<PAGE> 1
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
(AMENDMENT NO. 13)
(WITH RESPECT TO THE TENDER OFFER BY MARTIN MARIETTA CORPORATION)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
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
(516) 575-3871
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSONS(S) FILING STATEMENT)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
This Amendment No. 13 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9, dated March 8, 1994, as
amended (the "Schedule 14D-9"), of Grumman Corporation, a New York corporation
(the "Company"), filed in connection with the Offer of Martin Marietta
Corporation as set forth in the Schedule 14D-9. Capitalized terms used herein
shall have the definitions set forth in the Schedule 14D-9 unless otherwise
provided herein.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
The response to Item 4 is hereby amended and supplemented as follows:
(a) Recommendation. At a meeting of the Board held on April 3, 1994, the
Board unanimously adopted resolutions that the Board had, in light of and
subject to the terms and conditions set forth in the Agreement and Plan of
Merger, dated as of April 3, 1994, among the Company, Northrop and Northrop
Acquisition, Inc. (the "Northrop Merger Agreement") and in light of other
relevant circumstances, determined that the Offer and the Merger (as such terms
are defined in the Northrop Merger Agreement) are fair to, and in the best
interests of, the shareholders of the Company; authorizing the execution and
delivery of the Northrop Merger Agreement substantially in the form presented to
it; and recommending that the shareholders of the Company accept the Northrop
Offer and tender their Shares to Northrop Acquisition and approve and adopt the
Northrop Merger Agreement.
The Board also unanimously (i) recommended that the shareholders of the
Company reject the Martin Offer and not tender any of their Shares pursuant to
the Martin Offer and (ii) authorized the termination of the Martin Merger
Agreement.
The letter to shareholders of the Company, dated April 4, 1994, from Dr.
Renso L. Caporali, Chairman of the Board and Chief Executive Officer of the
Company, containing the recommendation of the Board is attached as Exhibit
(a)(11) hereto and is incorporated herein by reference in its entirety.
(b) Background and Reasons for the Recommendation.
The response to Item 4(b) on pages 7 through 10 of the
Solicitation/Recommendation Statement on Schedule 14D-9 dated April 4, 1994 (the
"April 4 Schedule 14D-9") of the Company filed with the Securities and Exchange
Commission on April 4, 1994 with respect to the amended tender offer of Northrop
is incorporated by reference herein its entirety.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
The response to Item 6(b) is hereby amended and supplemented as follows:
(b) To the best knowledge of the Company, all of the Company's executive
officers, directors and affiliates presently intend to tender to Northrop
Acquisition or present to the Exchange Agent after the Northrop 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.
The response to Item 7 is hereby amended and supplemented as follows:
(a) The response to Item 3(b) on pages 1 through 6 of the April 4 Schedule
14D-9 is incorporated by reference herein in its entirety. Other than as set
forth above and in Item 4, the Company is not engaged in any negotiation in
response to the Martin 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;
<PAGE> 3
(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
(4) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described under Items 4 and 7(a), there are no transactions,
Board resolutions, agreements in principle, or signed contracts in response to
the Offer 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 response to Item 8 is hereby amended and supplemented as follows:
A copy of the complaint in Fecci, et al. v. Grumman Corp., et al., filed in
the United States District Court for the Southern District of New York, 94 Civ.
1914, is set forth as Exhibit (c)(40) hereto, and incorporated by reference
herein in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(11) -- Letter to the Company's Shareholders, dated April 4, 1994*
(b) -- None
(c)(35) -- Solicitation/Recommendation Statement on Schedule 14D-9, dated April 4,
1994, of the Company with respect to the Northrop Offer
(c)(36) -- Agreement and Plan of Merger between Northrop Acquisition, Northrop
Corporation and the Company, dated April 3, 1994
(c)(37) -- Letter, dated March 31, 1994, from Martin Marietta Corporation to the
Company
(c)(38) -- Letter, dated March 31, 1994, from Northrop Corporation to the Company
(c)(39) -- Letter, dated April 3, 1994, from Northrop Corporation to the Company
(c)(40) -- Complaint in Fecci, et al. v. Grumman Corp., et al
</TABLE>
- ---------------
* Included in copies mailed to shareholders of the Company.
2
<PAGE> 4
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: /s/ RENSO L. CAPORALI
Chairman of the Board and
Chief Executive Officer
Date: April 4, 1994
3
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ----------------------------------------------------------------------------------
<S> <C>
(a)(11) -- Letter to the Company's Shareholders, dated April 4, 1994*
(b) -- None
(c)(35) -- Solicitation/Recommendation Statement on Schedule 14D-9, dated April 4, 1994, of
the Company with respect to the Northrop Offer
(c)(36) -- Agreement and Plan of Merger between Northrop Acquisition, Northrop Corporation
and the Company, dated April 3, 1994
(c)(37) -- Letter, dated March 31, 1994, from Martin Marietta Corporation to the Company
(c)(38) -- Letter, dated March 31, 1994, from Northrop Corporation to the Company
(c)(39) -- Letter, dated April 3, 1994, from Northrop Corporation to the Company
(c)(40) -- Complaint in Fecci, et al. v. Grumman Corp., et al
</TABLE>
- ---------------
* Included in copies mailed to shareholders of the Company.
<PAGE> 1
EXHIBIT (a)(11)
GRUMMAN CORPORATION
BETHPAGE, NEW YORK 11714-3580
DR. RENSO L. CAPORALI
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
April 4, 1994
Dear Shareholder:
Since my letter to you of March 6, 1994, many developments have taken place
in connection with the tender offers by Martin Marietta Corporation and Northrop
Corporation for Grumman. Throughout this period, the objective of your Board of
Directors has been to achieve, on your behalf, the best price for your shares.
Accordingly, I am pleased to inform you that Grumman has entered into a
merger agreement with Northrop Corporation and a subsidiary of Northrop (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
$62.00 per Share or $7.00 per Share in excess of the $55.00 per Share offered by
Martin Marietta.
You will receive a revised Offer to Purchase from Northrop reflecting its
$62.00 per Share offer. The revised Northrop Tender Offer is conditioned upon,
among other things, a minimum of 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 Northrop Tender
Offer, all Shares which are not tendered through the Northrop Tender Offer will
be acquired through the Northrop Merger at a price of $62.00 per Share.
Your Board of Directors has unanimously approved the revised Northrop
Tender Offer and the Northrop Merger and recommends that shareholders ACCEPT the
revised Northrop Tender Offer and REJECT the Martin Marietta Tender Offer.
Enclosed for your consideration are copies of each of Grumman's Schedules
14D-9 relating to the revised Northrop Tender Offer and the Martin Marietta
Tender Offer, 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 relating to the revised Northrop
Tender Offer, which describes both the reasons for the Board of Directors'
unanimous recommendations 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 revised
Northrop Tender Offer and the Northrop Merger are fair to, and in the best
interest of, the shareholders of Grumman. All directors intend to tender the
Shares they presently own to Northrop.
Sincerely,
Renso L. Caporali
Chairman of the Board
and Chief Executive Officer
<PAGE> 1
EXHIBIT (c)(35)
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
(AMENDMENT NO. 4)
(WITH RESPECT TO THE TENDER OFFER BY NORTHROP CORPORATION)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
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
(516) 575-3871
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSONS(S) FILING STATEMENT)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
This Amendment No. 4 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, dated March 24, 1994, as amended (the "Schedule
14D-9"), of Grumman Corporation, a New York corporation (the "Company"), filed
in connection with the Northrop Offer as set forth in the Schedule 14D-9.
Capitalized terms used herein shall have the definitions set forth in the
Schedule 14D-9 unless otherwise provided herein.
ITEM 2. TENDER OFFER OF THE BIDDER.
The response to Item 2 is hereby supplemented and amended as follows:
On April 3, 1994, the Company, Northrop and Northrop Acquisition entered
into an Agreement and Plan of Merger (the "Northrop Merger Agreement"), relating
to the purchase of all outstanding Shares at a price of $62.00 per Share net to
the seller in cash, as disclosed in the Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1") as amended on April 4, 1994 filed by Northrop and
Northrop Acquisition with the Securities and Exchange Commission, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated March 14,
1994, as amended April 4, 1994 (the "Northrop Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Northrop Offer").
ITEM 3. IDENTITY AND BACKGROUND.
The response to Item 3(b) is hereby supplemented and amended as follows:
(b) The Northrop Offer is being made pursuant to the Northrop Merger
Agreement. After the completion of the Northrop Offer, and upon the terms and
subject to the conditions of the Northrop Merger Agreement, Northrop Acquisition
will be merged with and into the Company (the "Northrop Merger"). Following the
Northrop Merger, the Company will be the surviving corporation ("Surviving
Corporation"). The Company will thereby become a wholly owned subsidiary of
Northrop 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 Northrop Acquisition, Northrop or any other
subsidiary of Northrop or (iii) held by any stockholder who has not voted in
favor of the Northrop 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 Northrop Merger (the "Effective Time") into the right to receive the higher
of (i) $62.00 in cash or (ii) any higher price paid pursuant to the Northrop
Offer (the "Northrop Merger Consideration"). The purpose of the Northrop Offer,
the Northrop Merger Agreement and the Northrop Merger is for Northrop
Acquisition and Northrop to acquire control of, and the entire equity interest
in, the Company. The Northrop Offer is intended to increase the likelihood that
the Northrop Merger will be effected. The Northrop Merger Agreement is filed as
Exhibit (c)(18) hereto and is hereby incorporated herein by reference in its
entirety.
