SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
SCHEDULE TO
Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934
LITTON INDUSTRIES, INC.
(Name of Subject Company (issuer))
NORTHROP GRUMMAN CORPORATION
LII ACQUISITION CORP.
(Name of Filing Persons (offeror))
Common Stock, Par Value $1.00 Per Share
(including associated rights)
(Title of Class of Securities)
5380211061
(CUSIP Number of Class of Securities)
Series B $2 Cumulative Preferred Stock, Par Value $5.00 Per Share
(Title of Class of Securities)
5380214032
(CUSIP Number of Class of Securities)
W. Burks Terry
Corporate Vice President and General Counsel
Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
(310) 553-6262
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
Copy to:
Andrew E. Bogen
Gibson, Dunn & Crutcher, LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
(213) 229-7159
CALCULATION OF FILING FEE
===================================================================================================================
Transaction Valuation* Amount of Filing Fee
- --------------------------------------------------------------------------------------------------------------------
$ 3,839,095,546 $ 767,819.11
===================================================================================================================
* Estimated for purposes of calculating the amount of the filing fee only.
This calculation assumes (a) the purchase of all of the issued and
outstanding shares of common stock, par value $1.00 per share (the "Common
Stock") of Litton Industries, Inc., a Delaware corporation (the "Company"),
together with any associated rights to purchase preferred stock of the
Company (the "Rights" and, together with the Common Stock, the "Common
Shares") at a price per Common Share of $80.00 in cash and (b) the purchase
of all of the issued and outstanding shares of Series B $2 Cumulative
Preferred Stock, par value $5.00 per share (the "Preferred Shares"), of the
Company at a price per Preferred Share of $35.00 in cash. As of December 31,
2000, based on the Company's representation of its capitalization, there
were (i) 45,577,834 Common Shares outstanding (excluding 2,734,083 Common
Shares held in the Company's treasury), (ii) approximately 5,137,149 vested
options to purchase Common Shares that are expected to be outstanding prior
to the Effective Time of the Merger (as defined herein), the exercise
price(s) of which is less than $80.00, (iii) approximately 168,786 shares of
performance-based restricted stock units and deferred stock units (the
"Restricted Stock") and (iv) 410,643 Preferred Shares outstanding. The
amount of the filing fee, calculated in accordance with Rule 0-11 of the
Securities Exchange Act of 1934, equals 1/50th of one percent of the value
of the Common Shares, Preferred Shares and Restricted Stock proposed to be
acquired.
[ ] Check the box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
[ ] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
[ ] Check the appropriate boxes to designate any transactions to which this
statement relates:
[X] third party tender offer [ ] going-private transaction
subject to Rule 14d-1 subject to Rule 13e-3
[ ] issuer tender offer [ ] amendment to Schedule 13D
subject to Rule 13e-4 under Rule 13d-2
Check the following box if the filing is a final amendment reporting the
results of the tender offer. [ ]
This Tender Offer Statement on Schedule TO is filed by Northrop Grumman
Corporation, a Delaware corporation ("Parent"), and LII Acquisition Corp., a
Delaware corporation ("Purchaser") and wholly owned subsidiary of Parent. This
statement relates to the tender offer (the "Offer") by Purchaser to purchase (a)
all of the issued and outstanding shares of common stock, par value $1.00 per
share (the "Common Stock") of Litton Industries, Inc., a Delaware corporation
(the "Company"), together with any associated rights to purchase preferred stock
of the Company (the "Rights," and, together with the Common Stock, the "Common
Shares") at a price per Common Share of $80.00 (the "Common Offer Price") and
(b) all of the outstanding shares of Series B $2 Cumulative Preferred Stock, par
value $5.00 per share (the "Preferred Shares"), of the Company at a price per
Preferred Share of $35.00 (the "Preferred Offer Price" and, together with the
Common Offer Price, the "Offer Price"), in each case, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated January 5, 2001 (the "Offer to Purchase") and in the
related Letter of Transmittal (the "Letter of Transmittal" which, together with
the Offer to Purchase, as each may be amended or supplemented from time to time,
collectively constitute the "Offer"), copies of which are attached as Exhibit
(a)(1)(i) and (a)(1)(ii), respectively.
2
Items 1 through 11.
As permitted by General Instruction F to Schedule TO, the information
set forth in the entire Offer to Purchase (including Schedules I and II
attached), is incorporated by reference into this Tender Offer Statement on
Schedule TO.
Item 12. Exhibits.
(a)(1)(i) Offer to Purchase, dated January 5, 2001.
(a)(1)(ii) Letter of Transmittal, Common Stock and Preferred Stock, each dated
January 5, 2001.
(a)(1)(iii) Notice of Guaranteed Delivery, Common Stock and Preferred Stock,
each dated January 5, 2001.
(a)(2) None.
(a)(3) Not applicable.
(a)(4) Not applicable.
(a)(5)(i) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
other Nominees, Common Stock and Preferred Stock, dated January 5,
2001.
(a)(5)(ii) Letter to Clients, Common Stock and Preferred Stock, each dated
January 5, 2001.
(a)(5)(iii) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(5)(iv) Press release issued by Parent on December 21, 2000 (incorporated by
reference to Schedule TO-C filed with the Securities and Exchange
Commission on December 22, 2000).
(a)(5)(v) Summary Advertisement as published in the Wall Street Journal on
January 5, 2001.
(b)(i) Financing Commitment Letter dated December 20, 2000 from Credit
Suisse First Boston and The Chase Manhattan Bank relating to
$6,000,000,000 aggregate principal amount of senior credit
facilities.
(c) Not applicable.
(d)(1) Merger Agreement, dated as of December 21, 2000, by and among
Parent, Purchaser and the Company.
(d)(2) Confidentiality Agreement dated June 23, 2000, between Parent and
the Company.
(d)(3) Letter Agreement dated December 21, 2000, between Ronald D. Sugar
and Parent.
(e) Not applicable.
(f) Section 262 of the Delaware General Corporation Law (included as
Schedule II to the Offer to Purchase).
(g) None.
(h) None.
Item 13. Information Required by Schedule 13E-3.
Not Applicable.
3
SIGNATURE
After due 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.
LII ACQUISITION CORP.
By: /s/ Albert F. Myers
-------------------------------------------
Name: Albert F. Myers
-----------------------------------------
Title: President
----------------------------------------
NORTHROP GRUMMAN CORPORATION
By: /s/ Albert F. Myers
------------------------------------------
Name: Albert F. Myers
----------------------------------------
Title: Corporate Vice President and Treasurer
---------------------------------------
Dated: January 5, 2001
4
EXHIBIT INDEX
(a)(1)(i) Offer to Purchase, dated January 5, 2001.
(a)(1)(ii) Letter of Transmittal, Common Stock and Preferred Stock, each dated
January 5, 2001.
(a)(1)(iii) Notice of Guaranteed Delivery, Common Stock and Preferred Stock,
each dated January 5, 2001.
(a)(2) None.
(a)(3) Not applicable.
(a)(4) Not applicable.
(a)(5)(i) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
other Nominees, Common Stock and Preferred Stock, dated January 5,
2001.
(a)(5)(ii) Letter to Clients, Common Stock and Preferred Stock, each dated
January 5, 2001.
(a)(5)(iii) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(5)(iv) Press release issued by Parent on December 21, 2000 (incorporated by
reference to Schedule TO-C filed with the Securities and Exchange
Commission on December 20, 2000).
(a)(5)(v) Summary Advertisement as published in the Wall Street Journal on
January 5, 2001.
(b)(i) Financing Commitment Letter dated December 20, 2000 from Credit
Suisse First Boston and The Chase Manhattan Bank relating to
$6,000,000,000 aggregate principal amount of senior credit
facilities.
(c) Not applicable.
(d)(1) Merger Agreement, dated as of December 21, 2000, by and among
Parent, Purchaser and the Company.
(d)(2) Confidentiality Agreement dated June 23, 2000, between Parent and
the Company.
(d)(3) Letter Agreement dated Decmeber 21, 2000, between Ronald D. Sugar
and Parent.
(e) Not applicable.
(f) Section 262 of the Delaware General Corporation Law (included as
Schedule II to the Offer to Purchase).
(g) None.
(h) None.
5
EXHIBIT 99.(a)(1)(i)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(together with associated rights)
of
LITTON INDUSTRIES, INC.
at
$80.00 NET PER SHARE
and
All Outstanding Shares of Series B $2 Cumulative Preferred Stock
of
LITTON INDUSTRIES, INC.
at
$35.00 NET PER SHARE
by
LII ACQUISITION CORP.
a wholly owned subsidiary of
NORTHROP GRUMMAN CORPORATION
THE OFFER (AS DEFINED HEREIN) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 2, 2001 UNLESS THE OFFER
IS EXTENDED.
This Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of December 21, 2000 (the "Merger Agreement"), among Northrop Grumman
Corporation ("Parent"), LII Acquisition Corp. ("Purchaser") and Litton
Industries, Inc. (the "Company"). The Board of Directors of the Company (the
"Company Board") has unanimously approved the Merger Agreement, the Offer and
the Merger (each as defined herein), and unanimously recommends that holders
of Common Shares (as defined herein) accept the Offer and tender their Common
Shares pursuant to the Offer. The Company Board makes no recommendation with
respect to the tender of Preferred Shares (as defined herein).
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer a total of at
least 25,562,006 Common Shares and Preferred Shares, which represents a
majority of the total outstanding Common Shares and Preferred Shares on a
fully-diluted basis (the "Minimum Tender Condition") and (ii) the expiration
or termination of any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and, to the
extent required, the approval of the Merger by the Commission of the European
Union under Council Regulation (EEC) No. 4064/89 of the Council of the
European Union.
IMPORTANT
Any stockholder wishing to tender all or any portion of its shares of common
stock, par value $1.00 per share (together with the associated rights to
purchase preferred stock of the Company pursuant to the Rights Agreement dated
as of August 17, 1994 between the Company and The Bank of New York, the
"Common Shares") or its shares of Series B $2 Cumulative Preferred Stock, par
value $5.00 per share (the "Preferred Shares") in the Offer should either: (i)
complete and sign the Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions in the Letter of Transmittal and mail or
deliver the Letter of Transmittal and all other required documents to the
Depositary (as defined herein) together with certificates representing the
Common Shares and Preferred Shares tendered; (ii) follow the procedure for
book-entry transfer set forth in Section 3 of this Offer to Purchase entitled
"Procedures for Accepting the Offer and Tendering Common Shares and Preferred
Shares;" or (iii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
A stockholder having Common Shares or Preferred Shares registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee must
contact such person if they desire to tender such Common Shares or Preferred
Shares.
Any stockholder who wishes to tender Common Shares or Preferred Shares and
cannot deliver certificates representing such Common Shares or Preferred
Shares and all other required documents to the Depositary on or prior to the
date on which the Offer expires or who cannot comply with the procedures for
book-entry transfer on a timely basis may tender such Common Shares or
Preferred Shares pursuant to the guaranteed delivery procedure set forth in
Section 3 of this Offer to Purchase entitled "Procedures for Accepting the
Offer and Tendering Common Shares and Preferred Shares." Questions and
requests for assistance may be directed to the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth below.
Additional copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other related materials may be obtained from
the Information Agent or the Dealer Manager. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee.
The Dealer Manager for the Offer is:
[LOGO FOR SALOMON SMITH BARNEY]
The date of this Offer to Purchase is January 5, 2001.
TABLE OF CONTENTS
Page
----
SUMMARY ................................................................ 3
INTRODUCTION............................................................ 7
THE TENDER OFFER........................................................ 9
1. Terms of the Offer................................................. 9
Acceptance of Payment and Payment for Common Shares and Preferred
2. Shares............................................................. 10
Procedures for Accepting the Offer and Tendering Common Shares and
3. Preferred Shares................................................... 12
4. Withdrawal Rights.................................................. 14
5. Material U.S. Federal Income Tax Considerations.................... 15
6. Price Range of Common Shares and Preferred Shares.................. 16
7. Certain Information Concerning the Company......................... 17
8. Selected Financial Information and Certain Projections............. 18
9. Certain Information Concerning Parent and Purchaser................ 20
10. Source and Amount of Funds......................................... 21
Background of the Offer; Past Contacts or Negotiations with the
11. Company............................................................ 22
12. The Merger Agreement; Other Arrangements........................... 23
13. Purpose of the Offer; Plans for the Company........................ 31
14. Certain Effects of the Offer....................................... 32
15. Dividends and Distributions........................................ 33
16. Certain Conditions of the Offer.................................... 34
17. Certain Legal Matters; Regulatory Approvals........................ 35
18. Appraisal Rights................................................... 37
19. Fees and Expenses.................................................. 39
20. Miscellaneous...................................................... 40
SCHEDULE I: DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER.... 41
1. Directors and Executive Officers of Parent......................... 41
2. Directors and Executive Officers of Purchaser...................... 45
SCHEDULE II: SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW........ 46
2
SUMMARY
The following is a summary of some of the key terms of this offer to
purchase all of the outstanding Common Shares and Preferred Shares. We urge
you to read carefully the remainder of this offer to purchase and the
accompanying letter of transmittal because the information in this Summary is
not complete. Additional important information is contained in the remainder
of this offer to purchase and the letter of transmittal.
. The Purchaser.
The Purchaser referred to in this offer is LII Acquisition Corp., a Delaware
corporation formed for the purpose of making this tender offer and the merger
described herein. We are a wholly owned subsidiary of Northrop Grumman
Corporation, a Delaware corporation. See Section 9 of this offer to purchase--
"Certain Information Concerning Parent and Purchaser."
. Classes and Amounts of Shares Sought.
We are seeking to purchase all of the outstanding Common Shares and all of
the outstanding Preferred Shares. See "Introduction" and Section 1 of this
offer to purchase--"Terms of the Offer."
. Offer Prices; Fees and Commissions.
We are offering to pay $80.00 per Common Share and $35.00 per Preferred
Share, net to you in cash, less any required withholding of taxes and without
the payment of interest. If you are the record owner of your shares and you
tender your shares to us in the offer, you will not have to pay brokerage fees
or similar expenses. If you own your shares through a broker or other nominee,
and your broker tenders your shares on your behalf, your broker or nominee may
charge you a fee for doing so. You should consult your broker or nominee to
determine whether any charges will apply. We will not be obligated to pay for
or reimburse you for such broker or nominee charges. See the "Introduction"
Section to this offer to purchase. In addition, if you do not complete and
sign the Substitute Form W-9 included in the letter of transmittal, you may be
subject to required backup federal income tax withholding. See Instruction 9
to the letter of transmittal.
. Source of Funds.
LII Acquisition Corp. will be provided with approximately $4.0 billion by
its parent company, Northrop Grumman Corporation for the purchase of Common
Shares and Preferred Shares in the offer. Northrop Grumman Corporation will
borrow the majority of such funds pursuant to a commitment letter which it has
received from Credit Suisse First Boston and The Chase Manhattan Bank. The
loan commitments are subject to normal and customary conditions. However, the
offer is not conditioned upon any financing arrangements. See Section 10 of
this offer to purchase--"Source and Amount of Funds." Northrop Grumman
Corporation is one of the world leaders in the aerospace and defense industry.
As of December 31, 1999, Northrop Grumman Corporation's fiscal year-end,
Northrop Grumman Corporation had total assets of $7.616 billion and net income
of $467 million. See Section 9 of this offer to purchase--"Certain Information
Concerning Parent and Purchaser."
. Time For Acceptance.
You will have at least until 12:00 midnight, New York City time, on Friday,
February 2, 2001, to decide whether to tender your shares in the offer. If you
cannot deliver everything that is required in order to make a valid tender by
that time, you may be able to use a guaranteed delivery procedure, which is
described later in this offer to purchase. See Sections 1 and 3 of this offer
to purchase--"Terms of the Offer" and "Procedures for Accepting the Offer and
Tendering Common Shares and Preferred Shares."
3
. Extension of the Offer.
We may extend the offer as follows:
. for additional 5 business day periods if at the time the offer is
scheduled to expire (including at the end of any extension) any of the
conditions to the offer are not satisfied or waived by us;
. for any period during which we are required to extend the offer by the
rules of the Securities and Exchange Commission; and
. for a subsequent offering period of up to 20 business days in order to
acquire over 90% of the outstanding Common Shares or Preferred Shares. A
subsequent offering period, if one is provided, will be an additional
opportunity for stockholders to tender their Common Shares and Preferred
Shares and receive the offer consideration for such shares promptly after
they are tendered.
See Section 1 of this offer to purchase--"Terms of the Offer."
. Notification of Extensions.
We will make a public announcement if we extend the offer, and we will
inform EquiServe Trust Company, the depositary for the offer, of the extension
by not later than 9:00 a.m., New York City time, on the next business day
after the day on which the offer was scheduled to expire. See Section 1 of
this offer to purchase--"Terms of the Offer."
. Significant Conditions to the Offer.
We are not obligated to purchase any tendered shares if the total number of
Common Shares and Preferred Shares validly tendered is less than 25,562,006,
which represents a majority of the total outstanding number of Common Shares
and Preferred Shares on a fully-diluted basis. The offer is also subject to a
number of other conditions including the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Act or a similar
regulation of the European Union. See Sections 1 and 16 of this offer to
purchase--"Terms of the Offer," and "Certain Conditions of the Offer."
. Method of Tender.
To tender shares, you must deliver the certificates representing your
shares, together with a completed letter of transmittal, to EquiServe Trust
Company, the depositary for the offer, not later than the time the tender
offer expires. If your shares are held in street name, the shares can be
tendered by your nominee through the depositary. If you cannot deliver
something that is required by the depositary by the expiration of the offer,
you may get a little extra time to do so by having a broker, a bank or other
fiduciary which is a member of the Securities Transfer Agents Medallion
Program or other eligible institution, guarantee that the missing items will
be received by the depositary within three New York Stock Exchange trading
days. However, the depositary must receive the missing items within that three
trading day period. See Section 3 of this offer to purchase--"Procedures for
Accepting the Offer and Tendering Common Shares and Preferred Shares."
. Time of Payment.
If all of the conditions of the offer are satisfied or waived and your
shares of Litton Industries, Inc. are accepted for payment, we will pay you
promptly after the expiration of the offer. See Section 2 of this offer to
purchase--"Acceptance of Payment and Payment for Common Shares and Preferred
Shares."
. Withdrawal of Tendered Shares.
You can withdraw previously tendered shares at any time until the offer has
expired and, if we have not agreed to accept your shares for payment by
Tuesday, March 6, 2001, you can withdraw them at any time after such time
until we accept the shares for payment. See Section 4 of this offer to
purchase--"Withdrawal Rights."
4
To withdraw previously tendered shares, you must deliver a written notice of
withdrawal, or a facsimile of one, with the required information to the
depositary while you still have the right to withdraw the shares. If you
tendered by giving instructions to a broker or bank, you must instruct the
broker or bank to arrange for the withdrawal of your shares. See Sections 1
and 4 of this offer to purchase--"Terms of the Offer" and "Withdrawal Rights."
. Board of Directors Recommendation.
We are making the offer pursuant to an agreement and plan of merger dated
December 21, 2000 among Litton Industries, Inc., Northrop Grumman Corporation
and us. The Board of Directors of each of Litton Industries, Inc. and Northrop
Grumman Corporation has unanimously approved the merger agreement, the offer
and the proposed merger with LII Acquisition Corp. The Board of Directors of
Litton Industries, Inc. unanimously recommends that holders of Common Shares
accept the offer and tender their Common Shares. The Board of Directors of
Litton Industries, Inc. is not taking a position with respect to whether
holders of Preferred Shares should accept the offer and tender their Preferred
Shares. See Section 11 of this offer to purchase--"Background of the Offer;
Past Contacts or Negotiations with the Company."
. Merger After Tender Offer.
If we purchase in the offer a total of at least 25,562,006 Common Shares and
Preferred Shares on a fully-diluted basis, and all other applicable conditions
are met, LII Acquisition Corp. will be merged with Litton Industries, Inc. and
all remaining stockholders holding Common Shares (other than stockholders who
have properly perfected appraisal rights under Delaware state law) will
receive the same price per Common Share paid in the offer, that is $80.00 per
share in cash (or any greater amount per Common Share we pay in the offer).
See "Introduction" and Section 13 of this offer to purchase--"Purpose of the
Offer; Plans for the Company."
Any Preferred Shares that are not tendered in the offer or not accepted for
purchase by LII Acquisition Corp. will remain outstanding after our merger
with Litton Industries, Inc. The rights, preferences and privileges of such
untendered or unpurchased Preferred Shares will remain the same after the
offer and the merger, as before the offer. If, however, we acquire two-thirds
or more of the Preferred Shares we will have sufficient voting power to amend
the terms of the Preferred Shares under Litton Industries, Inc.'s Restated
Certificate of Incorporation. See Section 12 of this offer to purchase--"The
Merger Agreement, Other Arrangements--Preferred Shares" and Section 13--
"Purpose of the Offer; Plans for the Company--Preferred Shares."
. Appraisal Rights.
No appraisal rights are available in connection with the offer. After the
offer, appraisal rights will be available to holders of Common Shares who do
not vote in favor of the merger (if a stockholder vote is required), subject
to and in accordance with Delaware state law. Holders of Preferred Shares will
not have appraisal rights in connection with the merger if the Preferred
Shares are either listed on a national securities exchange or quoted on the
Nasdaq National Market System on the record date fixed to determine those
stockholders entitled to vote on the merger (if a stockholder vote is
required). A holder of Common Shares or Preferred Shares must properly perfect
its right to seek an appraisal under Delaware state law in connection with the
merger to have appraisal rights as provided under Delaware state law. See
Section 18 of this offer to purchase--"Appraisal Rights."
. Market for Common Shares and Preferred Shares After the Offer.
If we purchase all of the tendered shares and the merger takes place, there
will no longer be a trading market for the Common Shares. There may remain a
limited trading market for the Preferred Shares. Even if the merger does not
take place, if we purchase all of the tendered Common Shares and Preferred
Shares:
. there may be so few remaining stockholders and publicly held shares that
the Common Shares and Preferred Shares no longer will be eligible to be
traded through the New York Stock Exchange, the Pacific Exchange or
another exchange or the National Association of Securities Dealers
Automated Quotation System;
5
. there may not be a public trading market for the Common Shares and
Preferred Shares; and
. Litton Industries, Inc. may cease making filings with the Securities and
Exchange Commission or otherwise cease being required to comply with the
Securities and Exchange Commission's rules relating to publicly held
companies. See Section 14 of this offer to purchase--"Certain Effects of
the Offer."
. Return of Tendered Shares.
If any Common Shares or Preferred Shares that you tender are not accepted
for any reason, certificates representing such shares will be returned to you
or to the person you specify in your tendering documents. See Section 2 of
this offer to purchase--"Acceptance of Payment and Payment for Common Shares
and Preferred Shares."
. Recent Market Prices.
On December 21, 2000, the last trading day before Northrop Grumman
Corporation and Litton Industries, Inc. announced that they had signed the
merger agreement, (a) the last sale price of the Common Shares reported on the
New York Stock Exchange was $62.6250 per share and (b) the last sale price of
the Preferred Shares reported on the New York Stock Exchange was $24.0000 per
share. On January 4, 2001, the last trading day before LII Acquisition Corp.
commenced the offer, (i) the last sale price of the Common Shares reported on
the New York Stock Exchange was $78.9375 per share and (ii) the last sale
price of the Preferred Shares reported on the New York Stock Exchange was
$34.2500. We advise you to obtain a recent quotation for shares of Litton
Industries, Inc. in deciding whether to tender your shares. See Section 6 of
this offer to purchase--"Price Range of Common Shares and Preferred Shares.
. Effect of the Offer on Preferred Shares.
If you own Preferred Shares and decide not to tender them for purchase in
the offer, your untendered and unpurchased Preferred Shares will remain
outstanding and unchanged as the result of the merger. If two-thirds or more
of the Preferred Shares are acquired by LII Acquisition Corp. in the offer or
otherwise, LII Acquisition Corp. will have sufficient voting power to approve
amendments to the terms of the Preferred Shares under the Company's Restated
Certificate of Incorporation. Also, if there are less than 300 record holders
of Preferred Shares remaining, LII Acquisition Corp. currently anticipates
that it will deregister and delist the Preferred Shares from the New York
Stock Exchange. See Section 13 of this offer to purchase--"Purpose of the
Offer; Plans for the Company--Preferred Shares" and Section 18--"Appraisal
Rights."
. Questions and Information.
You can call Georgeson Shareholder Communications Inc., at (800) 223-2064
(toll free) or Salomon Smith Barney Inc. at (877) 319-4978 (toll free).
Georgeson Shareholder Communications Inc. is acting as the information agent
and Salomon Smith Barney Inc. is acting as the dealer manager for our tender
offer. See the back cover page of this offer to purchase.
6
To the Holders of Common Stock
(including the associated rights) and
Series B $2 Cumulative Preferred Stock
of Litton Industries, Inc.:
INTRODUCTION
LII Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Northrop Grumman Corporation, a Delaware corporation
("Parent"), hereby offers to purchase (a) all of the outstanding shares of
common stock, par value $1.00 per share (together with the associated rights
to purchase preferred stock pursuant to the Rights Agreement dated as of
August 17, 1994 between Litton Industries, Inc. and The Bank of New York, the
"Common Shares") of Litton Industries, Inc., a Delaware corporation (the
"Company"), at a purchase price of $80.00 per Common Share (the "Common Offer
Price") and (b) all of the outstanding shares of Series B $2 Cumulative
Preferred Stock, par value $5.00 per share (the "Preferred Shares") of the
Company, at a purchase price of $35.00 per Preferred Share (the "Preferred
Offer Price"), in each case, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in this Offer
to Purchase (as amended or supplemented from time to time, the "Offer to
Purchase") and Letter of Transmittal (the "Letter of Transmittal," which,
together with the Offer to Purchase, as each may be amended or supplemented
from time to time, collectively constitute the "Offer").
Tendering stockholders who are record owners of the Common Shares and
Preferred Shares and tender directly to the Depositary (as defined below) will
not be obligated to pay brokerage fees or commissions or, except as otherwise
provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes
with respect to the purchase of Common Shares or Preferred Shares by Purchaser
pursuant to the Offer. Stockholders who hold their Common Shares or Preferred
Shares through a broker or bank should consult such institution as to whether
it charges any service fees. Parent or Purchaser will pay all charges and
expenses of Salomon Smith Barney Inc. as dealer manager (the "Dealer
Manager"), EquiServe Trust Company, as depositary (the "Depositary"), and
Georgeson Shareholder Communications Inc., as information agent (the
"Information Agent"), incurred in connection with the Offer. See Section 19 of
this Offer to Purchase--"Fees and Expenses."
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
total of at least 25,562,006 Common Shares and Preferred Shares, which
represents a majority of the total outstanding number of Common Shares and
Preferred Shares on a fully-diluted basis (the "Minimum Tender Condition") and
(ii) the expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and, to the extent required, the approval of the Merger (as defined
below) by the Commission of the European Union under Council Regulation (EEC)
No. 4064/89 of the Council of the European Union. The Offer also is subject to
certain other terms and conditions. See Sections 1, 16 and 17 of this Offer to
Purchase.
The Offer will expire at 12:00 midnight, New York City time, on Friday,
February 2, 2001 (the "Expiration Date") unless the Offer is extended, in
which case the Expiration Date will be the latest time and date the Offer, as
extended, expires.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of December 21, 2000, among the Company, Parent and Purchaser (the "Merger
Agreement") pursuant to which, after completion of the Offer and satisfaction
or waiver of certain conditions, Purchaser will be merged with and into the
Company and the Company will be the surviving corporation (the "Merger"). On
the effective date of the Merger (the "Effective Time"), each outstanding
Common Share (other than Common Shares owned by Purchaser or any subsidiary or
affiliate of Purchaser or the Company or held in the treasury of the Company
or by stockholders who have properly perfected appraisal rights under Delaware
state law) will by virtue of the Merger, and without any action by the holder
thereof, be cancelled and converted into the right to receive $80.00 per
Common Share in cash, or any higher price per Common Share paid pursuant to
the Offer, without interest thereon (the "Merger Consideration"). Each
Preferred Share that remains outstanding at the Effective Time shall, without
any change, remain outstanding as a Preferred Share of the surviving
corporation. The Merger Agreement is more fully
7
described in Section 12 of this Offer to Purchase entitled "The Merger
Agreement; Other Arrangements." Certain United States federal income tax
consequences of the sale of Common Shares and Preferred Shares pursuant to the
Offer and the Merger, as the case may be, are discussed in Section 5 of this
Offer to Purchase entitled "Material U.S. Federal Income Tax Considerations."
The Company Board (i) has unanimously approved the Merger Agreement, the
Offer and the Merger, (ii) has unanimously determined that the Offer and the
Merger are fair to, and in the best interests of, the holders of Common Shares,
and (iii) unanimously recommends that holders of Common Shares accept the Offer
and tender their Common Shares pursuant to the Offer. The Company Board makes
no recommendation with respect to the tender of Preferred Shares.
Merrill Lynch & Co., the Company's financial advisor (the "Advisor"), has
delivered to the Company Board a written opinion dated December 21, 2000, to
the effect that, as of that date and based on and subject to the matters
described in the opinion, the $80.00 per Common Share cash consideration to be
received by the holders of Common Shares in the Offer and the Merger is fair to
such holders from a financial point of view. A copy of the Advisor's written
opinion, which describes the assumptions made, procedures followed, matters
considered and limitations on the review undertaken, is contained in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") filed with the Securities and Exchange Commission (the "SEC")
on January 5, 2001 in connection with the Offer, a copy of which (without
certain exhibits) is being furnished to stockholders of the Company
concurrently herewith. Stockholders are urged to read the full text of such
opinion carefully in its entirety.
If the Minimum Tender Condition and the other conditions to the Offer are
satisfied and the Offer is consummated, Purchaser will own a sufficient number
of Common Shares and Preferred Shares to ensure that the Merger will be
approved. Under the Delaware General Corporation Law ("DGCL") if, after
consummation of the Offer, Purchaser owns at least 90% of the Common Shares and
at least 90% of the Preferred Shares then outstanding, Purchaser will be able
to cause the Merger to occur without a vote of the Company's stockholders.
However, if Purchaser owns less than 90% of the Common Shares or less than 90%
of the Preferred Shares then outstanding after consummation of the Offer, a
vote of the Company's stockholders will be required under the DGCL to approve
the Merger. See Sections 12 and 18 of this Offer to Purchase--"The Merger
Agreement; Other Arrangements" and "Appraisal Rights."
The Company has informed Purchaser that, as of December 31, 2000, there were
45,577,834 Common Shares issued and outstanding (excluding 2,743,083 Common
Shares held in the Company's treasury), there were 5,194,720 Common Shares
reserved for issuance pursuant to outstanding options under the Company's stock
option plans and there were 410,643 Preferred Shares issued and outstanding. As
of the date of this Offer to Purchase, Parent beneficially owns no Common
Shares or Preferred Shares and no rights to acquire Common Shares or Preferred
Shares of the Company. See Section 13 of this Offer to Purchase--"Purpose of
the Offer; Plans for the Company."
The Merger is subject to the satisfaction or waiver of certain conditions,
including, among other things, the approval and adoption of the Merger
Agreement by the requisite vote of the stockholders of the Company, if
required. If the Minimum Tender Condition is satisfied, Purchaser would have
sufficient voting power to approve the Merger without the affirmative vote of
any other stockholder of the Company and has agreed to vote its shares in favor
of the Merger. The Company has agreed, if required, to duly call, give notice
of, convene and hold a meeting of its stockholders, to be held as promptly as
practicable after the expiration of the Offer for the purpose of obtaining
stockholder approval of the Merger Agreement. See Section 12 of this Offer to
Purchase--"The Merger Agreement; Other Arrangements."
No appraisal rights are available in connection with the Offer. Stockholders
may have appraisal rights in connection with the Merger if they comply with
applicable Delaware state law and do not vote such Common Shares or Preferred
Shares in favor of the Merger or, if no such vote is required, if they comply
with the requirements of Delaware state law regarding the perfection of
available appraisal rights. See Section 18 of this Offer to Purchase--
"Appraisal Rights."
This Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully and in their entirety
before any decision is made with respect to the Offer.
8
THE TENDER OFFER
1. Terms of the Offer.
Upon the terms and subject to the conditions of the Offer (including the
terms and conditions of any extension or amendment, if the Offer is extended
or amended), Purchaser will accept for payment and pay the Common Offer Price
for all Common Shares and the Preferred Offer Price for all Preferred Shares
validly tendered and not properly withdrawn prior to the Expiration Date as
permitted under Section 4 of this Offer to Purchase entitled "Withdrawal
Rights."
The Offer is conditioned upon, among other things, the Minimum Tender
Condition. The "Minimum Tender Condition" refers to the requirement that there
have been validly tendered and not properly withdrawn a total of at least
25,562,006 Common Shares and Preferred Shares, which represents a majority of
the total outstanding Common Shares and Preferred Shares on a fully-diluted
basis. The Offer also is conditioned upon expiration or termination of any
applicable waiting period under the HSR Act, the approval, to the extent
required, of the Commission of the European Union under Council Regulation
(EEC) No. 4064/89 of the Council of the European Union, and the other
conditions described in Section 16 of this Offer to Purchase entitled "Certain
Conditions of the Offer."
Extension of the Offer. Subject to the limitations set forth in this Offer,
the Merger Agreement and the applicable rules and regulations of the SEC
described below, Purchaser reserves the right, at any time and from time to
time in its sole discretion, to extend the period during which the Offer is
open by giving oral or written notice of such extension to the Depositary.
During any such extension, all Common Shares and Preferred Shares previously
tendered and not properly withdrawn will remain subject to the Offer, subject
to the right, if any, of a tendering stockholder to withdraw such
stockholder's Common Shares and Preferred Shares. See Section 4 of this Offer
to Purchase--"Withdrawal Rights." There can be no assurance that Purchaser
will exercise its right to extend the Offer.
Purchaser has agreed that it will not, without the prior written consent of
the Company (a) decrease the Common Offer Price or the Preferred Offer Price,
(b) change the form of consideration payable in the Offer, (c) decrease the
number of Common Shares or Preferred Shares sought to be purchased in the
Offer, (d) impose additional conditions to the Offer other than those set
forth in the Merger Agreement, (e) amend any other term of the Offer in any
manner adverse to the holders of Common Shares or Preferred Shares, (f) reduce
the time period during which the Offer shall remain open or (g) waive the
Minimum Tender Condition.
Pursuant to the Merger Agreement, Parent may, without the consent of the
Company, cause Purchaser to (i) extend the Offer from time to time in its sole
discretion, if at the then-scheduled expiration date of the Offer, any of the
conditions to the Offer have not been satisfied or waived, for such amount of
time as is reasonably necessary to cause the Offer conditions to be satisfied,
but not to exceed five business days for each such extension, (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the SEC or the staff of the SEC applicable to the Offer, or
(iii) extend the Offer for a subsequent offering period (as provided in Rule
14d-11 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of up to twenty business days beyond the latest expiration date that
would otherwise be permitted under clause (ii) of this sentence in order to
acquire over 90% of the outstanding Common Shares and over 90% of the
outstanding Preferred Shares. Parent has agreed to cause Purchaser to extend
the Offer as permitted by the Merger Agreement for the shortest time periods
which it reasonably believes are necessary to consummate the Offer if the
conditions to the Offer have not been satisfied or waived so long as the
Merger Agreement has not been terminated pursuant to its terms.
The rights reserved in the foregoing paragraphs are in addition to any
additional rights described in Section 16 of this Offer to Purchase entitled
"Certain Conditions of the Offer."
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement. An announcement, in the case
of an extension, will be made no later than 9:00 a.m.,
9
New York City time, on the next business day after the previously scheduled
expiration of the Offer, in accordance with the public announcement
requirements of Rule 14e-1(d). Subject to applicable law (including Rules 14d-
4(d), and 14d-6(c) under the Exchange Act, which require that material changes
be promptly disseminated to stockholders in a manner reasonably designed to
inform them of such changes) and without limiting the manner in which Purchaser
may choose to make any public announcement, Purchaser shall have no obligation
to publish, advertise or otherwise communicate any such public announcement
other than by issuing a press release to the Dow Jones News Service.
Subject to the Merger Agreement, if Purchaser makes a material change in the
terms of the Offer or the information concerning the Offer or waives any
material condition of the Offer, Purchaser will disseminate additional tender
offer materials (including by public announcement as set forth below) and
extend the Offer to the extent required by Rules 14d-4(d) and 14e-1 under the
Exchange Act. These rules generally provide that the minimum period during
which a tender offer must remain open following material changes in the terms
of the offer or information concerning the offer, other than a change in price
or a change in the percentage of securities sought, will depend upon the facts
and circumstances then existing, including the relative materiality of the
changed terms or information. In the SEC's view, an offer should remain open
for a minimum of five business days from the date the material change is first
published, sent or given to stockholders, and, if material changes are made
with respect to information that approaches the significance of price and the
percentage of securities sought, a minimum of ten business days may be required
to allow for adequate dissemination and investor response. With respect to a
change in price, a minimum ten business day period from the date of the change
is generally required to allow for adequate dissemination to stockholders.
Accordingly, if, prior to the Expiration Date, Purchaser increases or decreases
the consideration offered pursuant to the Offer, and if the Offer is scheduled
to expire at any time earlier than the tenth business day from the date that
notice of the increase or decrease is first published, sent or given to holders
of Common Shares and Preferred Shares, Purchaser will extend the Offer at least
until the expiration of such tenth business day. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or a federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New
York City time.
Pursuant to, but subject to certain conditions in, the Merger Agreement,
Purchaser has agreed to (i) accept for payment all Common Shares and Preferred
Shares validly tendered and not withdrawn pursuant to the Offer as soon as
permitted under applicable law, and (ii) pay for such Common Shares and
Preferred Shares promptly thereafter.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Common Shares and Preferred Shares. This Offer to Purchase and the
related Letter of Transmittal will be mailed to record holders of Common Shares
and Preferred Shares whose names appear on the Company's stockholder list and
will be furnished, for subsequent transmittal to beneficial owners of Common
Shares and Preferred Shares, to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. Acceptance of Payment and Payment for Common Shares and Preferred Shares.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment, purchase and pay for all Common
Shares and Preferred Shares which have been validly tendered and not properly
withdrawn pursuant to the Offer at the earliest time following expiration of
the Offer when all conditions to the Offer described in Section 16 of this
Offer to Purchase entitled "Certain Conditions of the Offer" have been
satisfied or waived by Purchaser. Subject to the Merger Agreement and any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
Common Shares or Preferred Shares promptly after termination or withdrawal of
the Offer), Purchaser expressly reserves the right to delay the acceptance for
payment of or the payment for any tendered Common Shares or Preferred Shares in
order to comply in whole or in part with any applicable laws, including,
without limitation,
10
the HSR Act and similar foreign statutes and regulations. See Section 17 of
this Offer to Purchase--"Certain Legal Matters; Regulatory Approvals."
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Common Shares and Preferred Shares validly
tendered and not properly withdrawn as, if and when Purchaser gives oral or
written notice to the Depositary of Purchaser's acceptance for payment of such
Common Shares or Preferred Shares pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Common Shares and Preferred
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price for the Common Shares and Preferred Shares with the
Depositary, which will act as agent for tendering stockholders for the purposes
of receiving payments from Purchaser and transmitting payments to tendering
stockholders. Under no circumstances will Purchaser pay interest on the
purchase price for any Common Shares or Preferred Shares accepted for payment,
regardless of any extension of the Offer or any delay in making payment.
The reservation by Purchaser of the right to delay the acceptance, purchase
of or payment for Common Shares or Preferred Shares is subject to the terms of
the Merger Agreement and the provisions of Rule 14e-1(c) under the Exchange
Act, which requires Purchaser to pay the consideration offered or return the
Common Shares and Preferred Shares deposited by or on behalf of tendering
stockholders promptly after the termination or withdrawal of the Offer.
In all cases, Purchaser will pay for Common Shares and Preferred Shares
purchased in the Offer only after timely receipt by the Depositary of (i) the
certificates representing the Common Shares or Preferred Shares, as the case
may be (the "Share Certificates") or confirmation (a "Book-Entry Confirmation")
of a book-entry transfer of such Common Shares or Preferred Shares into the
Depositary's account at The Depositary Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in Section 3 of this Offer to
Purchase entitled "Procedures for Accepting the Offer and Tendering Common
Shares and Preferred Shares;" (ii) the appropriate Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message (as defined below) in lieu of the Letter of Transmittal; and (iii) any
other documents required under the Letter of Transmittal.
"Agent's Message" means a message transmitted by a Book-Entry Transfer
Facility to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which message states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Common Shares or Preferred Shares which are the
subject of the Book-Entry Confirmation that the participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce the Letter of Transmittal against the participant.
If Purchaser does not purchase any tendered Common Shares or Preferred Shares
pursuant to the Offer for any reason, or if a holder of Common Shares or
Preferred Shares submits Share Certificates representing more Common Shares or
Preferred Shares than are tendered, Share Certificates representing unpurchased
or untendered Common Shares and Preferred Shares will be returned, without
expense to the tendering stockholder (or, in the case of Common Shares or
Preferred Shares tendered by book-entry transfer into the Depositary's account
at the Book-Entry Transfer Facility pursuant to the procedure set forth in
Section 3 of this Offer to Purchase entitled "Procedures for Accepting the
Offer and Tendering Common Shares and Preferred Shares," such Common Shares or
Preferred Shares will be credited to an account maintained at the Book-Entry
Transfer Facility), as promptly as practicable following the expiration or
termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the Common Offer Price
or the Preferred Offer Price, Purchaser will pay the increased Common Offer
Price to all holders of Common Shares and the increased Preferred Offer Price
to all holders of Preferred Shares that are purchased in the Offer, whether or
not the Common Shares or Preferred Shares were tendered before the increase in
the Common Offer Price or Preferred Offer Price, as the case may be.
11
Purchaser reserves the right to transfer or assign, in whole or in part,
from time to time, to one or more direct or indirect subsidiaries of Parent,
the right to purchase all or any portion of the Common Shares or Preferred
Shares tendered pursuant to the Offer, but any such transfer or assignment
will not relieve Purchaser of its obligations under the Offer and will in no
way prejudice the rights of tendering stockholders to receive payment for
Common Shares or Preferred Shares validly tendered and accepted for payment
pursuant to the Offer.
3. Procedures for Accepting the Offer and Tendering Common Shares and
Preferred Shares.
Valid Tenders. To tender Common Shares or Preferred Shares pursuant to the
Offer, a stockholder must comply with one of the following: (a) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof) in
accordance with the instructions of the Letter of Transmittal, with any
required signature guarantees, certificates for the Common Shares or Preferred
Shares to be tendered and any other documents required by the Letter of
Transmittal must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration
Date, (b) such Common Shares or Preferred Shares must be properly delivered
pursuant to the procedures for book-entry transfer, as described below, and a
confirmation of such delivery received by the Depositary, which confirmation
must include an Agent's Message if the tendering stockholder has not delivered
a Letter of Transmittal, prior to the Expiration Date, or (c) the tendering
stockholder must comply with the guaranteed delivery procedures set forth
below.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Common Shares and Preferred Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of the
Book-Entry Transfer Facility may make a book-entry delivery of Common Shares
or Preferred Shares by causing the Book-Entry Transfer Facility to transfer
such Common Shares or Preferred Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Common
Shares and Preferred Shares may be effected through book-entry transfer at the
Book-Entry Transfer Facility, either the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, together with any required
signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must, in any case, be received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase on or prior to the Expiration Date, or the tendering
stockholder must comply with the guaranteed delivery procedure set forth
below.
Delivery of documents to the Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures does not constitute delivery to
the Depositary. The method of delivery of Share Certificates, the Letter of
Transmittal and all other required documents, including delivery through the
Book-Entry Transfer Facility, is at the option and risk of the tendering
stockholder, and the delivery will be deemed made only when actually received
by the Depositary (including, in the case of a book-entry transfer, a Book-
Entry Confirmation). If delivery is by mail, registered mail with return
receipt requested and properly insured is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal where Common Shares or Preferred Shares are tendered (i) by a
registered holder of Common Shares or Preferred Shares who has not completed
either the box labeled "Special Delivery Instructions" or the box labeled
"Special Payment Instructions" on the Letter of Transmittal or (ii) for the
account of a bank, broker, dealer, credit union, savings association or other
entity which is a member in good standing of a recognized Medallion Program
approved by the Securities Transfer Association Inc., including the Securities
Transfer Agents Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP") and the New York Stock Exchange Medallion Signature Program
("MSP"), or any other "eligible guarantor institution" as defined in Rule
17Ad-15 under the Exchange Act (each of the foregoing, an "Eligible
Institution"). In all other cases, all signatures on a Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter
of Transmittal.
