (iii) later lawfully acquired by Parent or Purchaser from
other sources who are not known by Parent or Purchaser to be bound by a
confidentiality agreement or otherwise prohibited from transmitting the
information to Parent or Purchaser by a contractual, legal or fiduciary
obligation) and will not release or disclose such information to any other
person, except its auditors, attorneys, financial advisors and other consultants
and advisors in connection with the Merger Agreement and the transactions
contemplated thereby. Parent and Purchaser will each be deemed to have satisfied
its obligation to hold such information confidential if it exercises the same
care as it takes to preserve confidentiality for its own similar information.
In the Merger Agreement the Company, its affiliates and their respective
officers, directors, employees, representatives and agents have agreed that they
shall immediately cease any existing discussions or negotiations, if any, with
any parties conducted heretofore with respect to any acquisition of all or any
material portion of the assets of, or any equity interest in, the Company or any
of its subsidiaries or any business combination with the Company or any of its
subsidiaries, subject to certain exceptions. The Company may, directly or
indirectly, furnish information and access, in each case only in response to
unsolicited requests
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<PAGE> 23
therefor, to any corporation, partnership, person or other entity or group
pursuant to confidentiality agreements, and may participate in discussions and
negotiate with such entity or group concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company or any
subsidiary or division of the Company, if such entity or group has submitted a
written proposal to the Board relating to any such transaction and the Board by
a majority vote determines in its good faith judgment, based as to legal matters
on the written opinion of legal counsel, that failing to take such action would
constitute a breach of the Board's fiduciary duty. The Board shall provide a
copy of any such written proposal to Parent or Purchaser immediately after
receipt thereof and thereafter keep Parent and Purchaser promptly advised of any
development with respect thereto. Except as set forth above, neither the Company
nor any of its affiliates, nor any of its or their respective officers,
directors, employees, representatives or agents, shall, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with,
or provide any information to, any corporation, partnership, person or other
entity or group (other than Parent and Purchaser, any affiliate or associate of
Parent and Purchaser or any designees of Parent and Purchaser) concerning any
merger, sale of assets, sale of shares of capital stock or similar transaction
involving the Company or any subsidiary or division of the Company; provided,
however, that nothing in the Merger Agreement shall prevent the Board from
taking, and disclosing to the Company's shareholders, a position contemplated by
Rules 14d-9 and 14e-2 promulgated under the Exchange Act with regard to any
tender offer; provided, further, that the Board shall not recommend that the
shareholders of the Company tender their Shares in connection with any such
tender offer unless the Board by a majority vote determines in its good faith
judgment, based as to legal matters on the written opinion of legal counsel,
that failing to take such action would constitute a breach of the Board's
fiduciary duty.
Between the date hereof and the Effective Time, the Company will give
Parent and Purchaser and their authorized representatives reasonable access to
all employees, plants, offices, warehouses and other facilities and to all books
and records of the Company and its subsidiaries, will permit Parent and
Purchaser to make such inspections as Parent and Purchaser may reasonably
require and will cause the Company's officers and those of its subsidiaries to
furnish Parent and Purchaser with such financial and operating data and other
information with respect to the business and properties of the Company and any
of its subsidiaries as Parent or Purchaser may from time to time reasonably
request.
The Merger Agreement provides that effective upon purchase and payment for
any Shares by Purchaser, the Purchaser shall be entitled to designate the number
of directors, rounded up to the next whole number, on the Company's Board of
Directors that equals the product of (i) the total number of directors on the
Board of Directors (giving effect to the election of any additional directors
pursuant to this paragraph) and (ii) the percentage that the number of Shares
owned by the Purchaser (including Shares accepted for payment) bears to the
total number of Shares outstanding on a fully-diluted basis, and the Company
shall take all action necessary to cause the Purchaser's designees to be elected
or appointed to the Board of Directors, including, without limitation,
increasing the number of directors, and seeking and accepting resignations of
its incumbent directors. Notwithstanding the foregoing, the Company has agreed
to use its best efforts to ensure that three of the current members of the Board
remain members of the Board until the Effective Time.
Pursuant to the Merger Agreement, the Company shall cause a meeting of its
shareholders (the "Company Shareholder Meeting") to be duly called and held
after May 18, 1994 for the purposes of voting on the approval and adoption of
the Merger Agreement and the Merger.
The Merger Agreement provides that the Company will promptly prepare and
file with the Commission under the Exchange Act a proxy statement relating to
the Company Shareholder Meeting (the "Proxy Statement"). The Company has agreed,
subject to the fiduciary duties of its Board of Directors, based as to legal
matters on the written opinion of legal counsel, to use all reasonable efforts
to obtain the necessary approvals by its shareholders of the Merger Agreement
and the transactions contemplated thereby. Parent has agreed to vote and to
cause its affiliates (including, without limitation, the Purchaser) to vote all
Shares owned by them in favor of adoption of the Merger Agreement.
Parent, Purchaser and the Company have each agreed that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries as
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<PAGE> 24
provided in their respective charters or by-laws or otherwise in effect as of
the date of the Merger Agreement with respect to matters occurring prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect. To the maximum extent permitted by the NYBCL, such indemnification shall
be mandatory rather than permissive and the Surviving Corporation shall advance
expenses in connection with such indemnification. In addition, Parent has agreed
that for three years after the Effective Time, Parent will provide, pursuant to
a policy maintained by it, or will cause the Surviving Corporation to use its
best efforts to provide, officers' and directors' liability insurance and
fiduciary insurance in respect of acts or omissions occurring prior to the
Effective Time covering each such Person currently covered by the Company's
officers' and directors' liability insurance policy on terms with respect to
coverage and amount no less favorable than those of such policy in effect on the
date of the Merger Agreement, except that the Surviving Corporation shall not be
required to pay annually more than two times the current annual premium.
Parent has agreed to guarantee the performance by Purchaser of its
obligations under the Merger Agreement and the indemnification obligations of
the Surviving Corporation pursuant to the preceding paragraph.
The Merger Agreement provides that the Company, the Purchaser and Parent
will each use all reasonable efforts to consummate the transactions contemplated
by the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations by the Company as to undisclosed
liabilities, certain changes or events concerning its businesses, compliance
with applicable law, employee benefit plans, litigation and environmental
liabilities. In addition, the Company represented to Parent and the Purchaser
that the Board, at a meeting duly called and held, has (i) determined that the
Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger, are fair to, and in the best interests of, the shareholders of
the Company, (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, in all respects and
that such approval constitutes approval of the Offer, the Merger Agreement and
the Merger for purposes of (A) Sections 902 and 912 of the New York Business
Corporation Law and similar statutes of other states that might be deemed
applicable, (B) paragraph 1(a) of Article SEVENTH of the Company's certificate
of incorporation and (C) Section 11(a)(ii)(B) of the Rights Agreement. The
Company has also represented to the Parent and the Purchaser that it has taken
all necessary action so that none of the execution of the Merger Agreement, the
making of the Offer, the acquisition of Shares pursuant to the Offer or the
consummation of the Merger will (i) cause the Rights to become exercisable, (ii)
cause any person to become an Acquiring Person (as defined below) or (iii) give
rise to a Distribution Date or a Triggering Event (as each such term is defined
below).
Conditions to the Merger. The obligations of each of Parent, the Purchaser
and the Company to effect the Merger are subject to the satisfaction of certain
conditions, including: (a) the Merger Agreement shall have been adopted by the
affirmative vote of the shareholders of the Company by the requisite vote in
accordance with applicable law; (b) no statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or enforced by any U.S. court or U.S. governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the Merger; (c)
any waiting period applicable to the Merger under the HSR Act shall have
terminated or expired; and (d) Purchaser shall have purchased Shares pursuant to
the Offer.
Termination. The Merger Agreement may be terminated: (a) by mutual written
consent of Parent, Purchaser and the Company; (b) by Parent and Purchaser or the
Company if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued a final order, decree or
ruling or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable; (c) by Parent and Purchaser if due to an
occurrence or circumstance which would result in a failure to satisfy any of the
conditions set forth in Section 15 hereto, Purchaser shall have (i) failed to
commence the Offer within five days following the initial public announcement of
the Offer, (ii) terminated the Offer or (iii) failed to pay for Shares pursuant
to the Offer within 75 days following the commencement of the Offer; (d) by the
Company if (i) there shall not have been a material breach of any
representation, warranty, covenant or agreement on the
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<PAGE> 25
part of the Company and the Purchaser shall have (A) failed to commence the
Offer within five days following the initial public announcement of the Offer,
(B) terminated the Offer or (C) failed to pay for Shares pursuant to the Offer
within 75 days following the commencement of the Offer or (ii) prior to the
purchase of Shares pursuant to the Offer, a corporation, partnership, person or
other entity or group shall have made a bona fide offer that the Board by a
majority vote determines in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the written opinion of legal
counsel, is more favorable to the Company's shareholders than the Offer and the
Merger, provided that such termination under this clause (ii) shall not be
effective until payment of the Third Party Acquisition Fee (as defined below);
(e) by Parent and Purchaser prior to the purchase of Shares pursuant to the
Offer if (i) there shall have been a breach of any representation or warranty on
the part of the Company having a Material Adverse Effect (as defined below) on
the Company or materially adversely affecting (or materially delaying) the
consummation of the Offer, (ii) there shall have been a breach of any covenant
or agreement on the part of the Company resulting in a Material Adverse Effect
on the Company or materially adversely affecting (or materially delaying) the
consummation of the Offer which shall not have been cured prior to the earlier
of (A) 10 days following notice of such breach and (B) two business days prior
to the date on which the Offer expires, (iii) the Company shall engage in
negotiations with any entity or group (other than Parent or Purchaser) that has
proposed a Third Party Acquisition (as defined below), (iv) the Board shall have
withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner
adverse to Purchaser its approval or recommendation of the Offer, the Merger
Agreement or the Merger or shall have recommended another offer, or shall have
adopted any resolution to effect any of the foregoing or (v) the Minimum
Condition shall not have been satisfied by the expiration date of the Offer and
on such date an entity or group (other than Parent or Purchaser) shall have made
and not withdrawn a proposal with respect to a Third Party Acquisition; or (f)
by the Company if (i) there shall have been a breach of any representation or
warranty on the part of Parent or Purchaser which materially adversely affects
(or materially delays) the consummation of the Offer or (ii) there shall have
been a material breach of any covenant or agreement on the part of Parent or
Purchaser and which materially adversely affects (or materially delays) the
consummation of the Offer which shall not have been cured prior to the earliest
of (A) 10 days following notice of such breach and (B) two business days prior
to the date on which the Offer expires.
Termination Fee. Pursuant to the Merger Agreement, in the event Parent and
Purchaser terminate the Merger Agreement pursuant to clause (e)(i) or (e)(ii) of
the preceding paragraph, the Company shall pay to Parent the amount of $20
million as liquidated damages immediately upon such a termination. If, (i)
Parent and Purchaser terminate the Merger Agreement pursuant to clause (e)(ii),
(e)(iii), (e)(iv) or (e)(v) of the preceding paragraph and, within 12 months
thereafter the Company enters into an agreement with respect to a Third Party
Acquisition, or a Third Party Acquisition occurs, involving any party (or any
affiliate thereof) (x) with whom the Company (or its agents) had negotiations
with a view to a Third Party Acquisition, (y) to whom the Company (or its
agents) furnished information with a view to a Third Party Acquisition or (z)
who had submitted a proposal or expressed an interest in a Third Party
Acquisition, in the case of each of clauses (x), (y) and (z) after the date
hereof and prior to such termination; or (ii) Parent and Purchaser terminate the
Merger Agreement pursuant to clause (e)(iii), (e)(iv) or (e)(v) of the preceding
paragraph, and within 12 months thereafter a Third Party Acquisition shall occur
involving a consideration for Shares (including the value of any stub equity) in
excess of the price per share paid pursuant to the Offer; or (iii) the Company
terminates the Merger Agreement pursuant to clause (d)(ii) of the preceding
paragraph, then the Company shall pay to Parent and Purchaser, within one
business day following the execution and delivery of such agreement or such
occurrence, as the case may be, or simultaneously with such termination pursuant
to clause (d)(ii) of the preceding paragraph, a fee, in cash, of $50,000,000;
provided, however, that the Company in no event shall be obligated to pay more
than one such $50,000,000 fee with respect to all such agreements and
occurrences and such termination. In case liquidated damages shall have been
paid pursuant to the first sentence of this paragraph in connection with such a
termination, the amount so paid, minus certain fees and expenses paid shall be
credited against the amount payable pursuant to this paragraph.
"Third Party Acquisition" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Parent, Purchaser any affiliate thereof (a
"Third
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Party"); (ii) the acquisition by Third Party of 30% or more of the total assets
of the Company and its subsidiaries, taken as a whole; (iii) the acquisition by
Third Party of 30% or more of the outstanding Shares; (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the repurchase by the Company or any of its
subsidiaries of more than 20% of the outstanding Shares, other than a repurchase
which was not approved by the Company or publicly announced prior to the
termination of the Merger Agreement and which is not part of a series of
transactions resulting in a change of control.
Upon the termination of the Merger Agreement for any reason prior to the
purchase of Shares by Purchaser pursuant to the Offer (other than (i)
termination by the Company upon a breach by Parent or the Purchaser and (ii)
termination in circumstances requiring the Company to pay liquidated damages)
the Company shall reimburse Parent, Purchaser and their affiliates (not later
than one business day after submission of statements therefor) for all actual
documented out-of-pocket fees and expenses, not to exceed $8,800,000, actually
and reasonably incurred by any of them or on their behalf in connection with the
Offer and the Merger and the consummation of all transactions contemplated by
the Merger Agreement (including, without limitation, fees payable to financing
sources, investment bankers, counsel to any of the foregoing, and accountants).
Pursuant to the Merger Agreement, in the event of the termination and
abandonment of the Merger Agreement, the Merger Agreement will become void and
have no effect, without any liability on the part of any party or its directors,
officers or shareholders, other than certain provisions of the Merger Agreement
relating to the termination fee, expenses of the parties and confidentiality of
information, provided, that a party will not be relieved from liability for any
breach of the Merger Agreement.
Costs and Expenses. Except as discussed above, the Merger Agreement
provides that all costs and expenses incurred in connection with the
transactions contemplated by the Merger Agreement shall be paid by the party
incurring such costs and expenses.
THE RIGHTS AGREEMENT
Pursuant to the Rights Agreement, on February 18, 1988 the Board of
Directors of the Company declared a dividend distribution of one Right for each
Share outstanding on March 25, 1988. Each Right issued pursuant to the Rights
Agreement entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock at a
price of $80.00, subject to adjustment.
Until the earlier to occur of (i) ten days following the date (the "Shares
Acquisition Date") of public announcement that a person or group of affiliated
or associated persons acquired, or obtained the right to acquire, beneficial
ownership of 20% or more of the outstanding shares of the Common Stock (an
"Acquiring Person") or (ii) ten days following the commencement or first public
announcement of the intent of any person to commence a tender offer or exchange
offer if, upon consummation thereof, such person would be an Acquiring Person
(the earlier of such dates being called the "Distribution Date"), the Rights are
evidenced by the certificates evidencing the Common Stock. Until the
Distribution Date, the Rights will be transferred with and only with the Shares.
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of Shares as of the close of business on the Distribution Date and such separate
Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire at the close of business on January 31, 1998 unless earlier redeemed by
the Company as described below.
In the event that (i) the Company is the surviving corporation in a merger
with an Acquiring Person and its Common Stock is not changed or exchanged, (ii)
a person (other than certain specified persons) becomes the beneficial owner of
more than 30% of the then outstanding Shares (except pursuant to an offer for
all outstanding Shares of which the Independent Directors (as defined below)
determined to be fair to and otherwise in the best interests of the Company and
its shareholders), (iii) an Acquiring Person engages in one or more
"self-dealing" transactions or transfers assets as set forth in the Rights
Agreement, or (iv) during
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such time as there is an Acquiring Person, the Company fails to pay certain
dividends or an event occurs which results in such Acquiring Person's ownership
interest being increased by more than 1% (e.g., a reverse stock split), at any
time following the Distribution Date, each holder of a Right will thereafter
have the right to receive, upon exercise, Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. Notwithstanding any of the
foregoing, following the occurrence of any of the events set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person will be null
and void.
In the event that, at any time following the Shares Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction
(other than a merger described in the immediately preceding paragraph or a
merger which follows an offer described in the immediately preceding paragraph),
or (ii) more than 50% of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided as set forth above) shall thereafter have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the exercise price of the Right. The events set forth in this paragraph
and in the preceding paragraph are referred to as the "Triggering Events."
At any time prior to the earlier of (i) 5:00 P.M. New York City time on the
tenth day following the Shares Acquisition Date and (ii) January 31, 1998, the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price"). Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the concurrence of a
majority of the Independent Directors. Thereafter, the Company's right of
redemption may be reinstated if an Acquiring Person reduces his beneficial
ownership to 10% or less of the outstanding shares of common stock of the
Company in a transaction or series of transactions not involving the Company or
any of its subsidiaries and there is no other Acquiring Person. Immediately upon
the action of the Board of Directors of the Company electing to redeem the
Rights with, if required, the concurrence of the Independent Directors, the
Company shall make announcement thereof, and upon such action, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Other than those provisions relating to the principal economic terms of the
Rights, any of the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company prior to the Distribution Date. After the
Distribution Date or the Shares Acquisition Date, the provisions of the Rights
Agreement may be amended by the Board (in certain circumstances, with the
concurrence of the Independent Directors) in order to cure any ambiguity, defect
or inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or, with
certain limitations, to shorten or lengthen any time period under the Rights
Agreement.
The term "Independent Director" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Agreement, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Independent Directors,
but shall not include an Acquiring Person, or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing entities.
Whereas (i) the Offer is an offer to purchase all of the outstanding Shares
and the Board has unanimously determined that the Offer described herein is fair
to and in the best interests of the Company and its shareholders and (ii) on
March 6, 1993, the Company amended the Rights Agreement to provide that neither
Parent nor any direct or indirect subsidiary thereof shall be an Acquiring
Person and to exclude Parent and any direct or indirect subsidiary thereof from
certain provisions of the Rights Agreement, the acquisition of Shares pursuant
to the Offer or the consummation of the Merger will not (a) cause any person to
become an Acquiring Person, (b) cause the Distribution Date to occur or (c) give
rise to a Triggering Event.
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11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY.
Purpose of the Offer. The purpose of the Offer is for the Purchaser to
acquire control of, and an equity interest in, the Company. The purpose of the
Merger is to acquire all outstanding Shares not tendered and purchased pursuant
to the Offer. The acquisition of the entire equity interest in the Company has
been structured as a cash tender offer followed by a cash merger in order to
provide a prompt and orderly transfer of ownership of the Company from the
public shareholders to Parent and to provide shareholders with cash for all
their Shares. The purchase of Shares pursuant to the Offer will increase the
likelihood that the Merger will be effected.
Except as noted in this Offer to Purchase, neither Parent nor the Purchaser
has any present plans or proposals that would result in an extraordinary
corporate transaction, such as a merger, reorganization, liquidation, relocation
of operations, or sale or transfer of assets, involving the Company or any of
its subsidiaries, or any material changes in the Company's corporate structure
or business or the composition of its management or personnel.
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE
LISTING; REGISTRATION UNDER THE EXCHANGE ACT. The purchase of Shares pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and may reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by shareholders other
than the Purchaser. The Purchaser cannot predict whether the reduction in the
number of Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for or marketability of the Shares or
whether it would cause future market prices to be greater or less than the Offer
price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NYSE for continued listing and
may, therefore, be delisted from such exchange. According to the NYSE's
published guidelines, the NYSE could consider delisting the Shares if, among
other things, the number of publicly-held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings of
10% or more) were less than 600,000, there were less than 1,200 holders of at
least 100 shares or the aggregate market value of the publicly-held Shares were
less than $5 million. If, as a result of the purchase of Shares pursuant to the
Offer, the Shares no longer meet the requirements of the NYSE for continued
listing and the listing of Shares is discontinued, the market for the Shares
could be adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
trade on another securities exchange or in the over-the-counter market and that
price quotations for the Shares would be reported by such exchange or through
NASDAQ or other sources. The extent of the public market for the Shares and
availability of such quotations would, however, depend upon such factors as the
number of holders and/or the aggregate market value of the publicly-held Shares
at such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated if the Shares are not listed on a national
securities exchange and there are less than 300 holders of record. Termination
of the registration of the Shares under the Exchange Act would substantially
reduce the information required to be furnished by the Company to holders of
Shares and to the Commission and would make certain of the provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy or information statement in
connection with shareholder action and the related requirement of an annual
report to shareholders and the requirements of Rule 13e-3
24
<PAGE> 29
under the Exchange Act with respect to "going private" transactions, no longer
applicable to the Shares. Furthermore, "affiliates" of the Company and persons
holding "restricted securities" of the Company may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Securities Act"). If registration of the Shares
under the Exchange Act were terminated, the Shares would no longer be "margin
securities" or eligible for listing on a securities exchange or NASDAQ
reporting. It is the current intention of Parent to deregister the Shares after
consummation of the Offer if the requirements for termination of registration
are met.
13. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger
Agreement, the Company should (i) split, combine or otherwise change the Shares
or its capitalization, (ii) issue or sell any additional securities of the
Company or otherwise cause an increase in the number of outstanding securities
of the Company (except for Shares issuable upon the exercise of employee stock
options outstanding on the date of the Merger Agreement) or (iii) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares, then, without prejudice to the Purchaser's rights under
Sections 1 and 15, the Purchaser, in its sole discretion, subject to the terms
of the Merger Agreement, may make such adjustments as it deems appropriate in
the purchase price and other terms of the Offer.
If, on or after the date of the Merger Agreement, the Company should
declare or pay any dividend on the Shares or make any distribution (including,
without limitation, cash dividends, the issuance of additional Shares pursuant
to a stock dividend or stock split, the issuance of other securities or the
issuance of rights for the purchase of any securities) with respect to the
Shares that is payable or distributable to shareholders of record on a date
prior to the transfer to the name of the Purchaser or its nominee or transferee
on the Company's stock transfer records of the Shares purchased pursuant to the
Offer, then, without prejudice to the Purchaser's rights under Sections 1 and
15, any such dividend, distribution or right to be received by the tendering
shareholders will be received and held by the tendering shareholders for the
account of the Purchaser and will be required to be promptly remitted and
transferred by each tendering shareholder to the Depositary for the account of
the Purchaser, accompanied by appropriate documentation of transfer. Pending
such remittance and subject to applicable law, the Purchaser will be entitled to
all rights and privileges as owner of any such dividend, distribution or right
and may withhold the entire purchase price or deduct from the purchase price the
amount or value thereof, as determined by the Purchaser in its sole discretion.
14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION. The Purchaser
expressly reserves the right, in its sole discretion, at any time or from time
to time, regardless of whether or not any of the events set forth in Section 15
shall have occurred or shall have been determined by the Purchaser to have
occurred, subject to the terms of the Merger Agreement and applicable rules of
the Commission, (i) to extend the period of time during which the Offer is open
and thereby delay acceptance for payment of, and the payment for, any Shares, by
giving oral or notice of such extension to the Depositary and (ii) to amend the
Offer in any respect by giving oral or written notice of such amendment to the
Depositary. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer pursuant to Section
15. Any extension, amendment or termination will be followed as promptly as
practicable by public announcement thereof, the announcement in the case of an
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date in accordance with
the public announcement requirements of Rule 14d-4(c) under the Exchange Act.
Any reduction in the purchase price pursuant to the Merger Agreement will be
considered an amendment to the Offer, and will be followed by the appropriate
announcement. Without limiting the obligation of the Purchaser under such Rule
or the manner in which the Purchaser may choose to make any public announcement,
the Purchaser currently intends to make announcements by issuing a release to
the Dow Jones News Service or the Reuters News Service.
The Purchaser also reserves the right, in its sole discretion, in the event
any of the conditions specified in Section 15 shall not have been satisfied and
so long as Shares have not theretofore been accepted for payment, to delay
(except as otherwise required by applicable law) acceptance for payment of or
payment for Shares or to terminate the Offer and not accept for payment or pay
for Shares.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant
25
<PAGE> 30
to the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer, the Depositary may retain tendered shares on behalf of the
Purchaser, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to withdrawal rights as described in Section 4.
However, the ability of the Purchaser to delay the payment for Shares which the
Purchaser has accepted for payment is limited by Rule 14e-1(c) under the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by or on behalf of holders of securities
promptly after the termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer
(including the Minimum Condition), the Purchaser will disseminate additional
tender offer materials and extend the Offer to the extent required by Rules 14d-
4(c) and 14d-6(d) under the Exchange Act. The minimum period during which the
Offer must remain open following material changes in the terms of the Offer or
information concerning the Offer, other than a change in price or a change in
percentage of securities sought, will depend upon the facts and circumstances,
including the relative materiality of the terms or information. With respect to
a change in price or a change in percentage of securities sought, a minimum ten
business day period is generally required to allow for adequate dissemination to
shareholders and investor response. If prior to the Expiration Date, the
Purchaser should decide to increase the price per Share being offered in the
Offer, such increase will be applicable to all shareholders whose Shares are
accepted for payment pursuant to the Offer. As used in this Offer to Purchase,
"business day" means any day other than Saturday, Sunday or a federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time as computed in accordance with Rule 14d-1 under the Exchange Act.
15. CERTAIN CONDITIONS TO THE OFFER. Notwithstanding any other provisions
of the Offer, Purchaser shall not be required to accept for payment or pay for,
and may delay the acceptance for payment of, or the payment for, any Shares, and
may terminate the Offer and not accept for payment or pay for any Shares, if (i)
immediately prior to the expiration of the Offer (as it may be extended in
accordance with the Offer), the Minimum Condition shall not have been satisfied,
(ii) any applicable waiting period under the HSR Act shall not have expired or
been terminated prior to the expiration of the Offer or (iii) at any time on or
after March 7, 1994 and prior to the acceptance for payment of Shares, Purchaser
makes a determination (which shall be made in good faith) that any of the
following conditions exist:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction proposed, sought, promulgated,
enacted, entered, enforced or deemed applicable to the Offer, or any other
action shall have been taken, proposed or threatened, by any state or
federal government or governmental authority or by any U.S. court, other
than the routine application to the Offer, the Merger or other subsequent
business combination of waiting periods under the HSR Act, that presents a
substantial likelihood of (1) making the acceptance for payment of, or the
payment for, some or all of the Shares illegal or otherwise prohibiting,
restricting or significantly delaying consummation of the Offer, (2)
imposing material limitations on the ability of Purchaser to acquire or
hold or to exercise effectively all rights of ownership of the Shares,
including, without limitation, the right to vote any Shares purchased by
Purchaser on all matters properly presented to the shareholders of the
Company, or effectively to control in any material respect the business,
assets or operations of the Company, its subsidiaries, Purchaser or any of
their respective affiliates, or (3) otherwise having a Material Adverse
Effect on the Company, Parent or Purchaser; or
(b) any material adverse change shall have occurred or be threatened,
or Parent or Purchaser shall have become aware of any fact or circumstance,
that has had or is reasonably likely to have a Material Adverse Effect on
the Company; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
(ii) the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not mandatory), (iii)
the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, and
having a Material Adverse Effect on the Company or
26
<PAGE> 31
materially adversely affecting (or materially delaying) the consummation of
the Offer, (iv) any limitation (whether or not mandatory), by any U.S.
governmental authority or agency on, or any other event that, in the
judgment of Purchaser, is reasonably likely to materially adversely affect,
the extension of credit by banks or other financial institutions, (v) from
the date of the Merger Agreement through the date of termination or
expiration of the Offer, a decline of at least 25% in the Standard & Poor's
500 Index or (vi) in the case of any of the situations described in clauses
(i) through (v) inclusive, existing at the date of the commencement of the
Offer, a material acceleration or worsening thereof; or
(d) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its
affiliates, or any group of which any of them is a member shall have
acquired beneficial ownership of more than 30% of the outstanding Shares or
shall have entered into a definitive agreement or an agreement in principle
with the Company with respect to a tender offer or exchange offer for any
Shares or a merger, consolidation or other business combination with or
involving the Company or any of its subsidiaries; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
(f) prior to the purchase of Shares pursuant to the Offer, the Board
shall have withdrawn or modified (including by amendment of the Schedule
14D-9) in a manner adverse to Purchaser its approval or recommendation of
the Offer, the Merger Agreement or the Merger or shall have recommended
another offer, or shall have adopted any resolution to effect any of the
foregoing
which, in the sole judgment of Purchaser in any such case, and regardless of the
circumstances (including any action or omission by Purchaser) giving rise to any
such condition, makes it inadvisable to proceed with such acceptance for
payment. When used in connection with a corporation, the term "Material Adverse
Effect" means any change or effect (other than, with respect to the Company,
changes or effects, described in the letter delivered by the Company to Parent
dated the date of the Merger Agreement) that is or is reasonably likely to be
materially adverse to the business, results of operations or condition
(financial or otherwise) of such corporation and its subsidiaries, taken as a
whole, other than, with respect to the Company, any change or effect arising out
of general economic conditions unrelated to any business in which the Company is
engaged.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. Except as described in
this Section 16, based on a review of publicly available filings by the Company
with the Commission and other publicly available information concerning the
Company, neither Parent nor the Purchaser is aware of any license or regulatory
permit that appears to be material to the business of the Company and its
subsidiaries, taken as a whole, that might be adversely affected by the
acquisition of Shares by the Purchaser pursuant to the Offer, the Merger or
otherwise or of any approval or other action by any governmental, administrative
or regulatory agency or authority, domestic or foreign, that would be required
prior to the acquisition of Shares by the Purchaser pursuant to the Offer, the
Merger or otherwise. Should any such approval or other action be required,
Parent and the Purchaser currently contemplate that it will be sought. While the
Purchaser does not currently intend to delay the acceptance for payment of
Shares tendered pursuant to the Offer pending the outcome of any such matter,
there can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that
adverse consequences might not result to the business of the Company or the
Purchaser Entities or that certain parts of the business of the Company or the
Purchaser Entities might not have to be disposed of in the event that such
approvals were not obtained or any other actions were not taken. The Purchaser's
obligation under the Offer to accept for payment and pay for Shares is subject
to certain conditions, including conditions relating to the legal matters
discussed in this Section 16. See Section 15.
State Takeover Statutes. The Company is incorporated under the laws of the
State of New York. Section 912 of the NYBCL prohibits certain "business
combinations" (defined to include mergers and consolidations) involving a New
York corporation and an "interested shareholder" (defined generally as a person
who is the beneficial owner of 20% or more of the outstanding voting stock of
such New York corporation) for a period of five years following the date on
which such interested shareholder became such (such date, a "stock acquisition
date") unless such business combination or the purchase of stock made by
27
<PAGE> 32
such interested shareholder is approved by the board of direction of such New
York corporation prior to such interested shareholder's stock acquisition date
or certain other statutory conditions have been met. At a meeting on March 6,
1994, the Board of Directors approved the Merger Agreement, the Merger, the
Offer and the Purchaser's purchase of Shares pursuant to the Offer. Accordingly,
the provisions of Section 912 of the NYBCL have been satisfied with respect to
the Offer and the Merger and such provisions will not delay the consummation of
the Merger. Article 16 of the NYBCL also requires a bidder for shares of a New
York corporation to file a registration statement with the attorney general and
satisfy certain disclosure requirements. Parent and the Purchaser have filed
such a registration statement and this Offer to Purchase sets forth the
information required to be disclosed pursuant to Article 16.
A number of other states adopted "takeover" statutes that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or places of business in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act, which,
as a matter of state securities law, made takeovers of corporations meeting
certain requirements more difficult. However, in CTS Corp. v. Dynamics Corp. of
America, the Supreme Court held that a state may, as a matter of corporate law
and, in particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without prior approval of the remaining shareholders, provided that
such laws were applicable under certain conditions, in particular, that the
corporation has a substantial number of shareholders in the state and is
incorporated there.
The Company, directly or though subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted "takeover"
statutes. The Purchaser does not know whether any of these statutes will, by
their terms, apply to the Offer, and has not complied with any such statutes
other than those adopted by the State of New York. To the extent that certain
provisions of these statutes purport to apply to the Offer, the Purchaser
believes that there are reasonable bases for contesting such statutes. If any
person should seek to apply any state takeover statute, the Purchaser would take
such action as then appears desirable, which action may include challenging the
validity or applicability of any such statute in appropriate court proceedings.
If it is asserted that one or more takeover statues apply to the Offer, and it
is not determined by an appropriate court that such statute or statutes do not
apply or are invalid as applied to the Offer, the Purchaser might be required to
file certain information with, or receive approvals from, the relevant state
authorities, and the Purchaser might be unable to purchase or pay for Shares
tendered pursuant to the Offer, or be delayed in continuing or consummating the
Offer. In such case, the Purchaser may not be obligated to accept for payment or
pay for Shares tendered. At the meeting held on March 6, 1994, the Board amended
the by-laws of the Company to provide that, to the extent the Company is
permitted to do so, the takeover statutes of any state, other than the State of
New York, shall not apply to the Company. See Section 15.
Antitrust. Under the HSR Act, certain acquisitions may not be consummated
unless information has been furnished to the Federal Trade Commission and the
Antitrust Division of the Department of Justice and certain waiting period
requirements have been satisfied. The Offer and the acquisition of Shares
pursuant to the Merger Agreement are subject to the HSR Act, which provides that
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission ("FTC") and
certain waiting period requirements have been satisfied. Parent expects to file
on or before March 9, 1994 a Notification and Report Form with respect to the
Offer.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares under the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by Parent. Accordingly, if
such filing is made on March 9, 1994, the waiting period with respect to the
Offer will expire at 11:59 p.m., New York City time, on March 24, 1994, unless
Parent receives a request for additional information or documentary material, or
the Antitrust Division and the FTC terminate the waiting period
28
<PAGE> 33
prior thereto. If, within such 15-day waiting period, either the Antitrust
Division or the FTC requests additional information or material from Parent
concerning the Offer, the waiting period will be extended and would expire at
11:59 p.m., New York City time, on the tenth calendar day after the date of
substantial compliance by Parent with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the HSR Act. Thereafter, such waiting period may be extended only by court order
or with the consent of Parent. The Purchaser will not accept for payment Shares
tendered pursuant to the Offer unless and until the waiting period requirements
imposed by the HSR Act with respect to the Offer have been satisfied. See
Section 15.
No separate HSR Act waiting period requirements with respect to the Merger
Agreement will apply, so long as the 15-day waiting period expires or is
terminated. Thus, all Shares may be acquired pursuant to the Offer at the close
of the 15-day waiting period or on the tenth calendar day after the date of
substantial compliance with a request for additional information.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of Shares
pursuant to the Offer and the Merger Agreement. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise or seeking divestiture of Shares acquired by the
Purchaser or divestiture of substantial assets of Parent or its subsidiaries.
Private parties and state attorneys general may also bring legal action under
the antitrust laws under certain circumstances. Based upon an examination of
publicly available information relating to the businesses in which Parent and
the Company are engaged, Parent and the Purchaser believe that the acquisition
of Shares by the Purchaser will not violate the antitrust laws. Nevertheless,
there can be no assurance that a challenge to the Offer or other acquisition of
Shares by the Purchaser on antitrust grounds will not be made or, if such a
challenge is made, of the result. See Section 15 for certain conditions to the
Offer, including conditions with respect to litigation and certain governmental
actions.
Margin Rules. The Purchaser and Parent believe that the requirements of the
margin regulations promulgated by the Federal Reserve Board are not applicable
to the financing of the Offer and the Merger.
Short-Form Merger. Section 905 of the NYBCL would permit the Merger to
occur without a vote of the Company's shareholders (a "short-form merger") if
the Purchaser were to acquire at least 90% of the outstanding Shares in the
Offer. However, because Article SEVENTH of the Company's certificate of
incorporation imposes certain conditions on short-form mergers that will not be
satisfied, the Merger will require the approval of the Company's shareholders
even if the Purchaser acquires at least 90% of the outstanding Shares in the
Offer. Therefore, consummation of the Merger may occur at a date later than the
date on which the Merger could have occurred if effected as a short-form merger.
In any event, pursuant to the Merger Agreement, the Merger will not occur on or
prior to May 18, 1994.
17. FEES AND EXPENSES. Parent and the Purchaser have engaged Bear Stearns
as the Dealer Manager in connection with the Offer and as financial advisor in
connection with the Offer and the Merger. Parent has agreed to pay Bear Stearns
$2 million as compensation for its services to date as financial advisor to
Parent and a fee of $8 million that will be payable to Bear Stearns upon
consummation of the Offer. The Purchaser also has agreed to reimburse Bear
Stearns for its expenses, including reasonable counsel fees, and to indemnify it
against certain liabilities and expenses, including certain liabilities under
the federal securities laws.
The Purchaser has retained Morrow & Co., Inc. to act as the Information
Agent and First Chicago Trust Company of New York to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, facsimile, telegraph and personal interview and may
request brokers, dealers, commercial banks, trust companies and other nominees
to forward the Offer material to beneficial owners. The Information Agent and
Depositary each will receive reasonable and customary compensation for their
services, will be reimbursed for certain reasonable out-of-pocket expenses and
will be indemnified against certain liabilities and expenses in connection
therewith, including certain liabilities under the federal securities laws.
Neither the Information Agent nor the Depositary has been retained to make
solicitations or recommendations in connection with the Offer.
29
<PAGE> 34
Neither the Purchaser nor Parent will pay any fees or commissions to any
broker or dealer or other persons for soliciting tenders of Shares pursuant to
the Offer (other than the fees of the Dealer Manager and the Information Agent).
Brokers, dealers, commercial banks and trust companies will be reimbursed by the
Purchaser for reasonable expenses incurred by them in forwarding material to
their customers.
18. MISCELLANEOUS. The Purchaser is not aware of any jurisdiction in which
the making of the Offer is not in compliance with applicable law. If the
Purchaser becomes aware of any jurisdiction in which the making of the Offer
would not be in compliance with applicable law, the Purchaser will make a good
faith effort to comply with any such law. If, after good faith effort, the
Purchaser cannot comply with any such law, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares residing in
such jurisdiction. In those jurisdictions where securities or blue sky laws
require the Offer to be made by a licensed broker or dealer, the Offer is being
made on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR PARENT NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
The Purchaser has filed with the Commission the Schedule 14D-1 pursuant to
Rule 14d-3 under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-1
and any amendments thereto, including exhibits, may be inspected and copies may
be obtained at the same places and in the same manner as set forth in Section 7
(except they will not be available at the regional offices of the Commission).
MMC ACQUISITION CORP.