THE NORTHROP OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING
VALIDLY TENDERED, AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE
NORTHROP 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 Northrop Merger Agreement provides that Northrop Acquisition will
commence the Northrop Offer and accept for payment, purchase and pay for Shares
tendered pursuant to the Northrop Offer, subject to the terms and conditions set
forth in the Northrop Offer to Purchase. The Northrop Merger Agreement further
provides that Northrop Acquisition, upon purchase of Shares pursuant to the
Northrop 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 Northrop 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 Northrop Merger
Agreement as set forth below) and the percentage that the number of Shares
purchased by Northrop Acquisition bears to the total number of outstanding
shares of Common Stock
<PAGE> 3
of the Company on a fully diluted basis, and that the Company will use its best
efforts, upon request by Northrop Acquisition, promptly, at the Company's
election either to 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 Northrop
Acquisition's designees to be elected to the Board. The Northrop 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 Northrop 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 Northrop Merger Agreement), (ii)
each board of directors of each subsidiary of the Company and (iii) each
committee of each such board. The Northrop 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 Northrop Merger
Agreement shall remain members of the Board until the Effective Time. The
Northrop Merger Agreement further provides that the Northrop Merger shall occur
as soon as practicable after May 18, 1994 (provided that Northrop Acquisition
shall have purchased Shares pursuant to the Northrop Offer) and the satisfaction
or waiver of the conditions in the Northrop Merger Agreement and that, upon such
Merger, the directors of Northrop 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 Northrop 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 Northrop Merger Agreement to
take such action as is necessary under the Stock Plans to cause any Options that
remain outstanding after the Northrop 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 Northrop Merger Consideration by the number
of Shares for which each such Option was theretofore exercisable. The Northrop
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).
The Northrop Merger Agreement provides that Northrop, upon notice to the
Company, may modify the structure of the Northrop Merger if Northrop determines
it advisable to do so because of tax or other considerations, but no such
modification may reduce the consideration payable upon consummation of the
Northrop Merger.
Representations and Warranties. The Northrop 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 Northrop Merger Agreement, and Board approval of the Northrop 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 Northrop Offer
Documents and the Proxy Statement relating to the Northrop Merger; the absence
of undisclosed liabilities or changes; obtaining necessary approvals to
consummate the transactions contemplated by the Northrop 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
Northrop 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
2
<PAGE> 4
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 Rights Agreement. In addition, the Company represents
that it has terminated the Martin Merger Agreement pursuant to Section
8.1(d)(ii) thereof. The Northrop Merger Agreement also contains customary
representations and warranties of Northrop Acquisition and Northrop.
Covenants. The Northrop Merger Agreement obligates the Company until the
designees of Northrop 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. Northrop has agreed to
guarantee the performance by Northrop Acquisition of its obligations under the
Northrop Merger Agreement.
Other Potential Bidders. The Northrop 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 Northrop 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 Northrop dated the date of the Northrop Merger Agreement. The
Northrop 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 Northrop Merger Agreement provides that the Board shall
provide a copy of any such written proposal to Northrop or Northrop Acquisition
immediately after receipt thereof and thereafter keep Northrop and Northrop
Acquisition promptly advised of any development with respect thereto. Otherwise,
the Northrop 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 Northrop 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,
and 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 Northrop 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
Northrop Merger; the expiration of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act; and the purchase of Shares
pursuant to the Northrop Offer.
Termination. The Northrop Merger Agreement provides that it may be
terminated and the Northrop Offer and the Northrop Merger may be abandoned at
any time, but prior to the Effective Time in the following circumstances: (i) by
the mutual written consent of Northrop, Northrop Acquisition and the Company;
(ii) by Northrop and Northrop 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 Northrop Merger and
such order, decree, ruling or other action is or shall have become
non-appealable; (iii) by Northrop and Northrop Acquisition if, due to an
occurrence or circumstance which would result in a failure to satisfy any of the
conditions set forth in the Northrop Offer, Northrop Acquisition shall have (A)
failed to commence the
3
<PAGE> 5
Northrop Offer within five days following the date of the initial public
announcement of the Northrop Offer, (B) terminated the Northrop Offer or (C)
failed to pay for Shares pursuant to the Northrop Offer within 60 days following
commencement of the Northrop 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 Northrop Acquisition shall have (A)
failed to commence the offer within five days following the date of the initial
public announcement of the Northrop Offer, (B) terminated the Northrop Offer or
(C) failed to pay for Shares pursuant to the Northrop Offer within 60 days
following the commencement of the Northrop Offer or (2) prior to the purchase of
Shares pursuant to the Northrop 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 Northrop Offer and the Northrop 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 Northrop and Northrop
Acquisition prior to the purchase of Shares pursuant to the Northrop 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 Northrop 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 Northrop 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 Northrop 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 Northrop or Northrop 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
Northrop Acquisition its approval or recommendation of the Northrop Offer, the
Northrop Merger Agreement or the Northrop 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 Northrop Offer and on or prior to such date an entity or
group (other than Northrop or Northrop 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 Northrop or Northrop Acquisition which materially
adversely affects (or materially delays) the consummation of the Northrop Offer
or (2) there shall have been a material breach of any covenant or agreement on
the part of Northrop or Northrop Acquisition and which materially adversely
affects (or materially delays) the consummation of the Northrop 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 Northrop
Offer expires.
"Material Adverse Effect," when used in connection with the Company or any
of its subsidiaries, is defined in the Northrop Merger Agreement as any change
or effect (other than changes or effects disclosed 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 a 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 Northrop Merger Agreement provides that in the
event Northrop and Northrop Acquisition terminate the Northrop Merger Agreement
pursuant to a Company Breach Event, Northrop and Northrop Acquisition would
suffer direct and substantial damages, which damages cannot be determined with
reasonable certainty. To compensate Northrop and Northrop Acquisition for such
damages, the Company has agreed under the Northrop Merger Agreement to pay to
Northrop the amount of $20 million as liquidated damages immediately upon such
termination.
The Northrop Merger Agreement also provided that if (i) Northrop and
Northrop Acquisition terminate the Northrop 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
4
<PAGE> 6
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) Northrop and Northrop Acquisition
terminate the Northrop 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 Northrop Offering, or (iii) the Company terminates the Northrop
Merger Agreement pursuant to an Other Offer Event, the Company shall pay to
Northrop and Northrop 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
$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 Northrop and Northrop
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 Northrop 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 includes a "person" as such
term is defined in Section 13(d)(3) of the Exchange Act) or entity other than
Northrop, Northrop 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 Northrop Merger Agreement and which is not part
of a series of transactions resulting in a change of control.
The Northrop Merger Agreement provides that upon the termination of the
Northrop Merger Agreement for any reason prior to the purchase of Shares by
Northrop Acquisition pursuant to the Northrop Offer (other than (i) termination
by the Company due to a breach of a representation, warranty, covenant or
agreement on the part of Northrop or Northrop Acquisition and (ii) termination
in circumstances requiring the Company to pay liquidated damages pursuant to a
Company Breach Event), the Company shall reimburse Northrop, Northrop
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 Northrop Offer and the
Northrop Merger and the consummation of all transactions contemplated by the
Northrop Merger Agreement (including, without limitation, fees payable to
financing sources, investment bankers, counsel to any of the foregoing, and
accountants). Northrop and Northrop Acquisition have provided the Company with
an estimate of the amount of such fees and expenses and, if Northrop or Northrop
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 Northrop Merger Agreement, Northrop
and Northrop 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 Northrop Merger Agreement
with respect to matters occurring prior to the Effective Time shall survive the
Northrop Merger and continue in full force and effect. The Northrop Merger
Agreement also provides that to the maximum extent permitted by the NYBCL such
indemnification
5
<PAGE> 7
shall be mandatory rather than permissive and Surviving Corporation shall
advance expenses in connection with such indemnification. The Northrop Merger
Agreement further provides that Northrop guarantees the indemnification
obligations of Surviving Corporation.
Under the Northrop Merger Agreement, Northrop 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.
Redemption of Rights. The Northrop Merger Agreement provides that, at
Northrop's request, the Company will take such action as Northrop may request to
effectuate the redemption, at any time after the purchase of Shares pursuant to
the Northrop Offer of at least a majority of the outstanding Shares, of the
Rights.
Amendment. The Northrop Merger Agreement provides that, subject to the
next paragraph, the Northrop Merger Agreement may be amended by action taken by
the Company, Northrop and Northrop Acquisition at any time before or after
approval of the Northrop 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 Northrop Merger Agreement further provides that the Northrop
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of the parties hereto.
The Northrop Merger Agreement further provides that, following the election
or appointment of Northrop Acquisition's designees to the Company's Board of
Directors pursuant to the Northrop 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 Northrop Merger Agreement, any termination
of the Northrop 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 Northrop
Acquisition or Northrop or waiver of any of the Company's rights under the
Northrop Merger Agreement will require the concurrence of a majority of such
directors.
Extension; Waiver. The Northrop Merger Agreement provides that, subject to
the second paragraph under Amendment above, at any time prior to the Effective
Time, each party to the Northrop 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 Northrop Merger Agreement or in any document, certificate or
writing delivered pursuant to the Northrop Merger Agreement or (iii) waive
compliance by the other party with any of the agreements or conditions contained
in the Northrop Merger Agreement. Any agreement on the part of either party
hereto to any such extensions 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.
6
<PAGE> 8
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
The response to Item 4 is hereby amended and supplemented as follows:
(a) Recommendation. At a meeting of the Board held on April 3, 1994,
the Board unanimously adopted resolutions that the Board had, in light of
and subject to the terms and conditions set forth in the Northrop Merger
Agreement and in light of other relevant circumstances, determined that the
Northrop Offer and the Northrop Merger are fair to, and in the best
interests of, the shareholders of the Company; authorizing the execution
and delivery of the Northrop Merger Agreement substantially in the form
presented to it; and recommending that the shareholders of the Company
accept the Northrop Offer and tender their Shares to Northrop Acquisition
and approve and adopt the Northrop Merger Agreement.
The Board also unanimously (i) recommended that the shareholders of
the Company reject the Martin Offer and not tender any of their Shares
pursuant to the Martin Offer and (ii) authorized the termination of the
Martin Merger Agreement.
The letter to shareholders of the Company, dated April 4, 1994, from
Dr. Renso L. Caporali, Chairman of the Board and Chief Executive Officer of
the Company, containing the recommendations of the Board is filed as
Exhibit (a)(2) hereto and is incorporated herein by reference in its
entirety.
(b) Background and Reasons for the Recommendation.