If a Share Certificate is registered in the name of a person or persons
other than the signer of the Letter of Transmittal, or if payment is to be
made or delivered to a person other than the registered holder, or if a
12
Share Certificate for unpurchased Common Shares or Preferred Shares is to be
issued or returned to a person other than the registered holder, then the
Share Certificate must be endorsed or accompanied by a duly executed stock
power, in either case signed exactly as the name of the registered holder
appears on the Share Certificate, with the signature on such Share Certificate
or stock power guaranteed by an Eligible Institution as provided in the Letter
of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Common Shares or
Preferred Shares pursuant to the Offer and the Share Certificates evidencing
such stockholder's Common Shares or Preferred Shares are not immediately
available or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary prior to the Expiration Date, or
such stockholder cannot complete the procedure for delivery by book-entry
transfer on a timely basis, the stockholder's Common Shares and Preferred
Shares may nevertheless be tendered, provided that all of the following
conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) the Depositary receives, as described below, a properly completed and
duly executed Notice of Guaranteed Delivery (the "Notice of
Guaranteed Delivery"), substantially in the form made available by
Purchaser, on or prior to the Expiration Date; and
(iii) the Depositary receives the Share Certificates (or a Book-Entry
Confirmation) evidencing all tendered Common Shares and Preferred
Shares, in proper form for transfer, in each case together with the
Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal, within three New
York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram or facsimile transmission to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
form of Notice of Guaranteed Delivery made available by Purchaser.
Notwithstanding any other provision of the Offer, Purchaser will pay for
Common Shares and Preferred Shares only after timely receipt by the Depositary
of: (i) Share Certificates representing, or Book-Entry Confirmation with
respect to, the Common Shares and/or Preferred Shares, (ii) a properly
completed and duly executed Letter of Transmittal (or a facsimile thereof),
together with any required signature guarantees (or, in the case of a book-
entry transfer, an Agent's Message), and (iii) any other documents required by
the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Common Shares or Preferred Shares will be determined by Purchaser in
its sole discretion, which determination will be final and binding on all
parties. Purchaser reserves the absolute right to reject any and all tenders
determined by it not to be in proper form or the acceptance for payment of
which may, in the opinion of its counsel, be unlawful. Subject to the terms of
the Merger Agreement, Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any
Common Shares or Preferred Shares of any particular stockholder of the
Company, whether or not similar defects or irregularities are waived in the
case of other stockholders of the Company.
Subject to the Merger Agreement, Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Common Shares or
Preferred Shares will be deemed to have been validly made until all defects
and irregularities have been cured or waived. None of Parent, Purchaser, or
any of their respective affiliates or assigns, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
agents, attorneys-in-fact and proxies, with full power of
13
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Common Shares and/or
Preferred Shares tendered by such stockholder and accepted for payment by
Purchaser and with respect to any and all other Common Shares or Preferred
Shares or other securities or rights issued or issuable in respect of those
Common Shares or Preferred Shares on or after the date of this Offer to
Purchase. All such powers of attorney and proxies will be considered
irrevocable and coupled with an interest in the tendered Common Shares or
Preferred Shares, as the case may be. This appointment will be effective when,
and only to the extent that, Purchaser accepts such Common Shares or Preferred
Shares for payment. Upon such acceptance for payment, all other powers of
attorney and proxies given by such stockholder with respect to such Common
Shares or Preferred Shares and such other securities or rights prior to such
payment will be revoked without further action, and no subsequent powers of
attorney or proxies may be given, nor may any subsequent written consent be
executed by such stockholder (and, if given or executed, will not be deemed to
be effective) with respect thereto. With respect to the Common Shares or
Preferred Shares for which the appointment is effective, the designees of
Purchaser will be empowered to exercise all voting and other rights of such
stockholder as the designees, in their sole discretion, may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, or by written consent in lieu of any such meeting or
otherwise. In order for Common Shares or Preferred Shares to be deemed validly
tendered, immediately upon the acceptance for payment of such Common Shares or
Preferred Shares, Purchaser or its designee must be able to exercise full
voting rights to the extent permitted under applicable law with respect to such
Common Shares or Preferred Shares.
Tender Constitutes Binding Agreement. Purchaser's acceptance for payment of
Common Shares and Preferred Shares tendered pursuant to any of the procedures
described above will constitute a binding agreement between Purchaser and the
tendering stockholder upon the terms and subject to the conditions of the
Offer.
4. Withdrawal Rights.
Tenders of Common Shares and Preferred Shares made pursuant to the Offer are
irrevocable, except that such Common Shares and Preferred Shares may be
withdrawn (i) at any time prior to the Expiration Date and (ii) at any time
after Tuesday, March 6, 2001 (or such later date as may apply if the Offer is
extended), unless accepted for payment by Purchaser pursuant to the Offer prior
to that date. See Section 1 of this Offer to Purchase--"Terms of the Offer."
If Purchaser extends the Offer, is delayed in its acceptance for payment of
Common Shares or Preferred Shares, or is unable to accept Common Shares or
Preferred Shares for payment pursuant to the Offer for any reason, then,
without prejudice to Purchaser's rights under the Offer, the Depositary may
nevertheless retain tendered Common Shares or Preferred Shares on behalf of
Purchaser, and such Common Shares and Preferred Shares may not be withdrawn,
except to the extent that tendering stockholders are entitled to and duly
exercise their withdrawal rights as described in this Section 4. Any such delay
will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover page of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Common Shares
or Preferred Shares to be withdrawn, the number of Common Shares and Preferred
Shares to be withdrawn and (if Share Certificates have been tendered) the name
of the registered holder of such Common Shares or Preferred Shares, if
different from that of the person who tendered such Common Shares and Preferred
Shares. If Share Certificates representing Common Shares or Preferred Shares to
be withdrawn have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such Share Certificates, the serial
numbers shown on such Share Certificates must be submitted to the Depositary
and the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Common Shares or Preferred Shares tendered
for the account of an Eligible Institution. If Common Shares or Preferred
Shares have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3 of this Offer to Purchase entitled "Procedures for
Accepting the Offer and Tendering Common Shares and Preferred Shares," the
notice of withdrawal must specify
14
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Common Shares or Preferred Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
Withdrawals of Common Shares and Preferred Shares may not be rescinded. Any
Common Shares or Preferred Shares properly withdrawn will be considered not
validly tendered for purposes of the Offer. However, withdrawn Common Shares
and Preferred Shares may be tendered again at any time prior to the Expiration
Date by following one of the procedures described in Section 3 of this Offer to
Purchase entitled "Procedures for Accepting the Offer and Tendering Common
Shares and Preferred Shares."
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser in its sole discretion,
whose determination will be final and binding. None of Parent, Purchaser, or
their respective affiliates or assigns, the Dealer Manager, the Depositary, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
5. Material U.S. Federal Income Tax Considerations.
The following is a summary of the material United States federal income tax
consequences that are generally applicable to holders of Preferred Shares and
Common Shares who exchange such shares for cash pursuant to the Offer and to
holders of Common Shares who exchange such shares for cash pursuant to the
Merger. This discussion is based on currently existing federal income tax laws,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences of the Offer and the Merger that
are described below. Stockholders should be aware that this discussion does not
deal with all federal income tax considerations that may be relevant to
particular stockholders in light of their individual circumstances. For
example, this discussion does not address the tax consequences of the Offer and
the Merger to stockholders who are dealers in securities, are foreign persons,
or do not hold their Common Shares or Preferred Shares as capital assets. Nor
does it address the tax consequences of the Offer or the Merger to stockholders
who acquired such shares through the exercise of employee stock options or
otherwise as compensation or stockholders who are otherwise subject to special
tax treatment under the Internal Revenue Code of 1986, as amended (the "Code")
(such as insurance companies, tax-exempt entities and regulated investment
companies). In addition, the following discussion does not address the tax
consequences of the Offer or the Merger to the stockholders under foreign,
state, or local tax laws. Accordingly, all stockholders are urged to consult
their own tax advisors to determine the particular tax consequences to them of
the Offer and the Merger, including the applicable federal, state, local and
foreign tax consequences.
In general, the receipt of cash by the holders of the Common Shares and the
Preferred Shares pursuant to the Offer and/or the Merger will constitute a
taxable transaction for United States federal income tax purposes. For United
States federal income tax purposes, a tendering stockholder would generally
recognize gain or loss in an amount equal to the difference between the amount
of cash received by the stockholder pursuant to the Offer and/or the Merger and
the stockholder's tax basis for the Common Shares or Preferred Shares that are
tendered and purchased pursuant to the Offer and/or the Merger. Generally, gain
or loss must be calculated separately for each identifiable block of shares of
Company stock (i.e., shares acquired at the same cost in a single transaction).
If tendered Common Shares or Preferred Shares are held by a tendering
stockholder as capital assets, that gain or loss will be a capital gain or
loss. Any such capital gain or loss will be long term if, as of the date of the
disposition of its Common Shares or Preferred Shares, the stockholder held such
Common Shares or Preferred Shares for more than one year, or will be short term
if, as of such date, the stockholder held such Common Shares or Preferred
Shares for one year or less. In the case of Company stockholders who are
individuals, long term capital gain is currently subject to tax at a favorable
tax rate. There are limitations on the deductibility of capital losses.
Backup U.S. Federal Income Tax Withholding. Under the United States federal
income tax laws, the payments made by the Depositary to stockholders of the
Company, pursuant to the Offer and/or the Merger may, under certain
circumstances, be subject to backup withholding at a rate of 31%. To avoid
backup withholding
15
with respect to payments made pursuant to the Offer and/or the Merger, each
stockholder must provide the Depositary with proof of an applicable exemption
or a correct taxpayer identification number, and must otherwise comply with the
applicable requirements of the backup withholding rules. The Letter of
Transmittal provides instructions on how to provide the Depositary with
information to prevent backup withholding with respect to cash received
pursuant to the Offer and/or the Merger. See Instruction 9 of the Letter of
Transmittal. Any amount withheld under the backup withholding rules is not an
additional tax. Rather, the tax liability of the persons subject to backup
withholding will be reduced by the amount of tax withheld.
The foregoing is intended as a general summary only. Because the tax
consequences to a particular stockholder may differ based on that stockholder's
particular circumstances, each stockholder should consult his or her own tax
advisor regarding the tax consequences of the Offer and the Merger.
6. Price Range of Common Shares and Preferred Shares.
The Common Shares trade on the New York Stock Exchange under the symbol
"LIT," and the Preferred Shares trade on the New York Stock Exchange under the
symbol "LIT pb." The following tables set forth, for the calendar quarters
shown, the high and low closing sale prices for the Common Shares and the
Preferred Shares, respectively, on the New York Stock Exchange based on
published financial sources.
Litton Industries, Inc. Common Stock
High Low
------- -------
Calendar 1998
First Quarter................................................. 63.1875 55.0625
Second Quarter................................................ 63.4375 55.5000
Third Quarter................................................. 62.0625 47.4375
Fourth Quarter................................................ 68.0000 55.6250
Calendar 1999
First Quarter................................................. 65.2500 50.6250
Second Quarter................................................ 74.6250 54.4375
Third Quarter................................................. 73.3750 54.0625
Fourth Quarter................................................ 55.7500 42.4375
Calendar 2000
First Quarter................................................. 53.3750 26.8125
Second Quarter................................................ 46.8750 38.0000
Third Quarter................................................. 59.8125 40.7500
Fourth Quarter................................................ 80.6250 43.7500
16
Litton Industries, Inc. Series B $2 Cumulative Preferred Stock
High Low
------- -------
Calendar 1998
First Quarter................................................. 37.0000 31.0000
Second Quarter................................................ 35.0000 28.7500
Third Quarter................................................. 35.0000 28.0000
Fourth Quarter................................................ 34.6250 29.0000
Calendar 1999
First Quarter................................................. 34.1250 29.8750
Second Quarter................................................ 33.6250 28.6250
Third Quarter................................................. 31.6250 26.9375
Fourth Quarter................................................ 30.5625 26.9375
Calendar 2000
First Quarter................................................. 28.0000 24.0000
Second Quarter................................................ 27.7500 21.0000
Third Quarter................................................. 27.0000 22.5000
Fourth Quarter................................................ 35.0000 23.0000
In the Merger Agreement, the Company has represented to each of Parent and
Purchaser that as of November 30, 2000, there were 45,418,647 Common Shares
(excluding 2,734,083 Common Shares held in the Company's treasury) and 410,643
Preferred Shares issued and outstanding. On December 21, 2000, the last full
day of trading before the public announcement of the execution of the Merger
Agreement, the closing price of the Common Shares on the New York Stock
Exchange was $62.6250 per Common Share and the closing price of the Preferred
Shares on the New York Stock Exchange was $24.0000 per Preferred Share. On
January 4, 2001, the last full day of trading before the commencement of the
Offer, the closing price of the Common Shares on the New York Stock Exchange
was $78.9375 per Common Share and the closing price of the Preferred Shares on
the New York Stock Exchange was $34.2500 per Preferred Share.
Stockholders are urged to obtain a current market quotation for the Common
Shares and the Preferred Shares.
The Company does not pay any dividends on its Common Shares, and the Merger
Agreement prohibits the Company from declaring or paying any dividends, except
for the payment of dividends on the Preferred Shares and except for the
payment of dividends or distributions by a wholly owned subsidiary of the
Company to the Company or another wholly owned subsidiary of the Company paid
in the ordinary course of business, from the date of the Merger Agreement
until the Effective Time.
7. Certain Information Concerning the Company.
The Company is a Delaware corporation with its principal offices located at
21240 Burbank Boulevard, Woodland Hills, California 91367-6675. The telephone
number of the Company is (818) 598-5000.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended July 31, 2000 (the "Company's 10-K"), the Company designs, builds, and
overhauls surface ships for government and commercial customers worldwide and
is a provider of defense and commercial electronics technology, components and
materials for customers worldwide. In addition, the Company is a prime
contractor to the United States government for information technology and
provides specialized IT services to commercial customers in local and foreign
jurisdictions.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the SEC relating to its
business, financial condition and other matters. Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
17
Room 1024, Washington, D.C. 20549, and at the SEC's regional offices located
at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Information regarding the public reference facilities may be obtained from the
SEC by telephoning 1-800-SEC-0330. The Company's filings are also available to
the public on the SEC's Internet site (http://www.sec.gov). Copies of such
materials may also be obtained by mail from the Public Reference Section of
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
You may also read and copy reports and other information at the office of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005 or
the office of the Pacific Exchange, 301 Pine Street, San Francisco, California
94104.
8. Selected Financial Information and Certain Projections.
Certain Selected Financial Information
Set forth below is certain selected historical consolidated financial
information with respect to the Company, excerpted from the Company's 10-K for
the fiscal year ended June 31, 2000 and from the Company's unaudited interim
consolidated financial statements in the Company's quarterly report on Form
10-Q for the fiscal quarter ended October 31, 2000 (the "Company's 10-Q"),
each as filed with the SEC pursuant to the Exchange Act. More comprehensive
financial information is included in such reports (including management's
discussion and analysis of financial condition and results of operation) and
other documents filed by the Company with the SEC, and the following summary
is qualified in its entirety by reference to such reports and other documents
along with all of the financial information and notes contained therein.
Copies of such reports and other documents may be examined at or obtained from
the SEC in the manner set forth above.
LITTON INDUSTRIES, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
3 Months Ended
October 31 Year Ended July 31
------------------ ----------------------------------------------
2000 1999 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- -------- --------
Sales and Service
Revenues............... $1,083.1 $1,000.0 $5,588.2 $4,827.5 $4,399.9 $4,175.5 $3,611.5
Total Segment Operating
Profit................. (1) (1) 562.1 339.3 410.0 369.6 320.1
Earnings before
Cumulative Effect of a
Change in Accounting
Principle.............. 44.9 52.8 221.2 120.6 181.4 162.0 150.9
Earnings Per Share
Basic................. 0.98 1.09 4.79 2.63 3.91 3.48 3.24
Diluted............... 0.97 1.07 4.74 2.58 3.82 3.40 3.15
Total Assets............ $4,279.5 (1) $4,835.9 $4,260.1 (2) (2) (2)
Total Current
Liabilities............ 1,108.4 (1) 1,531.4 1,709.3 (2) (2) (2)
Total Stockholders'
Investment............. 1,544.6 (1) 1,495.9 1,300.2 (2) (2) (2)
- --------
(1) Not provided in the Company's 10-Q for the quarter ended October 31, 2000.
(2) Not provided in the Company's 10-K for the fiscal year ended July 31,
2000.
Although each of Parent and Purchaser has no knowledge that would indicate
that any statements contained above taken from or based on such documents and
records of the Company are untrue, neither Parent nor Purchaser can take
responsibility for the accuracy or completeness of the information contained
in such documents and records, of the Company or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent or Purchaser.
18
Certain Projections
Prior to entering into the Merger Agreement, the Company provided to Parent
certain information which was not publicly available, including a variety of
projected financial data based on various differing assumptions for future
fiscal years. The Company has advised that it does not publicly disclose
projections, and the projections furnished to Parent were not prepared with a
view to public disclosure. Parent analyzed the information in the projections,
certain publicly available information and additional information obtained in
Parent's due diligence review of the Company, along with Parent's own
estimates of potential cost savings and benefits in evaluating the Offer and
the Merger.
The projections provided to Parent by the Company included, among other
things, the following forecasts of the Company's revenues, net income
(excluding pension income) and earnings per share (excluding pension income),
respectively (in millions, except per share data): $5,850.0, $151.9 and $3.31
in 2001; $6,473.0, $186.4 and $4.06 in 2002; $6,827.0, $220.8 and $4.81 in
2003; $7,183.0, $248.4 and $5.41 in 2004; and $7,436.0, $278.7, and $6.07 in
2005. Including pension income, the projected net income and earnings per
share were, respectively (in millions, except per share data): $220.5 and
$4.80 in 2001; $254.9 and $5.55 in 2002; $289.4 and $6.30 in 2003; $317.0 and
$6.90 in 2004; and $347.3 and $7.56 in 2005.
Other projections provided to Parent by the Company indicated the potential
for increased profitability based upon more aggressive assumptions. Based upon
the more aggressive assumptions, these projections indicated revenues and net
income (including pension income), respectively (in millions), of: $6,019.0
and $228.0 in 2001; $6,740.0 and $300.0 in 2002; $7,329.0 and $414.0 in 2003;
$7,920.0 and $490.0 in 2004; and $8,426.0 and $548.0 in 2005. The Company has
advised Parent that these projections do not give effect to customary
processes of adjustment by senior management of projections provided by
operating/divisional management.
The projections were prepared by the Company independently and provided to
Parent prior to entering the Merger Agreement. The projections were not
prepared by the Company with a view to public disclosure or compliance with
published guidelines of the SEC, the guidelines established by the American
Institute of Certified Public Accountants for Prospective Financial
Information or generally accepted accounting principles. The Company's
certified public accountants have not examined or compiled any of the
projections. The projections were not prepared with the approval of the
Company Board. The projections are included herein to give the Company's
stockholders access to information that was not publicly available and that
the Company provided to Parent.
The projections are forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those statements and should be read with caution. The projections are
subjective in many respects and thus susceptible to interpretations and
periodic revisions based on actual experience and recent developments. While
presented with numerical specificity, the projections were not prepared by the
Company in the ordinary course and are based upon a variety of estimates and
hypothetical assumptions made by management of the Company with respect to,
among other things, industry performance, general economic, market, interest
rate and financial conditions, sales, cost of goods sold, operating and other
revenues and expenses, capital expenditures and working capital of the
Company, and other matters which may not be realized and are inherently
subject to significant business, economic and competitive uncertainties and
contingencies, all of which are difficult to predict and many of which are
beyond the Company's control. The Company's operations are subject to various
additional risks and uncertainties resulting from its position as a supplier,
either directly or as subcontractor or team member, to the United States
government and its agencies as well as to foreign governments and agencies;
actual outcomes are dependent upon factors, including, without limitation, the
Company's successful performance of internal plans; government customers'
budgetary restraints; customer changes in short-range and long-range plans;
domestic and international competition in both the defense and commercial
areas; product performance; continued development and acceptance of new
products; performance issues with key suppliers and subcontractors; government
import and export policies; acquisition or termination of government
contracts; the outcome of political and legal processes; legal, financial, and
governmental risks related to international transactions and global needs for
military aircraft, military and civilian
19
electronic systems and support and information technology. Accordingly, there
can be no assurance that the assumptions made in preparing the projections
will prove accurate, and actual results may be materially greater or less than
those contained in the projections. In addition, the projections do not take
into account any of the transactions contemplated by the Merger Agreement,
including the Offer and the Merger. These events may cause actual results to
differ materially from the projections.
For these reasons, as well as the bases and assumptions on which the
projections were compiled by the Company, the inclusion of such projections
herein should not be regarded as an indication that the Company, Parent,
Purchaser or any of their respective affiliates or representatives considers
such information to be an accurate prediction of future events, and the
projections should not be relied on as such. None of such persons assumes any
responsibility for the reasonableness, completeness, accuracy or reliability
of such projections. No party nor any of their respective affiliates or
representatives has made, or makes, any representation to any person regarding
the information contained in the projections and none of them intends to
update or otherwise revise the projections to reflect circumstances existing
after the date when made or to reflect the occurrences of future events even
in the event that any or all of the assumptions are shown to be in error.
9. Certain Information Concerning Parent and Purchaser.
Purchaser is a Delaware corporation and, to date, has engaged in no
activities other than those incident to its formation and the Offer and the
Merger. Purchaser is currently a wholly owned subsidiary of Parent. The
principal executive offices of Purchaser are located at 1840 Century Park
East, Los Angeles, California 90067 and Purchaser's telephone number is (310)
553-6262.
Parent is a Delaware corporation with its principal executive offices
located at 1840 Century Park East, Los Angeles, California 90067. The
telephone number of Parent is (310) 553-6262. Parent is an advanced technology
company operating in the Integrated Systems Sector ("ISS"), Electronic Systems
and Sensors Sector ("ES/3/") and Information Technology ("Logicon") segments
of the broadly defined aerospace and defense industry. The ISS segment
includes the design, development and manufacturing of aircraft and aircraft
subassemblies. The ES/3/ segment includes the design, development,
manufacturing and integration of electronic systems and components for
military and commercial use. Logicon, Parent's information technology segment,
includes the design, development, operation and support of computer systems
for scientific and management information.
The name, citizenship, business address, principal occupation or employment
and five-year employment history for each of the directors and executive
officers of Parent and Purchaser and certain other information are set forth
in Schedule I to this Offer to Purchase.
Except as described elsewhere in this Offer to Purchase, (i) none of Parent,
Purchaser nor, to the best knowledge of Parent and Purchaser, any of the
persons listed in Schedule I to this Offer to Purchase or any associate or
majority-owned subsidiary of Parent or Purchaser or any of the persons so
listed beneficially owns or has any right to acquire, directly or indirectly,
any Common Shares or Preferred Shares; and (ii) none of Parent, Purchaser nor,
to the best knowledge of Parent and Purchaser, any of the persons or entities
referred to above nor any director, executive officer or subsidiary of any of
the foregoing has effected any transaction in the Common Shares or Preferred
Shares during the past 60 days.
Except as provided in the Merger Agreement or as otherwise described in this
Offer to Purchase, none of Parent, Purchaser nor, to the best knowledge of
Parent and Purchaser, any of the persons listed in Schedule I to this Offer to
Purchase, has any contract, arrangement, understanding or relationship with
any other person with respect to any securities of the Company, including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or voting of such securities, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of loans,
guarantees against loss, guarantees of profits, division of profits or loss or
the giving or withholding of proxies.
20
Except as set forth in this Offer to Purchase, (i) none of Parent, Purchaser
nor, to the best knowledge of Parent and Purchaser, any of the persons listed
on Schedule I hereto, has had any business relationship or transaction with
the Company or any of its executive officers, directors or affiliates that is
required to be reported under the rules and regulations of the SEC applicable
to the Offer, and (ii) there have been no contracts, negotiations or
transactions between Parent or any of its subsidiaries or, to the best
knowledge of Parent, any of the persons listed in Schedule I to this Offer to
Purchase, on the one hand, and the Company or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or
other acquisition of securities, an election of directors or a sale or other
transfer of a material amount of assets.
None of the persons listed in Schedule I to this Offer to Purchase has,
during the past five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors). None of the persons listed in
Schedule I has, during the past five years, been a party to any judicial or
administrative proceeding (except for matters that were dismissed without
sanction or settlement) that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to federal or state securities laws, or a finding of any violation of
federal or state securities laws.
In the normal course of their business, Parent and the Company are parties
to transactions and agreements. During the two years ended October 31, 2000,
no such transaction had an aggregate value in excess of one percent of the
Company's consolidated revenues.
10. Source and Amount of Funds.
The Offer is not conditioned upon any financing arrangements.
Parent and Purchaser estimate that the total amount of funds required to
purchase all of the outstanding Common Shares and Preferred Shares that Parent
or its affiliates do not own pursuant to the Offer and the Merger and to pay
related fees and expenses will be approximately $4.0 billion. Purchaser
expects to obtain the funds necessary to consummate the Offer and the Merger
from Parent. Parent has received a commitment letter from Credit Suisse First
Boston ("CSFB") and The Chase Manhattan Bank ("Chase") providing for the
structure, arrangement and syndication of senior unsecured loans (the "Loans")
of up to $6.0 billion, the initial proceeds of which will be used solely to
acquire Common Shares and Preferred Shares in the Offer and the Merger, to
retire and refinance certain outstanding debt of the Company and to pay any
related expenses. The proceeds of subsequent borrowings under the Loans will
be used for general corporate purposes of Parent and the Company. The Loans
will be in the form of a 364-day Revolving Credit Facility and a separate
Five-Year Revolving Credit Facility, each in an aggregate maximum principal
amount of $3.0 billion. Each of the facilities will be an unsecured senior
credit facility and will contain usual and customary affirmative and negative
covenants, customary financial covenants (including (a) maximum ratios of
Funded Debt to Total Capitalization, (b) maximum ratios of Funded Debt to Cash
Flow and (c) minimum ratios of Cash Flow minus Capital Expenditures to Fixed
Charges). Events of Default will include (i) failure to pay principal,
interest or other amounts, (ii) breach of representations and warranties,
(iii) breach of covenants, (iv) certain bankruptcy events, (v) cross default
and cross acceleration, (vi) certain ERISA matters, (vii) certain judgments
and (viii) change in control events, which will be defined in the final
documents for the Loans. Interest rates for the Loans will be Adjusted LIBOR
(which will at all times include statutory reserves) or the Adjusted Base Rate
(defined as the higher of Chase's Prime Rate and the Federal Funds Effective
Rate plus 0.5%), at the election of Parent, in each case plus spreads
depending upon a schedule of certain specified Standard & Poor's and Moody's
Investor Services ratings of Parent. Parent may elect periods of one, two,
three or six months for Adjusted LIBOR borrowings under the Loans.
It is expected that the Loan documents will be negotiated while the Offer is
outstanding and signed on or before the Expiration Date. No alternate
financing plans exist.
21
11. Background of the Offer; Past Contacts or Negotiations with the Company.
In May 2000, Kent Kresa, Chairman and Chief Executive Officer of Parent, and
Michael Brown, Chairman and Chief Executive Officer of the Company, agreed
that a small group of directors, officers and senior employees from the two
companies would have discussions looking into the possibility of a strategic
transaction. A confidentiality letter agreement was signed, dated June 23,
2000 (the "Confidentiality Agreement"), by which each company agreed to
maintain the confidentiality of non-public information which might be received
from the other and also agreed that no disclosure would be made concerning the
discussions between the parties. From that time to the present a number of
meetings and conversations have taken place between representatives of the two
companies.
In mid-September 2000, Mr. Kresa contacted Mr. Brown to advise him that
Parent would have an interest in acquiring the Company in a transaction in
which the holders of Common Shares would receive a combination of cash and
stock having a value equivalent, on a per share basis, to 0.70 of a share of
Parent common stock. Subsequent to the conversation, a representative of
Parent was advised that the Company did not wish to pursue the proposal.
On October 20, 2000, the Company publicly announced its intention to explore
the sale of its advanced electronics group. Later the same day, Mr. Kresa
spoke with Mr. Brown and wrote to him reiterating Parent's interest in an
acquisition of the Company in a transaction involving cash and stock valued at
0.70 of a share of Parent common stock, for each Common Share. Mr. Kresa
pointed out that the sale of the advanced electronics group would be
inconsistent with Parent's plans for the combined company and would diminish
Parent's interest in the combination. In response, Mr. Brown advised Mr. Kresa
that the transaction value proposed by Parent was not sufficient for the
Company Board to support such a transaction.
On November 2, 2000, Mr. Kresa again wrote to Mr. Brown increasing the value
of Parent's proposal so that holders of Common Shares would receive a
combination of cash and Parent common stock having a value, per share,
equivalent to 0.75 of a share of Parent common stock and offering the
potential for some additional value to be delivered to the holders of Common
Shares through a contingent value mechanism.
Following a meeting of the Company Board on November 3, 2000, Mr. Brown
again advised Mr. Kresa that the value proposed by Parent was considered
insufficient by the Company Board. On November 29, 2000, Mr. Kresa wrote to
Mr. Brown to specifically propose two alternatives for a potential
transaction. The first proposed alternative would provide the Company's
stockholders with a combination of cash and stock valued at 0.75 of a share of
Parent common stock plus a contingent value instrument which would provide the
Parent's stockholders with 75% of the net after-tax recovery in Parent's
pending litigation with Honeywell, Inc. as well as certain other litigation,
and between 40% and 60% of the net after-tax value of the Electronic
Components and Materials business segment achieved within the five-year period
following closing. The second alternative proposed was for an acquisition for
cash at $72.00 per Common Share.
Following further discussions and negotiations and the exchange of
additional non-public information between the parties, the board of directors
of Parent met on December 20, 2000 and unanimously approved the Merger
Agreement. The Company Board met on December 21, 2000 and also approved the
Merger Agreement and determined unanimously that the transactions contemplated
thereby, including the Offer and the Merger, were fair to, and in the best
interests of, the holders of Common Shares of the Company.
On December 21, 2000, the Merger Agreement was executed by Parent, Purchaser
and the Company, and Parent and the Company issued a joint press release
announcing the transaction.
On January 5, 2001, Parent commenced the Offer.
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12. The Merger Agreement; Other Arrangements.
The Merger Agreement
The following is a summary of the material provisions of the Merger
Agreement, a copy of which is filed as an exhibit to the Tender Offer
Statement on Schedule TO (the "Schedule TO") filed by Parent and Purchaser on
January 5, 2001 with the SEC in connection with the Offer. The following
summary may not contain all of the information important to you, and is
qualified in its entirety by reference to the Merger Agreement, which is
deemed incorporated by reference in this Offer to Purchase. Accordingly, we
encourage you to read the entire Merger Agreement. The Merger Agreement may be
examined and copies may be obtained from the SEC in the same manner as set
forth in Section 7 of this Offer to Purchase entitled "Certain Information
Concerning the Company." Capitalized terms used in the following summary and
not otherwise defined in this Offer to Purchase shall have the respective
meanings set forth in the Merger Agreement.
The Offer. The Merger Agreement provides that Purchaser will commence the
Offer and that, upon the terms and subject to prior satisfaction or waiver of
the Minimum Tender Condition and the other conditions of the Offer, as set
forth in Section 16 of this Offer to Purchase entitled "Certain Conditions of
the Offer," Purchaser will purchase all Common Shares and Preferred Shares
validly tendered and not properly withdrawn pursuant to the Offer. The Merger
Agreement further provides that, without the prior written consent of the
Company, Purchaser will not: (i) decrease the Common Offer Price or the
Preferred Offer Price, (ii) change the form of consideration payable in the
Offer, (iii) decrease the number of Common Shares or Preferred Shares sought
to be purchased in the Offer, (iv) impose additional conditions to the Offer
other than those set forth in the Merger Agreement, (v) amend any other term
of the Offer in any manner adverse to the holders of Common Shares or
Preferred Shares, (vi) reduce the time period during which the Offer shall
remain open or (vii) waive the Minimum Tender Condition.
Pursuant to the Merger Agreement, Parent may, without the consent of the
Company, cause Purchaser to: (i) extend the Offer from time to time in its
sole discretion, if at the then-scheduled expiration of the Offer, any of the
conditions to the Offer have not been satisfied or waived, for such amount of
time as is reasonably necessary to cause such Offer conditions to be
satisfied, but not to exceed five business days for each such extension, (ii)
extend the Offer for any period required by any rule, regulation,
interpretation or position of the SEC or the staff of the SEC applicable to
the Offer, or (iii) extend the Offer for a subsequent offering period (as
provided in Rule 14d-11 under the Exchange Act) of up to twenty business days
beyond the latest expiration date that would otherwise be permitted under
clause (ii) of this sentence in order to acquire over 90% of the outstanding
Common Shares or over 90% of the outstanding Preferred Shares. Parent has
agreed to cause Purchaser to extend the Offer as permitted by the Merger
Agreement for the shortest time periods which it reasonably believes are
necessary until the consummation of the Offer if the conditions to the Offer
have not been satisfied or waived so long as the Merger Agreement has not been
terminated pursuant to its terms.
Directors. The Merger Agreement provides that promptly upon the acceptance
for payment of any Common Shares pursuant to the Offer, Purchaser shall be
entitled to designate that number of directors on the Company Board (rounded
to the next whole number that constitutes at least a majority of the members
of the Company Board) that equals the product of (i) the total number of
directors on the Company Board (giving effect to the election of any
additional directors pursuant to the Merger Agreement), and (ii) the
percentage that the number of Common Shares so purchased bears to the total
number of Common Shares outstanding. The Company has agreed to use all
reasonable efforts, upon Purchaser's request, promptly to cause Purchaser's
designees to be elected or appointed to the Company Board, including, at the
Company's election, increasing the number of directors or securing
resignations of incumbent directors. At such time, to the extent requested by
Purchaser, the Company will use its best efforts to cause Purchaser's
designees to constitute at least a majority on each committee of the Company
Board, other than any committee of the Company Board established to take
action under the Merger Agreement. Notwithstanding the foregoing, the Company
will use all reasonable efforts to ensure that, prior to the Effective Time,
the Company will retain at least three directors who were directors of the
Company on the date of the Merger Agreement (the "Continuing Directors");
provided, however, that if there are fewer than three Continuing Directors for
any reason, the Continuing Directors or, if there is only one Continuing
Director, that
23
director, shall be entitled to designate a person or persons to fill such
vacancy or vacancies. The Company's obligation to appoint designees to the
Company Board is subject to certain provisions of the Exchange Act. From and
after the time that Purchaser's designees are elected or appointed to the
Company Board until the Effective Time, the approval of a majority of the
Continuing Directors shall be required to authorize: (i) any termination of
the Merger Agreement by the Company, (ii) any amendment of the Merger
Agreement, (iii) any extension by the Company of time for performance of any
of the obligations or actions of Parent or Purchaser under the Merger
Agreement, (iv) any waiver of any of the Company's rights under the Merger
Agreement and (v) any other action which adversely affects the holders of the
Common Shares or the Preferred Shares (other than Parent or Purchaser).
The Merger. The Merger Agreement provides that, subject to the terms and
conditions of the Merger Agreement, at the Effective Time, Purchaser will be
merged with and into the Company in accordance with the applicable provisions
of the DGCL. Following the Merger, the separate existence of Purchaser will
cease and the Company will continue as the surviving corporation (the
"Surviving Corporation"). The Company, as the Surviving Corporation, will
succeed to and assume all of the rights and obligations of both the Company
and Purchaser. Also, the Bylaws of the Company in effect upon the consummation
of the Merger will be the Bylaws of the Surviving Corporation and the Restated
Certificate of Incorporation of the Company will be the Certificate of
Incorporation of the Surviving Corporation; provided, however, that Article
Fourth, Section 1 of the Restated Certificate of Incorporation of the Company
shall be amended in its entirety to read as follows: "The Corporation shall be
authorized to issue 3,000,000 shares of Common Stock, par value $1.00 per
share, 600,000 shares of Preferred Stock, par value $5.00 per share and 1,000
shares of Preference Stock, par value $2.50 per share." In addition, following
the Merger, the directors of Purchaser will become the initial directors of
the Surviving Corporation and the officers of the Company will become the
initial officers of the Surviving Corporation. The Merger Agreement provides
that the closing of the Merger will take place as promptly as practicable but
in no event later than the second business day after the satisfaction or
waiver of the conditions to the Merger. At the closing, the Company, Parent
and Purchaser will file the necessary documents with Delaware public officials
to make the Merger effective.
Conversion of Common Shares. At the Effective Time, each Common Share issued
and outstanding immediately prior to the Effective Time (excluding (i) Common
Shares held in the Company's treasury or by any of the Company's subsidiaries,
(ii) Common Shares held by Parent, Purchaser or any other subsidiary of Parent
and (iii) Common Shares held by dissenting shareholders who have perfected
their appraisal rights) will, by virtue of the Merger and without any action
on the part of Purchaser, the Company or the holder, be converted into and
become the right to receive an amount of cash, without interest, equal to the
Merger Consideration. At the Effective Time, each Common Share held in the
treasury of the Company and each Common Share held by Parent, Purchaser or any
subsidiary of Parent, Purchaser or any subsidiary of the Company immediately
prior to the Effective Time will, without any action on the part of Purchaser,
the Company or the holder, be canceled and retired and will cease to exist,
and no payment shall be made with respect thereto. Moreover, at the Effective
Time, each share of common stock of Purchaser, par value $0.01 per share,
issued and outstanding immediately prior to the Effective Time will be
converted into and become 3,000 shares of common stock, par value $1.00 per
share, of the Surviving Corporation.
Preferred Shares. At the Effective Time, each issued and outstanding
Preferred Share shall remain outstanding, without any change, as a share of
the Series B $2 Cumulative Preferred Stock, par value $5.00 per share, of the
Surviving Corporation.
Company Stock Options. As of the Effective Time, each outstanding option to
purchase Common Shares (a "Company Stock Option" or collectively, "Company
Stock Options") that has been granted pursuant to any Company stock option
plan (the "Company Plans"), that is then vested (each, an "A Option") will be
canceled and each A Option will become the right to receive an amount, without
interest, in cash (less any applicable tax withholding) equal to the number of
Common Shares subject to such Company Stock Option immediately prior to the
Effective Time, multiplied by the excess, if any, of the Merger Consideration
over the exercise price per Common Share of such Company Stock Option. The
Company shall provide holders of A Options the opportunity to elect, before
the Effective Time, to have some or all of their A Options to be converted
into
24
options to acquire Parent Common Shares as if they were B Options, as
described below. As of the Effective Time, each outstanding Company Stock
Option that is not an A Option (each, a "B Option") shall be converted into an
option to purchase shares of common stock of Parent, on the same terms and
conditions as were applicable under such B Option, in an amount equal to the
number of Common Shares subject to such B Option times a fraction, the
numerator of which is the Merger Consideration and the denominator of which is
the average of the high and low trading prices of the shares of common stock
of Parent on the New York Stock Exchange during normal business hours on the
day on which the Effective Time occurs; provided, however, that in the case of
any B Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the option price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code. Pursuant to the Merger Agreement, the parties have agreed
to cooperate to take all reasonable steps necessary to effect the foregoing.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the parties. These include representations
and warranties of the Company with respect to, among other things,
organization and qualification, capitalization, subsidiaries, authority, SEC
filings, financial statements, governmental approvals, compliance with laws,
litigation, intellectual property and trade secrets, employment matters,
environmental laws and regulations and tax matters. The Merger Agreement also
contains customary representations and warranties of Parent and Purchaser,
including among other things, organization and qualification, authority and
financing. The representations and warranties contained in the Merger
Agreement expire at the Effective Time of the Merger.
Conduct of Business. From the date of the Merger Agreement until the
Effective Time, unless Parent consents in writing, which consent may not be
unreasonably withheld, and except for as contemplated by the Merger Agreement
or in a schedule attached thereto, the Company has agreed not to, and to cause
each of its subsidiaries not to: (i) amend its Restated Certificate of
Incorporation or Bylaws or similar organizational documents, (ii) authorize
for issuance, issue, sell, deliver or agree or commit to issue, sell or
deliver any shares of any class of capital stock or any other securities
(other than bank loans) or equity equivalents, with limited exceptions, (iii)
split, combine or reclassify any shares of its capital stock, declare, set
aside or pay any dividend or other distribution in respect of its capital
stock or otherwise make any payments to its stockholders in their capacity as
stockholders or redeem or acquire any of its securities or any securities of
any of its subsidiaries, except for the payment of dividends in respect of the
Preferred Shares and the payment of dividends or distributions by a wholly-
owned subsidiary of the Company to the Company or another wholly-owned
subsidiary of the Company, (iv) adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries (other than the Merger), (v) alter through merger, liquidation,
reorganization, restructuring or any other fashion the corporate structure of
ownership of any subsidiary (other than as permitted by the Merger Agreement),
(vi) incur or become liable or responsible for indebtedness for borrowed money
or issue debt securities or make any loans or advances to or investments in
any other person or mortgage, pledge or otherwise encumber shares of capital
stock of the Company or its subsidiaries or any of the Company's material
assets, except as permitted under the Merger Agreement, (vii) enter into,
adopt, 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, except as permitted
under the Merger Agreement, (viii) acquire, sell, lease, or dispose of any
assets in any transaction or series of related transactions having a fair
market value in excess of $10,000,000 in the aggregate, other than in the
ordinary course of business or as permitted under the Merger Agreement, (ix)
materially change any of its accounting principles or practices, except as
required by a change of law or generally accepted accounting principles, (x)
revalue in any material respect any of its assets other than in the ordinary
course of business or as required by generally accepted accounting principles,
(xi) acquire any corporation, partnership or other business organization or
division thereof or equity interest therein or enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice that would be material to the Company and its subsidiaries, taken as
a whole or
25
authorize any capital expenditures in excess of $10,000,000 individually or
$210,000,000 in the aggregate, (xii) make any material tax election or settle
or compromise any income tax liability material to the Company and its
subsidiaries taken as a whole, except in the ordinary course of business
consistent with past practice, (xiii) settle or compromise any pending or
threatened suit, action or claim which relates to the transactions
contemplated by the Merger Agreement or the settlement or compromise of which
would have a Company Material Adverse Effect (as defined in the Merger
Agreement), (xiv) commence or terminate any material research and/or
development project, except as permitted under the Merger Agreement, (xv)
amend the Company Rights Agreement in any way that would permit any person
other than Parent or its affiliates to acquire more than 15% of the Common
Shares or redeem the rights issuable under the Rights Plan established
thereunder, or (xvi) take or agree in writing to take any of the foregoing
actions.
Stockholder Approval. If Company stockholder approval of the Merger is
required by law, the Company has agreed to, as promptly as practicable
following the expiration of the Offer, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Stockholders Meeting") for the
purpose of obtaining such approval. If a Stockholders Meeting is required, the
Company will use all reasonable efforts to prepare and file a Proxy Statement
(the "Proxy Statement") with the SEC and shall use all reasonable efforts to
obtain and furnish the information required to be included in the Proxy
Statement and, after consultation with Parent and Purchaser, respond promptly
to any comments of the SEC or its staff with respect to the Proxy Statement or
any preliminary version of the Proxy Statement and to cause the Proxy
Statement to be mailed to the Company's stockholders as promptly as
practicable after the expiration or termination of the Offer. Subject to its
fiduciary duties under applicable law and after consultation with counsel, the
Company shall, through the Company Board, recommend that the stockholders of
the Company vote in favor of the approval and adoption of the Merger Agreement
and the Merger. At the Stockholders Meeting, Parent, Purchaser and their
subsidiaries will vote all Common Shares and all Preferred Shares owned by
them in favor of approval and adoption of the Merger Agreement and in favor of
the Merger.
Access to Information. The Merger Agreement provides that from the date of
the Merger Agreement until the Effective Time, the Company will, and will
cause each of its subsidiaries to, give Parent and its representatives
reasonable access, during normal business hours, to the employees, plants,
offices, warehouses and other facilities, books and records of the Company and
its subsidiaries, and will furnish to Parent and its representatives financial
and operating data and other information concerning the business of the
Company and its subsidiaries as Parent may reasonably request. All information
obtained by the Parent and its representatives will be kept confidential in
accordance with the confidentiality provisions of the Confidentiality
Agreement between Parent and the Company. Between the date of the Merger
Agreement and the Effective Time, the Company has agreed to furnish to Parent
with certain quarterly statements of financial information.