March 8, 1994
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<PAGE> 35
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF
PARENT
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of Parent
and certain other information are set forth below. Unless otherwise indicated
below, the address of each director and officer is c/o Martin Marietta
Corporation, 6801 Rockledge Drive, Bethesda, Maryland 20817. No information is
provided in the right-hand column where the individual has occupied the position
indicated in the middle column for the past five years. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Parent. All directors and officers listed below are citizens of
the United States. Directors are identified by a single asterisk.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION AND
NAME HELD WITH PARENT** BUSINESS EXPERIENCE**
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
Norman R. Augustine* (58) Chairman of the Board
(1988), Chief Executive
Officer (1987) and
Director (1986)
A. Thomas Young* (55) President and Chief Executive Vice President, 1989
Operating Officer (1990)
and Director (1989)
Richard G. Adamson (61) Corporate Vice President, Corporate Vice President, Business
Strategic Development Development, 1988-1993
(1993)
Joseph D. Antinucci (53) Corporate Vice President President, Martin Marietta Aero & Naval
(1993) and President, Systems, 1984-1993
Electronics and Missiles
(1993)
Marcus C. Bennett* (58) Corporate Vice President
(1984), Chief Financial
Officer (1988), and
Director (1993)
Peter A. Bracken (52) Corporate Vice President President, Martin Marietta Electronics,
(1992) and President, Information & Missiles, 1992-1993; Vice
Information Group (1993) President, Technical Operations for
Information Systems, 1986-1992
Michael F. Camardo (52) Corporate Vice President President, GE Government Services,
(1993) and President, Inc.,+ 1990-1993; President, GE
Services Group (1993) Government Services,+ 1988-1990
Thomas A. Corcoran (49) Corporate Vice President Vice President and General Manager,
(1993) and President, General Electric Company,++ 1990-1993;
Electronics Group (1993) General Manager, GE Government
Communications,+ 1988-1990
Clyde C. Hopkins (64) Corporate Vice President President, Martin Marietta Energy
(1991) and President, Systems, Inc., 1988-1993
Energy Group (1993)
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION AND
NAME HELD WITH PARENT** BUSINESS EXPERIENCE**
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
Alexander L. Horvath (52) Corporate Vice President Vice President and General Manager, GE
(1993); President, Martin Ocean, Radar & Sensor Systems,++ 1992-
Marietta Ocean, Radar & 1993; General Manager, GE,++ 1989-1992
Sensor Systems (1993)
Bobby F. Leonard (61) Corporate Vice President,
Human Resources (1981)
James W. McAnally (57) President, Martin President, Martin Marietta Defense
Marietta Astronautics Systems & Communications, 1987-1993
(1993)
Janet L. McGregor (40) Treasurer (1992) Deputy Treasurer, 1991-1992; Assistant
Treasurer, 1984-1991
Frank H. Menaker, Jr. Corporate Vice President
(53) (1982) and General
Counsel (1981)
Dan A. Peterson (63) Corporate Vice President President, Information Systems,
(1986), and Vice 1986-1989
President, Washington
Operations (1989)
Robert J. Polutchko (56) Corporate Vice President Vice President, Technical Operations,
(1991) and Vice 1991-1993; President, Information
President, Space Group Systems Group, 1989-1991; President,
Technical Operations Martin Marietta Communications Systems,
(1993) 1988-1989
Michael A. Smith (50) Corporate Vice President Vice President and General Manager of
(1993); President, Martin General Electric Company,++ 1989-1993
Marietta Astro Space
(1993)
Peter B. Teets (52) Corporate Vice President
(1985) and President,
Space Group (1993)
Stephen P. Zelnak, Jr. Corporate Vice President
(49) (1989) and President,
Materials Group (1993)***
A. James Clark* (66) Director (since 1981), Mr. Clark has served since 1987 as
member of the Chairman of the Board of Clark
Compensation, Executive, Enterprises, Inc., a holding company
and Finance Committees engaged in the construction business.
He has also served as its President
since 1972. Mr. Clark serves on the
Boards of Directors of GEICO
Corporation and Potomac Electric Power
Company. In addition, Mr. Clark is a
member of the Board of Trustees of The
Johns Hopkins University.
</TABLE>
I-2
<PAGE> 37
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION AND
NAME HELD WITH PARENT** BUSINESS EXPERIENCE**
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
Edwin I. Colodny* (67) Director (since 1987), Mr. Colodny is Of Counsel to Paul,
member of the Executive, Hastings, Janofsky & Walker. He served
Finance, and Nominating as Chief Executive Officer of USAir,
Committees Inc. from 1975 until retiring in June
1991 and as Chairman of the Board of
USAir, Inc. from 1978 until July 1992.
He also served as Chairman of the Board
of USAir Group, Inc. from 1983 until
retiring from that position in July
1992. Mr. Colodny serves on the Board
of Directors of USAir Group, Inc.,
USAir Inc., COMSAT Corporation,
Esterline Technologies Corp., and the
United States Chamber of Commerce. In
addition, Mr. Colodny is a member of
the Board of Trustees of the University
of Rochester.
James L. Everett, III* Director (since 1976), Mr. Everett was elected Chief Executive
(67) Chairman of the Officer of Philadelphia Electric
Nominating Committee, Company in 1978 and Chairman of its
member of the Audit and Board of Directors in 1982. He
Ethics and Compensation continued to serve in those capacities
Committees until his retirement in 1988. He serves
on the Boards of Directors of Phillips
& Jacobs, Inc. and Tasty Baking
Company.
Allen E. Murray* (65) Director (since 1991), Mr. Murray was Chairman of the Board
Chairman of the and Chief Executive Officer of Mobil
Compensation Committee, Corporation from 1986 until his
member of the Audit and retirement on March 1, 1994. He serves
Ethics Committee on the Boards of Directors of
Metropolitan Life Insurance Company,
Minnesota Mining and Manufacturing
Company, and Morgan Stanley Group Inc.
Mr. Murray is also a member of the
Board of Trustees of New York
University, a member of the Chase
International Advisory Committee, and
serves as a Director of the American
Petroleum Institute. In addition, Mr.
Murray is a member of The Business
Council, The Business Roundtable, The
Council on Foreign Relations, and The
Trilateral Commission.
</TABLE>
I-3
<PAGE> 38
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION AND
NAME HELD WITH PARENT** BUSINESS EXPERIENCE**
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
Caleb H. Hurtt* (62) Director (since 1987), Mr. Hurtt was President and Chief
member of the Operating Officer of the Corporation
Compensation, Executive, from 1987 until his retirement in
and Finance Committees January 1990. He was its Executive Vice
President in 1987 and a Senior Vice
President from 1983 to 1987. Mr. Hurtt
is Vice Chairman of the Board of
Trustees of Stevens Institute of
Technology. He was Chairman of the
Board of Governors of the Aerospace
Industries Association in 1989 and is a
past Chairman of the NASA Advisory
Council.
Melvin R. Laird* (71) Director (since 1981), Mr. Laird has served as a Director of
member of the Audit and The Reader's Digest Association, Inc.
Ethics, Executive, and since 1990 and as its Senior Counsellor
Nominating Committees for National and International Affairs
since 1974. He served as a United
States Congressman for nine terms, as
U.S. Secretary of Defense, and as a
Presidential Counsellor. Mr. Laird is
Chairman of the Board of Directors of
COMSAT Corporation. He serves on the
Boards of Directors of IDS Mutual Fund
Group, Metropolitan Life Insurance
Company, Science Applications
International Corporation, and The
Wallace-Reader's Digest Funds. Mr.
Laird is a Director Emeritus of
Northwest Airlines, Inc. and is a
member of the Public Oversight Board of
the American Institute of Certified
Public Accountants.
Gordon S. Macklin* (65) Director (since 1992), Mr. Macklin is Chairman of White River
Chairman of the Audit and Corporation, a financial services
Ethics Committee, member company. He served as Chairman of the
of the Executive and Board of Hambrecht & Quist, Inc., a
Finance Committees venture capital and investment banking
company, from 1987 until his retirement
in April 1992 and was President of the
National Association of Securities
Dealers, Inc. from 1970 until 1987. He
is also a former director of H&Q
Healthcare Investors. Mr. Macklin
serves on the Boards of Directors of
Fund American Enterprises Holdings,
Inc. and MCI Communications
Corporation. In addition, he serves as
Director of certain of the investment
companies in the Templeton Group of
Funds and as Director, Trustee or
Managing General Partner, as the case
may be, of most of the investment
companies in the Franklin Group of
Funds.
</TABLE>
I-4
<PAGE> 39
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION AND
NAME HELD WITH PARENT** BUSINESS EXPERIENCE**
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
Eugene F. Murphy* (58) Director (since 1993), Mr. Murphy is President and Chief
member of the Executive Officer of GE Aircraft
Compensation and Finance Engines. Until the Aerospace businesses
Committees of General Electric ("GE Aerospace")
were combined with the businesses of
the Corporation in April 1993, he was
President and Chief Executive Officer
of GE Aerospace. Prior to 1992, he was
Senior Vice President of GE
Communications & Services. Mr. Murphy
became a Senior Vice President of GE
upon its merger with RCA Corporation in
1986. He was a member of President
Reagan's National Security
Telecommunications Advisory Committee
and is a former Chairman and permanent
member of the Board of Directors of the
Armed Forces Communications and
Electronics Association. In addition,
Mr. Murphy is a member of the Aerospace
Industries Association Board of
Governors.
John W. Vessey, Jr.* (71) Director (since 1985), General Vessey was Chairman of the
member of the Audit and Joint Chiefs of Staff from 1982 until
Ethics, Executive, and his retirement from active military
Nominating Committees duty in October 1985 after 44 years in
the armed services. He serves on the
Boards of Directors of National
Computer Systems, Inc., Youth Service
USA Inc., and The National Flag Day
Foundation. He also serves on the Board
of Advisors of GA Technologies, Inc.
Lamar Alexander* (53) Director (since 1993), Mr. Alexander is counsel to Baker,
member of the Audit and Worthington, Crossley, Stansberry &
Ethics and Compensation Woolf of Nashville, Tennessee. He
Committees served as U.S. Secretary of Education
from March 1991 until January 1993. He
was President of The University of
Tennessee from July 1988 until March
1991, and he served as the Governor of
the State of Tennessee from 1979 to
1987. Mr. Alexander served on the
Corporation's Board of Directors from
1989 until his confirmation as U.S.
Secretary of Education.
</TABLE>
I-5
<PAGE> 40
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION AND
NAME HELD WITH PARENT** BUSINESS EXPERIENCE**
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
John J. Byrne* (61) Director (since 1978), Mr. Byrne has been Chairman of the
Chairman of the Finance Board and Chief Executive Officer of
Committee, member of the Fund American Enterprises Holdings,
Nominating Committee Inc. (formerly Fireman's Fund
Corporation) since 1985. In addition to
the Boards of Fund American and its
subsidiary, Source One Mortgage
Company, he serves on the Boards of
Directors of New Dartmouth Bank, LTD,
Zurich Reinsurance Centre, Inc.,
Special Olympics International,
American Academy of Actuaries, and is
an Advisory Director of Potomac
Electric Power Company. Mr. Byrne is an
Overseer of the Amos Tuck School of
Business Administration of Dartmouth
College and, the Rutgers University
Foundation.
Edward L. Hennessy, Jr.* Director (since 1983), Mr. Hennessy served as Chairman of the
(65) member of the Board and Chief Executive Officer of
Compensation and AlliedSignal Inc. from May 1979 through
Nominating Committees June 1991. He served as Chairman of
AlliedSignal Inc. from July 1991
through December 1991. Mr. Hennessy
serves on the Boards of Directors of
The Bank of New York, Titan
Pharmaceuticals, Inc., Dycom
Industries, Inc., The Wackenhut
Corporation, and Walden Residential
Properties, Inc. He is a Trustee and
Chairman of the Board of Fairleigh
Dickinson University.
Edward E. Hood, Jr.* (63) Director (since 1993), Mr. Hood joined GE in 1957 after
member of the Audit and service in the U.S. Air Force. He was
Ethics, Executive, and elected a Vice President of GE in 1968
Finance Committees and was Vice Chairman and Executive
Officer of GE in 1979. He was a
Director of GE from 1980 until his
retirement in 1993. Mr. Hood is a
Director of FlightSafety International,
Inc. and the Lincoln Electric Company.
He also serves as Chairman of the Board
of Trustees of Rensselaer Polytechnic
Institute.
</TABLE>
I-6
<PAGE> 41
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRINCIPAL OCCUPATION AND
NAME HELD WITH PARENT** BUSINESS EXPERIENCE**
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ------------------------- ------------------------- ---------------------------------------
<S> <C> <C>
Gwendolyn S. King* (53) Director (since 1992), Mrs. King has been Senior Vice
member of the Audit and President of Corporate and Public
Ethics and Finance Affairs for Philadelphia Electric
Committees Company since October 1992. She served
as Commissioner of the Social Security
Administration from August 1989 through
September 1992. From March 1988 to July
1989, Mrs. King was Executive Vice
President of Gogol & Associates in
Washington, D.C. Mrs. King serves on
the Board of Directors of Monsanto
Company.
</TABLE>
- ---------------
** In April 1993, as a result of the Combination, all of the Executive Officers
of Technologies (then known as Martin Marietta Corporation) assumed the same
offices with Parent and all of the directors of Technologies (then known as
Martin Marietta Corporation) assumed the same positions with Parent. The
above listing does not distinguish between their service with the two
corporations. Mr. Hood and Mr. Murphy assumed their offices in 1993 in
connection with the Combination.
*** In November 1993, Parent's aggregates business and the Common Stock of
Martin Marietta Magnesia Specialties Inc. were transferred to a subsidiary,
Martin Marietta Materials, Inc. On February 24, 1994, approximately 19% of
the common stock of Martin Marietta Materials, Inc. was sold to the public.
Mr. Zelnak is the President, Chief Executive Officer and a Director of
Martin Marietta Materials, Inc. Effective upon the completion of the
offering, Mr. Zelnak resigned his position as a corporate officer of Parent.
+ Route 38, Cherry Hill, New Jersey 08358
++ 3135 Eastern Turnpike, Fairfield, Connecticut 06431
I-7
<PAGE> 42
DIRECTORS AND EXECUTIVE OFFICERS OF
THE PURCHASER
The name, business address, present principal occupation or employment and
five-year employment history of each director and executive officer of Purchaser
and certain other information are set forth below. Unless otherwise indicated
below, the address of each director and officer is c/o Martin Marietta
Corporation, 6801 Rockledge Drive, Bethesda, Maryland 20817. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with Parent. All directors and officers listed below are citizens of
the United States. Directors are identified by a single asterisk.
<TABLE>
<CAPTION>
PRINCIPAL
POSITIONS AND OCCUPATION
OFFICES HELD AND BUSINESS
NAME WITH THE PURCHASER EXPERIENCE
(AGE AT 3/30/94) (YEAR ELECTED) (PAST FIVE YEARS)
- ---------------------------- ---------------------- -------------------------
<S> <C> <C>
John E. Montague* (40) President (1994) Vice President Corporate
Development and Investor
Relations (1991-1994);
Director of Corporate
Development (1988-1991)
Frank H. Menaker, Jr.* (53) Vice President (1994) Corporate Vice President
(1982) and General
Counsel (1981)
Janet L. McGregor (40) Treasurer (1994) Treasurer (1992); Deputy
Treasurer, 1991-1992;
Assistant Treasurer,
1984-1991
Lillian M. Trippett (40) Secretary (1994) Corporate Secretary and
Assistant General
Counsel, 1993 to present;
Director, Washington
Operation, 1989-1993;
Counsel, Subcommittee on
Science, Space and
Technology, U.S. House of
Representatives,
1986-1989
Marcus C. Bennett* (58) Corporate Vice President
(1984), Chief Financial
Officer (1988), and
Director (1993)
</TABLE>
I-8
<PAGE> 43
SCHEDULE II
CERTAIN INFORMATION ABOUT PARENT REQUIRED BY NEW YORK LAW
EDUCATIONAL OPPORTUNITIES
Parent provides assistance to eligible employees participating in study
programs leading to an undergraduate or an advanced degree. Such study programs
must be consistent with Parent's business goals and objectives and applicable to
the employee's field of work. Parent will reimburse the academic costs of
tuition for up to two courses per term.
RELOCATION ADJUSTMENTS
Parent may reimburse job applicants for reasonable and actual interview
expenses, and may reimburse new and existing employees for reasonable and actual
travel and relocation expenses in accordance with the provisions of corporate
policy.
CHARITABLE CONTRIBUTIONS
Parent supports a broad spectrum of public interest activities through a
gifts and grants program, with emphasis on recognized agencies in such fields as
health, education, civic affairs, and cultural activities.
POST-EMPLOYMENT BENEFIT PLANS
Parent sponsors a number of retirement plans that cover substantially all
employees. Defined benefit plans for salaried and certain hourly employees
provide benefits based on employees' years of service and compensation, either
on a final or career average basis. Defined benefit plans for other hourly
employees generally provide benefits of stated amounts for specified periods of
service. Certain health care and life insurance benefits are provided to
eligible retirees by Parent. For recently retired participants, the health
benefits generally provide for cost sharing through participant contributions
and copayments. For salaried employees who retired after 1992, there is an
annual limit on the Corporation's contribution per participant.
STOCK OPTION AND AWARD PLANS
Under Parent's Amended Omnibus Securities Award Plan (the "Plan"),
employees of Parent may be granted stock-based incentive awards, including
options to purchase common stock, stock appreciation rights, restricted stock or
other stock-based incentive awards. These awards may be granted singly or in
combination with other awards. To date, Parent has awarded stock options and
restricted stock under the Plan. The options to purchase its common stock are
granted at a price equal to the market value at the date of grant. These options
become exercisable in three approximately equal annual increments in multiples
of 100 on the first, second and third anniversary dates of such grants and
expire 10 years from such date. The Plan allows Parent to provide financing or
purchases, subject to certain conditions, by interest-bearing notes payable to
Parent. Parent also maintains other non-stock based award plans for its
employees, including the Amended and Restated Martin Marietta Corporation Long
Term Performance Incentive Compensation Plan pursuant to which units payable in
cash are granted to employees.
I-9
<PAGE> 44
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each shareholder
of the Company or his broker, dealer, commercial bank or other nominee to the
Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
P.O. Box 2564 (201) 222-4720 14 Wall Street, 8th Floor
Tenders & Exchanges or Suite 4660
Suite 4660 (201) 222-4721 New York, New York 10005
Jersey City, New Jersey
07303-2564
</TABLE>
Confirm Facsimile By Telephone:
(201) 222-4707
(Call Collect)
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent or the Dealer Manager at their respective
telephone numbers and locations listed below. You may also contact your broker,
dealer, commercial bank or trust company or nominee for assistance concerning
the Offer.
The Information Agent for the Offer is:
[LOGO] MORROW & CO., INC.
909 Third Avenue
New York, New York 10022
(212) 754-8000 (collect)
OR
CALL TOLL FREE (800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
(212) 272-7921
(Call Collect)
I-10
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
GRUMMAN CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED MARCH 8, 1994
OF
MMC ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
MARTIN MARIETTA CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, APRIL 4, 1994, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Facsimile
By Mail: Transmission: By Hand or Overnight Courier:
<S> <C> <C>
P.O. Box 2564 (201) 222-4720 14 Wall Street, 8th Floor
Suite 4660 or Suite 4660
Jersey City, New Jersey 07303 - 2564 (201) 222-4721 New York, New York 10005
Confirm Fax Only:
(201) 222-4707
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used if certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if delivery of Shares (as defined below) is to be made by book-entry
transfer to the Depositary's account at The Depository Trust Company, Midwest
Securities Trust Company or Philadelphia Depository Trust Company (hereinafter
collectively referred to as the "Book-Entry Transfer Facilities") pursuant to
the procedures set forth in Section 3 of the Offer to Purchase.
Shareholders who cannot deliver their Shares and all other documents
required hereby to the Depositary by the Expiration Date (as defined in the
Offer to Purchase) or who cannot complete the procedure for delivery by
book-entry transfer on a timely basis and who wish to tender their Shares must
do so pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. See Instruction 2.
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution_____________________________________________
Account No. ______________________________________________________________
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Transaction Code No. _____________________________________________________
/ / CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Shareholder(s) _____________________________________
Date of Execution of Notice of Guaranteed Delivery _______________________
Name of Institution which Guaranteed Delivery ____________________________
IF DELIVERY IS BY BOOK-ENTRY TRANSFER, PLEASE PROVIDE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
Account No. ______________________________________________________________
/ / The Depository Trust Company
/ / Midwest Securities Trust Company
/ / Philadelphia Depository Trust Company
Transaction Code No. _____________________________________________________
<PAGE> 2
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON
SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REPRESENTED SHARES
BY
NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
------------------------------------------------
TOTAL NUMBER
OF SHARES
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
- --------------------------------------------------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to MMC Acquisition Corp., a New York
corporation (the "Purchaser") and a wholly owned subsidiary of Martin Marietta
Corporation, the above-described shares of common stock, par value $1.00 per
share (including the associated Rights (as defined in the Offer to Purchase))
(collectively, the "Shares"), of Grumman Corporation, a New York corporation
(the "Company"), pursuant to the Purchaser's offer to purchase all outstanding
Shares at a price of $55.00 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated March 8, 1994, receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which together constitute the "Offer"). The
Purchaser reserves the right to transfer or assign in whole or from time to time
in part, to one or more of its affiliates the right to purchase Shares tendered
pursuant to the Offer.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns, and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all other Shares or other securities issued or issuable in
respect thereof on or after March 8, 1994) and appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and all such other Shares or securities), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates for such Shares (and all
such other Shares or securities), or transfer ownership of such Shares (and all
such other Shares or securities) on the account books maintained by any of the
Book-Entry Transfer Facilities, together, in any such case, with all
accompanying evidence of transfer and authenticity, to or upon the order of the
Purchaser, (b) present such Shares (and all such other Shares or securities) for
transfer on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and all such other
Shares or securities), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Marcus C. Bennett and Frank H.
Menaker, Jr., and each of them, the attorneys and proxies of the undersigned,
each with full power of substitution, to exercise all voting and other rights of
the undersigned in such manner as each such attorney and proxy or his substitute
shall in his sole discretion deem proper, with respect to all of the Shares
tendered hereby which have been accepted for payment by the Purchaser prior to
the time of any vote or other action (and any and all other Shares or other
securities issued or issuable in respect thereof on or after
<PAGE> 4
March 8, 1994), at any meeting of shareholders of the Company (whether annual or
special and whether or not an adjourned meeting), by written consent or
otherwise. This proxy is irrevocable and coupled with an interest in the
tendered Shares and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares or securities, and no subsequent proxies
will be given or written consents will be executed by the undersigned (and if
given or executed, will not be deemed to be effective).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities issued or
issuable in respect thereof on or after March 8, 1994) and that when the same
are accepted for payment by the Purchaser, the Purchaser will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claims. The undersigned will,
upon request, execute and deliver any additional documents deemed by the
Depositary or the Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby (and all such other Shares
or securities).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that a tender of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase will constitute
the tendering shareholder's acceptance of the terms and conditions of the Offer,
as well as the tendering shareholder's representation and warranty that such
shareholder has the full power and authority to tender and assign the Shares
tendered, as specified in this Letter of Transmittal. The Purchaser's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering shareholder and the Purchaser upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions", please
issue the check for the purchase price of any Shares purchased, and return any
Shares not tendered or not purchased, in the name(s) of the undersigned (and, in
the case of Shares tendered by book-entry transfer, by credit to the account at
the Book-Entry Transfer Facility designated above). Similarly, unless otherwise
indicated under "Special Delivery Instructions", please mail the check for the
purchase price of any Shares purchased and any certificates for Shares not
tendered or not purchased (and accompanying documents, as appropriate) to the
undersigned at the address shown below the undersigned's signature(s). In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the check for the purchase price of
any Shares purchased and return any Shares not tendered or not purchased in the
name(s) of, and mail said check and any certificates to, the person(s) so
indicated. The undersigned recognizes that the Purchaser has no obligation,
pursuant to the "Special Payment Instructions", to transfer any Shares from the
name of the registered holder(s) thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
<PAGE> 5
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if check for the purchase price of Shares purchased or
certificates for Shares not tendered or not purchased are to be issued in the
name of someone other than the undersigned, or if Shares tendered by book-entry
transfer that are not purchased are to be returned by credit to an account at
one of the Book-Entry Transfer Facilities other than that designated above.
Issue / /check
/ /certificate(s) to:
Name ______________________________________________________________________
(Please Print)
Address ______________________________________________________________________
______________________________________________________________________
(Zip Code)
______________________________________________________________________
(Taxpayer Identification Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or certificates for Shares not tendered or not purchased are to be
mailed to someone other than the undersigned or to the undersigned at an address
other than that shown under "Description of Shares Tendered".
Mail / /check
/ /certificate(s) to:
Name ______________________________________________________________________
(Please Print)
Address ______________________________________________________________________
______________________________________________________________________
(Zip Code)
/ /Credit unpurchased Shares tendered by book-entry transfer to the account set
forth below:
Name of Account Party ______________________________________________________
Account No. _____________________________________________________________at
/ /The Depository Trust Company
/ /Midwest Securities Trust Company
/ /Philadelphia Depository Trust Company
<PAGE> 6
IMPORTANT
SHAREHOLDERS: SIGN HERE
(Please complete Substitute Form W-9 on Reverse)
..........................................................................
..........................................................................
SIGNATURE(S) OF HOLDER(S)
DATED: ........................................, 199
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON SHARE
CERTIFICATES OR ON A SECURITY POSITION LISTING OR BY PERSON(S) AUTHORIZED TO
BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND DOCUMENTS TRANSMITTED HEREWITH.
IF SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR, GUARDIAN,
ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY
OR REPRESENTATIVE CAPACITY, PLEASE PROVIDE THE FOLLOWING INFORMATION AND SEE
INSTRUCTION 5.)
NAME(S):........................................................................
..........................................................................
(PLEASE PRINT)
CAPACITY (FULL TITLE):
ADDRESS:........................................................................
..........................................................................
(INCLUDE ZIP CODE)
AREA CODE AND TELEPHONE NO.:
TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NO.:..........................................................
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
Authorized Signature:...........................................................
Name:...........................................................................
(PLEASE TYPE OR PRINT)
Title:..........................................................................
Name of Firm:...................................................................
Address:........................................................................
..........................................................................
(INCLUDE ZIP CODE)
Area Code and Telephone No.:....................................................
Dated: ........................................, 199
<PAGE> 7
PAYER'S NAME:
- --------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
PART I -- Taxpayer Identification Number -- For All
Accounts Enter your taxpayer identification number in the Social Security
SUBSTITUTE appropriate box. For most individuals and sole Number
proprietors, this is your Social Security Number. For
FORM W-9 other entities, it is your Employer Identification Number. OR_____________
If you do not have a number, see "How to Obtain a TIN" in
the enclosed Guidelines.
DEPARTMENT OF THE Note: if the account is in more than one name, see the Employer
TREASURY chart on page 2 of the enclosed Guidelines to determine Identification
INTERNAL REVENUE what number to enter. Number
SERVICE -----------------------------------------------------------
PART II -- For Payees Exempt From Backup Withholding (see
enclosed Guidelines and complete as instructed therein).
[ ] Awaiting TIN
- ---------------------------------------------------------------------------------------------------------
CERTIFICATION. -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number,
or I am waiting for a number to be issued to me and either (a) I have mailed or
delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security Administration
Office or (b) I intend to mail or deliver an application in the near future.
I understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
PAYER'S REQUEST FOR withheld until I provide a number;
TAXPAYER
IDENTIFICATION (2) I am not subject to backup withholding either because (a) I am exempt from
NUMBER backup withholding, or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding; and
(3) Any other information provided on this form is true, correct and complete.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2).
---------------------------------------------------------------------------------
SIGNATURE __________________________________________________ DATE________, 199_
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR INSTRUCTIONS
<PAGE> 8
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm which is a
member of a registered national securities exchange or the National Association
of Securities Dealers, Inc., or by a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution").
Signatures on this Letter of Transmittal need not be guaranteed (a) if this
Letter of Transmittal is signed by the registered holder(s) of the Shares (which
term, for purposes of this document, shall include any participant in one of the
Book-Entry Transfer Facilities whose name appears on a security position listing
as the owner of Shares) tendered herewith and such holder(s) have not completed
the instruction entitled "Special Payment Instructions" on this Letter of
Transmittal or (b) if such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates. This Letter of
Transmittal is to be used either if certificates are to be forwarded herewith or
if delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), unless an Agent's Message is
utilized, and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the front
page of this Letter of Transmittal by the Expiration Date. Shareholders who
cannot deliver their Shares and all other required documents to the Depositary
by the Expiration Date must tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to
such procedure: (a) such tender must be made by or through an Eligible
Institution, (b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Purchaser must be received by
the Depositary by the Expiration Date and (c) the certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), unless an Agent's Message is
utilized, and any other documents required by this Letter of Transmittal, must
be received by the Depositary within five New York Stock Exchange, Inc. trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT THE OPTION
AND RISK OF THE TENDERING SHAREHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
facsimile thereof), the tendering shareholder waives any right to receive any
notice of the acceptance for payment of Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to shareholders who tender by book-entry
transfers). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered". In
such case, a new certificate for the remainder of the Shares represented by the
old certificate will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the appropriate box on this Letter of
Transmittal, as promptly a practicable following the expiration or termination
of the Offer. All Shares represented by certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made, or Shares not
tendered or not purchased are to be returned, in the name of any person other
than the registered holder(s). Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s)
<PAGE> 9
of the registered holder(s) appear(s) on the certificates for such Shares.
Signature(s) on any such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. The Purchaser will pay any stock transfer taxes
with respect to the sale and transfer of any Shares to it or its order pursuant
to the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), or if a transfer tax is imposed for
any reason other than the sale or transfer of Shares to the Purchaser pursuant
to the Offer, then the amount of any stock transfer taxes (whether imposed on
the registered holder(s), such other person or otherwise) will be deducted from
the purchase price unless satisfactory evidence of the payment of such taxes, or
exemption therefrom, is submitted herewith.
7. Special Payment and Delivery Instructions. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or not
purchased are to be returned, in the name of a person other than the person(s)
signing this Letter of Transmittal or if the check or any certificates for
Shares not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Shareholders tendering
Shares by book-entry transfer may request that Shares not purchased be credited
to such account at any of the Book-Entry Transfer Facilities as such shareholder
may designate under "Special Payment Instructions". If no such instructions are
given, any such Share not purchased will be returned by crediting the account at
the Book-Entry Transfer Facilities designated above.
8. Substitute Form W-9. Under the federal income tax laws, the Depositary
will be required to withhold 31% of the amount of any payments made to certain
shareholders pursuant to the Offer. In order to avoid such backup withholding,
each tendering shareholder, and, if applicable, each other payee, must provide
the Depositary with such shareholder's or payee's correct taxpayer
identification number and certify that such shareholder or payee is not subject
to such backup withholding by completing the Substitute Form W-9 set forth above
or by filing a properly completed Form W-9. In general, if a shareholder or
payee is an individual, the taxpayer identification number is the Social
Security number of such individual. If the Depositary is not provided with the
correct taxpayer identification number, the shareholder or payee may be subject
to a $50 penalty imposed by the Internal Revenue Service. Certain shareholders
or payees (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. In order to satisfy the Depositary that a foreign individual
qualifies as an exempt recipient, such shareholder or payee must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from the Depositary. For further
information concerning backup withholding and instructions for completing the
Substitute Form W-9 (including how to obtain a taxpayer's identification number
if you do not have one and how to complete the Substitute Form W-9 if Shares are
held in more than one name), consult the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9.
Failure to complete the Substitute Form W-9 (or to file a Form W-9) will
not, by itself, cause Shares to be deemed invalidly tendered, but may require
the Depositary to withhold 31% of the amount of any payments made pursuant to
the Offer. Backup withholding is not an additional federal income tax. Rather,
the federal income tax liability of a person subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained provided that the required
information is furnished to the Internal Revenue Service.
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 10
9. Requests for Assistance or Additional Copies. Requests for assistance or
additional copies of the Offer to Purchase and this Letter of Transmittal may be
obtained from the Information Agent or Dealer Manager at their respective
addresses or telephone numbers set forth below.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(DO NOT WRITE IN SPACES BELOW)
- --------------------------------------------------------------------------------
Date Received__________ Accepted By _____________ Checked By_____________
- --------------------------------------------------------------------------------
SHARES SHARES SHARES CHECK AMOUNT SHARES CERTIFICATE BLOCK
SURRENDERED TENDERED ACCEPTED NO. OF CHECK RETURNED NO. NO.
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Or
Net
- --------------------------------------------------------------------------------------------------------
Delivery Prepared By _______________ Checked By ______________ Date ______________________
- --------------------------------------------------------------------------------------------------------
</TABLE>
The Information Agent is:
[LOGO] MORROW & CO., INC.
909 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 754-8000 (COLLECT)
OR
CALL TOLL FREE (800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
(212) 272-7921
(Call Collect)
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
GRUMMAN CORPORATION
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if the certificates representing shares of
common stock, par value $1.00 per share, of Grumman Corporation and the
associated preferred share purchase rights (collectively, the "Shares") are not
immediately available or if the procedure for book-entry transfer cannot be
completed on a timely basis or if time will not permit all required documents to
reach the Depositary at or prior to the expiration of the Offer. Such form may
be delivered by hand or facsimile transmission, telex or mail to the Depositary.
See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Facsimile By Hand
By Mail Transmission or Overnight Carrier:
P.O. Box 2564 (201) 222-4720 14 Wall Street, 8th Floor
Suite 4660 or Suite 4660
Jersey City, New Jersey (201) 222-4721 New York, New York 10005
07303-2564
Confirm by Telephone
(201) 222-4707
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS LISTED ABOVE,
WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to MMC Acquisition Corp. (the "Purchaser"),
a New York corporation and a wholly owned subsidiary of Martin Marietta
Corporation, a Maryland corporation, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated March 8, 1994 (the "Offer
to Purchase"), and the related Letter of Transmittal (which together constitute
the "Offer"), receipt of which is hereby acknowledged, Shares pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Share Certificate Nos. (if available): Name(s) of Record Holder(s):
______________________________________ _____________________________________________
______________________________________ _____________________________________________
PLEASE TYPE OR PRINT
Address(es) ________________________________
If Shares will be delivered by book-entry _____________________________________________
transfer, check one box: ZIP CODE
/ / The Depositary Trust Company Area Code and Telephone Number:
/ / Midwest Securities Trust Company _____________________________________________
/ / Philadelphia Depositary Trust Company _____________________________________________
Account Number________________________ _____________________________________________
Dated: , 1994 _____________________________________________
SIGNATURE(S)
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange, a member of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States (each, an "Eligible Institution"), hereby guarantees that either the
certificates representing the Shares tendered hereby in proper form for
transfer, or timely confirmation of a book-entry transfer of such Shares into
the Depositary's account at The Depository Trust Company, the Midwest Securities
Trust Company or the Philadelphia Depository Trust Company (pursuant to
guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase),
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with any required signature guarantee and any
other required documents, will be received by the Depositary at one of its
addresses set forth above within five (5) New York Stock Exchange, Inc. trading
days after the date of execution hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
<PAGE> 3
<TABLE>
<S> <C>
Name of Firm: ______________________________ _____________________________________
AUTHORIZED SIGNATURE
Address: ___________________________________ Name: ______________________________
PLEASE TYPE OR PRINT
___________________________________ Title: _____________________________
ZIP CODE
Area Code and
Tel. No.: ________________________________ Dated: _____________________________ , 1994
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM. CERTIFICATES ARE TO
BE DELIVERED WITH THE LETTER OF TRANSMITTAL.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
GRUMMAN CORPORATION
BY
MMC Acquisition Corp.,
a wholly owned subsidiary
of
MARTIN MARIETTA CORPORATION
AT
$55.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, APRIL 4, 1994, UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Commercial Banks, March 8, 1994
Trust Companies and Other Nominees:
We have been appointed by MMC Acquisition Corp., a New York corporation
(the "Purchaser") and a wholly owned subsidiary of Martin Marietta Corporation,
a Maryland corporation, to act as Dealer Manager in connection with its offer to
purchase all outstanding shares of common stock, par value $1.00 per share
(including the associated Rights (as defined in the Offer to Purchase referred
to below) (collectively, the "Shares"), of Grumman Corporation, a New York
corporation (the "Company"), at $55.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase, dated March 8, 1994, and the related Letter of
Transmittal (which together constitute the "Offer").
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase, dated March 8, 1994;
2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information
relating to backup federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents cannot be delivered to the
Depositary by the Expiration Date (as defined in the Offer to Purchase);
4. A form of letter which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard
to the Offer;
5. Solicitation/Recommendation Statement on Schedule 14D-9 issued by the
Company; and
6. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary.
<PAGE> 2
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will be deemed to have accepted for payment, and
will pay for, all Shares validly tendered and not properly withdrawn prior to
the Expiration Date (as defined in the Offer to Purchase) when, as and if the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Payment for Shares
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of certificates for such Shares (or confirmation of a book-entry
transfer of such Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities (as defined in the Offer to Purchase)), a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) (unless, in the
case of a book-entry transfer, an Agent's Message is utilized) and any other
documents required by the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal, with any required signature guarantees and any
other required documents, should be sent to the Depositary, and certificates
representing the tendered Shares should be delivered, all in accordance with the
instructions set forth in the Letter of Transmittal and the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to deliver their certificates on or prior to the Expiration Date or to
comply with the book-entry transfer procedures on a timely basis, a tender may
be effected by following the guaranteed delivery procedures specified in Section
3 of the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Dealer Manager, the Information Agent or the
Depositary as described in the Offer to Purchase) for soliciting tenders of
Shares pursuant to the Offer. The Purchaser will, however, upon request,
reimburse brokers, dealers, commercial banks and trust companies for reasonable
and necessary costs and expenses incurred by them in forwarding materials to
their customers. The Purchaser will pay all stock transfer taxes applicable to
its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, APRIL 4, 1994, UNLESS THE OFFER IS
EXTENDED.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers set
forth on the back cover of the Offer to Purchase.
Very truly yours,
Bear, Stearns & Co. Inc.
as Dealer Manager
245 Park Avenue
New York, New York 10167
(212) 272-7921
(Call Collect)
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE PURCHASER, THE COMPANY, ANY AFFILIATE OF THE
COMPANY, MARTIN MARIETTA CORPORATION, THE DEALER MANAGER, THE INFORMATION AGENT
OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR
MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER
THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
GRUMMAN CORPORATION
BY
MMC Acquisition Corp.,
a wholly owned subsidiary
of
MARTIN MARIETTA CORPORATION
AT
$55.00 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, APRIL 4, 1994 UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated March 8,
1994 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") and other materials relating to the offer by
MMC Acquisition Corp., a New York corporation (the "Purchaser") and a wholly
owned subsidiary of Martin Marietta Corporation, a Maryland corporation, to
purchase all outstanding shares of common stock, par value $1.00 per share
(including the associated Rights (as defined in the Offer to Purchase))
(collectively, the "Shares"), of Grumman Corporation, a New York corporation
(the "Company"), at $55.00 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer.
This material is being sent to you as the beneficial owner of Shares held by us
for your account but not registered in your name. A TENDER OF SUCH SHARES CAN BE
MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE
LETTER OF TRANSMITTAL ACCOMPANYING THIS LETTER IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to have us tender any or all
of the Shares held by us for your account, upon the terms and subject to the
conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $55.00 per Share, net to the seller in cash.
2. The Offer and withdrawal rights will expire at 12:00 Midnight, New York
City time, on Monday, April 4, 1994, unless the Offer is extended.
3. The Board of Directors of the Company unanimously has determined that
the Offer and the Merger (as defined in the Offer to Purchase) are fair
to, and in the best interests of, the Company and its shareholders, has
approved the Offer and the Merger and recommends that shareholders
accept the Offer and tender their Shares pursuant to the Offer.
<PAGE> 2
4. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined in
the Offer) a number of Shares representing at least two-thirds of the
total number of Shares outstanding on a fully diluted basis.
5. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
The Offer is being made to all holders of Shares. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares in
any jurisdiction in which the making of the Offer or acceptance thereof would
not be in compliance with the laws of such jurisdiction. In any jurisdiction
where the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by Bear, Stearns & Co., Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdictions.
2
<PAGE> 3
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us the
instruction form set forth below. Please forward your instructions to us in
ample time to permit us to submit a tender on your behalf prior to the
expiration of the Offer. If you authorize the tender of your Shares, all such
Shares will be tendered unless otherwise specified on the instruction form set
forth below.
INSTRUCTIONS WITH RESPECT TO
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
GRUMMAN CORPORATION
BY
MMC ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated March 8, 1994, and the related Letter of Transmittal,
in connection with the offer by MMC Acquisition Corp., a New York corporation
and a wholly owned subsidiary of Martin Marietta Corporation, a Maryland
corporation, to purchase for cash all outstanding shares of common stock, par
value $1.00 per share (including the associated Rights (as defined in the Offer
to Purchase))(collectively, the "Shares"), of Grumman Corporation, a New York
corporation.
This will instruct you to tender the number of Shares indicated below (or
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: , 1994
NUMBER OF SHARES TO BE TENDERED:
_______SHARES*
__________________________________
__________________________________
SIGNATURE(S)
__________________________________
PLEASE PRINT NAME(S)
__________________________________
__________________________________
PLEASE PRINT ADDRESS(ES)
__________________________________
AREA CODE AND TELEPHONE NUMBER(S)
__________________________________
TAX IDENTIFICATION OR SOCIAL
SECURITY NUMBER(S)
- ---------------
* I (we) understand that if I (we) sign this instruction form without indicating
a lesser number of Shares in the space above, all Shares held by you for my
(our) account will be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
Purpose of Form.-- A person who is required to file an information return
with the IRS must obtain your correct TIN to report income paid to you, real
estate transactions, mortgage interest you paid, the acquisition or abandonment
of secured property, or contributions you made to an IRA. Use Form W-9 to
furnish your correct TIN to the requester (the person asking you to furnish your
TIN) and, when applicable, (1) to certify that the TIN you are furnishing is
correct (or that you are waiting for a number to be issued), (2) to certify that
you are not subject to backup withholding, and (3) to claim exemption from
backup withholding if you are an exempt payee. Furnishing your correct TIN and
making the appropriate certifications will prevent certain payments from being
subject to backup withholding.
Note: If a requester gives you a form other than a W-9 to request your TIN,
you must use the requester's form.
How To Obtain a TIN.-- If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part I, sign and date the form, and give it to the
requester. Generally, you will then have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payer must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payer must backup withhold on any
withdrawals you make from your account after 7 business days after the requester
receives this form back from you. Under option (2), the payer must backup
withhold on any reportable interest or dividend payments made to your account,
regardless of whether you make any withdrawals. The backup withholding under
option (2) must begin no later than 7 business days after the requester receives
this form back. Under option (2), the payer is required to refund the amounts
withheld if your certified TIN is received within the 60-day period and you were
not subject to backup withholding during that period.
Note: Writing "Applied for" on the form means that you have already applied
for a TIN OR that you intend to apply for one in the near future.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
What Is Backup Withholding?-- persons making certain payments to you after
1992 are required to withhold and pay to the IRS 31% of such payments under
certain conditions. This is called "backup withholding". Payments that could be
subject to backup withholding include interest, dividends, broker and barter
exchange transactions, rents, royalties, nonemployee compensation, and certain
payments from fishing boat operators, but do not include real estate
transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS notifies the requester that you furnished an incorrect TIN,
or
3. You are notified by the IRS that you are subject to backup
withholding because you failed to report all your interest and dividends on
your tax return (for reportable interest and dividends only), or
<PAGE> 2
4. You do not certify to the requester that you are not subject to
backup withholding under 3 above (for reportable interest and dividend
accounts opened after 1983 only), or
5. You do not certify your TIN. This applies only to reportable
interest, dividend, broker, or barter exchange accounts opened after 1983,
or broker accounts considered inactive in 1983.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Example Payees and Payments
under Specific Instructions, below, if you are an exempt payee.
Payees and Payments Exempt From Backup Withholding. -- The following is a
list of payees exempt from backup withholding and for which no information
reporting is required. For interest and dividends, all listed payees are exempt
except item (9). For broker transactions, payees listed in (1) through (13) and
a person registered under the Investment Advisers Act of 1940 who regularly acts
as a broker are exempt. Payments subject to reporting under sections 6041 and
6041A are generally exempt from backup withholding only if made to payees
described in items (1) through (7), except a corporation that provides medical
and health care services or bills and collects payments for such services is not
exempt from backup withholding or information reporting. Only payees described
in items (2) through (6) are exempt from backup withholding for barter exchange
transactions, patronage dividends, and payments by certain fishing boat
operators.
(1) A corporation. (2) An organization exempt from tax under section
501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The
United States or any of its agencies or instrumentalities. (4) A state, the
District of Columbia, a possession of the United States, or any of their
political subdivisions or instrumentalities. (5) A foreign government or any of
its political subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign central
bank of issue. (8) A dealer in securities or commodities required to register in
the United States or a possession of the United States. (9) A futures commission
merchant registered with the Commodity Futures Trading Commission. (10) A real
estate investment trust. (11) An entity registered at all times during the tax
year under the Investment Company Act of 1940. (12) A common trust fund operated
by a bank under section 584(a). (13) A financial institution. (14) A middleman
known in the investment community as a nominee or listed in the most recent
publication of the American Society of Corporate Secretaries, Inc., Nominee
List. (15) A trust exempt from tax under section 664 or described in section
4947.
Payments of dividend and patronage dividends generally not subject to
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include
the following:
- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
<PAGE> 3
- Mortgage interest paid by you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041 A(a), 6042, 6044,
6045, 6049, 6050A, and 6050N, and their regulations.
PENALTIES
Failure To Furnish TIN. -- If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
Civil Penalty for False Information With Respect to Withholding. -- If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
Criminal Penalty for Falsifying Information. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
Misuse of TINs. -- If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
Name. -- If you are an individual, you must generally provide the name
shown on your social security card. However, if you have changed your last name,
for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your social security card, and your new last name.
If you are a sole proprietor, you must furnish your individual name and
either your SSN or EIN. You may also enter your business name or "doing business
as" name on the business name line. Enter your name(s) as shown on your social
security card and/or as it was used to apply for your EIN on Form SS-4.
SIGNING THE CERTIFICATION.
1. Interest, Dividend, and Barter Exchange Accounts Opened Before 1984 and
Broker Accounts Considered Active During 1983. You are required to furnish your
correct TIN, but you are not required to sign the certification.
2. Interest, Dividend, Broker, and Barter Exchange Accounts Opened After
1983 and Broker Accounts Considered Inactive During 1983. You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
3. Real Estate Transactions. You must sign the certification. You may
cross out item 2 of the certification.
4. Other Payments. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified of an
incorrect TIN. Other payments include payments made in the course of the
requester's trade or business for rents, royalties, goods (other than bills for
merchandise), medical and health care services, payments to a nonemployee for
services (including attorney and accounting fees), and payments to certain
fishing boat crew members.
5. Mortgage Interest Paid by You, Acquisition or Abandonment of Secured
Property, or IRA Contributions. You are required to furnish your correct TIN,
but you are not required to sign the certification.
6. Exempt Payees and Payments. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
7. TIN "Applied for." Follow the instructions under How To Obtain a TIN,
on page 1, and sign and date this form.
<PAGE> 4
Signature. -- For a joint account, only the person whose TIN is shown in
Part I should sign.
Privacy Act Notice. -- Section 6109 requires you to furnish your correct
TIN to persons who must file information returns with the IRS to report
interest, dividends, and certain other income paid to you, mortgage interest you
paid, the acquisition or abandonment of secured property, or contributions you
made to an IRA. The IRS uses the numbers for identification purposes and to help
verify the accuracy of your tax return. You must provide your TIN whether or not
you are required to file a tax return. Payers must generally withhold 31% of
taxable interest, dividend, and certain other payments to a payee who does not
furnish a TIN to a payer. Certain penalties may also apply.
<PAGE> 5
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<C> <S> <C>
For this type of account: Give name and SSN of:
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account or, if
combined funds, the first individual on
the account(1)
3. Custodian account of a minor (Uniform Gift The minor(2)
to Minors Act)
4. a. The usual revocable savings trust the grantor-trustee(1)
(grantor is also trustee)
b. So-called trust account that is not a The actual owner(1)
legal or valid trust under state law
5. Sole proprietorship The owner(3)
For this type of account: Give name and EIN of:
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or pension trust Legal entity(4)
8. Corporate The corporation
9. Association, club, religious, charitable, The organization
educational, or other tax-exempt
organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
12. Account with the Department of Agriculture The public entity
in the name of a public entity (such as a
state or local government, school district
or prison) that receives agriculture
program payments
</TABLE>
- ---------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) Show your individual name. You may also enter your business name. You may
use your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 1
FOR IMMEDIATE RELEASE
BOARDS OF DIRECTORS
UNANIMOUSLY APPROVE
MARTIN MARIETTA CASH TENDER
OFFER FOR GRUMMAN CORPORATION
BETHESDA, Maryland/BETHPAGE, New York, March 7 -- The boards of directors
of Martin Marietta Corporation and Grumman Corporation said today they have
entered into a definitive agreement to combine the two companies and have
unanimously approved a $55-per-share cash offer by Martin Marietta for Grumman's
outstanding shares.
The transaction, valued at approximately $1.9 billion, will be effected
through a cash tender offer expected to commence tomorrow, March 8. The offer
will be for all but not less than two-thirds of Grumman's fully diluted shares.
The transaction is subject to Hart-Scott-Rodino antitrust review.
Martin Marietta said it has commitments from Bank of America National Trust
and Savings Association and Morgan Guaranty Trust Company of New York to provide
$2.4 billion in the aggregate in unsecured financing to support the tender
offer.
Norman R. Augustine, Martin Marietta chairman and chief executive officer,
said that "the joining of Grumman with Martin Marietta strategically positions
the combined entity on the leading edge of the industry consolidation that is so
essential to preserving our nation's defense capabilities and the jobs that go
with them."
Renso L. Caporali, chairman and chief executive officer of Grumman, said,
"The overwhelmingly positive recommendation of our board represents our belief
that a combination with Martin Marietta will provide our people, programs and
products with the support necessary to grow in a shrinking defense market.
"Grumman concluded over one year ago that we could not thrive in the
current business climate without making a significant strategic move," said
Caporali. "We looked at a number of different approaches and combinations, and
this is far superior to any of our other options."
Augustine said, "This combination will create a company with over $13
billion in sales that will have the critical mass, breadth of programs and depth
of technology to be solidly positioned in the aerospace/electronics industry.
"There is a complementary fit between our companies in defense electronics,
aerospace systems, aerostructures, services and information systems. It is these
diversified products and technologies and a common heritage that make this
combination extraordinarily beneficial to our customers, shareholders and
employees. It will allow us to enter new and adjacent markets. The companies
also share a 'geographical synergy' with significant operations in Florida,
Georgia, Louisiana, New York and Pennsylvania," said Augustine.
Augustine said that Martin Marietta was "immensely proud" of the
opportunity to be associated with Grumman, noting the comment by a Navy admiral
during World War II that "the name Grumman on a product is like the name
Sterling on silver."
Grumman, headquartered in Bethpage, New York, has 18,000 employees and had
1993 sales exceeding $3 billion, with a year-end backlog of $6 billion. Major
product areas are airborne surveillance systems, including the Air Force and
Army Joint STARS, and the Navy E-2C Hawkeye; defense electronics; commercial
aircraft structures; and computer information systems and software.
Martin Marietta, headquartered in Bethesda, Maryland, had 1993 sales of
$9.44 billion, with a total backlog of $16.7 billion. The Corporation has nearly
93,000 employees in seven operating groups, including Electronics, Space,
Information, Services, Materials, Energy and the Sandia National Laboratories,
and has facilities in 39 states and 17 foreign countries.
<PAGE> 2
Bear, Stearns & Co. Inc. is financial advisor to Martin Marietta and dealer
manager for the tender offer. Goldman, Sachs & Co. is financial advisor to
Grumman. The tender offer will be made only pursuant to definitive offering
documents to be filed with the Securities and Exchange Commission.
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
March 8, 1994 and the related Letter of Transmittal and is not being made to,
nor will tenders be accepted from or on behalf of, holders of Shares in any
jurisdiction in which the making of the Offer or acceptance thereof would not
be in compliance with the laws of such jurisdiction. In those jurisdictions
where securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
the Purchaser by Bear, Stearns & Co. Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdictions.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED RIGHTS)
OF
GRUMMAN CORPORATION
BY
MMC Acquisition Corp.
A WHOLLY OWNED SUBSIDIARY
OF
MARTIN MARIETTA CORPORATION
AT
$55.00 NET PER SHARE
MMC Acquisition Corp., a New York corporation (the "Purchaser") and a wholly
owned subsidiary of Martin Marietta Corporation, a Maryland corporation
("Parent"), is offering to purchase all outstanding shares of common stock, par
value $1.00 per share (including the associated Rights (as defined in the Offer
to Purchase)) (collectively, the "Shares"), of Grumman Corporation, a New York
corporation (the "Company"), at $55.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated March 8, 1994 (the "Offer to Purchase") and in the
related Letter of Transmittal (which together constitute the "Offer").
<PAGE> 2
- ------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON MONDAY, APRIL 4, 1994, UNLESS THE OFFER IS EXTENDED.
- ------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY AND ITS SHAREHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND
RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BY THE EXPIRATION DATE (AS DEFINED IN THE OFFER
TO PURCHASE) THAT NUMBER OF SHARES REPRESENTING AT LEAST TWO-THIRDS OF THE
TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM
CONDITION").
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of March 6, 1994 (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that, among other
things, the Purchaser will make the Offer and that following the purchase
of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with
relevant provisions of the New York Business Corporation Law, the Purchaser
will be, on or after May 18, 1994, merged with and into the Company (the
"Merger"). Following consummation of the Merger, the Company will continue
as the surviving corporation and will be a wholly owned subsidiary of
Parent. At the effective time of the Merger (the "Effective Time"), each
Share issued and outstanding immediately prior to the Effective Time (other
than Shares held by the Company as treasury stock or by any subsidiary of
the Company or by Parent, the Purchaser or any other subsidiary of Parent
and other than Shares held by a holder who has not voted in favor of the
Merger or consented thereto in writing and who has demanded appraisal for
such Shares in accordance with Section 623 of the New York Business
Corporation Law) will be converted into the right to receive cash without
interest in an amount equal to the price per share paid pursuant to the
Offer.
The Offer is subject to certain conditions set forth in the Offer to
Purchase. If any such condition is not satisfied, the Purchaser may (i)
terminate the Offer and return all tendered Shares to tendering
shareholders, (ii) extend the Offer and, subject to withdrawal rights as
set forth below, retain all such Shares until the expiration of the Offer
as so extended, (iii) waive such condition and, subject to any requirement
to extend the time during which the Offer is open, purchase all Shares
validly tendered prior to the Expiration Date and not withdrawn or (iv)
delay acceptance for payment of or payment for Shares, subject to
applicable law, until satisfaction or waiver of the conditions to the
Offer.
The Purchaser reserves the right, at any time or from time to time,
to extend the period of time during which the Offer is open by giving oral
or written notice of such extension to the Depositary. Any such extension
will be followed as promptly as practicable by public announcement thereof
no later than 9:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date.
For purposes of the Offer, the Purchaser shall be deemed to have
accepted for payment (and thereby purchased) tendered Shares when, as and
if the Purchaser gives oral or written notice to First Chicago Trust
Company of New York (the "Depositary") of its acceptance of the tenders of
such Shares. Payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of certificates
for such Shares (or a confirmation of a book-entry transfer of such Shares
into the Depositary's account at one of the Book-Entry Transfer Facilities
(as defined in the Offer to Purchase)), a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) and any other
documents required by the Letter of Transmittal.
<PAGE> 3
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn at any time after May 6, 1994 unless theretofore
accepted for payment as provided in the Offer to Purchase. To be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at one of its addresses set forth in the
Offer to Purchase and must specify the name of the person who tendered the
Shares to be withdrawn and the number of Shares to be withdrawn. If the Shares
to be withdrawn have been delivered to the Depositary, a signed notice of
withdrawal with (except in the case of Shares tendered by an Eligible
Institution (as defined in the Offer to Purchase)) signatures guaranteed by an
Eligible Institution must be submitted prior to the release of such Shares. In
addition, such notice must specify, in the case of Shares tendered by delivery
of certificates, the name of the registered holder (if different from that of
the tendering shareholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities (as defined in the Offer to Purchase) to be
credited with the withdrawn Shares.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has agreed to provide the Purchaser with the Company's
shareholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase, the related Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent or the Dealer Manager as set forth below, and copies will be furnished
promptly at the Purchaser's expense. The Purchaser will not pay any fees or
commissions to any broker or dealer or any other person (other than the Dealer
Manager and the Information Agent) for soliciting tenders of Shares pursuant to
the Offer.
The Information Agent for the Offer is:
[LOGO] MORROW & CO., INC.
909 Third Avenue
New York, New York 10022
(212) 754-8000 (collect)
OR
CALL TOLL FREE (800) 662-5200
The Dealer Manager for the Offer is:
BEAR, STEARNS & CO. INC.
245 Park Avenue
New York, New York 10167
(212) 272-7921
(Call Collect)
March 8, 1994
<PAGE> 1
[Letterhead]
Dear Shareholder:
I am pleased to inform you that on March 6, 1994, Grumman Corporation,
Martin Marietta Corporation and a wholly-owned subsidiary of Martin Marietta
entered into an agreement and plan of merger (the "Merger Agreement") providing
for the acquisition of all of the issued and outstanding shares of Grumman
common stock (the "Shares") at a net price of $55.00 per Share.
Pursuant to that Agreement, the Martin Marietta subsidiary has commenced a
cash tender offer (the "Tender Offer") for all outstanding Shares at $55.00 per
share. The Tender Offer is conditioned upon, among other things, a minimum of
[ ] Shares (two-thirds of the total number of Shares outstanding on a
fully diluted basis) being validly tendered and not withdrawn. The Merger
Agreement provides that, promptly following the Tender Offer, all Shares which
are not tendered through the Tender Offer will be acquired through the Merger at
a price of $55.00 per share.
Your Board of Directors has unanimously approved the Tender Offer and the
Merger and recommends that shareholders accept the Tender Offer. Enclosed for
your consideration are copies of the Tender Offer materials and the Company's
Schedule 14D-9, which are being filed today with the Securities and Exchange
Commission. These documents should be read carefully. In particular, I call your
attention to Item 4 of the Schedule 14D-9, which describes both the reasons for
the Board of Director's unanimous recommendation and certain additional factors
that shareholders may wish to consider.
Grumman's Board of Directors has, in light of and subject to the terms and
conditions set forth in the Merger Agreement, determined that the Tender Offer
and the Merger are fair to, and in the best interests of, the shareholders of
Grumman. All directors intend to tender the Shares they presently own.
Sincerly,
[Sig]
Renso L. Caporali
Chairman of the Board and
and Chief Executive Officer
March 8, 1994
<PAGE> 1
EXHIBIT (a)(10)
March 8, 1994
Board of Directors
Grumman Corporation
1111 Stewart Avenue
Bethpage, NY 11714
Re: Schedule 14D-9 of Grumman Corporation
Gentlemen and Madame:
Reference is made to our opinion letter dated March 8, 1994 with respect to the
fairness to the holders of the outstanding shares of Common Stock, par value
$1.00 per share (the "Shares") of Grumman Corporation (the "Company") of the
$55.00 per Share in cash to be received by such holders in the Offer and the
Merger pursuant to the Agreement and Plan of Merger dated as of March 6, 1994
among Martin Marietta Corporation ("Martin Marietta"), MMC Acquisition Corp., a
wholly owned subsidiary of Martin Marietta and the Company.
The foregoing opinion letter is solely for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is to be filed with, included
in or referred to in whole or in part in any registration statement, proxy
statement or any other document, except in accordance with our prior written
consent.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the caption "The Solicitation or Recommendation -- Background and Reasons
for the Recommendation" and to the inclusion of the foregoing opinion in the
above-mentioned Schedule 14D-9.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE> 2
March 8, 1994
Board of Directors
Grumman Corporation
1111 Stewart Avenue
Bethpage, NY 11714
Gentlemen and Madame:
You have requested that we confirm our oral opinion as to the fairness to the
holders of the outstanding shares of Common Stock, par value $1.00 per share
(the "Shares"), of Grumman Corporation (the "Company") of the $55.00 per Share
in cash to be received by such holders in the Offer and the Merger (each as
defined below) pursuant to the Agreement and Plan of Merger dated as of March 8,
1994 among Martin Marietta Corporation ("Martin Marietta"), MMC Acquisition
Corp. ("Purchaser") a wholly owned subsidiary of Martin Marietta, and the
Company (the "Merger Agreement").
The Merger Agreement provides for a tender offer for all of the Shares (the
"Offer") pursuant to which Purchaser will pay $55.00 per Share in cash for each
Share accepted. The Merger Agreement further provides that following completion
of the Offer, the Purchaser will be merged with and into the Company (the
"Merger") and each outstanding Share (other than Shares already owned by Martin
Marietta or Purchaser) will be converted into the right to receive $55.00 in
cash.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Merger Agreement. We
also have provided a wide range of investment banking and financial advisory
services to Martin Marietta from time to time, including acting as financial
advisor to Martin Marietta in connection with its combination with the aerospace
and certain other businesses of General Electric Company in April 1993, as
managing underwriter of three public debt offerings of Martin Marietta in April
1993 and as co-managing underwriter to Martin Marietta of an initial public
offering of equity securities of Martin Marietta Materials, Inc., a subsidiary
of Martin Marietta, in February 1994. We may provide investment banking services
to Martin Marietta and its subsidiaries in the future.
In connection with this opinion, we have reviewed, among other things, the
Merger Agreement; the Tender Offer Statement on Schedule 14D-1, dated March 8,
1994, of Purchaser, including the Offer to Purchase; the
Solicitation/Recommendation Statement on Schedule 14D-9 dated March 8, 1994 of
the Company; Annual Reports to Shareholders and Annual Reports on Form 10-K of
the Company for the five years ended December 31, 1992; a draft of the Annual
Report to Shareholders of the Company for the year ended December 31, 1993;
certain interim reports to Shareholders and Quarterly Reports on Form 10-Q;
certain other communications from the Company to its Shareholders and certain
internal financial analyses and forecasts for the Company prepared by its
management. We also have held discussions with members of the senior management
of the Company regarding its past and current business operations, financial
condition and
<PAGE> 3
future prospects. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market information
for the Company with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the aerospace and defense industries
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and we have not been furnished with any such evaluation or
appraisal.
Based upon and subject to the foregoing and based upon such other matters as we
considered relevant, we confirm our oral opinion that, as of March 8, 1994, the
$55.00 per Share in cash to be received by the holders of Shares in the Offer
and the Merger is fair to such holders.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE> 1
EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER,
DATED AS OF MARCH 6, 1994,
AMONG
MARTIN MARIETTA CORPORATION,
MMC ACQUISITION CORP.
AND
GRUMMAN CORPORATION.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 THE OFFER.................................................................... 1
SECTION 1.1. The Offer.............................................................. 1
SECTION 1.2. Company Action......................................................... 2
SECTION 1.3. Boards of Directors and Committees; Section 14(f)...................... 3
ARTICLE 2 THE MERGER................................................................... 4
SECTION 2.1. The Merger............................................................. 4
SECTION 2.2. Effective Time......................................................... 4
SECTION 2.3. Effects of the Merger.................................................. 4
SECTION 2.4. Certificate of Incorporation and By-Laws............................... 4
SECTION 2.5. Directors.............................................................. 4
SECTION 2.6. Officers............................................................... 4
SECTION 2.7. Conversion of Shares................................................... 4
SECTION 2.8. Stock Option Plans; MIP................................................ 5
SECTION 2.9. Shareholders' Meeting.................................................. 5
ARTICLE 3 DISSENTING SHARES; EXCHANGE OF SHARES........................................ 5
SECTION 3.1. Dissenting Shares...................................................... 5
SECTION 3.2. Payment for Shares..................................................... 6
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ 7
SECTION 4.1. Organization and Qualification; Subsidiaries........................... 7
SECTION 4.2. Capitalization of the Company and its Subsidiaries..................... 7
SECTION 4.3. Authority Relative to this Agreement; Consents and Approvals........... 8
SECTION 4.4. SEC Reports; Financial Statements...................................... 8
SECTION 4.5. Proxy Statement; Offer Documents....................................... 9
SECTION 4.6. Consents and Approvals; No Violations.................................. 9
SECTION 4.7. No Default............................................................. 10
SECTION 4.8. No Undisclosed Liabilities; Absence of Changes......................... 10
SECTION 4.9. Litigation............................................................. 10
SECTION 4.10. Compliance with Applicable Law......................................... 10
SECTION 4.11. Employee Plans......................................................... 10
SECTION 4.12. Environmental Laws and Regulations..................................... 11
SECTION 4.13. Rights Agreement....................................................... 11
SECTION 4.14. Brokers................................................................ 11
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION..................... 11
SECTION 5.1. Organization........................................................... 11
SECTION 5.2. Authority Relative to this Agreement................................... 11
SECTION 5.3. Consents and Approvals; No Violations.................................. 12
SECTION 5.4. Proxy Statement; Schedule 14D-9........................................ 12
SECTION 5.5. Financing.............................................................. 12
SECTION 5.6. No Prior Activities.................................................... 12
SECTION 5.7. Brokers................................................................ 12
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 6 COVENANTS.................................................................... 12
SECTION 6.1. Conduct of Business of the Company..................................... 12
SECTION 6.2. Other Potential Bidders................................................ 14
SECTION 6.3. Access to Information.................................................. 15
SECTION 6.4. Additional Agreements; Reasonable Efforts.............................. 15
SECTION 6.5. Consents............................................................... 15
SECTION 6.6. Public Announcements................................................... 16
SECTION 6.7. Indemnification; Directors' and Officers' Insurance.................... 16
SECTION 6.8. Notification of Certain Matters........................................ 16
SECTION 6.9. Guarantee of Performance............................................... 16
SECTION 6.10. Redemption of Rights................................................... 16
ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER..................................... 17
SECTION 7.1. Conditions to Each Party's Obligations to Effect the Merger............ 17
ARTICLE 8 TERMINATION; AMENDMENT; WAIVER............................................... 17
SECTION 8.1. Termination............................................................ 17
SECTION 8.2. Effect of Termination.................................................. 18
SECTION 8.3. Fees and Expenses...................................................... 18
SECTION 8.4. Amendment.............................................................. 19
SECTION 8.5. Extension; Waiver...................................................... 19
ARTICLE 9 MISCELLANEOUS................................................................ 19
SECTION 9.1. Nonsurvival of Representations and Warranties.......................... 19
SECTION 9.2. Entire Agreement; Assignment........................................... 19
SECTION 9.3. Validity............................................................... 20
SECTION 9.4. Notices................................................................ 20
SECTION 9.5. Governing Law.......................................................... 20
SECTION 9.6. Descriptive Headings................................................... 20
SECTION 9.7. Parties in Interest.................................................... 20
SECTION 9.8. Counterparts........................................................... 20
</TABLE>
ii
<PAGE> 4
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
- ----------------------------------------------------------------------------- ---------------
<S> <C>
Acquisition.................................................................. Preamble
Balance Sheet................................................................ Section 4.4(a)
Board........................................................................ Recitals
Certificates................................................................. Section 3.2(b)
Code......................................................................... Section 4.11
Common Stock................................................................. Section 4.2(a)
Company...................................................................... Preamble
Company Permits.............................................................. Section 4.10
Company Securities........................................................... Section 4.2(a)
Dissenting Shares............................................................ Section 3.1
Effective Time............................................................... Section 2.2
Environmental Claim.......................................................... Section 4.12
Environmental Laws........................................................... Section 4.12
ERISA........................................................................ Section 4.11
Exchange Act................................................................. Section 1.3(b)
Exchange Agent............................................................... Section 3.2(a)
Exchange Fund................................................................ Section 3.2(a)
Financial Adviser............................................................ Section 1.2(a)
Governmental Entity.......................................................... Section 4.6
HSR Act...................................................................... Section 4.6
Lien......................................................................... Section 4.2(b)
Material Adverse Effect...................................................... Sections 4.1(a)
and 5.1
Merger....................................................................... Section 2.1
Merger Consideration......................................................... Section 2.7(a)
Minimum Condition............................................................ Section 1.1(a)
1993 Financial Statement..................................................... Section 4.4
NYBCL........................................................................ Section 1.2(a)
Offer........................................................................ Recitals
Offer Documents.............................................................. Section 1.1(b)
Option....................................................................... Section 2.8(a)
Parent....................................................................... Preamble
Per Share Amount............................................................. Recitals
Premium Amount............................................................... Section 6.7(b)
Proxy Statement.............................................................. Section 4.5
Rights....................................................................... Section 4.2(a)
Rights Agreement............................................................. Section 4.2(a)
Schedule 14D-9............................................................... Section 1.2(b)
Securities Act............................................................... Section 4.4
SEC.......................................................................... Section 1.1(b)
SEC Reports.................................................................. Section 4.4(a)
Shares....................................................................... Recitals
Shareholders' Meeting........................................................ Section 2.9(a)
Stock Plans.................................................................. Section 2.8(a)
Subsidiary................................................................... Section 4.1(a)
Surviving Corporation........................................................ Section 2.1
Third Party.................................................................. Section 8.3(a)
Third Party Acquisition...................................................... Section 8.3(a)
1993 Financial Statements.................................................... Section 4.4
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of March 6, 1994, is among
MARTIN MARIETTA CORPORATION, a Maryland corporation ("Parent"), MMC ACQUISITION
CORP., a New York corporation and a wholly owned subsidiary of Parent
("Acquisition"), and GRUMMAN CORPORATION, a New York corporation ("Company").
WHEREAS, the Board of Directors of the Company (the "Board") has, in light
of and subject to the terms and conditions set forth herein, (i) determined that
each of the Offer and the Merger (each as defined below) is fair to the
shareholders of the Company and in the best interests of such shareholders and
(ii) approved and adopted this Agreement and the transactions contemplated
hereby and resolved to recommend acceptance of the Offer and approval and
adoption by the shareholders of the Company of this Agreement; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition shall make
a tender offer (the "Offer") to acquire all of the outstanding shares of common
stock, par value $1.00 per share, of the Company (the "Shares"), together with
the associated Rights (as hereafter defined), at a price of $55.00 per Share
(such amount, or any greater amount per share paid pursuant to the Offer, being
hereinafter referred to as the "Per Share Amount"), net to the seller in cash,
in accordance with the terms and subject to the conditions provided herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, Parent, Acquisition and the Company hereby agree as
follows:
ARTICLE 1
THE OFFER
SECTION 1.1. The Offer. (a) Provided that this Agreement shall not have
been terminated in accordance with Section 8.1 and none of the events or
conditions set forth in Annex A shall have occurred and be existing, Acquisition
shall commence the Offer not later than the fifth business day from and
including the date of initial public announcement of this Agreement and the
Offer. Acquisition shall accept for payment Shares which have been validly
tendered and not withdrawn pursuant to the Offer at the earliest time following
expiration of the Offer that all conditions to the Offer shall have been
satisfied or waived by Acquisition. The obligation of Acquisition to commence
the Offer shall be subject only to the conditions set forth in Annex A hereto
and the obligation of Acquisition to accept for payment, purchase and pay for
Shares tendered pursuant to the Offer shall be subject only to such conditions
and to the further condition that a number of Shares representing not less than
two-thirds of the Shares then outstanding on a fully diluted basis shall have
been validly tendered and not withdrawn prior to the expiration date of the
Offer (the "Minimum Condition"). Acquisition expressly reserves the right to
increase the price per Share payable in the Offer or to make any other changes
in the terms and conditions of the Offer (provided that, unless previously
approved by the Company in writing, no change may be made which decreases the
price per Share payable in the Offer, which changes the form of consideration to
be paid in the Offer, which reduces the maximum number of Shares to be purchased
in the Offer, which imposes conditions to the Offer in addition to those set
forth in Annex A hereto or which broadens the scope of such conditions). It is
agreed that the conditions set forth in Annex A are for the sole benefit of
Acquisition and may be asserted by Acquisition regardless of the circumstances
giving rise to any such condition (including any action or inaction by
Acquisition) or may be waived by Acquisition, in whole or in part at any time
and from time to time, in its sole discretion. The failure by Acquisition at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination (which shall be
made in good faith) by Acquisition with respect to any of the foregoing
conditions (including, without limitation, the satisfaction of such conditions)
shall be final and binding on the parties. The Per Share Amount shall be paid
net to the seller in cash, less any required
1
<PAGE> 6
withholding of taxes, upon the terms and subject to such conditions of the
Offer. The Company agrees that no Shares held by the Company or any of its
subsidiaries will be tendered in the Offer.
(b) As soon as practicable on the date of commencement of the Offer,
Acquisition shall file with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 with respect to the Offer which will
contain the offer to purchase and form of the related letter of transmittal
(together with any supplements or amendments thereto, collectively the "Offer
Documents"). The Offer Documents will comply in all material respects with the
provisions of applicable federal securities laws and the securities laws of the
State of New York. The information provided and to be provided by the Company,
Parent and Acquisition for use in the Offer Documents shall not, on the date
filed with the SEC and on the date first published or sent or given to the
Company's shareholders, as the case may be, contain any untrue statement of a
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. Parent, Acquisition
and the Company each agrees promptly to correct any information provided by it
for use in the Offer Documents if and to the extent that it shall have become
false or misleading in any material respect and Acquisition further agrees to
take all steps necessary to cause the Offer Documents as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws and the
securities laws of the State of New York.
SECTION 1.2. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that the Board, at a meeting
duly called and held, has, subject to the terms and conditions set forth herein,
(i) determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to, and in the best interests of,
the shareholders of the Company, (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, in all
respects and that such approval constitutes approval of the Offer, this
Agreement and the Merger for purposes of (A) Sections 902 and 912 of the New
York Business Corporation Law (the "NYBCL") and similar provisions of any other
similar state statutes that might be deemed applicable to the transactions
contemplated hereby, (B) paragraph 1(a) of Article SEVENTH of the Company's
certificate of incorporation and (C) Section 11(a)(ii)(B) of the Rights
Agreement, and (iii) resolved to recommend that the shareholders of the Company
accept the Offer, tender their Shares thereunder to Acquisition and approve and
adopt this Agreement and the Merger; provided, however, that such recommendation
may be withdrawn, modified or amended to the extent that the Board by a majority
vote determines in its good faith judgment, based as to legal matters on the
written opinion of legal counsel, that the Board is required to do so in the
exercise of its fiduciary duties. The Company consents to the inclusion of such
recommendation and approval in the Offer Documents. The Company further
represents that Goldman, Sachs & Co. (the "Financial Adviser") has delivered to
the Board its written opinion that the cash consideration to be received by the
shareholders of the Company pursuant to the Offer and the Merger is fair to such
shareholders. The Company has been authorized by the Financial Adviser to
permit, subject to the prior review and consent by the Financial Adviser (such
consent not to be unreasonably withheld), the inclusion of the fairness opinion
(or a reference thereto) in the Offer Documents, the Schedule 14D-9 and the
Proxy Statement.
(b) The Company hereby agrees to file with the SEC as soon as practicable
on the date of commencement of the Offer a Solicitation/Recommendation Statement
on Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") containing the recommendation described in Section 1.2(a) and
to mail the Schedule 14D-9 to the shareholders of the Company promptly after the
commencement of the Offer. The Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published, sent or given to the
Company's shareholders, shall not contain any untrue statement of a 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, except that no representation is
made by the Company with respect to information supplied by Parent or
Acquisition in writing for inclusion in the Schedule 14D-9. The Company, Parent
and Acquisition each agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect and the Company further agrees to
take all steps necessary to cause the Sched-
2
<PAGE> 7
ule 14D-9 as so corrected to be filed with the SEC and disseminated to the
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Notwithstanding anything to the contrary in this
Agreement, if the Board by majority vote determines in its good faith judgment,
based as to legal matters on the written opinion of legal counsel, that the
Board is required in the exercise of its fiduciary duties to withdraw, modify or
amend the recommendation of the Board, such withdrawal, modification or
amendment shall not constitute a breach of this Agreement.
(c) In connection with the Offer, the Company will promptly furnish Parent
and Acquisition with mailing labels, security position listings and any
available listing or computer files containing the names and addresses of the
record holders of the Shares as of a recent date and shall furnish Acquisition
with such additional information and assistance (including, without limitation,
updated lists of shareholders, mailing labels and lists of securities positions)
as Acquisition or its agents may reasonably request in communicating the Offer
to the record and beneficial holders of Shares. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent, Acquisition and their affiliates, associates, agents and advisors shall
use the information contained in any such labels, listings and files only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated, will deliver to the Company all copies of such information then in
their possession.
SECTION 1.3. Boards of Directors and Committees; Section 14(f). (a)
Promptly upon the purchase by Acquisition of Shares pursuant to the Offer and
from time to time thereafter, and subject to the last sentence of this Section
1.3(a), Acquisition shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as will give
Acquisition representation on the Board equal to the product of the number of
directors on the Board (giving effect to any increase in the number of directors
pursuant to this Section 1.3) and the percentage that such number of Shares so
purchased bears to the total number of outstanding Shares on a fully-diluted
basis, and the Company shall use its best efforts to, upon request by
Acquisition, promptly, at the Company's election, either increase the size of
the Board (subject to the provisions of Article EIGHTH of the Company's
certificate of incorporation) or secure the resignation of such number of
directors as is necessary to enable Acquisition's designees to be elected to the
Board and to cause Acquisition's designees to be so elected. At such times, and
subject to the last sentence of this Section 1.3(a), the Company will use its
best efforts to cause persons designated by Acquisition to constitute the same
percentage as is on the Board of (i) each committee of the Board (other than any
committee of the Board established to take action under this Agreement), (ii)
each board of directors of each subsidiary of the Company and (iii) each
committee of each such board. Notwithstanding the foregoing, the Company shall
use its best efforts to ensure that three of the members of the Board as of the
date hereof shall remain members of the Board until the Effective Time (as
defined in Section 2.2 hereof).
(b) The Company's obligation to appoint designees to the Board shall be
subject to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all action required pursuant to such Section and Rule in order to
fulfill its obligations under this Section 1.3 and shall include in the Schedule
14D-9 such information with respect to the Company and its officers and
directors as is required under such Section and Rule in order to fulfill its
obligations under this Section 1.3. Acquisition will supply to the Company in
writing and be solely responsible for any information with respect to itself and
its nominees, officers, directors and affiliates required by such Section and
Rule.
(c) Following the election or appointment of Acquisition's designees
pursuant to this Section 1.3 and prior to the Effective Time, if there shall be
any directors of the Company who were directors as of the date hereof, any
amendment of this Agreement, any termination of this Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Acquisition or Parent or waiver of any of the
Company's rights hereunder, will require the concurrence of a majority of such
directors.