On March 31, 1994, a representative of the financial advisor of Martin
Marietta contacted the Company's financial advisor and stated that Martin
Marietta still had more than one option. The representative of the
financial advisor also asked whether Northrop had indicated whether it
would submit a proposal pursuant to the Rules and Procedures for Submission
of Proposals adopted by the Company, stating that it had implications as to
the option Martin Marietta would choose. The financial advisor of Martin
Marietta was informed that the financial advisor of the Company had nothing
to report regarding Northrop's plans. At approximately 4:30 p.m., a
representative of the financial advisor of Martin Marietta arrived at the
office of the financial advisor of the Company. At approximately 5:00 p.m.,
the representative of the financial advisor of Martin Marietta asked the
financial advisor of the Company whether he had heard from Northrop and
whether representatives of the financial advisor of Northrop were there.
Upon being informed that, since their conversation earlier that afternoon,
the financial advisor of the Company had had no contact with
representatives of Northrop and upon being informed that representatives of
the financial advisor of Northrop were present at the offices of the
Company's financial advisor, the representative of the financial advisor of
Martin Marietta delivered a letter in an envelope marked "B". A
representative of the financial advisor of Northrop also delivered a letter
to the Company's financial advisor.
7
<PAGE> 9
The text of the letter dated March 31, 1994 from Martin Marietta to
the Company is set forth below:
"MARTIN MARIETTA CORPORATION 6801 Rockledge Drive
Bethesda, Maryland 20617
Telephone (301) 897-6185
NORMAN R. AUGUSTINE
Chairman and Chief Executive Officer
March 31, 1994
Board of Directors
Grumman Corporation
c/o Gene T. Sykes
Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
Lady and Gentlemen:
We have received the letter dated March 28, 1994 from Dr. Caporali
regarding proposals for the acquisition of Grumman.
On February 21, 1994, Martin Marietta provided to Grumman Corporation a
proposal to enter into discussions leading to a cash tender for Grumman shares
at $55.00 per share. In that letter, we indicated that we had placed "the
highest value possible on Grumman," and that it was "our best proposal." We
relied upon assurances that the other potential suitor had executed a binding
agreement, virtually identical to our own, that precluded any unsolicited offer
and we chose to provide our highest and best offer in that proposal to "avoid a
debilitating and unpredictable auction process."
As a result of your acceptance of our proposal, our two companies worked
together to complete an unusual reciprocal due diligence investigation whereby
we made available to Grumman highly sensitive and confidential information about
our company. In addition, we went so far as to collectively develop a strategic
plan for capitalizing on the combined company's strengths in the consolidating
defense marketplace. We then jointly announced on March 7, 1994 a Grumman/Martin
Marietta combination "on the leading edge of the industry consolidation."
Martin Marietta remains excited about the benefits of a Grumman/Martin
Marietta combination and committed to the terms of the March 6, 1994 Merger
Agreement (the "Merger Agreement") between our two companies. We have
consistently made clear that Martin Marietta has no interest in participating in
an auction process which we believe would be damaging to Grumman, its employees
and our mutual customers. As we stated in our February 21, 1994 letter, Martin
Marietta's Board of Directors believes that $55.00 per share is a full and fair
price for Grumman shares and truly represents our "highest and best offer." As a
result, while we are fully prepared to carry out the terms of the Merger
Agreement, we do not believe that it is in our shareholders' best interests to
increase our offer.
Grumman cannot enter into a merger agreement with Northrop (or any other
third party) while the Merger Agreement is in effect. We recognize that Grumman
has the right to terminate the Merger Agreement pursuant to Section 8.1(d)(ii)
thereof if Grumman's Board determines in its good faith judgement and in the
exercise of its fiduciary duties, based on the written opinion of legal counsel,
that a different offer is more favorable to Grumman's shareholders. However,
such termination would not be effective until the $50 Million fee required by
Section 8.3(b) has been paid. While we hope that Grumman does not choose this
course of action, we enclose wiring instructions in the event Grumman decides to
proceed in this manner. Also, pursuant to Section 8.3(c) of the Merger
Agreement, our out-of-pocket fees and expenses, not to exceed $8.8 Million would
be payable upon such a termination and within one business day of request
thereof. In such event we would expect to submit promptly a reimbursement
request under Section 8.3(c).
8
<PAGE> 10
Despite our disappointment at the possibility that the Grumman employees
may not have the opportunity to join with Martin Marietta in a combination that
Dr. Caporali indicated would be "far superior to any of our other options" we
maintain our high regard for the Grumman legacy and its people.
If there are any questions, please feel free to contact us at your
convenience. We can be reached through our advisors at Bear Stearns & Co., Mr.
Denis Bovin (212) 272-6938 or Mr. Michael J. Urfirer (212) 272-3331.
Sincerely,
Norman R. Augustine"
The text of the letter from Northrop to the Company dated March 31, 1994 is
set forth below:
"Chairman of the Board,
President and Chief
Executive Officer
March 31, 1994
CONFIDENTIAL
Board of Directors
Grumman Corporation
In care of Mr. Gene T. Sykes
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Gentlemen and Mrs. Benson:
As you are aware, we have grave concerns with the fairness of the bidding
rules and procedures set forth in Dr. Caporali's March 28 letter. We continue to
desire an unimpeded opportunity to participate in a truly open and fair
procedure for bringing the bidding process to a conclusion without any
impediment to our responding to any bid made by Martin Marietta.
We strongly believe that a combination of Grumman and Northrop is in the
best interests of our mutual stockholders and other constituencies; and we wish
to be constructive in your effort to bring the bidding to a swift conclusion.
Accordingly, Northrop Corporation hereby offers to increase the price Northrop
will pay in accordance with the Merger Agreement as follows:
(1) An increased price of $66.00 per share if Martin Marietta's
proposal delivered to you at or before 5:00 p.m. New York time on March 31,
1994 (the "Martin Marietta Bid") contains a definitive offer to acquire all
outstanding shares of Grumman at a per share price of $64.01 through $66,
inclusive;
(2) An increased price of $65.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $63.01 through $64, inclusive;
(3) An increased price of $64.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $62.01 through $63, inclusive;
(4) An increased price of $63.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $61.01 through $62, inclusive;
(5) An increased price of $62.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $60.00 through $61 inclusive; or
9
<PAGE> 11
(6) A per share price of $60 if Martin Marietta fails to provide a bid
letter or the Martin Marietta Bid does not contain a definitive offer of at
least $60 per share.
If Grumman shall choose to accept a bid from Martin Marietta at or above
$66 per share, we would urge Grumman to notify Northrop of the bid as we will
give serious consideration to topping such a bid.
The offer made herein shall be irrevocable until 9:00 a.m. New York time on
Monday, April 4, 1994.
We must require that, upon Grumman's acceptance of the offer made herein at
a particular price, Grumman shall certify to us in writing that such price is
established in accordance with the formula set forth herein.
We further advise you that Northrop reserves its right to submit additional
bids or proposals intended to provide greater value to Grumman's stockholders or
other constituent communities than any agreement which may be entered into
between Grumman and Martin Marietta. Northrop does not agree with any provisions
of the bidding procedures that purport to limit Northrop's ability to make such
additional bids or proposals.
We expect that Grumman will honor the commitment it has made not to
publicly disclose or communicate to Martin Marietta the terms of this offer, and
this offer shall not be binding upon Northrop if it is so disclosed or
communicated prior to entering into a definitive merger agreement with us. We
also expect, and this offer is submitted on the condition, that Grumman will not
enter into any agreement with either Martin Marietta or Northrop, except on the
terms described in Dr. Caporali's March 28 letter.
Acceptance of this offer by Grumman Corporation shall constitute acceptance
and agreement to the Agreement and Plan of Merger submitted to you, pursuant to
the letter dated March 23, 1994, from our counsel, with a change in the second
"WHEREAS" clause of $60 to the dollar amount specified in Paragraphs (1) through
(5) herein and a change in Section 4.2 to correct a typographical error therein,
to change the number 107,975,451 to 107,975.451.
Sincerely yours,
Kent Kresa"
On April 1, 1994, the Board held a special telephonic meeting to discuss,
among other things, the foregoing. Senior management of the Company and the
Company's legal and financial advisors reviewed the two letters with the Board.
Following discussion of the two letters, the Board, by unanimous vote of all
members present, adopted resolutions (i) in light of all the relevant
circumstances, recommending that shareholders reject the Martin Offer; (ii) in
light of all the relevant circumstances, recommending that shareholders reject
the tender offer by Northrop Acquisition as disclosed in the Northrop Schedule
14D-1 dated March 16, 1994; (iii) approving the entering into of negotiations
with Northrop by the Company and not authorizing any contacts, discussions or
negotiations with Martin Marietta pending further action by the Board which is
dependent upon progress in negotiations with Northrop on April 1 and April 2;
and (iv) expressing the intention of the Board to amend the Rights Agreement and
to take all actions necessary with respect to Article Seventh of the Company's
Certificate of Incorporation and with respect to Sections 902 and 912 of the
NYBCL to exempt therefrom a $66 or higher offer by Northrop pursuant to a merger
agreement otherwise in the form submitted by Northrop to the Company.
At the direction of the Board and following the conclusion of the meeting,
representatives of the Company communicated the foregoing to representatives of
Northrop, including the view of the representative of the Company that under no
circumstances would the Board authorize the sale of the Company at $60 per
Share. Later in the day, on April 1, 1994, representatives of Northrop contacted
representatives of the Company and indicated that Northrop wished to pursue
negotiations with the Company.
10
<PAGE> 12
On April 2 and April 3, 1994, representatives of the Company met with
representatives of Northrop to discuss and negotiate the terms of the Northrop
Merger Agreement. During the negotiations, representatives of the Company
reiterated the view that under no circumstances would the Board authorize the
sale of the Company at $60 per Share, and, in such circumstances, the Board
would then review all alternatives available to it, including keeping in place
the Company's Rights Agreement, the Company's rights under its Certificate of
Incorporation and the Company's rights under Sections 902 and 912 of the NYBCL
and would also examine other possibilities. At the conclusion of the
negotiations, the Company received a letter from Northrop, a copy of which is
attached hereto as Exhibit (c)(21) and incorporated by reference herein in its
entirety, which confirmed the revised Northrop Offer of $62.00 per Share.