Further Actions. Pursuant to the Merger Agreement, each of Parent, Purchaser
and the Company has agreed to use all reasonable efforts to take, or cause to
be taken, all reasonable actions necessary, proper or advisable, and to
reasonably cooperate with each other in order to consummate and make effective
the transactions contemplated by the Merger Agreement, including using all
reasonable efforts: (i) to obtain all necessary waivers, consents and
approvals from other parties to material loan agreements, leases and other
contracts, (ii) to obtain all consents, approvals and authorizations that are
required to be obtained under any federal, state, local or foreign law or
regulation, (iii) to lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to the Merger
Agreement to consummate the transactions contemplated thereby, (iv) to effect
all necessary registrations and filings including, but not limited to, filings
and submissions of information requested or required by any domestic or
foreign government or governmental or multinational authority, including,
without limitation, the Antitrust Division of the United States Department of
Justice (the "Antitrust Division"), the Federal Trade Commission (the "FTC"),
any State Attorney General, or the European Commission, and (v) to fulfill all
conditions to the Merger Agreement. Parent, Purchaser and the Company have
further covenanted and agreed, with respect to a threatened or pending
preliminary or permanent injunction or other order, decree or ruling or
statute, rule, regulation or executive order that would adversely affect the
ability of the parties to the Merger Agreement to consummate the transactions
contemplated thereby, to use efforts to prevent the entry, enactment or
promulgation thereof, as the case may be. In furtherance
26
and not in limitation of the foregoing, the Company, Parent and Purchaser
shall use their respective best efforts to resolve such objections, if any, as
may be asserted with respect to the transactions contemplated by the Merger
Agreement under any antitrust, competition or trade regulatory laws of any
domestic or foreign government or governmental authority or any multinational
authority, or any regulations issued thereunder. Without limiting the
foregoing, if requested by any governmental authority, Parent and the Company
shall agree to divest, sell, dispose, or otherwise take or commit to take any
action that limits its freedom of action with respect to any of the
businesses, product lines or assets of Parent or its affiliates, the Company
or its affiliates, provided that any such action would not have a material
adverse effect on the business, assets, long-term earning capacity or
financial condition of Parent and the Company (and their subsidiaries), taken
as a whole.
Inquiries and Negotiations. The Merger Agreement provides that the Company
and its subsidiaries will, and will cause their respective officers,
directors, employees, representatives or agents to, refrain from directly or
indirectly, encouraging, soliciting, participating in, initiating discussions
or negotiations with, and to immediately cease any discussions or negotiations
with, or providing any information or data to anyone (other than Parent,
Purchaser or any designees of either entity) concerning any Third Party
Acquisition. The term "Third Party Acquisition" means: (i) the acquisition of
the Company by merger or otherwise by any person (including a "person" as such
term is defined under Section 13(d)(3) of the Exchange Act) other than Parent,
Purchaser, or any affiliate of Parent or Purchaser (each, a "Third Party"),
(ii) the acquisition by a Third Party of all or a major part of any of the
Company's business segments, as identified in the Company's SEC Reports or
more than 20% of the total assets of the Company and its subsidiaries taken as
a whole, (iii) the acquisition by a Third Party of 20% or more of the
outstanding Common Shares, (iv) the adoption by the Company of a plan of
liquidation or the declaration or payment of an extraordinary dividend, (v)
the repurchase by the Company or any of its subsidiaries of more than 20% of
the outstanding Common Shares, or (vi) the acquisition by the Company or any
subsidiary by merger, purchase of stock or assets, joint venture or otherwise
of a direct or indirect ownership interest or investment in any business whose
annual revenues, net income or assets is equal to or greater than 20% of the
annual revenues, net income or assets of the Company.
Notwithstanding the above, (i) nothing in the Merger Agreement prevents the
Company Board from taking and disclosing to the Company's stockholders a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer, (ii) if the Company receives an
unsolicited written proposal for a Third Party Acquisition from a Third Party,
nothing in the Merger Agreement prevents the Company or its representatives
from making such inquiries or conducting such discussions as the Company
Board, after consultation with and based upon the advice of, legal counsel,
may deem necessary to inform itself for the purpose of exercising its
fiduciary duties, and (iii) if the Company receives an unsolicited written
proposal for a Third Party Acquisition from a Third Party that the Company
Board by a majority vote determines in its good faith judgment (after
receiving the advice of a financial advisor of nationally recognized
reputation) is reasonably likely to constitute a Superior Proposal (as defined
hereafter), the Company and its representatives may conduct such additional
discussions or provide such information as the Company Board shall determine,
but only if, prior to such provision of information or additional discussion
(A) such Third Party shall have entered into a confidentiality and standstill
agreement substantially in the form of the Confidentiality Agreement between
Parent and the Company and (B) the Company Board by a majority vote determines
in its good faith judgment, after consultation with and based upon the advice
of, legal counsel that it is required to do so in order to comply with its
fiduciary duties. The Company shall promptly notify the Parent in the event it
receives any proposal or inquiry concerning a Third Party Acquisition
including the terms and conditions thereof and the identity of the party
submitting such proposal; and the Company shall advise the Parent from time to
time of the status and any material developments concerning the same. The term
"Superior Proposal" means any bona fide proposal to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, more than
50% of the Common Shares then outstanding or all or substantially all of the
assets of the Company and otherwise on terms which the Company Board by a
majority vote determines in its good faith judgment (after receiving the
advice of a financial advisor of nationally recognized reputation) to be more
favorable to the Company's stockholders, from a financial point of view, than
the Merger.
27
The Company Board may not withdraw, change or modify its recommendation of
the transactions contemplated by the Merger Agreement or approve or recommend,
or cause the Company to enter into any agreement with respect to, any Third
Party Acquisition unless, by a majority vote, it determines in its good faith
judgment, after consultation with and based upon the advice of, legal counsel
that it is required to do so in order to comply with its fiduciary duties, but
in each case only (i) after providing written notice to Parent (a "Notice of
Superior Proposal") advising Parent that the Company Board has received a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the person making such Superior Proposal,
(ii) if Parent does not, within five business days of Parent's receipt of the
Notice of Superior Proposal, make an offer which the Company Board by a
majority vote determines in its good faith judgment (after receiving the
advice of a financial advisor of nationally recognized reputation) to be as
favorable to the Company's stockholders as such Superior Proposal and (iii) in
connection with entering into an agreement with respect to a Superior
Proposal, after the Merger Agreement is terminated in accordance with its
terms and the Company has paid all amounts due to Purchaser pursuant to the
Merger Agreement.
If the Merger Agreement is terminated for any one of the following reasons:
(i) by the Parent and Purchaser because the Company Board enters into, or
recommends to the Company's stockholders, a Superior Proposal, (ii) by the
Parent and Purchaser because the Company Board withdraws, modifies, or changes
its approval or recommendation of the Merger Agreement or the Offer or the
Merger or adopts any resolution to effect any of the foregoing, (iii) by the
Parent and Purchaser because a Third Party Acquisition occurs after December
21, 2000, provided that, for purposes of termination only, a Third Party
Acquisition as defined in clause (iii) of the definition of such term shall be
deemed to occur only upon acquisition by a Third Party of 50% or more of the
outstanding Common Shares, (iv) by the Company because the Company receives a
Superior Proposal and resolves to accept such Superior Proposal, but only if
the Company has acted in accordance with, and has complied with the terms of
the Merger Agreement, including the notice provisions therein, and the Company
has paid all amounts due to Purchaser pursuant to the Merger Agreement, (v) by
the Parent and Purchaser because the Company breaches a covenant or agreement
under the Merger Agreement that would have a Company Material Adverse Effect,
or that would have a material adverse effect on, or materially delay, the
consummation of the Offer, or the Merger and such breach is not cured within
twenty days after notice from Parent and Purchaser (and neither Parent nor
Purchaser has breached any of its obligations under the Merger Agreement) and
within twelve 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 an affiliate thereof) (A) with whom the Company (or
its agents) had negotiations with a view to a Third Party Acquisition, (B) to
whom the Company (or its agents) furnished information with a view to a Third
Party Acquisition, or (C) who had submitted a proposal for a Third Party
Acquisition, in the case of (A), (B) and (C), after December 21, 2000 and
prior to such termination, or (vi) by Parent and Purchaser or the Company
because the purchase of Common Shares pursuant to the Offer has not been
consummated by September 15, 2001 (provided that no party may terminate the
Merger Agreement if that party's failure to fulfill any of its obligations
under the Merger Agreement is the reason that the purchase of Common Shares
has not occurred before that date) at a time when the Minimum Tender Condition
is not satisfied, there is outstanding a publicly announced offer by a Third
Party to consummate a Third Party Acquisition, and no other condition to the
Offer is unsatisfied, and within twelve months thereafter the Company enters
into an agreement with respect to a Third Party Acquisition or a Third Party
Acquisition occurs, in either case involving the Third Party referred to
above; then, the Company shall pay to Parent or its designated beneficiary
within three business days following the occurrence of one of the foregoing,
or upon the entering into of the agreement for a Third Party Acquisition or
the occurrence of the Third Party Acquisition, as the case may be, a fee of
$110 million in cash. Any fee paid as a result of the foregoing represents
liquidated damages and not a penalty.
Indemnification. For six years after the Effective Time, the Surviving
Corporation shall provide each person who is, or prior to the date of the
Merger Agreement was, or prior to the Effective Time becomes, a director or
officer of the Company (the "Indemnified Persons"), directors' and officers'
liability insurance that provides coverage for events occurring prior to the
Effective Time that is no less favorable than the Company's existing policy;
provided, however, that the Surviving Corporation shall not be required to pay
an annual
28
premium for the coverage in excess of 300% of the last annual premium paid by
the Company prior to the date of the Merger Agreement. After the Effective
Time, Parent and the Surviving Corporation shall indemnify and hold harmless
each Indemnified Person against all losses, claims, damages, costs, expenses
(including without limitation counsel fees and expenses), settlement payments
or liabilities arising out of or in connection with the fact that such person
is or was an officer or director of the Company or any of its subsidiaries, or
pertaining to the Merger Agreement or the transactions contemplated by the
Merger Agreement, in each case to the fullest extent required or permitted
under applicable law or under the Surviving Corporation's Certificate of
Incorporation or Bylaws.
Employee Benefit Matters. The Merger Agreement provides that from and after
the Effective Time, Parent will assume and honor, and cause the Company to
honor all material Employee Plans (as defined in the Merger Agreement) and
Employment Agreements (as defined in the Merger Agreement), in accordance with
their terms as in effect immediately before the Effective Time. For a period
of not less than two years from and after the Effective Time, Parent shall
cause the current and former employees of the Company and its subsidiaries
("Company Employees") to be provided with compensation and employee benefits
that are, in the aggregate, not less favorable than those provided to Company
Employees immediately before the Effective Time. For all purposes under the
employee benefit plans of Parent and its subsidiaries which provide benefits
to any Company Employee after the Effective Time, each Company Employee will
be credited with all years of service for which such Company Employee was
credited under comparable Company Employee Plans, except to the extent that
such service credits would result in a duplication of benefits. In addition,
from and after the Effective Time, Parent shall assume and honor, and shall
cause the Surviving Corporation to honor, the obligations of the Company to
provide lifetime benefits under the Company's Supplemental Medical Insurance
Plan to certain individuals specified in the Merger Agreement and Parent also
agrees not to demand, and to cause the Surviving Corporation not to demand,
repayment of the loans currently outstanding under the Company's Incentive
Loan Program before December 31, 2001. Further, Parent will continue, or cause
the Surviving Corporation to continue, certain executive life insurance
policies specified in the Merger Agreement in effect for the remaining
lifetime of the retired executive officers covered by such insurance policies.
Conditions to the Merger. The respective obligations of the Company, Parent
and Purchaser to complete the Merger are subject to the fulfillment of the
following conditions: (i) the Merger Agreement having been duly approved and
adopted, if required, by the requisite vote of the stockholders of the
Company, (ii) no statute, rule, regulation, executive order, decree, ruling or
injunction having been enacted, entered, promulgated or enforced by any United
States court or United States or European Union governmental authority which
prohibits, restrains or enjoins the consummation of the Merger, (iii) any
waiting period applicable to the Merger under the HSR Act having terminated or
expired and to the extent required, the Commission of the European Union
having approved the Merger under Council Regulation (EEC) No. 4064/89 of the
Council of the European Union, or such approval having been deemed to have
been granted, and (iv) Purchaser having accepted for payment and paid for
Common Shares pursuant to the Offer.
Termination and Abandonment. The Merger Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time as follows: (i) by
mutual written consent of the Company, Parent and Purchaser, (ii) by either
the Company or Parent and Purchaser, if any court of competent jurisdiction in
the United States or other United States or European Union governmental
authority has issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Offer or the Merger
and such order, decree, ruling or other action is or has become final and
nonappealable or the purchase of Common Shares pursuant to the Offer has not
been consummated by September 15, 2001 (provided that no party may terminate
the Merger Agreement if that party's failure to fulfill any of its obligations
under the Merger Agreement is the reason that the purchase of Common Shares
has not occurred before that date), (iii) by the Company if a representation
or warranty of Parent or Purchaser in the Merger Agreement is breached or
becomes untrue or if Parent or Purchaser breaches a covenant or agreement
under the Merger Agreement that would have a Parent Material Adverse Effect
(as defined in the Merger Agreement) or which would materially adversely
affect or delay, the consummation of the Offer or the Merger and such breach
is not cured within twenty business days
29
after notice from the Company (and the Company has not breached any of its
obligations under the Merger Agreement), (iv) by Parent and Purchaser if: (A)
a representation or warranty of the Company in the Merger Agreement is
breached or becomes untrue, in either such case such that the conditions set
forth in paragraph (e) of Annex A to the Merger Agreement are incapable of
being satisfied by September 15, 2001, (B) the Company breaches a covenant or
agreement under the Merger Agreement that would have a Company Material
Adverse Effect, or that would materially adversely affect or delay, the
consummation of the Offer, or the Merger and such breach is not cured within
twenty business days after notice from Parent and Purchaser (and neither
Parent nor Purchaser has breached any of its obligations under the Merger
Agreement), (C) the Company Board enters into, or recommends to the Company's
stockholders, a Superior Proposal, (D) the Company Board withdraws, modifies,
or changes its approval or recommendation of the Merger Agreement or the Offer
or the Merger or adopts any resolution to effect any of the foregoing, or (E)
a Third Party Acquisition occurs after December 21, 2000, provided that, for
purposes of termination only, a Third Party Acquisition as defined in clause
(iii) of the definition of such term will be deemed to occur only upon
acquisition by a Third Party of 50% or more of the outstanding Common Shares,
(v) by the Company if the Company receives a Superior Proposal and resolves to
accept such Superior Proposal, but only if the Company has acted in accordance
with, and has complied with, the terms of the Merger Agreement, including the
notice provisions therein, and the Company has paid all amounts due to
Purchaser pursuant to the Merger Agreement. In the event of the termination of
the Merger Agreement, except for the amounts described under the heading
entitled "Inquiries and Negotiations," and any liability arising out of a
breach of its covenants, agreements or obligations, no party shall have any
liability to any other party or its stockholders or directors or officers, and
the Merger Agreement shall become void and have no effect.
Publicity. The Company, Parent and Purchaser agree that they will not issue
any press release or make any other public announcement concerning the Merger
Agreement or the transactions contemplated thereby without consulting with the
other party, except as may be required by law or obligations pursuant to any
listing agreement with the New York Stock Exchange.
Amendment. The Merger Agreement may be amended by action taken the Company,
Parent and Purchaser at any time before or after approval, if necessary, of
the Merger by the stockholders of the Company but, after any such approval, no
amendment shall be made that requires the approval of such stockholders under
applicable law without such approval.
Waiver. Each of the Company, Parent and Purchaser 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 or
any document provided by the other party, or (iii) waive compliance by the
other party with any of the agreements or conditions contained in the Merger
Agreement.
Going Private Transactions.
The Merger would have to comply with any applicable federal law operative at
the time of its consummation including Rule 13e-3 under the Exchange Act which
applies to certain "going private" transactions. If applicable, Rule 13e-3
requires, among other things, that certain financial information concerning
the fairness of the Merger and the consideration offered to minority
stockholders in the Merger be filed with the SEC and disclosed to stockholders
prior to the consummation of the Merger. Purchaser does not believe that Rule
13e-3 will be applicable to the Merger unless the Merger is consummated more
than one year after the termination of the Offer
Confidentiality Agreement.
The following is a summary of certain provisions of the Confidentiality
Agreement. This summary does not purport to be complete and is qualified in
its entirety by reference to the complete text of the Confidentiality
Agreement, a copy of which is filed with the SEC as Exhibit (d)(2) to the
Schedule TO and incorporated herein by reference. Capitalized terms not
otherwise defined below shall have the meanings set forth in the
Confidentiality Agreement. The Confidentiality Agreement may be examined and
copies may be obtained at the
30
places and in the manner set forth in Section 7 of this Offer to Purchase
entitled "Certain Information Concerning the Company."
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Parent and the Company have mutually agreed,
subject to certain exceptions, to keep confidential all non-public,
confidential or proprietary information exchanged between each other,
including analyses, compilations, forecasts, studies, notes, summaries,
reports, analyses or other materials derived from the information exchanged
(the "Confidential Information"), and to use the Confidential Information
solely for the purpose of evaluating a possible transaction (the
"Transaction") involving Parent and the Company, together with any of their
subsidiaries or affiliates. Parent and the Company each agreed not to solicit
certain members of the other's directors, officers or employees with whom they
have had dealings for employment for a period of two years from June 23, 2000.
Parent and the Company also agreed for the same period not to (i) acquire more
than one percent of any securities of the other party or any of its
subsidiaries, (ii) solicit proxies or consents with respect to the other party
or any of its subsidiaries, (iii) seek to advise, control or influence the
management, board of directors or policies of the other party or any of its
subsidiaries, (iv) make any proposal or any public announcement relating to a
tender or exchange offer for securities of the other party or any of its
subsidiaries, (v) enter into any discussions or understandings with any third
party with respect to any of the foregoing, or (vi) advise, assist or
encourage any other person in connection with any of the foregoing.
Employment Agreement with Dr. Ronald D. Sugar
In connection with the Merger Agreement on December 21, 2000, Parent entered
into an agreement with Ronald D. Sugar, President and Chief Operating Officer
of the Company, by which Parent agreed to assume Dr. Sugar's existing
employment agreement and change in control employment agreement with the
Company (the "Sugar Employment Agreement"). In addition, Parent agreed that
Dr. Sugar will become an elected Corporate Vice President of Parent and
President of the Company after the Merger. The Sugar Employment Agreement
provides that Dr. Sugar will defer until the later of (i) six months after the
Merger, or (ii) December 31, 2001, certain rights he would otherwise have to
terminate his employment and receive payments under his existing agreements
with the Company.
13. Purpose of the Offer; Plans for the Company.
Purpose of the Offer. The purpose of the Offer is to acquire control of, and
the entire common stock equity interest in, the Company. The purpose of the
Merger is to acquire all outstanding Common Shares not tendered and purchased
pursuant to the Offer. If the Offer is successful, Purchaser intends to
consummate the Merger as soon as practicable following the satisfaction or
waiver of each of the conditions to the Merger set forth in the Merger
Agreement.
Preferred Shares. If two-thirds or more of the Preferred Shares are tendered
for purchase in the Offer and Purchaser acquires such percentage of the
Preferred Shares, Purchaser will have sufficient voting power to amend the
terms of the Preferred Shares in accordance with the provisions set forth in
the Company's Restated Certificate of Incorporation. If, after the Offer,
there are less than 300 registered holders of Preferred Shares remaining,
Purchaser currently anticipates that it will deregister and delist the
Preferred Shares from the New York Stock Exchange. Parent and Purchaser do not
intend to redeem any Preferred Shares that are not tendered and accepted by
Purchaser for purchase in the Offer. However, following the Merger, Purchaser
may seek to acquire the Preferred Shares that remain outstanding for cash at a
price or prices not exceeding $35.00 per share through open market
transactions, an amendment to the Certificate of Incorporation of the Company,
a subsequent merger, or otherwise.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business
operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted. The directors of
Purchaser will be the initial directors of the Surviving Corporation, and the
officers of the Company will be the initial officers of the Surviving
Corporation. Upon completion of the Offer and the Merger, Parent intends to
conduct a detailed review of the Company and its
31
assets, corporate structure, capitalization, operations, policies, management
and personnel. After such review, Parent will determine what actions or
changes, if any, would be desirable in light of the circumstances which then
exist.
Except as described in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals that would relate to or result in: (i) any
extraordinary corporate transaction, such as a merger, reorganization or
liquidation involving the Company or any of its subsidiaries, (ii) a purchase,
sale or transfer of a material amount of assets of the Company or any of its
subsidiaries, (iii) any change in the Company Board or management, including,
but not limited to, any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the Company Board or to change
any material term of the employment contract of any executive officer, (iv)
any material change in the Company's capitalization, indebtedness or dividend
policy, (v) any other material change in the Company's corporate structure or
business, (vi) a class of securities being delisted from a national securities
exchange or ceasing to be authorized to be quoted in an inter-dealer quotation
system of a registered national securities association, or (vii) a class of
equity securities of the Company becoming eligible for termination of
registration pursuant to Section 12(g)(4) of the Exchange Act. Certain members
of the Company's current management are not expected to continue with the
Surviving Corporation following the Merger. See Sections 12 and 14 of this
Offer to Purchase--"The Merger Agreement; Other Arrangements" and "Certain
Effects of the Offer," respectively.
14. Certain Effects of the Offer.
Market for the Common Shares and Preferred Shares. The purchase of Common
Shares and Preferred Shares pursuant to the Offer will reduce the number of
holders of Common Shares and Preferred Shares and the number of Common Shares
and Preferred Shares that might otherwise trade publicly and could adversely
affect the liquidity and market value of the remaining Common Shares and
Preferred Shares held by stockholders other than Purchaser. Purchaser cannot
predict whether the reduction in the number of Common Shares or Preferred
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or marketability of, the Common Shares or
Preferred Shares or whether such reduction would cause future market prices to
be greater or less than the Common Offer Price or the Preferred Offer Price,
as the case may be.
Stock Quotation. Listing the Common Shares and Preferred Shares on the New
York Stock Exchange is voluntary, so the Company may terminate such listing at
any time. Neither Parent nor Purchaser has any intention to cause the Company
to terminate the inclusion of the Common Shares or Preferred Shares on the New
York Stock Exchange prior to the Merger. However, depending upon the number of
Common Shares and Preferred Shares purchased pursuant to the Offer, the Common
Shares and/or Preferred Shares may no longer meet the standards for continued
inclusion on the New York Stock Exchange. According to its published
guidelines, the New York Stock Exchange would give consideration to delisting
the Common Shares or Preferred Shares if, among other things, the number of
publicly held Common Shares or Preferred Shares, as the case may be, falls
below 600,000, the number of holders of round lots of Common Shares or
Preferred Shares falls below 400 (or below 1,200 if the average monthly
trading volume is below 100,000 for the last twelve months). Common Shares and
Preferred Shares held by officers or directors of the Company or their
immediate families, or by any beneficial owner of more than 10% or more of the
Common Shares or Preferred Shares, ordinarily will not be considered as being
publicly held for this purpose. In the event the Common Shares or Preferred
Shares are no longer eligible for listing on the New York Stock Exchange,
quotations might still be available from other sources. The extent of the
public market for the Common Shares and the Preferred Shares and the
availability of such quotations would, however, depend upon the number of
holders of such shares at such time, the interest in maintaining a market in
such shares on the part of securities firms, the possible termination of
registration of such shares under the Exchange Act as described below and
other factors. If, as a result of the purchase of Common Shares and/or
Preferred Shares pursuant to the Offer, the Common Shares or Preferred Shares
no longer meet the criteria for continued inclusion in the New York Stock
Exchange, the market for the Common Shares or Preferred Shares, as the case
may be, could be adversely affected.
If the New York Stock Exchange were to delist the Common Shares or Preferred
Shares, it is possible that such shares would continue to trade on another
securities exchange or in the over-the-counter market and that
32
price or other quotations would be reported by such exchange, or through the
National Association of Securities Dealers Automated Quotation System, or
other sources. The extent of the public market for such delisted shares and
the availability of such quotations would depend upon such factors as the
number of stockholders and/or the aggregate market value of the publicly
traded shares remaining at such time, the interest in maintaining a market in
the shares on the part of securities firms, the possible termination of
registration under the Exchange Act (as described below) and other factors. We
cannot predict whether the reduction in the number of Common Shares or
Preferred Shares that might otherwise trade publicly would have an adverse or
beneficial effect on the market price for or marketability of such shares or
whether it would cause future market prices to be greater or less than the
Common Offer Price or the Preferred Offer Price, as the case may be.
Exchange Act Registration. The Common Shares and Preferred Shares are
currently registered under the Exchange Act. The purchase of the Common Shares
and Preferred Shares pursuant to the Offer may result in the Common Shares and
Preferred Shares becoming eligible for deregistration under the Exchange Act.
Such registration of the Common Shares and Preferred Shares may be terminated
upon application of the Company to the SEC if the Common Shares and Preferred
Shares are not listed on a national securities exchange and there are fewer
than 300 holders of record of the Common Shares and Preferred Shares.
Termination of registration of the Common Shares and Preferred Shares under
the Exchange Act would substantially reduce the information required to be
furnished by the Company to its stockholders and to the SEC and would make
certain provisions of the Exchange Act no longer applicable to the Company,
such as the short-swing profit recovery provisions of Section 16(b) of the
Exchange Act, the requirement of furnishing a proxy statement pursuant to
Section 14(a) of the Exchange Act in connection with stockholders' meetings
and the related requirement of furnishing an annual report to stockholders,
and the requirements of Rule 13e-3 under the Exchange Act with respect to
"going private" transactions. Furthermore, the ability of "affiliates" of the
Company and persons holding "restricted securities" of the Company to dispose
of such securities pursuant to Rule 144 promulgated under the Securities Act
of 1933 may be impaired or eliminated. If registration of the Common Shares
and Preferred Shares under the Exchange Act were terminated, the Common Shares
and Preferred Shares would no longer be "margin securities" or be eligible for
inclusion on the New York Stock Exchange.
Purchaser believes that the purchase of the Common Shares and Preferred
Shares pursuant to the Offer may result in the Common Shares and Preferred
Shares becoming eligible for deregistration under the Exchange Act and it
would be the intention of Purchaser to cause the Company to make an
application for termination of registration of the Common Shares and Preferred
Shares as soon as possible after successful completion of the Merger, if the
Common Shares and Preferred Shares are then eligible for such termination.
Margin Regulations. The Common Shares and Preferred Shares are currently
"margin securities" under the Regulations of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), which has the effect,
among other things, of allowing brokers to extend credit on the collateral of
the Common Shares and Preferred Shares. Depending upon factors similar to
those described above regarding the market for the Common Shares and Preferred
Shares and stock quotations, it is possible that, following the Offer, the
Common Shares and Preferred Shares would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for loans made by
brokers.
15. Dividends and Distributions.
The Merger Agreement provides that from the date of the Merger Agreement
until the Effective Time, unless Parent has consented in writing, the Company
may not declare, set aside or pay any dividend, make any other actual,
constructive or deemed distribution or otherwise make any payments to its
stockholders in their capacity as such, or redeem or otherwise acquire any of
its securities or any securities of any of its subsidiaries, other than the
dividends payable with respect to the Preferred Shares in the ordinary course.
33
16. Certain Conditions of the Offer.
Notwithstanding any other provision of the Offer (subject to the terms and
conditions of the Merger Agreement), and subject to any applicable rules and
regulations of the SEC including Rule 14e-l(c) under the Exchange Act relating
to Purchaser's obligation to pay for or return any tendered Common Shares or
Preferred Shares after termination of the Offer, Purchaser shall not be
required to accept for payment or pay for Common Shares or Preferred Shares
tendered pursuant to the Offer and may delay the acceptance for payment of any
Common Shares or Preferred Shares if (i) less than 25,562,006 Common Shares
and Preferred Shares, which represent a majority of the total outstanding
Common Shares and Preferred Shares on a fully-diluted basis, have been
tendered pursuant to the Offer by the expiration of the Offer and not
withdrawn, (ii) any applicable waiting period under the HSR Act or similar
statutes or regulations of a foreign jurisdiction has not expired or
terminated prior to the expiration of the Offer, or if to the extent required,
the Merger has not been approved by the Commission of the European Union under
Council Regulation (EEC) No. 4064/89 of the Council of the European Union, or
(iii) at any time after the date of the Merger Agreement and before the
Expiration Date, any of the following conditions shall have occurred and
continued to exist:
(a) there shall have been any statute, rule, regulation, judgment, order or
injunction enacted or entered and which shall remain in effect by any state or
United States government or governmental authority or by any state, United
States or European Union court or any agency or authority of the European
Union, other than the routine application to the Offer, the Merger or other
subsequent business combination of waiting periods under the HSR Act or
Council Regulation (EEC) No. 4064/89 of the Council of the European Union,
that has the effect of (i) making the acceptance for payment of, or the
payment for, some or all of the Common Shares illegal or otherwise prohibiting
consummation of the Offer, (ii) imposing limitations on the ability of
Purchaser or Parent to acquire or hold or to exercise effectively all rights
of ownership of the Common Shares or effectively to control the business,
assets or operations of Parent, the Company and their subsidiaries, of such
magnitude as would have a material adverse effect on the business, assets,
long-term earning capacity or financial condition of Parent, the Company and
their subsidiaries, taken as a whole; or
(b) a Company Material Adverse Effect shall have occurred and continued to
exist; or
(c) there shall have occurred and continued to exist (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange (excluding any coordinated trading halt triggered solely
as a result of a specified decrease in a market index and suspensions or
limitations resulting from physical damage to or interference with such
exchange not related to market conditions), (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 Company Material Adverse Effect, (iv)
any material limitation (whether or not mandatory) by any United States
governmental authority or agency on 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 27.5% 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) the Merger Agreement shall have been terminated in accordance with its
terms; or
(e) (i) the representations of the Company contained in the Merger Agreement
are not true and correct at and as of consummation of the Offer with the same
effect as if made at and as of such date or if such representations speak as
of an earlier date, as of such earlier date, except, in either such case to
the extent that the breach thereof would not have a Company Material Adverse
Effect, or (ii) the Company shall have failed to comply with its covenants and
agreements contained in the Merger Agreement in all material respects; or
(f) prior to the purchase of Common Shares pursuant to the Offer, the
Company Board shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to Purchaser its approval or
recommendation of the Offer, this Agreement or the Merger or shall have
recommended another offer, or shall have adopted any resolution to effect any
of the foregoing.
34
17. Certain Legal Matters; Regulatory Approvals.
General. Purchaser is not aware of any material pending legal proceeding
relating to the Offer. Based on its examination of publicly available
information filed by the Company with the SEC and other publicly available
information concerning the Company, Purchaser is not aware of any governmental
license or regulatory permit that appears to be material to the Company's
business that might be adversely affected by Purchaser's purchase of the
Common Shares and Preferred Shares as contemplated herein or, except as set
forth below, of any approval or other action by any government or governmental
administrative or regulatory authority or agency, domestic or foreign, that
would be required for the purchase or ownership of Common Shares and Preferred
Shares by Purchaser or Parent as contemplated herein. Should any such approval
or other action be required, Purchaser currently contemplates that, except as
described below under "State Takeover Statutes," such approval or other action
will be sought. There can be no assurance that any such approval or other
action, if needed, would be obtained or would be obtained without substantial
conditions or that if such approval were not obtained or such other action
were not taken, adverse consequences might not result to the Company's
business, or certain parts of the Company's business might not have to be
disposed of, any of which could cause Purchaser to elect to terminate the
Offer without the purchase of Common Shares and Preferred Shares under certain
conditions. See Section 16 of this Offer to Purchase--"Certain Conditions of
the Offer."
State Takeover Statutes. A number of states (including Delaware, where the
Company is incorporated), have adopted laws which purport, to varying degrees,
to apply to attempts to acquire corporations that are incorporated in, or
which have substantial assets, stockholders, principal executive offices or
principal places of business or whose business operations otherwise have
substantial economic effects in, such states. Except as described herein,
Purchaser does not know whether any of these laws will, by their terms, apply
to the Offer or the Merger or any other business combination between Purchaser
or any of its affiliates and the Company. To the extent that certain
provisions of these laws purport to apply to the Offer or the Merger or other
business combination, Purchaser believes that there are reasonable bases for
contesting such laws. In 1982, in Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However, in 1987 in
CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State
of Indiana could, as a matter of corporate law, constitutionally disqualify a
potential acquiror from voting shares of a target corporation without the
prior approval of the remaining stockholders where, among other things, the
corporation is incorporated in, and has a substantial number of stockholders
in, the state. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a
Federal District Court in Oklahoma ruled that the Oklahoma statutes were
unconstitutional insofar as they apply to corporations incorporated outside
Oklahoma in that they would subject such corporations to inconsistent
regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal District
Court in Tennessee ruled that four Tennessee takeover statutes were
unconstitutional as applied to corporations incorporated outside Tennessee.
This decision was affirmed by the United States Court of Appeals for the Sixth
Circuit.
Section 203 of the DGCL ("Section 203"), in general, prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of the corporation's outstanding voting stock) from engaging in a
"business combination" (defined to include mergers and certain other actions)
with a Delaware corporation for a period of three years following the date
such person became an interested stockholder. The Company Board has taken all
appropriate action so that neither Parent nor Purchaser is or will be
considered an "interested stockholder" pursuant to Section 203.
Neither Parent nor Purchaser has determined whether any other state takeover
laws or regulations will by their terms apply to the Offer or the Merger, and
except as set forth above, neither Purchaser nor Parent have attempted to
comply with any state takeover statutes in connection with the Offer or the
Merger. Purchaser and Parent reserve the right to challenge the validity or
applicability of any state law allegedly applicable to the Offer or the
Merger, and nothing in this Offer to Purchase nor any action taken by Parent
or Purchaser in connection with the Offer is intended as a waiver of that
right. In the event it is asserted that one or more state takeover statutes is
applicable to the Offer or the Merger and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer or the
Merger, Purchaser might be required to file certain information with, or
35
to receive approvals from, the relevant state authorities or holders of Common
Shares and/or Preferred Shares, and Purchaser might be unable to accept for
payment or pay for Common Shares and/or Preferred Shares tendered pursuant to
the Offer, or be delayed in continuing or consummating the Offer or the
Merger. In such case, Purchaser may not be obligated to accept for payment or
pay for any tendered Common Shares and/or Preferred Shares. See Section 16 of
this Offer to Purchase--"Certain Conditions of the Offer."
Antitrust in the United States. Under the HSR Act and the rules that have
been promulgated thereunder by the FTC, certain acquisition transactions may
not be consummated unless certain information has been furnished to the
Antitrust Division and the FTC and certain waiting period requirements have
been satisfied. The purchase of Common Shares and Preferred Shares pursuant to
the Offer is subject to such requirements.
Pursuant to the requirements of the HSR Act, Purchaser expects to file a
Notification and Report Form with respect to the Offer and Merger with the
Antitrust Division and the FTC on or about January 5, 2001. The waiting period
applicable to the purchase of Common Shares and Preferred Shares pursuant to
the Offer is scheduled to expire at 11:59 p.m., New York City time, fifteen
days after such filing. However, prior to such time, the Antitrust Division or
the FTC may extend the waiting period by requesting additional information or
documentary material relevant to the Offer from Purchaser. If such a request
is made, the waiting period will be extended until 11:59 p.m., New York City
time, on the tenth day after substantial compliance by Purchaser with such
request. Thereafter, such waiting period can be extended only by court order.
Any extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4 of this
Offer to Purchase--"Withdrawal Rights." If Purchaser's purchase of Common
Shares or Preferred Shares is delayed pursuant to a request by the Antitrust
Division or the FTC for additional information or documentary material
pursuant to the HSR Act, the Offer will be extended in certain circumstances.
See Section 16 of this Offer to Purchase--"Certain Conditions of the Offer."
The Antitrust Division and the FTC scrutinize the legality under the
antitrust laws of transactions such as the purchase of Common Shares and
Preferred Shares by Purchaser pursuant to the Offer. At any time before or
after the consummation of any such transactions, the Antitrust Division or the
FTC could take such action under the antitrust laws of the United States as it
deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of Common Shares and/or Preferred Shares pursuant to the
Offer or seeking divestiture of the Common Shares and/or Preferred Shares so
acquired or divestiture of substantial assets of Parent or the Company.
Private parties (including individual states) may also bring legal actions
under the antitrust laws of the United States. Purchaser does not believe that
the consummation of the Offer will result in a violation of any applicable
antitrust laws. However, there can be no assurance that a challenge to the
Offer on antitrust grounds will not be made, or if such a challenge is made,
what the result will be. See Section 16 of this Offer to Purchase--"Certain
Conditions of the Offer," including conditions with respect to litigation and
certain governmental actions and Section 12 of this Offer to Purchase--"The
Merger Agreement; Other Arrangements" for certain termination rights.
Foreign Regulatory Matters.
Completion of the transaction also may require certain approvals by foreign
regulatory authorities. The parties conduct business in a number of foreign
countries. Under the laws of certain foreign nations and multinational
authorities, such as the European Commission (under Council Regulation (EEC)
4064/89, or "ECMR"), the transaction may not be completed unless certain
filings are made with these nations' antitrust regulatory authorities or
multinational antitrust authorities and these antitrust authorities approve or
clear closing of the transaction. Other foreign nations and multinational
authorities have voluntary and/or post-merger notification systems. The
parties intend to file shortly all non-United States pre-merger notifications
that they believe are required, including that required under the ECMR. Should
any other approval or action be required, the parties currently contemplate
that such approval or action would be sought.
Although the parties believe that they will obtain all material required
regulatory approvals in a timely manner, it is not certain that all such
approvals will be received in a timely manner or at all or that foreign or
multinational antitrust authorities will not impose unfavorable conditions for
granting the required approvals.
36
18. Appraisal Rights.
No appraisal rights are available in connection with the Offer.
If Purchaser acquires at least 90% of the Common Shares and at least 90% of
the Preferred Shares pursuant to the Offer, the Merger may be consummated
without a stockholders' meeting and without the approval of the Company's
stockholders.
If less than 90% of the Preferred Shares are acquired pursuant to the Offer
and a stockholder vote is required to approve the Merger, holders of Preferred
Shares may have appraisal rights in connection with the Merger under certain
circumstances. If the Preferred Shares are not listed on a national securities
exchange or quoted on the Nasdaq National Market System on the record date
fixed to determine the stockholders entitled to receive notice of and to vote
on the Merger, the holders of Preferred Shares will have appraisal rights
pursuant to Section 262 of the DGCL ("Section 262").
In addition, holders of Common Shares at the Effective Time who do not wish
to accept the Merger Consideration pursuant to the Merger will have the right
to seek an appraisal and to be paid the "fair value" of their Common Shares at
the Effective Time (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) judicially determined and paid to
it in cash provided that such holder complies with the provisions of such
Section 262.
The following is a brief summary of the statutory procedures to be followed
in order to dissent from the Merger and perfect appraisal rights under
Delaware law. This summary is not intended to be complete and is qualified in
its entirety by reference to Section 262, the text of which is set forth in
Schedule II hereto. Any stockholder considering demanding appraisal is advised
to consult legal counsel. Dissenters' rights, if any, will not be available
unless and until the Merger (or a similar business combination) is
consummated.
Stockholders of record who desire to exercise their appraisal rights must
fully satisfy all of the following conditions. A written demand for appraisal
of Common Shares or Preferred Shares must be delivered to the Secretary of the
Company (x) before the taking of the vote on the approval and adoption of the
Merger Agreement if the Merger is not being effected without a vote of
stockholders pursuant to Section 253 of the DGCL (a "short-form merger"), but
rather is being consummated following approval thereof at a meeting of the
Company's stockholders (a "long-form merger") or (y) within twenty days after
the date that the Surviving Corporation mails to the stockholders a notice
(the "Notice of Merger") to the effect that the Merger is effective and that
appraisal rights are available (and includes in such notice a copy of Section
262 and any other information required thereby) if the Merger is being
effected as a short-form merger without a vote or meeting of the Company's
stockholders. If the Merger is effected as a long-form merger, this written
demand for appraisal must be in addition to and separate from any proxy or
vote abstaining from or against the approval and adoption of the Merger
Agreement, and neither voting against, abstaining from voting, nor failing to
vote on the Merger Agreement will constitute a demand for appraisal within the
meaning of Section 262. In the case of a long-form merger, any stockholder
seeking appraisal rights must hold the Common Shares or Preferred Shares for
which appraisal is sought on the date the demand is made and, continuously
hold such Common Shares or Preferred Shares through the Effective Time, and
otherwise comply with the provisions of Section 262.
In the case of both a short-form merger and a long-form merger, a demand for
appraisal must be executed by or for the stockholder of record, fully and
correctly, as such stockholder's name appears on the stock certificates. If
Common Shares or Preferred Shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, such demand must be executed by
the fiduciary. If Common Shares or Preferred Shares are owned of record by
more than one person, as in a joint tenancy or tenancy in common, such demand
must be executed by all joint owners. An authorized agent, including an agent
for two or more joint owners, may execute the demand for appraisal for a
stockholder of record; however, the agent must identify the record owner and
expressly disclose the fact that, in exercising the demand, he is acting as
agent for the record owner.
37
A record owner, such as a broker, who holds Common Shares or Preferred
Shares as a nominee for others, may exercise appraisal rights with respect to
the Common Shares or Preferred Shares held for all or less than all beneficial
owners of Common Shares or Preferred Shares as to which the holder is the
record owner. In such case the written demand must set forth the number of
Common Shares or Preferred Shares covered by such demand. Where the number of
Common Shares or Preferred Shares is not expressly stated, the demand will be
presumed to cover all Common Shares or Preferred Shares outstanding in the
name of such record owner. Beneficial owners who are not record owners and who
intend to exercise appraisal rights should instruct the record owner to comply
strictly with the statutory requirements with respect to the exercise of
appraisal rights before the date of any meeting of stockholders of the Company
called to approve the Merger in the case of a long-form merger and within
twenty days following the mailing of the Notice of Merger in the case of a
short-form merger.
Stockholders who elect to exercise appraisal rights must mail or deliver
their written demands to: Secretary, Litton Industries, Inc., 21240 Burbank
Boulevard, Woodland Hills, California 91367. The written demand for appraisal
should specify the stockholder's name and mailing address, the number of
Common Shares or Preferred Shares covered by the demand and that the
stockholder is thereby demanding appraisal of such shares. In the case of a
long-form merger, the Company must, within ten days after the Effective Time,
provide notice of the Effective Time to all stockholders who have complied
with Section 262 and have not voted for approval and adoption of the Merger
Agreement.
In the case of a long-form merger, stockholders electing to exercise their
appraisal rights under Section 262 must not vote for the approval and adoption
of the Merger Agreement or consent thereto in writing. Voting in favor of the
approval and adoption of the Merger Agreement, or delivering a proxy in
connection with the stockholders meeting called to approve the Merger
Agreement (unless the proxy votes against, or expressly abstains from the vote
on, the approval and adoption of the Merger Agreement), will constitute a
waiver of the stockholder's right of appraisal and will nullify any written
demand for appraisal submitted by the stockholder.
Regardless of whether the Merger is effected as a long-form merger or a
short-form merger, within 120 days after the Effective Time, either the
Company or any stockholder who has complied with the required conditions of
Section 262 and who is otherwise entitled to appraisal rights may file a
petition in the Delaware Court of Chancery demanding a determination of the
fair value of the shares of the dissenting stockholders. If a petition for an
appraisal is timely filed, after a hearing on such petition, the Delaware
Court of Chancery will determine which stockholders are entitled to appraisal
rights and thereafter will appraise the Common Shares and/or Preferred Shares
owned by such stockholders, determining the fair value of such Common Shares
and/or Preferred Shares exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value.
In determining fair value, the Delaware Court of Chancery is to take into
account all relevant factors. In Weinberger v. UOP, Inc., et al., the Delaware
Supreme Court discussed the factors that could be considered in determining
fair value in an appraisal proceeding, stating that "proof of value by any
techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered
and that "[f]air price obviously requires consideration of all relevant
factors involving the value of a company." The Delaware Supreme Court stated
that in making this determination of fair value the court must consider
"market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts which were known or which could be ascertained
as of the date of merger which throw any light on future prospects of the
merged corporation . . . ." The Delaware Supreme Court has construed Section
262 to mean that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the
merger and not the product of speculation, may be considered." However, the
court noted that Section 262 provides that fair value is to be determined
"exclusive of any element of value arising from the accomplishment or
expectation of the merger."