3
<PAGE> 8
ARTICLE 2
THE MERGER
SECTION 2.1. The Merger. At the Effective Time and upon the terms and
subject to the conditions of this Agreement and in accordance with the NYBCL,
Acquisition shall be merged with and into the Company (the "Merger"). Following
the Merger, the Company shall continue as the surviving corporation (the
"Surviving Corporation") and the separate corporate existence of Acquisition
shall cease.
SECTION 2.2. Effective Time. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article 7, the parties hereto will
deliver a certificate of merger to the department of state of the State of New
York for filing and make all other filings or recordings required by the NYBCL
in connection with the Merger. Prior to the filing referred to in this Section
2.2, a closing will be held at the offices of Dewey Ballantine, 1301 Avenue of
the Americas, New York, New York 10019 (or such other place as the parties may
agree) for the purpose of confirming all of the foregoing. The Merger shall
become effective at such time as such certificate of merger is duly filed by the
Department of State of the State of New York, or at such later time as is
specified in such certificate of merger (the time the Merger becomes effective
being referred to herein as the "Effective Time").
SECTION 2.3. Effects of the Merger. The Merger shall have the effects set
forth in the NYBCL (including, without limitation, Section 906 thereof). Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and Acquisition shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Acquisition shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 2.4. Certificate of Incorporation and By-Laws. (a) The certificate
of incorporation of the Company in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
(b) The by-laws of the Company in effect at the Effective Time shall be the
by-laws of the Surviving Corporation until amended in accordance with applicable
law.
SECTION 2.5. Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
SECTION 2.6. Officers. The officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and By-Laws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 2.7. Conversion of Shares. (a) Each Share issued and outstanding
immediately prior to the Effective Time (other than (i) Shares held in the
Company's treasury or by any of the Company's subsidiaries, (ii) Shares held by
Parent, Acquisition or any other subsidiary of Parent and (iii) Dissenting
Shares (as defined in Section 3.1 hereof)) together with the associated Rights,
shall, by virtue of the Merger and without any action on the part of
Acquisition, the Company or the holder thereof, be cancelled and extinguished
and be converted into the right to receive, pursuant to Section 3.2, the Per
Share Amount in cash (the "Merger Consideration"), payable to the holder
thereof, without interest thereon, upon the surrender of the certificate
formerly representing such Share, less any required withholding of taxes. Parent
and Acquisition shall take such action as may be necessary to cause Acquisition
to have outstanding, immediately prior to the Effective Time, the same number of
shares of common stock as the number of Shares then outstanding. At the
Effective Time, each outstanding share of the common stock, par value $.01 per
share, of Acquisition shall be converted into a share of common stock, par value
$1.00 per share, of the Surviving Corporation.
(b) Each Share held in the treasury of the Company and each Share held by
Parent, Acquisition or any subsidiary of Parent, Acquisition or the Company
immediately prior to the Effective Time shall, by virtue of
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the Merger and without any action on the part of Acquisition, the Company or the
holder thereof, be cancelled, retired and cease to exist and no payment shall be
made with respect thereto.
SECTION 2.8. Stock Option Plans; MIP. (a) The Company shall use all
reasonable efforts to cause all holders of options ("Options") to purchase
Shares granted under the 1981 Stock Option Plan of the Company, the 1990 Stock
Option Plan of the Company, the 1992 Long Term Incentive Plan of the Company or
any predecessor stock option or stock plan of the Company (collectively, the
"Stock Plans") which are outstanding immediately prior to the Effective Time to
exercise such Options prior to the Effective Time. The Company shall take such
action as is necessary under the Stock Plans to cause any Options that remain
outstanding after the Merger to thereafter be exercisable for a short-term debt
instrument of the Surviving Corporation in a face amount (and with an interest
rate and other terms designed to provide a fair value) equal to an amount
determined by multiplying the Merger Consideration by the number of Shares for
which such Option was theretofore exercisable.
(b) Prior to the Effective Time, the Company shall use all reasonable
efforts to (i) obtain any consents from individuals who are entitled to awards
under the Company's Management Incentive Plan ("MIP") and (ii) make any
amendments to the terms of such plan that are necessary to provide for future
distributions thereunder to be paid in the form of cash (and not in the form of
Shares).
SECTION 2.9. Shareholders' Meeting. The Company, acting through the Board,
shall in accordance with applicable law:
(i) duly call, give notice of, convene and hold an annual or special
meeting of its shareholders (the "Shareholders' Meeting"), to be held as
soon as practicable after May 18, 1994 (provided that Acquisition shall
have purchased Shares pursuant to the Offer) for the purpose of considering
and taking action upon this Agreement;
(ii) subject to its fiduciary duties as determined in good faith by a
majority of the Board, based as to legal matters on the written opinion of
legal counsel, include in the Proxy Statement the recommendation of the
Board that shareholders of the Company vote in favor of the approval and
adoption of this Agreement and the written opinion of the Financial Advisor
that the cash consideration to be received by the shareholders of the
Company pursuant to the Merger is fair to such shareholders; and
(iii) use all reasonable efforts (A) to obtain and furnish the
information required to be included by it in the Proxy Statement and, after
consultation with Parent and Acquisition, respond promptly to any comments
made by the SEC with respect to the Proxy Statement and any preliminary
version thereof and cause the Proxy Statement to be mailed to its
shareholders at the earliest practicable time following the expiration or
termination of the Offer and (B) subject to its fiduciary duties as
determined in good faith by a majority of the Board, based as to legal
matters on the written opinion of legal counsel, to obtain the necessary
approvals by its shareholders of this Agreement and the transactions
contemplated hereby.
At such meeting, Parent, Acquisition and their affiliates will vote all
Shares owned by them in favor of approval and adoption of this Agreement and the
transactions contemplated hereby.
ARTICLE 3
DISSENTING SHARES; EXCHANGE OF SHARES
SECTION 3.1. Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, Shares outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger or consented thereto
in writing and who has demanded appraisal for such Shares in accordance with
Section 623 of the NYBCL ("Dissenting Shares") shall not be converted into a
right to receive the Merger Consideration, unless such holder fails to perfect
or withdraws or otherwise loses his right to appraisal. If, after the Effective
Time, such holder fails to perfect or withdraws or loses his right to appraisal,
such Shares shall be treated as if they had been converted as of the Effective
Time into a right to receive the Merger Consideration,
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without interest thereon. The Company shall give Parent and Acquisition prompt
notice of any demands received by the Company for appraisal of Shares, and,
prior to the Effective Time, Parent and Acquisition shall have the right to
direct all negotiations and proceedings with respect to such demands. Prior to
the Effective Time, the Company shall not, except with the prior written consent
of Parent or Acquisition, make any payment with respect to, or settle or offer
to settle, any such demands.
SECTION 3.2. Payment for Shares. (a) Prior to the Effective Time, Parent
and Acquisition shall designate a bank or trust company reasonably acceptable to
the Company to act as Exchange Agent in connection with the Merger (the
"Exchange Agent") pursuant to an exchange agency agreement providing for the
matters set forth in this Section 3.2 and otherwise reasonably satisfactory to
the Company. At or prior to the Effective Time, Parent or Acquisition will
provide the Exchange Agent with the funds necessary to make the payments
contemplated by Section 2.7(a) hereof (the "Exchange Fund").
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder, as of the Effective Time, of an outstanding certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") a form letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates for payment
therefor. Upon surrender to the Exchange Agent of a Certificate, together with a
duly executed letter of transmittal and any other required documents, the holder
of such Certificate shall receive in exchange therefor (as promptly as
practicable) the consideration set forth in Section 2.7(a) hereof, without any
interest thereon, less any required withholding of taxes, and such Certificate
shall forthwith be cancelled. If payment is to be made to a person other than
the person in whose name a Certificate so surrendered is registered, it shall be
a condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer, that the signatures on the
Certificate or any related stock power shall be properly guaranteed and that the
person requesting such payment shall either pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate so surrendered or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.2(b), each
Certificate (other than Certificates representing Shares held in the Company's
treasury or by Acquisition, or by any subsidiary of the Company or Acquisition,
and other than Certificates representing Dissenting Shares) shall represent for
all purposes only the right to receive for each Share represented thereby the
consideration provided for under this Agreement.
(c) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the Shares which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged for the consideration provided for, and in accordance with the
procedures set forth, in this Article 3.
(d) From and after the Effective Time, the holders of Certificates
evidencing ownership of Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares except as
otherwise provided herein or by applicable law. Such holders shall have no
rights, after the Effective Time, with respect to such Shares except to
surrender such Certificates in exchange for cash pursuant to this Agreement or
to perfect any rights of appraisal as a holder of Dissenting Shares that such
holders may have pursuant to Section 623 of the NYBCL.
(e) Any portion of the Exchange Fund (including the proceeds of any
investment thereof) that remains unclaimed by the shareholders of the Company
for six months after the Effective Time shall be repaid to the Surviving
Corporation. Any shareholders of the Company who have not theretofore complied
with this Article 3 shall thereafter look only to the Surviving Corporation for
payment of their claims for the consideration set forth in Section 2.7(a) hereof
for each Share such shareholder holds, without any interest thereon.
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(f) Notwithstanding anything to the contrary in this Section 3.2, none of
the Exchange Agent, Parent or the Surviving Corporation shall be liable to a
holder of a Certificate formerly representing Shares for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If Certificates are not surrendered prior to two years
after the Effective Time, unclaimed funds payable with respect to such
Certificates shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition that, except as disclosed in the letter, dated the date hereof, from
the Company to Parent (the "Letter"):
SECTION 4.1. Organization and Qualification; Subsidiaries. (a) Each of the
Company and its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
power and authority would not, individually or in the aggregate, have a Material
Adverse Effect (as defined below) on the Company. The Company has heretofore
delivered to Acquisition or Parent accurate and complete copies of the
certificate of incorporation and by-laws, as currently in effect, of the Company
and promptly will deliver to Acquisition and Parent accurate and complete copies
of the certificate or articles of incorporation and by-laws, as currently in
effect, of each of its significant subsidiaries (as that term is defined in
Regulation S-X of the General Rules and Regulations under the Securities Act of
1933, as amended). When used in connection with the Company or any of its
subsidiaries, the term "Material Adverse Effect" means any change or effect
(other than changes or effects described in the Letter) that is or is reasonably
likely to be materially adverse to the business, results of operations or
condition (financial or otherwise) of the Company and its subsidiaries, taken as
whole, other than any change or effect arising out of general economic
conditions unrelated to any businesses in which the Company is engaged.
(b) Each of the Company and its subsidiaries is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not, individually or in aggregate, have a Material Adverse Effect on the
Company.
SECTION 4.2. Capitalization of the Company and its Subsidiaries. (a) The
authorized capital stock of the Company consists of: 80,000,000 shares of common
stock, par value $1.00 per share (the "Common Stock"), of which, as of February
28, 1994, 33,935,448 Shares were issued and outstanding and 10,000,000 shares of
preferred stock, par value $1.00 per share, no shares of which are outstanding.
All of the Shares have been validly issued, and are fully paid, nonassessable
and free of preemptive rights. As of February 28, 1994, approximately 1,129,226
shares of Common Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding Options. As of
February 28, 1994, performance share awards were outstanding with respect to a
maximum of 428,650 shares of Common Stock under the Company's Long Term
Incentive Plan with no more than an additional 30,000 shares of Common Stock
payable as dividend equivalents with respect to such share awards, and the
number of all such shares (including shares under the performance share awards
and the dividend equivalent shares thereon) will be doubled under such plan as a
result of any change of control as defined therein. As of February 28, 1994,
107,975.451 shares of Common Stock were deliverable in settlement of deferred
compensation under the MIP. Since February 28, 1994, no shares of the Company's
capital stock have been issued other than pursuant to stock options already in
existence on such date, and since February 28, 1994, no stock options have been
granted. Except as set forth above and except for the rights (the "Rights") to,
among other things, purchase Series A Junior Participating Preferred Stock
issued pursuant to the Rights Agreement, dated as of February 18, 1988 (the
"Rights Agreement"), between the Company and The Bank of New York, as Rights
Agent, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no
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securities of the Company or any of its subsidiaries convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
(iii) no options or other rights to acquire from the Company or any of its
subsidiaries, and no obligations of the Company or any of its subsidiaries to
issue, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, interests in the ownership or earnings of the Company or any
of its subsidiaries or other similar rights (collectively, "Company
Securities"). There are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
(b) Except for directors qualifying shares, if any, all of the outstanding
capital stock of, or other ownership interests in, each subsidiary of the
Company, is owned by the Company, directly or indirectly, free and clear of any
Lien (as hereinafter defined) or any other limitation or restriction (including
any restriction on the right to vote or sell the same, except as may be provided
as a matter of law). There are no securities of the Company or any of its
subsidiaries convertible into or exchangeable for, no options or other rights to
acquire from the Company or any of its subsidiaries, and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for the issuance or sale, directly or indirectly, of any capital stock or other
ownership interests in, or any other securities of, any subsidiary of the
Company. There are no outstanding contractual obligations of the Company or any
of its subsidiaries to repurchase, redeem or otherwise acquire any outstanding
shares of capital stock or other ownership interests in any subsidiary of the
Company. For purposes of this Agreement, "Lien" means, with respect to any asset
(including, without limitation, any security) any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
(c) The Shares and the Rights constitute the only class of equity
securities of the Company or any of its subsidiaries registered or required to
be registered under the Exchange Act.
SECTION 4.3. Authority Relative to this Agreement; Consents and Approvals.
(a) The Company has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the approval and
adoption of this Agreement by the holders, including Acquisition, of two-thirds
of the then outstanding Shares). This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with its
terms.
(b) The Board has duly and validly approved, and taken all corporate
actions required to be taken by the Board for the consummation of, the
transactions, including the Offer and the acquisition of the Shares pursuant
thereto and the Merger, contemplated hereby, including but not limited to all
actions required to render the provisions of Section 912 of the NYBCL
restricting business combinations with "interested shareholders" inapplicable to
such transactions.
SECTION 4.4. SEC Reports; Financial Statements. (a) The Company has filed
all required forms, reports and documents with the SEC since January 1, 1990
(collectively, the "SEC Reports"), each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act each as in effect on the
dates so filed. The Company has heretofore delivered or promptly will deliver to
Acquisition or Parent, in the form filed with the SEC (including any amendments
thereto), (i) its Annual Reports on Form 10-K for each of the three fiscal years
ended December 31, 1990, 1991 and 1992 and Quarterly Reports on Form 10-Q for
the quarterly periods ended March 31, June 30, and September 30, 1993, (ii) all
definitive proxy statements relating to the Company's meetings of shareholders
(whether annual or special) held since January 1, 1990 and (iii) all other
reports (other than Quarterly Reports on Form 10-Q not listed above) or
registration statements filed by the Company with the SEC since January 1, 1990.
None of such forms, reports or documents, including, without limitation, any
financial statements or schedules included or incorporated by reference therein,
contained, when filed, any untrue statement of a material fact or omitted to
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
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circumstances under which they were made, not misleading. The Company has also
delivered to Parent or Acquisition a true and complete copy of the audited
consolidated financial statements of the Company, including the notes thereto,
for the fiscal year ended December 31, 1993 (the "1993 Financial Statements").
The 1993 Financial Statements and the audited consolidated financial statements
and unaudited consolidated interim financial statements of the Company included
in its Annual Reports on Form 10-K and its Quarterly Reports on Form 10-Q
referred to in the first sentence of this Section 4.4(a) fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and their consolidated results of operations and changes in
financial position for the periods then ended (subject in the case of any
unaudited interim financial statements to normal recurring year-end audit
adjustments).
(b) The Company has heretofore made available or promptly will make
available to Acquisition or Parent a complete and correct copy of any amendments
or modifications, which have not yet been filed with the SEC, to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC pursuant to the Exchange Act.
SECTION 4.5. Proxy Statement; Offer Documents. Any proxy or similar
materials distributed to the Company's shareholders in connection with the
Merger, including any amendments or supplements thereto (the "Proxy Statement"),
will comply in all material respects with applicable federal securities laws,
except that no representation is made by the Company with respect to information
supplied by Acquisition or Parent for inclusion in the Proxy Statement. None of
the information supplied by the Company in writing for inclusion in the Offer
Documents or provided by the Company in the Schedule 14D-9 will, at the
respective times that the Offer Documents and the Schedule 14D-9 or any
amendments or supplements thereto are filed with the SEC and are first published
or sent or given to holders of Shares, contain any untrue statement of a
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.
SECTION 4.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the filing and recordation of a
certificate of merger as required by the NYBCL, no filing with or notice to, and
no permit, authorization, consent or approval of, any court or tribunal or
administrative, governmental or regulatory body, agency or authority (a
"Governmental Entity") is necessary for the execution and delivery by the
Company of this Agreement or the consummation by the Company of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a Material Adverse Effect on the Company. Neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
certificate of incorporation or by-laws (or similar governing documents) of the
Company or of any its subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound, other than
breaches or defaults under loan agreements resulting from the existence of
indebtedness on the part of Acquisition, or (iii) violate any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company
or any of its subsidiaries or any of their respective properties or assets,
except in the case of(ii)or (iii) for violations, breaches or defaults which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
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SECTION 4.7. No Default. None of the Company or any of its subsidiaries is
in default or violation (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 (i) its certificate of incorporation or by-laws (or
similar governing documents), (ii) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company or any of its subsidiaries is now a party or by which any of them or any
of their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company,
any of its subsidiaries or any of their respective properties or assets, except
in the case of (ii) or (iii) for violations, breaches or defaults that would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
SECTION 4.8. No Undisclosed Liabilities; Absence of Changes. Except as and
to the extent publicly disclosed by the Company, as of December 31, 1993,
neither the Company nor any of its subsidiaries had any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by generally accepted accounting principles to be reflected on
a consolidated balance sheet of the Company and its subsidiaries (including the
notes thereto) or, which would have, individually or in the aggregate, a
Material Adverse Effect on the Company. Except as publicly disclosed by the
Company, since December 31, 1993, neither the Company nor any of its
subsidiaries has incurred any liabilities of any nature, whether or not accrued,
contingent or otherwise, which would have, and there have been no events,
changes or effects with respect to the Company and its subsidiaries having,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 4.9. Litigation. Except as publicly disclosed by the Company, there
is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company or any of its
subsidiaries or any of their respective properties or assets before any
Governmental Entity which, individually or in the aggregate, would have a
Material Adverse Effect on the Company or would prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
publicly disclosed by the Company, neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree
which, insofar as can be reasonably foreseen, individually or in the aggregate,
in the future would have a Material Adverse Effect on the Company or would
prevent or delay the consummation of the transactions contemplated hereby.
SECTION 4.10. Compliance with Applicable Law. Except as publicly disclosed
by the Company, the Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Company
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company, the Company and its subsidiaries are in compliance
with the terms of the Company Permits, except where the failure so to comply
would not have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company, the businesses of the Company and its subsidiaries are
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity except that no representation or warranty is made in this
Section 4.10 with respect to Environmental Laws (as defined in Section 4.12
below) and except for violations or possible violations which individually or in
the aggregate do not, and, insofar as reasonably can be foreseen, in the future
will not, have a Material Adverse Effect on the Company. Except as publicly
disclosed by the Company, no investigation or review by any Governmental Entity
with respect to the Company or any of its subsidiaries is pending or, to the
best knowledge of the Company, threatened, nor, to the best knowledge of the
Company, has any Governmental Entity indicated an intention to conduct the same,
other than, in each case, those which the Company reasonably believes will not
have a Material Adverse Effect on the Company.
SECTION 4.11. Employee Plans. All "employee benefit plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained or contributed to by the Company and its subsidiaries are
in compliance with the applicable provisions of ERISA and the Internal Revenue
Code of 1986, as amended (the "Code"), except for instances of non-compliance
that individually or in the aggregate would not have a Material Adverse Effect
on the Company.
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SECTION 4.12. Environmental Laws and Regulations. (a) Except as publicly
disclosed by the Company, (i) the Company and each of its subsidiaries is in
material compliance with all applicable federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws"),
except for non-compliance that individually or in the aggregate would not have a
Material Adverse Effect on the Company, which compliance includes, but is not
limited to, the possession by the Company and its subsidiaries of all material
permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof; (ii)
neither the Company nor any of its subsidiaries has received written notice of,
or, to the best knowledge of the Company, is the subject of, any action, cause
of action, claim, investigation, demand or notice by any person or entity
alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim") that individually or in the aggregate would have a
Material Adverse Effect on the Company; and (iii) to the best knowledge of the
Company, there are no circumstances that are reasonably likely to prevent or
interfere with such material compliance in the future.
(b) Except as publicly disclosed by the Company, there are no Environmental
Claims which individually or in the aggregate would have a Material Adverse
Effect on the Company that are pending or, to the best knowledge of the Company,
threatened against the Company or any of its subsidiaries or, to the best
knowledge of the Company, against any person or entity whose liability for any
Environmental Claim the Company or any of its subsidiaries has or may have
retained or assumed either contractually or by operation of law.
SECTION 4.13. Rights Agreement. The Company has taken all necessary action
so that none of the execution of this Agreement, the making of the Offer, the
acquisition of Shares pursuant to the Offer or the consummation of the Merger
will (i) cause the Rights issued pursuant to the Rights Agreement to become
exercisable, (ii) cause any person to become an Acquiring Person (as such term
is defined in the Rights Agreement) or (iii) give rise to a Distribution Date or
a Triggering Event (as each such term is defined in the Rights Agreement).
SECTION 4.14. Brokers. No broker, finder or investment banker (other than
the Financial Adviser, a true and correct copy of whose engagement agreement has
been provided to Acquisition or Parent) is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by and on behalf of the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
SECTION 5.1. Organization. Each of Parent and Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
States of Maryland and New York, respectively, and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not in
the aggregate have a Material Adverse Effect (as defined below) on Parent or
Acquisition. When used in connection with Parent or Acquisition, the term
"Material Adverse Effect" means any change or effect that is materially adverse
to the business, results of operations or condition (financial or otherwise) of
Parent and its subsidiaries, taken as a whole, other than any change or effect
arising out of general economic conditions unrelated to any businesses in which
Parent and its subsidiaries are engaged.
SECTION 5.2. Authority Relative to this Agreement. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Acquisition and by Parent as the sole
shareholder of Acquisition, and no other corporate proceedings on the
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part of Parent or Acquisition are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Acquisition and
constitutes a valid, legal and binding agreement of each of Parent and
Acquisition, enforceable against each of Parent and Acquisition in accordance
with its terms.
SECTION 5.3. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the HSR Act, and the filing and recordation of a
certificate of merger as required by the NYBCL, no filing with or notice to, and
no permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery by Parent or Acquisition of this
Agreement or the consummation by Parent or Acquisition of the transactions
contemplated hereby, except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings or give such
notice would not have a material adverse effect on the ability of Parent or
Acquisition to consummate the Offer or the Merger. Neither the execution,
delivery and performance of this Agreement by Parent or Acquisition nor the
consummation by Parent or Acquisition of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
respective certificate of incorporation or by-laws (or similar governing
documents) of Parent or Acquisition or any of Parent's subsidiaries, (ii) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent or Acquisition or any of Parent's
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to Parent or Acquisition or
any of Parent's subsidiaries or any of their respective properties or assets,
except in the case of (ii) or (iii) for violations, breaches or defaults which
would not, individually or in the aggregate, have a material adverse effect on
the ability of Parent or Acquisition to consummate the Offer or the Merger.
SECTION 5.4. Proxy Statement; Schedule 14D-9. None of the information
supplied by Parent or Acquisition in writing for inclusion in the Proxy
Statement or the Schedule 14D-9 will, at the respective times that the Proxy
Statement and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or given to holders of
Shares, and in the case of the Proxy Statement, at the time that it or any
amendment or supplement thereto is mailed to the Company's shareholders, at the
time of the Shareholders' Meeting or at the Effective Time, contain any untrue
statement of a 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.
SECTION 5.5. Financing. Either Parent or Acquisition has or will have
sufficient funds available to purchase all of the Shares outstanding on a fully
diluted basis and to pay all related fees and expenses.
SECTION 5.6. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization or the negotiation and
consummation of this Agreement and the transactions contemplated hereby,
Acquisition has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person or entity.
SECTION 5.7. Brokers. Except for Bear, Stearns & Co. Inc. (a true and
correct copy of whose engagement agreement has been provided to the Company), no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Parent or
Acquisition.
ARTICLE 6
COVENANTS
SECTION 6.1. Conduct of Business of the Company. Except as contemplated by
this Agreement, during the period from the date hereof to the time persons
designated or elected by Acquisition or any of its affiliates shall constitute a
majority of the Board, the Board will not permit the Company or any of its
subsidiaries to
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conduct its operations otherwise than in the ordinary course of business
consistent with past practice. Without limiting the generality of the foregoing,
and except as otherwise expressly provided in this Agreement, prior to the time
persons designated or elected by Acquisition or any of its affiliates shall
constitute a majority of the Board, the Board will not, without the prior
written consent of Parent or Acquisition, permit the Company or any of its
subsidiaries to:
(a) amend or propose to amend its certificate or articles of
incorporation or by-laws;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except as required by agreements with the Company's
employees under the Stock Plans as in effect as of the date hereof or
pursuant to the Rights Agreement, and except deliveries of certificates for
Shares issued prior to the date hereof pursuant to the Company's Restricted
Stock Award Plan, or amend any of the terms of any such securities or
agreements outstanding as of the date hereof, except as specifically
contemplated by this Agreement;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, or redeem or otherwise acquire any of its securities or any
securities of its subsidiaries;
(d) (i) incur or assume any long-term or short-term debt or issue any
debt securities except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to the Company and
its subsidiaries taken as a whole; (ii) assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except in the ordinary
course of business consistent with past practice and in amounts not
material to the Company and its subsidiaries, taken as a whole, and except
for obligations of wholly owned subsidiaries of the Company; (iii) make any
loans, advances or capital contributions to, or investments in, any other
person (other than to wholly owned subsidiaries of the Company or customary
loans or advances to employees in the ordinary course of business
consistent with past practice and in amounts not material to the maker of
such loan or advance); (iv) pledge or otherwise encumber shares of capital
stock of the Company or any of its subsidiaries; or (v) mortgage or pledge
any of its material assets, tangible or intangible, or create or suffer to
exist any material Lien thereupon, except as disclosed in the Letter;
(e) except as may be required by law or as contemplated by this
Agreement, enter into, adopt or amend or terminate any bonus, profit
sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner, or (except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, and as required under existing agreements or in the
ordinary course of business generally consistent with past practice)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without
limitation, the granting of stock appreciation rights or performance
units);
(f) except as disclosed in the Letter, acquire, sell, lease or dispose
of any assets outside the ordinary course of business or any assets which
in the aggregate are material to the Company and its subsidiaries taken as
a whole, or enter into any commitment or transaction outside the ordinary
course of business consistent with past practice which would be material to
the Company and its subsidiaries taken as a whole;
(g) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
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(h) revalue in any material respect any of its assets, including,
without limitation, writing down the value of inventory or writing-off
notes or accounts receivable other than in the ordinary course of business;
(i) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any
contract or agreement other than in the ordinary course of business
consistent with past practice which would be material to the Company and
its subsidiaries taken as a whole; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of $2,500,000
or, in the aggregate, are in excess of $25,000,000; provided, that none of
the foregoing shall limit any capital expenditure already included in the
Company's 1994 capital expenditure budget previously provided to Parent or
Acquisition; or (iv) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would
be prohibited hereunder;
(j) make any tax election or settle or compromise any income tax
liability material to the Company and its subsidiaries taken as a whole;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in, or contemplated
by, the consolidated financial statements (or the notes thereto) of the
Company and its subsidiaries or incurred in the ordinary course of business
consistent with past practice;
(l) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby; or
(m) take, or agree in writing or otherwise to take, any of the actions
described in Sections 6.1(a) through 6.1(l) or any action which would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made or would result in
any of the conditions set forth in Annex A not being satisfied.
SECTION 6.2. Other Potential Bidders. The Company, its affiliates and their
respective officers, directors, employees, representatives and agents shall
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any acquisition of all or any
material portion of the assets of, or any equity interest in, the Company or any
of its subsidiaries or any business combination with the Company or any of its
subsidiaries, other than as described in the Letter. The Company may, directly
or indirectly, furnish information and access, in each case only in response to
unsolicited requests therefor, to any corporation, partnership, person or other
entity or group pursuant to confidentiality agreements, and may participate in
discussions and negotiate with such entity or group concerning any merger, sale
of assets, sale of shares of capital stock or similar transaction involving the
Company or any subsidiary or division of the Company, if such entity or group
has submitted a written proposal to the Board relating to any such transaction
and the Board by a majority vote determines in its good faith judgment, based as
to legal matters on the written opinion of legal counsel, that failing to take
such action would constitute a breach of the Board's fiduciary duty. The Board
shall provide a copy of any such written proposal to Parent or Acquisition
immediately after receipt thereof and thereafter keep Parent and Acquisition
promptly advised of any development with respect thereto. Except as set forth
above, neither the Company or any of its affiliates, nor any of its or their
respective officers, directors, employees, representatives or agents, shall,
directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent and
Acquisition, any affiliate or associate of Parent and Acquisition or any
designees of Parent and Acquisition) concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction involving the Company or any
subsidiary or division of the Company; provided, however, that nothing herein
shall prevent the Board from taking, and disclosing to the Company's
shareholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to any tender offer; provided, further, that the
Board shall not recommend that the shareholders of the Company tender their
Shares in connection with any
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such tender offer unless the Board by a majority vote determines in its good
faith judgment, based as to legal matters on the written opinion of legal
counsel, that failing to take such action would constitute a breach of the
Board's fiduciary duty.
SECTION 6.3. Access to Information. (a) Between the date hereof and the
Effective Time, the Company will give Parent and Acquisition and their
authorized representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Parent and Acquisition to make such inspections as
Parent and Acquisition may reasonably require and will cause the Company's
officers and those of its subsidiaries to furnish Parent and Acquisition with
such financial and operating data and other information with respect to the
business and properties of the Company and any of its subsidiaries as Parent or
Acquisition may from time to time reasonably request.
(b) Each of Parent and Acquisition will hold and will cause its consultants
and advisors to hold in confidence, unless compelled to disclose by judicial or
administrative process or, in the written opinion of its legal counsel, by other
requirements of law, all documents and information concerning the Company and
its subsidiaries furnished to Parent or Acquisition in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been (i) previously known by Parent or
Acquisition from sources other than the Company, or its directors, officers,
representatives or affiliates, (ii) in the public domain through no fault of
Parent or Acquisition or (iii) later lawfully acquired by Parent or Acquisition
on a non-confidential basis from other sources who are not known by Parent or
Acquisition to be bound by a confidentiality agreement or otherwise prohibited
from transmitting the information to Parent or Acquisition by a contractual,
legal or fiduciary obligation) and will not release or disclose such information
to any other person, except its auditors, attorneys, financial advisors and
other consultants and advisors in connection with this Agreement who need to
know such information. If the transactions contemplated by this Agreement are
not consummated, such confidence shall be maintained and, if requested by or on
behalf of the Company, Parent and Acquisition will, and will use all reasonable
efforts to cause their auditors, attorneys, financial advisors and other
consultants, agents and representatives to, return to the Company or destroy all
copies of written information furnished by the Company to Parent and Acquisition
or their agents, representatives or advisors. It is understood that Parent and
Acquisition shall be deemed to have satisfied their obligation to hold such
information confidential if they exercise the same care as they take to preserve
confidentiality for their own similar information.
SECTION 6.4. Additional Agreements; Reasonable Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
all reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Proxy Statement, any filings that may be required under the HSR Act,
and any amendments to any thereof; (ii) the taking of all action reasonably
necessary, proper or advisable to secure any necessary consents under existing
debt obligations of the Company and its subsidiaries or amend the notes,
indentures or agreements relating thereto to the extent required by such notes,
indentures or agreements or redeem or repurchase such debt obligations; (iii)
contesting any pending legal proceeding relating to the Offer or the Merger and
(iv) the execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Acquisition agree to use all reasonable efforts to cause
the Effective Time to occur as soon as practicable after the shareholder vote
with respect to the Merger. In case at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall take all such necessary
action.
SECTION 6.5. Consents. Parent, Acquisition and the Company each will use
all reasonable efforts to obtain consents of all third parties and governmental
authorities necessary, proper or advisable for the consummation of the
transactions contemplated by this Agreement.
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SECTION 6.6. Public Announcements. Parent, Acquisition and the Company, as
the case may be, will consult with one another before issuing any press release
or otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including, without limitation, the Offer and the
Merger, and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law or by obligations pursuant to any listing agreement with any national
securities exchange or the Nasdaq Stock Market, as determined by Parent,
Acquisition or the Company, as the case may be.
SECTION 6.7. Indemnification; Directors' and Officers' Insurance. (a)
Parent and Acquisition agree that all rights to indemnification or exculpation
now existing in favor of the directors, officers, employees and agents of the
Company and its subsidiaries as provided in their respective charters or by-laws
or otherwise in effect as of the date hereof with respect to matters occurring
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect. To the maximum extent permitted by the NYBCL, such
indemnification shall be mandatory rather than permissive and the Surviving
Corporation shall advance expenses in connection with such indemnification.
(b) Parent shall cause the Surviving Corporation to maintain in effect for
not less than three years from the Effective Time the policies of the directors'
and officers' liability and fiduciary insurance most recently maintained by the
Company (provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the beneficiaries thereof so long as such substitution
does not result in gaps or lapses in coverage) with respect to matters occurring
prior to the Effective Time to the extent available provided that in no event
shall the Surviving Corporation be required to expend more than an amount per
year equal to 200% of the current annual premiums paid by the Company (the
"Premium Amount") to maintain or procure insurance coverage pursuant hereto and
further provided that if the Surviving Corporation is unable to obtain the
insurance called for by this Section 6.7(b), the Surviving Corporation will
obtain as much comparable insurance as is available for the Premium Amount per
year.
SECTION 6.8. Notification of Certain Matters. The Company shall give prompt
notice to Parent and Acquisition, and Parent and Acquisition shall give prompt
notice to the Company, of (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time and (ii) any material failure
of the Company, Parent or Acquisition, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.8 shall not cure such breach or non-compliance or limit or
otherwise affect the remedies available hereunder to the party receiving such
notice. Notwithstanding anything to the contrary herein, no provision of this
Agreement shall limit or restrict the right of the Board to amend, rescind or
take or omit to take any action pursuant to or under any provision of the Rights
Agreement; provided, however, that no such amendment, action or omission will
cause the acquisition of Shares pursuant to the Offer or the consummation of the
Merger to give rise to a Triggering Event.
SECTION 6.9. Guarantee of Performance. Parent hereby guarantees the
performance by Acquisition of its obligations under this Agreement and the
indemnification obligations of the Surviving Corporation pursuant to Section
6.7(a) hereof.
SECTION 6.10. Redemption of Rights. At Parent's request, the Company will
take such action as Parent may request to effectuate the redemption, at any time
after the purchase by Acquisition pursuant to the Offer of at least a majority
of the outstanding Shares, of the Rights.
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ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party hereto to effect the Merger is subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been adopted by the affirmative vote of
the shareholders of the Company by the requisite vote;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
U.S. court or U.S. governmental authority which prohibits, restrains,
enjoins or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired; and
(d) Acquisition shall have purchased Shares pursuant to the Offer.
ARTICLE 8
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. Termination. This Agreement may be terminated and the Offer
and the Merger may be abandoned at any time, but prior to the Effective Time:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become
nonappealable;
(c) by Parent and Acquisition if due to an occurrence or circumstance
which would result in a failure to satisfy any of the conditions set forth
in Annex A hereto, Acquisition shall have (A) failed to commence the Offer
within five days following the date of the initial public announcement of
the Offer, (B) terminated the Offer or (C) failed to pay for Shares
pursuant to the Offer within 75 days following the commencement of the
Offer;
(d) by the Company if (i) there shall not have been a material breach
of any representation, warranty, covenant or agreement on the part of the
Company and Acquisition shall have (A) failed to commence the Offer within
five days following the date of the initial public announcement of the
Offer, (B) terminated the Offer or (C) failed to pay for Shares pursuant to
the Offer within 75 days following the commencement of the Offer or (ii)
prior to the purchase of Shares pursuant to the Offer, a corporation,
partnership, person or other entity or group shall have made a bona fide
offer that the Board by a majority vote determines in its good faith
judgment and in the exercise of its fiduciary duties, based as to legal
matters on the written opinion of legal counsel, is more favorable to the
Company's shareholders than the Offer and the Merger, provided that such
termination under this clause (ii) shall not be effective until payment of
the fee required by Section 8.3(b) hereof;
(e) by Parent and Acquisition prior to the purchase of Shares pursuant
to the Offer, if (i) there shall have been a breach of any representation
or warranty on the part of the Company having a Material Adverse Effect on
the Company or materially adversely affecting (or materially delaying) the
consummation of the Offer, (ii) there shall have been a breach of any
covenant or agreement on the part of the Company resulting in a Material
Adverse Effect on the Company or materially adversely affecting (or
materially delaying) the consummation of the Offer, which shall not have
been cured prior to the earlier of (A) 10 days following notice of such
breach and (B) two business days prior to the date in which the Offer
expires, (iii) the Company shall engage in negotiations with any entity or
group (other than Parent
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or Acquisition) that has proposed a Third Party Acquisition (as defined
below), (iv) the Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to Acquisition its
approval or recommendation of the Offer, this Agreement or the Merger or
shall have recommended another offer, or shall have adopted any resolution
to effect any of the foregoing or (v) the Minimum Condition shall not have
been satisfied by the expiration date of the Offer and on or prior to such
date an entity or group (other than Parent or Acquisition) shall have made
and not withdrawn a proposal with respect to a Third Party Acquisition; or
(f) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition which
materially adversely affects (or materially delays) the consummation of the
Offer or (ii) there shall have been a material breach of any covenant or
agreement on the part of Parent or Acquisition and which materially
adversely affects (or materially delays) the consummation of the Offer
which shall not have been cured prior to the earliest of (A) 10 days
following notice of such breach and (B) two business days prior to the date
on which the Offer expires.
SECTION 8.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provision of this Section 8.2 and Sections 6.3(b) and 8.3 hereof.
Nothing contained in this Section 8.2 shall relieve any party from liability for
any breach of this Agreement.
SECTION 8.3. Fees and Expenses. (a) In the event Parent and Acquisition
terminate this Agreement pursuant to Section 8.1(e)(i) or 8.1(e)(ii) hereof,
Parent and Acquisition would suffer direct and substantial damages, which
damages cannot be determined with reasonable certainty. To compensate Parent and
Acquisition for such damages, the Company shall pay to Parent the amount of $20
million as liquidated damages immediately upon such a termination. It is
specifically agreed that the amount to be paid pursuant to this Section 8.3(a)
represents liquidated damages and not a penalty.