On April 3, 1994, the Board held a special meeting. At such meeting, the
Board reviewed with its senior management, legal counsel and financial advisors
the discussions and negotiations between the Company and Northrop since the last
meeting of the Board. The Board also heard presentations by its legal counsel on
the terms and conditions contained in the Northrop Merger Agreement and by its
financial advisor of its analysis of the proposed transaction, including
reference to previous analyses discussed with the Board. Representatives of the
financial advisor then delivered the oral opinion of the financial advisor to
the Board (subsequently confirmed by written opinion) that, as of such date, the
$62.00 in cash to be received by the holders of Shares in the Northrop Offer and
the Northrop 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 Northrop Merger Agreement,
determined that the Northrop Offer and Northrop Merger are fair to, and in the
best interest of, the shareholders of the Company and that the Northrop Offer
and the Northrop Merger represent the best value available under the
circumstances to the Company's shareholders; authorizing the execution and
delivery of the Northrop Merger Agreement substantially in the form presented to
it; recommending that the shareholders of the Company accept the Northrop Offer
and tender their shares to Northrop Acquisition and approve and adopt the
Northrop Merger Agreement; authorizing the termination of the Martin Merger
Agreement, including authorization of payment of the fee required by Section
8.3b thereof; and affirming that, in view of the March 31, 1994 letters from
Martin Marietta and Northrop and the Northrop Merger Agreement and in light of
all the relevant circumstances, the Board recommended that shareholders reject
the Martin Offer.
In determining to approve the Northrop Merger Agreement and to recommend
acceptance of the Northrop Offer, the Board considered a number of factors,
including, without limitation, the following:
(i) The factors considered by the Board at its meeting of March 6,
1994;
(ii) The letters of Martin Marietta and Northrop dated March 31, 1994
and the positions taken and/or statements made by each of them;
(iii) The Board's review of presentations from, and discussion of the
terms and conditions of the Northrop Offer and the Northrop Merger with,
senior executive officers of the Company, representatives of its legal
counsel and representatives of Goldman; and
(iv) The Board's receipt of the oral opinion of Goldman (subsequently
confirmed by a written opinion) that, as of April 3, 1994, the $62.00 per
Share in cash to be received by the holders of Shares in the Northrop Offer
and the Northrop Merger is fair to such holders.
The Board did not assign relative weights to the factors discussed above.
A copy of the written opinion of Goldman dated April 4, 1994, confirming
its oral opinion as of April 3, 1994 and describing the assumptions made,
matters considered and the scope of the review undertaken and procedures
followed by Goldman, is attached as Exhibit (a)(3) hereto and is incorporated
herein by reference in its entirety. SHAREHOLDERS ARE ENCOURAGED TO READ SUCH
OPINION IN ITS ENTIRETY.
11
<PAGE> 13
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
The response to Item 6(b) is hereby amended and supplemented as follows:
(b) To the best knowledge of the Company, all of the Company's executive
officers, directors and affiliates presently intend to tender to Northrop
Acquisition or present to the Exchange Agent after the Northrop 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.
The response to Item 7 is hereby amended and supplemented as follows:
(a) The Company is not engaged in any negotiation in response to the
Northrop 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
(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 Northrop Offer 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 response to Item 8 is hereby amended and supplemented as follows:
The information statement attached hereto as Annex I is being furnished in
connection with the possible designation by Northrop Acquisition, pursuant to
the Northrop Merger Agreement, of certain persons to be appointed to the Board
other than at a meeting of the Company's stockholders.
A copy of the complaint in Fecci, et al. v. Grumman Corp., et al., filed in
the United States District Court for the Southern District of New York, 94 Civ.
1914, is set forth as Exhibit (c)(22) hereto, and incorporated by reference
herein in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(2) -- Letter to the Company's Shareholders, dated April 4, 1994*
(a)(3) -- Opinion of Goldman, Sachs & Co., dated April 4, 1994*
(b) -- None.
(c)(18) -- Agreement and Plan of Merger between Northrop Acquisition, Northrop
Corporation and the Company dated April 3, 1994
(c)(19) -- Letter, dated March 31, 1994, from Martin Marietta Corporation to the Company
(c)(20) -- Letter, dated March 31, 1994, from Northrop Corporation to the Company
(c)(21) -- Letter, dated April 3, 1994, from Northrop Corporation to the Company
(c)(22) -- Complaint in Fecci, et al., v. Grumman Corp. et al.
</TABLE>
- ---------------
* Included in copies mailed to shareholders of the Company.
12
<PAGE> 14
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: /s/ RENSO L. CAPORALI
Chairman of the Board and
Chief Executive Officer
Date: April 4, 1994
13
<PAGE> 15
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 April 4, 1994, as
part of the Grumman Corporation's (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the revised tender offer by Northrop
Acquisition (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 Northrop Acquisition to a majority of the seats on the Board. The
Northrop Merger Agreement provides that Northrop Acquisition, upon purchase of
Shares pursuant to the Northrop 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 Northrop 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 Northrop Merger Agreement as set forth
below) and the percentage that the number of shares of Common Stock purchased by
Northrop 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 Northrop 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 Northrop Acquisition's designees to be
elected to the Board. The Northrop 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 Northrop
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 Northrop Merger Agreement, (ii) each board of directors of
each subsidiary of the Company and (iii) each committee of each such board. The
Northrop 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 Northrop 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.
Pursuant to the Northrop Merger Agreement, on April 4, 1994, Northrop
Acquisition revised its Offer to Purchase dated March 14, 1994. The Northrop
Offer is scheduled to expire at 12:00 midnight, New York City time, on April 15,
1994, at which time, if all conditions to the Northrop Offer have been satisfied
or waived, Northrop Acquisition has informed the Company that it intends to
purchase all of the Shares validly tendered pursuant to the Northrop Offer and
not withdrawn.
The information contained in this Information Statement concerning Northrop
Acquisition and Northrop has been furnished to the Company by Northrop, and the
Company assumes no responsibility for the accuracy, completeness or fairness of
any such information.
Northrop 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 Northrop Merger Agreement from the directors and officers
listed in ANNEX I of the Northrop Offer to Purchase, a copy of which has been
mailed to shareholders. The information on ANNEX I is hereby incorporated herein
by reference in its entirety.
<PAGE> 16
It is expected that the Acquisition Designees may assume office at any time
following the purchase by Northrop Acquisition of a specified minimum number of
Shares pursuant to the Northrop Offer, which purchase cannot be earlier than
April 15, 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. Northrop
Acquisition has informed the Company that each of the directors and officers
listed in ANNEX I of the Northrop Offer to Purchase has consented to act as a
director, if so designated.
None of the executive officers and directors of Northrop or Northrop
Acquisition currently is a director of, or holds any position with, the Company.
The Company has been advised that, to the best knowledge of Northrop and
Northrop Acquisition, none of Northrop's or Northrop 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").
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 Northrop Acquisition of a specified minimum number of
shares pursuant to the Northrop 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,
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Applied Energy Systems China Generating Co. Ltd., the Advisory Board of the
Freedom Forum 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 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,
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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 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 1943 to 1946. Before joining J.C. Penney Company,
Inc. in
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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 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
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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 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 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
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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.
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.
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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 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.
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.
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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.
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
9
<PAGE> 24
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.
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
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. 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%.
10
<PAGE> 25
(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.
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 Stock
c/o Grumman Corporation
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.
11
<PAGE> 26
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 $100 is
invested in Grumman Corporation Common Stock, the S&P 500 index, and a composite
index for the peer companies on December 31, 1988, and that dividends paid
during the December 31, 1988 through December 31, 1993 period were reinvested to
purchase additional shares during this performance period.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN(1)
AMONG GRUMMAN CORPORATION, S&P 500 AND
AEROSPACE/DEFENSE PEER GROUP
[GRAPH]
- ---------------
(1) Companies in peer groups weighted by market capitalization, indexed to 100
at 12/31/88. Dividends reinvested over period.
12
<PAGE> 27
The table below sets forth all compensation paid by the Corporation and its
subsidiaries for services in all capacities in the past three fiscal years to
each of the five most highly compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------------
SECURITIES
ANNUAL COMPENSATION OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
----------------------- COMPENSATION STOCK AWARD OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) ($)(3) (#) ($)(2)(4)
- ---------------------------- ---- --------- ----------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Renso L. Caporali........... 1993 525,000 375,000 -0- 16,700 4,540
Chairman of the Board and 1992 450,000 310,000 -0- 6,800 5,135
Chief Executive Officer 1991 375,000 220,000 79,875 9,000
Robert J. Myers............. 1993 381,250 275,000 -0- 8,800 4,860
President and Chief 1992 325,000 215,000 -0- 5,000 5,168
Operating Officer 1991 257,000 150,000 56,800 6,400
J. Robert Anderson(5)....... 1993 337,500 225,000 -0- 6,000 4,960
Vice Chairman and 1992 300,000 190,000 -0- 4,600 5,193
Chief Financial Officer 1991 150,000 90,000 232,000 21,000
Albert Verderosa............ 1993 251,250 145,000 -0- 5,200 5,140
President 1992 190,000 100,000 53,677(6) -0- 3,000 4,370
Grumman Aerospace 1991 185,833 80,000 31,950 3,600
Corporation
Gerald H. Sandler........... 1993 208,750 100,000 -0- 4,000 4,580
President 1992 187,508 80,000 -0- 2,400 4,500
Grumman Data Systems 1991 155,500 60,000 28,400 3,200
Corporation
</TABLE>
- ---------------
(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
13
<PAGE> 28
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, $52,088 represents Mr. Verderosa's housing and meal allowance
while serving at the Corporation's request at a location away from his
normal residence.