Stockholders who in the future consider seeking appraisal should have in
mind that the fair value of their Common Shares or Preferred Shares determined
under Section 262 could be more than, the same as, or less than the Merger
Consideration (or, in the case of the Preferred Shares, the highest amount
paid per Preferred Share in the Offer) if they do seek appraisal of their
Common Shares or Preferred Shares, and that opinions of investment banking
firms as to fairness from a financial point of view are not necessarily
opinions as to fair value under Section 262. Moreover, Parent intends to cause
the Surviving Corporation to argue in any appraisal proceeding
38
that, for purposes thereof, the "fair value" of the Common Shares or Preferred
Shares, as the case may be, is less than that paid in the Offer. The cost of
the appraisal proceeding may be determined by the Delaware Court of Chancery
and taxed upon the parties as the Delaware Court of Chancery deems equitable
in the circumstances. Upon application of a dissenting stockholder, the
Delaware Court of Chancery may order that all or a portion of the expenses
incurred by any dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, be charged pro rata against the value of all
Common Shares and/or Preferred Shares entitled to appraisal. In the absence of
such a determination or assessment, each party bears its own expenses.
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the Effective Time, be entitled to vote for any purpose
the Common Shares and/or Preferred Shares subject to such demand or to receive
payment of dividends or other distributions on such Common Shares and/or
Preferred Shares, except for dividends or other distributions payable to
stockholders of record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any former holder of
Common Shares or Preferred Shares shall have the right to withdraw his or her
demand for appraisal and to accept the Merger Consideration (or, in the case
of Preferred Shares, the highest amount paid per Preferred Share in the
Offer). After this period, such holder may withdraw his or her demand for
appraisal only with the consent of the Company as the Surviving Corporation.
If no petition for appraisal is filed with the Delaware Court of Chancery
within 120 days after the Effective Time, stockholders' rights to appraisal
shall cease and all stockholders shall be entitled to receive the Merger
Consideration (or, in the case of the Preferred Shares, the highest amount
paid per Preferred Share in the Offer). Inasmuch as the Company has no
obligation to file such a petition, and Parent has no present intention to
cause or permit the Surviving Corporation to do so, any stockholder who
desires such a petition to be filed is advised to file it on a timely basis.
However, no petition timely filed in the Delaware Court of Chancery demanding
appraisal shall be dismissed as to any stockholder without the approval of the
Delaware Court of Chancery, and such approval may be conditioned upon such
terms as the Delaware Court of Chancery deems just.
Failure to take any required step in connection with the exercise of
appraisal rights may result in the termination or waiver of such rights.
APPRAISAL RIGHTS CANNOT BE EXERCISED AT THIS TIME. THE INFORMATION SET FORTH
ABOVE IS FOR INFORMATIONAL PURPOSES ONLY WITH RESPECT TO ALTERNATIVES
AVAILABLE TO STOCKHOLDERS IF THE MERGER IS CONSUMMATED. STOCKHOLDERS WHO WILL
BE ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER WILL RECEIVE
ADDITIONAL INFORMATION CONCERNING APPRAISAL RIGHTS AND THE PROCEDURES TO BE
FOLLOWED IN CONNECTION THEREWITH BEFORE SUCH STOCKHOLDERS HAVE TO TAKE ANY
ACTION RELATING THERETO.
STOCKHOLDERS WHO SELL COMMON SHARES OR PREFERRED SHARES IN THE OFFER WILL
NOT BE ENTITLED TO EXERCISE APPRAISAL RIGHTS WITH RESPECT THERETO BUT, RATHER,
WILL RECEIVE THE PRICE PAID IN THE OFFER THEREFOR.
The foregoing summary of the rights of objecting stockholders under the DGCL
does not purport to be a complete statement of the procedures to be followed
by stockholders of the Company desiring to exercise any available dissenters'
rights. The foregoing summary is qualified in its entirety by reference to
Section 262. The preservation and exercise of dissenters' rights require
strict adherence to the applicable provisions of the DGCL.
19. Fees and Expenses.
Salomon Smith Barney Inc. is acting as the Dealer Manager in connection with
the Offer and as financial advisor to Parent in connection with our offer and
the Merger, for which services Salomon Smith Barney Inc. will receive
reasonable and customary compensation. Parent has agreed to reimburse Salomon
Smith Barney Inc.
39
for reasonable fees and expenses incurred by Salomon Smith Barney Inc. in
performing its services, including reasonable fees and expenses of its legal
counsel, and to indemnify Salomon Smith Barney Inc. and certain related
parties against certain liabilities, including liabilities under the federal
securities laws, arising out of its engagement. In the ordinary course of
business, Salomon Smith Barney Inc. and its affiliates may actively trade or
hold the securities of Parent, the Company and their respective affiliates for
Salomon Smith Barney Inc.'s and its affiliates' own account or for the account
of customers and, accordingly, may at any time hold a long or short position
in such securities.
Parent and Purchaser have retained Georgeson Shareholder Communications Inc.
to be the Information Agent and EquiServe Trust Company, to be the Depositary
in connection with the Offer. The Information Agent may contact holders of
Common Shares or Preferred Shares by mail, telephone, telecopy, telegraph and
personal interview and may request banks, brokers, dealers and other nominees
to forward materials relating to the Offer to beneficial owners of Common
Shares or Preferred Shares. The Information Agent and the Depositary each will
receive reasonable and customary compensation for their respective services in
connection with the Offer, will be reimbursed for reasonable out-of-pocket
expenses, and will be indemnified against certain liabilities and expenses in
connection therewith, including certain liabilities under federal securities
laws. Parent also retained Salomon Smith Barney Inc. to render financial
advisory services to Parent concerning its acquisition of the Company and to
act as the Dealer Manager in connection with the Offer, pursuant to which
Salomon Smith Barney Inc. will be paid customary compensation. Neither Parent
nor Purchaser will pay any fees or commissions to any broker or dealer or to
any other person (other than to the Dealer Manager, the Depositary and the
Information Agent) in connection with the solicitation of tenders of Common
Shares and Preferred Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by
Purchaser for customary mailing and handling expenses incurred by them in
forwarding Offering materials to their customers.
20. Miscellaneous.
Neither Purchaser nor Parent is aware of any jurisdiction where the making
of the Offer is prohibited by any administrative or judicial action pursuant
to any valid state statute. If either Purchaser or Parent becomes aware of any
valid state statute prohibiting the making of the Offer or the acceptance of
the Common Shares and Preferred Shares, Parent and Purchaser will make a good
faith effort to comply with that state statute. If, after a good faith effort,
Purchaser and Parent cannot comply with the state statute, the Offer will not
be made to, nor will tenders be accepted from or on behalf of, the holders of
Common Shares and Preferred Shares in that state.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED HEREIN IN THE
OFFER DOCUMENTS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO
pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange
Act, together with exhibits furnishing certain additional information with
respect to the Offer, and may file amendments thereto. In addition, the
Company has filed with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 under the
Exchange Act, setting forth the recommendations of the Company Board with
respect to the Offer and the reasons for such recommendations and furnishing
certain additional related information. A copy of such documents, and any
amendments thereto, may be examined at, and copies may be obtained from, the
SEC (but not the regional offices of the SEC) in the manner set forth in
Section 7 of this Offer to Purchase entitled "Certain Information Concerning
the Company."
LII Acquisition Corp.
January 5, 2001
40
SCHEDULE I:
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER
1. Directors and Executive Officers of Parent.
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for
the past five years of each director and executive officer of Parent. Unless
otherwise indicated below, each occupation set forth opposite each person
refers to employment with Parent. Unless otherwise indicated, the business
address of each such person is c/o Northrop Grumman Corporation at 1840
Century Park East, Los Angeles, California 90067 and each such person is a
citizen of the United States.
Directors and
Executive Officers Present Principal and Five-Year Employment History
------------------ --------------------------------------------------
Kent Kresa*............. Chairman, President and Chief Executive Officer.
Before joining the Company, Kent Kresa was associated
with the Lincoln Laboratory of M.I.T. and the Defense
Advanced Research Projects Agency of the Department
of Defense. In 1975, he joined the Company as Vice
President and Manager of the Company's Research and
Technology Center. He became General Manager of the
Ventura Division in 1976, Group Vice President of the
Aircraft Group in 1982 and Senior Vice President for
Technology and Development in 1986. Mr. Kresa was
elected President and Chief Operating Officer of the
Company in 1987. He was named Chief Executive Officer
in 1989 and Chairman of the Board in 1990. Mr. Kresa
is a member of the National Academy of Engineering
and is past Chairman of the Board of Governors of the
Aerospace Industries Association. He is also an
Honorary Fellow of the American Institute of
Aeronautics and Astronautics. He serves on the Board
of Directors of the W.M. Keck Foundation and on the
Board of Trustees of the California Institute of
Technology, and serves as a director of Avery
Dennison Corporation, the Los Angeles World Affairs
Council, the John Tracy Clinic and Eclipse Aviation.
He is also a Member of the Corporation, Draper
Laboratories, Inc. and serves on the Board of
Governors of the Performing Arts Center of Los
Angeles.
Jack R. Borsting*....... E. Morgan Stanley Professor of Business
Administration and Director of the Center for
Telecommunications Management, University of Southern
California. Dr. Jack R. Borsting was at the Naval
Postgraduate School in Monterey, California from 1959
to 1980. During his tenure at Monterey, he was
professor of Operations Research, Chairman of the
Department of Operations Research and Administration
Science, and Provost and Academic Dean. Dr. Borsting
was Assistant Secretary of Defense (Comptroller) from
1980 to 1983 and Dean of the School of Business at
the University of Miami from 1983 to 1988. From 1988
to 1994, he was the Robert R. Dockson professor and
Dean of the School of Business Administration at the
University of Southern California, Los Angeles. He is
past president of both the Operations Research
Society of America and the Military Operations
Research Society. He is currently Chairman of the
Board of Trustees of the Orthopedic Hospital of
Los Angeles and serves as a director of Whitman
Education Group and TRO Learning, Inc. He is also a
trustee of the Rose Hills Foundation.
John T. Chain, Jr.*..... General, United States Air Force (Ret.) and Chairman
of the Board, Thomas Group, a management consulting
company. During his military career, General John T.
Chain held a number of Air Force commands. In 1978,
he became military assistant to the Secretary of the
Air Force. In 1984, he became the Director of
Politico-Military Affairs, Department of State.
General Chain has
41
been Chief of Staff of Supreme Headquarters Allied
Powers Europe, and Commander in Chief, Strategic Air
Command, the position from which he retired in
February 1991. In March 1991, he became Executive
Vice President for Burlington Northern Railroad,
serving in that capacity until February 1996. In
December 1996, he assumed the position of President
of Quarterdeck Equity Partners, Inc. and in May 1998,
he became Chairman of the Board of Thomas Group, Inc.
He is also a director of Nabisco Holding Group, Inc.,
R.J. Reynolds, Inc. and Kemper Insurance Company.
Vic Fazio*.............. Senior Partner, Clark & Weinstock, a consulting firm.
Vic Fazio served as a Member of Congress for twenty
years representing California's third congressional
district. During that time he served as a member of
the Armed Services, Budget and Ethics Committees and
was a member of the House Appropriations Committee
where he served as Subcommittee Chair or ranking
member for eighteen years. Mr. Fazio was a member of
the elected Democratic Leadership in the House from
1991-1998 including four years as Chair of the
Democratic Caucus, the third ranking position in the
party. From 1975 to 1978 Mr. Fazio served in the
California Assembly and was a member of the staff of
the California Assembly Speaker from 1971 to 1975.
Upon leaving Congress in early 1999, he became a
Senior Partner at Clark & Weinstock, a strategic
communications consulting firm. He is a member of
numerous boards including The California Institute,
Coro National Board of Governors, the U.S. Capitol
Historical Society and the Board of Visitors, The
University of California at Davis.
Phillip Frost*.......... Chairman of the Board and Chief Executive Officer,
IVAX Corporation, a pharmaceutical company. Dr.
Phillip Frost has served as Chairman of the Board of
Directors and Chief Executive Officer of IVAX
Corporation since 1987. He was Chairman of the
Department of Dermatology at Mt. Sinai Medical Center
of Greater Miami, Miami Beach, Florida from 1972 to
1990. Dr. Frost was Chairman of the Board of
Directors of Key Pharmaceuticals, Inc. from 1972 to
1986. He is Chairman of Whitman Education Group, and
Vice Chairman of the Board of Directors of North
American Vaccine, Inc., and Continucare Corporation.
He is also a Trustee of the Board of the University
of Miami and a member of the Board of Governors of
the American Stock Exchange.
Charles R. Larson*...... Admiral, United States Navy (Ret.). Charles R. Larson
was superintendent of the U.S. Naval Academy from
1983 to 1986. In 1991, he became senior military
commander in the Pacific. He returned to the U.S.
Naval Academy in 1994, where he served as
superintendent until 1998. Currently, he is Chairman
of the Board of the U.S. Naval Academy Foundation,
Vice Chairman of the Board of Regents of the
University System of Maryland and serves on the board
of directors of such organizations as Constellation
Energy Group, Inc., the White House Fellows
Foundation, Edge Technologies, Inc., Fluor Global
Services, the Atlantic Council, Military.com and the
National Academy of Sciences' Committee on
International Security and Arms Control. In addition,
he is a member of the Council on Foreign Relations
and is a senior fellow of The CNA Corporation. His
decorations include the Defense Distinguished Service
Medal, seven Navy Distinguished Service Medals, three
Legions of Merit, Bronze Star Medal, Navy
Commendation and the Navy Achievement Medal.
Robert A. Lutz*......... Chairman and Chief Executive Officer, Exide
Corporation, a battery manufacturing company. Robert
A. Lutz has served as Chairman and Chief Executive
Officer of Exide Corporation since December 1998.
Previously he had
42
joined Chrysler Corporation in 1986 as Executive Vice
President of Chrysler Motors Corporation and was
elected a director of Chrysler Corporation that same
year. He was elected President in 1991 and Vice
Chairman in 1996. He retired from Chrysler
Corporation in July 1998. Prior to joining Chrysler
Corporation, Mr. Lutz held senior positions with Ford
Motor Company, General Motors Corporation Europe and
Bavarian Motor Werke. He is an executive director of
the National Association of Manufacturers and a
member of the National Advisory Council of the
University of Michigan School of Engineering, the
Board of Trustees of the U.S. Marine Corps University
Foundation and the Advisory Board of the University
of California-Berkeley, Haas School of Business. Mr.
Lutz is also a director of ASCOM Holdings, A.G. and
Silicon Graphics, Inc.
Aulana L. Peters*....... Partner, Gibson, Dunn & Crutcher. Aulana L. Peters
joined the law firm of Gibson, Dunn & Crutcher in
1973. In 1980, she was named a partner in the firm
and continued in the practice of law until 1984 when
she accepted an appointment as Commissioner of the
SEC. In 1988, after serving four years as a
Commissioner, she returned to Gibson, Dunn &
Crutcher. Ms. Peters is a director of Callaway Golf
Company, Minnesota Mining and Manufacturing Company,
and Merrill Lynch & Co., Inc. She is also a member of
the Board of Directors of Community Television for
Southern California ("KCET") and of the Legal
Advisory Board of the National Association of
Securities Dealers. Ms. Peters is a member of the
Financial Accounting Standards Board Steering
Committee for its Financial Reporting Project and is
a member of the Public Oversight Board's Panel on
Audit Effectiveness.
John E. Robson*......... Senior Advisor, Robertson Stephens, a Fleet Boston
Financial Company, investment bankers. From 1989 to
1993, John E. Robson served as Deputy Secretary of
the United States Treasury. He was Dean and Professor
of Management at the Emory University School of
Business Administration from 1986 to 1989 and
President and Chief Executive Officer and Executive
Vice President and Chief Operating Officer of G.D.
Searle & Co., a pharmaceutical company, from 1977 to
1986. Previously, he held government posts as
Chairman of the U.S. Civil Aeronautics Board,
regulator of the airline industry and Under Secretary
of the U.S. Department of Transportation, and engaged
in the private practice of law as a partner of Sidley
and Austin. Mr. Robson is a director of Exide
Corporation, Monsanto Company and ProLogis Trust. He
is also a Distinguished Visiting Fellow of the Hoover
Institution at Stanford University, a Visiting Fellow
at the Heritage Foundation and a director of the
University of California San Francisco Foundation.
Richard M. Rosenberg*... Chairman of the Board and Chief Executive Officer
(Ret.), BankAmerica Corporation and Bank of America
NT&SA. Richard M. Rosenberg was the Chairman of the
Board and Chief Executive Officer of BankAmerica
Corporation ("BAC") and Bank of America ("BofA") from
1990 to 1996. He had served as President since
February 1990 and as Vice Chairman of the Board and a
director of BAC and the BofA since 1987. Before
joining BAC, Mr. Rosenberg served as President and
Chief Operating Officer of Seafirst Corporation and
Seattle-First National Bank, which he joined in 1986.
Mr. Rosenberg is a retired Commander in the U.S. Navy
Reserve, a director of
Airborne Express Corporation, SBC Communications,
Chronicle Publishing, Pacific Life Insurance Company,
and Bank of America Corporation and a member of the
Board of Trustees of the California Institute of
Technology.
43
John Brooks Slaughter*.. President and CEO of the National Action Council for
Minorities in Engineering, Inc. Dr. John Brooks
Slaughter held electronics engineering positions with
General Dynamics Convair and the U.S. Navy
Electronics Laboratory. In 1975, he became Director
of the Applied Physics Laboratory of the University
of Washington. In 1977, he was appointed Assistant
Director for Astronomics, Atmospherics, Earth and
Ocean Sciences at the National Science Foundation.
From 1979 to 1980, he served as Academic Vice
President and Provost of Washington State University.
In 1980, he returned to the National Science
Foundation as Director and served in that capacity
until 1982 when he became Chancellor of the
University of Maryland, College Park. From 1988 to
July 1999, Dr. Slaughter was President of Occidental
College in Los Angeles and in August 1999, he assumed
the position of Melbo Professor of Leadership in
Education at the University of Southern California.
In June 2000, Dr. Slaughter was named President and
CEO of the National Action Counsel for Minorities in
Engineering, Inc. He is a member of the National
Academy of Engineering, a fellow of the American
Academy of Arts and Sciences and serves as a director
of Avery Dennison Corporation, Solutia, Inc. and
International Business Machines Corporation.
Richard J. Stegemeier*.. Chairman Emeritus of the Board of Directors, Unocal
Corporation, an integrated petroleum company. Richard
J. Stegemeier joined Union Oil Company of California,
principal operating subsidiary of Unocal Corporation
("Unocal"), in 1951. He became President and Chief
Operating Officer in 1985, and President and Chief
Executive Officer in 1988. In 1989 he was elected
Chairman of the Board, the position from which he
retired in 1995. Mr. Stegemeier is a member of the
National Academy of Engineering and a director of
Foundation Health Systems, Inc., Halliburton Company,
Sempra Energy and Montgomery Watson, Inc.
Herbert W. Anderson..... Corporate Vice President, President and Chief
Executive Officer, Logicon, Inc. since 1998. Prior to
this, Mr. Anderson was Corporate Vice President and
General Manager, Data Systems and Services Division.
Ralph D. Crosby, Jr..... Corporate Vice President and President, Integrated
Systems and Aerostructures Sector since 1998. Prior
to this, Mr. Crosby was Corporate Vice President and
General Manager, Commercial Aircraft Division. Prior
to September 1996, he was Corporate Vice President
and Deputy General Manager, Commercial Aircraft
Division. Prior to March 1996, he was Corporate Vice
President and Deputy General Manager, Military
Aircraft Systems Division. Prior to January 1996, he
was Corporate Vice President and General Manager, B-2
Division.
J. Michael Hateley...... Corporate Vice President and Chief Human Resources
and Administrative Officer since 2000. Prior to
January 1999, Mr. Hateley was Vice President, Human
Resources, Security and Administration Military
Aircraft Systems Division. Prior to 1996, he was Vice
President, Human Resources, Security and
Administration, B-2 Division.
Robert W. Helm.......... Corporate Vice President, Government Relations since
1994.
John H. Mullan.......... Corporate Vice President and Secretary since 1999.
Prior to this, Mr. Mullan was Acting Secretary. Prior
to May 1998, he was Senior Corporate Counsel.
Albert F. Myers......... Corporate Vice President and Treasurer since 1994.
Rosanne P. O'Brien...... Corporate Vice President, Communications since
August, 2000. Prior to this, Ms. O'Brien was Vice
President, Communications since January, 1999.
Ms. O'Brien was Senior Consultant to Alleghany
Teledyne, Inc. from 1996 to 1999, and Vice President,
Corporate Relations for Teledyne, Inc. from 1993
through 1995.
44
James G. Roche.......... Corporate Vice President and President, Electronic
Sensors and Systems Sector since 1998. Prior to this,
Mr. Roche was Corporate Vice President and General
Manager, Electronic Sensors and Systems Division.
Prior to 1996, he was Corporate Vice President and
Chief Advanced Development, Planning, and Public
Affairs Officer.
W. Burks Terry.......... Corporate Vice President and General Counsel since
August, 2000. Prior to this, Mr. Terry became Vice
President, Deputy General Counsel and Sector Counsel
in October, 1998 and prior to October, 1998 he was
Vice President and Assistant General Counsel.
Robert B. Spiker........ Corporate Vice President and Controller since
December, 2000. Prior to this, Mr. Spiker was Vice
President, Finance and Controller, Electronic Sensors
and Systems Sector. Prior to 1999, he was Business
Manager for C3&I Naval Systems.
Richard B. Waugh, Jr.... Corporate Vice President and Chief Financial Officer
since 1993.
- --------
* Member of Parent's Board of Directors.
2. Directors and Executive Officers of Purchaser.
The following table sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for
the past five years of each director and executive officer of Purchaser.
Unless otherwise indicated below, each occupation set forth opposite each
person refers to employment with Purchaser. Unless otherwise indicated, the
business address of each such person is c/o Parent at 1840 Century Park East,
Los Angeles, California 90067 and each such person is a citizen of the United
States.
Directors and
Executive Officers Present Principal and Five-Year Employment History
------------------ --------------------------------------------------
Albert F. Myers** President. Mr. Myers has held the position of
Corporate Vice President and Treasurer of Parent
since 1994.
W. Burks Terry** Chief Financial Officer, Vice President and General
Counsel. In addition, Mr. Terry has held the position
of Corporate Vice President and General Counsel of
Parent since August 2000. From October 1998 to August
2000, Mr. Terry was Vice President, Deputy General
Counsel, and Sector Counsel of Parent. From 1989 to
October 1998, Mr. Terry was Vice President and
Assistant General Counsel of Parent.
John H. Mullan** Secretary. In addition, Mr. Mullan has held the
positions of Corporate Vice President and Secretary
of Parent since 1999. Prior to this, Mr. Mullan was
Acting Secretary of Parent, and prior to May 1998,
Mr. Mullan was Senior Corporate Counsel of Parent.
- --------
** Member of Purchaser's Board of Directors.
45
SCHEDULE II:
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
DELAWARE CODE ANNOTATED
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER, CONSOLIDATION OR CONVERSION
8 Del. C. (S) 262 (2000)
Section 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing pursuant
to (S) 228 of this title shall be entitled to an appraisal by the Court of
Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to (S)
251(g) of this title), (S) 252, (S) 254, (S) 257, (S) 258, (S) 263 or (S) 264
of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by more than
2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of (S)
251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to (S)(S) 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts
in respect thereof) or depository receipts at the effective date
of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;
46
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs paragraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs paragraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under (S) 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for such
meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection section and has
not voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to (S) 228 or (S)
253 of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall
notify each of the holders of any class or series of stock of such constituent
corporation who are entitled to appraisal rights of the approval of the merger
or consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such
notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective date
of the merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however,
that if such second notice is sent more than 20 days following the sending of
the first notice, such
47
second notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to give
either notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be not
more than 10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or consolidation,
the record date shall be such effective date. If no record date is fixed and
the notice is given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the notice is
given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial
48
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder
whose name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under
this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of such stockholder's demand for an appraisal and an acceptance of the merger
or consolidation, either within 60 days after the effective date of the merger
or consolidation as provided in subsection (e) of this section or thereafter
with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
49
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, Share Certificates and
any other required documents should be sent by each stockholder or such
stockholder's broker, dealer, commercial bank, trust company or other nominee
to the Depositary at one of the addresses set forth below:
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Mail: By Hand: By Overnight Delivery:
EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY
P.O. Box 842010 c/o Securities Transfer and 40 Campanelli Drive
Boston, Massachusetts Reporting Services Inc. Braintree, Massachusetts 02184
02284-2010 100 William Street--Galleria
New York, New York 10038
By Facsimile Transmission: Confirmation Receipt of Facsimile
(For Eligible Institutions Only) by Telephone Only:
(781) 575-4826 (781) 575-4816
or
(781) 575-4827
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers as set forth below. Additional copies of this Offer to Purchase, the
Letter of Transmittal, or other related tender offer materials may be obtained
from the Information Agent or from brokers, dealers, commercial banks or trust
companies.
The Information Agent for the Offer is:
[LOGO OF GEORGESON SHAREHOLDER COMMUNICATIONS INC.]
17 State Street, 10th Floor
New York, New York 10004
Bankers and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
Salomon Smith Barney
[LOGO FOR SALOMON SMITH BARNEY]
388 Greenwich Street
New York, New York 10013
Call Toll Free: (877) 319-4978
EXHIBIT 99.(a)(1)(ii)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
(together with associated rights)
of
Litton Industries, Inc.
at
$80.00 Net Per Share
Pursuant to the Offer to Purchase
Dated January 5, 2001
of
LII Acquisition Corp.,
a wholly owned subsidiary of
Northrop Grumman Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 2, 2001, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Mail: By Hand: By Overnight Delivery:
EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY
P.O. Box 842010 c/o Securities Transfer and 40 Campanelli Drive
Boston, Massachusetts 02284-2010 Reporting Services, Inc. Braintree, Massachusetts 02184
100 William Street--Galleria
New York, New York 10038
By Facsimile Transmission: By Confirmation Receipt of Facsimile
(for Eligible Institutions
Only) by Telephone Only:
(781) 575-4826 (781) 575-4816
or
(781) 575-4827
Delivery of this Letter of Transmittal to an address other than as set forth
above, or transmissions of instructions via a facsimile number other than as
set forth above, will not constitute a valid delivery. The instructions
accompanying this Letter of Transmittal should be read carefully before this
Letter of Transmittal is completed. You must sign this Letter of Transmittal
in the appropriate space provided therefor, with signature guarantee if
required, and complete the substitute form W-9 set forth below. See
Instruction 9.
DESCRIPTION OF COMMON SHARES TENDERED
- --------------------------------------------------------------------------------------------------
Common Share Certificate(s) and
Name(s) and address(es) of registered holder(s) Common Share(s) tendered (attach
(Please fill in, if blank, exactly as name(s) appear(s) on additional list if necessary). See
Common Share Certificate(s)) Instruction 3.
- --------------------------------------------------------------------------------------------------
Total Number
of Common
Shares Number of
Common Share Represented Common
Certificate by Share(s)
Number(s)* Certificate(s) Tendered**
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Total Common
Shares
* Need not be completed by stockholder delivering by book-entry transfer.
** Unless otherwise indicated it will be assumed that all Common Shares
evidenced by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
This Letter of Transmittal is to be completed by stockholders, either if
Common Share Certificates (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase, as referred to
below) is utilized, if tenders of Common Shares (as defined below) are to be
made by book-entry transfer into the account of EquiServe Trust Company, as
Depositary (the "Depositary"), at The Depository Trust Company (the "Book-
Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of
the Offer to Purchase. Stockholders who tender Common Shares by book-entry
transfer are referred to herein as "Book-Entry Stockholders." Stockholders
whose Common Share Certificates are not immediately available or who cannot
deliver their Common Share Certificates and all other required documents to
the Depositary on or prior to the Expiration Date (as defined in the Offer to
Purchase), or who cannot complete the procedure for book-entry transfer on a
timely basis, must tender their Common Shares according to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Depositary.
SPECIAL TENDER INSTRUCTIONS
[_]CHECK HERE IF COMMON SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE
TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER COMMON SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
[_]CHECK HERE IF COMMON SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING (please enclose a photocopy of such notice of guaranteed
delivery):
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
2
NOTE: SIGNATURES MUST BE PROVIDED ON PAGE 6
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to LII Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Northrop Grumman
Corporation, a Delaware corporation, the above described shares of common
stock, par value $1.00 per share (together with the associated rights to
purchase preferred stock of Litton Industries, Inc. (the "Company") pursuant
to the Rights Agreement dated as of August 17, 1994 between the Company and
The Bank of New York, the "Common Shares" and the certificates representing
such Common Shares, the "Common Share Certificates") of the Company, at a
price of $80.00 per Common Share, net to the seller in cash, less any required
withholding of taxes and without the payment of interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated January 5,
2001 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and
in this Letter of Transmittal (the "Letter of Transmittal," which, together
with the Offer to Purchase, as each may be amended or supplemented from time
to time, collectively constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Common Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all of the Common Shares that are being
tendered hereby and any and all Common Shares or other securities issued, paid
or distributed or issuable, payable or distributable in respect of such Common
Shares on or after January 5, 2001, and prior to the transfer to the name of
Purchaser (or a nominee or transferee of Purchaser) on the Company's stock
transfer records of the Common Shares tendered herewith (collectively, a
"Distribution"), and irrevocably appoints the Depositary the true and lawful
agent, attorney-in-fact and proxy of the undersigned with respect to such
Common Shares (and any Distribution), with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver such Common Share Certificates (and any Distribution)
or transfer ownership of such Common Shares (and any Distribution) on the
account books maintained by the Book-Entry Transfer Facility, together, in
either case, with appropriate evidences of transfer, to the Depositary for the
account of Purchaser, (b) present such Common Shares (and any Distribution)
for transfer on the books of the Company, and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Common Shares
(and any Distribution), all in accordance with the terms and subject to the
conditions of the Offer.
The undersigned irrevocably appoints designees of Purchaser as such
undersigned's agents, attorneys-in-fact and proxies, with full power of
substitution, to the full extent of the undersigned's rights with respect to
the Common Shares (and any Distribution) tendered by the undersigned and
accepted for payment by Purchaser. All such powers of attorney and proxies
shall be considered irrevocable and coupled with an interest. Such appointment
will be effective when, and only to the extent that, Purchaser accepts such
Common Shares for payment. Upon such acceptance for payment, all prior powers
of attorney, proxies and consents given by the undersigned with respect to
such Common Shares (and any Distribution) will be revoked without further
action, and no subsequent powers of attorney and proxies may be given nor any
subsequent written consents executed (and, if given or executed, will not be
deemed effective). The designees of Purchaser will, with respect to the Common
Shares (and any Distribution) for which such appointment is effective, be
empowered to exercise all voting and other rights of the undersigned as they
in their sole discretion may deem proper at any annual or special meeting of
Company stockholders or any adjournment or postponement thereof, by written
consent in lieu of any such meeting or otherwise. Purchaser reserves the right
to require that, in order for the Common Shares to be deemed validly tendered,
immediately upon Purchaser's acceptance of such Common Shares, Purchaser must
be able to exercise full voting rights with respect to such Common Shares (and
any Distribution), including, without limitation, voting at any meeting of
stockholders.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the
undersigned's Common Shares (and any Distribution) tendered hereby, and (b)
when the Common Shares are accepted for payment by Purchaser, Purchaser will
acquire good, marketable and unencumbered title to the Common Shares (and any
Distribution), free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse claim and will
not have been transferred to Purchaser in violation of any contractual or
other
3
restriction on the transfer thereof. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the Common Shares (and any Distribution) tendered hereby. In
addition, the undersigned shall promptly remit and transfer to the Depositary
for the account of Purchaser any and all Distributions in respect of the
Common Shares tendered hereby, accompanied by appropriate documentation of
transfer, and, pending such remittance or appropriate assurance thereof,
Purchaser will be, subject to applicable law, entitled to all rights and
privileges as the owner of any such Distribution and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof,
as determined by Purchaser, in its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and
any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Common Shares made pursuant to the Offer are irrevocable, except
that Common Shares tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date, and, unless theretofore accepted for payment by
the Purchaser pursuant to the Offer, may also be withdrawn at any time after
Tuesday, March 6, 2001. See Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Common Shares pursuant to any of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions set
forth in the Offer, including the undersigned's representation that the
undersigned owns the Common Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or issue or return any
certificate(s) for Common Shares not tendered or not accepted for payment in
the name(s) of the registered holder(s) appearing under "Description of Common
Shares Tendered." Similarly, unless otherwise indicated herein under "Special
Delivery Instructions," please mail the check for the purchase price and/or
any Common Share Certificate(s) not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Common Shares Tendered." In the
event that both the "Special Delivery Instructions" and the "Special Payment
Instructions" are completed, please issue the check for the purchase price
and/or any Common Share Certificate(s) not tendered or accepted for payment in
the name of, and deliver such check and/or such Common Share Certificates to,
the person or persons so indicated. Unless otherwise indicated herein under
"Special Payment Instructions," please credit any Common Shares tendered
herewith by book-entry transfer that are not accepted for payment by crediting
the account at the Book-Entry Transfer Facility designated above. The
undersigned recognizes that Purchaser has no obligation, pursuant to the
Special Payment Instructions, to transfer any Common Shares from the name(s)
of the registered holder(s) thereof if Purchaser does not accept for payment
any of the Common Shares so tendered.
[_]CHECK HERE IF ANY COMMON SHARE CERTIFICATES REPRESENTING COMMON SHARES THAT
YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 11.
Number of Common Shares represented by lost, stolen or destroyed Common
Share Certificates:
* YOU MUST CONTACT THE TRANSFER AGENT TO HAVE ALL LOST COMMON SHARE
--------------
CERTIFICATES REPLACED IF YOU WANT TO TENDER SUCH COMMON SHARES. SEE
PARAGRAPH 11 OF THE ATTACHED INSTRUCTIONS FOR CONTACT INFORMATION FOR THE
TRANSFER AGENT.
4
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if Common To be completed ONLY if Common
Share Certificate(s) not tendered Share Certificate(s) not tendered
or not accepted for payment or not accepted for payment
and/or the check for the purchase and/or the check for the purchase
price of Common Shares accepted price of Common Shares accepted
for payment are to be issued in for payment are to be issued in
the name of someone other than the name of someone other than
the undersigned or if Common the undersigned or to the
Shares tendered by book-entry undersigned at an address other
transfer that are not accepted than that shown above.
for payment are to be returned by
credit to an account maintained
at the Book-Entry Transfer
Facility other than that
designated above.
Issue [_] Check Issue [_] Check
[_] Common Share [_] Common Share
Certificate(s) to: Certificate(s) to:
Name: ____________________________ Name: ____________________________
(Please Print) (Please Print)
Address: _________________________ Address: _________________________
__________________________________ __________________________________
__________________________________ __________________________________
(Include Zip Code) (Include Zip Code)
__________________________________ __________________________________
(Tax Identification or Social (Tax Identification or Social
Security No.) Security No.)
(See Substitute Form W-9 Included (See Substitute Form W-9 Included
Herein) Herein)
[_]Credit Common Shares tendered
by book-entry transfer that
are not accepted for payment
to Depositary to the account
set forth below:
__________________________________
__________________________________
(Depositary Account Number)
5
SIGN HERE
AND COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Signature(s) of Holder(s)
(See guarantee requirement below)
Dated: ____________ , 2001
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Common Share Certificate(s). If signed by person(s) to whom the Common
Shares represented hereby have been assigned or transferred as evidenced by
endorsement or stock powers transmitted herewith, the signatures must be
guaranteed. If signature is by an officer on behalf of a corporation or by
an executor, administrator, trustee, guardian, attorney, agent or any other
person acting in a fiduciary or representative capacity, please provide the
following information. See Instructions 2, 3 and 5.)
Name(s): ___________________________________________________________________
----------------------------------------------------------------------------
(Please Print)
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Zip Code)
Area Code and Telephone Number: ____________________________________________
Tax Identification or Social Security Number: ______________________________
============================================================================
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1, 2 AND 5)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
(Please Print)
Capacity (full title): _____________________________________________________
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number: ____________________________________________
Dated: ______________________________________________________________ , 2001
6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal if: (a) this Letter of Transmittal is signed by the
registered holder(s) of Common Shares (which term, for purposes of this
document, shall include any participant in the Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Common
Shares) tendered herewith, unless such holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions," or (b) such Common Shares are tendered for the account of a
firm which is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of a recognized Medallion
Program approved by the Securities Transfer Association Inc., including the
Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange
Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature
Program (MSP), or any other "eligible guarantor institution" (as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934) (each of the
foregoing, an "Eligible Institution"'). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
stockholders either if Common Share Certificates are to be forwarded herewith
or, unless an Agent's Message is utilized, if tenders are to be made pursuant
to the procedure for tender by book-entry transfer set forth in Section 3 of
the Offer to Purchase. Common Share Certificates evidencing tendered Common
Shares, or timely confirmation (a "Book-Entry Confirmation") of a book-entry
transfer of Common Shares into the Depositary's account at the Book-Entry
Transfer Facility, as well as this Letter of Transmittal (or a facsimile
hereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer,
and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth herein on or
prior to the Expiration Date. Stockholders whose Common Share Certificates are
not immediately available or who cannot deliver their Common Share
Certificates and all other required documents to the Depositary on or prior to
the Expiration Date or who cannot complete the procedure for delivery by book-
entry transfer on a timely basis may tender their Common Shares by properly
completing and duly executing a Notice of Guaranteed Delivery pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (a) such tender must be made by or through an
Eligible Institution; (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by Purchaser,
must be received by the Depositary on or prior to the Expiration Date; and (c)
the Common Share Certificates (or a Book-Entry Confirmation) representing all
tendered Common Shares in proper form for transfer, in each case, together
with this Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case of
a book-entry delivery, an Agent's Message) and any other documents required by
this Letter of Transmittal, must be received by the Depositary within three
New York Stock Exchange trading days after the date of execution of such
Notice of Guaranteed Delivery. If Common Share Certificates are forwarded
separately in multiple deliveries to the Depositary, a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) must accompany
each such delivery.
The method of delivery of this Letter of Transmittal, Common Share
Certificates and all other required documents, including delivery through the
Book-Entry Transfer Facility, is at the option and risk of the tendering
stockholder, and the delivery will be deemed made only when actually received
by the Depositary (including, in the case of book-entry transfer, by Book-
Entry Confirmation). If delivery is by mail, registered mail with return
receipt requested and properly insured is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery. No alternative,
conditional or contingent tenders will be accepted and no fractional Common
Shares will be purchased. All tendering stockholders, by execution of this
Letter of Transmittal (or a facsimile hereof if by an Eligible Institution),
waive any right to receive any notice of the acceptance of their Common Shares
for payment.
3. Inadequate Space. If the space provided herein is inadequate, the Common
Share Certificate numbers and/or the number of Common Shares and any other
required information should be listed on a separate signed schedule attached
hereto.
4. Partial Tenders (Not Applicable to Stockholders Who Tender by Book-Entry
Transfer). If fewer than all the Common Shares evidenced by any Common Share
Certificate submitted are to be tendered, fill in the number of Common
7
Shares which are to be tendered in the box entitled "Number of Common Shares
Tendered" in the "Description of Common Shares Tendered." In such cases, new
Common Share Certificates for the Common Shares that were evidenced by your
old Common Share Certificates, but were not tendered by you, will be sent to
you, unless otherwise provided in the appropriate box on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Common
Shares represented by Common Share Certificates delivered to the Depositary
will be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Common
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the Common Share Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Common Shares tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal. If
any of the tendered Common Shares are registered in different names on several
Common Share Certificates, it will be necessary to complete, sign and submit
as many separate Letters of Transmittal as there are different registrations
of Common Share Certificates.
If this Letter of Transmittal or any Common Share Certificates or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to Purchaser of their authority so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Common Shares listed and transmitted hereby, no endorsements of Common Share
Certificates or separate stock powers are required unless payment is to be
made to, or Common Share Certificates for Common Shares not tendered or not
purchased are to be issued in the name of, a person other than the registered
holder(s). In such latter case, signatures on such Common Share Certificates
or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Common Share Certificate(s) listed, the Common
Share Certificate(s) must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered
holder(s) appear on the Common Share Certificate(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6,
Purchaser will pay any stock transfer taxes with respect to the transfer and
sale of Common Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if Common Share
Certificates for Common Shares not tendered or accepted for payment are to be
registered in the name of, any person other than the registered holder(s), or
if tendered Common Share Certificates are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder(s) or such
person) payable on account of the transfer to such person will be deducted
from the purchase price, unless satisfactory evidence of the payment of such
taxes or an exemption therefrom is submitted. Except as otherwise provided in
this Instruction 6, it will not be necessary for transfer tax stamps to be
affixed to the Common Share Certificate(s) listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name of, and/or Common Share Certificates for Common Shares not tendered
or not accepted for payment are to be issued or returned to, a person other
than the signer of this Letter of Transmittal or if a check and/or such Common
Share Certificates are to be returned to a person other than the person(s)
signing this Letter of Transmittal or to an address other than that shown in
this Letter of Transmittal, the appropriate boxes on this Letter of
Transmittal must be completed. A Book-Entry Stockholder may request that
Common Shares not accepted for payment be credited to such account maintained
at the Book-Entry Transfer Facility as such Book-Entry Stockholder may
designate under "Special Payment Instructions." If no such instructions are
given, such Common Shares not accepted for payment will be returned by
crediting the account at the Book-Entry Transfer Facility designated above.
8. Waiver of Conditions. Subject to the terms and conditions of the
Agreement and Plan of Merger (as defined in the Offer to Purchase), the
conditions of the Offer may be waived by Purchaser in whole or in part at any
time and from time to time in its sole discretion.
8
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. federal income
tax law, a stockholder whose tendered Common Shares are accepted for payment
pursuant to the Offer may be subject to backup withholding at a rate of 31%.
To prevent backup withholding on any payment made to a stockholder pursuant to
the Offer, the stockholder is required to notify the Depositary of the
stockholder's current taxpayer identification number ("TIN") by completing the
enclosed Substitute Form W-9, certifying that the TIN provided on that form is
correct (or that such stockholder is awaiting a TIN), and that (i) the
stockholder has not been notified by the Internal Revenue Service that the
stockholder is subject to backup withholding as a result of failure to report
all interest or dividends or (ii) after being so notified, the Internal
Revenue Service has notified the stockholder that the stockholder is no longer
subject to backup withholding. If the Depositary is not provided with the
correct TIN, such stockholder may be subject to a $50 penalty imposed by the
Internal Revenue Service and payments that are made to such stockholder with
respect to Common Shares pursuant to the Offer may be subject to backup
withholding (see below).
Each stockholder is required to give the Depositary the TIN (e.g., Social
Security number or employer identification number) of the record holder of the
Common Shares. If the Common Shares are registered in more than one name or
are not registered in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report. A stockholder who
does not have a TIN may check the box in Part 3 of the Substitute Form W-9 if
such stockholder has applied for a number or intends to apply for a TIN in the
near future. If the box in Part 3 is checked, the stockholder must also
complete the "Certificate of Awaiting Taxpayer Identification Number" below in
order to avoid backup withholding. If the box is checked, payments made will
be subject to backup withholding unless the stockholder has furnished the
Depositary with his or her TIN by the time payment is made. A stockholder who
checks the box in Part 3 in lieu of furnishing such stockholder's TIN should
furnish the Depositary with such stockholder's TIN as soon as it is received.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
To avoid possible erroneous backup withholding, a stockholder who is exempt
from backup withholding should complete the Substitute Form W-9 by providing
his or her correct TIN, signing and dating the form, and writing exempt on the
face of the form. A stockholder who is a foreign individual or a foreign
entity should also submit to the Depositary a properly completed Form W-8,
Certificate of Foreign Status (which the Depositary will provide upon
request), signed under penalty of perjury, attesting to the stockholder's
exempt status. Stockholders are urged to consult their own tax advisors to
determine whether they are exempt from these backup withholding and reporting
requirements.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments to be made to the stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained by filing a tax
return with the Internal Revenue Service. The Depositary cannot refund amounts
withheld by reason of backup withholding.