(b) If
(i) Parent and Acquisition terminate this Agreement pursuant to
Section 8.1(e)(ii), (iii), (iv) or (v) hereof and, within 12 months
thereafter the Company enters into an agreement with respect to a Third
Party Acquisition, or a Third Party Acquisition occurs, involving any party
(or any affiliate thereof) (x) with whom the Company (or its agents) had
negotiations with a view to a Third Party Acquisition, (y) to whom the
Company (or its agents) furnished information with a view to a Third Party
Acquisition or (z) who had submitted a proposal or expressed an interest in
a Third Party Acquisition, in the case of each of clauses (x), (y) and (z)
after the date hereof and prior to such termination; or
(ii) Parent and Acquisition terminate this Agreement pursuant to
Section 8.1(e)(iii), (iv) or (v), and within 12 months thereafter a Third
Party Acquisition shall occur involving a consideration for Shares
(including the value of any stub equity) in excess of the Per Share Amount;
or
(iii) the Company terminates this Agreement pursuant to 8.1(d)(ii)
hereof,
the Company shall pay to Parent and Acquisition, within one business day
following the execution and delivery of such agreement or such occurrence, as
the case may be, or simultaneously with such termination pursuant to Section
8.1(d)(ii), a fee, in cash, of $50,000,000, provided however that the Company in
no event shall be obligated to pay more than one such $50,000,000 fee with
respect to all such agreements and occurrences and such termination. In case
liquidated damages shall have been paid pursuant to Section 8.3(a) in connection
with such a termination, the amount so paid, minus an amount equal to the fees
and expenses that would have been collectible by Parent and Acquisition pursuant
to Section 8.3(c) but for the operation of clause (ii) of the parenthetical of
the first sentence thereof, shall be credited against the amount payable
pursuant to this Section 8.3(b).
"Third Party Acquisition" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Parent, Acquisition or any affiliate thereof
(a
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"Third Party"); (ii) the acquisition by a Third Party of more than 30% of the
total assets of the Company and its subsidiaries, taken as a whole; (iii) the
acquisition by a Third Party of 30% or more of the outstanding Shares; (iv) the
adoption by the Company of a plan of liquidation or the declaration or payment
of an extraordinary dividend; or (v) the repurchase by the Company or any of its
subsidiaries of more than 20% of the outstanding Shares, other than a repurchase
which was not approved by the Company or publicly announced prior to the
termination of this Agreement and which is not part of a series of transactions
resulting in a change of control.
(c) Upon the termination of this Agreement for any reason prior to the
purchase of Shares by Acquisition pursuant to the Offer (other than (i)
termination by the Company pursuant to Section 8.1(f) hereof and (ii)
termination in circumstances requiring the Company to pay liquidated damages as
contemplated by Section 8.3(a) hereof) the Company shall reimburse Parent,
Acquisition and their affiliates (not later than one business day after
submission of statements therefore) for all actual documented out-of-pocket fees
and expenses, not to exceed $8,800,000, actually and reasonably incurred by any
of them or on their behalf in connection with the Offer and the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, fees payable to financing sources, investment bankers,
counsel to any of the foregoing, and accountants). Parent and Acquisition have
provided the Company with an estimate of the amount of such fees and expenses
and, if Parent or Acquisition shall have submitted a request for reimbursement
hereunder, will provide the Company in due course with invoices or other
reasonable evidence of such expenses upon request. The Company shall in any
event pay the amount requested (not to exceed $8,800,000) within one business
day of such request, subject to the Company's right to demand a return of any
portion as to which invoices are not received in due course.
(d) Except as specifically provided in this Section 8.3 each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
SECTION 8.4. Amendment. Subject to Section 1.3(c), this Agreement may be
amended by action taken by the Company, Parent and Acquisition at any time
before or after approval of the Merger by the shareholders of the Company (if
required by applicable law) but, after any such approval, no amendment shall be
made which requires the approval of such shareholders under applicable law
without such approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of the parties hereto.
SECTION 8.5. Extension; Waiver. Subject to Section 1.3(c), at any time
prior to the Effective Time, each party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document, certificate or writing delivered pursuant
hereto or (iii) waive compliance by the other party with any of the agreements
or conditions contained herein. Any agreement on the part of either party hereto
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of either
party hereto to assert any of its rights hereunder shall not constitute a waiver
of such rights.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement.
SECTION 9.2. Entire Agreement; Assignment.This Agreement (a) constitutes
the entire agreement between the parties hereto with respect to the subject
matter hereof and supersedes all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and (b) shall not be assigned by operation of law or otherwise; provided,
however, that Acquisition may assign any or all of its rights and obligations
under this Agreement to any subsidiary of Parent, but no such assignment shall
relieve Acquisition of its obligations hereunder if such assignee does not
perform such obligations.
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<PAGE> 24
SECTION 9.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 9.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested), to the other party as follows:
if to Parent or Acquisition:
Martin Marietta Corporation
6801 Rockledge Drive
Bethesda, Maryland 26817
Attention: General Counsel
if to the Company to:
Grumman Corporation
1111 Stewart Avenue
Bethpage, New York 11714-3580
Attention: General Counsel
Fax No. 516-575-2921
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 9.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the principles of conflicts of law thereof.
SECTION 9.6. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 6.7 and 9.2, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 9.8. Counterparts.This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
20
<PAGE> 25
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
MARTIN MARIETTA CORPORATION
By:
Title:
MMC ACQUISITION CORP.
By:
Title:
GRUMMAN CORPORATION
By:
Title:
21
<PAGE> 26
ANNEX A
THE CAPITALIZED TERMS USED HEREIN HAVE THE
MEANINGS SET FORTH IN THE AGREEMENT AND
PLAN OF MERGER TO WHICH THIS
ANNEX A IS ATTACHED
Notwithstanding any other provisions of the Offer, Acquisition shall not be
required to accept for payment or pay for, and may delay the acceptance for
payment of, or the payment for, any Shares, and may terminate the Offer and not
accept for payment or pay for any Shares, if (i) immediately prior to the
expiration of the Offer (as it may be extended in accordance with the Offer),
the Minimum Condition shall not have been satisfied, (ii) any applicable waiting
period under the HSR Act shall not have expired or been terminated prior to the
expiration of the Offer or (iii) at any time on or after March 7, 1994 and prior
to the acceptance for payment of Shares, Acquisition makes a determination
(which shall be made in good faith) that any of the following conditions exist:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction proposed, sought, promulgated,
enacted, entered, enforced or deemed applicable to the Offer, or any other
action shall have been taken, proposed or threatened, by any state or
federal government or governmental authority or by any U.S. court, other
than the routine application to the Offer, the Merger or other subsequent
business combination of waiting periods under the HSR Act, that presents a
substantial likelihood of (1) making the acceptance for payment of, or the
payment for, some or all of the Shares illegal or otherwise prohibiting,
restricting or significantly delaying consummation of the Offer, (2)
imposing material limitations on the ability of Acquisition to acquire or
hold or to exercise effectively all rights of ownership of the Shares,
including, without limitation, the right to vote any Shares purchased by
Acquisition on all matters properly presented to the shareholders of the
Company, or effectively to control in any material respect the business,
assets or operations of the Company, its subsidiaries, Acquisition or any
of their respective affiliates, or (3) otherwise having a Material Adverse
Effect on the Company, Parent or Acquisition; or
(b) any material adverse change shall have occurred or be threatened,
or Parent or Acquisition shall have become aware of any fact or
circumstance, that has had or is reasonably likely to have a Material
Adverse Effect on the Company; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange,
(ii) the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States (whether or not mandatory), (iii)
the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States and
having a Material Adverse Effect on the Company or materially adversely
affecting (or materially delaying) the consummation of the Offer, (iv) any
limitation (whether or not mandatory), by any U.S. governmental authority
or agency on, or any other event that, in the judgment of Acquisition, is
reasonably likely to materially adversely affect, the extension of credit
by banks or other financial institutions, (v) from the date of the Merger
Agreement through the date of termination or expiration of the Offer, a
decline of at least 25% in the Standard & Poor's 500 Index or (vi) in the
case of any of the situations described in clauses (i) through (v)
inclusive, existing at the date of the commencement of the Offer, a
material acceleration or worsening thereof; or
(d) any person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Acquisition, any of its
affiliates, or any group of which any of them is a member shall have
acquired beneficial ownership of more than 30% of the outstanding Shares or
shall have entered into a definitive agreement or an agreement in principle
with the Company with respect to a tender offer or exchange offer for any
Shares or a merger, consolidation or other business combination with or
involving the Company or any of its subsidiaries; or
(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
22
<PAGE> 27
(f) prior to the purchase of Shares pursuant to the Offer, the Board
shall have withdrawn or modified (including by amendment of the Schedule
14D-9) in a manner adverse to Acquisition its approval or recommendation of
the Offer, this Agreement or the Merger or shall have recommended another
offer, or shall have adopted any resolution to effect any of the foregoing
which, in the sole judgment of Acquisition in any such case, and regardless
of the circumstances (including any action or omission by Acquisition)
giving rise to any such condition, makes it inadvisable to proceed with
such acceptance for payment.
23
<PAGE> 1
EXHIBIT (c)(2)
EXECUTIVE COMPENSATION
The Compensation Committee's report on executive compensation is set
forth below. No member of the Compensation Committee is a former or current
officer or employee of the Corporation or any of its subsidiaries. None of the
executives named in the Summary Compensation Table served as a member of the
compensation committee of any entity that determined the compensation of the
members of the Corporation's Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee") is composed entirely of non-employee directors. The Committee has
responsibility for the administration of the Corporation's Management Incentive
Plan, as adopted by the Board of Directors on January 20, 1972, and as amended
from time to time; and the Long-Term Incentive Plan as approved by shareholders
on April 16, 1992. The Committee also approves the compensation of elected
corporate officers and certain appointed officers. In this capacity, the
Committee reviews and approves those officers' salaries, Management Incentive
Plan bonuses, and stock option grants and performance share awards in
accordance with the terms of the Long-Term Incentive Plan. The Committee met
five times during 1992.
The Committee believes that competitive base salary levels provide an
essential foundation for an effective and motivational officer compensation
program which is complemented by annual and longer-term incentives. The
Committee also intends the total compensation program for the Corporation's
executive officers to be designed and administered to ensure that a substantial
component of their total compensation is dependent upon, and directly linked
to, the Corporation's annual and longer-term earnings growth, return on equity,
and the total returns realized by the Corporation's common shareholders. As it
has done from time to time, the Commitee has retained a compensation consultant
to advise it in 1993 as to how well the Corporation's officer compensation
program adheres to this philosophy and to evaluate the competitiveness of the
level and mix of officer salary, annual bonuses and long term incentives.
This Committee report describes the components of the 1992
executive officer compensation program. It also describes
<PAGE> 2
-2-
the manner in which 1992 compensation determinations were made by the Committee
for the Corporation's Chairman and Chief Executive Officer, Dr. Renso L.
Caporali.
BASE SALARY
The Committee administers the salaries of executive officers to
ensure that they are competitive with the salaries paid to incumbents of
comparable positions by U.S. corporations of comparable size and by other U.S.
aerospace and defense contractors. Grumman Corporation participates in several
nationally recognized executive compensation surveys. These surveys, which are
conducted by independent companies, provide the basis for establishing and
maintaining competitive officer salary ranges. Executive officer salaries are
set and administered within the ranges to which they have been assigned based
on the incumbent's experience and performance.
Executive officer salaries are periodically reviewed by the
Committee. Increases are based on the Committee's assessment of the officer's
performance taking into account where the officer's current salary falls within
the competitive salary range to which the position has been assigned. The
Chairman and CEO evaluates the performance of other officers and, based on his
assessment, periodically recommends appropriate increases to the Committee for
its review and approval. The Committee independently evaluates the performance
of the Chairman and CEO and reaches a determination regarding his salary. Dr.
Caporali's salary was last adjusted by the Committee in October 1991.
SHORT TERM INCENTIVE
The Management Incentive Plan (MIP) is a short-term incentive bonus
program, designed and administered to ensure that a significant portion of each
executive officer's annual cash compensation is based on the Corporation's
annual performance. The maximum amount that may be paid for awards in 1992
under this plan is seven percent of the Corporation's after tax net income
before unusual and non-recurring items. The plan provides that awards may not
be paid unless common stock dividend payments for the year total at least $1.00
per share.
MIP award payments earned by executives in the Corporation's
four-operating groups for 1992 were based on their operating group's
performance, evaluated relative to pre-established criteria in five areas:
pre-tax profits,
<PAGE> 3
-3-
reduction in working capital, new business, technical achievements and quality.
The 1992 MIP awards earned by the Chairman, President and Vice Chairman were
based on the Corporation's achievements in reducing working capital and on the
consolidated performance achievements of the Corporation's operating groups.
For 1992 performance, Dr. Caporali's bonus was $310,000. The Committee
believes that the award is consistent with Dr. Caporali's outstanding efforts
and results in substantially improving the financial condition of the
Corporation in 1992.
LONG TERM INCENTIVES
The Committee believes that a significant component of executive
officer total compensation should be related to the Corporation's longer-term
earnings growth and return on equity - both of which directly influence the
total returns realized by the Corporation's shareholders. The Corporation
accordingly submitted a new Long-Term Incentive Plan for shareholder approval
at the April 16, 1992, annual meeting.
Subsequent to receiving shareholder approval of the Long-Term
Incentive Plan, the Committee approved grants of performance shares to its
executive officers and other plan participants. These grants to the named
executive officers are shown under the target column of the Long-Term Incentive
Plan Awards Table of this proxy. Participants can earn from zero to twice the
number of performance shares granted based upon (1) how the Corporation's
three-year average earnings per share growth and return on equity compare with
pre-established standards established by the Committee at the time the
performance shares were granted and (2) how such three-year average earnings
per share growth and return on equity compare with those of six aerospace
industry peer corporations identified on the stock performance graph. Awards
issued in May 1992 cover a measurement period of January 1, 1992 through
December 31, 1994. Awards issued in November 1992 cover the measurement period
of January 1, 1993 through December 31, 1995.
These performance share grants have been structured so the number
of performance shares earned for each three-year period is directly related to
the Corporation's earnings per share growth and return on equity during the
period while the value of the performance shares that have been earned will be
directly related to the price of the Corporation's common stock at the end of
the performance measurement period when the shares are distributed. Thus, the
value of performance share
<PAGE> 4
-4-
distributions is directly related to changes in the market value of the
shareholder's investment during the performance measurement period. Dividend
equivalents are credited during the performance period on a share reinvestment
basis and are distributed at the end of the period with respect to all
performance shares that have been earned.
The performance shares awarded to Dr. Caporali were based upon a
formula designed to provide an opportunity to earn a significant percentage of
total compensation based on long- term incentives consistent with the
Committee's assessment of Dr. Caporali's impact on achieving the performance
criteria set forth in the Long-Term Incentive Plan.
The Committee has also granted stock options under the Long-Term
Incentive Plan. The options granted in 1992 to the executive officers are
shown on the Option Grant Table. These grants were made in November 1992 at the
same time as the performance share awards and were equal in size to the target
number of performance shares awarded. These options were granted with an
exercise price equal to the fair market value of Grumman Corporation common
stock on the date of grant and have a ten year exercise term. To further
reinforce the linkage between long-term incentive compensation and increases in
shareholder value, stock option grants cannot be exercised until the third
anniversary of the date of grant. Thereafter, the options can be exercised
partially or in their entirety at any time during the remaining seven-year
term. The 1992 Stock Option grants to Dr. Caporali were, as discussed above,
equal in amount to the target number of performance shares awarded to him in
November 1992.
COMPENSATION COMMITTEE
Charles Marshall, Chairman
Richard Dulude
James F. Orr, III
<PAGE> 5
-5-
STOCK PERFORMANCE GRAPH
The following performance graph compares the five- year cumulative
total shareholder returns (assuming reinvestment of dividends) realized by
Grumman Corporation's common shareholders with the S&P 500 index and an
aerospace company peer group comprised of the following six companies: General
Dynamics, Lockheed, Martin Marietta, McDonnell Douglas, Northrop, and Rockwell
International. This peer group's performance enters into the computation of
the actual number of performance shares to be distributed to participants under
the Long-Term Incentive Plan following the three year measurement period, in
that 50% of the ultimate distribution is based on a comparison of the
Corporation's three-year average earnings per share growth and return on equity
with those averages of these six peer companies. The performance graph assumes
$100 is invested in Grumman Corporation common stock, the S&P 500 index, and a
composite index for the peer companies on December 31, 1987, and that dividends
paid during the December 31, 1987 through December 31, 1992 period were
reinvested to purchase additional shares during this performance period.
Comparison of 5-Year Cumulative Total Return*
Among Grumman Corporation, S&P 500 and
Aerospace/Defense Peer Group
GRAPH - SEE PAGE 12 OF MASTER
<TABLE>
<CAPTION>
Aerospace
Grumman Peer Group S & P 500
<S> <C> <C> <C>
1988 $000 $000 $000
1989 $000 $000 $000
1990 $000 $000 $000
1991 $000 $000 $000
1992 $000 $000 $000
</TABLE>
- --------------------------
* Assumes $100 invested on 12-31-87 in Grumman stock, S&P
500 and peer group; assumes all dividends reinvested over
period.
<PAGE> 6
-6-
The table below sets forth all compensation paid by the Corporation
and its subsidiaries for services in all capacities in 1992 to each of the five
most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
----------------------
ANNUAL COMPENSATION OTHER RESTRICTED STOCK ALL OTHER
---------------------------- COMPENSATION STOCK OPTIONS COMPENSATION
NAME & PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($)(3) (#) ($)(2)(4)
- ------------------------- ---- --------- ----------- ------------ --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Renso L. Caporali . . . . . . . . . . . . . . . 1992 450,000 310,000 -- -0- 6,800 5,135
Chairman of the Board & 1991 375,000 220,000 79,875 9,000
Chief Executive Officer 1990 245,000 190,000 76,781 31,000
Robert J. Myers . . . . . . . . . . . . . . . . 1992 325,000 215,000 -- -0- 5,000 5,168
President & Chief Operating 1991 257,000 150,000 56,800 4,500
Officer 1990 180,000 80,000 51,188 6,400
J. Robert Anderson (5) . . . . . . . . . . . . 1992 300,000 190,000 -- -0- 4,600 5,193
Vice Chairman and 1991 150,000 90,000 232,000 21,000
Chief Financial Officer
Peter B. Oram . . . . . . . . . . . . . . . . . 1992 250,000 130,000 -- -0- -0- (6)
President 1991 243,333 125,000 42,600 4,800
Aircraft Systems Division 1990 210,000 100,000 54,600 4,800
Albert Verderosa (7) . . . . . . . . . . . . . 1992 190,000 100,000 53,677(8) -0- 3,000 4,370
President 1991 185,833 80,000 31,950 3,750
Systems Group
</TABLE>
<PAGE> 7
-7-
- --------------------
(1) Reflects Management Incentive Plan awards earned in specified calendar
year, but paid in either the following February or March. For example,
Dr. Caporali's award of $310,000 for 1992 performance was paid in
February 1993. Officers and key employees of the Corporation and of most
of its subsidiaries are eligible to participate in the Management
Incentive Plan adopted by the Board of Directors. The maximum amounts
available for total awards under the Plan are equal to 7% of the after
tax net income before adjustments for unusual and non-recurring items,
provided dividend payments for the year in question on the Grumman
Corporation Common Stock total at least $1.00 per share. The
Compensation Committee of the Board of Directors determines the
recipients and amounts of awards under the Plan.
(2) While each of the five named individuals received perquisites or other
personal benefits in 1992, in accordance with SEC regulations, the value
of these benefits are not indicated for any one other than Mr. Verderosa,
since those benefits did not exceed in the aggregate the lesser of
$50,000 or 10% of the individual's salary and bonus in 1992. In
accordance with the transitional provisions applicable to the revised
rules on executive officer and director compensation disclosure adopted
by the Securities and Exchange Commission, as informally interpreted by
the Commission's Staff, amounts of Other Annual Compensation and All
Other Compensation are excluded for the Corporation's 1990 and 1991
fiscal years.
(3) Amounts represent the aggregate market value of Restricted Stock on the
date of grant. The aggregate number and fair market value of all
Restricted Stock held by the named individuals on December 31, 1992 are
as follows: R Caporali, 19,600 shares, $483,875; R. Myers, 13,160
shares, $324,886; R. Anderson, 13,000 shares, $320,938; P. Oram, 11,920
shares, $294,275; A. Verderosa, 8,940 shares, $220,706. Dividend
equivalents are paid on Restricted Stock. Restrictions automatically
lapse in the event of a "change in control" of the Corporation. For this
purpose, a "change in control" is defined in the Change in Control
Arrangements Section (see page 17).
(4) This column includes the company contribution to the Grumman Corporation
Employee Investment Plan. All employees of the Corporation and of most
of its subsidiaries become eligible to participate in the Employee
Investment Plan after one year of employment. Employer contributions,
which can match up to 4% of the employee's annual basic compensation
rate, are invested in a Company Stock Fund for the employee's benefit.
(5) Mr. Anderson joined the Company on July 1, 1991.
<PAGE> 8
-8-
(6) Mr. Oram did not participate in the Grumman Corporation Employee
Investment Plan.
(7) Mr. Verderosa was not an Executive Officer in 1990 as defined by
regulations issued by the Securities and Exchange Commission.
(8) Of this sum, $52,088 represents Mr. Verderosa's housing and meal
allowance while serving at the Corporation's request at a location away
from his normal residence.
<PAGE> 9
-9-
The Corporation has in effect plans pursuant to which options to
purchase Common Stock of the Corporation are granted to officers and other
selected employees as determined by the Compensation Committee. The tables
below identify the option grants awarded in the last fiscal year to the
individuals identified on the Summary Compensation Table and the aggregate
option values on December 31, 1992.
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED VALUE OF
------------------------------------------------------- ASSUMED ANNUAL RATES OF
% OF TOTAL STOCK PRICE APPRECIATION OVER
OPTIONS GRANTED EXERCISE 10 YEAR OPTION TERM (2)
OPTIONS TO EMPLOYEES OR BASE PRICE EXPIRATION --------------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE 0% ($) 5% ($) 10% ($)
- -------------------- ---------- --------------- ------------- ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Renso L. Caporali ..... 6,800 2.79% $21.0625 Nov. 19, 2002 $0 $90,232 $227,728
Robert J. Myers ....... 5,000 2.07% $21.0625 Nov. 19, 2002 $0 $66,347 $167,447
J. Robert Anderson .... 4,600 1.90% $21.0625 Nov. 19, 2002 $0 $61,039 $154,051
Peter B. Oram (3) ..... -0- N/A N/A N/A N/A N/A N/A
Albert Verderosa ...... 3,000 1.23% $21.0625 Nov. 19, 2002 $0 $39,808 $100,468
</TABLE>
- -------------------
(1) All options were granted on November 19, 1992 under the 1992 Long Term
Incentive Plan. Options must be held three years after the grant date
before they can be exercised. In the event of a change in control, all
restrictions lapse. For this purpose, a "change in control" is as
defined in Change in Control Arrangements Section (see page 17).
(2) The dollar amounts under these columns are the result of calculations at
0% and the 5% and 10% rates set by the SEC, and therefore are not
intended to forecast possible future appreciation, if any, of Grumman
Corporation's stock price.
(3) In the fall of 1992, Mr. Oram announced his retirement effective the
close of business December 31, 1992. Accordingly, he did not receive an
option grant in 1992.
<PAGE> 10
-10-
AGGREGATE OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FY-END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1992 DECEMBER 31, 1992 (2)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Renso L. Caporali ................................ 74,450 6,800 $337,207 $24,638
Robert J. Myers .................................. 31,350 5,000 $131,979 $18,121
J. Robert Anderson ............................... 21,000 4,600 $143,805 $16,664
Peter B. Oram .................................... 32,250 -0- $135,781 -0-
Albert Verderosa ................................. 20,050 3,000 $ 66,681 $10,887
</TABLE>
- --------------------
(1) None of the named executive officers exercised any option in 1992.
(2) Based on the average of the high and low sales price of the Corporation's
Common Stock on the New York Stock Exchange -- Composite Transactions on
that date ($24.6875).
<PAGE> 11
-11-
The following table shows performance share awards made to the
individuals identified on the Summary Compensation Table. The performance
share awards were in lieu of the traditional awards of Restricted Stock to
certain key employees. Payout of awards is tied to the Corporation achieving
certain pre-set performance targets. The measures chosen to establish those
targets are earnings per share growth and return on equity of the Corporation
standing alone and as compared to its selected peer group. The actual
distributions may be adjusted as described in footnote (3) below. In the event
of a change in control, all performance share awards will be fully vested,
deemed earned in full at the maximum performance level and promptly paid
entirely in cash. For this purpose, a "change in control" is as defined in
Change in Control Arrangements Section (see page 17).
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
NUMBER OF PERFORMANCE OR UNDER NON-STOCK
SHARES OTHER PERIOD PRICE-BASED PLANS(3)
UNITS OR UNTIL -------------------------------
OTHER MATURATION OR THRESHOLD TARGET MAXIMUM
NAME YEAR(1) RIGHTS(#) PAYOUT(2) (#) (#) (#)
---- ------- --------- ------------- --------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
R. Caporali ......................... Nov-92 6,800 Mar-96 0 6,800 13,600
May-92 6,800 Mar-95 0 6,800 13,600
R. Myers ............................ Nov-92 5,000 Mar-96 0 5,000 10,000
May-92 4,900 Mar-95 0 4,900 9,800
J.R. Anderson ....................... Nov-92 4,600 Mar-96 0 4,600 9,200
May-92 4,600 Mar-95 0 4,600 9,200
P. Oram (4) ......................... May-92 3,800 Mar-95 0 3,800 7,600
A. Verderosa ........................ Nov-92 3,000 Mar-96 0 3,000 6,000
May-92 2,400 Mar-95 0 2,400 4,800
</TABLE>
<PAGE> 12
-12-
- -----------------------
(1) Awards issued in May 1992 are subject to a measurement period of January
1, 1992-December 31, 1994. These represent the initial awards granted
under the Long-Term Incentive Plan. Such awards would have been made in
November 1991, but were delayed until the Long-Term Incentive Plan was
approved by the shareholders in April 1992. Awards issued in November
1992 are subject to a measurement period of January 1, 1993-December 31,
1995.
(2) Date shown reflects anticipated date of distribution.
(3) For performance which falls below or above the pre-set target will be
prorated between those shown under Threshold and Target or Target and
Maximum, respectively. Dividend equivalents in the form of additional
shares are credited during the performance period, and will be
distributed at the end of the period with respect to all performance
shares that have been earned.
(4) In the fall of 1992, Mr. Oram announced his retirement effective the
close of business December 31, 1992. Accordingly, he did not receive an
award under this plan in November 1992.
<PAGE> 13
-13-
PENSION PLANS
All employees of the Corporation and of most of its subsidiaries,
are admitted to membership in its noncontributory employee pension plan after
one year's service and attainment of age 21. The plan provides benefits upon
retirement which are based upon a percentage of earnings per year of membership
service. Retirement is mandatory at age 65 for corporate officers. Early
retirement is allowed any time after a member reaches age 60 with at least one
year of service or age 50 with at least 20 years of service. The plan is a
career average plan and provides an annual sum on account of membership
service. The calculation of the benefit is based upon a formula level which
varies by calendar year. For example, from January 1, 1989 to date, the
benefit is calculated based upon the following formula: for each full or
partial calendar year, 2.60% of the base compensation per year up to the
formula level plus 2.85% of any base compensation in excess of the formula
level for those participants with 35 years or less of membership service. For
each year of membership service in excess of 35 years, the benefit accrues at
2.60% of base compensation. The formula level is the social security wage base
used to calculate the maximum social security tax minus $16,700. Base
compensation is salary excluding bonus, special pay or pay for overtime. The
projected annual pension benefit for each of the individuals identified in the
Summary Compensation Table, assuming he retires at age 65, his current earnings
remain constant over this period and he elects a pension benefit for his life
only is: R. Caporali, $114,716;; R. Myers, $105,099; J.R. Anderson, $58,056
and A. Verderosa, $88,121. In that Mr. Oram retired effective the close of
business December 31, 1992, his annual pension which accrued during his
employment produced a benefit payable for his life only of $74,791.
Section 415 of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the annual benefits which may be paid from a tax qualified
plan. The Corporation has a nonqualified unfunded excess benefit plan which
provides for the payment out of its general funds of any benefits calculated
under the provisions of the qualified noncontributory career average plan
(discussed in the paragraph above) that are above the limits under Section 415.
Benefits payable under this excess benefit plan are in addition to those
described above. The projected annual benefit payable under this excess benefit
plan for each of the individuals identified in the Summary Compensation Table,
assuming he retires at age 65, his current
<PAGE> 14
-14-
earnings will remain constant over this period and he elects a benefit payable
for his life only is: R. Caporali, $39,270; R. Mayers, $22,457 and J.R.
Anderson, $17,230. A. Verderosa is not covered by this plan. In that Mr.
Oram retired effective the close of business December 31, 1992, the annual
benefit payable under this plan for his life only is $1,227.
Further, the Corporation has a supplemental plan which provides to
certain officers of the Corporation, its subsidiaries and divisions and key
employees designated by the Compensation Committee of the Board of Directors a
supplemental pension up to 30% of final base compensation at retirement or age
65, depending on years of service, which is payable in monthly installments for
a period certain of 180 months. The maximum 30% supplemental payment is
reduced for service less than 25 years and/or retirement before age 60
(entitlement is subject to approval of the Compensation Committee of the Board
of Directors if retirement is prior to age 60 but after age 50 with 20 years of
continuous service) and may be further reduced or eliminated to make certain
that the sum of the annual pension calculated under the provisions of the above
described career average plan, excess benefit plan, when applicable, and annual
Social Security benefits, plus the supplemental benefit do not exceed 60% of
final total compensation (base compensation at retirement or age 65 and the
average of the three highest bonuses before then). The plan also provides an
annual pre-retirement death benefit equal to 25% of the final base compensation
payable monthly for a period certain of 108 months in lieu of any supplemental
retirement benefits being payable. Pursuant to this plan, the projected annual
benefits payable for 15 years commencing at age 65 are: R. Caporali $135,000;
R. Myers $97,500; J.R. Anderson $45,000 and A. Verderosa $67,500. In that Mr.
Oram retired effective the close of business December 31, 1992, his actual
annual benefit payable commencing January 1, 1993 is $75,000.
The Corporation has committed to provide Mr. Anderson a special
retirement bonus, to be paid in the form of an annuity, the cost of which will
be the total of 20% of each of his management incentive plan bonuses, and the
payment terms of which will be consistent with Mr. Anderson's pension election
under the Grumman Corporation Pension Plan. The Corporation also committed to
provide him with a supplemental retirement pension equivalent in lieu of the
supplemental retirement benefit described above in the event Mr. Anderson does
not complete ten full years of service with the Corporation.
<PAGE> 15
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CHANGE IN CONTROL ARRANGEMENTS
The Corporation in January 1990 adopted a plan which permits it to
enter into special severance agreements ("Agreements") with key employees, such
employees being designated from time to time by the Compensation Committee of
the Board of Directors. Currently, there are 27 designated key employees,
including Dr. Caporali and Messrs. Anderson, Myers and Verderosa. Until his
retirement, Mr. Oram was a designated key employee. The purpose of the
Agreements is to encourage the key employees to continue to carry out their
duties in the event of the possibility of a change in control of the
Corporation. Payments under the Agreement would be made only if there is (i) a
Change in Control of the Corporation; (ii) if the key employee is then in the
employ of the Corporation; and (iii) the key employee's employment is
terminated other than for narrowly defined causes. A "Change in Control" shall
be deemed to have occurred if (i) a majority of the directors of the
Corporation are not "Continuing Directors" as defined below, or (ii) any
"person" (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended), or an "Affiliate" or "Associate"
(as such terms are defined in Rule 405 of the Rules and Regulations under the
Securities Act of 1993, as amended) thereof, becomes a beneficial owner,
directly or indirectly, of securities of the Corporation representing thirty
percent (30%) or more of any class of the Corporation's then outstanding
securities having the right to vote on the election of directors, or (iii) any
trustee, receiver, custodian, assignee, liquidator or other person is appointed
to take charge of, or takes charge of, all or substantially all of the assets
of the Corporation, or (iv) by operation of any law the powers of the Board to
control the affairs of the Corporation shall be suspended or impaired.
"Continuing Director" shall mean a person who was a director of the Corporation
on December 31, 1989, or a person designated (before his initial election as a
Director) as a Continuing Director by two-thirds of the then Continuing
Directors.
Should an Agreement become operative, the key employee shall
receive his full base salary through the Date of Termination (as defined in the
Agreement); and after the Date of Termination, severance pay in a lump sum
equal to 2.99 times the key employee's base amount (as defined in Section 280G;
of the Code). This severance pay shall be reduced by any severance pay
received pursuant to the Corporation's Termination Review policy (Personnal
Policy A 641) in effect at the date of Notice of Termination (as defined in the
Agreement). In
<PAGE> 16
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addition, the Corporation would continue to provide certain fringe benefits
(i.e. medical, dental) and other employee benefits (as defined in the
Agreement) for up to 36 months.
If any portion of the key employee's severance compensation under
the Agreement (i) exceeds the total amount of payments or benefits which could
be received by the key employee from the Corporation without any portion
thereof constituting a nondeductible "excess parachute payment" pursuant to
Section 280G of the Code; or (ii) is subject to the excise tax imposed by
Section 4999 of the Code, such payments or benefits shall be reduced to the
extent necessary to comply with the limitation. Such reduction shall be made
in the order and manner determined by the key employee as soon as
administratively practicable following the Change in Control.
In January, 1990, the Board of Directors authorized the
Corporation to provide that in the event of a "Change in Control", any employee
whose employment is involuntarily terminated within 30 months following such
"Change in Control", shall be entitled to receive the Corporation's severance
pay benefits in effect immediately prior to the "Change in Control". For
purposes of this policy, the definition of "Change in Control" is substantially
the same as that for the Agreements described above.
<PAGE> 1
EXHIBIT (c)(3)
Amendments to 1981 Stock Option Plan, 1990 Stock
Option Plan and Long Term Incentive Plan
RESOLVED, that notwithstanding the provisions of the Company's Stock
Option Plans (specifically the 1981, 1990 and Long Term Incentive Plans), the
following wording shall be added to Section VI(d) of the 1981 Plan and the last
sentence of Sections VIII of the 1990 Plan and the Long-Term Incentive Plan at
the end thereof: "or by a beneficiary or beneficiaries designated in writing
on an appropriate form provided by the Company";
RESOLVED, that each outstanding grant letter be deemed to have
included such phrase in the appropriate sentence from the date of grant;
<PAGE> 1
EXHIBIT (c)(4)
Amendments to 1981 Stock Option Plan, 1990 Stock
Option Plan, Long-Term Incentive Plan and
Restricted Stock Award Plan
RESOLVED, that the provisions of the Company's 1981 and 1990
Stock Option Plans, as amended, the Restricted Stock Award Plan, as amended,
and the Long-Term Incentive Plan, as amended, be amended by adding to the Plan
as follows:
1981 and 1990 Stock Option Plans, as amended. At the end of
Section VII. Surrender of Options: "The Participant shall be
required to pay the amount of any taxes required to be
withheld, prior to receipt of Common Stock, with that number
of shares the Fair Market Value of which equals the amount
required to be withheld. Shares of Common Stock to be
withheld for tax withholding purposes may be either at the
required minimum or maximum combined statutory tax rate, plus
FICA taxes, if required. However, any Participant who is
subject to the reporting provisions of Section 16(a) of the
Securities Exchange Act of 1934, as amended, shall have such
withholdings at the maximum combined statutory tax rate, plus
FICA taxes, if required."
Restricted Stock Award Plan, as amended. At the end of Section
10. Restricted Period: "Upon the lapse of restrictions there
shall be deducted and withheld that number of shares the Fair
Market Value of which equals the amount required to be
withheld. Shares of Common Stock to be withheld for tax
withholding purposes may be either at the required minimum or
maximum combined statutory tax rate, plus FICA taxes, if
required. However, any Participant who is subject to the
reporting provisions of Section 16(a) of the Securities
Exchange Act of 1934, as amended, shall have such withholding
at the maximum combined statutory tax rate, plus FICA taxes,
if required."
<PAGE> 2
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Long-Term Incentive Plan, as amended. Section VIII. Other
Terms and Conditions: Paragraph (f)(ii) shall be deleted and
rewritten in its entirety as follows: "in the case of
payments of Awards in shares of Common Stock, the Participant
shall be required to pay the amount of any taxes required to
be withheld, prior to receipt of such stock, with that number
of shares the Fair Market Value of which equals the amount
required to be withheld. Shares of Common Stock to be
withheld for tax withholding purposes may be either at the
required minimum or maximum combined statutory tax rate, plus
FICA taxes, if required. However, any Participant who is
subject to the reporting provisions of Section 16(a) of the
Securities Exchange Act of 1934, as amended, shall have such
withholdings at the maximum combined statutory tax rate, plus
FICA taxes, if required."
Section VI. Awards Under This Plan: Paragraph (e) shall have
a second sentence added that reads, "Dividend equivalents
credited in the form of Common Stock shall be subject to tax
withholding by deducting therefrom that number of shares the
Fair Market Value of which equals the amount required to be
withheld. Shares of Common Stock to be withheld for tax
withholding purposes may be either at the required minimum or
maximum combined statutory tax rate, plus FICA taxes, if
required. However, any Participant who is subject to the
reporting provisions of Section 16(a) of the Securities
Exchange Act of 1934, as amended, shall have such withholdings
at the maximum combined statutory tax rate, plus FICA taxes,
if required."
and further
RESOLVED, that the first sentence of Section VII. Surrender of
Options under the 1981 and 1990 Stock Option Plans, as amended, be amended to
read: "The Committee may, under such terms and conditions as it deems
appropriate, accept the surrender by an optionee of a right to exercise an
option,
<PAGE> 3
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or some portion thereof (provided however, that the number of option shares
being surrendered be large enough to result in payment therefor of 100 or more
shares of Common Stock, unless all shares exercisable under the option are
surrendered), to purchase shares of Common Stock granted under an option and
authorize a payment in consideration therefor of an amount equal to the
difference obtained by subtracting the option price for such shares from their
fair market value on the date of such surrender, such payment to be in the
nearest whole number of shares of the Common Stock of the Company valued at
fair market value on the date of such surrender, provided that the Committee
determines that such settlement is consistent with the purposes of the Plan set
down in Article I hereof."
<PAGE> 1
EXHIBIT (c)(5)
Amendment to Restricted Stock Award Plan
RESOLVED, that Section 12(b) of the Restricted Stock Award
Plan is amended in its entirety to read as follows:
(b) The restrictions shall lapse immediately upon a Change in Control
of Grumman Corporation (the "Corporation"). A "Change in Control" of
the Corporation, for purposes of this Section, shall be deemed to
occur upon the happening of any of the following events;
(i) the acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either the then outstanding shares of Common
Stock of the Corporation or the combined voting power of the
then outstanding voting securities of the Corporation entitled
to vote generally in the election of directors, but excluding,
for this purpose, any such acquisition by the Corporation or
any of its subsidiaries, or any employee benefit plan (or
related trust) of the Corporation or its subsidiaries;
(ii) individuals who, as of February 17, 1994, constitute the
Board (as of such date, the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board,
provided that any individual becoming a director subsequent to
such date whose election, or nomination for election by the
Corporation's
<PAGE> 2
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shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of the directors of the Corporation (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act); or
(iii) approval by the stockholders of the Corporation of a
reorganization, merger or consolidation of the Corporation, in
each case, with respect to which all or substantially all of
the individuals and entities who were the respective
beneficial owners of the Common Stock and voting securities of
the Corporation immediately prior to such reorganization,
merger or consolidation do not, following such reorganization,
merger or consolidation, beneficially own, directly or
indirectly, more than 50% of, respectively, the then
outstanding shares of Common Stock and the combined voting
power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may
be, of the corporation resulting from such reorganization,
merger or consolidation, or a complete liquidation or
dissolution of the Corporation or of the sale or other
disposition of all or substantially all of the assets of the
Corporation.