The Corporation has in effect plans pursuant to which options to purchase
Common Stock of the Corporation are granted to officers and other selected
employees as determined by the Compensation Committee. The tables below identify
the option grants awarded in the last fiscal year to the individuals identified
on the Summary Compensation Table and the aggregate option values on December
31, 1993.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZED VALUE
- ----------------------------------------------------------------------------- OF ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS/SARS APPRECIATION OVER
UNDERLYING GRANTED TO EXERCISE OR 10 YEAR OPTION TERM(2)
OPTIONS/SARS EMPLOYEES BASE PRICE EXPIRATION -----------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/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.
AGGREGATE OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS IN OPTIONS/SARS AT
DECEMBER 31, 1993 DECEMBER 31, 1993(1)
SHARES ACQUIRED $ VALUE ----------------------------- -----------------------------
NAME ON EXERCISE REALIZED 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
14
<PAGE> 29
$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.
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.
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
15
<PAGE> 30
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 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
16
<PAGE> 31
either 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 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
April 4, 1994
17
<PAGE> 1
EXHIBIT (c)(36)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 3, 1994
AMONG
NORTHROP CORPORATION,
NORTHROP ACQUISITION, INC.
AND
GRUMMAN CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1
THE OFFER
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
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
SECTION 3.1 Dissenting Shares...................................................... 5
SECTION 3.2 Payment for Shares..................................................... 6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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............................................................. 9
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..................................... 10
SECTION 4.13 Rights Agreement....................................................... 11
SECTION 4.14 Brokers................................................................ 11
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
SECTION 5.1 Organization........................................................... 11
SECTION 5.2 Authority Relative to This Agreement................................... 11
SECTION 5.3 Consents and Approvals; No Violations.................................. 11
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
ARTICLE 6
COVENANTS
SECTION 6.1 Conduct of Business of the Company..................................... 12
SECTION 6.2 Other Potential Bidders................................................ 14
SECTION 6.3 Access to Information.................................................. 14
SECTION 6.4 Additional Agreements; Reasonable Efforts.............................. 15
SECTION 6.5 Consents............................................................... 15
SECTION 6.6 Public Announcements................................................... 15
SECTION 6.7 Indemnification........................................................ 15
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
SECTION 7.1 Conditions to Each Party's Obligations to Effect the Merger............ 16
ARTICLE 8
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1 Termination............................................................ 17
SECTION 8.2 Effect of Termination.................................................. 17
SECTION 8.3 Fees and Expenses...................................................... 18
SECTION 8.4 Amendment.............................................................. 19
SECTION 8.5 Extension; Waiver...................................................... 19
ARTICLE 9
MISCELLANEOUS
SECTION 9.1 Nonsurvival of Representations and Warranties.......................... 19
SECTION 9.2 Entire Agreement; Assignment........................................... 19
SECTION 9.3 Validity............................................................... 19
SECTION 9.4 Notices................................................................ 19
SECTION 9.5 Governing Law.......................................................... 19
SECTION 9.6 Descriptive Headings................................................... 20
SECTION 9.7 Parties in Interest.................................................... 20
SECTION 9.8 Counterparts........................................................... 20
</TABLE>
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<PAGE> 4
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERM 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)
DGCL.................................................................. Section 2.1
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 Statements............................................. 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)
</TABLE>
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<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 3, 1994, is among
NORTHROP CORPORATION, a Delaware corporation ("Parent"), NORTHROP ACQUISITION,
INC., a Delaware corporation and a wholly owned subsidiary of Parent
("Acquisition"), and GRUMMAN CORPORATION, a New York corporation (the
"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
amend its outstanding 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 hereinafter defined) at a
price of $62.00 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 use all reasonable efforts to consummate 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 accept for payment, purchase and
pay for Shares tendered pursuant to the Offer shall be subject only to the
conditions set forth in Annex A hereto 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 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.
<PAGE> 6
(b) As soon as practicable after the date hereof, Acquisition shall file
with the Securities and Exchange Commission (the "SEC") an amendment to its
Tender Offer Statement on Schedule 14D-1 dated March 14, 1994 with respect to
the Offer which will reflect the existence of this Agreement, amend the
conditions to the Offer in accordance herewith and contain a supplement to
Acquisition's Offer to Purchase dated March 14, 1994 and 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 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. The Company hereby represents that it has terminated the
Agreement and Plan of Merger dated as of March 6, 1994 among Martin Marietta
Corporation, MMC Acquisition Corp. and the Company pursuant to Section
8.1(d)(ii) thereof.
(b) The Company hereby agrees to file with the SEC as soon as practicable
after the date hereof an amendment to its Solicitation/Recommendation Statement
on Schedule 14D-9 pertaining to the Offer (together with any amendments or
supplements thereto, the "Schedule 14D-9") containing the recommendation
described in Section 1.2(a) and to promptly mail the Schedule 14D-9 to the
shareholders of the Company. 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
2
<PAGE> 7
in any material respect and the Company further agrees to take all steps
necessary to cause the Schedule 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 and
the Delaware General Corporation Law (the "DGCL"), 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. Parent may, upon
notice to the Company, modify the structure of the Merger if Parent determines
it advisable to do so because of tax or other considerations, and the Company
shall promptly enter into any amendment to this Agreement necessary or desirable
to accomplish such structure modification, provided that no such amendment shall
reduce the Merger Consideration.
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 and to the Secretary of State of the State of Delaware for
filing and make all other filings or recordings required by the NYBCL and the
DGCL 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 Gibson, Dunn & Crutcher,
200 Park Avenue, New York, New York 10166 (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) and the
DGCL. 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 canceled 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
4
<PAGE> 9
outstanding. At the Effective Time, each outstanding share of the common stock,
par value $.01 per share, of Acquisition shall be converted into one 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 the Merger and
without any action on the part of Acquisition, the Company or the holder
thereof, be canceled, 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
5
<PAGE> 10
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, 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 canceled. 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 canceled
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.
(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
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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 a 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 the 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 securities of the
Company or any of its subsidiaries convertible into or exchangeable for shares
of capital stock
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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, 1991, 1992 and 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) 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 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,
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for the fiscal year ended December 31, 1993 (the "1993 Financial Statements").
The 1993 Financial Statements and the audited consolidated financial statements
of the Company included in its Annual Reports on Form 10-K 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 date thereof and
their consolidated results of operations and changes in financial position for
the periods then ended.
(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 and the DGCL, 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 bylaws (or similar governing documents) of the
Company or of any of 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.
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
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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.
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
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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 transaction 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 State of Delaware 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 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
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merger as required by the NYBCL and the DGCL, 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, the making of the Offer 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 Salomon Brothers 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 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;
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(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;
(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
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<PAGE> 18
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 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
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<PAGE> 19
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.
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
15
<PAGE> 20
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.
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.
16
<PAGE> 21
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) terminated the Offer or (B)
failed to pay for Shares pursuant to the Offer within 60 days following the
date hereof;
(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) terminated the Offer or (B) failed
to pay for Shares pursuant to the Offer within 60 days following the date
hereof 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 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 provisions 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.
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<PAGE> 22
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 "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 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 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
18
<PAGE> 23
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.
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:
<TABLE>
<S> <C>
if to Parent or Acquisition to: Northrop Corporation
1840 Century Park East
Los Angeles, CA 90067
Attention: General Counsel
if to the Company to: Grumman Corporation
1111 Stewart Avenue
Bethpage, NY 11714-3580
Attention: General Counsel
Fax No. 516-575-2921
</TABLE>
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.
19
<PAGE> 24
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.
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.
NORTHROP CORPORATION
By: /s/ KENT KRESA
Name: Kent Kresa
Title: Chairman of the Board,
President and Chief
Executive Officer
NORTHROP ACQUISITION, INC.
By: /s/ RICHARD R. MOLLEUR
Name: Richard R. Molleur
Title: Vice President
GRUMMAN CORPORATION
By: /s/ RENSO L. CAPORALI
Name: Renso L. Caporali
Title: Chairman of the Board and
Chief
Executive Officer
20
<PAGE> 25
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 April 4, 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 exists:
(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 liability 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
(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
A-1
<PAGE> 26
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.
A-2
<PAGE> 1
EXHIBIT (c)(37)
MARTIN MARIETTA CORPORATION 6801 Rockledge Drive
Bethesda, Maryland 20617
Telephone (301) 897-6185
NORMAN R. AUGUSTINE
Chairman and Chief Executive Officer
March 31, 1994
Board of Directors
Grumman Corporation
c/o Gene T. Sykes
Goldman Sachs & Co.
85 Broad Street
New York, NY 10004
Lady and Gentlemen:
We have received the letter dated March 28, 1994 from Dr. Caporali
regarding proposals for the acquisition of Grumman.
On February 21, 1994, Martin Marietta provided to Grumman Corporation a
proposal to enter into discussions leading to a cash tender for Grumman shares
at $55.00 per share. In that letter, we indicated that we had placed "the
highest value possible on Grumman," and that it was "our best proposal." We
relied upon assurances that the other potential suitor had executed a binding
agreement, virtually identical to our own, that precluded any unsolicited offer
and we chose to provide our highest and best offer in that proposal to "avoid a
debilitating and unpredictable auction process."
As a result of your acceptance of our proposal, our two companies worked
together to complete an unusual reciprocal due diligence investigation whereby
we made available to Grumman highly sensitive and confidential information about
our company. In addition, we went so far as to collectively develop a strategic
plan for capitalizing on the combined company's strengths in the consolidating
defense marketplace. We then jointly announced on March 7, 1994 a Grumman/Martin
Marietta combination "on the leading edge of the industry consolidation."
Martin Marietta remains excited about the benefits of a Grumman/Martin
Marietta combination and committed to the terms of the March 6, 1994 Merger
Agreement (the "Merger Agreement") between our two companies. We have
consistently made clear that Martin Marietta has no interest in participating in
an auction process which we believe would be damaging to Grumman, its employees
and our mutual customers. As we stated in our February 21, 1994 letter, Martin
Marietta's Board of Directors believes that $55.00 per share is a full and fair
price for Grumman shares and truly represents our "highest and best offer." As a
result, while we are fully prepared to carry out the terms of the Merger
Agreement, we do not believe that it is in our shareholders' best interests to
increase our offer.