10. Requests for Assistance or Additional Copies. Questions or requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery also may be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
11. Lost, Destroyed or Stolen Certificates. If any Common Share Certificate
has been lost, destroyed or stolen, the stockholder should promptly notify the
Transfer Agent at (800) 432-0140. The stockholder then will be instructed as
to the steps that must be taken in order to replace the Common Share
Certificate. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Common Share
Certificates have been followed.
Important: This Letter of Transmittal (or a facsimile hereof), together with
Common Share Certificates or confirmation of book-entry transfer or the Notice
of Guaranteed Delivery, and all other required documents, must be received by
the Depositary on or prior to the Expiration Date.
9
EQUISERVE TRUST COMPANY
- -------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR Social Security Number
Form W-9 TIN IN THE BOX AT THE RIGHT OR
AND CERTIFY BY SIGNING AND Employer Identification
DATING BELOW Number
Department of ----------------------
the Treasury
Internal Revenue
Service
EquiServe Trust
Company's Request for
Taxpayer Identification
Number ("TIN")
Part 2--Certificate--Under penalties of perjury, I certify that:
- -------------------------------------------------------------------------------
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) after
being so notified, the IRS has notified me that I am no longer subject
to backup withholding.
- -------------------------------------------------------------------------------
Certification Instructions--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS stating that your are no
longer subject to backup withholding, do not cross out such item (2).
- -------------------------------------------------------------------------------
[_] Part 3--
Signature :__________________________________________ Awaiting TIN
Name: ________________________ Date :_______________
Address: ____________________________________________
(Please Print)
_______________________________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU
MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3
OF SUBSTITUTE FORM W-9.
_______________________________________________________________________________
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld.
Signature :_______________________ Date :_____________ , 2001
_______________________________________________________________________________
10
Questions and requests for assistance may be directed to the Information
Agent or Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal or other related tender offer materials may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust
companies.
The Information Agent for the Offer is:
[LOGO OF GEORGESON SHAREHOLDER COMMUNICATIONS INC.]
17 State Street, 10th floor
New York, New York 10004
Bankers and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
Call Toll Free: (877) 319-4978
LETTER OF TRANSMITTAL
To Tender Shares of Series B $2 Cumulative Preferred Stock
of
Litton Industries, Inc.
at
$35.00 Net Per Share
Pursuant to the Offer to Purchase Dated January 5, 2001
of
LII Acquisition Corp.,
a wholly owned subsidiary of
Northrop Grumman Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON FRIDAY, FEBRUARY 2, 2001, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Mail: By Hand: By Overnight Delivery:
EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY
P.O. Box 842010 c/o Securities Transfer and 40 Campanelli Drive
Boston, Massachusetts Reporting Services, Inc. Braintree, Massachusetts
02284-2010 100 William Street--Galleria 02184
New York, New York 10038
By Facsimile Transmission: By Confirmation Receipt of Facsimile
(for Eligible Institutions Only) by Telephone Only:
(781) 575-4826 (781) 575-4816
or
(781) 575-4827
Delivery of this Letter of Transmittal to an address other than as set forth
above, or transmissions of instructions via a facsimile number other than as
set forth above, will not constitute a valid delivery. The instructions
accompanying this Letter of Transmittal should be read carefully before this
Letter of Transmittal is completed. You must sign this Letter of Transmittal
in the appropriate space provided therefor, with signature guarantee if
required, and complete the substitute form W-9 set forth below. See
Instruction 9.
- --------------------------------------------------------------------------------------------
DESCRIPTION OF PREFERRED SHARES TENDERED
- --------------------------------------------------------------------------------------------
Preferred Share Certificate(s)
Name(s) and Address(es) of Registered Holder(s) and Preferred Shares Tendered
(Please fill in, if blank, exactly as name(s) (Attach additional signed list if
appear(s) on Preferred Share Certificate(s)) necessary) See Instruction 3.
- --------------------------------------------------------------------------------------------
Total Number
of Preferred
Preferred Shares Number of
Share Represented Preferred
Certificate by Shares
Number(s)* Certificate(s) Tendered**
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Total
Preferred
Shares
- --------------------------------------------------------------------------------------------
* Need not be completed by stockholder delivering by book-entry transfer.
** Unless otherwise indicated it will be assumed that all Preferred Shares
evidenced by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
This Letter of Transmittal is to be completed by stockholders, either if
Preferred Share Certificates (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase, as
referred to below) is utilized, if tenders of Preferred Shares (as defined
below) are to be made by book-entry transfer into the account of EquiServe
Trust Company, as Depositary (the "Depositary"), at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in Section 3 of the Offer to Purchase. Stockholders who tender Preferred
Shares by book-entry transfer are referred to herein as "Book-Entry
Stockholders." Stockholders whose Preferred Share Certificates are not
immediately available or who cannot deliver their Preferred Share Certificates
and all other required documents to the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedure for book-entry transfer on a timely basis, must tender their
Preferred Shares according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS
TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE
DEPOSITARY.
SPECIAL TENDER INSTRUCTIONS
[_]CHECK HERE IF PREFERRED SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER PREFERRED SHARES BY BOOK-ENTRY
TRANSFER):
Name of Tendering Institution: ______________________________________________
Account Number: _____________________________________________________________
Transaction Code Number: ____________________________________________________
[_]CHECK HERE IF PREFERRED SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING (please enclose a photocopy of such notice of guaranteed
delivery):
Name of Registered Owner(s): ________________________________________________
Window Ticket Number (if any): ______________________________________________
Date of Execution of Notice of Guaranteed Delivery: _________________________
Name of Institution that Guaranteed Delivery: _______________________________
Account Number: _____________________________________________________________
Transaction Code Number: ____________________________________________________
2
NOTE: SIGNATURES MUST BE PROVIDED ON PAGE 6
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to LII Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Northrop Grumman
Corporation, a Delaware corporation, the above described shares of Series B $2
Cumulative Preferred Stock, par value $5.00 per share (the "Preferred Shares"
and the certificates representing such Preferred Shares, the "Preferred Share
Certificates") of Litton Industries, Inc., a Delaware corporation (the
"Company"), at a price of $35.00 per Preferred Share, net to the seller in
cash, less any required withholding of taxes and without the payment of
interest, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated January 5, 2001 (the "Offer to Purchase"), receipt of which
is hereby acknowledged, and in this Letter of Transmittal (the "Letter of
Transmittal," which, together with the Offer to Purchase, as each may be
amended or supplemented from time to time, collectively constitute the
"Offer").
Subject to, and effective upon, acceptance for payment of the Preferred
Shares tendered herewith in accordance with the terms of the Offer, the
undersigned hereby sells, assigns and transfers to, or upon the order of,
Purchaser all right, title and interest in and to all of the Preferred Shares
that are being tendered hereby and any and all Preferred Shares or other
securities issued, paid or distributed or issuable, payable or distributable
in respect of such Preferred Shares on or after January 5, 2001, 2001, and
prior to the transfer to the name of Purchaser (or a nominee or transferee of
Purchaser) on the Company's stock transfer records of the Preferred Shares
tendered herewith (collectively, a "Distribution"), and irrevocably appoints
the Depositary the true and lawful agent, attorney-in-fact and proxy of the
undersigned with respect to such Preferred Shares (and any Distribution), with
full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest) to (a) deliver such Preferred
Share Certificates (and any Distribution) or transfer ownership of such
Preferred Shares (and any Distribution) on the account books maintained by the
Book-Entry Transfer Facility, together, in either case, with appropriate
evidences of transfer, to the Depositary for the account of Purchaser,
(b) present such Preferred Shares (and any Distribution) for transfer on the
books of the Company, and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Preferred Shares (and any
Distribution), all in accordance with the terms and subject to the conditions
of the Offer.
The undersigned irrevocably appoints designees of Purchaser as such
undersigned's agents, attorneys-in-fact and proxies, with full power of
substitution, to the full extent of the undersigned's rights with respect to
the Preferred Shares (and any Distribution) tendered by the undersigned and
accepted for payment by Purchaser. All such powers of attorney and proxies
shall be considered irrevocable and coupled with an interest. Such appointment
will be effective when, and only to the extent that, Purchaser accepts such
Preferred Shares for payment. Upon such acceptance for payment, all prior
powers of attorney, proxies and consents given by the undersigned with respect
to such Preferred Shares (and any Distribution) will be revoked without
further action, and no subsequent powers of attorney and proxies may be given
nor any subsequent written consents executed (and, if given or executed, will
not be deemed effective). The designees of Purchaser will, with respect to the
Preferred Shares (and any Distribution) for which such appointment is
effective, be empowered to exercise all voting and other rights of the
undersigned as they in their sole discretion may deem proper at any annual or
special meeting of Company stockholders or any adjournment or postponement
thereof, by written consent in lieu of any such meeting or otherwise.
Purchaser reserves the right to require that, in order for the Preferred
Shares to be deemed validly tendered, immediately upon Purchaser's acceptance
of such Preferred Shares, Purchaser must be able to exercise full voting
rights with respect to such Preferred Shares (and any Distribution),
including, without limitation, voting at any meeting of stockholders.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the
undersigned's Preferred Shares (and any Distribution) tendered hereby, and (b)
when the Preferred Shares are accepted for payment by Purchaser, Purchaser
will acquire good, marketable and unencumbered title to the Preferred Shares
(and any Distribution), free and clear of all liens, restrictions, charges and
encumbrances, and the same will not be subject to any adverse claim and will
not have been transferred to Purchaser in violation of any contractual or
other restriction on the transfer thereof. The undersigned, upon request, will
execute and deliver any additional documents deemed
3
by the Depositary or Purchaser to be necessary or desirable to complete the
sale, assignment and transfer of the Preferred Shares (and any Distribution)
tendered hereby. In addition, the undersigned shall promptly remit and
transfer to the Depositary for the account of Purchaser any and all
Distributions in respect of the Preferred Shares tendered hereby, accompanied
by appropriate documentation of transfer, and, pending such remittance or
appropriate assurance thereof, Purchaser will be, subject to applicable law,
entitled to all rights and privileges as the owner of any such Distribution
and may withhold the entire purchase price or deduct from the purchase price
the amount or value thereof, as determined by Purchaser, in its sole
discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and
any obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Preferred Shares made pursuant to the Offer are irrevocable,
except that Preferred Shares tendered pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date, and, unless theretofore accepted for
payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after Tuesday, March 6, 2001. See Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Preferred Shares pursuant to any
of the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions set
forth in the Offer, including the undersigned's representation that the
undersigned owns the Preferred Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or issue or return any
certificate(s) for Preferred Shares not tendered or not accepted for payment
in the name(s) of the registered holder(s) appearing under "Description of
Preferred Shares Tendered." Similarly, unless otherwise indicated herein under
"Special Delivery Instructions," please mail the check for the purchase price
and/or any Preferred Share Certificate(s) not tendered or not accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Preferred Shares
Tendered." In the event that both the "Special Delivery Instructions" and the
"Special Payment Instructions" are completed, please issue the check for the
purchase price and/or any Preferred Share Certificate(s) not tendered or
accepted for payment in the name of, and deliver such check and/or such
Preferred Share Certificates to, the person or persons so indicated. Unless
otherwise indicated herein under "Special Payment Instructions," please credit
any Perferred Shares tendered herewith by book-entry transfer that are not
accepted for payment by crediting the account at the Book-Entry Transfer
Facility designated above. The undersigned recognizes that Purchaser has no
obligation, pursuant to the Special Payment Instructions, to transfer any
Preferred Shares from the name(s) of the registered holder(s) thereof if
Purchaser does not accept for payment any of the Preferred Shares so tendered.
[_]CHECK HERE IF ANY PREFERRED SHARE CERTIFICATES REPRESENTING PREFERRED
SHARES THAT YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION
11.
Number of Preferred Shares represented by lost, stolen or destroyed Preferred
Share Certificates: ____________________________
* YOU MUST CONTACT THE TRANSFER AGENT TO HAVE ALL LOST PREFERRED SHARE
--------------
CERTIFICATES REPLACED IF YOU WANT TO TENDER SUCH PREFERRED SHARES. SEE
PARAGRAPH 11 OF THE ATTACHED INSTRUCTIONS FOR CONTACT INFORMATION FOR THE
TRANSFER AGENT.
4
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6, and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if To be completed ONLY if
Preferred Share Certificate(s) Preferred Share Certificate(s)
not tendered or not accepted for not tendered or not accepted for
payment and/or the check for the payment and/or the check for the
purchase price of Preferred purchase price of Preferred
Shares accepted for payment are Shares accepted for payment are
to be issued in the name of to be issued in the name of
someone other than the someone other than the
undersigned or if Preferred undersigned or to the undersigned
Shares tendered by book-entry at an address other than that
transfer that are not accepted shown above.
for payment are to be returned by
credit to an account maintained
at the Book-Entry Transfer
Facility other than that
designated above.
Issue [_] Check and/or [_] Preferred
Shar Certificate(s) to:
Name: ____________________________
(Please Print)
Issue [_] Check and/or [_] Preferred Address: _________________________
Share Certificate(s) to:
__________________________________
__________________________________
Name: ____________________________ __________________________________
(Please Print)
__________________________________
Address: _________________________ (Include Zip Code)
_____________________________ __________________________________
(Tax Identification or Social
_____________________________ Security No.)
(Include Zip Code)
__________________________________ (See Substitute Form W-9 Included
(Tax Identification or Social Herein)
Security No.)
(See Substitute Form W-9 Included
Herein)
[_]Credit Preferred Shares
tendered by book-entry transfer
that are not accepted for payment
to Depositary to the account set
forth below:
__________________________________
__________________________________
(Depositary Account Number)
5
SIGN HERE
(And Complete Accompanying Substitute Form W-9)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Signature(s) of Holder(s)
(See guarantee requirement below)
Dated: ______________________________________________________________ , 2001
Must be signed by registered holder(s) exactly as name(s) appear(s) on
Preferred Share Certificate(s). If signed by person(s) to whom the
Preferred Shares represented hereby have been assigned or transferred as
evidenced by endorsement or stock powers transmitted herewith, the
signatures must be guaranteed. If signature is by an officer on behalf of a
corporation or by an executor, administrator, trustee, guardian, attorney,
agent or any other person acting in a fiduciary or representative capacity,
please provide the following information. (See Instructions 2, 3 and 5.)
Name(s): ___________________________________________________________________
____________________________________________________________________________
(Please Print)
Capacity (full title): _____________________________________________________
Address: ___________________________________________________________________
(Zip Code)
Area Code and Telephone No.: _______________________________________________
Tax Identification or Social Security No.: _________________________________
GUARANTEE OF SIGNATURE(S)
(See Instructions 1, 2 And 5)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
(Please Print)
Capacity (full title): _____________________________________________________
Name of Firm: ______________________________________________________________
Address: ___________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Zip Code)
Area Code and Telephone No.: _______________________________________________
Dated: ______________________________________________________________ , 2001
6
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal if: (a) this Letter of Transmittal is signed by the
registered holder(s) of Preferred Shares (which term, for purposes of this
document, shall include any participant in the Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Preferred
Shares) tendered herewith, unless such holder(s) has completed either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions," or (b) such Preferred Shares are tendered for the account of a
firm which is a bank, broker, dealer, credit union, savings association or
other entity which is a member in good standing of a recognized Medallion
Program approved by the Securities Transfer Association Inc., including the
Securities Transfer Agents Medallion Program (STAMP), the Stock Exchange
Medallion Program (SEMP) and the New York Stock Exchange Medallion Signature
Program (MSP), or any other "eligible guarantor institution" (as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934) (each of the
foregoing, an "Eligible Institution"'). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
stockholders either if Preferred Share Certificates are to be forwarded
herewith or, unless an Agent's Message is utilized, if tenders are to be made
pursuant to the procedure for tender by book-entry transfer set forth in
Section 3 of the Offer to Purchase. Preferred Share Certificates evidencing
tendered Preferred Shares, or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of Preferred Shares into the
Depositary's account at the Book-Entry Transfer Facility, as well as this
Letter of Transmittal (or a facsimile hereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and any other documents required by
this Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date. Stockholders
whose Preferred Share Certificates are not immediately available or who cannot
deliver their Preferred Share Certificates and all other required documents to
the Depositary on or prior to the Expiration Date or who cannot complete the
procedure for delivery by book-entry transfer on a timely basis may tender
their Preferred Shares by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedure: (a) such
tender must be made by or through an Eligible Institution; (b) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form made available by Purchaser, must be received by the Depositary on or
prior to the Expiration Date; and (c) the Preferred Share Certificates (or a
Book-Entry Confirmation) representing all tendered Preferred Shares in proper
form for transfer, in each case, together with this Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry delivery, an Agent's
Message) and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery. If
Preferred Share Certificates are forwarded separately in multiple deliveries
to the Depositary, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) must accompany each such delivery.
The method of delivery of this Letter of Transmittal, Preferred Share
Certificates and all other required documents, including delivery through the
Book-Entry Transfer Facility, is at the option and risk of the tendering
stockholder, and the delivery will be deemed made only when actually received
by the Depositary (including, in the case of book-entry transfer, by Book-
Entry Confirmation). If delivery is by mail, registered mail with return
receipt requested and properly insured is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery. No alternative,
conditional or contingent tenders will be accepted and no fractional Preferred
Shares will be purchased. All tendering stockholders, by execution of this
Letter of Transmittal (or a facsimile hereof if by an Eligible Institution),
waive any right to receive any notice of the acceptance of their Preferred
Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
Preferred Share Certificate numbers and/or the number of Preferred Shares and
any other required information should be listed on a separate signed schedule
attached hereto.
4. Partial Tenders (Not Applicable to Stockholders Who Tender by Book-Entry
Transfer). If fewer than all the Preferred Shares evidenced by any Preferred
Share Certificate submitted are to be tendered, fill in the number of
Preferred
7
Shares which are to be tendered in the box entitled "Number of Preferred
Shares Tendered" in the "Description of Preferred Shares Tendered." In such
cases, new Preferred Share Certificates for the Preferred Shares that were
evidenced by your old Preferred Share Certificates, but were not tendered by
you, will be sent to you, unless otherwise provided in the appropriate box on
this Letter of Transmittal, as soon as practicable after the Expiration Date.
All Preferred Shares represented by Preferred Share Certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the
Preferred Shares tendered hereby, the signature(s) must correspond with the
name(s) as written on the face of the Preferred Share Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Preferred Shares tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal. If
any of the tendered Preferred Shares are registered in different names on
several Preferred Share Certificates, it will be necessary to complete, sign
and submit as many separate Letters of Transmittal as there are different
registrations of Preferred Share Certificates.
If this Letter of Transmittal or any Preferred Share Certificates or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to Purchaser of their authority so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Preferred Shares listed and transmitted hereby, no endorsements of Preferred
Share Certificates or separate stock powers are required unless payment is to
be made to, or Preferred Share Certificates for Preferred Shares not tendered
or not purchased are to be issued in the name of, a person other than the
registered holder(s). In such latter case, signatures on such Preferred Share
Certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Preferred Share Certificate(s) listed, the
Preferred Share Certificate(s) must be endorsed or accompanied by appropriate
stock powers, in either case signed exactly as the name(s) of the registered
holder(s) appear on the Preferred Share Certificate(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6,
Purchaser will pay any applicable stock transfer taxes with respect to the
transfer and sale of Preferred Shares to it or its order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
Preferred Share Certificates for Preferred Shares not tendered or accepted for
payment are to be registered in the name of, any person other than the
registered holder(s), or if tendered Preferred Share Certificates are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s) or such person) payable on account of the transfer
to such person will be deducted from the purchase price, if applicable, unless
satisfactory evidence of the payment of such taxes or an exemption therefrom
is submitted. Except as otherwise provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Preferred Share
Certificate(s) listed in this Letter of Transmittal.
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name of, and/or Preferred Share Certificates for Preferred Shares not
tendered or not accepted for payment are to be issued or returned to, a person
other than the signer of this Letter of Transmittal or if a check and/or such
Preferred Share Certificates are to be returned to a person other than the
person(s) signing this Letter of Transmittal or to an address other than that
shown in this Letter of Transmittal, the appropriate boxes on this Letter of
Transmittal must be completed. A Book-Entry Stockholder may request that
Preferred Shares not accepted for payment be credited to such account
maintained at the Book-Entry Transfer Facility as such Book-Entry Stockholder
may designate under "Special Payment Instructions." If no such instructions
are given, such Preferred Shares not accepted for payment will be returned by
crediting the account at the Book-Entry Transfer Facility designated above.
8. Waiver of Conditions. Subject to the terms and conditions of the
Agreement and Plan of Merger (as defined in the Offer to Purchase), the
conditions of the Offer may be waived by Purchaser in whole or in part at any
time and from time to time in its sole discretion.
8
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. federal income
tax law, a stockholder whose tendered Preferred Shares are accepted for
payment pursuant to the Offer is required to provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") on Substitute
Form W-9 and to certify that the TIN provided on Substitute Form W-9 is
correct (or that such stockholder is awaiting a TIN). If such stockholder is
an individual, the TIN is his or her social security number. If the Depositary
is not provided with the correct TIN, such stockholder may be subject to a $50
penalty imposed by the Internal Revenue Service and payments that are made to
such stockholder with respect to Preferred Shares pursuant to the Offer may be
subject to backup withholding (see below).
A stockholder who does not have a TIN may check the box in Part 3 of the
Substitute Form W-9 if such stockholder has applied for a number or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder must also complete the "Certificate of Awaiting Taxpayer
Identification Number" below in order to avoid backup withholding. If the box
is checked, payments made will be subject to backup withholding unless the
stockholder has furnished the Depositary with his or her TIN within 60 days. A
stockholder who checks the box in Part 3 in lieu of furnishing such
stockholder's TIN should furnish the Depositary with such stockholder's TIN as
soon as it is received.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
In order for a foreign individual to qualify as an exempt recipient, that
stockholder must submit a statement, signed under penalties of perjury,
attesting to that individual's exempt status (Form W-8). Forms for such
statements can be obtained from the Depositary. Stockholders are urged to
consult their own tax advisors to determine whether they are exempt from these
backup withholding and reporting requirements.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments to be made to the stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained by filing a tax
return with the Internal Revenue Service. The Depositary cannot refund amounts
withheld by reason of backup withholding.
10. Requests for Assistance or Additional Copies. Questions or requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery also may be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
11. Lost, Destroyed or Stolen Certificates. If any Preferred Share
Certificate has been lost, destroyed or stolen, the stockholder should
promptly notify the Transfer Agent at (800) 432-0140. The stockholder then
will be instructed as to the steps that must be taken in order to replace the
Preferred Share Certificate. This Letter of Transmittal and related documents
cannot be processed until the procedures for replacing lost or destroyed
Preferred Share Certificates have been followed.
Important: This Letter of Transmittal (or a facsimile hereof), together with
Preferred Share Certificates or confirmation of book-entry transfer or the
Notice of Guaranteed Delivery, and all other required documents, must be
received by the Depositary on or prior to the Expiration Date.
9
EQUISERVE TRUST COMPANY:
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR Social Security Number
Form W-9 TIN IN THE BOX AT RIGHT AND OR
Department of CERTIFY BY SIGNING AND Employer Identification
the Treasury DATING BELOW. Number
Internal Revenue
Service ----------------------
EquiServe Trust Company's
Request for Taxpayer
Identification Number ("TIN")
- -------------------------------------------------------------------------------
Part 2--Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding because (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS
has notified me that I am no longer subject to backup withholding.
- -------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of under-reporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS stating that your are no
longer subject to backup withholding, do not cross out such item (2).
- -------------------------------------------------------------------------------
[_] Part 3--
SIGNATURE: ___________________ Awaiting TIN
NAME: ________________________ DATE: ______ , 2001
(Please Print)
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
________________________________________________________________________________
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld.
Signature: _______________________ Date: _____________ , 2001
________________________________________________________________________________
10
Questions and requests for assistance may be directed to the Information
Agent or Dealer Manager at their respective addresses and telephone numbers
set forth below. Additional copies of the Offer to Purchase, this Letter of
Transmittal or other related tender offer materials may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust
companies.
The Information Agent for the Offer is:
[LOGO OF GEORGESON SHAREHOLDER COMMUNICATIONS INC.]
17 State Street, 10th floor
New York, New York 10004
Bankers and Brokers Call Collect: (212) 440-9800
All Others Call Toll Free: (800) 223-2064
The Dealer Manager for the Offer is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
Call Toll Free: (877) 319-4978
EXHIBIT 99.(a)(1)(iii)
NOTICE OF GUARANTEED DELIVERY
(Not to Be Used for Signature Guarantees)
for
Tender of Shares of Common Stock
(together with associated rights)
of
Litton Industries, Inc
at
$80.00 Net Per Share
to
LII Acquisition Corp.
a wholly owned subsidiary of
Northrop Grumman Corporation
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates
representing shares of Common Stock, par value $1.00 per share, of Litton
Industries, Inc. (together with the associated rights to purchase preferred
stock of Litton Industries, Inc. pursuant to the Rights Agreement dated as of
August 17, 1994 between Litton Industries, Inc. and the Bank of New York, the
"Common Shares" and the certificates representing such Common Shares, the
"Common Share Certificates") are not immediately available or time will not
permit the Common Share Certificates and all required documents to reach the
Depositary (as defined in the Offer to Purchase) on or prior to the Expiration
Date (as defined in the Offer to Purchase) or if the procedures for delivery
by book-entry transfer, as set forth in the Offer to Purchase, cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or transmitted by facsimile transmission or mailed to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Mail: By Hand: By Overnight Delivery:
EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY
P.O. Box 842010 c/o Securities Transfer and 40 Campanelli Drive
Boston, Massachusetts 02284- Reporting Services Inc. Braintree, Massachusetts 02184
2010 100 William Street--Galleria
New York, New York 10038
By Facsimile Transmission: Confirm Receipt of Facsimile
(Eligible Institutions Only) by Telephone Only:
(781) 575-4826 (781) 575-4816
or
(781) 575-4827
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN ELIGIBLE INSTITUTION UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX IN THE LETTER OF TRANSMITTAL.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
Ladies and Gentlemen:
The undersigned hereby tenders to LII Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Northrop Grumman
Corporation, a Delaware corporation, in accordance with the terms and
subject to the conditions set forth in Purchaser's Offer to Purchase, dated
January 5, 2001 (the "Offer to Purchase"), and in the related Letter of
Transmittal (the "Letter of Transmittal," which, together with the Offer to
Purchase, as each may be amended or supplemented from time to time,
collectively constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Common Shares indicated below pursuant to the
procedures for guaranteed delivery set forth in Section 3 of the Offer to
Purchase.
Certificate Nos. (If Available): ___________________________________________
Number of Common Shares: ___________________________________________________
(Check if Common Shares will be tendered by book-entry transfer) [_]
Account Number: ____________________________________________________________
Dated: _______________________________________________________________, 2001
Name(s) of Record Holder(s): _______________________________________________
(Please type or print)
Address(es): _______________________________________________________________
Zip Code: __________________________________________________________________
Area Code and Tel. No(s): __________________________________________________
Signature(s): ______________________________________________________________
2
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of a
recognized Medallion Program approved by the Securities Transfer
Association Inc., including the Securities Transfer Agents Medallion
Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New
York Stock Exchange Medallion Signature Program (MSP), or any other
"eligible guarantor institution" as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934 ("Exchange Act"), (a) represents that the
above named person(s) "own(s)" the Common Shares tendered hereby within
the meaning of Rule 14e-4 promulgated under Exchange Act, (b) represents
that such tender of Common Shares complies with Rule 14e-4 under the
Exchange Act, and (c) guarantees to deliver to the Depositary either the
Common Share Certificates evidencing all tendered Common Shares, in proper
form for transfer, or a Book-Entry Confirmation (as defined in the Offer
to Purchase) with respect to such Common Shares, in either case, together
with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other required documents, all within three
New York Stock Exchange trading days after the date hereof. The eligible
guarantor institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Common Share Certificates to the Depositary within the time period
indicated herein. Failure to do so may result in financial loss to such
eligible guarantor institution.
Name of Firm: _____________________________________________________________
Authorized Signature: _____________________________________________________
Name: _____________________________________________________________________
(Please Print or Type)
Title: ____________________________________________________________________
Address: __________________________________________________________________
Zip Code: _________________________________________________________________
Area Code and Telephone Number: ___________________________________________
Dated: , 2001
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
NOTICE OF GUARANTEED DELIVERY
(Not To Be Used For Signature Guarantees)
for
Tender of Shares of Series B $2 Cumulative Preferred Stock
of
Litton Industries, Inc.
at
$35.00 Net Per Share
to
LII Acquisition Corp.
a wholly owned subsidiary of
Northrop Grumman Corporation
This Notice of Guaranteed Delivery or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if certificates
representing shares of Series B $2 Cumulative Preferred Stock, par value $5.00
per share, of Litton Industries, Inc. (the "Preferred Shares" and the
certificates representing such Preferred Shares, the "Preferred Share
Certificates") are not immediately available or time will not permit the
Preferred Share Certificates and all required documents to reach the
Depositary (as defined in the Offer to Purchase) on or prior to the Expiration
Date (as defined in the Offer to Purchase) or if the procedures for delivery
by book-entry transfer, as set forth in the Offer to Purchase, cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or transmitted by facsimile transmission or mailed to the
Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Mail: By Hand: By Overnight Delivery:
EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY
P.O. Box 842010 c/o Securities Transfer and 40 Campanelli Drive
Boston, Massachusetts 02284- Reporting Services Inc. Braintree, Massachusetts 02184
2010 100 William Street--Galleria
New York, New York 10038
By Facsimile Transmission: Confirm Receipt of Facsimile
(Eligible Institutions Only) by Telephone Only:
(781) 575-4826 (781) 575-4816
or
(781) 575-4827
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE
INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST
APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF
TRANSMITTAL.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
Ladies and Gentlemen:
The undersigned hereby tenders to LII Acquisition Corp., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of Northrop Grumman
Corporation, a Delaware corporation, in accordance with the terms and
subject to the conditions set forth in Purchaser's Offer to Purchase, dated
January 5, 2001 (the "Offer to Purchase"), and in the related Letter of
Transmittal (the "Letter of Transmittal," which, together with the Offer to
Purchase, as each may be amended or supplemented from time to time,
collectively constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Preferred Shares indicated below pursuant to
the procedures for guaranteed delivery set forth in Section 3 of the Offer
to Purchase.
Certificate Nos. (If Available): ___________________________________________
Number of Preferred Shares: ________________________________________________
(Check if Preferred Shares will be tendered by book-entry transfer) [_]
Account Number: ____________________________________________________________
Dated: ______________________________________________________________ , 2001
Name(s) of Record Holder(s): _______________________________________________
(Please type or print)
Address(es): _______________________________________________________________
Zip Code: __________________________________________________________________
Area Code and Tel. No(s): __________________________________________________
Signature(s): ______________________________________________________________
2
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of a
recognized Medallion Program approved by the Securities Transfer
Association Inc., including the Securities Transfer Agents Medallion
Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New
York Stock Exchange Medallion Signature Program (MSP), or any other
"eligible guarantor institution" as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934 ("Exchange Act"), (a) represents that the
above named person(s) "own(s)" the Preferred Shares tendered hereby within
the meaning of Rule 14e-4 promulgated under Exchange Act, (b) represents
that such tender of Preferred Shares complies with Rule 14e-4 under the
Exchange Act, and (c) guarantees to deliver to the Depositary either the
Preferred Share Certificates evidencing all tendered Preferred Shares, in
proper form for transfer, or a Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to such Preferred Shares, in either case,
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other required documents, all within three
New York Stock Exchange trading days after the date hereof. The eligible
guarantor institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Preferred Share Certificates to the Depositary within the time period
indicated herein. Failure to do so may result in financial loss to such
eligible guarantor institution.
Name of Firm: _____________________________________________________________
Authorized Signature: _____________________________________________________
Name: _____________________________________________________________________
(Please Print or Type)
Title: ____________________________________________________________________
Address: __________________________________________________________________
Zip Code: _________________________________________________________________
Area Code and Telephone No.: ______________________________________________
Dated: ____________, 2001
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL.
3
EXHIBIT 99.(a)(5)(i)
SALOMON SMITH BARNEY INC.
OFFER TO PURCHASE FOR CASH
All Outstanding Shares of Common Stock
(together with associated rights)
of
Litton Industries, Inc.
at
$80.00 Net Per Common Share
and
All Outstanding Shares of Series B $2 Cumulative Preferred Stock
of
Litton Industries, Inc.
at
$35.00 Net Per Preferred Share
by
LII Acquisition Corp.,
a wholly owned subsidiary of
Northrop Grumman Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 2, 2001, UNLESS THE OFFER IS EXTENDED.
January 5, 2001
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged to act as Dealer Manager in connection with the third
party tender offer by LII Acquisition Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Northrop Grumman Corporation, a
Delaware corporation, to purchase all of the outstanding shares of common
stock, par value $1.00 per share (together with the associated rights to
purchase preferred stock of Litton Industries, Inc. (the "Company") pursuant
to the Rights Agreement dated as of August 17, 1994 between Litton Industries,
Inc. and The Bank of New York, the "Common Shares") and all of the outstanding
shares of Series B $2 Cumulative Preferred Stock, par value $5.00 per share
(the "Preferred Shares"), of the Company, at a price of $80.00 per Common
Share and $35.00 per Preferred Share, net to the seller in cash, less any
required withholding of taxes and without payment of any interest, upon the
terms and subject to the conditions set forth in the Offer to Purchase Common
Shares and/or the Offer to Purchase Preferred Shares, each dated January 5,
2001 (each, an "Offer to Purchase") and in the related Letter of Transmittal
for the Common Shares and the related Letter of Transmittal for the Preferred
Shares (each individually, a "Letter of Transmittal," which, together with the
applicable Offer to Purchase, as each may be amended or supplemented from time
to time, collectively constitute the "Offer").
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
total of at least 25,562,006 Common Shares and Preferred Shares, which
represents a majority of the total outstanding Common Shares and Preferred
Shares on a fully-diluted basis, and (ii) the expiration or termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
as of 1976, as amended, and, to the extent required, the approval of the
merger by the Commission of the European Union under Council Regulation (EEC)
No. 4064/89 of the Council of the European Union.
For your information and for forwarding to your clients for whom you hold
Common Shares and/or Preferred Shares registered in your name or in the name
of your nominee or who hold Common Shares and/or Preferred Shares registered
in their own names, we enclose the following documents:
1. Offer to Purchase Common Shares and a separate Offer to Purchase
Preferred Shares, each dated January 5, 2001.
2. Letter of Transmittal to tender Common Shares for your use and for the
information of your clients who hold Common Shares. Facsimile copies of the
Letter of Transmittal may be used to tender Common Shares.
3. Letter of Transmittal to tender Preferred Shares for your use and for the
information of your clients who hold Preferred Shares. Facsimile copies of the
Letter of Transmittal may be used to tender Preferred Shares.
4. Two separate Letters to Clients, which may be sent to your clients for
whose account you hold Common Shares or Preferred Shares, as the case may be,
registered in your name or in the name of your nominee, with space provided
for obtaining such clients' instructions with regard to the Offer.
5. Notice of Guaranteed Delivery to be used to accept the Offer if Common
Share Certificates (as defined in the Offer to Purchase) are not immediately
available or time will not permit the Common Share Certificates and all
required documents to reach the Depositary on or prior to the Expiration Date
(as defined in the Offer to Purchase Common Shares) or if the procedures for
delivery by book-entry transfer, as set forth in the Offer to Purchase Common
Shares, cannot be completed on a timely basis.
6. Notice of Guaranteed Delivery to be used to accept the Offer if Preferred
Share Certificates (as defined in the Offer to Purchase Preferred Shares) are
not immediately available or time will not permit the Preferred Share
Certificates and all required documents to reach the Depositary on or prior to
the Expiration Date or if the procedures for delivery by book-entry transfer,
as set forth in the Offer to Purchase Preferred Shares, cannot be completed on
a timely basis.
7. Letter to stockholders of the Company from Michael R. Brown, Chairman and
Chief Executive Officer of the Company, and Ronald D. Sugar, President and
Chief Operating Officer of the Company accompanied by the Company's
Solicitation/Recommendation Statement on Schedule 14D-9.
8. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
9. Return envelope addressed to EquiServe Trust Company, as Depositary.
In accordance with the terms and subject to the satisfaction or waiver
(where applicable) of the conditions to the Offer, Purchaser will accept for
payment, purchase and pay for, all Common Shares and all Preferred Shares
validly tendered and not properly withdrawn pursuant to the Offer at the
earliest time following expiration of the Offer when all such conditions shall
have been satisfied or waived (where applicable). For purposes of the Offer,
Purchaser will be deemed to have accepted for payment (and thereby purchased),
Common Shares and Preferred Shares validly tendered and not properly withdrawn
if, as and when Purchaser gives oral or written notice to the Depositary of
Purchaser's acceptance for payment of such Common Shares and Preferred Shares
pursuant to the Offer. Upon the terms and subject to the conditions of the
Offer, payment for Common Shares and Preferred Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (1) the Common Share Certificates, the Preferred Share Certificates or a
Book-Entry Confirmation (as defined in the applicable Offer to Purchase) of a
book-entry transfer of such Common Shares and/or Preferred Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in the
applicable Offer to Purchase) pursuant to the procedures set forth in Section
3 of each Offer to Purchase; (2) the Letter of Transmittal to tender Common
Shares (or a facsimile thereof) properly completed and duly executed, with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of
Transmittal and/or the Letter of Transmittal to tender Preferred Shares (or a
2
facsimile thereof) properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message in lieu of the Letter of Transmittal; and (3) any other documents
required under the applicable Letter of Transmittal.
Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Depositary, the Information Agent and the Dealer
Manager, as described in the Offer to Purchase) in connection with the
solicitation of tenders of Common Shares and Preferred Shares pursuant to the
Offer. Purchaser will, however, upon request, reimburse you for customary
clerical and mailing expenses incurred by you in forwarding any of the
enclosed materials to your clients.
Purchaser will pay any stock transfer taxes with respect to the transfer and
sale of Common Shares and/or Preferred Shares to it or to its order pursuant
to the Offer, except as otherwise provided in Instruction 6 of the enclosed
Letter of Transmittal.
Your prompt action is requested. We urge you to contact your clients as
promptly as possible. Please note that Offer and withdrawal rights expire at
12:00 midnight, New York City time, on Friday, February 2, 2001, unless the
Offer is extended.
In order for a stockholder of the Company to take advantage of the Offer,
the Letter of Transmittal to tender Common Shares or Preferred Shares (or a
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal) and any other documents
required by such Letter of Transmittal should be sent to the Depositary and
Common Share Certificates and Preferred Share Certificates should be
delivered, or Common Shares and Preferred Shares should be tendered pursuant
to the procedure for book-entry transfer, all in accordance with the
instructions set forth in the applicable Letter of Transmittal and the
applicable Offer to Purchase.
Holders of Common Shares and/or Preferred Shares whose Common Share
Certificates and/or Preferred Share Certificates are not immediately available
or who cannot deliver their Common Share Certificates and/or Preferred Share
Certificates and all other required documents to the Depositary on or prior to
the Expiration Date of the Offer, or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis, must tender their Common
Shares and/or Preferred Shares according to the guaranteed delivery procedures
set forth in Section 3 of each Offer to Purchase.
Inquiries you may have with respect to the Offer should be addressed to the
Information Agent or the Dealer Manager as set forth below. Requests for
copies of the Offer to Purchase, the Letter of Transmittal and all other
tender offer materials may be directed to the Information Agent.
Very truly yours,
Salomon Smith Barney Inc.
Enclosures
Nothing contained herein or in the enclosed documents shall constitute you
or any other person as an agent of Purchaser, the Depositary, the Information
Agent, the Dealer Manager or any affiliate of any of them, or authorize you or
any other person to make any statement or use any document on behalf of any of
them in connection with the Offer other than the enclosed documents and the
statements contained therein.
3
EXHIBIT 99.(a)(5)(ii)
OFFER TO PURCHASE FOR CASH
All Outstanding Shares of Common Stock
(together with associated rights)
of
Litton Industries, Inc.
at
$80.00 Net Per Share
by
LII Acquisition Corp.
a wholly owned subsidiary of
Northrop Grumman Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 2, 2001, UNLESS THE OFFER IS EXTENDED.
January 5, 2001
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated January 5,
2001 (the "Offer to Purchase") and the related Letter of Transmittal (the
"Letter of Transmittal," which, together with the Offer to Purchase, as each
may be amended or supplemented from time to time, collectively constitute the
"Offer") relating to the third party tender offer by LII Acquisition Corp., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Northrop
Grumman Corporation, a Delaware corporation ("Parent"), to purchase all of the
outstanding shares of common stock, par value $1.00 per share (together with
the associated rights to purchase preferred stock of Litton Industries, Inc.
(the "Company") pursuant to the Rights Agreement dated as of August 17, 1994
between the Company and The Bank of New York, the "Common Shares"), of the
Company at a price of $80.00 per Common Share (the "Common Share Offer
Price"), net to the seller in cash, less any required withholding of taxes and
without the payment of any interest, upon the terms and subject to the
conditions set forth in the Offer.
We are the holder of record of Common Shares held by us for your account.
The Letter of Transmittal is furnished to you for your information only and
cannot be used by you to tender Common Shares held by us for your account. A
tender of such Common Shares can be made only by us as the holder of record
and pursuant to your instructions.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Common Shares held by us for your
account, in accordance with the terms and subject to the conditions set forth
in the Offer.
Your attention is directed to the following:
1. The Offer Price is $80.00 per Common Share, net to the seller in cash,
without interest and less any required withholding of taxes, upon the terms
and subject to the conditions set forth in the Offer.
2. The Offer is being made for all outstanding Common Shares.
3. The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated as of December 21, 2000, among Parent, the Company and Purchaser
(the "Merger Agreement"). The Merger
Agreement provides, among other things, for the making of the Offer by
Purchaser. The Merger Agreement further provides that Purchaser will be merged
with and into the Company (the "Merger") following the completion of the Offer
and promptly after satisfaction or waiver of certain conditions. The Company
will continue as the surviving corporation after the Merger and will be a
wholly owned subsidiary of Parent.
4. The Board of Directors of the Company has unanimously (i) determined that
each of the Offer and the Merger is fair to, and in the best interests, of the
common stockholders of the Company and (ii) approved and adopted the Merger
Agreement and the transactions contemplated thereby and resolved to recommend
acceptance of the Offer by the common stockholders of the Company and approval
and adoption by the stockholders of the Company, if necessary, of the Merger
Agreement. The Board of Directors of the Company makes no recommendation with
respect to the tender of Preferred Shares (as defined below).
5. The Offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on Friday, February 2, 2001, unless the Offer is extended.
6. Tendering stockholders will not be obligated to pay any commissions or
fees to any broker, dealer or other person or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect
to the transfer and sale of Common Shares to Purchaser or to its order
pursuant to the Offer.
7. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration or
termination of the Offer a total of at least 25,562,006 Common Shares and
shares of Series B $2 Cumulative Preferred Stock, par value $5.00 per share
("Preferred Shares"), which represents a majority of the total outstanding
Common Shares and Preferred Shares on a fully-diluted basis, and (ii) the
receipt of certain governmental and regulatory approvals. The Offer also is
subject to other terms and conditions.
If you wish to have us tender any or all of the Common Shares held by us for
your account, please instruct us by completing, executing and returning to us
the instruction form contained in this letter. If you authorize a tender of
your Common Shares, all your Common Shares will be tendered unless otherwise
specified in such instruction form. Your instructions should be forwarded to
us in ample time to permit us to submit a tender on your behalf on or prior to
the expiration of the Offer.
2
INSTRUCTIONS WITH RESPECT TO THE
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(together with associated rights)
of
Litton Industries, Inc.
at
$80.00 Net Per Share
by
LII Acquisition Corp.
a wholly owned subsidiary of
Northrop Grumman Corporation
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase, dated January 5, 2001, and the related Letter of Transmittal, in
connection with the offer by LII Acquisition Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Northrop Grumman Corporation,
to purchase all of the outstanding shares of common stock, par value $1.00 per
share (together with the associated rights to purchase preferred stock of
Litton Industries, Inc. (the "Company") pursuant to the Rights Agreement dated
as of August 17, 1994 between the Company and The Bank of New York, the
"Common Shares"), of the Company at $80.00 per Common Share, net to the seller
in cash, without interest, upon the terms and subject to the conditions set
forth in the Offer to Purchase and related Letter of Transmittal.
This will instruct you to tender to Purchaser the number of Common Shares
indicated below (or, if no number is indicated below, all Common Shares) which
are held by you for the account of the undersigned, upon the terms and subject
to the conditions set forth in the Offer to Purchase and in the related Letter
of Transmittal furnished to the undersigned.