<PAGE> 1
EXHIBIT (c)(6)
Amendment to Special Severance Pay Plan
RESOLVED, that Section 2 of the Corporation's Special
Severance Pay Plan is hereby amended in its entirety to read as follows:
2. Change in Control. Benefits provided herein shall be payable
only in the event there shall have occurred a "Change of control" as
defined below, and an Employee's employment by the Company shall
thereafter have been terminated in accordance with Section 3 below.
Each event constituting a "Change in Control" as defined below shall
be considered a separate "Change of Control" entitling an Employee to
the Benefits provided herein if his employment by the Company shall
have been terminated in accordance with Section 3 below following such
"Change in Control". For purposes of this Plan, a "Change in Control"
shall be deemed to have occurred upon the happening of any of the
following events:
(1) the acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either the then outstanding shares of Common
Stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors, but excluding, for
this purpose, any such acquisition by the Company or any of
its subsidiaries, or any employee benefit plan (or related
trust) of the Company or its subsidiaries;
<PAGE> 2
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(ii) individuals who, as of February 17, 1994, constitute the
Board of Directors of the Company (as of such date, the
"Incumbent Board") cease for any reason to constitute at least
a majority of such Board, provided that any individual
becoming a director subsequent to such date whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of the
directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act);
or
(iii) approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company, in
each case, with respect to which all or substantially all of
the individuals and entities who were the respective
beneficial owners of the Common Stock and voting securities of
the Company immediately prior to such reorganization, merger
or consolidation do not, following such reorganization, merger
or consolidation, beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of
Common Stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger or
consolidation, or
<PAGE> 3
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a complete liquidation or dissolution of the Company or of the
sale or other disposition of all or substantially all of the
assets of the Company.
<PAGE> 1
EXHIBIT (c)(7)
GRUMMAN CORPORATION
AMENDED AND RESTATED EXCESS BENEFIT PLAN
1. Purpose of Plan. This Excess Benefits Plan is intended to
provide additional benefits to employees of Grumman Corporation ("Grumman") or
its subsidiaries who are Members of the Grumman Corporation Pension Plan (the
"Pension Plan") and whose benefits thereunder are limited by (i) the statutory
ceilings on the amount of compensation which may be utilized in any Plan Year
for purposes of computing benefits payable under the Pension Plan with respect
to any Member, as imposed pursuant to Section 401(a)(17) of the Code and
reflected in Section 11.06 of the Pension Plan, and (ii) statutory ceilings on
the amount of the Annual Benefit payable to any Member under the Pension Plan,
as imposed pursuant to Section 415 of the Code and reflected in Sections 11.01
through 11.05 of the Pension Plan (the statutory ceilings referred to in
clauses (i) and (ii) being hereinafter collectively referred to as the
"Statutory Ceilings"). It is intended that the additional benefits hereunder
will be provided to Members (as hereinafter defined) who attain the status of a
Pensioner (as hereinafter defined) on or after December 1, 1983.
2. Definitions. Unless the context requires otherwise, all
terms used herein (other than the terms that are defined herein) shall have the
meaning set forth in Article I of the Pension Plan.
In addition -
(a) "BENEFICIARY" shall have the meaning set forth in Article I
of the Pension Plan except that it shall not include the Pensioner;
(b) "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(c) "PENSIONER" shall mean any Member of the Pension Plan who is
entitled to receive benefits pursuant to the terms thereof, including, without
limitation,
(i) a Member whose Normal Retirement Age is age 65, who
retired on his Normal Retirement Date, and who is entitled to receive a pension
pursuant to Section 4.02 of the Pension Plan;
<PAGE> 2
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(ii) a Member whose Normal Retirement Age is other than age 65,
who retires on his Normal Retirement Date, and who is entitled to receive a
pension pursuant to Section 4.02A of the Pension Plan;
(iii) a Member who retires after his Normal Retirement Date,
and who is entitled to receive a pension purpose to Section 4.03 of the Pension
Plan;
(iv) a Member who has retired before his Normal Retirement
Age pursuant to Section 4.04 of the Pension Plan, and is entitled to receive a
pension pursuant to such Section;
(v) a Member who, pursuant to Section 4.05 of the Pension
Plan, is deemed to have retired under Section 4.04 of the Pension Plan, and is
entitled to receive a pension under Section 4.05 of the Pension Plan; and
(vi) a Member who had been in service as an employee of
Grumman and/or any other Company or Companies for the requisite number of years
as of the time of his termination of employment with a Company, and is entitled
to receive a pension pursuant to Section 4.07 of the Pension Plan.
(d) "PLAN" shall mean the Grumman Corporation Excess
Benefit Plan, as set forth herein and as from time to time amended; and
(e) "UNREDUCED BENEFIT" shall mean the benefit to which a
Pensioner or Beneficiary would be entitled under the Pension Plan in the
absence of the Statutory Ceilings.
3. Participation in the Plan. Benefits under this Plan shall
be payable to each Pensioner whose Unreduced Benefit exceeds the maximum
benefit payable to him under the Pension Plan after giving effect to the
Statutory Ceilings. Benefits shall also be payable to the Beneficiary of a
Pensioner if such Beneficiary's Unreduced Benefit exceeds the maximum benefit
payable to him under the Pension Plan after giving effect to the Statutory
Ceilings.
4. Amount of Benefit. Except as otherwise provided in
Section 7, each Pensioner or Beneficiary shall be entitled to a benefit equal
to the difference between (i) his Unreduced Benefit and (ii) the maximum
benefit which may be paid to him under the provisions of the Pension Plan,
giving effect to the Statutory Ceilings.
<PAGE> 3
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5. Form of Benefit. Benefits under this Plan shall be paid in
the same form and at the same time as the benefits payable to the Pensioner or
Beneficiary under the Pension Plan. To the extent required in calculating
benefits hereunder, the interest rate assumptions and mortality tables then
being used under the Pension Plan shall be used in similar situations and for
similar purposes hereunder.
6. Obligation of Grumman. This Plan is intended to be an
unfunded Plan for purposes of Title I of ERISA. All benefits payable hereunder
are unsecured contractual obligations of Grumman.
7. Amendment of Termination. (a) Grumman may amend this Plan
at any time and from time to time, without the consent of any Member,
Pensioner, or Beneficiary, provided, however, that (x) no amendment to this
Plan shall reduce the benefits payable to any present or future Pensioner or
Beneficiary hereunder to an amount less than that which would have been payable
to him under paragraph (b) below if this Plan had been terminated as of the
date of such amendment, and (y) if the Pension Plan shall be terminated, this
Plan shall be terminated simultaneously.
(b) Grumman may terminate this Plan at any time, without the
consent of any Pensioner, Member or Beneficiary. Upon any termination of the
Plan, the following provisions shall govern Grumman's liability for benefits
hereunder, anything in this Plan to the contrary notwithstanding:
(i) Pensioners in Pay Status. With respect to any
Pensioner or Beneficiary who is receiving benefits hereunder as of the
date of termination of this Plan, Grumman shall continue to pay
benefits to such Pensioner or Beneficiary hereunder, as and when such
benefits are payable and in accordance with the terms hereof, as if
this Plan had not been terminated.
(ii) Individuals Vested under the Pension Plan. With
respect to any Pensioner who is vested under the Pension Plan but is
not yet receiving benefits hereunder as of the date of termination of
this Plan, Grumman shall pay such Pensioner or his Beneficiary his
Accrued Benefits (as hereinafter defined), as and when he receives
benefits under the Pension Plan.
<PAGE> 4
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(iii) Termination of Pension Plan. Except as otherwise
Provided in clauses (i) and (ii) above, if this Plan is terminated
because of termination of the Pension Plan, benefits hereunder shall
be paid at the same time, and in the same manner as benefits are paid
pursuant to the termination of the Pension Plan.
(iv) Other Persons. Except as provided in clauses (i), (ii)
and (iii) above, Grumman shall have no liability to pay any benefits
hereunder in the event of termination of this Plan.
(c) As used herein, "Accrued Benefits" shall mean, with
respect to any individual vested under the Pension Plan, and upon termination
of this Plan, the difference (if any) between (x) the Unreduced Benefit such
individual would have been entitled to under the Pension Plan, in the absence
of the Statutory Ceilings, and (y) the actual benefit the individual would be
entitled to receive under the Pension Plan, if the individual had terminated
his employment with Grumman on the date of termination of this Plan.
8. Miscellaneous.
(a) This Plan shall be administered by the Employees
Pension Board of the Pension Plan (the "Employees Pension Board"). The
Employees Pension Board shall review all questions arising in connection with
the Plan, including its interpretation, and may adopt procedural rules, and
employ and rely upon such legal counsel, actuaries, accountants and agents as
it may deem advisable to assist it in the administration of the Plan.
Interpretations and findings of the Employees Pension Board shall be conclusive
and binding on all persons.
This Plan shall be construed, administered and enforced
according to the laws of the State of New York except to the extent superseded
by ERISA.
(b) This Plan shall be binding upon Grumman and its
successors and assigns.
(c) All benefit payments hereunder shall be subject to all
applicable taxes and tax withholdings.
(d) Should any provision of this Plan in any way contravene
the laws of any state or jurisdiction, such provision shall be deemed not to be
a part of this Plan in that
<PAGE> 5
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state or jurisdiction and the parties agree to remain bound by all remaining
provisions.
(e) As used herein, he or his includes she or hers.
(f) Grumman may, for administrative reasons, establish a
grantor trust for the benefit of participants in the Plan. The assets of such
trust will be held separate and apart from other Grumman funds and shall be
used exclusively for the purposes set forth in the applicable trust agreement,
subject to the following conditions:
(i) the creation of such trust shall not cause the Plan to
be other than "unfunded" for purposes of Title I of ERISA;
(ii) Grumman shall be treated as the "grantor" of such trust
for purposes of subpart E, part I, subchapter J, chapter 1, subtitle
A of the Internal Revenue Code; and
(iii) such trust agreement shall provide that, in the event
of Grumman's insolvency, the assets held in trust may be used to
satisfy claims of Grumman's general creditors, provided that the
rights of such general creditors are enforceable under federal and
state law.
(g) Subject to any applicable law, no benefit under the Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to do so shall be
void, nor shall any such benefit be in any manner liable for or subject to
garnishment, attachment, execution or levy, or liable for or subject to the
debts, contracts, liabilities, engagements or torts of the participant.
(h) The Employees Pension Board shall provide adequate notice
in writing to any Pensioner or Beneficiary whose claim for a benefit under this
Plan has been denied, setting forth the specific reasons for such denial, and
written in a manner calculated to be understood by such Pensioner or
Beneficiary. A reasonable opportunity shall be afforded to any such Pensioner
or Beneficiary for a full and fair review by the Employees Pension Board of its
decision denying the claim.
(i) This Plan does not constitute a contract of employment
between any Member, Pensioner or Beneficiary and Grumman, and shall not be
construed as limiting Grumman's
<PAGE> 6
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rights to terminate a Member, Pensioner or Beneficiary as freely and with the
same effect as if this Plan was not in effect.
<PAGE> 1
EXHIBIT (c)(8)
GRUMMAN CORPORATION
AMENDED AND RESTATED SUPPLEMENTAL RETIREMENT PLAN
(SRP)
I. Purpose of Plan.
This Supplemental Retirement Plan (the "Plan") is intended to be
an unfunded plan, for purposes of ERISA (as hereinafter defined), maintained by
Grumman Corporation (the "Company") for the purpose of providing deferred
compensation for a select group of highly compensated and/or management
employees of the Company and its divisions, groups, and subsidiaries. As such,
its purpose is to provide a means to supplement the retirement benefits of
certain employees who are or were participating in the Grumman Corporation
Pension Plan (the "Pension Plan") and who retire on or after January 1, 1983.
Payments under the Plan shall not commence prior to January 1, 1984.
II. Definitions.
Unless the context requires otherwise, all terms used herein
(other than the terms that are defined herein) shall have the meaning set forth
in Article I of the Pension Plan.
(a) "Committee" means the Compensation Committee of the Board of
Directors of the Company.
(b) "Death Benefit" means the annual benefit payable to the SRP
Beneficiary of a Participant who dies prior to SRP Retirement as determined
pursuant to Article VI, or who dies after the Plan is terminated as determined
pursuant to Article IX, whichever is applicable.
(c) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(d) "Final Base Compensation" means a Participant's annual rate
of pay in effect immediately preceding his termination of employment or, if the
Plan is terminated pursuant to Article IX, immediately preceding such
termination, excluding any remuneration in the form of bonus, special pay or
pay for overtime. Final Base Compensation shall not include any increase in
annual rate of pay after a Participant attains his Normal Retirement Date,
except that the Final Base Compensation of a Participant who attained his
Normal
<PAGE> 2
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Retirement Date on or before January 1, 1984 is his annual rate of pay in
effect on January 1, 1984.
(e) "Final Total Compensation" means a Participant's Final Base
Compensation plus one-third (1/3) of the sum of the three highest annual
bonuses received by him from the Company during or before the year he attains
his Normal Retirement Date, unless he attains his Normal Retirement Date in
1984 or earlier, in which event the last bonus used for purposes of this
calculation shall be the annual bonus received in 1984.
(f) "Participant" means an employee of the Company or its
divisions, groups and subsidiaries who has become eligible to participate in
this Plan pursuant to Article IV.
(g) "SRP Beneficiary" means any beneficiary designated in writing
by a Participant from time to time, provided such writing is filed by him with
the Committee. If no designated SRP Beneficiary survives a Participant, his
surviving spouse shall be his SRP Beneficiary and, if no spouse survives him,
his estate shall be his SRP Beneficiary.
(h) "SRP Pension" means the annual benefit payable to a
Participant as determined pursuant to Article V.
(i) "SRP Retirement" means
(i) a Participant's termination of employment on or after
his sixtieth (60th) birthday provided he has
completed ten (10) years of Continuous Service; or
(ii) if the Committee, in its sole discretion, so
approves, a Participant's termination of employment
on or after his fiftieth (50th) birthday provided he
has completed twenty (20) years of Continuous
Service, provided, however, that if such termination
occurs on or after the occurrence of any Change in
Control (as hereinafter defined), Committee approval
shall automatically be deemed given, and such
termination shall be treated as "SRP Retirement" for
purposes of this Plan without the need for any action
by the Committee.
<PAGE> 3
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For purposes of this Plan, a "Change of Control" shall mean the
occurrence of any of the following events:
(A) the acquisition, other than from the Company, by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 30% or more of either the then outstanding shares of
Common Stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors, but excluding, for this purpose, any such
acquisition by the Company or any of its subsidiaries, or any employee
benefit plan (or related trust) of the Company or its subsidiaries;
(B) individuals who, as of February 17, 1994, constitute the
Board of Directors of the Company (as of such date, the "Incumbent Board")
cease for any reason to constitute at least a majority of such Board,
provided that any individual becoming a director subsequent to such date
whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act); or
(C) approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company, in each case, with
respect to which all or substantially all of the individuals and entities
who were the respective beneficial owners of the Common Stock and voting
securities of the Company immediately prior to such reorganization, merger
or consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of Common Stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
<PAGE> 4
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corporation resulting from such reorganization, merger or consolidation,
or a complete liquidation or dissolution of the Company or of the sale or
other disposition of all or substantially all of the assets of the
Company.
III. Administration of the Plan.
The Committee shall administer the Plan. The Committee shall
review all questions arising in connection with the Plan, including its
interpretation, and may adopt procedures rules, and employ and rely on such
legal counsel, actuaries, accountants and agents as it may deem advisable to
assist in the administration of the Plan. Interpretations and findings of the
Committee shall be conclusive and binding on all persons.
The Committee shall provide adequate notice in writing to any
Participant, former Participant or SRP Beneficiary whose claim for a benefit
under this Plan has been denied, setting forth the specific reasons for such
denial, and written in a manner calculated to be understood by such
Participant, former Participant, or SRP Beneficiary. A reasonable opportunity
shall be afforded to any such Participant, former Participant or SRP
Beneficiary for a full and fair review by the Committee of its decision denying
the claim.
IV. Participation in the Plan.
The Committee, in it sole discretion, shall designate a select
group of highly compensated and/or management employees of the Company and its
divisions, groups and subsidiaries, who shall be eligible to participate in the
Plan.
V. Benefits Upon Retirement.
(a) Except as provided in Article VIII and subject to the
limitations in Article VII, upon his SRP Retirement, a Participant shall be
entitled to receive an annual SRP Pension equal to thirty percent (30%) of
his Final Base Compensation provided that such thirty percent (30%) multiplier
shall be reduced by one percentage point (or fraction thereof) for each full
year (or portion thereof) of his Continuous Service less than twenty-five (25).
Employment past his Normal Retirement Date shall qualify as Continuous Service.
If a SRP Pension commences to be paid prior to a Participant's sixtieth (60th)
<PAGE> 5
-5-
birthday, his SRP Pension shall be reduced to the special actuarial equivalent
of the SRP Pension the Participant would have been entitled to receive had he
retired at age 60 and payment of his SRP Pension commenced at that time. In
computing such special actuarial equivalent, the Company shall utilize the
appropriate factor for the Participant's actual age at retirement, as set out
in Section 4.04 of the Pension Plan.
In computing any special actuarial equivalent pursuant to this
Article V(a), values for ages at retirement which are not exact integral ages
shall be determined by straight line interpolation between integral ages to the
nearest month of age.
An SRP Pension shall be payable each year for a total period of
fifteen (15) years, in monthly installments. Each such installment shall be
equal to one-twelfth (1/l2th) of the annual SRP Pension.
(b) A Participant's SRP Pension will commence upon the first day
of the first month next following the Participant's termination of employment.
A Participant may, by written irrevocable election filed with the Compensation
Committee not less than thirty (30) days prior to his SRP Retirement, and with
the consent of the Compensation Committee, defer commencement of his SRP
Pension to the first day of any month up to the month next following the
Participant's sixtieth (60th) birthday, with the SRP Pension computed in
accordance with the provisions of this Article V.
(c) If a Participant dies after his SRP Pension has commenced,
the remaining installments of his SRP Pension shall continue to be paid to his
SRP Beneficiary. If a Participant dies after SRP Retirement, but prior to
commencement of any SRP Pension payments by virtue of deferral, the SRP Pension
shall be computed pursuant to the provisions of this Article V and paid to his
SRP Beneficiary in the form provided herein.
VI. Pre-Retirement Death Benefit.
(a) If a Participant dies prior to his SRP Retirement, his SRP
Beneficiary shall be entitled to receive each year, for a total of nine (9)
years, an annual Death Benefit equal to twenty-five percent (25%) of his Final
Base Compensation. Such Death Benefit shall be payable each year in equal
monthly installments, commencing on the first day of the
<PAGE> 6
-6-
month next following the first anniversary of the Participant's death, with
each such installment being equal to 1/12th of the annua1 Death Benefit.
(b) The Death Benefit shall not be subject to the limitations in
Article VII.
VII. Limitation on SRP Pension.
Notwithstanding any other provisions of this Plan, the annual SRP
Pension payable under this Plan pursuant to Article V shall not exceed sixty
percent (60%) of the Participant's Final Total Compensation reduced by the sum
of:
(a) the annual 100% joint and survivor option benefit payable to
the Participant or his surviving spouse under the Pension Plan at the time of
his SRP Retirement, regardless of whatever option form of benefit the
Participant elects under the Pension Plan,
(b) the annual benefit, if any, provided by the Company or by any
other person controlling, controlled by, or under common control with, the
Company, to the Participant or his beneficiary under any arrangement with him
or for his benefit supplementing, similar to, or in lieu of benefits under the
Pension Plan at the time of his SRP Retirement (excluding any benefits payable
to the Participant or his beneficiary under the Company's Employee Investment
Plan or deferred awards under the Management Incentive Plan), it being deemed
that he shall have selected the 100% joint and survivor option, regardless of
whatever option form of benefit the Participant elects under such plan,
(c) the annual 100% joint and survivor option benefit, if any,
payable to the Participant or his beneficiary under the Grumman Corporation
Excess Benefit Plan at the time of his SRP Retirement, regardless of whatever
option form of benefit the Participant elects under the Pension Plan, and
(d) the amount of the annual Social Security benefit for which
the Participant is eligible as of the later of the date of his termination of
employment or the date on which he attains age sixty-two (62), provided,
however, that, if his termination of employment occurs before he attains age
sixty-two (62) no amount shall be offset under this Subsection (d) until the
Participant attains age sixty-two (62) and the
<PAGE> 7
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amount then offset sha11 be equal to the amount of the Socia1 Security benefit
he would have been entitled to receive had he continued in employment until age
sixty-two (62) and his earnings continued at the same rate as his Final Total
Compensation.
If an SRP Pension is payable to a Participant's SRP Beneficiary
pursuant to Article V, then for purposes of this Article VII, the amount of any
offset shall be the amount that would have been offset if the Participant had
not died and the SRP Pension was payable to the Participant.
For purposes of computing any of the offsets required under
paragraphs (a) through (d) above, if the Participant has no spouse, he shall be
deemed to have a spouse whose age is the same as that of the Participant. The
offsets required under paragraphs (a) through (c) above will be calculated as
if paid as of SRP Retirement, even if not paid at that time.
VIII. Forfeiture.
(a) If the Committee, in its sole discretion, so determines, no
benefit shall be payable under this Plan in respect of a Participant
(i) whose termination of employment does not constitute
SRP Retirement, or
(ii) who is convicted of a felony involving theft, fraud,
embezzlement or other similar unlawful acts committed against the Company or
against the Company's interests.
With respect to clause (ii) above, if the Participant has already
begun to receive SRP Pension Payments at the time of his conviction, he shall
not thereafter be entitled to any further payments hereunder, if the Committee
so determines.
(b) If the Committee, in its sole discretion, so determines, an
SRP Pension which has been approved by the Committee but deferred by the
Participant with the consent of the Committee, or an SRP Pension which has
commenced to be paid to a Participant, shall cease if the Participant within 1
year after his SRP Retirement has directly or indirectly owned, managed,
operated, controlled, been employed by, participated in or been connected in
any manner with the ownership,
<PAGE> 8
-8-
management, operation or control of any business similar to in competition with
the types of businesses conducted by the Company. Ownership of less than a one
percent (1%) interest in a publicly traded company which is in a business
similar to or competes with the Company shall not be considered as falling
within the scope of the previous sentence and shall not, in and of itself,
constitute grounds for the forfeiture of an SRP Pension pursuant to such
sentence.
IX. Amendment or Termination of Plan.
(a) The Company reserves the right to amend the Plan at any time
and from time to time; provided, however, that the Company may not amend the
Plan in such a manner that a Participant or an SRP Beneficiary would receive a
benefit hereunder which would be less than the benefit he would have received
had the Plan been terminated immediately preceding the date the amendment was
adopted.
(b) Although it is expected that the Plan will continue
indefinitely, the Company reserves the right to terminate the Plan at any time.
Upon any termination of the Plan, the following provisions shall govern the
Company's liability for benefits hereunder, anything in this Plan to the
contrary notwithstanding:
(i) The Company shall continue to pay SRP Pensions to
Participants who are receiving SRP Pensions as of the effective date of the
Plan's termination and shall continue to pay Death Benefits to SRP
Beneficiaries who are receiving Death Benefits as of such effective date, in
each case in accordance with the terms of the Plan;
(ii) If a Participant would have been entitled to receive
an SRP Pension had he terminated employment on the day immediately preceding
the effective date of the Plan's termination, he shall be entitled to receive,
and the Company shall pay him, an SRP Pension based on his Continuous Service
to the date of the Plan's termination, and calculated as if he had terminated
employment on such day, but such SRP Pension shall not be payable until the
Participant's actual termination of employment or, if later, at the request of
the Participant and with the consent of the Committee, upon the Participant's
attainment of age 60. If the consent of the Committee would have been required
for the Participant's termination of
<PAGE> 9
-9-
employment to constitute SRP Retirement, such consent shall be deemed to have
been given.
(iii) Except as provided in clauses (i) and (ii) above, the
Company shall have no liability to pay any SRP Pensions hereunder in the event
of termination of this Plan.
(iv) If any Participant eligible to receive an SRP Pension
pursuant to clause (ii) above dies before commencement of such SRP Pension
(regardless of whether such death occurs prior to or after the Participant's
termination of employment or prior to or after the termination of the Plan),
his SRP Beneficiary shall receive a Death Benefit equal to twenty-five percent
(25%) of the Participant's Final Base Compensation, such Death Benefit to be
payable as provided in Article VI.
X. Insurance Contracts.
(a) The Company may, but shall not be required to purchase
insurance contracts on the lives of Participants to provide for its obligations
under this Plan.
(b) In the event the Company elects to purchase insurance
contracts on the lives of Participants as a means for making, offsetting or
contributing to any benefit payment, in full or in part, which may become due
and payable under this Plan, each Participant agrees to cooperate in the
securing of life insurance on his life by furnishing such information and
completing such documentation as the Company and the life insurance company may
require, including the results and reports of previous Company and other
insurance company physical examinations, taking such physical examinations as
may be requested, and taking any other action which may be requested by the
Company and the insurance company to obtain and maintain such insurance
coverage. If a Participant does not cooperate in the securing and maintaining
of such life insurance, the Company shall have no further obligation to such
Participant under this Plan.
XI. Miscellaneous.
(a) This Plan shall be construed, administered and enforced
according to the laws of the State of New York except to the extent superseded
by ERISA.
<PAGE> 10
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(b) This Plan shall be binding upon the Company and its
successors and assigns.
(c) All benefit payments hereunder shall be subject to all
applicable taxes and tax withholdings.
(d) Should any provision of this Plan in any way contravene the
laws of any state or jurisdiction, such provision shall be deemed not to be a
part of this Plan in that state or jurisdiction and the parties agree to remain
bound by all remaining provisions.
(e) As used herein, he or his includes she or hers.
(f) This Plan is intended to be unfunded for purposes of Title I
of ERISA. All benefits payable hereunder are unsecured contractual obligations
of the Company.
(g) The Committee may, for administrative reasons, establish a
grantor trust for the benefit of Participants in the Plan. The assets of such
trust will be held separate and apart from other Company funds and shall be
used exclusively for the purposes set forth in the applicable trust agreement,
subject to the following conditions:
(i) the creation of such trust shall not cause the Plan
to be other than "unfunded" for purposes of Title I of ERISA;
(ii) the Company shall be treated as the "grantor" of such
trust for purposes of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code; and
(iii) such trust agreement shall provide that, in the event
of the Company's insolvency, the assets held in trust may be used
to satisfy claims of the Company's general creditors, provided
that the rights of such general creditors are enforceable under
federal and state law.
(h) Subject to any applicable law, no benefit under the Plan
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt to do so shall be
void, nor shall any such benefit be in any manner liable for or subject to
<PAGE> 11
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garnishment, attachment, execution or levy, or liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Participant.
(i) This Plan does not constitute a contract of employment
between any Participant and the Company, and shall not be construed as limiting
the Company's rights to terminate a Participant as freely and with the same
effect as if this Plan was not in effect.
<PAGE> 1
EXHIBIT (c)(9)
Amendment to Non-Employee Director Pension Plan
RESOLVED, that Section 8(e) of the Non-Employee Director Pension
Plan is amended in its entirety to read as follows:
(e) The Company may, for administrative reasons, establish a
grantor trust for the benefit of Directors covered by the Plan. The
assets of such trust will be held separate and apart from other
Company funds and shall be used exclusively for the purposes set forth
in the applicable trust agreement, subject to the following
conditions:
(i) the creation of such trust shall not cause the Plan to be
other than "unfunded" for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended;
(ii) the Company shall be treated as the "grantor" of such
trust for purposes of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code, as amended; and
(iii) such trust agreement shall provide that, in the event of
the Company's insolvency, the assets held in trust may be used
to satisfy claims of the Company's general creditors, provided
that the rights of such general creditors are enforceable under
federal and state law.
<PAGE> 1
EXHIBIT (c)(10)
Amendment to Management Incentive Plan
RESOLVED, that the Management Incentive Plan is hereby amended
so as to add a new Article IX thereto, reading as follows:
IX. ESTABLISHMENT OF TRUST TO ASSIST IN PAYING DEFERRED AWARDS
Grumman Corporation may, for administrative reasons, establish a
grantor trust for the benefit of participants receiving deferred
awards under the Plan. The assets of such trust will be held separate
and apart from other Corporation funds and shall be used exclusively
for the purposes set forth in the applicable trust agreement, subject
to the following conditions:
(i) the creation of such trust shall not cause the Plan to be
other than "unfunded" for purposes of Title I of the Employee
Retirement Income Security Act of 1974, as amended;
(ii) the Corporation shall be treated as the "grantor" of such
trust for purposes of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code, as amended; and
(iii) such trust agreement shall provide that, in the event of
the Corporation's insolvency, the assets held in trust may be
used to satisfy claims of the Corporation's general creditors,
provided that the rights of such general creditors are
enforceable under federal and state law;
The Corporation may, if it determines such action to be
appropriate, establish separate
<PAGE> 2
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accounts within any such trust for deferred awards payable to
individual Plan participants.
<PAGE> 1
EXHIBIT (c)(11)
Amendment to Management Incentive Plan
RESOLVED, that the Company's Management Incentive Plan be and the same
hereby is amended by adding "or other consideration" after the word
"securities" in the second sentence of the fifth paragraph of Article VII of
such plan, effective March 6, 1994.
<PAGE> 1
EXHIBIT (c)(12)
INDEMNITY AGREEMENT
AGREEMENT dated as of by and between
, a corporation (the "Corporation") and (the
"Indemnitee").
RECITALS
Indemnitee is a director of the Corporation. Both the
Corporation and Indemnitee recognize the increased risk of litigation and other
claims being asserted against directors of public companies in today's
environment. Basic protection against undue risk of personal liability of
directors heretofore has, in part, been provided through insurance coverage
providing reasonable protection at a reasonable cost, and Indemnitee has relied
on the availability of such coverage, but as a result of substantial changes in
the marketplace for such insurance, it has become increasingly more difficult
to obtain such insurance on terms providing reasonable protection at a
reasonable cost.
Article VI of the By-laws of the Corporation requires the
Corporation to indemnify its directors as currently provided therein and the
Indemnitee has been serving and continues to serve as a director of the
Corporation in part in reliance on such By-law provision.
In part to provide Indemnitee with specific contractual
assurance of substantial protection against personal liability (regardless of,
among other things, any amendment to or revocation of the aforementioned
provisions of the Corporation's By-laws or any change in the composition of the
Corporation's Board of Directors or acquisition of the Corporation), the
Corporation desires to enter into this Agreement. Section 721 of the New York
Business Corporation Law expressly recognizes that the indemnification
provisions of the New York Business Corporation Law are not exclusive of any
other rights to which a person seeking indemnification may be entitled by the
certificate of incorporation or by-laws, or, when authorized by such
certificate of incorporation or by-laws, an agreement providing for
indemnification, and this Agreement is being entered into pursuant to such
By-law as permitted by the New York Business Corporation Law.
<PAGE> 2
-2-
In order to induce Indemnitee to remain in Indemnitee's present
position as a director of the Corporation and in consideration of Indemnitee's
so remaining, the Corporation desires to indemnify Indemnitee according to the
terms and conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing recitals and
of Indemnitee's continuing to serve the Corporation directly, the parties
hereto agree as follows:
The Corporation hereby agrees to indemnify Indemnitee and
Indemnitee's successors referred to in Section 9 hereof according to the terms
and conditions set forth below:
1. Basic Indemnification. The Corporation hereby agrees to
hold harmless and indemnify Indemnitee and Indemnitee's successors referred to
in Section 9 hereof to the fullest extent authorized or permitted by the New
York Business Corporation Law or any other applicable law, or by any amendment
thereof or other statutory provisions authorizing or permitting such
indemnification which is adopted after the date hereof.
2. Additional Indemnification. (a) Without limiting the
generality of Section 1 hereof, the Corporation hereby agrees to hold harmless
and indemnify Indemnitee and Indemnitee's successors referred to in Section 9
hereof to the fullest extent permitted by applicable law against any and all
expenses (including, without limitation, investigation expenses and expert
witnesses' and attorneys' fees and expenses), judgments, fines and amounts paid
in settlement actually and reasonably incurred by Indemnitee (net of any
related insurance proceeds received by Indemnitee or paid on Indemnitee's
behalf), in connection with any future threatened, pending or completed claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, based upon, arising from, relating to, or by reason of the fact
that Indemnitee was, is, shall be or shall have been a director of the
Corporation, or is or was serving, shall serve or shall have served at the
request of the Corporation as a director or an officer or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise; provided that such indemnification shall not apply to any actions,
suits, or proceedings if a judgment or other final adjudication adverse to the
Indemnitee establishes that his or her acts were committed in bad faith, or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or the
<PAGE> 3
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Indemnitee personally gained in fact a financial profit or other advantage to
which he or she was not legally entitled.
(b) The Corporation hereby further agrees to hold harmless and
indemnify Indemnitee and Indemnitee's successors referred to in Section 9
hereof to the fullest extent as may be provided to the Indemnitee by the
Corporation and permitted by the relevant non-exclusive indemnification
provisions of Article 7 of the New York Business Corporation Law, or any
successor provisions thereto.
3. Insurance.
A. The Corporation may purchase and maintain insurance on
behalf of the Indemnitee against any liability asserted against him or her or
incurred by or on behalf of him or her in such capacity as a director of the
Corporation or of an Affiliate, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Agreement or under the New
York Business Corporation Law, as it may then be in effect. The purchase and
maintenance of such insurance shall not in any way limit or affect the rights
and obligations of the Corporation or of the Indemnitee under this Agreement
and the execution and delivery of this Agreement by the Corporation and the
Indemnitee shall not in any way limit or affect the rights and obligations of
the Corporation or the other party or parties thereto under any such policy or
agreement or insurance.
B. If the Indemnitee shall receive payment from any insurance
carrier or from the plaintiff in any Action against the Indemnitee in respect
of Indemnified Amounts after payments on account of all or part of such
Indemnified Amounts have been made by the Corporation pursuant to this
Agreement, the Indemnitee shall promptly reimburse the Corporation for the
amount, if any, by which the sum of such payment by such insurance carrier or
such plaintiff and payments by the Corporation to the Indemnitee exceeds such
Indemnified Amounts; provided however, that such portions, if any, of such
insurance proceeds that are required to be reimbursed to the insurance carrier
under the terms of its insurance policy, such as deductible or co-insurance
payments, shall not be deemed to be payments to the Indemnitee hereunder.
In addition, upon payment of Indmenified Amounts under this
Agreement, the Corporation shall be subrogated to
<PAGE> 4
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the Indemnitee's rights against any insurance carrier in respect of such
Indemnified Amounts and the Indemnitee shall execute and deliver any and all
instruments and/or documents and perform any and all other acts or deeds which
the Corporation deems necessary or advisable to secure such rights. The
Indemnitee shall do nothing to prejudice such rights of recovery or
subrogation.
C. In the event the Corporation's directors' and officers'
liability insurance shall terminate or the scope or amount of coverage of the
Corporation's directors' and officers' liability insurance shall be reduced
from the scope and coverage in effect as of the date hereof, the Corporation
agrees, but not as a limitation on the amounts payable pursuant to Sections 1
and 2 hereof, to hold harmless and indemnify the Indemnitee to the fullest
extent permitted by applicable law to the full extent of the coverage which is
in effect as of the date hereof. (All amounts payable by the Corporation
pursuant to this Section 3 and Sections 1 and 2 hereof are herein referred to
as "Indemnified Amounts" and all claims, actions, suits or proceedings
indemnified by the Corporation pursuant to this Section 3 and Sections 1 and 2
hereof are herein referred to as "Actions".)
4. Section 16(b) Liability. The Corporation shall not be
liable under this Agreement to make any payment in connection with any claim
made against Indemnitee for an accounting of profits made from the purchase or
sale by Indemnitee of securities of the Corporation within the meaning of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any state statutory law or common law.
5. Payments. Upon written request by Indemnitee in
accordance with this Section 5, the Corporation hereby agrees to pay to
Indemnitee, by a check payable in New York funds, all Indemnified Amounts with
respect to which Indemnitee shall not have been previously reimbursed by the
Corporation. In making any written reguest for Indemnified Amounts incurred,
Indemnitee shall submit to the Corporation a schedule setting forth in detail
the dollar amount expended (or incurred and expected to be expended) for each
Indemnified Amount. Each such listing of Indemnified Amounts shall be
supported by the bill, agreement or other documentation relating thereto, each
of which shall be appended to the schedule as an exhibit.
<PAGE> 5
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In the event Indemnitee is unsuccessful on the merits in the
defense of any action, Indemnitee's written request to the Corporation for
Indemnified Amounts shall also include a written certificate by Indemnitee
stating that his or her acts that formed the subject matter of such action were
not committed in bad faith, or, if material to the cause of action so
adjudicated were not the result of active and deliberate dishonesty, and that
he or she did not personally gain in fact a financial profit or other advantage
to which he or she was not legally entitled.
6. Advancement of Indemnified Amounts; Repayments. The amount
of Indemnified Amounts previously expended or incurred by Indemnitee or
reasonably expected by Indemnitee to be expended or incurred by Indemnitee
within the three months next succeeding a request by Indemnitee as described
below, and not in either case previously reimbursed by the Corporation to
Indemnitee, in defending any Action or otherwise expended or incurred by
Indemnitee shall be paid directly to Indemnitee promptly by the Corporation
upon Indemnitee's written request or requests, from time to time, which shall
be at least for the sum of $10,000. The amount paid by the Corporation to
Indemnitee pursuant to such a request is herein referred to as an "Advanced
Amount".
Indemnitee hereby agrees to repay by check in New York funds all
Advanced Amounts, or the excess of the total Advanced Amounts over the total
Indemnified Amounts, to the Corporation promptly after the final resolution of
the Action or matter to which such Advanced Amounts relate if Indemnitee is not
entitled to reimbursement pursuant to Sections 1, 2 or 3 hereof for the
Indemnified Amounts to which such Advanced Amounts relate, or if the total
Advanced Amounts exceed the total Indemnified Amounts, as the case may be.
7. Agreement Not Exclusive; Subrogation Rights, etc. This
Agreement shall not be deemed exclusive of and shall not diminish any other
rights Indemnitee may have to be indemnified or insured by the Corporation, any
subsidiary of the Corporation or any other person or entity under any
certificate of incorporation, by-laws, law, agreement, policy of insurance,
surety, vote of stockholders or disinterested directors or otherwise, whether
or not now in effect, both as to action in Indemnitee's official capacity and
as to action in another capacity while holding such office, and shall continue
as to Indemnitee after Indemnitee has ceased to be a director and
<PAGE> 6
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shall inure to the benefit of Indemnitee's successors referred to in Section 9
hereof.
In the event any Indemnitee shall receive payment from any
insurance carrier or from the plaintiff in any Action against such Indemnitee
in respect of Indemnified Amounts after payments on account of all or part of
such Indemnified Amounts have been made by the Corporation pursuant hereto,
such Indemnitee shall reimburse to the Corporation the amount, if any, by which
the sum of such payment by such insurance carrier or such plaintiff and
payments by the Corporation to the Indemnitee exceeds such Indemnified Amounts;
provided, however, thst such portions, if any, of such insurance proceeds that
are required to be reimbursed to the insurance carrier under the terms of its
insurance policy shall not be deemed to be payments to the Indemnitee
hereunder. In addition, upon payment of Indemnified Amounts hereunder, the
Corporation shall be subrogated to the rights of the Indemnitee receiving such
payments (to the extent thereof) against any insurance carrier in respect of
such Indemnified Amounts (to the extent permitted under such insurance
policies). Such right of subrogation shall be terminated upon receipt by the
Corporation of the amount to be reimbursed by the Indemnitee pursuant to the
first sentence of this paragraph.