Grumman cannot enter into a merger agreement with Northrop (or any other
third party) while the Merger Agreement is in effect. We recognize that Grumman
has the right to terminate the Merger Agreement pursuant to Section 8.1(d)(ii)
thereof if Grumman's Board determines in its good faith judgement and in the
exercise of its fiduciary duties, based on the written opinion of legal counsel,
that a different offer is more favorable to Grumman's shareholders. However,
such termination would not be effective until the $50 Million fee required by
Section 8.3(b) has been paid. While we hope that Grumman does not choose this
course of action, we enclose wiring instructions in the event Grumman decides to
proceed in this manner. Also, pursuant to Section 8.3(c) of the Merger
Agreement, our out-of-pocket fees and expenses, not to exceed $8.8 Million would
be payable upon such a termination and within one business day of request
thereof. In such event we would expect to submit promptly a reimbursement
request under Section 8.3(c).
<PAGE> 2
Despite our disappointment at the possibility that the Grumman employees
may not have the opportunity to join with Martin Marietta in a combination that
Dr. Caporali indicated would be "far superior to any of our other options" we
maintain our high regard for the Grumman legacy and its people.
If there are any questions, please feel free to contact us at your
convenience. We can be reached through our advisors at Bear Stearns & Co., Mr.
Dennis Bovin (212) 272-6938 or Mr. Michael J. Urfirer (212) 272-3331.
Sincerely,
Norman R. Augustine
2
<PAGE> 1
EXHIBIT (c)(38)
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
March 31, 1994
CONFIDENTIAL
Board of Directors
Grumman Corporation
In care of Mr. Gene T. Sykes
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Gentlemen and Mrs. Benson:
As you are aware, we have grave concerns with the fairness of the bidding
rules and procedures set forth in Dr. Caporali's March 28 letter. We continue to
desire an unimpeded opportunity to participate in a truly open and fair
procedure for bringing the bidding process to a conclusion without any
impediment to our responding to any bid made by Martin Marietta.
We strongly believe that a combination of Grumman and Northrop is in the
best interests of our mutual stockholders and other constituencies; and we wish
to be constructive in your effort to bring the bidding to a swift conclusion.
Accordingly, Northrop Corporation hereby offers to increase the price Northrop
will pay in accordance with the Merger Agreement as follows:
(1) An increased price of $66.00 per share if Martin Marietta's
proposal delivered to you at or before 5:00 p.m. New York time on March 31,
1994 (the "Martin Marietta Bid") contains a definitive offer to acquire all
outstanding shares of Grumman at a per share price of $64.01 through $66,
inclusive;
(2) An increased price of $65.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $63.01 through $64, inclusive;
(3) An increased price of $64.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $62.01 through $63, inclusive;
(4) An increased price of $63.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $61.01 through $62, inclusive;
(5) An increased price of $62.00 per share if the Martin Marietta Bid
contains a definitive offer to acquire all outstanding shares of Grumman at
a per share price of $60.00 through $61 inclusive; or
(6) A per share price of $60 if Martin Marietta fails to provide a bid
letter or the Martin Marietta Bid does not contain a definitive offer of at
least $60 per share.
If Grumman shall choose to accept a bid from Martin Marietta at or above
$66 per share, we would urge Grumman to notify Northrop of the bid as we will
give serious consideration to topping such a bid.
The offer made herein shall be irrevocable until 9:00 a.m. New York time on
Monday, April 4, 1994.
We must require that, upon Grumman's acceptance of the offer made herein at
a particular price, Grumman shall certify to us in writing that such price is
established in accordance with the formula set forth herein.
We further advise you that Northrop reserves its right to submit additional
bids or proposals intended to provide greater value to Grumman's stockholders or
other constituent communities than any agreement which may be entered into
between Grumman and Martin Marietta. Northrop does not agree with any provisions
of the bidding procedures that purport to limit Northrop's ability to make such
additional bids or proposals.
<PAGE> 2
We expect that Grumman will honor the commitment it has made not to
publicly disclose or communicate to Martin Marietta the terms of this offer, and
this offer shall not be binding upon Northrop if it is so disclosed or
communicated prior to entering into a definitive merger agreement with us. We
also expect, and this offer is submitted on the condition, that Grumman will not
enter into any agreement with either Martin Marietta or Northrop, except on the
terms described in Dr. Caporali's March 28 letter.
Acceptance of this offer by Grumman Corporation shall constitute acceptance
and agreement to the Agreement and Plan of Merger submitted to you, pursuant to
the letter dated March 23, 1994, from our counsel, with a change in the second
"WHEREAS" clause of $60 to the dollar amount specified in Paragraphs (1) through
(5) herein and a change in Section 4.2 to correct a typographical error therein,
to change the number 107,975,451 to 107,975.451.
Sincerely yours,
Kent Kresa
<PAGE> 1
EXHIBIT (c)(39)
CONFIDENTIAL
By hand delivery
April 3, 1994
Board of Directors
Grumman Corporation
Gentlemen and Mrs. Benson:
This is to confirm our conversation today, in which we advised that
Northrop Corporation and Northrop Acquisition, Inc. are prepared to enter into
an Agreement and Plan of Merger with Grumman Corporation, with the price therein
increased to $62 per share of Grumman common stock. The form of such agreement
shall be as previously furnished to you and referred to in our letter of March
31, 1994.
This offer is presented with the understanding that it will be presented to
the Grumman Board of Directors at a meeting scheduled for 8:00 p.m. Eastern Time
on this date. This offer is expressly conditioned upon Grumman's execution of
the Agreement and Plan of Merger no later than 10:00 p.m., Eastern Time,
tonight.
This offer was approved by the Directors of Northrop at a special meeting
held earlier this evening.
Sincerely,
Richard B. Waugh, Jr.
Corporate Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT (c)(40)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------------------)
)
)
DENNIS FECCI, ALLEN M. OLENDER and )
DAVID RUDNICK, )
Plaintiffs ) Civil Action No. 94 Civ 1914
)
v. )
)
)
GRUMMAN CORP., MARTIN MARIETTA CORP., ) CLASS ACTION COMPLAINT
J.R. ANDERSON, CHARLES MARSHALL, )
K.S. AXELSON, V.H. LI, LUCY W. BENSON, )
RICHARD DULUDE, R.J. MYERS, J.F. ORR, III, )
R.L. CAPORALI, J.T. SARGENT and )
E.N. WILLIAMS, )
Defendants. )
)
)
- ----------------------------------------------)
Plaintiffs Dennis Fecci, Allen M. Olender and David Rudnick and all others
similarly situated, by their attorneys, allege upon personal knowledge as to
allegations concerning themselves and upon information and belief as to all
other matters as follows:
NATURE OF THE ACTION
This is a shareholders' Class action brought against Grumman Corp.
("Grumman" or the "Company"), its directors and Martin Marietta Corp. By this
action, plaintiffs seek injunctive and monetary relief for, inter alia, the
Individual Defendants' breaches of their disclosure duty and their fiduciary
duty and abuse of their positions of control of Grumman in connection with their
pursuit of a merger with Martin Marietta Corp. ("Martin Marietta") announced
March 7, 1994, which would severely and irreparably damage the shareholders of
Grumman.
<PAGE> 2
JURISDICTION AND VENUE
1. Plaintiffs bring this action pursuant to Sections 10(b), 14(e) and 20(a)
of the Securities Exchange Act of 1934 (the "1934 Act") and Rule 10b-5 of the
Securities Exchange Commission ("SEC") thereunder and applicable principles of
common law. This Court has jurisdiction pursuant to Section 27 of the 1934 Act,
15 U.S.C. sec.78aa, and under principles of supplemental jurisdiction.
2. Venue is proper in this District because many of the events and
omissions giving rise to the claims alleged herein have occurred and are
occurring in this district, including the dissemination of false and misleading
statements in connection with the tender offer by and proposed merger with
Martin Marietta.
3. In connection with the acts and conduct alleged in this complaint,
defendants directly and indirectly, used the means and instrumentalities of
interstate commerce, including the mails and telephone communication, and the
facilities of national securities exchanges, namely, the New York Stock
Exchange.
THE PARTIES
4. Plaintiffs Dennis Fecci, Allen M. Olender and David Rudnick were
continuously owners of Grumman common stock through the period of defendants'
wrongdoing, as alleged herein.
5. Defendant Grumman is a corporation duly organized and existing under the
laws of the State of New York with its principal executive offices at 1111
Stewart Avenue, Bethpage, New York 11747. Grumman is a designer of and
manufacturer of military electronic systems, truck bodies and special purpose
vehicles. The Company also has a large data processing operation. As of January
7, 1994, the Company had over 34 million shares of common stock outstanding and
15,960 shareholders of record. Grumman insiders control 2.8% of the shares
outstanding and as of March 1993, the Company's employee investment plan
controls 39.7% of the common stock.
6. Defendant Martin Marietta is a corporation duly organized under the laws
of the State of Maryland and maintains its principal executive offices in
Bethesda, Maryland. Martin Marietta has six business segments titled
"Electronics", "Space", "Services", "Materials" and "Energy."
7. Defendants Charles Marshall, K.S. Axelson, V.H. Li, Lucy W. Benson,
Richard Dulude, J.F. Orr, III, J.T. Sargent and E.N. Williams were at all
relevant times directors of Grumman and owed fiduciary duties of care, loyalty
and candor to Grumman's public shareholders.
8. Defendant J.R. Anderson was at all relevant times Grumman's Vice
Chairman and Chief Financial Officer.
9. Defendant R.J. Myers was at all relevant times a director of Grumman and
its President and Chief Operating Officer.
10. Defendant R.L. Caporali was at all relevant times Grumman's Chairman
and Chief Executive Officer.
11. The defendants described in paragraphs 6 through 9 are sometimes
referred to herein collectively as the Individual Defendants.
12. By virtue of their positions as directors and/or officers of Grumman
and their exercise of control over the business and corporate affairs of
Grumman, the Individual Defendants had, at all relevant times, the power to
control and influence, and did control and influence and cause Grumman to engage
in the practices complained of herein.