Number of Common Common Shares*
Shares to be
Tendered:
- ------------------- ----------------
SIGN BELOW
---------------------------------------
Signature(s)
---------------------------------------
Please Print Name(s)
---------------------------------------
Address
---------------------------------------
Account Number
---------------------------------------
Area Code and Telephone Number
---------------------------------------
Taxpayer Identification Numbers(s) or
Social Security Number(s)
Dated: __________________________, 2001
- -------
* Unless otherwise indicated, it will be assumed that all of your Common
Shares held by us for your account are to be tendered.
OFFER TO PURCHASE FOR CASH
All Outstanding Shares of Series B $2 Cumulative Preferred Stock
of
Litton Industries, Inc.
at
$35.00 Net Per Share
by
LII Acquisition Corp.
a wholly owned subsidiary of
Northrop Grumman Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, FRIDAY, FEBRUARY 2, 2001, UNLESS THE OFFER IS EXTENDED.
January 5, 2001
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated January 5,
2001 (the "Offer to Purchase") and the related Letter of Transmittal (the
"Letter of Transmittal," which, together with the Offer to Purchase, as each
may be amended or supplemented from time to time, collectively constitute the
"Offer") relating to the third party tender offer by LII Acquisition Corp., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of Northrop
Grumman Corporation, a Delaware corporation ("Parent"), to purchase all of the
outstanding shares of Series B $2 Cumulative Preferred Stock, par value $5.00
per share ("Preferred Shares"), of Litton Industries, Inc., a Delaware
corporation (the "Company"), at a price of $35.00 per Preferred Share (the
"Preferred Share Offer Price"), net to the seller in cash, less any required
withholding of taxes and without the payment of any interest, upon the terms
and subject to the conditions set forth in the Offer.
We are the holder of record of Preferred Shares held by us for your account.
The Letter of Transmittal is furnished to you for your information only and
cannot be used by you to tender Preferred Shares held by us for your account.
A tender of such Preferred Shares can be made only by us as the holder of
record and pursuant to your instructions.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Preferred Shares held by us for your
account, in accordance with the terms and subject to the conditions set forth
in the Offer.
Your attention is directed to the following:
1. The Offer Price is $35.00 per Preferred Share, net to the seller in cash,
without interest and less any required withholding of taxes, upon the terms
and subject to the conditions set forth in the Offer.
2. The Offer is being made for all outstanding Preferred Shares.
3. The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger, dated as of December 21, 2000, among Parent, the Company and Purchaser
(the "Merger Agreement"). The Merger Agreement provides, among other things,
for the making of the Offer by Purchaser. The Merger Agreement further
provides that Purchaser will be merged with and into the Company (the
"Merger") following the
completion of the Offer and promptly after satisfaction or waiver of certain
conditions. The Company will continue as the surviving corporation after the
Merger and will be a wholly owned subsidiary of Parent.
4. The Board of Directors of the Company has unanimously (i) determined that
each of the Offer and the Merger is fair to, and in the best interests, of the
common stockholders of the Company and (ii) approved and adopted the Merger
Agreement and the transactions contemplated thereby and resolved to recommend
acceptance of the Offer by the common stockholders of the Company and approval
and adoption by the stockholders of the Company, if necessary, of the Merger
Agreement. The Board of Directors of the Company makes no recommendation with
respect to the tender of Preferred Shares.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New York
City time, on Friday, February 2, 2001, unless the Offer is extended.
6. Tendering stockholders will not be obligated to pay any commissions or
fees to any broker, dealer or other person or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect
to the transfer and sale of Preferred Shares to Purchaser or to its order
pursuant to the Offer.
7. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration or
termination of the Offer a total of at least 25,562,006 common stock, par
value $1.00 per share (together with the associated rights to purchase
preferred stock of Litton Industries, Inc. pursuant to the Rights Agreement
dated as of August 17, 1994 between Litton Industries, Inc. and The Bank of
New York, the "Common Shares"), and Preferred Shares, which represents a
majority of the total outstanding Common Shares and Preferred Shares on a
fully-diluted basis, and (ii) the receipt of certain governmental and
regulatory approvals. The Offer also is subject to other terms and conditions.
If you wish to have us tender any or all of the Preferred Shares held by us
for your account, please instruct us by completing, executing and returning to
us the instruction form contained in this letter. If you authorize a tender of
your Preferred Shares, all your Preferred Shares will be tendered unless
otherwise specified in such instruction form. Your instructions should be
forwarded to us in ample time to permit us to submit a tender on your behalf
on or prior to the expiration of the Offer.
2
INSTRUCTIONS WITH RESPECT TO THE
Offer to Purchase for Cash
All Outstanding Shares of Series B $2 Cumulative Preferred Stock
of
Litton Industries, Inc.
at
$35.00 Net Per Share
by
LII Acquisition Corp.
a wholly owned subsidiary of
Northrop Grumman Corporation
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase, dated January 5, 2001, and the related Letter of Transmittal, in
connection with the offer by LII Acquisition Corp., a Delaware corporation
("Purchaser") and a wholly owned subsidiary of Northrop Grumman Corporation,
to purchase all of the outstanding shares of Series B $2 Cumulative Preferred
Stock, par value $5.00 per share ("Preferred Shares"), of Litton Industries,
Inc., a Delaware corporation, at $35.00 per Preferred Share, net to the seller
in cash, without interest, upon the terms and subject to the conditions set
forth in the Offer to Purchase and related Letter of Transmittal.
This will instruct you to tender to Purchaser the number of Preferred Shares
indicated below (or, if no number is indicated below, all Preferred Shares)
which are held by you for the account of the undersigned, upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the
related Letter of Transmittal furnished to the undersigned.
Number of Preferred Preferred Shares*
Shares to be
Tendered:
- ------------------- ----------------
SIGN BELOW
_______________________________________
Signature(s)
_______________________________________
Please print name(s)
_______________________________________
Address
_______________________________________
Account Number
_______________________________________
Area Code & Telephone Number
_______________________________________
Taxpayer Identification Number(s) or
Social Security Number(s)
Dated: __________________________, 2001
- -------
* Unless otherwise indicated, it will be assumed that all of your Preferred
Shares held by us for your account are to be tendered.
3
EXHIBIT 99.(a)(5)(iii)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give to
EquiServe Trust Company--Social Security numbers have nine digits separated by
two hyphens: i.e., 000-00-0000. Employer identification numbers have
nine digits separated by only one hyphen: i.e., 00-0000000. The table below
will help determine the number to give to EquiServe Trust Company.
- ---------------------------------------------
Give the
SOCIAL SECURITY
For this type of account: number of-
- ---------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if combined
funds, the first
individual on
the account(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor
guardian or committee or incompetent
for a designated ward, person(3)
minor or incompetent
person
7. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also trustee)
b. So-called trust The actual
account that is not a owner(1)
legal or valid trust
under state law
8. Sole proprietorship The owner(4)
------
Give the
EMPLOYER
IDENTIFICATION
For this type of account: number of--
------
9. A valid trust, estate or The legal entity
pension trust (do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)
(5)
10. Corporate The corporation
11. Religious, charitable or The organization
educational tax-exempt
organization
12. Partnership account held The partnership
in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity (such
as a state or local
government, school
district or prison) that
receives agricultural
program payments
- --------------------------------------- ---------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person has a social security number, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. You must show your individual name, but you
may also enter your business or "doing business as" name. You may use
either your social security number or employer identification number (if
you have one).
(5) List first and circle the name of the legal trust, estate or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a TIN or you don't know your number, obtain Form SS-5,
Application for a Social Security Card, or Form SS-4, Application for Employer
Identification Number, at the local office of the Social Security
Administration or the Internal Revenue Service and apply for a number.
Payees Exempt From Backup Withholding
Payees specifically exempted from backup withholding include the following:
1. An organization exempt from tax under section 501(a), any IRA, or a
custodial account under section 403(b)(7) if the account satisfies the
requirements of section 401(f)(2).
2. The United States or any of its agencies or instrumentalities.
3. A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
4. A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
5. An international organization or any of its agencies or
instrumentalities.
Other payees that may be exempt from backup withholding include:
6. A corporation.
7. A foreign central bank of issue.
8. A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
9. A futures commission merchant registered with the Commodity Futures
Trading Commission.
10. A real estate investment trust.
11. An entity registered at all times during the tax year under the
Investment Company Act of 1940.
12. A common trust fund operated by a bank under section 584(a).
13. A financial institution.
14. A middleman known in the investment community as a nominee or custodian.
15. A trust exempt from tax under section 664 or described in section 4947.
Payments Exempt From Backup Withholding
Dividends and patronage dividends that generally are exempt from backup
withholding include:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payents to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
. Section 404(k) distributions made by an ESOP.
Interest payments that generally are exempt from backup withholding include:
. Payments of interest on obligations issued by individuals. Note: you may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided a
correct TIN to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TIN, WRITE
"EXEMPT" ON THE FACE OF THE FORM AND SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends not
subject to information reporting are also not subject to backup withholding.
For details, see the regulations under Internal Revenue Code sections 6041,
6041A, 6042, 6044, 6045, 6049, 6050A and 6050N.
Privacy Act Notice.--Section 6109 of the Internal Revenue Code requires you to
give your correct TIN to persons who must file information returns with the
IRS to report, among other things, interest, dividends, and certain other
income paid to you. The IRS uses the numbers for identification purposes and
to help verify the accuracy of your tax return. The IRS may also provide this
information to the Department of Justice for civil and criminal litigation,
and to cities, states and the District of Columbia to carry out their tax
laws. You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividend and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish TIN.--If you fail to furnish your correct
TIN to a payer, you are subject to a penalty of $50 for each such failure
unless your failure is due to reasonable cause and not to willful neglect.
(2) Civil and Criminal Penalties for False Information.--If you make a false
statement with no reasonable basis which results in no imposition of backup
withholding, you are subject to a $500 civil penalty. Willfully falsifying
certifications or affirmations may also subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
EXHIBIT 99.(a)(5)(v)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Common Shares or Preferred Shares (each as defined below). The Offer (as
defined below) is made only by the Offer to Purchase, dated January 5, 2001, and
the related Letters of Transmittal, and any amendments or supplements thereto,
and is being made to all holders of Common Shares and Preferred Shares. The
Offer, however, is not being made to (nor will tenders be accepted from or on
behalf of) holders of Common Shares or Preferred Shares residing in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the securities, blue sky or other laws of such
jurisdiction. However, Purchaser (as defined below) may, in its discretion, take
such action as it may deem necessary to make the Offer in any jurisdiction and
extend the Offer to holders of Common Shares and Preferred Shares in such
jurisdiction. In those jurisdictions where securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(together with associated rights)
of
Litton Industries, Inc.
at
$80.00 Net Per Common Share
and
All Outstanding Shares of Series B $2 Cumulative Preferred Stock
of
Litton Industries, Inc.
at
$35.00 Net Per Preferred Share
by
LII Acquisition Corp.
a wholly owned subsidiary of
Northrop Grumman Corporation
LII Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Northrop Grumman Corporation, a Delaware corporation
("Parent"), is offering to purchase all of the outstanding shares of common
stock, par value $1.00 per share (together with the associated rights to
purchase preferred stock of Litton Industries, Inc. (the "Company") pursuant to
the Rights Agreement dated as of August 17, 1994 between the Company and The
Bank of New York, the "Common Shares") and all of the outstanding shares of
Series B $2 Cumulative Preferred Stock, par value $5.00 per share (the
"Preferred Shares"), of the Company, at a price of $80.00 per Common Share and
$35.00 per Preferred Share, net to the seller in cash, less any required
withholding of taxes and without payment of any interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated January
5, 2001 (the "Offer to Purchase") and in the related Letter of Transmittal
for the Common Shares and the related Letter of Transmittal for the Preferred
Shares (each individually, a "Letter of Transmittal," together, the "Letters
of Transmittal," and which, together with the Offer to Purchase, as each may be
amended or supplemented from time to time, collectively constitute the "Offer").
Tendering stockholders who have Common Shares and/or Preferred Shares
registered in their names and who tender directly will not be charged brokerage
fees or commissions or, subject to Instruction 6 of the Letters of Transmittal,
transfer taxes on the purchase of Common Shares and/or Preferred Shares pursuant
to the Offer. Stockholders who hold their Common Shares and/or Preferred Shares
through a broker or bank should consult such institution as to whether it
charges any service fees. Parent or Purchaser will pay all charges and expenses
of the Depositary, the Information Agent and the Dealer Manager incurred in
connection with the Offer.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 2, 2001, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 21, 2000 (the "Merger Agreement"), among Parent, Purchaser and
the Company, pursuant to which, after completion of the Offer and the
satisfaction or waiver of certain conditions, Purchaser will be merged with and
into the Company and the Company will be the surviving corporation (the
"Merger"). On the effective date of the Merger (the "Effective Time"), each
outstanding Common Share (other than Common Shares held in the Company's
treasury, by any subsidiary of the Company, or by Parent, Purchaser or any
subsidiary of Parent or by stockholders who have properly perfected appraisal
rights under Delaware law) will by virtue of the Merger, and without any
action by the holder thereof, be cancelled and converted into the right to
receive $80.00 per Common Share in cash, or any higher price paid pursuant to
the Offer without interest. The Merger Agreement is more fully described in
section 12 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY (I) HAS UNANIMOUSLY APPROVED THE
MERGER AGREEMENT, THE OFFER AND THE MERGER, (II) HAS UNANIMOUSLY DETERMINED THAT
THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTEREST OF, THE HOLDERS
OF COMMON SHARES, AND (III) UNANIMOUSLY RECOMMENDS THAT THE COMMON STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR COMMON SHARES PURSUANT TO THE OFFER. THE
BOARD OF DIRECTORS OF THE COMPANY IS NOT MAKING ANY RECOMMENDATION TO HOLDERS OF
PREFERRED SHARES AS TO WHETHER THEY SHOULD ACCEPT THE OFFER AND TENDER THEIR
PREFERRED SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A TOTAL OF AT
LEAST 25,562,006 COMMON SHARES AND PREFERRED SHARES, WHICH REPRESENTS A MAJORITY
OF THE TOTAL OUTSTANDING COMMON SHARES AND PREFERRED SHARES ON A FULLY-DILUTED
BASIS, AND (II) THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD
UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENT ACT OF 1976, AS AMENDED, AND,
TO THE EXTENT REQUIRED, THE APPROVAL OF THE MERGER BY THE COMMISSION OF THE
EUROPEAN UNION UNDER REGULATION (EEC) NO. 4064/89 OF THE COUNCIL OF THE EUROPEAN
UNION. THE OFFER ALSO IS SUBJECT TO OTHER TERMS AND CONDITIONS.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Common Shares and Preferred Shares validly
tendered and not withdrawn as, if and when Purchaser gives oral or written
notice to EquiServe Trust Company (the "Depositary") of its acceptance for
payment of such Common Shares and Preferred Shares pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer, payment for
Common Shares and Preferred Shares accepted for payment pursuant to the Offer
will be made by deposit of the purchase price therefor with the Depositary,
which will act as agent for all tendering stockholders for the purpose of
receiving payments from Purchaser and transmitting such payments to tendering
stockholders whose Common Shares and/or Preferred Shares have been accepted for
payment.
In all cases, payment for Common Shares and Preferred Shares accepted for
payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates representing the Common Shares and/or Preferred
Shares or a Book-Entry Confirmation (as defined in the Offer to Purchase) with
respect to such Common Shares and/or Preferred Shares, (ii) a Letter of
Transmittal to tender Common Shares and/or a Letter of Transmittal to tender
Preferred Shares (or a manually signed facsimile therof), properly completed and
duly executed, with any required signature guarantees of, in the case of a book-
entry transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu
of such Letter of Transmittal, and (iii) any other documents required by the
Letter of Transmittal. UNDER NO CIRCUMSTANCES WILL ANY INTEREST BE PAID ON THE
OFFER PRICE FOR TENDERED COMMON SHARES AND TENDERED PREFERRED SHARES, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.
2
The purpose of the Offer is to acquire control of, and the entire common
equity interest in, the Company. The Offer is subject to certain conditions set
forth in the Offer to Purchase. If any such condition is not satisfied,
Purchaser may, except as provided in the Merger Agreement, (i) terminate the
Offer and return all tendered Common Shares and all tendered Preferred Shares to
tendering stockholders, (ii) extend the Offer and, subject to withdrawal rights
as set forth below, retain all such Common Shares and Preferred Shares until the
expiration of the Offer as so extended, (iii) waive such condition and purchase
all Common Shares and Preferred Shares validly tendered and not withdrawn prior
to the expiration of the Offer, or (iv) delay acceptance for payment or payment
for Common Shares and Preferred Shares, subject to applicable laws, until
satisfaction or waiver of the conditions to the Offer.
The term "Expiration Date" means 12:00 midnight, New York City time, on
Friday, February 2, 2001, unless and until Purchaser, in its sole discretion
(but subject to the terms of the Merger Agreement), shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date on which the Offer, as so
extended by Purchaser, shall expire. Subject to the applicable rules and
regulations of the Securities and Exchange Commission, applicable law and the
terms of the Merger Agreement, Purchaser expressly reserves the right, in its
sole discretion, at any time, from time to time, to extend the period of time
during which the Offer is open by giving oral or written notice of such
extension to the Depositary. Any such extension will be followed as promptly as
possible by a public announcement thereof not later than 9:00 a.m., New York
City time, on the next business day after the day on which the Offer is
scheduled to expire. During any such extension, all Common Shares and Preferred
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering stockholder to withdraw its Common Shares
and/or Preferred Shares.
Tenders of Common Shares and Preferred Shares made pursuant to the Offer
are irrevocable except that such Common Shares and Preferred Shares may be
withdrawn at any time prior to Friday, February 2, 2001. Thereafter, such
tenders are irrevocable, except that they may be withdrawn at any time after
Tuesday, March 6, 2001, unless theretofore accepted for payment as provided in
the Offer to Purchase.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Common Shares
and/or Preferred Shares to be withdrawn, the number of Common Shares and/or
Preferred Shares to be withdrawn and the names in which the certificate(s)
evidencing the Common Shares and/or Preferred Shares to be withdrawn are
registered, if different from the name of the person who tendered such Common
Shares and/or Preferred Shares. The signature(s) on the notice of withdrawal
must be guaranteed by an Eligible Institution (as defined in the Offer to
Purchase), unless such Common Shares and/or Preferred Shares have been tendered
for the account of any Eligible Institution. If Common Shares and/or Preferred
Shares have been tendered pursuant to the procedures for book-entry transfer as
set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
(as defined in the Offer to Purchase) to be credited with the withdrawn Common
Shares and/or Preferred Shares and must otherwise comply with such Book-Entry
Transfer Facility's procedures. If certificates for Common Shares and/or
Preferred Shares to be withdrawn have been delivered or otherwise identified to
the Depositary, the name of the registered holder and the serial numbers of the
particular certificates evidencing the Common Shares and/or Preferred Shares to
be withdrawn must also be furnished to the Depositary as aforesaid prior to the
physical release of such certificates. All questions as to the form and
validity (including time of receipt) of any notice of withdrawal will be
determined by Purchaser or its designee, in its sole discretion, which
determination shall be final and binding. None of Purchaser, Parent, the Dealer
Manager (listed below), the Depositary, the Information Agent (listed below) or
any other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give such notification. Withdrawals of tenders of Common Shares and/or
Preferred Shares may not be rescinded, and any Common Shares and/or Preferred
Shares properly withdrawn will be considered not validly tendered for purposes
of the Offer. However, withdrawn Common Shares and/or Preferred Shares may be
retendered by following one of the procedures described in Section 3 of the
Offer to Purchase at any time prior to the Expiration Date.
The information required to be disclosed by paragraph (d)(1) of Rule 14d-6
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), is contained in the Offer to Purchase and is
incorporated herein by reference.
3
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
stockholders. The Offer to Purchase, the related Letters of Transmittal and
other relevant materials will be mailed to record holders of Common Shares and
Preferred Shares and will be furnished to brokers, banks and similar persons
whose names, or the names of whose nominees, appear on the stockholder list or,
if applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Common
Shares and Preferred Shares.
THE OFFER TO PURCHASE AND THE LETTERS OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth below. Stockholders may request additional copies of the Offer to
Purchase, the related Letters of Transmittal and other tender offer materials
from the Information Agent, the Dealer Manager or their broker, dealer,
commercial bank or trust company. Such additional copies will be furnished at
Purchaser's expense. No fees or commissions will be paid to brokers, dealers or
other persons (other than the Information Agent and the Dealer Manager) for
soliciting tenders of Common Shares and/or Preferred Shares pursuant to the
Offer.
The Information Agent for the Offer is:
GEORGESON SHAREHOLDER
COMMUNICATIONS, INC.
17 State Street, 10th Floor
New York, New York 10004
Bankers and Brokers Call Collect: (212) 440-9800
All Others Please Call: (800) 223-2064
The Dealer Manager for the Offer is:
SALOMON SMITH BARNEY
388 Greenwich Street
New York, New York 10013
Call Toll Free: (877) 319-4978
January 5, 2001
4
EXHIBIT 99.(b)(1)
Execution Copy
CREDIT SUISSE FIRST BOSTON THE CHASE MANHATTAN BANK
Eleven Madison Avenue CHASE SECURITIES INC.
New York, NY 10010 270 Park Avenue
New York, NY 10017
December 20, 2000
Northrop Grumman Corporation
1840 Century Park East
Los Angeles, CA. 90067-2199
Attention of Albert F. Myers
Project Intrepid
----------------
$6,000,000,000 Senior Credit Facilities
--------------------------------------
Commitment Letter
-----------------
Ladies and Gentlemen:
You have advised Credit Suisse First Boston ("CSFB"), The Chase
Manhattan Bank ("Chase" and, together with CSFB, the "Initial Lenders") and
Chase Securities Inc. ("CSI" and, together with CSFB, the "Agents") that
Northrop Grumman Corporation ("you" or the "Borrower") intends to acquire (the
"Acquisition") a company that you have identified to us as Litton Industries,
Inc. (the "Target") and to consummate the other Transactions. Capitalized terms
used but not defined herein have the meanings assigned in the Summary of
Principal Terms and Conditions attached hereto as Exhibit A (the "Term Sheet").
You have further advised us that, in connection therewith, the Borrower
will obtain the senior credit facilities (the "Facilities") described in the
Term Sheet, in an aggregate principal amount of $6,000,000,000, consisting of a
364-Day Revolving Credit Facility in a principal amount of $3,000,000,000 and a
Five-Year Revolving Credit Facility in a principal amount of $3,000,000,000.
In connection with the foregoing, you have requested that (a) we agree
to structure, arrange and syndicate the Facilities, (b) CSFB and Chase agree to
act as co-administrative agents, (c) CSFB and CSI agree to act as joint book
managers and joint lead arrangers for the Facilities and (d) each Initial Lender
severally commits to provide one-half of the principal amount of the Facilities.
Each Initial Lender is pleased to advise you of its several commitment
to provide up to one-half of the principal amount of the Facilities, upon the
terms and subject to the conditions set forth or referred to in this commitment
letter (the "Commitment Letter") and in the Term Sheet.
It is agreed that CSFB and Chase will act as co-administrative agents
for the Facilities, that CSFB and CSI will act as joint book managers and joint
lead arrangers for the Facilities and that we will, in such capacities, perform
the duties and exercise the authority customarily performed and exercised by it
in such roles. You agree that no other titles will be awarded and no
compensation (other than that expressly contemplated by the
Term Sheet and the Fee Letter referred to below) will be paid in connection with
the Facilities unless you and we shall so agree.
We intend to syndicate the Facilities to a group of financial
institutions (together with the Initial Lenders, the "Lenders") identified by us
in consultation with you. We intend to commence syndication efforts promptly
upon the execution of this Commitment Letter, and you agree to actively assist
us in completing a syndication satisfactory to us. Such assistance shall include
(a) your using commercially reasonable efforts to ensure that the syndication
efforts benefit materially from your and the Target's existing lending
relationships, (b) direct contact between senior management, representatives and
advisors of the Borrower, the Target and the proposed Lenders, (c) assistance by
the Borrower and the Target in the preparation of a Confidential Information
Memorandum for the Facilities and other marketing materials to be used in
connection with the syndication and (d) the hosting, with us, of one or more
meetings of prospective Lenders.
We will manage, in consultation with you, all aspects of the syndication
including decisions as to the selection of institutions to be approached and
when they will be approached, when their commitments will be accepted, which
institutions will participate, the allocation of the commitments among the
Lenders and the amount and distribution of fees among the Lenders. To assist us
in our syndication efforts, you agree promptly to prepare and provide, and to
use commercially reasonable efforts to cause the Target to prepare and provide,
to us all information with respect to the Borrower, the Target and their
respective subsidiaries, the Transactions and the other transactions
contemplated hereby, including all financial information and projections (the
"Projections"), as we may reasonably request. You hereby represent and covenant
that (a) all information other than the Projections (the "Information") that has
been or will be made available to us by you or any of your representatives is
or will be, when furnished, complete and correct in all material respects and
does not or will not, when furnished, contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made and (b) the Projections that have been or will be
made available to us by you or any of your representatives have been or will be
prepared in good faith based upon assumptions that are reasonable at the time
made and at the time the related Projections are made available to us. You agree
that if at any time prior to the closing of the Facilities any of the
representations in the preceding sentence would be incorrect if the Information
and Projections were being furnished, and such representations were being made,
at such time, then you will promptly supplement the Information and the
Projections so that such representations will be correct under those
circumstances. In arranging and syndicating the Facilities, we will be entitled
to use and rely primarily on the Information and the Projections without
responsibility for independent verification thereof.
As consideration for the Initial Lender's several commitments hereunder
and our agreements to perform the services described herein, you agree to pay to
the Initial Lenders the nonrefundable fees set forth in the Term Sheet and in
the Fee Letter dated the date hereof and delivered herewith with respect to the
Facilities (the "Fee Letter").
The Initial Lenders' several commitments hereunder and our agreements to
perform the services described herein are further subject to (a) our not having
discovered or otherwise become aware of any information not previously disclosed
to us that we believe to be inconsistent in a material and adverse manner with
our understanding, based on the information provided to us prior to the date
hereof, of the business, assets,
3
operations, condition (financial or otherwise), or prospects of the Borrower,
the Target and their respective subsidiaries, (b) there not having occurred any
material adverse change or material adverse condition in the business, assets,
operations, condition (financial or otherwise) or prospects of the Borrower and
its subsidiaries, taken as a whole, or the Target and its subsidiaries, taken as
a whole, in each case since December 31, 1999, (c) there not having occurred
after the date hereof a material disruption of or material adverse change in
financial, banking or capital market conditions that has adversely affected the
syndication of the Facilities, (d) our satisfaction that, prior to and during
the syndication of the Facilities, there shall be no competing issues of debt
securities or commercial bank or other credit facilities of the Borrower, the
Target or their respective subsidiaries being offered, placed or arranged, (e)
the negotiation, execution and delivery of definitive documentation with respect
to the Facilities satisfactory to us and our counsel, (f) our having been
afforded a reasonable period following the date hereof to syndicate the
Facilities and (g) the other conditions set forth in the Term Sheet.
You agree (a) to indemnify and hold harmless each of CSFB, Chase, CSI and
their respective affiliates and their respective officers, directors, employees,
agents and controlling persons from and against any and all losses, claims,
damages, liabilities and expenses, joint or several, to which any such persons
may become subject arising out of or in connection with this Commitment Letter,
the Fee Letter, the Term Sheet, the Transactions, the Facilities or any related
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any of such indemnified persons is a
party thereto, and to reimburse each of such indemnified persons upon demand for
any reasonable legal or other expenses incurred in connection with investigating
or defending any of the foregoing, provided that the foregoing indemnity will
--------
not, as to any indemnified person, apply to losses, claims, damages, liabilities
or related expenses to the extent they are found in a final judgment of a court
to have resulted from the willful misconduct or gross negligence of such
indemnified person, and (b) to reimburse us from time to time, upon presentation
of a summary statement, for all reasonable out-of-pocket expenses (including but
not limited to expenses of our due diligence investigation, syndication
expenses, travel expenses and reasonable fees, disbursements and other charges
of counsel), in each case incurred in connection with the Facilities and the
preparation of this Commitment Letter, the Term Sheet, the Fee Letter and the
definitive documentation for the Facilities. Notwithstanding any other provision
of this Commitment Letter, no indemnified person shall be liable for any
indirect or consequential damages in connection with its activities related to
the Facilities.
You acknowledge that each of us and our affiliates may be providing debt
financing, equity capital or other services (including financial advisory
services) to other companies in respect of which you may have conflicting
interests regarding the transactions described herein and otherwise. None of us
will use confidential information obtained from you by virtue of the
transactions contemplated by this Commitment Letter or its other relationships
with you in connection with the performance by us of services for other
companies, and none of us will furnish any such information to other companies.
You also acknowledge that none of us has any obligation to use in connection
with the transactions contemplated by this Commitment Letter, or to furnish to
you, confidential information obtained by us from other companies.
This Commitment Letter and our commitments hereunder shall not be
assignable by you without the prior written consent of the Initial Lenders and
the Agents (and any attempted assignment without such consent shall be null and
void), are intended to be
4
solely for the benefit of the parties hereto (and indemnified persons), are not
intended to confer any benefits upon, or create any rights in favor of, any
person other than the parties hereto (and indemnified persons) and are not
intended to create a fiduciary relationship among the parties hereto. Each
Initial Lender may assign its commitment hereunder to any of its affiliates or
any Lender. Any such assignment to an affiliate will not relieve the assignor
from any of its obligations hereunder unless and until such affiliate shall have
funded the portion of the commitment so assigned. Any assignment to a Lender
shall be by novation and shall release the assignor from the portion of its
commitment hereunder so assigned. This Commitment Letter may not be amended or
any provision hereof waived or modified except by an instrument in writing
signed by the Initial Lenders, the Agents and you. This Commitment Letter may be
executed in any number of counterparts, each of which shall be an original and
all of which, when taken together, shall constitute one agreement. Delivery of
an executed counterpart of a signature page of this Commitment Letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. This Commitment Letter and the Fee Letter are the only
agreements that have been entered into between us with respect to the Facilities
and set forth the entire understanding of the parties with respect thereto. This
Commitment Letter shall be governed by, and construed in accordance with, the
laws of the State of New York.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY
PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER OR THE PERFORMANCE OF
SERVICES HEREUNDER.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letter nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to your officers, employees, attorneys, accountants and
advisors on a confidential and need-to-know basis or (b) as required by
applicable law or compulsory legal process (in which case you agree to inform us
promptly thereof); provided that following our acceptance hereof and of the Fee
--------
Letter you may disclose this Commitment Letter, the Term Sheet and the contents
hereof and thereof (but not the Fee Letter or the contents thereof) to the
Target and its attorneys, accountants and advisors, in each case in connection
with the Acquisition and on a confidential and need-to-know basis.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letter shall remain in full force and
effect regardless of whether definitive financing documentation shall be
executed and delivered and notwithstanding the termination of this Commitment
Letter or the Initial Lenders' commitments hereunder.
If the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 5:00 p.m., New York City time, on December 29, 2000. The Initial Lenders'
commitments hereunder and agreements contained herein will expire at such time
in the event that we have not received such executed counterparts in accordance
with the immediately preceding sentence. In the event that the Closing Date does
not occur on or before March 31, 2001, then this Commitment Letter and the
Initial Lenders' commitments and undertakings hereunder shall automatically
terminate unless we shall, in our discretion, agree to an extension.
5
Before such date, we may terminate this Commitment Letter if any event occurs or
information becomes available that, in our judgment, results or is likely to
result in the failure to satisfy any condition precedent set forth herein or in
the Term Sheet.
We are pleased to have been given the opportunity to assist you in
connection with the financing for the Acquisition.
Very truly yours,
CREDIT SUISSE FIRST BOSTON,
by /s/ Richard B. Carey
_________________________________
Name: Richard B. Carey
Title: Managing Director
by /s/ Eugene F. Martin
---------------------------------
Name: Eugene F. Martin
Title: Senior Vice President
THE CHASE MANHATTAN BANK,
by /s/ Thomas H. Kozlink
_________________________________
Name: Thomas H. Kozlink
Title: Vice President
CHASE SECURITIES INC.,
by /s/ Patricia A. Brill
_________________________________
Name: Patricia A. Brill
Title: Managing Director
Accepted and agreed to as of
the date first above written:
NORTHROP GRUMMAN CORPORATION,
by /s/ Albert F. Myers
-------------------------------
Name: Albert F. Myers
Title: Corporate Vice President
and Treasurer
CONFIDENTIAL
December 20, 2000 EXHIBIT A
Project Intrepid
----------------
$6,000,000,000 Senior Credit Facilities
---------------------------------------
Summary of Principal Terms and Conditions
-----------------------------------------
Borrower: Northrop Grumman Corporation, a Delaware
- -------- corporation (the "Borrower").
Acquisition: The Borrower intends to acquire (the
- ----------- "Acquisition") a Delaware corporation
identified as Litton Industries, Inc.
(the "Target") pursuant to an agreement
and plan of merger (the "Merger Agreement")
to be entered into by the Borrower, a wholly
owned special purpose subsidiary of the
Borrower ("Merger Sub") and the Target.
The Merger Agreement will provide either for
(a) a tender offer to be made by Merger Sub
for all the issued and outstanding capital
stock of the Target at a purchase price of
$80.00 per share, net to the seller in cash
(the "Tender Offer"), followed by a merger
(the "Merger") of Merger Sub and the Target
in which, subject to stockholders' dissent
rights, each share not tendered in the Tender
Offer would be converted into the right to
receive $80.00 in cash, or (b) a one-step
statutory Merger of Merger Sub and the Target
in which, subject to stockholders' dissent
rights, each issued outstanding share of
capital stock of the Target would be
converted into the right to receive $80.00
per share in cash. In either event, the
aggregate cash consideration payable to the
stockholders of the Target in respect of the
Acquisition would be approximately $3.972
billion. In connection with the Acquisition,
(a) the Borrower and the Target will repay
all amounts outstanding under, and terminate,
their existing bank credit agreements (the
"Existing Credit Agreements") and certain
other existing debt (together with the
Existing Credit Agreements, the "Refinanced
Debt"), (b) the Borrower will obtain the
senior credit facilities described below
under the caption "Facilities" and (c) fees
and expenses incurred in connection with the
foregoing will be paid. The transactions
described in this paragraph, together with
the Acquisition, are collectively referred to
herein as the "Transactions".
Sources and Uses: The approximate sources and uses of the
- ---------------- funds necessary to consummate the
Transactions are set forth in Annex II
hereto.
Joint Book Managers and Joint Chase Securities, Inc. ("CSI") and Credit
- ----------------------------- Suisse First Boston ("CSFB") will act as
Lead Arrangers: joint book managers and joint lead arrangers
- -------------- for the Facilities
2
(the "Arrangers"), and will perform the duties
customarily associated with such roles.
Co-Administrative Agents: The Chase Manhattan Bank ("Chase") and CSFB
- ------------------------ will act as co-administrative agents (the
"Agents") for a syndicate of financial
institutions (together will Chase and CSFB,
the "Lenders"), and will perform the duties
customarily associated with such role.
Payment Agent: Chase (the "Payment Agent").
- -------------
Syndication Agent(s): One or more financial institutions mutually
- -------------------- acceptable to the Arrangers and the Borrower
will be given the title of syndication agent.
Documentation Agent(s): One or more financial institutions mutually
- ---------------------- acceptable to the Arrangers and the Borrower
will be given the title of documentation
agent.
Senior Credit Facilities: Two unsecured Revolving Credit Facilities
- ------------------------ (each a "Facility" and together the
"Facilities") in an aggregate principal amount
of up to $6,000,000,000:
(A) A 364-Day Revolving Credit Facility in an
aggregate principal amount of up to
$3,000,000,000 (the "364-Day Facility").
(B) A Five-Year Revolving Credit Facility in
an aggregate principal amount of up to
$3,000,000,000 (the "Five-Year
Facility").
Availability: Amounts borrowed and repaid may be reborrowed
- ------------ subject to availability under the applicable
Facility.
Purpose: The proceeds of the initial borrowings under
- ------- the Facilities will be used solely (a) to pay
the cash consideration payable in the
Acquisition, (b) to refinance the Existing
Credit Agreements and Refinanced Debt and (c)
to pay related fees and expenses. The proceeds
of subsequent borrowings under the Facilities
will be used for general corporate purposes.
Final Maturity: The Lenders' commitments under the 364-Day
- -------------- Facility will expire and the borrowings
thereunder will mature on the date that is 364
days after the date of execution of definitive
credit documentation for the Facilities (the
"Closing Date"). Commitments under the Five-
Year Facility will
3
expire and the borrowings thereunder will
mature on the fifth anniversary of the
Closing Date.
Mandatory Reductions in Commitments under the 364-Day Facility
- ----------------------- will be reduced, and loans thereunder
Commitments: prepaid, from time to time by an amount
- ----------- equal to (a) 100% of the net cash proceeds
of certain non-ordinary-course asset sales
or other dispositions of assets by the
Borrower and its subsidiaries and (b) 100%
of the net cash proceeds of certain
issuances of debt or equity securities of
the Borrower and its subsidiaries.
Voluntary Reductions in Voluntary reductions of the unutilized
- ----------------------- portion of the commitments and prepayments
Commitments: of Revolving Credit borrowings will be
- ----------- permitted at any time, in minimum
principal amounts to be agreed upon,
without premium or penalty, subject to
reimbursement of the Lenders' redeployment
costs in the case of a prepayment of
Adjusted LIBOR borrowings other than on
the last day of the relevant interest
period.
Representations and Warranties: Usual for facilities and transactions of
- ------------------------------ this type and otherwise substantially in
the form of those contained in the
Borrower's Second Amended and Restated
Credit Agreement dated as of March 1, 1996
(the "Restated Credit Agreement"),
including corporate existence; accuracy of
financial information, absence of material
adverse change; absence of material
litigation; absence of breach or defaults;
corporate action; necessary approvals; use
of proceeds; ERISA matters; payment of
taxes; ownership of properties;
environmental matters; true and complete
disclosure; material subsidiaries and
intercompany debt.
Conditions Precedent to Initial Usual for facilities and transactions of
- ------------------------------- this type and otherwise substantially in
Borrowing: the form of those contained in the
- --------- Restated Credit Agreement, including
delivery of satisfactory legal options,
audited financial statements and other
financial information; accuracy of
representations and warranties; absence of
defaults, prepayment events or creation
of liens under debt instruments or other
agreements; evidence of authority, and
payment of fees and expenses.
Either (a) the Merger shall be consummated
substantially simultaneously with the
closing under the Facilities or (b) the
Tender Offer shall be consummated
substantially simultaneously with the
4
closing under the Facilities and there shall
have been validly tendered thereunder and
not withdrawn a majority of the capital
stock of the Target, such that Merger Sub
would be able to consummate the Merger
without the vote of any other stockholder of
the Target, in each case in accordance with
applicable law and on the terms described
herein; the Merger Agreement and all other
related documentation shall be satisfactory
to the Lenders; and none of such
documentation shall have been amended,
waived or modified in any material respect
without the consent of the Lenders.
After giving effect to the Transactions and
the other transactions contemplated hereby,
the Borrower and its subsidiaries shall have
outstanding no indebtedness or preferred
stock other than (a) the loans and other
extensions of credit under the Facilities
and (b) other indebtedness to be agreed
upon.
The Lenders shall have received (a) audited
consolidated balance sheets and related
statements of income, stockholders' equity
and cash flows of the Borrower and the
Target for the 1997, 1998 and 1999 fiscal
years and (b) unaudited consolidated balance
sheets and related statements of income,
stockholders' equity and cash flows of the
Borrower and the Target for each subsequent
fiscal quarter ended 30 days before the
Closing Date, which financial statements
shall not be materially inconsistent with
the financial statements or forecasts
previously provided to the Lenders.
The amount and nature of any environmental
or health and safety liabilities, including
any liabilities related to the presence or
release of, or exposure to, hazardous
substances, to which the Borrower and its
subsidiaries may be subject after giving
effect to the Transactions shall be
substantially consistent with the Agent's
understanding thereof based on the
disclosure contained in the Company's Annual
Report on Form 10-K for the year ended
December 31, 1999.
All requisite governmental authorities and
third parties shall have approved or
consented to the Transactions and the other
transactions contemplated hereby to the
extent required, all applicable appeal
periods shall have expired and there shall
be no litigation, governmental,
5
administrative or judicial action, actual
or threatened, that could reasonably be
expected to restrain, prevent or impose
burdensome conditions on the other
Transactions or the other transactions
contemplated hereby.
Conditions Precedent to all Delivery of notice, accuracy of
- --------------------------- representations and warranties and
Borrowings: absence of defaults.
- ----------
Affirmative Covenants: Usual for facilities and transactions of
- --------------------- this type and otherwise substantially in
the form of those contained in the
Restated Credit Agreement, including
delivery of financial statements and
other financial information; maintenance
of corporate existence and rights;
performance of obligations, including
payment of taxes and ERISA; compliance
with law; delivery of notices of default
and litigation; maintenance of
satisfactory insurance and inspection of
books and properties.
Negative Covenants: Usual for facilities and transactions of
- ------------------ this type and otherwise substantially in
the form of those contained in the
Restated Credit Agreement, including
limitations on restricted payments;
limitations on dispositions of property;
limitations on guarantees; limitations on
mergers, acquisitions and asset sales;
limitations on subsidiary equity
issuances; limitations on liens;
limitations on loans and investments;
limitations on debt and hedging
arrangements; limitations on acquisitions
of Margin Stock and limitations on
changes in business conducted by the
Borrower and its subsidiaries.
Selected Financial Covenants: Usual for facilities and transactions of
- ---------------------------- this type and otherwise substantially in
the form of those contained in the
Restated Credit Agreement (with financial
definitions and levels to be agreed
upon), including (a) maximum ratios of
Funded Debt to Total Capitalization, (b)
maximum ratios of Funded Debt to Cash
Flow and (c) minimum ratios of Cash Flow
minus Capital Expenditures to Fixed
Charges.
Events of Default: Usual for facilities and transactions of
- ----------------- this type and otherwise substantially in
the form of those contained in the
Restated Credit Agreement, including:
failure to pay principal, interest or
other amounts; breach of representations
and warranties; breach of covenants;
certain bankruptcy events; cross default
and cross acceleration; certain ERISA
matters; certain judgments; and Change in
Control (to be defined).
6
Voting: Amendments and waivers of the definitive
- ------ credit documentation will require the
approval of Lenders holding more than 50%
of the aggregate amount of the loans and
commitments under the Facilities, except
that the consent of each Lender adversely
affected thereby shall be required with
respect to, among other things, (a)
increases in the commitment of such Lender,
(b) reductions of principal, interest or
fees and (c) extensions of final maturity.
Yield Protection and Illegality: Usual and customary, including but not
- ------------------------------- limited to protection with respect to
breakage costs, changes in capital
requirements or their interpretation,
changes in circumstances, reserves,
illegality and taxes.
Assignments and Participations: The Lenders will be permitted to assign
- ------------------------------ loans and commitments to other Lenders (or
their affiliates) without restriction, or
to other financial institutions with the
consent of the Borrower and the Agents, in
each case not to be unreasonably withheld.
Each assignment (except to other Lenders or
their affiliates) will be in a minimum
amount of $10,000,000. The Agents will
receive a customary processing and
recordation fee, payable by the assignor
and/or the assignee, with each assignment.
Assignments will be by novation.
The Lenders will be permitted to
participate loans and commitments without
restriction to other financial
institutions. Voting rights of participants
shall be limited to matters in respect of
(a) increases in commitments, (b)
reductions of principal, interest or fees
and (c) extensions of final maturity.
Expenses and Indemnification: The Borrower will indemnify the Arrangers,
- ---------------------------- the Agents and other Lenders and hold them
harmless from and against all costs,
expenses (including without limitation
fees, disbursements and other charges of
counsel) and liabilities of the Arrangers,
the Agents and the other Lenders arising
out of or relating to any claim or any
litigation or other proceeding (regardless
of whether the Arrangers, the Agents or any
other Lender is a party thereto) that
relates to the Transactions, including the
financing contemplated hereby, the
Acquisition or any transactions connected
therewith, provided that none of the
--------
Arrangers, the Agents or any other Lender
will be indemnified for any cost, expense
or liability to the extent determined in
the final judgment of a court of competent
jurisdiction to
have resulted from its gross
negligence or willful misconduct.
In addition, all out-of-pocket
expenses of the Lenders for
enforcement costs and documentary
taxes associated with the
Facilities are to be paid by the
Borrower.