8. Continuation of Indemnity. All agreements snd obligations
of the Corporation contained herein shall continue during the period Indemnitee
is a director of the Corporation (or is or was serving at the reguest of the
Corporation as a director, officer, employee, trustee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Indemnitee shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that Indemnitee was a director of the Corporation or serving in any other
capacity referred to herein.
9. Successors; Binding Agreement. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Corporation, by agreement in form and substance reasonably
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform if such succession had not taken place.
<PAGE> 7
-7-
This agreement shall inure to the benefit of and be enforceable
by Indemnitee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Indemnitee should
die while any amounts would still be payable to Indemnitee hereunder if
Indemnitee had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Indemnitee's devisee, legatee, or other designee, or if there be no such
designee, to Indemnitee's estate.
10. Notification and Defense of Claim. Promptly after receipt
by Indemnitee of notice of the commencement of any Action, Indemnitee will, if
a claim in respect thereof is to be made against the Corporation under this
Agreement, notify the Corporation of the commencement thereof; but the omission
so to notify the Corporation will not relieve it from any liability which it
may have to Indemnitee otherwise than under this Agreement. With respect to
any such Action as to which Indemnitee notifes the Corporation of the
commencement thereof:
(a) The Corporation will be entitled to participate therein at
its own expense; and
(b) Except as otherwise provided below, to the extent that it
may wish, the Corporation jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof,
with counsel satisfactory to Indemnitee. After notice from the
Corporation to Indemnitee of its election so to assume the defense
thereof, the Corporation will not be liable to Indemnitee under this
Agreement for any legal or other expenses subsequently incurred by
Indemnitee in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below.
Indemnitee shall have the right to employ its counsel in such Action,
but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at
the expense of Indemnitee unless (i) the employment of counsel by
Indemnitee has been authorized by the Corporation,l (ii) Indemnitee
shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Indemnitee in the conduct of the
defense of such Action or (iii) the Corporation shall not in fact have
employed counsel to assume the defense of such Action, in each of
which cases the fees and expenses of counsel shall be at the expense
of
<PAGE> 8
-8-
the Corporation. The Corporation shall not be entitled to assume the
defense of any Action brought by or on behalf of the Corporation or
as to which Indemnitee shall have made the conclusion provided for in
(ii) above; and
(c) The Corporation shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of
any Action effected without its written consent. The Corporation
shall not settle any Action in any manner which would impose any
penalty or limitation on Indemnitee without Indemnitee's written
consent. Neither the Corporation nor Indemnitee will unreasonably
withhold their consent to any proposed settlement.
11. Enforcement. (a) The Corporation expressly confirms
and agrees that it has entered into this Agreement and assumed the obligations
imposed on the Corporation hereby in order to induce Indemnity to continue as a
director of the Corporation, and acknowledges that Indemnitee is relying upon
this Agreement in continuing in such capacity.
(b) In the event Indemnitee is required to bring any action
to enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse Indemnitee for all
of Indemnitee's reasonable fees and expenses in bringing and pursuing such
action.
12. Separability. Each of the provisions of this Agreement
is a separate and distinct agreement and independent of the others, so that if
any provisions hereof shall be held to be invalid or unenforceable for any
reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof, which other provisions shall
remain in full force and effect.
13. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by Indemnitee and either the Corporation's Chief
Executive Officer or another officer of the Corporation specifically designated
by the Board of Directors. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiveer of similar or dissimlar provisions or conditions at the same or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to
<PAGE> 9
-9-
the subject matter hereof have been made by either party which are not set
forth expressly in this Agreement. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
New York, without giving effect to the principles of conflicts of laws thereof.
14. Notices. For the purposes of this Agreement, notices
and all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, as follows:
If to Indemnitee:
If to Corporation: Secretary
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
16. Effectiveness. This Agreement shall be effective as of
the date it is executed.
<PAGE> 10
-10-
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be executed, as of the day and year first above written.
[CORPORATE SEAL]
By:
-------------------------
President
ATTEST:
- ----------------------------
Secretary
[Indemnitee]
By:
-------------------------
<PAGE> 1
EXHIBIT (c)(13)(a)
NORTHROP
January 21, 1992
CONFIDENTIALITY AGREEMENT
Grumman Corporation
1111 Stewart Avenue
Bethpage, New York 11714-3580
Dear Sirs:
This letter agreement will confirm our possible interest in preliminary
discussions ("Discussions") which might lead to some form of negotiated
transaction between the parties (the "Transaction"). During such Discussions,
we, which term shall include Northrop Corporation, its directors, officers,
employees and affiliates and you, which term shall include Grumman Corporation,
its directors, officers, employees and affiliates, may determine that it is
necessary and appropriate to exchange certain information relating to Northrop
or Grumman respectively. Any such information (whether written or oral)
furnished to either party to this letter agreement (whether before or after the
date hereof) by the other party or its respective financial advisors,
attorneys, accountants or agents (collectively, "Representatives") and all
analyses, compilations, forecasts, studies or other documents prepared by
either party or its Representatives in connection with such party's or its
Representatives' review of, or interest in, the Discussions or the Transaction
which contain or reflect any such information is hereinafter referred to as the
"Information". The term Information will not include information which (i) is
or becomes publicly available other than as a result of a disclosure by the
receiving party or its Representatives or (ii) is or becomes available to the
receiving party on a nonconfidential basis from a source (other than that party
or its Representatives) which, to the best of the receiving party's knowledge
is not prohibited from disclosing such information to it by a legal,
contractual or fiduciary obligation, or (iii) is independently developed by the
receiving party without reference to the Information.
<PAGE> 2
Grumman Corporation
January 21, 1992
Page 2
Accordingly, we and you hereby agree that:
1. Each of the parties and its Representatives (i) will keep the
Information confidential and will not (except as required by
applicable law, regulation or legal process, and only after compliance
with paragraph 3 below), without the prior written consent of the
party which furnished the Information, disclose the Information in any
manner whatsoever, and (ii) will not use the Information other than in
connection with the Transaction; provided, however, that each of the
parties may reveal the Information to its respective Representatives
(a) who need to know the Information for the purpose of evaluating the
Transaction, (b) who are informed of the confidential nature of the
Information and (c) who agree to act in accordance with the terms of
this letter agreement.
2. Each of the parties and its Representatives will not (except as
required by applicable law, regulation or legal process, and only
after compliance with paragraph 3 below), without the other party's
prior written consent, disclose to any person the fact that the
Information exists or has been made available, that either party is
considering the Transaction, or that discussions or negotiations are
taking or have taken place concerning the Transaction or any term,
condition or other fact relating to any such Transaction or such
discussions or negotiations, including, without limitation, the status
thereof.
3. In the event that we or any of our Representatives are requested
pursuant to, or required by, applicable law, regulation or legal
process to disclose any of the Information, we will notify you
promptly so that you may seek a protective order or other appropriate
remedy or, in your sole discretion, waive compliance with the terms of
this letter agreement. Similarly, in the event that you or any of
your Representatives are requested pursuant to, or required by,
applicable law, regulation or legal process to disclose any of the
Information provided by us, you will notify us promptly so that we may
seek a protective order or other appropriate remedy or in our sole
discretion, waive compliance with the terms of this letter agreement.
In the event that no such protective order or other remedy is
obtained, that we or you waive compliance with the terms of this
letter agreement, or that disclosure is legally required, the
disclosing party will
<PAGE> 3
Grumman Corporation
January 21, 1992
Page 3
furnish only that portion of the Information which it is advised by
counsel is legally required and will exercise reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded
the Information.
4. If either party determines to cease discussions and/or not to proceed
with a Transaction, it will promptly inform the other party of that
decision. In that case, both parties at their sole election will
either (i) promptly destroy all copies of the written Information in
its or its Representatives' possession and confirm such destruction to
the other party in writing, or (ii) promptly deliver to the other
party at the returning party's expense all copies of the written
Information in its or its Representatives' possession.
5. The parties acknowledge that neither party, its affiliates, or
Representatives, nor any of its or their respective officers,
directors, employees, agents or controlling persons within the meaning
of Section 20 of the Securities Exchange Act of 1934, as amended,
makes any express or implied representation or warranty as to the
accuracy or completeness of the Information furnished to the other
party, and the parties agree that no such person will have any
liability relating to the Information or for any errors therein or
omissions therefrom. The parties further agree that they are not
entitled to rely on the accuracy or completeness of the Information
and that they will be entitled to rely solely on such representations
and warranties as may be included in any definitive agreement with
respect to a Transaction, subject to such limitations and restrictions
as may be contained therein.
6. The parties acknowledge that they are aware and will advise their
Representatives who are informed of the matters that are the subject
of this letter agreement, of the restrictions imposed by the United
States securities laws on the purchase or sale of securities by any
person who has received material, non-public information from the
issuer of such securities and on the communication of such information
to any other person when it is reasonably foreseeable that such other
person is likely to purchase or sell such securities in reliance upon
such information.
7. For a period of three years from the date of this letter agreement,
neither party nor any of its controlled
<PAGE> 4
Grumman Corporation
January 21, 1992
Page 4
subsidiaries will, unless specifically invited by the other party or
its Board of Directors: (i) acquire, offer to acquire, or agree to
acquire, directly or indirectly, by purchase or otherwise, any voting
securities or direct or indirect rights to acquire any voting
securities of the other party, or any assets of the other party or any
subsidiary or division thereof or of any such successor or controlling
person; (ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such terms are used in
the rules of the Securities Exchange Commission) to vote, or seek to
advise or influence any person or entity with respect to the voting
of, any voting securities of the other party; (iii) make any public
announcement with respect to, or submit a proposal for, or offer of
(with or without conditions) any extraordinary transaction involving
the other party or its securities or assets; (iv) form, join or in any
way participate in a "group" (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) in connection with any of
the foregoing. The parties agree that for the period specified above,
neither will request the other (its officers, directors, employees and
agents), directly or indirectly, to waive any provision of this
paragraph.
8. Each of the parties agrees that, for a period of two years from the
date of this letter agreement, it will not, directly or indirectly,
solicit for employment any employee of the other party or any of its
subsidiaries who became known to it as a result of the Discussions or
its consideration of a Transaction provided, however, that any such
solicitation shall not be deemed a breach of this agreement if (i) the
personnel who perform such solicitation have no access to or knowledge
of any Information or this agreement and (ii) none of the soliciting
party's personnel who have access to the Information have actual
advance knowledge of such solicitation. The term "solicit for
employment" shall not be deemed to include general solicitations of
employment not specifically directed towards employees of Northrop or
Grumman.
9. The parties agree that all (i) communications regarding the
Discussions or a Transaction, (ii) requests for additional
Information, facility tours or management meetings, and (iii)
discussions or questions regarding procedures with respect to the
Discussions or a Transaction, will be
<PAGE> 5
Grumman Corporation
January 21, 1992
Page 5
submitted or directed to Dr. James G. Roche, Corporate Vice
President-Advanced Development and Planning, if to Northrop
Corporation and to Jacob Busolina if to Grumman Corporation.
10. Each of the parties acknowledges that remedies at law may be
inadequate to protect it against any actual or threatened breach of
this letter agreement and, without prejudice to any other rights and
remedies otherwise available to them, the parties agree that each of
them shall be entitled to equitable relief, including injunction. In
the event of litigation relating to this letter agreement, if a court
of competent jurisdiction determines in a final, nonappealable order
that this letter agreement has been breached then the breaching party
shall reimburse the nonbreaching party for costs and expenses
(including, without limitation, legal fees and expenses) incurred in
connection with all such litigation.
11. No failure or delay by either party in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege
hereunder.
12. This letter agreement will be governed by and construed in accordance
with the laws of the State of California.
13. This letter agreement contains the entire agreement between the
parties concerning the confidentiality of the Information, and no
modifications of this letter agreement or waiver of the terms and
conditions hereof will be binding, unless approved in writing by each
of the Parties.
14. Any notice or communication hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally, telegraphed, telexed or
sent by facsimile transmission or, if mailed, three (3) business days
after the date of deposit in the United States mail, by certified mail
return receipt requested as follows:
<PAGE> 6
Grumman Corporation
January 21, 1992
Page 6
(i) If to Northrop to:
Northrop Corporation
1840 Century Park East
Los Angeles, CA 90067
Attention: R. R. Molleur, Esq.
Telecopier: (310) 210-3378
(ii) If to Grumman Corporation to:
Grumman Corporation
Stewart Avenue
Bethpage, New York 11714-3580
Attention: John Mullan, Esq.
Telecopier: (516) 575-2179
Please confirm your agreement with the foregoing by signing and returning the
duplicate copy of this letter enclosed herewith.
Very truly yours,
NORTHROP CORPORATION
By:
-----------------------------
Name: James F. Roche
-------------------------
Corporate Vice President-
Advanced Development And
Title: Planning
-------------------------
Accepted and Agreed as of the date first written above:
By:
----------------------------
A:01
<PAGE> 1
EXHIBIT (c)(13)(b)
Corporate Vice President and
General Counsel
----------------------------
N O R T H R O P Northrop Corporation
----------------------------
1840 Century Park East
Los Angeles, CA 90067-2199
Telephone (310) 553-6262
January 10, 1994
Grumman Corporation
1111 Stewart Avenue
Bethpage, New York 11714-3580
Re: Amendment of Confidentiality Agreement
Dear Sirs:
This will confirm that the Confidentiality Agreement, dated January 21, 1992,
between you and us shall be amended solely for the purpose of correcting the
date of the Agreement, which is hereby amended to "January 21, 1993". All
other terms and conditions of said Confidentiality Agreement are unchanged and
remain in full force and effect.
Please confirm your agreement with the foregoing by signing and returning the
duplicate copy of this letter enclosed herewith.
Sincerely,
By:
------------------------
Richard R. Molleur
Accepted and agreed to
as of the date first
written above:
By:
------------------------
T.L. Genovese
Vice President & General Counsel
<PAGE> 1
EXHIBIT (c)(14)
MARTIN MARIETTA CORPORATION 6801 Rockledge Drive
Bethesda, Maryland 20817
Telephone (301) 897-6125
FRANK H. MENAKER, JR.
VICE PRESIDENT AND GENERAL COUNSEL
February 7, 1994
Mr. Thomas L. Genovese
Vice President and General Counsel
Grumman Corporation
1111 Stewart Avenue
Bethpage, New York 11714-3580
Dear Mr. Genovese:
This letter agreement will confirm our possible interest in
preliminary discussions ("Discussions") which might lead to some form of
negotiated transaction between the parties (the "Transaction"). During such
Discussions, we, which term (as well as the terms "us" and "Martin Marietta"
and "party" when referring to Martin Marietta) shall include Martin Marietta
Corporation and its affiliates and their directors, officers, employees and
Representatives (as hereinafter defined) and you, which term (as well as the
terms "Grumman" and "party" when referring to Grumman) shall include Grumman
Corporation and its affiliates and their directors, officers, employees and
Representatives, may determine that it is necessary and appropriate to exchange
certain information relating to Martin Marietta or Grumman respectively. Any
such information (whether written or oral) furnished (whether before or after
the date hereof) by you to us or by us to you, including your or our respective
financial advisors, attorneys, accountants or agents (collectively,
"Representatives") and all analyses, compilations, forecasts, studies or other
documents prepared by you or by us in connection with your or our review of, or
interest in, the Discussions or the transactions which contain or reflect any
such information is hereinafter referred to as the "Information." The term
Information will not include information which (i) is or becomes publicly
available other than as a result of a disclosure by the receiving party or (ii)
is or becomes available to the receiving party on a nonconfidential basis from
a source (other than that party) which, to the best of the receiving party's
knowledge, is not prohibited from disclosing such information to it by a legal,
contractual or fiduciary obligation or (iii) is independently
<PAGE> 2
-2-
developed by the receiving party without reference to the Information.
Accordingly, it is hereby agreed that:
1. Each of the parties (i) will keep the Information confidential and will
not (except as required by applicable law, regulation or legal process,
and only after compliance with paragraph 3 below), without the prior
written consent to the party which furnished the Information, disclose the
Information in any manner whatsoever, and (ii) will not use the
Information other than in connection with the Transaction. Information
may be revealed to a receiving party's Representatives only if such
Representatives (a) need to know the Information for the purpose of
evaluating, or advising the receiving party with respect to the
Transaction, (b) are informed of the confidential nature of the
Information and (c) agree to act in accordance with the terms of this
letter agreement.
2. Each of the parties will not (except as required by applicable law,
regulation or legal process, and only after compliance with paragraph 3
below), without the other party's prior written consent, disclose to any
person the fact that the Information exists or has been made available,
that either party is considering the Transaction, or that discussions or
negotiations are taking or have taken place concerning the Transactions or
any term, condition or other fact relating to any such Transaction or such
discussions or negotiations, including, without limitation, the status
thereof.
3. In the event that we are requested pursuant to, or required by, applicable
law, regulation or legal process to disclose any of the Information, we
will notify you promptly so that you may seek a protective order or other
appropriate remedy or, in your sole discretion, waive compliance with the
terms of this letter agreement. Similarly, in the event that you are
requested pursuant to, or required by, applicable law, regulation or legal
process to disclose any of the Information provided by us, you will notify
us promptly so that we may seek a protective order or other appropriate
remedy or in our sole discretion, waive compliance with the terms of this
letter agreement. In the event that no such protective order or other
remedy is obtained, that we or you waive compliance with the terms of this
letter agreement, or that
<PAGE> 3
-3-
disclosure is legally required, the disclosing party will furnish only
that portion of the information which it is advised by counsel is legally
required and will exercise reasonable efforts to obtain reliable assurance
that confidential treatment will be accorded the information.
4. If either party determines to cease discussions and/or to proceed with a
Transaction, it will promptly inform the other party of that decision. In
that case, each party at its sole election will either (i) promptly
destroy all copies of the written Information in its possession and
confirm such destruction to the other party in writing, or (ii) promptly
deliver to the other party at the returning party's expense all copies of
the written Information in its possession.
5. The parties acknowledge that neither party or any of its controlling
persons within the meaning of Section 20 of the Securities Exchange Act of
1934, as amended, makes any express or implied representation or warranty
as to the accuracy or completeness of the Information furnished to the
other party, and the parties agree that no such person will have any
liability relating to the Information or for any errors therein or
omissions therefrom. The parties further agree that they are not entitled
to rely on the accuracy or completeness of the Information and that they
will be entitled to rely solely on such representations and warranties as
may be included in any definitive agreement with respect to a Transaction,
subject to such limitation and restrictions as may be contained therein.
6. The parties acknowledge that they are aware of the restrictions imposed by
the United States securities law on the purchase or sale of securities by
any person who has received material, non-public information from the
issuer of such securities and on the communication of such information to
any other person when it is reasonably foreseeable that such other person
is likely to purchase or sell such securities in reliance upon such
information.
7. For a period of three years from the date of this letter agreement,
neither Grumman Corporation nor Martin Marietta Corporation, nor any of
its controlled subsidiaries, will, unless specifically invited by the
other party ("party" in this paragraph 7 meaning either Grumman
Corporation or Martin Marietta Corporation, as the case may be) or its
Board of Directors: (i) acquire, offer to acquire, or
<PAGE> 4
-4-
agree to acquire, directly or indirectly, by purchase or otherwise, any
voting securities, or direct or indirect rights to acquire any voting
securities of the other party, or any assets of the other party or any
subsidiary or division thereof or of any such successor or controlling
person; (ii) make, or in any way participate in, directly or indirectly,
any "solicitation" of "proxies" (as such terms are used in the rules of
the Securities Exchange Commission) to vote, or seek to advise or
influence any person or entity with respect to the voting of, any voting
securities of the other party; (iii) make any public announcement with
respect to, or submit a proposal for, or offer of (with or without
conditions) any extraordinary transactions involving the other party or
its securities or assets; (iv) form, join or in any way participate in a
"group" (as defined in Section 13 (d) (3) of the Securities Exchange Act
of 1934, as amended) in connection with any of the foregoing. The parties
agree that for the period specified above, neither will publicly request
the other (its officers, directors, employees and agents) or publicly
disclose any request, directly or indirectly, to waive any provisions of
this paragraph.
8. Each of the parties ("party" in this paragraph 8 meaning either Grumman
Corporation or Martin Marietta Corporation, as the case may be) agrees
that, for a period of two years from the date of this letter agreement, it
and its controlled subsidiaries will not, directly or indirectly, solicit
for employment any employee of the other party or any of its subsidiaries
who became known to it as a result of the Discussions or its consideration
of a Transaction provided, however, that any such solicitation shall not
be deemed a breach of this agreement if (i) the personnel who perform such
solicitation have no access to or knowledge of any Information or this
agreement letter and (ii) none of the soliciting party's personnel who
have access to the information have actual advance knowledge of such
solicitation. The term "solicit for employment" shall not be deemed to
include general solicitations of employment not specifically directed
towards employees of a party or any of its subsidiaries.
9. The parties agree that all (i) communications regarding the Discussions or
a Transaction, (ii) requests for additional Information, facility tours or
management meetings, and (iii) discussions or questions regarding
procedures with respect to the Discussions or a Transaction, will be
<PAGE> 5
-5-
submitted or directed to John E. Montague, if to Martin Marietta
Corporation and to Jacob J. Bussolini, Jr., if to Grumman Corporation.
10. Each of the signatories acknowledges that remedies at law may be
inadequate to protect it against any actual or threatened breach of this
letter agreement and, without prejudice to any other rights and remedies
otherwise available to them, the signatories agree that each of them shall
be entitled to equitable relief, including injunction. In the event of
litigation relating to this letter agreement, if a court of competent
jurisdiction determines in a final, nonappealable order that this letter
agreement has been breached then the breaching signatory shall reimburse
the nonbreaching signatory for costs and expenses (including, without
limitation, legal fees and expenses) incurred in connection with all such
litigation.
11. No failure or delay by either signatory in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege hereunder.
12. This letter agreement will be governed by and construed in accordance with
the laws of the State of New York.
13. This letter agreement contains the entire agreement between the
signatories concerning the confidentiality of the Information, and no
modifications of this letter agreement or waiver of the terms and
conditions hereof will be binding, unless approved in writing by each of
the signatories.
14. Any notice or communication hereunder shall be in writing and shall be
delivered personally, telegraphed, telexed or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmissions or, if mailed, three (3) business days after the
date of deposit in the United States mail, by certified mail return
receipt requested as follows:
<PAGE> 6
-6-
(i) If to Martin Marietta Corporation to:
Martin Marietta Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Frank H. Menaker, Jr.
Telecopier: (301) 897-6028
(ii) If to Grumman Corporation to:
Grumman Corporation
1111 Stewart Avenue
Bethpage, New York 11714-3580
Attention: Thomas L. Genovese
Telecopier: (516) 575-2921
Please confirm your agreement with the foregoing by signing and
returning the duplicate copy of this letter enclosed herewith.
Very truly yours,
Martin Marietta Corporation
By:
-----------------------
Accepted and Agreed as of the date
first written above:
By:
-------------------------
<PAGE> 1
EXHIBIT (c)(15)
MARTIN MARIETTA CORPORATION
6801 ROCKLEDGE DRIVE
BETHESDA, MARYLAND 20617
TELEPHONE (301) 887-4186
NORMAN R. AUGUSTINE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PERSONAL AND CONFIDENTIAL
February 21,1994
Dr. Renso L. Caporali
Chairman and CEO
Grumman Corporation
1111 Stewart Avenue
Bethpage, New York 11714-3580
Dear Dr. Caporali:
We have greatly appreciated the time you and others at Grumman have spent with
us recently. As a result of the past two weeks of discussions, we are excited
about the potential benefits from a combination of our two companies --
benefits accruing to both companies' employees, customers and shareholders.
We believe the combined company, with over $13 billion in sales, will be
perfectly positioned for long-term leadership in the
defense/aerospace/electronics industry. The combined company with its critical
mass, breadth of programs, depth of technology and market position will be
ideally postured to maximize the stability of jobs for Grumman employees, and
provide enhanced career opportunities within the expanded enterprise.
Also, our discussions with you have led us to appreciate the importance of
maintaining the proud and rich heritage of Grumman. We believe that a merger
with Martin Marietta will provide the best avenue through which the Grumman
legacy can survive and prosper. We look forward to continuing the "best-
of-the-best" philosophy that has been so successful in our recent combination
with the GE Aerospace ("GEA") business. As in the combination with GEA we
would envision Grumman's
<PAGE> 2
Grumman Corporation
February 21, 1994
Page 2
business units, key executives and employees taking leadership roles where
appropriate.
Strategic Rationale
I want to assure you that Martin Marietta, after our discussions with you and
our analysis of the business and cultural fits between our two organizations,
is interested in pursuing a combination. Martin Marietta's long-term strategy
is to continue to lead, in a responsible manner, the consolidation of the
defense/aerospace/electronics sector. Expansion of our capabilities in systems
integration, defense electronics, information systems and services is a key
element of our strategic thrust. We believe that Grumman's and Martin
Marietta's businesses are complementary. Grumman's superb reputation, solid
technological base and breadth of expertise would enhance the combined
company's market position and help create the nation's leading large-scale
systems integrator.
Consideration and Price
We fully understand that Grumman's directors are simply exploring alternatives
and have made no decision to sell the company. It is in this spirit that I am
responding to Grumman's request for an indication of interest and our view of
valuation thinking for a possible business combination. I would emphasize that
this is a friendly initiative.
Although our Board of Directors has not formally considered this matter, I have
had informal conversations with the majority of its members regarding the
potential strategic and financial effects of a combination of our organizations
and the pricing of a transaction. They are supportive of our submitting this
letter. Assuming we receive a positive response from your Board of Directors
prior to our regularly scheduled Board meeting this Thursday morning, I expect
to discuss this matter more formally.
It is Martin Marietta's desire to have a strategic combination with Grumman, in
terms of melding the businesses, managements and employees. This philosophy
could suggest that the proper form of a transaction would be a stock-for-stock
merger at market. However, given the desire to avoid a debilitating and
unpredictable auction process, we believe that an all cash offer at a full
price provides the greatest chances for a successful combination without
interference from outside parties.
<PAGE> 3
Grumman Corporation
February 21, 1994
Page 3
On the basis of the information provided to date, a projection of potential
synergies, and subject to the conditions outlined below, Martin Marietta would
be prepared to place a cash value on Grumman shares of $55.00 each.
We, in combination with our outside financial advisors, have done our utmost to
place the highest value possible on Grumman. We have analyzed the business
utilizing a wide variety of valuation methodologies including, comparable
merger and acquisition transactions, comparable publicly traded companies and
discounted cash flow analyses. In addition, we reviewed premiums to market
value paid in other relevant merger and acquisition transactions. The value we
are offering to the Grumman shareholders is at the high end of the valuation
range for the company.
I thought it might be helpful for your Board of Directors if I provided you
with a little more detail of how we view this value level from a financial
perspective:
<TABLE>
<S> <C>
Proposed Purchase Price $55.00 per share
Premium to:
Stock Price (2/18/94) $38.875 42%
All Time High (1/21/94) $43.00 28%
52 Week Low (2/19/93) $28.875 91%
Purchase Price as a Multiple of:
Net Income (1994E) 15.5X
Operating Income (1994E) 8.7X
Operating Cash Flow (1994E) 6.4X
Revenues (1994E) 0.6X
Book Value (12/31/93) 2.3X
</TABLE>
To put these multiples in context, in comparison to what Loral paid for IBM
Federal Systems and what we paid for GE Aerospace, the proposed purchase price
for Grumman represents: (1) the same multiple of net income as IBM Federal
Systems, (2) the same multiple of book value as GEA and 15% more than IBM
Federal Systems, (3) the same multiple of revenues as GEA, and (4) a 5% premium
to the multiple of operating cash flow paid for IBM Federal Systems.
Furthermore, we believe that our proposal is more attractive than the
short-term or long-term value that Grumman could deliver to its shareholders on
its own. Our proposal provides
<PAGE> 4
Grumman Corporation
February 21, 1994
Page 4
your shareholders with $55.00 per share of cash today. This is not speculative
and is not subject to the vagaries of the stock market or the defense budget,
the theoretical success 12 to 18 months from now of a stock repurchase program
or the uncertainty of the rapidly consolidating global defense/aerospace
environment.
It is our desire and belief that it is in the best interest of Grumman to
complete the due diligence process and reach a definitive agreement as soon as
possible. Therefore, a brief exclusive review period to conduct customary due
diligence to verify our valuation, including supporting synergies, and to
negotiate a mutually satisfactory transaction will be necessary.
Timing
Time is of the essence. Assuming a favorable response to this proposal from
your Board of Directors, we are prepared to review this opportunity in detail
with our Board of Directors on Thursday. Immediately following our Board
meeting, we are ready to apply all of our resources to expeditiously conduct
our remaining due diligence and negotiate a mutually beneficial transaction.
Although our interest obviously is not binding until then, it is our
expectation that this process can be successfully completed within 10 days.
Sources of Financing
Martin Marietta would plan to finance the cash purchase of Grumman through a
combination of Martin Marietta's current cash reserves and borrowed funds. We
regularly hold discussions with our financial advisors and commercial banks to
review Martin Marietta's debt capacity, including financing for major
acquisitions. Based on these conversations, we believe that more than adequate
funds would be available on terms satisfactory to Martin Marietta to provide
the cash required to close the transaction. Any final offer from Martin
Marietta to acquire Grumman would not be subject to financing.
Conditions to the Consummation of a Transaction
While our valuation and use of cash as consideration is aimed at insuring
closure, we recognize that, assuming that Grumman and Martin Marietta were to
agree on and announce a business combination, competition from others is at
least possible and
<PAGE> 5
Grumman Corporation
February 21, 1994
Page 5
will not be precluded. In light of this, we would only be prepared to proceed
with discussions based on an understanding that any definitive agreement
between our companies would embody the provisions summarized in Appendix I,
which is attached. We believe that the terms outlined in Appendix I are
reasonable and, from Grumman's Directors' standpoint, would not preclude
legitimate competitive interest from presenting itself after a transaction
between Martin Marietta and Grumman was signed and announced. We thought your
Board's process would be better informed by understanding our approach in this
area sooner rather than later and offer the attachment in this spirit.
It is important to us that any discussions between Grumman and Martin Marietta
proceed quickly and on an exclusive and orderly basis. I am sure that this
subject is important to you and your Board as well. Therefore, in the
interests of candor and fairness to both parties, I believe it is essential
that we have a mutual, clear understanding in this area at the outset. To be
specific, while we are very interested in pursuing the possibilities of a
business combination, we are prepared to do so only with the following proviso:
from your receipt of this letter until you tell us that Grumman no longer
wishes to continue discussions, neither Grumman nor any of its representatives,
including its directors, officers, employees, financial advisors and counsel,
may engage in discussions, direct or indirect, with another party regarding a
business combination transaction with Grumman or in any way invite or solicit
such a transaction, nor disclose, directly or indirectly, through public
announcement, communications with any other parties or their representatives,
or otherwise, any information concerning our discussions with Grumman.
Should any of these circumstances occur before Grumman or Martin Marietta have
signed a definitive business combination agreement, any then-pending indication
of interest or proposal from us will be withdrawn and discussions between our
companies will be ended. Further, I want to emphasize that this is our best
proposal and if we have not received a positive response prior to our Board
meeting Thursday morning it will permanently expire with no possibility of
renewal.
From our perspective, these conditions are essential for us to proceed to
develop a mutually acceptable transaction that we are convinced can be highly
advantageous to Grumman's shareholders, employees, customers and other
constituencies. We
<PAGE> 6
Grumman Corporation
February 21, 1994
Page 6
recognize that, this would not represent a decision to sell the company or a
commitment not to deal with others indefinitely. Grumman will have complete
freedom at any time to cease discussions. In effect, we are saying that during
the period prior to signing a definitive agreement we work together on an
exclusive basis.
As we both know, process is important, as is being straightforward and avoiding
misunderstandings. That explains the length of this letter. But, hopefully
focusing on those matters has not obscured one fundamental point -- we have the
highest regard for Grumman and its people and believe that a business
combination between Grumman and Martin Marietta truly would be a "win-win"
situation for all parties.
I look forward to hearing from you.
Sincerely,
Norman R. Augustine
<PAGE> 7
Page 1 of 2
Appendix I
Certain Terms of Proposed Definitive Agreement
1. "Window Shop" Provisions
. Grumman and its representatives (1) must cease existing discussions
and (2) may not thereafter solicit or encourage offers relating to a
competing acquisition transaction or participate in discussions or
negotiations or furnish information in connection with any third
party interest expressed regarding such a transaction.
. Except that Grumman and its representatives may (1) engage in
negotiations with and provide information to a third party who has
submitted a written proposal relating to a competing acquisition
transaction to the extent required for the Grumman's Board to meet
its fiduciary duty, based on a determination by the Board, after
receiving the written opinion of outside counsel to such effect,
that failing to take such action would constitute a breach of
fiduciary duty by the Board and (2) recommend to its stockholders a
competing acquisition transaction (or withdraw or modify its
recommendation of Martin Marietta's transaction) if the Board
determines (with the written concurrence of outside counsel) that
failing to do so would constitute a breach of fiduciary duty by the
Board.
. Martin Marietta to receive copies of any proposals relating to
competing transactions and to be kept apprised promptly of
developments.
. If Grumman engaged in negotiations or furnishes information to a
third party, or withdraws or modifies its recommendations or makes
another one, pursuant to second preceding paragraph, Martin Marietta
has the right to terminate the merger agreement and collect its
break-up fee expenses (see below).
<PAGE> 8
Page 2 of 2
2. Break-Up Fee
. Reasonable percentage of per share merger consideration.
. Payable to Martin Marietta by Grumman
. if Martin Marietta has exercised its right to terminate the
agreement due to the entering into discussions with or the
provisions of information by Grumman to a third party
consistent with the terms of the "window shop" provision
. if Grumman breaches the merger agreement and Martin Marietta
exercises its right to terminate
. if Grumman modifies or withdraws its recommendations
concerning Martin Marietta's tender offer or the merger
agreement or recommends a competing acquisition transaction
. if a third party acquires a significant percentage of
Grumman's stock or assets
. if the minimum condition of Martin Marietta's tender offer
(two-thirds of Grumman's outstanding shares tendered and not
withdrawn) is not satisfied at the offer's expiration date and
at that time a third party has expressed and not withdrawn
interest in making a competing acquisition transaction
. if Grumman enters into an agreement relating to a competing
acquisition transaction or a competing acquisition transaction
is consummated within twelve months of the termination of the
merger agreement (unless fee has been previously paid).
3. Expenses Reimbursement
. Martin Marietta's expenses are reimbursed in full by Grumman if the
merger agreement is terminated for any reason.
<PAGE> 1
EXHIBIT (c)(16)
Chairman of the Board
President and
Chief Executive Officer
February 25, 1994
VIA FACSIMILE
Mr. J. R. Anderson
Vice Chairman and Chief Financial Officer
Grumman Corporation
1111 Stewart Avenue
Bethpage, NY 11714-3580
Dear Bob:
In several conversations between our investment bankers in recent weeks, your
representatives asked us if we would consider a transaction involving our
companies which would result in value to your shareholders in excess of current
market value. Although our first preference, as you know, has been for a
"merger of equals" transaction, we have given very serious consideration to
this request. After careful reflection, and in response to your stated
preferences, we concluded that, based upon the information available to us, we
would be in a position to propose a transaction along the lines suggested by
your financial advisors.
It was with considerable disappointment, therefore, that we received advice
from your representatives yesterday that you are not interested in continuing
discussions with Northrop.
We believe that you should have complete information before making a decision
of such consequence. Accordingly, we are writing to confirm the information
communicated orally to your investment bankers earlier yesterday. Based upon
the facts known to us, we would be prepared, if invited, to submit an offer at
a price per share of not less than $50.00, a premium in excess of 35 percent
over the trading level of Grumman stock as of the close on February 24, 1994.
We would also be prepared to consider an offer at a higher level, if warranted,
<PAGE> 2
Page 2
based upon any additional information or analysis you may wish to provide us.
Northrop is willing to proceed expeditiously to the completion of a definitive
acquisition agreement. There is no reason, from our point of view, that such
an agreement cannot be signed within 21 days or sooner.
We look forward to your prompt reply.
Sincerely,
Kent Kresa
cc: Mr. Gene Sykes
<PAGE> 1
Exhibit (C)(17)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
ARTHUR ANDERSEN & CO.
NEW YORK, N.Y.
To the Shareholders and Board of Directors of Grumman Corporation:
We have audited the accompanying consolidated balance sheet of Grumman
Corporation (a New York corporation) and subsidiaries as of December 31, 1993
and 1992, and the related consolidated statements of income, common
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Grumman Corporation and
subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
As discussed in Notes 6 and 11 to the consolidated financial statements,
effective January 1, 1992, the company changed its method of accounting for
income taxes and for postretirement benefits other than pensions.
/S/ ARTHUR ANDERSEN & CO.