13. Each Individual Defendant owed Grumman and its stockholders fiduciary
obligations and are required to: use their ability to control and manage Grumman
in a fair, just, and equitable manner; act in furtherance of the best interests
of Grumman and its stockholders; refrain from abusing their positions of
control; not favor their own interests or the interest of any fellow board
member at the expense of Grumman or its stockholders, and comply with the
requirements of law for solicitation and recommendations given in
2
<PAGE> 3
connection with the tender offer for Grumman shares by Martin Marietta (the
"Tender Offer") and the proposed merger of Martin Marietta and Grumman (the
"Merger").
14. By virtue of the acts and conduct alleged herein, the Individual
Defendants, who control the actions of Grumman, have breached, and continue to
breach, federal securities disclosure laws and regulations and their fiduciary
duties to Grumman and its stockholders, to the detriment of Grumman and its
stockholders.
15. (a) The Individual Defendants are sued individually and as
co-conspirators and aiders and abettors, as well as in their capacity as
officers and/or directors of Grumman, and the liability of each arises from the
fact that each has engaged in all or part of the unlawful acts, plans, schemes,
or transactions complained of herein.
(b) Defendant Martin Marietta is sued as a co-conspirator and aider and
abettor of the wrongs alleged herein.
CLASS ACTION ALLEGATIONS
16. Plaintiffs bring this action on behalf of themselves and as a class
action pursuant to Fed.R.Civ.P. 23 on behalf of all Grumman stockholders (except
the Defendants herein and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the Defendants) and their successor in
interest, who have been and will be damaged as a result of Defendants' actions
as more fully described herein (the "Class").
17. This action is properly maintainable as a class action for the
following reasons:
(a) The Class is so numerous that joinder of all members is
impracticable. As of March 1993, Grumman had approximately 34 million
common shares outstanding and over 16,000 shareholders of record.
(b) The members of the Class are scattered throughout the United
States and are so numerous as to make it impracticable to bring them all
before this Court.
(c) There are questions of law and fact which are common to the Class
and which predominate over questions affecting any individual Class member.
The common questions include, inter alia, the following:
(i) whether the defendants have engaged and are continuing to
engage in a plan and scheme to benefit themselves at the expense of
Grumman's public stockholders;
(ii) whether the defendants violated Sections 10(b), 14(e) and/or
20(a) of the 1934 Act and SEC Rule 10b-5 in connection with the
dissemination of Grumman's Form 14D-9 Recommendation;
(iii) whether the proposed transaction is grossly unfair to the
public shareholders of Grumman;
(iv) whether the defendants breached or aided and abetted the
breach of the fiduciary and other common law duties which they owed to
plaintiffs and other members of the Class; and
(v) whether plaintiffs and other members of the Class would be
irreparably damaged were the transaction complained of herein
consummated.
(d) The claims of plaintiffs are typical of the claims of the Class in
that all members of the Class will be damaged by the Individual Defendants'
actions.
(e) Plaintiffs are committed to prosecuting this action and have
retained competent counsel experienced in litigation of this nature.
Plaintiffs are adequate representatives of the Class.
(f) The class action is superior to any other method available for the
fair and efficient adjudication of this controversy since it would be
impractical and undesirable for each of the members of the Class who
suffered or will suffer damages to bring separate actions in various parts
of the country.
3
<PAGE> 4
FACTUAL BACKGROUND
18. Grumman is one of the country's leading aerospace concerns. The
Company's operations are classified into four business segments including
Aerospace, Electronic Systems, Information and Other Services and Special
Purpose Vehicles. While government business represents 90% of Grumman's sales,
Grumman has recovered from post-cold war cutbacks in orders for weaponry.
19. Grumman's future prospects are extremely favorable but have not had
time to be reflected in Grumman's recent financial results. Grumman is a major
contractor for the $7 billion Stars systems for tracking ground forces. Grumman
has recently received a $700 million order for E-2 aircraft from Taiwan and it
has been publicly reported that at least six other countries have expressed an
interest in confirming orders for aircraft from Grumman. In the last four years,
the Company has sharply reduced its debt levels from over $800 million in 1989
to approximately $245 million in 1994.
20. On January 18, 1994, Grumman announced a restructuring which involves
the closing of approximately 1/3 of its factory space. This restructuring,
Grumman has estimated, will result in savings of $600 million over the next
three years and will result in reduced overhead costs. The value of the
restructuring to Grumman is not fully reflected in its stock price.
21. On January 25, 1994, Grumman's stock began to decline after the release
of its fourth quarter and annual results for the period ended December 31, 1993.
22. From January 25, 1994 to March 3, 1994, the price of Grumman stock fell
from $41- 7/8 to $36- 3/4.
23. On March 7, 1994, it was announced that Martin Marietta and Grumman had
signed a definitive merger agreement (the "Merger Agreement") and unanimously
approved a $55 per share cash offer by Martin Marietta for Grumman's outstanding
shares.
24. On March 10, 1994, pursuant to the Merger Agreement, Martin Marietta,
by its wholly owned subsidiary, MMC Acquisition Corp. ("MMC") commenced the
Tender Offer for any and all shares of Grumman common stock at $55 per share.
25. On or about March 10, 1994, Northrop Corporation ("Northrop"), a
Delaware Corporation having its principal executive offices in Los Angeles,
California, and which operates in the advanced technology aerospace industry,
announced the commencement of a competing tender offer for all Grumman shares at
$60 cash per share, and informed Grumman's Board of Directors that Northrop was
prepared to enter into a merger agreement with Grumman on terms substantially
identical to the Martin Marietta Agreement.
26. In connection with the Martin Marietta Tender Offer, Grumman filed its
Form 14D-9 Recommendation Statement pursuant to Section 14(d)(4) of the 1934
Act. Said Form 14D-9 was materially false and misleading at least as follows:
(a) it falsely represented that the Individual Defendants had good
reason to believe, prior to the time the Merger Agreement was approved,
that Northrop would not increase its $50 bid for Grumman shares if the
Merger Agreement were not approved and that Martin Marietta would
permanently withdraw its $55 per share offer in the event that defendants
solicited a higher tender offer from Northrop or initiated an auction for
Grumman.
(b) it failed to set forth reasons why the opinion of Grumman's
financial advisor, Goldman Sachs & Co., that the $55 per share Martin
Marietta offer was likely to produce a higher value for shareholders than
if the Board of Directors did not approve the offer, remained unchanged
between February 23, 1994, and March 6, 1994, notwithstanding Northrop's
repeated indications of serious interest in acquiring Grumman.
(c) it falsely stated that Grumman was seeking a strategic merger,
when in fact that the Individual Defendants were seeking to sell Grumman
for cash and the purported "strategic merger" was no more than an attempted
justification for not seeking the highest bidder for Grumman through an
auction process.
4
<PAGE> 5
27. Further, Grumman's Board of Directors did not take any steps to ensure
that the interests of Grumman's stockholders in maximizing the value of their
holdings were protected by conducting an auction for Grumman or otherwise
seeking the highest bid for the Company, particularly under the circumstances
presented here, where at least two bona fide companies had expressed high
interest in acquiring Grumman. Because of the recent changes in the industry and
at Grumman, the Grumman board could not adequately assess the value of Grumman's
equity without fully exposing Grumman to the marketplace for competitive bids,
particularly where, as here, the marketplace was actual and active rather than
potential or theoretical.
28. Individual defendants breached their fiduciary duty by agreeing to a
$50 million Termination Fee for which Grumman would be immediately liable in the
event that, among other things, Grumman terminated the Merger Agreement because
of a more favorable bona fide offer or a competing acquiror obtained 20% or more
of Grumman's stock. While this Termination Fee was, according to the defendants,
as set forth in the Recommendation Statement, to be set at a reasonable amount,
the fee established here was not reasonable under the circumstances, since (a)
the Termination Fee represented 2.6% of the MMC offer for Grumman or almost
$1.50 per share and (b) the Individual Defendants knew that a highly interested
potential acquiror, Northrop, might well take action which would trigger the
Termination Fee, at the expense of Grumman and its shareholders. The true
purpose of the Termination Fee was to discourage Northrop from further pursuing
Grumman by increasing the cost of such pursuit.
29. The foregoing situation has been orchestrated by defendants in breach
of their fiduciary duties owed to the shareholders of Grumman.
COUNT I
(VIOLATION OF SECTION 14(E) AND SECTION 20(A)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
30. Plaintiffs repeat and reallege the allegations in paragraphs 1 through
29 of this complaint.
31. The Recommendation Statement advises Grumman shareholders of the
benefits of the proposed Merger with Martin Marietta and is a communication to
Grumman shareholders intended to solicit the tender of shares into the Martin
Marietta tender offer in order to effectuate the merger to which the Individual
Defendants committed the Company.
32. Section 14(e) provides, in pertinent part, as follows:
It shall be unlawful for any person, to make any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made, in light of the circumstances under which they are
made, not misleading, it shall be unlawful for any person to make any
untrue statement of material fact or omit to state any material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading, or to engage in
any fraudulent, deceptive, or manipulative acts or practices, in connection
with any tender offer or request or invitation for tenders, or any
solicitation of security holders in opposition to or in favor of any such
offer, request, or invitation.
33. In disseminating the Recommendation Statement, the Individual
Defendants intentionally or with reckless disregard, misrepresented and omitted
material facts, as set forth above. The Individual Defendants' purpose in doing
so was to disseminate a communication which would induce Grumman shareholders to
tender their shares in the Tender Offer and thereby effectuate the Merger.
34. The Recommendation Statement was disseminated by the Individual
Defendants on behalf of Grumman. Thus, the Individual Defendants, who constitute
the Board of Grumman and controlled the Company, participated in the violation
of Section 14(e) and are liable for such violations under Section 20(a) of the
1934 Act.
35. Defendant Martin Marietta knew that the Recommendation Statement
contained false and misleading statements and omissions and that the
Recommendation Statement was intended to induce Grumman
5
<PAGE> 6
shareholders to tender their shares to Martin Marietta, thereby benefiting
Martin Marietta at the expense of plaintiffs and the Class.