Governing Law and Forum: New York.
- -----------------------
Counsel to Agents and Cravath, Swaine & Moore.
- ---------------------
Arrangers:
- ---------
2
ANNEX I
Facility Fee: Facility Fees will accrue and be payable to
- ------------ the Lenders on the aggregate amount of each
Facility (whether drawn or undrawn),
commencing on the Closing Date. Facility Fees
will be payable in arrears at the end of each
calendar quarter and upon the maturity date or
the termination of the commitments. The rates
at which the Facility Fees accrue will depend
upon the ratings of Moody's Investors Service,
Inc. and Standard and Poor's Ratings Services
(the "Ratings") applicable to the Borrower's
senior, unsecured, non-credit enhanced long-
term debt (the "Index Debt"), as set forth in
the table appearing at the end of this Annex
I.
Interest Rates: The interest rates under the Facilities will
- -------------- be, at the option of the Borrower, Adjusted
LIBOR or ABR, in each case plus spreads
depending upon the Ratings, as set forth in
the table appearing at the end of this Annex
I.
The Borrower may elect interest periods of 1,
2, 3 or 6 months for Adjusted LIBOR
borrowings.
Calculation of interest shall be on the basis
of the actual days elapsed in a year in of 360
days (or 365 or 366 days, as the case may be,
in the case of ABR loans based on the Prime
Rate) and interest shall be and interest shall
be payable at the end of each interest period
and, in any event, at least every 3 months.
ABR is the Alternate Base Rate, which is the
higher of Chase's Prime Rate and the Federal
Funds Effective Rate plus 1/2 of 1%.
Adjusted LIBOR will at all times include
statutory reserves.
ANNEX II
Sources and Uses of Funds
(in millions of dollars)
(all figures are approximate)
Sources of Funds Uses of Funds
- ---------------- -------------
Facilities 1/
364-Day Revolver $1,295.7 Purchase of Equity $3,972.0
5-Year Revolver 3,000.0 Retire Misc. Existing 511.5
Debt & Preferred
Excess Cash/Option 262.8 Fees & Expenses 75.0
Proceeds -------- --------
Total Sources $4,558.5 Total Uses $4,558.5
======== ========
______________________
1/ Represents amount to be drawn under the $6,000,000,000 Facilities
on the Closing Date.
3
FEE AND SPREAD TABLES
---------------------
==========================================================================================================
LIBOR ABR Drawn
Facility Fee Spread Spread Cost
364-Day Ratings (bps per (bps per (bps per (bps per
Facility (S&P/Moody's) annum) annum) annum) annum)
- ----------------------------------------------------------------------------------------------------------
Catagory 1 BBB+ or Baal or 10.0 65.0 0.0 75.0
higher
- ----------------------------------------------------------------------------------------------------------
Catagory 2 BBB or Baa2 or 12.5 87.5 0.0 100.0
higher
- ----------------------------------------------------------------------------------------------------------
Catagery 3 BBB- and Baa3 17.5 107.5 7.5 125.0
- ----------------------------------------------------------------------------------------------------------
Catagory 4 BBB- and Bal or 25.0 125.0 25.0 150.0
BB+ and Baa3
- ----------------------------------------------------------------------------------------------------------
Catagory 5 BB+ and Bal 30.0 145.0 45.0 175.0
- ----------------------------------------------------------------------------------------------------------
Catagory 6 Anything lower 37.5 187.5 87.5 225.0
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
LIBOR ABR Drawn
Facility Fee Spread Spread Cost
Five-Year Ratings (bps per (bps per (bps per (bps per
Facility (S&P/Moody's) annum) annum) annum) annum)
- ----------------------------------------------------------------------------------------------------------
Catagory 1 BBB+ or Baal or 15.0 60.0 0.0 75.0
higher
- ----------------------------------------------------------------------------------------------------------
Catagory 2 BBB or Baa2 or 17.5 82.5 0.0 100.0
higher
- ----------------------------------------------------------------------------------------------------------
Catagery 3 BBB- and Baa3 22.5 102.5 2.5 125.0
- ----------------------------------------------------------------------------------------------------------
Catagory 4 BBB- and Bal or 37.5 112.5 12.5 150.0
BB+ and Baa3
- ----------------------------------------------------------------------------------------------------------
Catagory 5 BB+ and Bal 42.5 132.5 32.5 175.0
- ----------------------------------------------------------------------------------------------------------
Catagory 6 Anything lower 50.0 175.0 75.0 225.0
- ----------------------------------------------------------------------------------------------------------
EXHIBIT 99.(d)(1)
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 21, 2000
AMONG
NORTHROP GRUMMAN CORPORATION,
LITTON INDUSTRIES, INC.
AND
LII ACQUISITION CORP.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE OFFER...................................................... 1
SECTION 1.1. The Offer............................................. 1
---------
SECTION 1.2. Company Action........................................ 3
--------------
SECTION 1.3. Boards of Directors and Committees; Section 14(f)..... 4
-------------------------------------------------
ARTICLE 2 THE MERGER..................................................... 5
SECTION 2.1. The Merger............................................ 5
----------
SECTION 2.2. Effective Time........................................ 5
--------------
SECTION 2.3. Closing of the Merger................................. 5
---------------------
SECTION 2.4. Effects of the Merger................................. 5
---------------------
SECTION 2.5. Certificate of Incorporation and Bylaws............... 5
---------------------------------------
SECTION 2.6. Directors............................................. 6
---------
SECTION 2.7. Officers.............................................. 6
--------
SECTION 2.8. Conversion of Shares.................................. 6
--------------------
SECTION 2.9. Payment of Merger Consideration....................... 7
-------------------------------
SECTION 2.10. Stock Options......................................... 8
-------------
SECTION 2.11. Dissenting Shares..................................... 9
-----------------
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 10
SECTION 3.1. Organization and Qualification; Subsidiaries.......... 10
--------------------------------------------
SECTION 3.2. Capitalization of the Company and its Subsidiaries.... 10
--------------------------------------------------
SECTION 3.3. Authority Relative to this Agreement; Recommendation.. 11
----------------------------------------------------
SECTION 3.4. SEC Reports; Financial Statements..................... 12
---------------------------------
SECTION 3.5. Information Supplied.................................. 12
--------------------
SECTION 3.6. Consents and Approvals; No Violations................. 13
-------------------------------------
SECTION 3.7. No Default............................................ 13
----------
i
Table of Contents
(Continued)
SECTION 3.8. No Undisclosed Liabilities; Absence of Changes........ 13
----------------------------------------------
SECTION 3.9. Litigation............................................ 14
----------
SECTION 3.10. Compliance with Applicable Law........................ 14
------------------------------
SECTION 3.11. Employee Benefit Plans; Labor Matters................. 14
-------------------------------------
SECTION 3.12. Environmental Laws and Regulations.................... 15
----------------------------------
SECTION 3.13. Taxes................................................. 16
-----
SECTION 3.14. Intellectual Property; Software....................... 17
-------------------------------
SECTION 3.15. Government Contracts.................................. 17
--------------------
SECTION 3.16. Certain Business Practices............................ 18
--------------------------
SECTION 3.17. Vote Required......................................... 18
-------------
SECTION 3.18. Opinion of Financial Adviser.......................... 18
----------------------------
SECTION 3.19. Brokers............................................... 18
-------
SECTION 3.20. Problems with Customers............................... 19
-----------------------
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION....... 19
SECTION 4.1. Organization.......................................... 19
------------
SECTION 4.2. Authority Relative to this Agreement.................. 19
------------------------------------
SECTION 4.3. SEC Reports; Financial Statements..................... 20
---------------------------------
SECTION 4.4. Information Supplied.................................. 20
--------------------
SECTION 4.5. Consents and Approvals; No Violations................. 20
-------------------------------------
SECTION 4.6. Adequate Funds........................................ 21
--------------
SECTION 4.7. No Prior Activities................................... 21
-------------------
ARTICLE 5 COVENANTS...................................................... 21
SECTION 5.1. Conduct of Business of the Company.................... 21
----------------------------------
SECTION 5.2. Conduct of Business of Parent......................... 24
-----------------------------
ii
Table of Contents
(Continued)
SECTION 5.3. Other Potential Acquirers....................................... 24
-------------------------
SECTION 5.4. Meeting of Stockholders......................................... 26
-----------------------
SECTION 5.5. Access to Information........................................... 26
---------------------
SECTION 5.6. Additional Agreements; Reasonable Efforts....................... 27
-----------------------------------------
SECTION 5.7. Indemnification................................................. 29
---------------
SECTION 5.8. Public Announcements............................................ 29
--------------------
SECTION 5.9. Employee Matters................................................ 30
----------------
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER................................. 31
SECTION 6.1. Conditions to Each Party's Obligations to Effect the Merger..... 31
-----------------------------------------------------------
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER........................................... 32
SECTION 7.1. Termination..................................................... 32
-----------
SECTION 7.2. Effect of Termination........................................... 33
---------------------
SECTION 7.3. Fees and Expenses............................................... 33
-----------------
SECTION 7.4. Amendment....................................................... 34
---------
SECTION 7.5. Extension; Waiver............................................... 34
-----------------
ARTICLE 8 MISCELLANEOUS............................................................ 34
SECTION 8.1. Nonsurvival of Representations and Warranties................... 34
---------------------------------------------
SECTION 8.2. Entire Agreement; Assignment.................................... 34
----------------------------
SECTION 8.3. Validity........................................................ 34
--------
SECTION 8.4. Notices......................................................... 35
-------
SECTION 8.5. Governing Law................................................... 35
-------------
SECTION 8.6. Descriptive Headings............................................ 35
--------------------
SECTION 8.7. Parties in Interest............................................. 35
-------------------
SECTION 8.8. Certain Definitions............................................. 36
-------------------
SECTION 8.9. Personal Liability.............................................. 36
------------------
iii
Table of Contents
(Continued)
SECTION 8.10. Counterparts......................................... 36
------------
ANNEX A CONDITIONS OF THE OFFER......................................... 39
iv
TABLE OF DEFINED TERMS
Cross Reference
Term Section Page
- ---- ---------------------- ----
affiliate.............................. Section 8.8(a)......... 36
Bid.................................... Section 3.15(b)........ 18
business day........................... Section 8.8(b)......... 36
capital stock.......................... Section 8.8(c)......... 36
Certificates........................... Section 2.9(b)......... 7
Closing................................ Section 2.3............ 5
Closing Date........................... Section 2.3............ 5
Code................................... Section 8.8(d)......... 36
Company Financial Adviser.............. Section 3.18........... 18
Company Intellectual Property Rights... Section 3.14(a)........ 17
Company Material Adverse Effect........ Section 3.1(b)......... 10
Company Permits........................ Section 3.10........... 14
Company Securities..................... Section 3.2(a)......... 11
DGCL................................... Section 1.2(a) ........ 3
Effective Time......................... Section 2.2............ 5
Environmental Claim.................... Section 3.12(a)........ 15
Environmental Laws..................... Section 3.12(a)........ 15
Exchange Act........................... Section 3.2(c)......... 11
Government Contract.................... Section 3.15(b)........ 18
Governmental Entity.................... Section 3.6............ 13
HSR Act................................ Section 3.6............ 13
Indemnified Liabilities................ Section 5.7(a)......... 29
Indemnified Persons.................... Section 5.7(a)......... 29
knowledge.............................. Section 8.8(e)......... 36
known.................................. Section 8.8(e)......... 36
Lien................................... Section 3.2(b)......... 11
Merger................................. Section 2.1............ 5
Merger Certificate..................... Section 2.2............ 5
Merger Consideration................... Section 2.8(a)......... 6
Merger Fund............................ Section 2.9(a)......... 7
Notice of Superior Proposal............ Section 5.3(b)......... 25
Parent Disclosure Schedule............. Article 4.............. 19
Parent Material Adverse Effect......... Section 4.1(b)......... 19
Parent SEC Reports..................... Section 4.3(a)......... 20
Payment Agent.......................... Section 2.9(a)......... 7
person................................. Section 8.8(f)......... 36
Proxy Statement........................ Section 3.5............ 12
Rights................................. Section 3.2(a)......... 10
SEC.................................... Section 3.4(a)......... 12
Securities Act......................... Section 3.4(a)......... 12
Share.................................. Section 2.8(a)......... 6
v
TABLE OF DEFINED TERMS
(Continued)
Cross Reference
Term Section Page
- ---- ---------------------- ----
subsidiaries........................... Section 8.8(g)......... 36
subsidiary............................. Section 8.8(g)......... 36
Superior Proposal...................... Section 5.3(b)......... 26
Surviving Corporation.................. Section 2.1............ 5
Tax Return............................. Section 3.13(a)(iii)... 16
Taxes.................................. Section 3.13(a)(ii).... 16
Third Party............................ Section 5.3(b)......... 25
Third Party Acquisition................ Section 5.3(b)......... 25
vi
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of December
21, 2000 is among LITTON INDUSTRIES, INC., a Delaware corporation (the
"Company"), NORTHROP GRUMMAN CORPORATION, a Delaware corporation ("Parent") and
LII ACQUISITION CORP., a Delaware corporation and a wholly owned subsidiary of
Parent ("Acquisition").
WHEREAS, the board of directors of the Company (the "Company Board") has,
in light of and subject to the terms and conditions set forth herein, (i)
approved this Agreement, and deem it and the Offer (as defined below) advisable,
and fair to and in the best interests of the common stockholders of the Company
and (ii) resolved to recommend acceptance of the Offer to the common
stockholders of the Company and approval and adoption by the stockholders of the
Company of this Agreement; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition shall, by
January 5, 2001, commence a tender offer (the "Offer") to acquire all of the
outstanding shares of common stock, par value $1.00 per share, of the Company
(the "Shares"), together with the associated Rights (as hereafter defined), at a
price of $80.00 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, and to acquire all of the outstanding shares of
Series B $2 Cumulative Preferred Stock, par value $5.00 per share (the
"Preferred Shares") at a price of $35.00 per Preferred Share (such amount, or
any greater amount per share paid pursuant to the Offer, being referred to as
the "Per Preferred 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, the Company, Parent and Acquisition 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 Article 7 and none of the events or conditions set forth in
Annex A shall have occurred and be existing, by January 5, 2001, Parent shall
cause Acquisition to commence, and Acquisition shall commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) the Offer; and Parent and Acquisition shall use all reasonable
efforts to consummate the Offer. Parent shall cause Acquisition to accept for
payment, and Acquisition shall accept for payment, Shares and Preferred Shares
which have been validly tendered and not withdrawn pursuant to the Offer at the
earliest time following expiration of the initial offering period in the Offer
at which all conditions to the Offer shall have been satisfied or
1
waived by Acquisition, and thereafter shall accept for payment additional Shares
and/or Preferred Shares validly tendered during any subsequent offering period.
The obligation of Acquisition to accept for payment, and pay for Shares and/or
Preferred Shares tendered pursuant to the Offer shall be subject only to the
condition that the sum of the number of Shares validly tendered plus the number
of Preferred Shares validly tendered shall be at least 25,562,006 shares (the
"Minimum Condition") and the other conditions set forth in Annex A hereto.
Acquisition expressly reserves the right to increase the price per Share or
price per Preferred Share payable in the Offer and to waive any condition of the
Offer, except the Minimum Condition. Without the prior written consent of the
Company, Acquisition shall not decrease the Per Share Amount or the Per
Preferred Share Amount or change the form of consideration payable in the Offer,
decrease the number of Shares or Preferred Shares sought to be purchased in the
Offer, impose additional conditions to the Offer, amend any other term of the
Offer in any manner adverse to the holders of Shares or Preferred Shares, reduce
the time period during which the Offer shall remain open or waive the Minimum
Condition. The Per Share Amount and the Per Preferred 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 or Preferred Shares held by the Company or any of its subsidiaries will
be tendered in the Offer.
(b) As soon as practicable after the date hereof, Acquisition shall file
with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement
on Schedule TO with respect to the Offer, which shall include an offer to
purchase and form of transmittal letter (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. 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 stockholders, 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 and Preferred
Shares, in each case as and to the extent required by applicable federal
securities laws.
(c) Subject to the terms and conditions thereof, the Offer shall remain
open until at least midnight, New York City time, on the date that is twenty
(20) business days after the date the Offer is commenced (the initial
"Expiration Date," and any expiration time and date established pursuant to an
authorized extension of the Offer as so extended, also an "Expiration Date");
provided, however, that without the consent of the Company Board, Acquisition
may: (i) from time to time extend the Offer (each such individual extension not
to exceed five (5) business days after the previously scheduled Expiration
Date), if at the scheduled Expiration Date any of the conditions of the Offer
shall not have been satisfied or waived, until such time as such conditions are
satisfied or waived to the extent permitted by this Agreement; (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the SEC or the staff thereof applicable to the Offer; or (iii)
extend the Offer for a subsequent offering period (as provided in Rule 14d-11
under the Exchange Act) of up to twenty (20) business days in order to
2
acquire over ninety percent (90%) of the outstanding Shares or Preferred Shares.
Parent agrees to cause Acquisition to extend the Offer from time to time in
accordance with this Section 1.1(c) for the shortest time periods which it
reasonably believes are necessary until consummation of the Offer if the
conditions of the Offer shall not have been satisfied or waived so long as this
Agreement shall not have been terminated in accordance with Article 7 hereof.
Parent and Acquisition shall comply with the obligations respecting prompt
payment and announcement under the Exchange Act, and, without limiting the
generality of the foregoing, Acquisition shall, and Parent shall cause
Acquisition to, accept for payment, and pay for, all Shares and Preferred Shares
validly tendered and not withdrawn pursuant to the Offer promptly following the
acceptance of such Shares and Preferred Shares for payment pursuant to the Offer
and this Agreement.
SECTION 1.2. Company Action.
--------------
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Company Board, at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, (i) approved
this Agreement, and deem it and the Offer advisable, and fair to and in the best
interests of the common stockholders of the Company, (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, in all respects and such approval constitutes approval of the Offer,
this Agreement and the Merger for purposes of Section 203 of the Delaware
General Corporation Law (the "DGCL") and (iii) resolved to recommend that the
common stockholders of the Company accept the Offer, tender their Shares
thereunder to Acquisition and that the stockholders of the Company approve and
adopt this Agreement and the Merger; provided, that such recommendation may be
withdrawn, modified or amended if permitted by Sections 5.3 and 5.4. The Company
consents to the inclusion of such recommendation and approval in the Offer
Documents. The Company further represents that Merrill Lynch & Co. (the
"Financial Adviser") has delivered to the Company Board its written opinion that
the Merger Consideration to be received by the common stockholders of the
Company pursuant to the Offer and the Merger is fair to such stockholders from a
financial point of view.
(b) The Company hereby agrees to file with the SEC as soon as practicable
after the filing by Parent and Acquisition of the Offer Documents pursuant to
Section 1.1(b) a 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 stockholders 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 stockholders, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information supplied by Parent or Acquisition in writing for inclusion in the
Schedule 14D-9. The Company, Parent and Acquisition each agrees promptly to
correct any information provided by it for use in the Schedule 14D-9 if and to
the extent that it shall have become false or misleading in any material respect
and the Company further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to the
3
holders of Shares and Preferred Shares, in each case as and to the extent
required by applicable federal securities laws.
(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 and Preferred Shares as of a recent date and shall
furnish Acquisition with such additional information and assistance (including,
without limitation, updated lists of stockholders, 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 and
Preferred Shares. 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. Board of Directors; 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 to the nearest whole number constituting at least a majority
of the directors, on the Company Board as will give Acquisition representation
on the Company Board equal to the product of the number of directors on the
Company 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, and the Company shall use all
reasonable efforts to, upon request by Acquisition, promptly, at the Company's
election, either increase the size of the Company Board or secure the
resignation of such number of directors as is necessary to enable Acquisition's
designees to be elected to the Company Board and to cause Acquisition's
designees to be so elected. At such times, the Company will use its best
efforts to cause persons designated by Acquisition to constitute a majority of
each committee of the Company Board, other than any committee of the Company
Board established to take action under this Agreement. Notwithstanding the
foregoing, the Company shall use all reasonable efforts to ensure that three of
the members of the Company Board as of the date hereof shall remain members of
the Company Board until the Effective Time (as defined in Section 2.2 hereof).
If the number of directors who are members of the Company Board as of the date
hereof is reduced below three prior to the Effective Time, the remaining
directors who are members of the Company Board as of the date hereof (or if
there is only one such director, that remaining director) shall be entitled to
designate a person (or persons) to fill such vacancy (or vacancies).
(b) The Company's obligation to appoint designees to the Company Board
shall be subject to Section 14(f) of 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
4
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 or other action adversely affecting the rights of
stockholders of the Company (other than Parent or Acquisition), will require the
concurrence of a majority of such directors.
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 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.
SECTION 2.2. Effective Time. Subject to the terms and conditions set
--------------
forth in this Agreement, a Certificate of Merger (the "Merger Certificate")
shall be duly executed and acknowledged by Acquisition and the Company and
thereafter delivered to the Secretary of State of the State of Delaware for
filing pursuant to the DGCL on the Closing Date. The Merger shall become
effective at such time as a properly executed and certified copy of the Merger
Certificate is duly filed with the Secretary of State of the State of Delaware
in accordance with the DGCL or such later time as Parent and the Company may
agree upon and set forth in the Merger Certificate (the time the Merger becomes
effective being referred to herein as the "Effective Time").
SECTION 2.3. Closing of the Merger. The closing of the Merger (the
---------------------
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction of the latest to occur of the conditions set forth in Article
6 at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand Avenue, Los
Angeles, California 90071, unless another time, date or place is agreed to in
writing by the parties hereto.
SECTION 2.4. Effects of the Merger. The Merger shall have the effects set
---------------------
forth in 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 2.5. Certificate of Incorporation and Bylaws. The Restated
---------------------------------------
Certificate of Incorporation of the Company in effect at the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended in accordance with
5
applicable law and such Certificate of Incorporation; provided, however, that
Article Fourth, Section 1 of the Restated Certificate of Incorporation of the
Company shall be amended in its entirety to read as follows: "The Corporation
shall be authorized to issue 3,000,000 shares of Common Stock, par value $1.00
per share, 600,000 shares of Preferred Stock, par value $5.00 per share and
1,000 shares of Preference Stock, par value $2.50 per share." The Bylaws of the
Company in effect at the Effective Time shall be the Bylaws of the Surviving
Corporation until amended in accordance with applicable law, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
SECTION 2.6. 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 Bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
SECTION 2.7. 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 Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
SECTION 2.8. Conversion of Shares.
--------------------
(a) At the Effective Time, each share of common stock, par value $1.00
per share, of the Company (a "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 and (ii) Shares held by Parent, Acquisition
or any other subsidiary of Parent) shall, by virtue of the Merger and without
any action on the part of Acquisition, the Company or the holder thereof, be
converted into and shall become the right to receive an amount in cash equal to
the Per Share Amount, without interest (the "Merger Consideration" ). Unless the
context otherwise requires, each reference in this Agreement to the Shares shall
include the associated Rights (as such term is defined in Section 3.2(a)
hereof). Notwithstanding the foregoing if between the date of this Agreement and
the Effective Time, the Shares shall have been changed into a different number
of shares or a different class by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares
then the Merger Consideration contemplated by the Merger shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) At the Effective Time, each outstanding share of the common stock, par
value $0.01 per share, of Acquisition shall be converted into 3,000 shares of
common stock, par value $1.00 per share, of the Surviving Corporation.
(c) At the Effective Time, each Share held in the treasury of the Company
and each Share held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or any subsidiary of 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.
6
(d) At the Effective Time, each issued and outstanding share of the Series
B $2 Cumulative Preferred Stock, par value $5.00 per share, of the Company shall
remain outstanding, without any change, as a share of the Series B $2 Cumulative
Preferred Stock, par value $5.00 per share, of the Surviving Corporation.
SECTION 2.9. Payment of Merger Consideration.
-------------------------------
(a) From time to time following the Effective Time, as necessary to
satisfy the requirements of Section 2.9(b), Parent shall deliver to such agent
or agents as may be appointed by Parent and Acquisition and reasonably
satisfactory to the Company (the "Payment Agent") for the benefit of the
holders of Shares, in cash the aggregate amount necessary to pay the Merger
Consideration (such cash hereinafter referred to as the "Merger Fund") payable
and issuable pursuant to Section 2.8 in exchange for outstanding Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Payment Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose shares were converted into the
right to receive the Merger Consideration pursuant to Section 2.8: (i) a letter
of transmittal (which shall specify that delivery shall be effected and risk of
loss and title to the Certificates shall pass only upon delivery of the
Certificates to the Payment Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Payment Agent together with such letter of transmittal duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor a
check representing the Merger Consideration which such holder has the right to
receive pursuant to the provisions of this Article 2 and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Company, payment of the Merger Consideration may be made to a transferee if the
Certificate representing such Shares is presented to the Payment Agent
accompanied by all documents required to effect such transfer and by evidence
that any applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.9, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration as contemplated by this Section 2.9.
(c) In the event that any Certificate for Shares shall have been lost,
stolen or destroyed, the Payment Agent shall issue in exchange therefor, upon
the making of an affidavit of that fact by the holder thereof, such Merger
Consideration as may be required pursuant to this Agreement; provided, however,
that Parent or its Payment Agent may, in its discretion, require the delivery of
a suitable bond or indemnity.
(d) All Merger Consideration paid upon the surrender for exchange of
Shares in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares; subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such Shares in accordance with the terms of
this Agreement, or prior to the date hereof and which remain unpaid at the
Effective
7
Time, and there shall be no further registration of 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 for any reason they
shall be canceled and exchanged as provided in this Article 2
(e) Any portion of the Merger Fund which remains undistributed to the
stockholders of the Company for six months after the Effective Time shall be
delivered to Parent upon demand and any stockholders of the Company who have not
theretofore complied with this Article 2 shall thereafter look only to Parent
for payment of their claim for the Merger Consideration.
(f) Neither Parent nor the Company shall be liable to any holder of Shares
for cash from the Merger Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
SECTION 2.10. Stock Options.
-------------
(a) As of the Effective Time, each outstanding option to purchase Shares
that has been granted by the Company (a "Company Stock Option" or collectively
"Company Stock Options") that is then vested (an "A Option") shall be converted
into the right to receive a cash payment in accordance with the terms of this
Section 2.10(a). All plans or agreements pursuant to which any Company Stock
Option or Share of restricted stock ("Restricted Stock") has been issued or may
be issued are referred to collectively as the "Company Plans." Immediately
following the Effective Time, Parent or the Surviving Corporation shall pay to
each holder of an A Option, in cancellation of such A Option, an amount of cash
equal to (x) the excess of (i) the Merger Consideration over (ii) the per-share
exercise price of such Company Stock Option times (y) the number of Shares
subject to such Company Stock Option, subject to all required tax withholding.
Notwithstanding the foregoing, the Company shall provide the holders of A
Options the opportunity to elect, before the Effective Time, to have some or all
of their A Options to be instead converted into options to acquire Parent Common
Stock pursuant to Section 2.10(b) below, as if they were B Options (as defined
in Section 2.10(b) below). Such election opportunity shall be provided in one
or more written communications jointly prepared by, and mutually satisfactory
to, the Company and Parent and furnished to the holders of A Options not less 30
days prior to the Effective Time.
(b) As of the Effective Time, each outstanding Company Stock Option that
is not an A Option (a "B Option") shall be converted into an option to purchase
shares of Parent Common Stock in accordance with the terms of this Section
2.10(b). Each B Option shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such B Option, a number
of shares of Parent Common Stock equal to the number of Shares subject to such B
Option times the Ratio (as defined below) at a price per share equal to the per-
Share exercise price of the B Option divided by the Ratio; provided, however,
that in the case of any B Option to which Section 421 of the Code applies by
reason of its qualification under Section 422 of the Code ("incentive stock
options") the option price, the number of shares purchasable pursuant to such
option and the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. The "Ratio" means
a fraction, the numerator of which is the Merger Consideration and the
denominator of which is the average
8
of the high and low trading prices of the Parent Common Stock on the New York
Stock Exchange during normal business hours on the day on which the Effective
Time occurs.
(c) It is acknowledged and agreed that each share of Restricted Stock that
is outstanding at the time of the consummation of the Offer will vest (and all
restrictions will lapse) upon the consummation of the Offer, and will therefore
be converted into the Merger Consideration at the Effective Time, subject to all
required tax withholding.
(d) As soon as practicable after the Effective Time, Parent shall deliver
to the holders of B Options appropriate notices setting forth such holders'
rights pursuant to the Company Plan and that the agreements evidencing the
grants of such B Options shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 2.10 after
giving effect to the Merger). Parent shall comply with the terms of the Company
Plans and ensure, to the extent required by and subject to the provisions of
such Plans, that B Options which qualified as incentive stock options prior to
the Effective Time continue to qualify as incentive stock options of Parent
after the Effective Time.
(e) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
exercise of B Options assumed in accordance with Section 2.10(b). At the
Effective Time, Parent shall file a registration statement on Form S-8 (or any
successor or other appropriate forms) with respect to the shares of Parent
Common Stock subject to any options held by persons who are or were directors,
officers or employees of the Company or its subsidiaries and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
(f) At or before the Effective Time, the Company shall cause to be
effected any necessary amendments to the Company Plans to give effect to the
foregoing provisions of this Section 2.10.
SECTION 2.11. Dissenting Shares. Shares outstanding immediately prior to
-----------------
the Effective Time and held by a holder who neither shall have voted in favor of
the Merger nor shall have consented thereto in writing and who shall have
demanded appraisal for such Shares in accordance with the DGCL ("Dissenting
Shares") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect, withdraws or otherwise loses
its right to appraisal. If, after the Effective Time, such holder fails to
perfect, withdraws or loses its 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. The Company shall give Parent prompt notice of any
demands received by the Company for appraisal of Shares. Except as required by
applicable law or with the prior written consent of Parent, the Company shall
not make any payment with respect to, or settle or offer to settle, any such
demands.
9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as publicly disclosed by the Company in the Company SEC Reports and
except as set forth on the Disclosure Schedule (it being agreed that disclosure
of any item in such schedules shall be deemed disclosure with respect to any
section of this Agreement to which the relevance of such item is apparent)
previously delivered by the Company to Parent (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to each of Parent and
Acquisition as follows:
SECTION 3.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Section 3.1 of the Company Disclosure Schedule identifies each
subsidiary of the Company as of the date hereof and its respective jurisdiction
of incorporation or organization, as the case may be. Each of the Company and
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization 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. The Company has
heretofore delivered to Acquisition or Parent accurate and complete copies of
the Certificate of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of the Company and its subsidiaries.
(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 have a Company Material Adverse Effect. The term "Company Material Adverse
Effect" means any changes or effects that, individually or in the aggregate,
are materially adverse to the business, assets, long-term earning capacity or
financial condition of the Company and its subsidiaries, taken as whole, other
than any changes or effects arising out of (i) general economic conditions, (ii)
conditions generally affecting industries in which the Company operates, (iii)
the financial markets or (iv) the entering into or the public announcement or
disclosure of this Agreement or the transactions contemplated hereby.
SECTION 3.2. Capitalization of the Company and its Subsidiaries.
--------------------------------------------------
(a) The authorized capital stock of the Company consists of (i) 120
million Shares, of which, as of November 30, 2000, 45,518,647 Shares were issued
and outstanding, excluding 2,734,083 Shares held in the Company's treasury,
(each together with a Share purchase right (the "Rights") issued pursuant to
the Stockholder Rights Plan dated as of August 17, 1994 (the "Rights Plan")
between the Company and The Bank of New York, as Rights Agent), (ii) 22 million
shares of preferred stock, par value $5.00 per share, of which, as of November
30, 2000, 410,643 shares of Series B $2 Cumulative Preferred Stock were issued
and outstanding and 150,000 shares were designated as Series A Participating
Preferred Stock and were reserved for issuance under the Rights Plan and (iii) 8
million shares of preference stock, par value $2.50 per share, no shares of
which are outstanding. All of the outstanding Shares have been validly issued
10
and are fully paid, nonassessable and free of preemptive rights. As of November
30, 2000, 5,194,720 Shares were reserved for issuance pursuant to outstanding
Company Stock Options. Between August 1, 2000 and the date hereof, no shares of
the Company's capital stock have been issued other than pursuant to Company
Stock Options already in existence on such date, and between August 1, 2000 and
the date hereof no stock options have been granted. Except as set forth above
and except for the Rights, as of November 30, 2000, there were outstanding (i)
no shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company or its subsidiaries convertible into or exchangeable
for shares of capital stock or voting securities of the Company, (iii) no
options or other rights to acquire from the Company or its subsidiaries and, no
obligations of the Company or 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 equivalent
interests in the ownership or earnings of the Company or its subsidiaries
(collectively "Company Securities"). As of the date hereof, there are no
outstanding obligations of the Company or its subsidiaries to repurchase redeem
or otherwise acquire any Company Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which the
Company is a party or by which it is bound relating to the voting or
registration of any shares of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's subsidiaries
(other than director's qualifying shares in the case of foreign subsidiaries) is
owned by the Company, or one of its subsidiaries, directly or indirectly, free
and clear of any material Lien or any other material 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) and except for any Liens which are incurred in
the ordinary course of business. There are no securities of the Company or its
subsidiaries convertible into or exchangeable for, no options or other rights to
acquire from the Company or its subsidiaries and no other contract,
understanding, arrangement or obligation (whether or not contingent) providing
for, the issuance or sale, directly or indirectly, by the Company or any of its
subsidiaries 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 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 Preferred Shares constitute the only classes of
equity securities of the Company or its subsidiaries registered or required to
be registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
SECTION 3.3. Authority Relative to this Agreement; Recommendation.
----------------------------------------------------
(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 by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Company 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 except the approval and
11
adoption of this Agreement by the holders of a majority of the outstanding
Shares and Preferred Shares, voting together as one class. This Agreement has
been duly and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by Parent and Acquisition, constitutes a
valid, legal and binding agreement of the Company enforceable, against the
Company in accordance with its terms.
(b) The Company Board has unanimously resolved to recommend that the
stockholders of the Company approve and adopt this Agreement.
SECTION 3.4. SEC Reports; Financial Statements.
---------------------------------
(a) The Company has filed all required forms, reports and documents
("Company SEC Reports") with the Securities and Exchange Commission (the "SEC")
since October 1, 1997, 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 such
forms, reports and documents were filed. None of such Company SEC Reports,
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 audited consolidated financial statements of the Company included in the
Company SEC Reports and the unaudited financial statements contained in the
Company's quarterly report on Form 10-Q for the quarter ended October 31, 2000
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated in the notes thereto),
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated subsidiaries as of the dates thereof and
their consolidated results of operations and changes in financial position for
the periods then ended, except, in the case of unaudited interim financial
statements, for normal year-end audit adjustments and the fact that certain
information and notes have been condensed or omitted in accordance with the
applicable rules of the SEC.
(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 are required to be filed with the SEC but 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 3.5. Information Supplied. None of the information supplied or to
--------------------
be supplied by the Company for inclusion or incorporation by reference in the
proxy statement relating to the meeting of the Company's stockholders to be held
in connection with the Merger (the "Proxy Statement") will, at the date the
Proxy Statement is mailed to stockholders of the Company or at the time of the
meeting of stockholders of the Company to be held in connection with the Merger,
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 are made, not misleading.
The Proxy Statement insofar as it relates to the meeting of the Company's
stockholders to vote on the Merger will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and
12
regulations thereunder. None of the information supplied or to be supplied by
the Company for inclusion or incorporation by reference 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 3.6. Consents and Approvals; No Violations. Except for filings,
-------------------------------------
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, state securities or blue sky
laws, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), foreign antitrust laws and the filing and recordation of the
Merger Certificate as required by 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 Company Material Adverse Effect. Neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
by the Company of the transactions contemplated hereby will (a) 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 any
of its subsidiaries, (b) 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 or Lien) 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 or (c) except as set forth
in Section 3.6 of the Company Disclosure Schedule, 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 (b) or (c), for violations breaches or defaults which
would not have a Company Material Adverse Effect.
SECTION 3.7. No Default. None of the Company or its subsidiaries is in
----------
breach, default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a breach default or violation) of any
term, condition or provision of (a) its Certificate of Incorporation or Bylaws
(or similar governing documents), (b) 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 (c) 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 (b) or (c), for violations, breaches or defaults
that would not have a Company Material Adverse Effect.
SECTION 3.8. Absence of Changes. Since July 31, 2000, there have been no
------------------
events, changes or effects with respect to the Company or its subsidiaries that
would have a Company Material Adverse Effect.
13
SECTION 3.9. Litigation. 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 would have a Company Material
Adverse Effect or would reasonably be expected to prevent or materially delay
the consummation of the transactions contemplated by this Agreement. None of
the Company or its subsidiaries is subject to any outstanding order, writ,
injunction or decree of any Governmental Entity that would have a Company
Material Adverse Effect or would reasonably be expected to prevent or materially
delay the consummation of the transactions contemplated hereby.
SECTION 3.10. Compliance with Applicable Law. The Company and its
------------------------------
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals from 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 have a Company Material Adverse Effect. 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 Company Material Adverse Effect.
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 3.10 with respect to
Environmental Laws (as defined in Section 3.12 below) or any action or
circumstance referred to in Section 3.16 and except for violations or possible
violations which would not have a Company Material Adverse Effect. To the
knowledge of the Company, no investigation or review by any Governmental Entity
with respect to the Company or its subsidiaries is pending or threatened nor has
any Governmental Entity indicated an intention to conduct the same, other than
such investigations or reviews as would not have a Company Material Adverse
Effect.
SECTION 3.11. Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Section 3.11(a) of the Company Disclosure Schedule lists all material
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all material bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar fringe or employee benefit plans,
programs or arrangements maintained or contributed to by the Company or any of
its subsidiaries for the benefit of or relating to any employee of the Company,
or any of its subsidiaries, excluding plans, programs, agreements and
arrangements under which the Company has no remaining obligations, each
individual agreement under which the Company's future obligations and potential
obligations do not exceed $200,000 per year or $600,000 in the aggregate,
payroll practices, and any plans, programs, agreements and arrangements that are
required to be maintained by the Company or any of its subsidiaries under the
laws of any foreign jurisdiction (together the "Employee Plans"), other than
those referred to in Section 4(b)(4) of ERISA. The Company has made available
to Parent a copy of the documents and instruments governing each such Employee
Plan (other than those referred to in Section 4(b)(4) of ERISA). No event has
occurred and, to the knowledge of the Company, there currently exists no
condition or set of circumstances in connection with which the Company or any of
its subsidiaries would be subject to any material liability under the terms of
any Employee Plans, ERISA, the code or any other applicable law, including,
without limitation, any liability under Title IV of ERISA.
14
(b) Section 3.11(b) of the Company Disclosure Schedule sets forth a list
of (i) all employment agreements with executive officers of the Company
("Employment Agreements"); and (ii) all agreements with consultants who are
individuals obligating the Company to make annual cash payments in an amount
exceeding $200,000. The Company has made available to Parent copies or
descriptions of all such agreements.
(c) There will be no material payment, accrual of additional benefits,
acceleration of payments or vesting in any benefit under any Employee Plan or
any agreement or arrangement disclosed under this Section 3.11 solely by reason
of entering into or in connection with the transactions contemplated by this
Agreement.
(d) No Employee Plan that is a welfare benefit plan within the meaning of
Section 3(1) of ERISA (other than a plan covering only one individual employee
or former employee and his or her dependents) provides material benefits to
former employees of the Company or its ERISA Affiliates other than pursuant to
Section 4980B of the Code.
(e) There are no material controversies pending or, to the knowledge of
the Company, threatened between the Company or any of its subsidiaries and any
of their respective employees. Section 3.11(e) of the Company Disclosure
Schedule lists each collective bargaining agreement or other labor union
contract applicable to persons employed by the Company or its subsidiaries in
the United States. The Company does not have knowledge of any material
activities or proceedings of any labor union to organize any employees of the
Company or its subsidiaries. The Company has no knowledge of any material
strikes, slowdowns, work stoppages, lockouts or threats thereof by or with
respect to any employees of the Company or any of its subsidiaries.
SECTION 3.12. Environmental Laws and Regulations.
----------------------------------
(a) (i) Each of the Company and its subsidiaries is in compliance with all
applicable federal, state, local and foreign 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
would not have a Company Material Adverse Effect, which compliance includes but
is not limited to, the possession by the Company and its subsidiaries of all
material permits and other material authorizations by Governmental Entities
required under applicable Environmental Laws and compliance with the terms and
conditions thereof; and (ii) none of the Company or its subsidiaries has
received written notice of or, to the 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 would have a Company
Material Adverse Effect.
(b) Except as disclosed in the Company SEC Reports, there are no
Environmental Claims that would have a Company Material Adverse Effect that are
pending or, to the knowledge of the Company, threatened against the Company or
its subsidiaries or, to the 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.
15
SECTION 3.13 Taxes.
-----
(a) Definitions. For purposes of this Agreement:
-----------
(i) the term "Income Tax" shall mean any federal, state, local
or foreign Tax (A) based upon, measured by, or calculated with respect to net
income or profits (including capital gains Taxes, alternative minimum Taxes and
Taxes on items of Tax preference), or (B) based upon, measured by, or calculated
with respect to multiple bases (including corporate franchise Taxes), if one or
more of the principal bases on which such Tax may be based, measured by, or
calculated with respect to is described in clause (A).
(ii) the term "Tax" (including "Taxes") means (A) all federal,
state, local, foreign and other net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, lease, service, service
use, withholding, estimated, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts with respect thereto,
(B) any liability for payment of amounts described in clause (A) whether as a
result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (C) any liability for the payment of amounts described in
clauses (A) or (B) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person; and
(iii) the term "Tax Return" means any return, declaration,
report, statement, information statement and other document required to be filed
with respect to Taxes.
(b) The Company and its subsidiaries have timely filed (taking into
account extensions) all material Income Tax Returns they are required to have
filed. All Income Tax Returns filed by the Company and its subsidiaries are
accurate and correct in all material respects.
(c) Except as disclosed in the Company SEC Reports, the Company and its
subsidiaries have timely paid all material Income Taxes that have become due or
payable (other than Taxes being contested in good faith and for which adequate
reserves have been established) and have adequately reserved for in accordance
with generally accepted accounting principles all material Income Taxes (whether
or not shown on any Tax Return) that have accrued but are not yet due or
payable.
(d) Except as set forth in the Company SEC Reports, no claim for
assessment or collection of material Income Taxes is presently being asserted
against the Company or its subsidiaries and there is no presently pending audit
examination, refund claim, litigation, proceeding, proposed adjustment or matter
in controversy with respect to any material Income Taxes due and owing by the
Company or any of its subsidiaries.
(e) Neither the Company nor any subsidiary of the Company has filed any
waiver of the statute of limitations applicable to the assessment or collection
of any federal Income Tax which remains open.
16
(f) Neither the Company nor any subsidiary of the Company is a party to
any tax indemnity agreement, tax sharing agreement, or other agreement under
which it reasonably expects to become liable to another person as a result of
the imposition of a material Income Tax upon any person, or the assessment or
collection of such a Tax.
(g) The Company and each of its subsidiaries have complied in all material
respects with all rules and regulations relating to the withholding of federal
Income Taxes.
(h) The representations contained in subparagraphs (b) through (d) and
subparagraph (g) hereof are true and correct with respect to all Taxes other
than Income Taxes and all Tax Returns with respect to Taxes other than Income
Taxes, as applicable, except for such failures that would not have a Company
Material Adverse Effect.
(i) Neither the Company nor any of its subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in connection with this Agreement or any change
of control of the Company or any of its subsidiaries, in the payment of any
"excess parachute payments" within the meaning of Section 280G of the Code.
SECTION 3.14. Intellectual Property; Software.
-------------------------------
(a) Each of the Company and its subsidiaries owns or possesses adequate
licenses or other valid rights to use all existing United States and foreign
patents, trademarks, trade names, service marks, copyrights, trade secrets and
applications therefor owned or used by the Company and its subsidiaries (the
"Company Intellectual Property Rights"), except where the failure to own or
possess valid rights to use such Company Intellectual Property Rights would not
have a Company Material Adverse Effect.
(b) Except for any of the following which would not have a Company
Material Adverse Effect:
(i) the validity of the Company Intellectual Property Rights
and the title thereto of the Company or any subsidiary, as the case may be, is
not being questioned in any litigation to which the Company or any subsidiary is
a party, and
(ii) the conduct of the business of the Company and its
subsidiaries as now conducted does not, to the knowledge of the Company,
infringe any valid patents, trademarks, trade names, service marks or copyrights
of others. To the knowledge of the Company, the consummation of the transactions
contemplated by this Agreement will not result in the loss or impairment of any
Company Intellectual Property Rights.