January 20 , 1994
<PAGE> 2
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME Grumman Corporation and Subsidiaries
- -------------------------------------------------------------------------------
($ in thousands except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
REVENUES
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,224,535 $3,492,075 $3,963,492
Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,589 11,875 10,359
--------- --------- ---------
Total sales and other income . . . . . . . . . . . . . . . . . . . . . 3,249,124 3,503,950 3,973,851
--------- --------- ---------
COSTS AND EXPENSES
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,929,987 3,189,035 3,620,895
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 - -
Loss on Tracor Aviation Inc. settlement . . . . . . . . . . . . . . . . - - 46,500
Selling, administrative and other . . . . . . . . . . . . . . . . . . . 115,928 113,289 124,049
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,702 55,065 85,236
--------- --------- ---------
Total costs and expenses . . . . . . . . . . . . . . . . . . . . . . . 3,162,617 3,357,389 3,876,680
--------- --------- ---------
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . 86,507 146,561 97,171
Provision for federal income taxes . . . . . . . . . . . . . . . . . . . . 21,000 26,700 2,000
--------- --------- ---------
Income from continuing operations . . . . . . . . . . . . . . . . . . . 65,507 119,861 95,171
Income (loss) from discontinued operations . . . . . . . . . . . . . . . . (6,700) (45,035) 4,166
Cumulative effect of change to accrual method of accounting
for postretirement benefits . . . . . . . . . . . . . . . . . . . . . - (198,000) -
--------- --------- ---------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,807 $ (123,174) $ 99,337
========= ========= =========
PRIMARY EARNINGS PER COMMON SHARE:
Income from continuing operations. . . . . . . . . . . . . . . . . . . . $ 1.90 $ 3.49 $ 2.75
Income (loss) from discontinued operations . . . . . . . . . . . . . . . (.19) (1.34) .13
Cumulative effect of accounting change . . . . . . . . . . . . . . . . . - (5.88) -
--------- --------- ---------
NET INCOME (LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.71 $ (3.73) $ 2.88
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 3
CONSOLIDATED BALANCE SHEET Grumman Corporation and Subsidiaries
- -------------------------------------------------------------------------------
(amounts in thousands)
<TABLE>
<CAPTION>
December 31,
------------------------------------------
ASSETS 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 346,090 $ 299,077
Marketable securities (at cost, approximating market) . . . . . . . . . 18,034 -
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . 518,731 534,260
Inventories, less progress payments . . . . . . . . . . . . . . . . . . 499,436 612,424
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,992 41,280
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 1,423,283 1,487,041
------------ ------------
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation . . . . . . . 372,723 399,421
------------ ------------
NON-CURRENT ASSETS
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 120,028 94,856
Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . . . 6,009 9,079
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,505 28,678
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,901 69,941
------------ ------------
228,443 202,554
------------ ------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,024,449 $2,089,016
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,571 $ 83,399
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,576 128,610
Wages and benefits payable . . . . . . . . . . . . . . . . . . . . . . . 90,229 95,519
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,932 145,353
Advances and deposits . . . . . . . . . . . . . . . . . . . . . . . . . 95,340 30,251
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . 89,699 127,902
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 518,347 611,034
------------ ------------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,106 355,244
------------ ------------
ACCRUED RETIREMENT BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . 304,752 306,500
------------ ------------
RESTRUCTURING RESERVE . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 -
------------ ------------
OTHER LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,191 23,348
------------ ------------
COMMON STOCK--$1.00 par value, authorized 80,000 shares;
outstanding 34,049 and 33,519 shares (net of treasury stock) . . . . . . 344,589 321,038
RETAINED EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 491,464 471,852
------------ ------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,024,449 $2,089,016
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY Grumman Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------
(amounts in thousands)
YEAR 1993 YEAR 1992 YEAR 1991
------------------ ------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------
COMMON STOCK
<S> <C> <C> <C> <C> <C> <C>
Balance beginning of year . . . . . . . . . . 33,790 $337,896 33,512 $337,737 33,019 $313,916
Conversion of convertible subordinated
debentures . . . . . . . . . . . . . . . . 1,392 48,352 - - - -
Conversion of preferred stock . . . . . . . . - - 6 36 1 6
Exercise of stock options and awards -
net of (forfeitures) . . . . . . . . . . . 605 22,935 272 4,014 492 7,149
Majority interest in capital contributed to
joint venture . . . . . . . . . . . . . . - - - (3,891) - 16,666
------- ------- ------- ------- ------- -------
Balance end of year . . . . . . . . . . . . . . . 35,787 409,183 33,790 337,896 33,512 337,737
------- ------- ------- ------- ------- -------
Less:
TREASURY STOCK
Balance beginning of year . . . . . . . . . . 271 4,415 247 3,998 221 3,529
Common stock repurchase program . . . . . . . 1,361 49,931 - - - -
Reinstated (issued) under various plans--net . 106 2,848 24 417 26 469
------- ------- ------- ------- ------- -------
Balance end of year . . . . . . . . . . . . . 1,738 57,194 271 4,415 247 3,998
------- ------- ------- ------- ------- -------
RESTRICTED STOCK
Balance beginning of year . . . . . . . . . . 1,613 12,443 1,651 15,025 1,360 13,377
Awards (forfeitures)--net . . . . . . . . . . (85) (566) 131 1,490 444 6,462
Amortization and vesting . . . . . . . . . . . (234) (4,477) (169) (4,072) (153) (4,814)
------- ------- ------- ------- ------- -------
Balance end of year . . . . . . . . . . . . . 1,294* 7,400 1,613* 12,443 1,651* 15,025
------- ------- ------- ------- ------- -------
Common stock outstanding . . . . . . . . . . 34,049 $344,589 33,519 $321,038 33,265 $318,714
======= ======= ======= ======= ======= =======
RETAINED EARNINGS
Balance beginning of year . . . . . . . . . . $471,852 $632,998 $570,504
Net income (loss) . . . . . . . . . . . . . . 58,807 (123,174) 99,337
Cash dividends:
Common (per share: 1993, $1.15; 1992
and 1991, $1.00) . . . . . . . . . . . . . (38,690) (33,496) (33,220)
Preferred . . . . . . . . . . . . . . . . - (2,515) (3,623)
Redemption costs . . . . . . . . . . . . . (505) (1,961) -
-------- -------- --------
Balance end of year . . . . . . . . . . . . . $491,464 $471,852 $632,998
======== ======== ========
</TABLE>
* Shares are shown for information only and are included in common stock.
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS Grumman Corporation and Subsidiaries
- -------------------------------------------------------------------------------
($ in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,807 $(123,174) $ 99,337
Items affecting cash from operations:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 73,835 82,127 94,274
Cumulative effect of change in accounting for postretirement benefits . - 198,000 -
Restructuring charge . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000 - -
Loss on Tracor Aviation Inc. settlement . . . . . . . . . . . . . . . . - - 46,500
Release of tax reserves . . . . . . . . . . . . . . . . . . . . . . . . - (23,500) (30,700)
Changes in assets and liabilities:
Decrease/(increase) in:
Accounts receivable and marketable securities . . . . . . . . . . (2,505) 79,391 13,126
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,988 147,817 142,811
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 288 38,660 (9,930)
Increase/(decrease) in:
Accounts payable, wages and benefits . . . . . . . . . . . . . . . 13,676 (68,585) (52,399)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . (49,231) 65,947 (11,409)
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . (32,362) (6,351) (4,500)
Other current liabilities . . . . . . . . . . . . . . . . . . . . 26,886 56,155 (10,902)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,869 68,317 4,126
------- ------- -------
Net cash provided by operating activities . . . . . . . . . . . . . . . 322,251 514,804 280,334
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . (44,585) (39,054) (54,847)
Proceeds from sale of capital assets . . . . . . . . . . . . . . . . . . 3,882 2,361 6,385
Decrease (increase) in investments . . . . . . . . . . . . . . . . . . . (25,562) 4,237 (1,486)
------- ------- -------
Net cash used in investing activities . . . . . . . . . . . . . . . . . (66,265) (32,456) (49,948)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term debt . . . . . . . . . . . . . . . . . . . . . . - - (17,000)
Proceeds from long-term debt . . . . . . . . . . . . . . . . . . . . . . - - 75,000
Repayment of long-term debt . . . . . . . . . . . . . . . . . . . . . . (141,119) (283,372) (118,023)
Redemption of preferred stock . . . . . . . . . . . . . . . . . . . . . - (34,321) (5)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,690) (36,011) (36,843)
Repurchase of common stock . . . . . . . . . . . . . . . . . . . . . . . (49,931) - -
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . 20,767 (1,591) (3,015)
Capital received on formation of joint venture . . . . . . . . . . . . . - - 20,000
------- ------- ------
Net cash required by financing activities . . . . . . . . . . . . . . . (208,973) (355,295) (79,886)
------- ------- ------
Net increase in cash and cash equivalents for the period . . . . . . . . . 47,013 127,053 150,500
Cash and cash equivalents--January 1, . . . . . . . . . . . . . . . . . . . 299,077 172,024 21,524
------- ------- -------
Cash and cash equivalents--December 31, . . . . . . . . . . . . . . . . . . $346,090 $299,077 $172,024
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands in tabular presentations except per share data)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------------------------------------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the company and
all subsidiaries. All intercompany balances and transactions have been
eliminated.
INVENTORIES
Inventoried costs relating to both long-term government and commercial
contracts and programs are stated at the actual production cost. General and
administrative expenses allocable to aerospace fixed-price type contracts are
included in inventory, whereas such expenses for non-aerospace activities are
expensed as incurred. The costs attributed to units delivered under both
long-term government and commercial contracts and programs are based on the
estimated average costs of all units expected to be produced in a lot or
contract. In accordance with industry practice, inventories include amounts
relating to contracts and programs having long production cycles, portions of
which are not expected to be realized within one year.
Inventories of raw materials, purchased parts and supplies are carried at
the lower of cost or realizable values. Inventories are based on average cost
and/or first-in, first-out methods.
REVENUE RECOGNITION
Sales under fixed-price production contracts are recorded at the time of
delivery. Sales, including fees earned, under cost-reimbursement and research,
development, test and evaluation contracts are recorded as costs are incurred.
Certain contracts contain cost and/or performance incentives. Such
incentives are included in sales at the time actual performance can be related
to the target and the earned amount can be reasonably determined. Accordingly,
earnings recorded in one period may include adjustments related to sales
recorded in a prior period. Losses on contracts are recorded when they become
known.
DEPRECIATION AND AMORTIZATION
The company uses a declining-balance method of depreciation for
substantially all of its plant and equipment. Leasehold improvements are
amortized over the terms of the leases or their estimated useful lives,
whichever is shorter.
Upon sale or retirement of plant and equipment, the related cost and
accumulated depreciation are removed from the accounts, and any gain or loss is
reflected currently. Maintenance and repair costs are expensed as incurred.
INTANGIBLES
The excess of cost over the net assets of acquired companies at December
31, 1993 and 1992, was $3.6 and $3.7 million, respectively. These amounts are
included in Non-Current Assets--Other, and are being amortized over 40 years.
CASH EQUIVALENTS
It is the company's policy to treat securities which are readily
convertible to known amounts of cash with original maturities of three months
or less as cash equivalents. The carrying value of such items, which is at
cost, approximates fair value because of the short maturity of those
instruments.
CASH FLOW SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
Cash paid during the year for: 1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Interest (net of amount capitalized) . . . . . . . . . . . . . . . . . . . $39,058 $57,543 $87,884
Federal income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,800 37,000 40,000
</TABLE>
FINANCIAL INSTRUMENTS
During 1993, the company initiated a Common Stock Repurchase Program to
purchase up to $100 million of the company's outstanding common stock. As a
hedge of the company's cost, the company entered into a series of equity put
warrants whereby the company may be obligated to
<PAGE> 7
repurchase 750,000 shares, if put to the company, at expiration date. These
equity put warrants will expire during the period August through October 1994.
Also during 1993, the company invested approximately $25 million in a
limited partnership which invests in repurchase and reverse repurchase
agreements backed by highly rated securities. At December 31, 1993, the value
of the partnership's underlying net assets approximated the company's
investment which is being accounted for using the equity method.
RESEARCH AND DEVELOPMENT
Research and development costs associated with government programs up to a
negotiated ceiling are charged to inventory and are recorded in cost of sales
when products are delivered or services performed. Costs in excess of ceiling
and expenditures for commercial projects are charged against income in the year
incurred. Total expenditures for research and development, bid and proposal
efforts were, in millions, $122.5 in 1993, $132.8 in 1992 and $127.5 in 1991.
EARNINGS PER COMMON SHARE
Primary earnings per share are determined after deducting preferred stock
dividends and are based on the weighted average number of outstanding common
shares and common stock equivalents.
RECLASSIFICATION
Certain prior-year amounts have been reclassified to conform to 1993
classifications.
NOTE 2--RESTRUCTURING AND DISCONTINUED OPERATIONS
- -------------------------------------------------------------------------------
In order to become more competitive in the changing defense market, the company
recorded in the fourth quarter of 1993 an $85 million restructuring provision.
In connection with the consolidation of its facilities, the company anticipates
reducing its total floor space approximately 30 percent by 1997. The
restructuring charge provides for equipment and inventory write-offs of
approximately $60 million and plant closing costs of approximately $25 million.
During 1993, the company settled a lawsuit relating to its previously
discontinued solar panel business and recorded a loss of $9.9 million before an
income tax benefit of $3.2 million.
Operating results for Paumanock Insurance Company Ltd. for the years ended
December 31, 1992 and 1991, were reported in the income statement under the
caption "Income (loss) from discontinued operations" and are summarized as
follows:
<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $113,944 $64,055
Income (loss) before income taxes . . . . . . . . . . . . . . . . (54,035) 6,266
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (9,000) 2,100
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . (45,035) 4,166
</TABLE>
At December 31, 1992, the net book value of the insurance company's assets
and liabilities was $11.1 million and is included in other non-current assets.
This business was sold in the first quarter of 1993 at an amount that
approximated the company's carrying value.
<PAGE> 8
NOTE 3--ACCOUNTS RECEIVABLE
- -------------------------------------------------------------------------------
Receivables at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Billed:
U.S. government . . . . . . . . . . . . . . . . . . . . . . $121,394 $110,873
Commercial . . . . . . . . . . . . . . . . . . . . . . . . 59,027 46,017
-------- --------
180,421 156,890
-------- --------
Unbilled costs and accrued profits:
U.S. government . . . . . . . . . . . . . . . . . . . . . . 320,370 337,306
Commercial . . . . . . . . . . . . . . . . . . . . . . . . 17,940 40,064
-------- --------
338,310 377,370
-------- --------
$518,731 $534,260
======== ========
</TABLE>
Unbilled costs and accrued profits represent revenue earned but not billed
to the customer at year-end. At December 31, 1993, approximately $166.7 million
of claims and accruals, a portion of which is subject to negotiation, is not
expected to be realized before December 31, 1994.
In June of 1991, the company submitted a request to the U.S. Air Force
for an equitable adjustment of the price of a contract involving the F-111A/E &
EF-111A Avionics Modernization Program, based on late and inadequate
government-furnished software and other property and other failures to comply
with contract requirements by the government. The request, as amended in May of
1993, was in the amount of $62.5 million. On August 26, 1993, the Contracting
Officer issued what purports to be a decision under the Contract Disputes Act
denying the preponderance of the price increase requested and concluding that
the Air Force is entitled to recover a net amount of $5.5 million on the basis
of alleged company failures to comply with the terms of the contract. The
company believes there is little or no support for the Contracting Officer's
decision and that the amounts of revenue recognized pursuant to this contract
are appropriate as of December 31, 1993.
NOTE 4--INVENTORIES
- -------------------------------------------------------------------------------
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Work in process--long-term contracts:
Production costs . . . . . . . . . . . . . . . . . . . . . $ 951,837 $1,140,212
General and administrative expenses . . . . . . . . . . . . 120,491 110,316
Work in process--other . . . . . . . . . . . . . . . . . . . . . 9,595 13,664
Raw materials, purchased parts and supplies . . . . . . . . . . . 82,158 134,261
---------- -----------
1,164,081 1,398,453
Less related progress payments . . . . . . . . . . . . . . . . . 664,645 786,029
---------- -----------
$ 499,436 $ 612,424
========== ===========
</TABLE>
Under the contractual arrangements by which progress payments are
received, the government has a security interest in the inventories identified
with related contracts.
The aggregate amounts of selling, general and administrative expenses
incurred during 1993, 1992 and 1991 were, in millions, $375.0, $350.1 and
$349.3 respectively.
<PAGE> 9
NOTE 5--PROPERTY, PLANT AND EQUIPMENT
- -------------------------------------------------------------------------------
Property, plant and equipment at December 31 (at cost) consist of:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,954 $ 11,474
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316,029 310,747
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . 967,773 963,395
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . 51,437 51,829
Construction in progress . . . . . . . . . . . . . . . . . . . . 12,897 8,782
----------- -----------
1,360,090 1,346,227
Less accumulated depreciation and amortization . . . . . . . . . 987,367 946,806
----------- -----------
$ 372,723 $ 399,421
=========== ===========
</TABLE>
For the years 1993, 1992 and 1991, interest costs of $.9, $.5 and $1.8
million were capitalized, respectively, relating to construction in progress.
NOTE 6--INCOME TAXES
- -------------------------------------------------------------------------------
The provision for federal income taxes consists of the following:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Current . . . . . . . . . . . . . . . . . . . . . $101,400 $ 27,600 $ 8,600
Deferred . . . . . . . . . . . . . . . . . . . . (83,900) (9,900) (4,500)
-------- --------- --------
$ 17,500 $ 17,700* $ 4,100
======== ========= ========
</TABLE>
*Excludes a tax benefit of $102 million relating to the cumulative effect of
the change to the accrual method of accounting for postretirement health
benefits.
A reconciliation between the provision for federal income taxes
(substantially all domestic) and the amount computed at the statutory federal
income tax rate is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Provision computed at the statutory
rate of (1993 - 35%; 1992 and 1991 - 34%) . . . $ 26,710 $ 31,459 $ 35,169
Research and other tax credits realized . . . . - (23,500) (30,799)
Valuation allowance . . . . . . . . . . . . . . (9,372) 9,372 -
FAS 109 adjustment and other . . . . . . . . . . 162 369 (270)
-------- --------- --------
$ 17,500 $ 17,700 $ 4,100
======== ========= ========
</TABLE>
The provision for deferred federal income taxes consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Contract tax accounting methods . . . . . . . . . $(40,013) $ 16,208 $ (4,692)
Accelerated depreciation . . . . . . . . . . . . (294) (1,716) (3,502)
Capitalized costs . . . . . . . . . . . . . . . . (2,463) (669) (6,285)
Gain from investment. . . . . . . . . . . . . . . (17,150) - -
Restructuring charge . . . . . . . . . . . . . . (30,000) - -
Employee benefits and all other--net . . . . . . (2,980) (14,723) 9,979
Discontinued operations . . . . . . . . . . . . . 9,000 (9,000) -
-------- --------- --------
$(83,900) $ (9,900) $ (4,500)
======== ========= ========
</TABLE>
<PAGE> 10
The current liability for income taxes shown in the accompanying financial
statements includes current deferred income taxes of $42.7 and $62.4 million as
of December 31, 1993 and 1992, respectively.
Deferred tax liabilities (assets) consisted of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1993 1992
---- ----
<S> <C> <C>
Contract tax accounting . . . . . . . . . . . . $ 86,910 $ 96,159
Excess tax over book depreciation . . . . . . . 30,337 31,856
--------- ---------
Gross deferred tax liabilities . . . . . . 117,247 128,015
--------- ---------
Restructuring charge . . . . . . . . . . . . . . (30,000) -
Retiree benefit plans . . . . . . . . . . . . . (106,673) (104,203)
Capitalized costs . . . . . . . . . . . . . . . (17,307) (14,886)
Employee benefits and other . . . . . . . . . . (23,411) (32,398)
Gain from investment . . . . . . . . . . . . . . (17,150) -
Discontinued operations . . . . . . . . . . . . - (18,372)
--------- ---------
Gross deferred tax assets . . . . . . . . (194,541) (169,859)
--------- ---------
Valuation allowance . . . . . . . . . . . . . . . - 9,372
--------- ---------
Net deferred tax asset . . . . . . . . . . $ (77,294) $ (32,472)
========= =========
</TABLE>
The net change in the valuation allowance for deferred tax assets was a
decrease of $9.4 million as a result of the utilization of the loss incurred on
the sale of the reinsurance business.
Effective January 1, 1992, the company began using the liability method as
prescribed in Financial Accounting Standard No. 109 which was issued in
February 1992. Under FAS 109, deferred tax assets and liabilities are measured
at the tax rate that, under existing law, will be in effect when temporary
differences between financial and tax reporting turn around.
State taxes on income are included in general and administrative expenses,
and amounted to, in millions, $29.6 in 1993, $16.7 in 1992 and $11.3 in 1991.
NOTE 7--STOCK OPTIONS AND INCENTIVE PLANS
- -------------------------------------------------------------------------------
The 1981 Stock Option Plan provided for the granting, at any time before April
30, 1991, of options to purchase not more than 2,500,000 shares of the
company's stock. The 1990 Stock Option Plan provides for the granting, at any
time before April 30, 2000, of options to purchase not more than 1,500,000
shares of the company's stock. The 1992 Long Term Incentive Plan provides for
grants of awards not to exceed 1,750,000 shares. The stock option purchase
prices in these three plans are not less than the fair market value at dates of
grant.
The plans include an option surrender provision which allows the holders
to surrender some or all of their options and receive the value of the
appreciation of the shares in common stock.
<PAGE> 11
Options
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Available for
Outstanding future grant
December 31 Granted Exercised Surrendered Forfeited December 31
----------- ------- --------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Number
of shares
- ---------
1993 1,584,667 547,700 137,758 1,618,641 54,609 1,374,784
1992 2,847,975 535,000 11,150 493,200 131,200 1,457,472
Option price
per share
- ------------
1993 $14.19--39.13 $29.19--39.13 $14.94--32.13
1992 $14.19--32.13 $18.69--21.06 $14.25--21.56
</TABLE>
In exchange for the options surrendered in 1993 and 1992, 514,358 and 103,040
shares were issued, having an aggregate market value of $17.6 and $2.3 million,
respectively.
Restricted Stock Award Plans provide for granting to employees,
at any time before January 1, 1998, not more than 3,750,000 shares of common
stock. At December 31, 1993, 1,063,130 shares were still available for future
awards. The cost of shares awarded under these plans is being amortized over 10
years for awards made prior to April 1989 and seven years thereafter, the
periods after which all restrictions will have lapsed. In 1993, 1992 and 1991,
$3.2, $4.1 and $4.8 million, respectively, have been charged against income for
these awards.
The 1992 Long Term Incentive Plan provides for granting up to
1,750,000 shares in the form of stock options, performance shares and
restricted stock. To date three awards have been made totalling 428,650
performance shares, which are earned over a three-year period; and, $4.4
million and $1.4 million of compensation expense has been recorded for 1993 and
1992, respectively. Options for 495,500 shares have been granted under this
plan. Both the performance shares and the options granted under this plan are
included in the above table.
In addition, officers and key employees of the company and its
subsidiaries have received awards under a Management Incentive Plan totalling,
in millions, $7.0 in 1993, $6.8 in 1992 and $5.8 in 1991.
NOTE 8--LONG-TERM DEBT
- -------------------------------------------------------------------------------
Long-term debt, net of current maturities, at December 31 is as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Notes due 1999, 10 3/8% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000 $200,000
Convertible subordinated debentures due 2009, 9 1/4% . . . . . . . . . . . . . . - 50,000
Sinking fund debentures due 2011, 10 1/2% . . . . . . . . . . . . . . . . . . . . - 55,605
Notes and mortgages at rates from 5 3/4% to 12 7/8% with maturities
through 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,106 49,639
-------- --------
$243,106 $355,244
======== ========
</TABLE>
The fair value of the company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the corporation for debt of the same remaining maturities. Long-term debt at
December 31, 1993, in the opinion of management has a fair value of $262.3
million.
<PAGE> 12
Long-term debt maturing in each of the next five years is as
follows, in millions: 1994, $6.6; 1995, $7.3; 1996, $8.1; 1997, $8.3; 1998,
$9.5.
The company is party to a Restated Credit Agreement with various
banks under which it may borrow up to $200 million. Additionally, the banks
have provided a short-term credit facility which provides an additional $100
million through March 31, 1994. On February 25, 1996, the Restated Credit
Agreement will terminate and any outstanding advances must be repaid to the
banks. Any outstanding advances under the short-term credit facility must be
repaid at termination. Interest on borrowings under this agreement will be
based on a three level scale related to the company's current credit rating
ranging from either Citibank's Base Rate up to .25 percent over that rate or
.50 to 1.25 percent over the applicable Eurodollar Rate. There is a commitment
fee associated with both agreements that is also based on the company's credit
rating ranging from .25 to .50 percent on the Restated Credit Agreement and
from .20 to .50 percent on the short term agreement.
Repayment of borrowings under all of the loan agreements is
guaranteed by the company's major subsidiaries. The agreements contain, among
other things, provisions regarding maintenance of working capital, net worth
and the payment of cash dividends on common stock. The company's working
capital and net worth are substantially in excess of the minimum requirements,
and the amount available for the payment of cash dividends at December 31,
1993, was $36 million.
The $75 million 9.50 percent notes which were due February 15,
1996, were included in short-term debt at December 31, 1992, and were redeemed
on February 17, 1993, at 100 percent of face value, together with accrued
interest.
The 9.25 percent convertible subordinated debentures due
August 15, 2009, were convertible at any time prior to maturity into common
stock at $34.75 per share. This issue of debentures was called by the company
July 7, 1993, at a price of 101.85 percent of face value plus accrued
interest. The 10.50 percent sinking fund debentures due February 15, 2011,
were called by the company on April 20, 1993, at a price of 107 percent of
face value plus accrued interest.
The 10.375 percent notes due January 1, 1999, will be
redeemable at any time on or after January 1, 1996, after written notice, as a
whole or in part at 100 percent of principal amount thereof, together with
accrued interest. Upon the occurrence of a designated event (primarily a change
in equity ownership, a merger with another company or a two-thirds turnover of
the board of directors), the holders of the notes may require the company to
repurchase their notes at 100 percent of the principal amount.
NOTE 9--PREFERRED STOCK
- -------------------------------------------------------------------------------
The company is authorized to issue 10 million shares of $1.00 par value
preferred stock, none of which is issued and outstanding at December 31, 1993.
In July 1992, the remaining outstanding 1,192,249 shares of $2.80 cumulative
preferred stock were redeemed at $25.867 per share.
Each share of the $.80 convertible preferred stock was
convertible into 2.2 shares of the company's common stock. In November 1992 the
company exercised its right to call this issue of stock. Those holders who did
not convert their holdings to common stock by November 25, 1992, received a
cash payment of $14.43 per share plus accrued dividends to that date. Preferred
stock converted into common stock during 1992 and 1991 were 2,888 shares and
454 shares, respectively.
NOTE 10--RETIREMENT PLANS
- -------------------------------------------------------------------------------
Grumman has noncontributory defined benefit plans covering approximately 85
percent of its employees and some defined contribution plans covering others.
Benefits under the defined benefit plans are based on employees' years of
service and career average compensation.
Statement of Financial Accounting Standard (FAS) No. 87,
Employers' Accounting for Pensions, effective for fiscal years beginning after
December 15, 1986, established a methodology for calculating periodic pension
costs for defined benefit pension plans based on the projected unit credit
actuarial method.
<PAGE> 13
The following tables set forth the status of the company's
pension plans:
<TABLE>
<CAPTION>
December 31,
---------------------------
1993 1992
-----------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,619,958 $2,140,407
Nonvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,482 199,334
----------- ------------
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . 2,853,440 2,339,741
Effect of projected future salary increases . . . . . . . . . . . . 138,778 156,833
----------- ------------
Projected benefit obligation for services rendered to date . . . . 2,992,218 2,496,574
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,871,620 2,771,642
----------- ----------
Projected benefit obligations (in excess of)/less than plan assets . . . . . . . (120,598) 275,068
Items not yet recognized in earnings:
Unamortized net (asset) . . . . . . . . . . . . . . . . . . . . . . (187,182) (207,112)
Deferred net loss/(gain) . . . . . . . . . . . . . . . . . . . . . 326,734 (93,339)
----------- ------------
Accrued pension (liability)/prepaid expense . . . . . . . . . . . . . . . . . . . $ 18,954 $ (25,383)
=========== =============
Periodic pension cost for 1993, 1992 and 1991 is as follows:
1993 1992 1991
---- ---- ----
Defined benefit plans:
Service cost-benefits earned during period. . . . . . . . . . . . . $ 54,993 $ 61,918 $ 61,135
Interest cost on projected benefit obligation . . . . . . . . . . . 209,062 198,841 186,767
Actual return on assets . . . . . . . . . . . . . . . . . . . . . . (186,573) (149,733) (486,778)
Net amortization and deferral . . . . . . . . . . . . . . . . . . . (49,992) (67,693) 284,757
--------- ----------- ----------
27,490 43,333 45,881
Defined contribution plans, etc. . . . . . . . . . . . . . . . . . . . . . . . 11,737 10,740 9,260
--------- ----------- ------------
Total pension expense* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,227 $ 54,073 $ 55,141
========= =========== ============
Contributions to pension plans . . . . . . . . . . . . . . . . . . . . . . . . . $ 77,892 $ 92,227 $ 88,507
========== ============ =============
</TABLE>
*Since government procurement regulations permit the recovery of pension
expense only to the extent contributions are made to the pension plans and the
company's business is predominantly with the government, the difference between
plan contributions and the calculated amount per FAS No. 87 is recorded in a
deferred asset account, as this difference will be expensed in the future as
costs are funded. The company's consolidated statement of income therefore
includes the total FAS No. 87 pension cost and a comparable amount of revenue.
Costs and liabilities associated with the pension enhancement program where
1,900 employees accepted enhanced pensions as an incentive to retire during the
period April 2 through October 31, 1990, are included above and are being
funded over a ten-year period which began in 1991.
<PAGE> 14
Assumptions used in determining the actuarial present value of benefit
obligations as of December 31 were:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Discount rate . . . . . . . . . . . . . . . . . . 7.50% 8.50%
Rate of increase in compensation levels . . . . . 3.50% 5.00%
Expected long-term rate of return on assets . . . 8.50% 8.75%
</TABLE>
The discount rate was reduced from 8.50 percent to 7.50 percent
and the expected rate of return from 8.75 percent to 8.50 percent in
recognition of declining interest rates. These are the primary reasons that
plan assets shifted from being greater than the projected benefit obligations
at December 31, 1992 to being $120.6 million less than the projected benefit
obligation at December 31, 1993.
For the years 1992 and 1991, the assumptions used in determining
the net periodic pension expense and the actuarial present value of benefit
obligations were a discount rate of 8.75 percent, a compensation increase rate
of 6.00 percent, and an expected long-term rate of return on assets of 8.75
percent.
Approximately 37 percent of the retirement plans' assets are
invested in diversified corporate stock, 32 percent in U.S. government
securities, 10 percent in corporate fixed income securities, 4 percent in real
estate investments and 17 percent in short-term investments. In the event the
company terminates its major plan, the U.S. government may claim a share of the
remaining excess assets after the accumulated benefits have been satisfied. The
company's objectives are to make contributions to the plan that satisfy the
ERISA funding requirements and to utilize realistic actuarial assumptions based
on long-term trends.
NOTE 11--POSTRETIREMENT HEALTH AND POSTEMPLOYMENT BENEFITS
- -------------------------------------------------------------------------------
Approximately 75 percent of the company's employees employed at year-end may
become eligible for certain retiree health care benefits. The length of time
the benefit is available is directly related to years of service. Retiree
contributions depend on length of service and Medicare status.
Financial Accounting Standard (FAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," requires accrual
accounting for retiree medical benefits. The company adopted FAS No. 106
effective January 1, 1992, and elected to immediately expense the $300 million
transition obligation upon adoption. To date the company has not prefunded this
liability but has taken steps to establish an acceptable funding vehicle with
funding to commence in 1994.
The 1993 and 1992 net periodic postretirement benefit cost by component is
as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Service cost . . . . . . . . . $ 2,591 $ 3,350
Interest cost . . . . . . . . 20,310 25,150
Amortization of net gain . . . (1,904) --
------- -------
$ 20,997 $ 28,500
======== ========
</TABLE>
<PAGE> 15
The funded status and breakdown of the postretirement benefits are as
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1993 1992
---- ----
<S> <C> <C>
Accumulated benefit obligation
Active employees . . . . . . . . . . . . . . . . . . . . . . . . $ 96,681 $136,700
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155,325 169,800
--------- --------
Accumulated benefit obligation . . . . . . . . . . . . . . . 252,006 306,500
Unrecognized gain . . . . . . . . . . . . . . . . . . . . . . . . 52,746 -
-------- --------
Accrued postretirement benefit cost . . . . . . . . . . . . . . . $304,752 $306,500
======== ========
</TABLE>
The health care trend rates used by the company as of December
31, 1993, were: 1993, 14 percent; 1994 and 1995, 12.50 percent; 1996-1998,
inclusive, 9.50 percent; as of December 31, 1992, they were: 1992, 12 percent;
1993-1995, inclusive, 14 percent; 1996-1998, inclusive, 12 percent. The trend
thereafter is zero due to the company's announcement that these costs will be
capped at 1998 levels and all increases thereafter will be borne by the
retirees.
The combination of fewer employees, lower health care claim cost
experience, and changes in actuarial assumptions has had the effect of reducing
the accumulated benefit obligation by approximately $54.7 million.
The 1993 valuation used a 7.50 percent discount rate. The effect
of a one percentage point increase in the assumed health care cost trend rates
on the accumulated benefit obligation would be an increase of $6.7 million at
December 31, 1993. The net periodic postretirement cost for 1993 would increase
by $1.3 million.
Prior to adoption of this standard, postretirement medical
benefits were accounted for on a pay-as-you-go basis. The cost of providing
these benefits net of retiree contributions amounted to $21.3 million in 1991.
In 1994, FAS No. 112, "Employers' Accounting for Postemployment
Benefits," becomes mandatory. It requires postemployment benefits to be
accounted for on an accrual basis. The company's present accounting policies
provide for the accrual of the major components of these costs and adoption of
this standard will not have a material impact on the company's financial
statements.
NOTE 12--COMMITMENTS AND CONTINGENCIES
- -------------------------------------------------------------------------------
Rental expense for all operating leases amounted to, in millions, $67.1, $72.8
and $75.8 for 1993, 1992 and 1991, respectively. Minimum rental commitments
under long-term noncancellable operating leases total $234.2 million which is
payable as follows: 1994, $39.9; 1995, $34.6; 1996, $28.6; 1997, $23.8; 1998,
$21.4; and $85.9 million in later years.
On January 28, 1993, a jury sitting in the United States District
Court for the District of Massachusetts returned a verdict against Grumman
Systems Support Corporation (GSSC), a subsidiary of Grumman Data Systems
Corporation (GDSC), which in turn is a wholly-owned subsidiary of the company,
in an action brought against GSSC by Data General Corporation (DG) for copyright
infringement and misappropriation of trade secrets. Judgment against GSSC was
entered in the United States District Court for the District of Massachusetts
in the amount of $52.4 million. Immediately after the entry of judgment
DG brought a post-trial motion seeking to join GDSC as a party defendant on a
theory of vicarious liability. The motion was denied and DG then commenced a
separate action in the Federal District Court for the District of
Massachusetts, Wooster Div. to enforce the judgment obtained against GDSC,
which action is still pending. GSSC has filed an appeal with the Federal Court
of Appeals for the First Circuit which was heard on December 8, 1993. While
GSSC's ultimate liability in the disposition of this matter continues to be
difficult to estimate, it is management's belief that the outcome is not likely
to have a material adverse effect on the company's financial position.
<PAGE> 16
Three shareholder derivative actions, which are described as
brought on behalf of the company, have been filed in the New York State Supreme
Court for New York County. The actions name certain of the company's current
and former directors as defendants, and name the company as "nominal
defendant." The actions ask that damages and other unspecified relief be
awarded to the company for the individual defendants' alleged breach of their
fiduciary obligations primarily in relation to the subject matter of a
long-running federal investigation known as "Operation Upwind." The matters
referred to in these actions have been and continue to be acted upon by the
company's Board as part of its own ongoing investigation. Motions for summary
judgment which seek to dismiss the complaints have been filed on behalf of the
defendant directors and the company in two of the three actions. No response to
the complaint in the third action has been filed.
Currently, there are five waste disposal sites where the company
has been named either as a potentially responsible party or an owner/operator
of the site by a cognizant governmental agency for the cleanup of hazardous
materials previously placed there either directly or through an agent and where
the cost of remediation or settlement could reasonably exceed $100 thousand in
amount. It is unknown at this time what the company's share of these
remediation efforts may be but it is not expected to have a material adverse
effect on the company's financial position.
Other pending litigation relating to matters that are in the
ordinary course of the company's business activities, including environmental
matters, is not expected to have a material adverse effect on the company's
financial position.
NOTE 13--SEGMENT INFORMATION
- -------------------------------------------------------------------------------
The company's operations are classified into four business segments as follows:
"Aerospace"--Includes the design and production of military
aircraft, space systems and commercial aircraft components and subassemblies,
as well as the modernization or conversion of previously completed aircraft.
"Electronics systems"--Includes the design, manufacture and
integration of sophisticated electronics for aircraft, computerized test
equipment and other defense related products, such as airborne surveillance
systems.
"Information and other services"--Includes electronic data
processing services for affiliates and other customers as well as real estate
and leasing services. It also includes technical services that help ready the
space shuttle for flight, provide space station program support, service and
maintain flight simulators and trainers and support Grumman aircraft.
"Special purpose vehicles"--Includes fabrication of long life
vehicles for the U.S. Postal Service, and aluminum truck bodies.
Sales to the U.S. government and its agencies (including sales to
foreign governments through foreign military sales contracts with U.S.
government agencies) for the years 1993, 1992, and 1991 amounted to $2.8, $3.2
and $3.6 billion, respectively.
A summary of export sales by geographic areas follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Far East . . . . . . . . . . . $205,843 $141,782 $240,106
Middle East . . . . . . . . . 87,899 21,248 23,130
Europe . . . . . . . . . . . . 74,990 70,806 60,862
Western Hemisphere . . . . . . 5,720 4,478 9,949
-------- -------- --------
$374,452 $238,314 $334,047
======== ======== ========
</TABLE>
<PAGE> 17
Information about the company's operations in its different industry segments
for the past three years is as follows:
<TABLE>
<CAPTION>
DEPRECIATION
OPERATING IDENTIFIABLE AND CAPITAL
SALES INCOME (LOSS) ASSETS AMORTIZATION EXPENDITURES
----- ------------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C>
1993
- ----
Aerospace . . . . . . . . . . . . . . . . . $1,965,066 $ 55,533* $1,150,003 $48,881 $29,337
Electronics systems . . . . . . . . . . . . 635,684 2,659* 298,680 10,309 8,768
Information and other services . . . . . . 657,396 28,070* 294,224 9,391 4,850
Special purpose vehicles . . . . . . . . . 367,405 26,367 93,121 3,870 1,386
Corporate items and eliminations . . . . . (376,427) 5,580 188,421 1,384 244
---------- -------- ---------- ------- -------
Consolidated . . . . . . . . . . . . . . . $3,249,124 118,209* $2,024,449 $73,835 $44,585
========== ========== ======= =======
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 31,702
--------
Income from continuing operations
before federal income taxes . . . . . . . . . . . . . . . . . $ 86,507
========
</TABLE>
*Includes an $85 million restructuring charge as follows, in millions:
Aerospace, $73;Electronics systems, $9 and Information and other services, $3.
<TABLE>
<S> <C> <C> <C> <C> <C>
1992
- ----
Aerospace . . . . . . . . . . . . . . . . . $2,339,799 $134,476 $1,151,506 $54,855 $22,819
Electronics systems . . . . . . . . . . . . 610,850 13,715 317,111 11,245 9,705
Information and other services . . . . . . 593,152 28,189 290,826 10,236 5,058
Special purpose vehicles . . . . . . . . . 343,350 27,646 74,334 4,026 1,251
Corporate items and eliminations . . . . . (383,201) (2,400) 255,239 1,765 221
---------- -------- ---------- ------- -------
Consolidated . . . . . . . . . . . . . . . $3,503,950 201,626 $2,089,016 $82,127 $39,054
========== ========== ======= =======
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 55,065
--------
Income from continuing operations
before federal income taxes . . . . . . . . . . . . . . . . . $146,561
========
1991
- ----
Aerospace . . . . . . . . . . . . . . . . . $2,895,794 $119,753** $1,323,650 $64,308 $30,932
Electronics systems . . . . . . . . . . . . 505,395 13,855 325,546 11,121 12,705
Information and other services . . . . . . 622,314 31,555 352,001 13,022 8,544
Special purpose vehicles . . . . . . . . . 366,072 21,165 99,053 4,185 2,396
Corporate items and eliminations . . . . . (415,724) (3,921) 142,166 1,638 270
---------- --------- ---------- ------- -------
Consolidated . . . . . . . . . . . . . . . $3,973,851 182,407 $2,242,416 $94,274 $54,847
========== ========== ======= =======
Interest expense . . . . . . . . . . . . . . . . . . . . . . . 85,236
---------
Income from continuing operations
before federal income taxes . . . . . . . . . . . . . . . . . $ 97,171
=========
</TABLE>
**Includes a $46.5 million charge arising from the settlement of claims against
Tracor Aviation Inc.