36. As a result of the actions of defendants, plaintiffs and the other
members of the Class have been and will be damaged in that they will have been
provided with the Recommendation Statement which contains material
misrepresentations or omissions and/or because their decision to tender shares
to defendant Martin Marietta will be influenced by the materially misleading
Recommendation Statement.
37. As a proximate result of the violations of Section 14(e) and Section 20
alleged in this complaint, plaintiffs and the Class have suffered and will
suffer immediate and irreparable injury because the tender offer process has
been and will be influenced by false and misleading information.
38. Plaintiffs and the Class have no adequate remedy at law.
COUNT II
(VIOLATION OF SECTIONS 10(B) AND 20(A) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 AND SEC RULE 10B-5
39. Plaintiffs repeat and reallege the allegations in paragraphs 1 through
38 of this complaint.
40. The Recommendation Statement advises Grumman shareholders of the
benefits of the proposed Merger with Martin Marietta and is a communication to
Grumman shareholders intended to solicit the tender of shares into the Martin
Marietta tender offer and is therefore made in connection with the purchase or
sale of registered securities.
41. Section 10(b) provides, in pertinent part, as follows:
It shall be unlawful for any person, directly or indirectly, by the use
of any means or instrumentality of interstate commerce or of the mails,
or of any facility of any national securities exchange--
(b) To use or employ, in connection with the purchase or sale of any
security registered on a national securities exchange or any security
not so registered, any manipulative or deceptive device or contrivance
in contravention of such rules and regulations as the Commission may
prescribe as necessary or appropriate in the public interest or for the
protection of investors.
42. Rule 10b-5 provides in pertinent part as follows:
It shall be unlawful for any person, directly or indirectly, by the use
of any means or instrumentality of interstate commerce, or of the mails,
or of any facility or any national securities exchange:
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state
a material fact necessary in order to make the statements made, in
light of the circumstances under which they were made, not
misleading, or
(c) To engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any person, in connection
with the purchase or sale of any security.
43. In disseminating the Recommendation Statement, the Individual
Defendants intentionally or with reckless disregard, misrepresented and omitted
material facts, as set forth above. The Individual Defendants' purpose in doing
so was to disseminate a communication which would induce Grumman shareholders to
tender their shares in the Tender Offer and therefore was in connection with the
purchase or sale of Grumman securities.
44. The Recommendation Statement was disseminated by the Individual
Defendants on behalf of Grumman. Thus, the Individual Defendants, who constitute
the Board of Grumman and control the Company, participated in the violation of
Section 10(b) and Rule 10b-5 and are liable under Section 20(a) of the 1934 Act.
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45. Defendant Martin Marietta knew that the Recommendation Statement
contained false and misleading statements and omissions and that the
Recommendation Statement was intended to induce Grumman shareholders to tender
their shares to Martin Marietta, thereby benefiting Martin Marietta at the
expense of plaintiffs and the Class.
46. As a result of the actions of defendants, plaintiffs and the other
members of the Class have been and will be damaged in that they will have been
provided with the Recommendation Statement which contains material
misrepresentations or omissions and/or because their decision to tender shares
to defendant Martin Marietta will be influenced by the materially misleading
Recommendation Statement.
47. As a proximate result of the violations of Sections 10(b) and 20(a) of
the 1934 Act and Rule 10b-5 alleged in this complaint, plaintiffs and the Class
have suffered and will suffer immediate and irreparable injury because the
tender offer process has been and will be influenced by false and misleading
information.
48. Plaintiffs and the Class have no adequate remedy at law.
COUNT III
(BREACH OF FIDUCIARY DUTY)
49. Plaintiffs repeat and reallege the allegations in paragraphs 1 through
48 of this complaint.
50. By the acts described above and in breach of their fiduciary duties to
plaintiffs and the other members of the Class, defendants are unfairly
attempting to influence plaintiffs and other members of the Class to tender
their Grumman shares to Martin Marietta in order to benefit defendants.
51. Defendants' fiduciary duties to the Grumman shareholders included the
obligation not to put their own self-interests and personal considerations ahead
of the interests of the Class.
52. By virtue of the acts and conduct alleged herein, defendants are
carrying out a plan and acting in their own best interests, rather than those of
the Grumman shareholders and at the expense of plaintiffs and other members of
the Class. As a result of the steps taken by Defendants to effectuate the Merger
including the disclosure violations and adoption of the $50 million Termination
Fee alleged herein, plaintiffs and the Class have been and will continue to be
damaged. Defendants have violated their fiduciary duties owed to plaintiffs and
other members of the Class in that they have not and are not exercising
independent business judgment and have acted and are acting to the detriment of
the Class.
53. Further, by the acts, transactions and courses of conduct alleged
herein, defendants, individually and as part of a common plan and scheme or in
breach of their fiduciary duties to plaintiffs and the other members of the
Class, are attempting unfairly to deprive plaintiffs and other members of the
class of the true value of their investment in Grumman.
54. In pursuing the proposed transaction, the defendants have violated
their fiduciary duties owed to the public shareholders of Grumman and have acted
to put their personal interests ahead of those of Grumman's public stockholders.
The Individual Defendants are using their positions as directors and management
for the purpose of benefiting themselves to the detriment of plaintiffs and
other members of the Class.
55. Grumman's shareholders will, if the transaction is consummated, be
deprived of the opportunity for substantial gains which the Company may
otherwise realize.
56. Defendants have further failed to disclose, inter alia, the full extent
of the potential for growth and value potential of Grumman and the expected
increase in its profitability from the recently announced restructuring and
substantial orders received.
57. The Individual Defendants have not, in accordance with their fiduciary
duties:
(a) acted independently so that the interests of Grumman's public
shareholders would be protected;
(b) adequately ensured that no conflicts of interest exist or if such
conflicts exist to ensure that all conflicts would be resolved in the best
interests of Grumman's public shareholders; and
(c) taken all appropriate steps to enhance Grumman's value and
attractiveness as a merger acquisition, restructuring or recapitalization
candidate.
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58. The Individual Defendants have violated their fiduciary duties by
entering into a transaction with Martin Marietta without regard to the fairness
of the transaction to Grumman's public shareholders and the likelihood that a
higher price could be obtained by submitting Grumman to a fair auction process.
59. Because the Individual Defendants dominate and control the business and
corporate affairs of Grumman, and are in possession of private corporate
information concerning Grumman's assets, businesses and future prospects, there
exists an imbalance and disparity of knowledge and economic power between them
and the public stockholders of Grumman which makes it inherently unfair for them
to pursue any proposed transaction wherein they will reap disproportionate
benefits to the exclusion of other means of maximizing stockholder value.
60. By reason of the foregoing acts, practices and course of conduct, the
defendants have failed to exercise ordinary care and diligence in the exercise
of their fiduciary obligations toward plaintiffs and the other Grumman public
stockholders.
61. As a result of the action of defendants, plaintiffs and the other
members of the Class have been and will be damaged in that they have not and
will not receive their fair proportion of the value of Grumman's assets and
businesses and will be prevented from obtaining appropriate consideration for
their shares of Grumman's common stock.
62. Unless enjoined by this Court, the defendants will continue to breach
their fiduciary duties owed to plaintiffs and the other members of the Class,
and may consummate the proposed Merger which will exclude the Class from its
fair proportionate share of Grumman's valuable assets and businesses, and/or
benefit them in the unfair manner complained of herein, all to the irreparable
harm of the Class, as aforesaid.
63. Plaintiffs and the Class have no adequate remedy at law.
WHEREFORE, plaintiffs pray that a judgment be granted:
(a) declaring this action be certified as a class action under Rule 23
of the Federal Rules of Civil Procedure;
(b) declaring that the defendants have violated Sections 10(b), 14(e)
and 20(a) of the 1934 Act and SEC Rule 10b-5;
(c) declaring that the defendants have breached their fiduciary duties
to plaintiffs and the other members of the Class, including those of due
care, candor, good faith and fair dealing;
(d) preliminarily and permanently enjoining defendants from:
(1) making materially false and misleading statements as to the
merger; and
(2) exercising the Termination Fee provisions of the Merger
Agreement so as not to interfere with a superior offer;
(e) requiring defendants to publicly disseminate a communication, in a
form deemed appropriate by the Court, retracting and correcting the false
and misleading statements contained in the Recommendation Statement and
supplying material information omitted therefrom;
(f) Rescinding any transactions effected by the defendants in an
unfair manner and for an unfair price and in the event such transaction is
consummated prior to trial, awarding rescissory damages;
(g) Enjoining the complained of transaction or any related
transactions;
(h) Ordering defendants, jointly and severally, to pay to plaintiffs
and the Class all damages suffered and to be suffered by them as a result
of the acts and transactions alleged herein;
(i) Ordering defendants, jointly and severally, to account to
plaintiffs and the Class for all profits realized and to be realized by
them as a result of the transaction complained of and pending such
accounting to hold such profits in a constructive trust for the benefit of
plaintiffs and the other members of the class;
(j) Awarding plaintiffs the costs and disbursements of the action,
including allowance for plaintiffs' reasonable attorneys' and experts'
fees; and
(k) Granting such other and further relief as may be just and proper
in the premises.
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DEMAND FOR JURY TRIAL
PLEASE TAKE NOTICE that pursuant to Rule 38(b) of the Federal Rules of
Civil Procedure, plaintiffs hereby demand a trial by jury of all issues triable
by a jury.
Dated: March 18, 1994
Respectfully Submitted,
By: /s/ STEPHEN T. RODD
--------------------------------------
Stephen T. Rodd
Lee Squitieri
ABBEY & ELLIS
212 East 39th Street
New York, New York 10016
Telephone: (212) 889-3700
SCHIFFRIN & CRAIG
401 City Avenue
Bala Cynwyd, Pennsylvania 19004
Telephone: (215) 667-7706
BERNSTEIN LIEBHARD & LIFSHITZ
274 Madison Avenue
New York, New York 10016
Telephone: (212) 779-1414
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