SECTION 3.15. Government Contracts.
--------------------
(a) Except as disclosed in Section 3.9 or Section 3.15 of the Company
Disclosure Schedule, to the knowledge of the Company, with respect to Government
Contracts, there is, as of the date hereof, no (i) civil fraud or criminal
investigation by any Governmental Entity that would have a Company Material
Adverse Effect, (ii) suspension or debarment proceeding (or equivalent
proceeding) against the Company or any of its subsidiaries that would have a
17
Company Material Adverse Effect, (iii) request by the U.S. Government for a
contract price adjustment based on a claimed disallowance by the Defense
Contract Audit Agency or claim of defective pricing in excess of $40 million,
(iv) dispute between the Company or any of its subsidiaries and the U.S.
Government which, since August 1, 2000, has resulted in a government contracting
officer's determination and finding final decision where the amount in
controversy exceeds or is expected to exceed $40 million or (v) claim or
equitable adjustment by the Company or any of its subsidiaries against the U.S.
Government in excess of $40 million.
(b) For the purposes of this Agreement, with respect to any party,
"Government Contract" means any prime contract, subcontract, teaming agreement
or arrangement, joint venture, basic ordering agreement, letter contract,
purchase order, delivery order, Bid, change order, arrangement or other
commitment of any kind relating to the business of the Company between the
Company and (i) the U.S. Government or (ii) any prime contractor to the U.S.
Government. For the purposes of this Agreement, with respect to any party,
"Bid" means any quotation, bid or proposal by the Company or any of its
affiliates which, if accepted or awarded, would lead to a Contract with the U.S.
Government or any prime contractor to the U.S. Government, for the design,
manufacture or sale of products or the provision of services by the Company.
For the purposes of this Agreement, with respect to any party, "Contracts" means
all contracts, agreements, leases (including leases or real property), licenses,
commitments, sales and purchase orders, intercompany work transfer agreements)
with respect to work by or for another or such party's businesses) and other
instruments of any kind, whether written or oral.
SECTION 3.16. Certain Business Practices. To the knowledge of the
--------------------------
Company, none of the Company, any of its subsidiaries or any directors,
officers, agents or employees of the Company or any of its subsidiaries has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment, which in any event would be material to the Company.
SECTION 3.17. Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding Shares and Preferred Shares, voting together as one
class, is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve and adopt this Agreement.
SECTION 3.18. Opinion of Financial Adviser. Merrill Lynch & Co. (the
----------------------------
"Company Financial Adviser") has delivered to the Company Board its written
opinion dated the date of this Agreement to the effect that as of such date the
Merger Consideration is fair to the holders of Shares from a financial point of
view.
SECTION 3.19. Brokers. No broker, finder or investment banker (other than
-------
the Company Financial Adviser, a true and correct copy of whose engagement
agreement has been provided to Acquisition or Parent) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
18
SECTION 3.20. Problems with Customers. Except as provided in Schedule
-----------------------
3.20 of the Company Disclosure Schedule, from July 31, 2000 to the date hereof:
(a) no customer of the Company or any of its subsidiaries has canceled or
otherwise terminated its relationship with the Company or any of its
subsidiaries, except cancellations and terminations that would not have a
Company Material Adverse Effect; (b) to the knowledge of the Company, no
customer of the Company or any of its subsidiaries has overtly threatened to
cancel or otherwise terminate its relationship with the Company or any of its
subsidiaries or its usage of the services of the Company or any of its
subsidiaries, except cancellations and terminations that would not have a
Company Material Adverse Effect; and (c) the Company and its subsidiaries have
no direct or indirect ownership interest that is material to the Company and its
subsidiaries taken as a whole in any customer of the Company or any of its
subsidiaries.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Except as publicly disclosed by Parent in the Parent SEC Reports and except
as set forth on the Disclosure Schedule (it being agreed that disclosure of any
item in such schedules shall be deemed disclosure with respect to any section of
this Agreement to which the relevance of such item is apparent) previously
delivered by Parent to the Company (the "Parent Disclosure Schedule"), Parent
and Acquisition hereby represent and warrant to the Company as follows:
SECTION 4.1. Organization.
------------
(a) Each of Parent and Acquisition is 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 businesses as now being conducted. Parent has heretofore delivered
to the Company accurate and complete copies of the Certificate of Incorporation
and Bylaws as currently in effect of Parent and Acquisition.
(b) Each of Parent and Acquisition 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
have a Parent Material Adverse Effect. The term "Parent Material Adverse
Effect" means any changes or effects that, individually or in the aggregate, are
materially adverse to the business, assets, long-term earning capacity or
financial condition of Parent and its subsidiaries, taken as whole, other than
any changes or effects arising out of (i) general economic conditions, (ii)
conditions generally affecting industries in which Parent operates, (iii) the
financial markets or (iv) the entering into or the public announcement or
disclosure of this Agreement or the transactions contemplated hereby.
SECTION 4.2. 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 by Parent and the consummation by
Parent of the transactions contemplated hereby
19
have been duly and validly authorized by the boards of directors of Parent and
Acquisition and by Parent as the sole stockholder 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, assuming due authorization, execution and delivery
by the Company, 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 4.3. SEC Reports; Financial Statements.
---------------------------------
(a) Parent has filed all required forms, reports and documents (" Parent
SEC Reports") with the SEC since December 31, 1997, each of which has complied
in all material respects with all applicable requirements of the Securities Act
and the Exchange Act, each as in effect on the dates such forms reports and
documents were filed. None of such Parent SEC Reports, 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
audited consolidated financial statements of Parent included in the Parent SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and their consolidated results of operations and changes in financial
position for the periods then ended.
(b) Parent has heretofore made available or promptly will make available
to the Company a complete and correct copy of any amendments or modifications
which are required to be filed with the SEC but have not yet been filed with the
SEC to agreements documents or other instruments which previously had been filed
by Parent with the SEC pursuant to the Exchange Act.
SECTION 4.4. Information Supplied. 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 stockholders, at the time of the
Stockholders' 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 4.5. Consents and Approvals; No Violations. Except for filings,
-------------------------------------
permits, authorizations, consents and approvals as may be required under and
other applicable requirements of the Exchange Act, the HSR Act, foreign
antitrust laws and the filing and recordation of the Merger Certificate as
required by 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
20
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 Parent Material Adverse
Effect. 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 (a) conflict with or result in any breach
of any provision of the respective Certificate of Incorporation or Bylaws (or
similar governing documents) of Parent or Acquisition or any of Parent's other
subsidiaries, (b) 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 or Lien) 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 other subsidiaries is a party or by
which any of them or any of their respective properties or assets may be bound
or (c) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or Acquisition or any of Parent's other
subsidiaries or any of their respective properties or assets except, in the case
of (b) or (c), for violations breaches or defaults which would not have a Parent
Material Adverse Effect.
SECTION 4.6. Adequate Funds. Parent has sufficient funds or firm
--------------
commitment letters from nationally recognized lending institutions for, and will
have at the Effective Time sufficient funds, for the payment of the aggregate
Merger Consideration and to perform its obligations with respect to the
transactions contemplated by this Agreement. Parent has provided the Company
with accurate and complete copies of the commitment letters which it has
obtained to provide funds for the transactions contemplated by this Agreement.
SECTION 4.7. No Prior Activities. Except for obligations incurred in
-------------------
connection with its incorporation or organization of 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.
ARTICLE 5
COVENANTS
SECTION 5.1. Conduct of Business of the Company. Except as contemplated
----------------------------------
by this Agreement or as described in Section 5.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time or
earlier termination of this Agreement the Company will and will cause each of
its subsidiaries to conduct its operations in the ordinary course of business
consistent with past practice and seek to (i) preserve substantially intact its
current business organizations, (ii) keep available the services of its current
officers and employees and (iii) preserve its current relationships with
customers, suppliers and others having significant business dealings with it.
Without limiting the generality of the foregoing, except as otherwise expressly
provided in this Agreement or as described in Section 5.1 of the Company
Disclosure Schedule, prior to the Effective Time or earlier termination of this
Agreement, neither the Company nor any of its subsidiaries will, without the
prior written consent of Parent and Acquisition (which consent will not
unreasonably be withheld):
21
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(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
shares of any class of capital stock or any other securities (except bank loans)
or equity equivalents (including, without limitation, any stock options or stock
appreciation rights) except for (i) the issuance and sale of Shares pursuant to
options previously granted, (ii) the issuance and sale of Performance Based
Restricted Stock pursuant to rights previously granted or (iii) the issuance and
sale of securities by a subsidiary of the Company to any entity which is wholly
owned by the Company;
(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, make any
other actual, constructive or deemed distribution in respect of its capital
stock or otherwise make any payments to stockholders in their capacity as such,
or redeem or otherwise acquire any of its securities or any securities of any of
its subsidiaries, except for the payment of dividends in respect of the Series B
$2 Cumulative Preferred Stock and except for the payment of dividends or
distributions by a wholly owned subsidiary of the Company to the Company or
another wholly owned subsidiary of the Company;
(d) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its subsidiaries (other than the Merger);
(e) alter through merger, liquidation, reorganization, restructuring or
any other fashion the corporate structure of ownership of any subsidiary (other
than as permitted by this Section 5.1);
(f) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings under existing lines of credit or in connection
with existing commercial paper programs in the ordinary course of business; (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
except for obligations of subsidiaries of the Company incurred in the ordinary
course of business; (iii) make any loans, advances or capital contributions to
or investments in any other person (other than to subsidiaries of the Company or
customary loans or advances to employees, in each case in the ordinary course of
business consistent with past practice) (iv) pledge or otherwise encumber shares
of capital stock of the Company or its subsidiaries except in connection with
borrowings as permitted by this Section 4.1(f); or (v) mortgage or pledge any of
its material assets, tangible or intangible, or create or suffer to exist any
material Lien thereupon (other than currently existing Liens and Tax Liens for
Taxes not yet due);
(g) except as may be contemplated by a contract or written plan now in
effect or by applicable law, enter into, adopt, amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit,
22
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 increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
contemplated 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); provided, however, that this Section 5.1 shall not prevent
the Company or its subsidiaries from (i) entering into employment agreements or
severance agreements with new employees in the ordinary course of business and
consistent with past practice; (ii) increasing the compensation and benefits of
any employees who are not officers or directors of the Company in the ordinary
course of business consistent with past practice; or (iii) paying bonuses for
any period that ends on or before the Effective Time (including where relevant
those based upon actual performance during such period) in the ordinary course
of business consistent with past practice.
(h) other than in the ordinary course of business, acquire, sell, lease or
dispose of any assets in any single transaction or series of related
transactions having a fair market value in excess of $10,000,000 in the
aggregate (other than in connection with outsourcing agreements entered into
with customers of the Company or its subsidiaries);
(i) 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 (other than immaterial changes);
(j) 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 or as required by
generally accepted accounting principles;
(k) (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 (other than in connection with
outsourcing agreements entered into with customers of the Company or its
subsidiaries); (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 (not within the Company's existing capital expenditure budget) capital
expenditure or expenditures which individually is in excess of $10,000,000 or
capital expenditures in the aggregate are in excess of $210,000,000; provided
that none of the foregoing shall limit any capital expenditure required pursuant
to existing customer contracts or pursuant to the Company's existing capital
expenditures budget, a copy of which has been provided by the Company to Parent;
(l) make any material tax election or settle or compromise any income tax
liability material to the Company and its subsidiaries taken as a whole (in each
case, other than in the ordinary course of business consistent with past
practice);
(m) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which would have a Company Material Adverse Effect;
23
(n) commence any material research and/or development project or terminate
any material research and/or development project that is currently ongoing, in
either case except pursuant to the terms of existing contracts or except as
contemplated by the Company's project development budget previously provided to
Parent;
(o) amend the Company Rights Agreement in any manner that would permit any
person other than Parent or its affiliates to acquire more than 15% of the
Shares, or redeem the Company Rights; or
(p) take or agree in writing or otherwise to take any of the actions
described in Sections 5.1(a) through 5.1(o).
SECTION 5.2. Conduct of Business of Parent. Except as contemplated by
-----------------------------
this Agreement, during the period from the date hereof to the Effective Time or
earlier termination of this Agreement, neither Parent nor any of its
subsidiaries, without the prior written consent of the Company (which consent
will not unreasonably be withheld), shall
(a) acquire or agree to acquire, by merging or consolidating with, or by
purchasing an equity interest in or the assets of or by any other manner, any
business or corporation, partnership or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets of any other entity
(other than the purchase of assets from suppliers, clients or vendors in the
ordinary course of business and consistent with past practice) if such
transaction would prevent or materially delay the consummation of the
transactions contemplated by this Agreement;
(b) adopt or propose to adopt any amendments to its charter documents
which would have a material adverse impact on the consummation of the
transactions contemplated by this Agreement; or
(c) take or agree in writing or otherwise to take any of the actions
described in Sections 5.2(a) or 5.2(b).
SECTION 5.3. Other Potential Acquirers.
-------------------------
(a) The Company, its subsidiaries and their respective officers,
directors, employees, representatives and agents shall immediately cease any
discussions or negotiations with any parties with respect to any Third Party
Acquisition. Neither the Company nor any of its subsidiaries shall, nor shall
the Company authorize or permit any of its or their respective officers,
directors, employees, representatives or agents to, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations with
or provide any non-public information to any person or group (other than Parent
and Acquisition or any designees of Parent and Acquisition) concerning any Third
Party Acquisition; provided, however, that (i) nothing herein shall prevent the
Company Board from taking and disclosing to the Company's stockholders a
position contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to any tender offer; (ii) if the Company receives an unsolicited
written proposal for a Third Party Acquisition from a Third Party, nothing
herein shall prevent the Company or its representatives from making such
inquiries or conducting such discussions as the Company Board, after
consultation with and based upon the advice of, legal counsel, may deem
necessary
24
to inform itself for the purpose of exercising its fiduciary duties, and (iii)
if the Company receives an unsolicited written proposal for a Third Party
Acquisition from a Third Party that the Company Board by a majority vote
determines in its good faith judgment (after receiving the advice of a financial
adviser of nationally recognized reputation) is reasonably likely to constitute
a Superior Proposal, the Company and its representatives may conduct such
additional discussions or provide such information as the Company Board shall
determine, but only if, prior to such provision of information or additional
discussion (A) such Third Party shall have entered into a confidentiality and
standstill agreement substantially in the form of that certain Confidentiality
Agreement entered into between the Company and Parent dated June 23, 2000 (and
containing additional provisions that expressly permit the Company to comply
with the provisions of this Section 5.3) and (B) the Company Board by a majority
vote determines in its good faith judgment, after consultation with and based
upon the advice of, legal counsel that it is required to do so in order to
comply with its fiduciary duties. The Company shall promptly notify the Parent
in the event it receives any proposal or inquiry concerning a Third Party
Acquisition including the terms and conditions thereof and the identity of the
party submitting such proposal; and the Company shall advise the Parent from
time to time of the status and any material developments concerning the same.
(b) Except as set forth in this Section 5.3(b), the Company Board shall
not withdraw, change or modify its recommendation of the transactions
contemplated hereby or approve or recommend, or cause the Company to enter into
any agreement with respect to, any Third Party Acquisition. Notwithstanding the
foregoing, if the Company Board by a majority vote determines in its good faith
judgment, after consultation with and based upon the advice of, legal counsel
that it is required to do so in order to comply with its fiduciary duties, the
Company Board may withdraw its recommendation of the transactions contemplated
hereby or approve or recommend a Superior Proposal, but in each case only (i)
after providing written notice to Parent (a "Notice of Superior Proposal")
advising Parent that the Company Board has received a Superior Proposal,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal and (ii) if Parent does
not, within five business days of Parent's receipt of the Notice of Superior
Proposal, make an offer which the Company Board by a majority vote determines in
its good faith judgment (after receiving the advice of a financial adviser of
nationally recognized reputation) to be as favorable to the Company's
stockholders as such Superior Proposal; provided, however, the Company shall not
be entitled to enter into any agreement with respect to a Superior Proposal
(excluding a confidentiality agreement pursuant to Section 5.3(a)) unless and
until this Agreement is terminated by its terms pursuant to Section 7.1 and the
Company has paid all amounts due to Acquisition pursuant to Section 7.3. For
the purposes of this Agreement, "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) other than Parent, Acquisition or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party of
all or a major part of any of the Company's business segments, as identified in
the Company's SEC Reports or more than 20% of the total assets of the Company
and its subsidiaries taken as a whole; (iii) the acquisition by a Third Party of
20% 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;
(v) the repurchase by the Company or any of its subsidiaries of more than 20% of
the outstanding Shares; or (vi) the acquisition by the Company or any subsidiary
by merger, purchase of stock or assets, joint
25
venture or otherwise of a direct or indirect ownership interest or investment in
any business whose annual revenues, net income or assets is equal or greater
than 20% of the annual revenues, net income or assets of the Company. For
purposes of this Agreement a "Superior Proposal " means any bona fide proposal
to acquire directly or indirectly for consideration consisting of cash and/or
securities more than 50% of the Shares then outstanding or all or substantially
all the assets of the Company and otherwise on terms which the Company Board by
a majority vote determines in its good faith judgment (after receiving the
advice of a financial adviser of nationally recognized reputation) to be more
favorable, from a financial point of view, to the Company's stockholders than
the Merger.
SECTION 5.4. Meeting of Stockholders. The Company shall take all action
-----------------------
necessary in accordance with the DGCL and its Certificate of Incorporation and
Bylaws to duly call, give notice of, convene and hold a meeting of its
stockholders (the "Stockholders' Meeting") as promptly as practicable (provided
that Acquisition shall have purchased Shares pursuant to the Offer) to consider
and vote upon the adoption and approval of this Agreement and the transactions
contemplated hereby. At the Stockholders' Meeting, Parent, Acquisition and
their subsidiaries will vote all Shares and all Preferred Shares owned by them
in favor of approval and adoption of this Agreement. The stockholder votes
required for the adoption and approval of the transactions contemplated by this
Agreement shall be the vote required by the DGCL and the Company's Certificate
of Incorporation and Bylaws. The Company will, through its Board of Directors,
recommend to its stockholders approval of such matters as described in Section
1.2(a); provided, however, that subject to the provisions of Section 7.3, the
Company Board may withdraw, modify or amend its recommendation if (i) the
Company receives a Superior Proposal and (ii) after complying with the
provisions of Section 5.3(b) the Company Board by a majority vote determines in
its good faith judgment after consultation with and based upon the advice of
legal counsel that it is required in order to comply with its fiduciary duties
to recommend the Superior Proposal. The Company will use all reasonable efforts
(i) 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 stockholders at the earliest practicable time following the expiration or
termination of the Offer and (ii) to obtain the necessary approvals by its
stockholders of this Agreement.
SECTION 5.5. Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the Company will give
Parent and its authorized representatives reasonable access during normal
business hours to all employees, plants, offices, warehouses and other
facilities and to all books and records of itself and its subsidiaries, will
permit the Parent to make such inspections as the Parent may reasonably require
and will cause its officers and those of its subsidiaries to furnish the Parent
with such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as Parent may from
time to time reasonably request.
(b) Between the date hereof and the Effective Time, the Company shall
furnish to Parent within 25 business days after the end of each fiscal quarter
(commencing with the first fiscal quarter ending after the date hereof) an
unaudited balance sheet of the Company as of the end of the such fiscal quarter
and the related statements of earnings, stockholders' equity (deficit)
26
and cash flows for the quarter then ended, each prepared in conformity with the
accounting practices consistently applied by the Company with respect to its
quarterly financial statements.
(c) Notwithstanding the foregoing, the Company shall not be required to
provide any information which it reasonably believes it may not provide by
reason of any applicable law, rules or regulations, which constitutes
information protected by attorney/client privilege, or which it or any of its
subsidiaries is required to keep confidential by reason of contract, agreement
or understanding with third parties.
(d) Each of the parties hereto will hold and will cause its consultants
and advisers to hold in confidence all documents and information furnished to it
in connection with the transactions contemplated by this Agreement pursuant to
the terms of that certain Confidentiality Agreement entered into between the
Company and Parent dated June 23, 2000 and each of the parties shall comply with
all agreements, covenants, and restrictions contained therein.
SECTION 5.6. Additional Agreements; Reasonable Efforts.
-----------------------------------------
(a) Subject to the terms and conditions herein, Company, Parent and
Acquisition each agrees to use all reasonable efforts to take, or cause to be
taken, all reasonable actions necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement and to reasonably cooperate with the other in connection with the
foregoing, including using all reasonable efforts (i) to obtain all necessary
waivers, consents and approvals from other parties to material loan agreements,
leases and other contracts, (ii) to obtain all consents, approvals and
authorizations that are required to be obtained under any federal, state, local
or foreign law or regulation, (iii) to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
hereto to consummate the transactions contemplated hereby, (iv) to effect all
necessary registrations and filings including, but not limited to, filings and
submissions of information requested or required by any domestic or foreign
government or governmental or multinational authority, including, without
limitation, the Antitrust Division of the United States Department of Justice,
the Federal Trade Commission, any State Attorney General, or the European
Commission ("Governmental Antitrust Authority"), and (v) to fulfill all
conditions to this Agreement. Company, Parent and Acquisition further covenant
and agree, with respect to a threatened or pending preliminary or permanent
injunction or other order, decree or ruling or statute, rule, regulation or
executive order that would adversely affect the ability of the parties hereto to
consummate the transactions contemplated hereby, to use all reasonable efforts
to prevent the entry, enactment or promulgation thereof, as the case may be.
(b) In furtherance and not in limitation of the foregoing, the Company,
Parent and Acquisition shall use their respective best efforts to resolve such
objections, if any, as may be asserted with respect to the transactions
contemplated hereby under any antitrust, competition or trade regulatory laws of
any domestic or foreign government or governmental authority or any
multinational authority, or any regulations issued thereunder ("Antitrust
Laws"). Without limiting the generality of the foregoing, the Company, Parent
and Acquisition shall (i) use their respective best efforts to avoid the entry
of, or to have vacated or terminated, any decree, order, or judgment that would
restrain, prevent, or unreasonably delay the consummation of the transactions
contemplated hereby, including, without limitation, defending through litigation
on
27
the merits and through any available appeals any claim asserted in any court
by any party, and (ii) take any and all steps necessary to avoid (or eliminate)
any impediment (including the institution of proceedings) under any Antitrust
Laws that may be asserted by any Governmental Antitrust Authority with respect
to the transactions contemplated hereby so as to enable the consummation of such
transactions to occur reasonably expeditiously. The steps described in clause
(ii) of the preceding sentence shall include, without limitation, proposing,
negotiating, committing to and effecting (by consent decree, hold separate order
or otherwise) the sale, divestiture or disposition of such assets or businesses
of Parent or its subsidiaries, the Company or its subsidiaries -- or otherwise
taking or committing to take any action that limits its freedom of action with
respect to any of the businesses, product lines or assets of Parent or its
affiliates, the Company or its affiliates -- as may be required in order to
avoid the entry of, or to effect the dissolution of, any injunction, temporary
restraining order, or other order in any suit or proceeding, which would
otherwise have the effect of preventing or unreasonably delaying the
consummation of the transactions contemplated hereby. Notwithstanding anything
to the contrary contained in this Agreement, neither Parent nor Acquisition
shall be required to take any action pursuant to Sections 5.6(a) or (b) if the
taking of such action would have a material adverse effect on the business,
assets, long-term earning capacity or financial condition of Parent and the
Company (and their subsidiaries), taken as a whole.
(c) The Company, Parent and Acquisition shall keep the other party
apprised of the status of matters relating to the completion of the transactions
contemplated hereby and shall reasonably cooperate in connection with obtaining
the requisite approvals, consents or orders of any Governmental Antitrust
Authority, including, without limitation: (i) cooperating with the other party
in connection with filings under the HSR Act or any other Antitrust Laws,
including, with respect to the party making a filing, (A) providing copies of
all such documents to the non-filing party and its advisers prior to filing
(other than documents containing confidential business information that shall be
shared only with outside counsel to the non-filing party), and (B) if requested,
to accept all reasonable additions, deletions or changes suggested in connection
with any such filing; (ii) furnishing to each other all information required for
any application or other filing to be made pursuant to the HSR Act or any other
Antitrust Laws in connection with the transactions contemplated by this
Agreement; (iii) promptly notifying the other of, and if in writing furnishing
the other with copies of, any communications from or with any Governmental
Antitrust Authority with respect to the transactions contemplated by this
Agreement; (iv) permitting the other party to review in advance and considering
in good faith the views of one another in connection with any proposed
communication with any Governmental Antitrust Authority in connection with
proceedings under or relating to the HSR Act or any other Antitrust Laws; (v)
not agreeing to participate in any meeting or discussion with any Governmental
Antitrust Authority in connection with proceedings under or relating to the HSR
Act or any other Antitrust Laws unless it consults with the other party in
advance, and, to the extent permitted by such Governmental Antitrust Authority,
gives the other party the opportunity to attend and participate thereat; and
(vi) consulting and cooperating with one another in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to the HSR Act or any other Antitrust Laws.
If either party or any affiliate thereof receives a request for additional
information or documentary material from any such Governmental Antitrust
Authority with respect to the transactions contemplated hereby, then such party
will endeavor in good faith to make, or cause to be made, as soon as practicable
and
28
after consultation with the other party, an appropriate response in compliance
with such request. Parent and Acquisition will advise the Company promptly in
respect of any understandings, undertakings or agreements (oral or written)
which Parent and Acquisition propose to make or enter into with any Governmental
Antitrust Authority in connection with the transactions contemplated hereby.
SECTION 5.7. Indemnification.
---------------
(a) After the Effective Time, Parent and the Surviving Corporation shall
jointly and severally indemnify and hold harmless (and shall also advance
expenses as incurred to the fullest extent permitted under applicable law to)
each person who is now or has been prior to the date hereof or who becomes prior
to the Effective Time an officer or director of the Company or any of the
Company's subsidiaries (the "Indemnified Persons") against (i) all losses,
claims, damages, costs, expenses (including, without limitation, counsel fees
and expenses), settlement payments or liabilities arising out of or in
connection with any claim, demand, action, suit, proceeding or investigation
based in whole or in part on or arising in whole or in part out of the fact that
such person is or was an officer or director of the Company or any of its
subsidiaries whether or not pertaining to any matter existing or occurring at or
prior to the Effective Time and whether or not asserted or claimed prior to or
at or after the Effective Time ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on or arising in whole or in
part out of or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the fullest extent required or permitted under
applicable law or under the Surviving Corporation's Certificate of Incorporation
or Bylaws, it being agreed that the provisions thereof relating to
indemnification and exoneration from liability shall be at least as favorable to
the Indemnified Persons as the current provisions of the Company's Certificate
of Incorporation and Bylaws. The parties hereto intend, to the extent not
prohibited by applicable law, that the indemnification provided for in this
Section 5.7 shall apply without limitation to negligent acts or omissions by an
Indemnified Person. Each Indemnified Person is intended to be a third party
beneficiary of this Section 5.7 and may specifically enforce its terms. This
Section 5.7 shall not limit or otherwise adversely affect any rights any
Indemnified Person may have under any agreement with the Company or under the
Company's Certificate of Incorporation or Bylaws.
(b) For six years after the Effective Time, the Surviving Corporation
shall provide directors' and officers' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Indemnified
Person covered as of the date hereof or hereafter by the Company's directors'
and officers' liability insurance policy on terms with respect to coverage and
amounts no less favorable than those of such policy in effect on the date
hereof; provided, that if the aggregate annual premiums for such insurance at
any time during such period shall exceed 300% of the per annum rate of premium
paid by the Company as of the date hereof for such insurance, then the Surviving
Corporation shall provide only such coverage as shall then be available at an
annual premium equal to 300% of such current rate.
SECTION 5.8. 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
Merger, and shall not issue any such press release or make any
29
such public statement prior to such consultation except as may be required by
applicable law or by obligations pursuant to any listing agreement with the
NYSE.
SECTION 5.9. Employee Matters.
----------------
(a) From and after the Effective Time, Parent shall assume and honor, and
shall cause the Company to honor, all Employee Plans and all Employment
Agreements in accordance with their terms as in effect immediately before the
Effective Time, subject to any amendment or termination thereof that may be
permitted by such terms. It is acknowledged and agreed that the consummation of
the Offer will constitute a "change of control" for purposes of those Employee
Plans and Employment Agreements containing "change of control" provisions.
(b) For a period of not less than two years following the Effective Time,
Parent shall provide, or shall cause to be provided, to current and former
employees of the Company and its subsidiaries (the "Company Employees")
compensation and employee benefits that are, in the aggregate, not less
favorable than those provided to Company Employees immediately before the
Effective Time. The foregoing shall not be construed to prevent (i) the
amendment or termination of any particular Employee Plan or Employment Agreement
to the extent permitted by, and in accordance with, its terms as in effect
immediately before the Effective Time, or (ii) the termination of employment or
the reduction of, or other change in, the compensation or employee benefits of
any individual Company Employee.
(c) For all purposes under the employee benefit plans of Parent and its
subsidiaries providing benefits to any Company Employees after the Effective
Time (the "New Plans"), each Company Employee shall be credited with all years
of service for which such Company Employee was credited before the Effective
Time under any similar Company Employee Plans, except to the extent such credit
would result in a duplication of benefits. In addition, and without limiting
the generality of the foregoing: (i) each Company Employee shall be immediately
eligible to participate, without any waiting time, in any and all New Plans to
the extent coverage under such New Plan replaces coverage under a comparable
Company Employee Plan in which such Company Employee participated immediately
before the Effective Time (such plans, collectively, the "Old Plans"); and (ii)
for purposes of each New Plan providing medical, dental, pharmaceutical and/or
vision benefits to any Company Employee, Parent shall cause all pre-existing
condition exclusions and actively-at-work requirements of such New Plan to be
waived for such employee and his or her covered dependents, and Parent shall
cause any eligible expenses incurred by such employee and his or her covered
dependents during the portion of the plan year of the Old Plan ending on the
date such employee's participation in the corresponding New Plan begins to be
taken into account under such New Plan for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such New Plan.
(d) Without limiting the generality of the foregoing, from and after the
Effective Time, Parent shall assume and honor, and shall cause the Surviving
Corporation to honor, the obligations of the Company to provide lifetime
benefits under the Company's Supplemental Medical Insurance Plan to the
individuals listed on Schedule 5.9(d). In addition, Parent agrees not to
demand, and to cause the Surviving Corporation not to demand, repayment of the
loans
30
currently outstanding under the Company's Incentive Loan Program before December
31, 2001. Finally, Parent shall continue, or shall cause the Company to
continue, the executive life insurance policies listed in Section 5.9(d) of the
Company Disclosure Schedule in effect for the remaining lifetime of the retired
executives covered thereby, on the terms and conditions now in effect.
(e) On or before January 31, 2001, Company shall cause Parent to be
provided with:
(i) except to the extent already listed on Schedule 3.11(a) of the
Company Disclosure Schedule a list of all employee benefit plans (as defined in
Section(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements maintained or contributed to by
the Company or any of its subsidiaries for the benefit of or relating to any
employee of the Company, or any of its subsidiaries, excluding plans, programs,
agreements and arrangements under which the Company has no remaining
obligations, payroll practices, and any plans, programs, agreements and
arrangements that are required to be maintained by the Company or any of its
subsidiaries under the laws of any foreign jurisdiction;
(ii) a copy of the documents and instruments governing each such
plan and the most recent Form 5500 filed with the Internal Revenue Service
except to the extent already provided;
(iii) except to the extent already listed in Schedule 3.11(b) of the
Company Disclosure Schedule, (A) all employment agreements with officers of the
Company; and (B) all agreements with consultants who are individuals obligating
the Company to make annual cash payments in an amount exceeding $30,000. The
Company shall make available to Parent copies (or descriptions in detail
reasonably satisfactory to Parent) of all such agreements, plans, programs and
other arrangements; and
(iv) except to the extent already listed in Section 3.11(d) of the
Company Disclosure Schedule, a list of any Employee Plan that is a welfare plan
within the meaning of Section 3(1) of ERISA providing benefits to former
employees of the Company or its ERISA Affiliates other than pursuant to Section
4980B of the Code.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 6.1. Conditions to Each Party's Obligations to Effect the Merger.
-----------------------------------------------------------
The respective obligations of each party hereto to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted, if required, by
the requisite vote of the stockholders of the Company;
(b) no statute, rule, regulation, executive, order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States
31
or European Union Governmental Entity which prohibits, restrains or enjoins the
consummation of the Merger;
(c) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired and to the extent required, the Commission of the
European Union shall have approved the Merger under Regulation (EEC) No. 4064/89
of the Council of the European Union, or such approval shall have been deemed to
have been granted; and
(d) Acquisition shall have purchased Shares pursuant to the Offer.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
SECTION 7.1. Termination. This Agreement may be terminated and the Merger
-----------
may be abandoned at any time prior to the purchase of Shares pursuant to the
Offer:
(a) by mutual written consent of Parent, Acquisition and the Company;
(b) by Parent and Acquisition or the Company if (i) any court of competent
jurisdiction in the United States or other United States or European Union
Governmental Entity shall have issued a final order, decree or ruling or taken
any other final action restraining, enjoining or otherwise prohibiting the Offer
or the Merger and such order, decree, ruling or other action is or shall have
become final and nonappealable or (ii) the purchase of the Shares pursuant to
the Offer has not been consummated by September 15, 2001; provided that no party
may terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any of its obligations under this Agreement shall have been
the reason that the purchase of Shares pursuant to the Offer shall not have
occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement or if any representation or warranty of Parent or Acquisition
shall have become untrue or (ii) there shall have been a breach by Parent or
Acquisition of any of their respective covenants or agreements hereunder, where
such breaches under clauses (i) or (ii) would have a Parent Material Adverse
Effect or materially adversely affecting (or materially delaying) the
consummation of the Offer or the Merger, and Parent or Acquisition, as the case
may be, has not cured such breach within twenty business days after notice by
the Company thereof; provided that the Company has not breached any of its
obligations hereunder; or
(d) by Parent and Acquisition if (i) there shall have been a breach of any
representation or warranty on the part of the Company set forth in this
Agreement or if any representation or warranty of the Company shall have become
untrue in either case such that the condition set forth in paragraph (e) of
Annex A would be incapable of being satisfied by September 15, 2001, (ii) there
shall have been a breach or breaches by the Company of its covenants or
agreements hereunder that would have a Company Material Adverse Effect or would
materially adversely affect (or materially delay) the consummation of the Offer
or the Merger, and the Company has not cured such breach within twenty business
days after notice by Parent or Acquisition thereof provided that neither Parent
nor Acquisition has breached any of
32
their respective obligations hereunder, (iii) the Company Board shall have
entered into, or recommended to the Company's stockholders, a Superior Proposal,
(iv) the Company Board shall have withdrawn, modified or changed its approval or
recommendation of this Agreement or the Offer or the Merger or shall have
adopted any resolution to effect any of the foregoing or (v) a Third Party
Acquisition shall have occurred after the date hereof, provided that for
purposes of Article 7, the Third Party Acquisition described in clause (iii) of
the definition of such term shall be deemed to occur only upon the acquisition
by a Third Party of 50% or more of the outstanding Shares.
(e) by the Company if the Company receives a Superior Proposal and
resolves to accept such Superior Proposal, but only if (i) the Company has acted
in accordance with, and has otherwise complied with the terms of, Section 5.3
hereof, including the notice provisions therein, and (ii) the Company has paid
all amounts due to Acquisition pursuant to Section 7.3.
SECTION 7.2. Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 7.1, 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 stockholders other
than the provisions of this Section 7.2 and Sections 5.5(d) and 7.3 hereof.
Nothing contained in this Section 7.2 shall relieve any party from liability for
any breach of its covenants, agreements or obligations set forth in this
Agreement.
SECTION 7.3. Fees and Expenses.
-----------------
(a) In the event that this Agreement shall be terminated pursuant to:
(i) Sections 7.1(d)(iii), (iv), (v) or 7.1(e);
(ii) Section 7.1(d)(ii) and within twelve 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 for 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
(iii) Section 7.1(b)(ii) at a time when (i) the Minimum
Condition is not satisfied, (ii) there shall be outstanding a publicly announced
offer by a Third Party to consummate a Third Party Acquisition, and (iii) no
other condition to the Offer is unsatisfied, and within twelve months thereafter
the Company enters into an agreement with respect to a Third Party Acquisition
or a Third Party Acquisition occurs, in either case involving the Third Party
referred to above;
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
$110,000,000 as liquidated damages within three business days following (x) a
termination referred to in Section 7.3(a)(i) (except as provided in Section
7.1(e), which payment shall be made simultaneously with such termination), or
(y) the entering into of the agreement for a Third Party Acquisition or the
occurrence of the Third Party
33
Acquisition which triggers the obligation to make the payment pursuant to
Section 7.3(a)(ii) or (iii). In no event shall the Company be obligated to make
more than one payment referred to in this Section 7.3(a). It is specifically
agreed that the amount to be paid pursuant to this Section 7.3(a) represents
liquidated damages and not a penalty.
(b) Except as specifically provided in this Section 7.3, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
SECTION 7.4. Amendment. 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 stockholders of the Company but, after any such approval, no
amendment shall be made which requires the approval of such stockholders under
applicable law without such approval. This Agreement (including the Company
Disclosure Schedule) may be amended only by an instrument in writing signed on
behalf of the parties hereto.
SECTION 7.5. Extension; Waiver. 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 any 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 any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Nonsurvival of Representations and Warranties. The
---------------------------------------------
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 8.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
SECTION 8.2. Entire Agreement; Assignment. (a) This Agreement (including
----------------------------
the Company Disclosure Schedule) and the Confidentiality Agreement referred to
in Section 5.5(b) constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and supersede all other prior and
contemporaneous agreements and understandings both written and oral between the
parties with respect to the subject matter hereof and (b) this Agreement 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 8.3. 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.
34
SECTION 8.4. 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 facsimile
or by registered or certified mail (postage prepaid, return receipt requested)
to each other party as follows:
if to Parent or Acquisition: NORTHROP GRUMMAN CORPORATION
1840 Century Park East
Los Angeles, California 90067
Telecopier: (310) 556-4558
Attention: W. Burks Terry
with a copy to: Gibson Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles CA 90071
Telecopier: (213) 229-6159
Attention: Andrew E. Bogen, Esq.
if to the Company to: LITTON INDUSTRIES, INC.
21240 Burbank Boulevard
Woodland Hills, California 91367
Telecopier: (818) 598-2025
Attention: John E. Preston
with a copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopier: (212) 403-2000
Attention: Daniel A. Neff, Esq.
or to such other address or facsimile as the person to whom notice is given may
hereinafter furnish to the others in writing in the manner set forth above.
SECTION 8.5. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of law thereof.
SECTION 8.6. 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 8.7. 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 5.7, 5.9(d) and 8.2,
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.
35
SECTION 8.8. Certain Definitions. For the purposes of this Agreement the
-------------------
term:
(a) "affiliate" means a person that, directly or indirectly, through one
or more intermediaries controls, is controlled by or is under common control
with the first-mentioned person, provided, that Unitrin, Inc. and its
subsidiaries shall not be considered affiliates of the Company for any purpose
under this Agreement;
(b) "business day" means any day other than a day on which the New York
Stock Exchange is closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof;
(d) "Code" means the Internal Revenue Code of 1986, as amended;
(e) "knowledge" or "known" means, with respect to any matter in question,
the actual knowledge of an executive officer of the Company or Parent, as the
case may be;
(f) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(g) "subsidiary" or "subsidiaries" of the Company, Parent, the Surviving
Corporation or any other person means any corporation, partnership, limited
liability company, association, trust, unincorporated association or other legal
entity of which the Company, Parent, the Surviving Corporation or any such other
person, as the case may be, (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the capital stock the
holders of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity.
SECTION 8.9. Personal Liability. This Agreement shall not create or be
------------------
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of the Company or Parent or any officer,
director, employee, agent, representative or investor of any party hereto.
SECTION 8.10. 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.
36
IN WITNESS WHEREOF, each of the parties has caused this Agreement and Plan
of Merger to be duly executed on its behalf as of the day and year first above
written.
NORTHROP GRUMMAN CORPORATION
By:________________________________
Name:______________________________
Title:_____________________________
LITTON INDUSTRIES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
LII ACQUISITION CORP.
By:________________________________
Name:______________________________
Title:_____________________________
37
ANNEX A
CONDITIONS OF THE OFFER
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 (subject to the terms and
conditions of the Merger Agreement and any applicable rules and regulations of
the SEC, including Rules 14e-1(c) under the Exchange Act), Acquisition shall not
be required to accept for payment or pay for, and may delay the acceptance for
payment of, any Shares, if (i) any applicable waiting period under the HSR Act
or Regulation (EEC) No. 4064/89 of the Council of the European Union shall not
have expired or been terminated prior to the expiration of the Offer, (ii) the
Minimum Condition is not satisfied or (iii) at any time on or after the date
hereof and prior to the acceptance for payment of Shares, any of the following
conditions shall have occurred and continued to exist:
(a) there shall have been any statute, rule, regulation, judgment, order
or injunction enacted or entered and which shall remain in effect by any state
or U.S. government or governmental authority or by any state, U.S. or European
Union court or any agency or authority of the European Union, other than the
routine application to the Offer, the Merger or other subsequent business
combination of waiting periods under the HSR Act or Regulation (EEC) No. 4064/89
of the Council of the European Union, that has the effect of (1) making the
acceptance for payment of, or the payment for, some or all of the Shares illegal
or otherwise prohibiting consummation of the Offer, (2) imposing limitations on
the ability of Acquisition or Parent to acquire or hold or to exercise
effectively all rights of ownership of the Shares, or effectively to control the
business, assets or operations of Parent, the Company and their subsidiaries, of
such magnitude as would have a material adverse effect on the business, assets,
long-term earning capacity or financial condition of Parent, the Company and
their subsidiaries, taken as a whole.
(b) a Company Material Adverse Effect shall have occurred and continued to
exist; or
(c) there shall have occurred and continued to exist (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange (excluding any coordinated trading halt triggered solely as
a result of a specified decrease in a market index and suspensions or
limitations resulting from physical damage to or interference with such exchange
not related to market conditions), (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 Company Material Adverse Effect, (iv) any material
limitation (whether or not mandatory) by any U.S. governmental authority or
agency on 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 27.5% 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
39
(d) the Merger Agreement shall have been terminated in accordance with its
terms; or
(e) (i) the representations of the Company contained in the Merger
Agreement shall not be true and correct at and as of consummation of the Offer
with the same effect as if made at and as of such date or if such
representations speak as of an earlier date, as of such earlier date, except, in
either such case to the extent that the breach thereof would not have a Company
Material Adverse Effect, or (ii) the Company shall have failed to comply with
its covenants and agreements contained in the Merger Agreement in all material
respects;
(f) prior to the purchase of Shares pursuant to the Offer, the Company
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.
40
EXHIBIT 99.(d)(2)
[LETTERHEAD]
Litton
- --------------------------------------------------------------------------------
Corporate Litton Industries, Inc.
21240 Burbank Boulevard
Woodland Hills, California
91367-5575
June 23, 2000
Tel 818-598-5955
Fax 818-598-3313
Mr. Kent Kresa brownm@littoncorp.com
Chairman, President and CEO
Northrop Grumman Corporation Michael R. Brown
1840 Century Park East Chairman and
Los Angeles, CA 90067 Chief Executive Officer
CONFIDENTIALITY AGREEMENT
-------------------------
Dear Mr. Kresa:
Each of our corporations (each, a `Party") Is engaged in the development,
manufacture and sale of various products, services and systems. In connection
with our possible mutual interest In exploring a transaction (a "Transaction")
Involving some form of teaming arrangement, Joint endeavor or other combination,
we have agreed to exchange certain Information about our respective businesses
(the "Businesses) that is necessary or useful in evaluating the advisability of
consummating a Transaction.
All such information (whether written or oral) that either Party (the
"Disclosing Party") furnishes (whether before or after the date hereof) to the
other (the "Receiving Party"), all copies thereof and all analyses,
compilations, forecasts, studies or other documents prepared by the Receiving
Party in connection with its or their review of, or its interest in, a
Transaction that contain or reflect any such information are hereinafter
referred to as the "Information." The term Information will not, however,
Include information that (i) is or becomes publicly available other than as a
result of a disclosure by the Receiving Party, (ii) is or becomes available to
the Receiving Party on a non-confidential basis from a source (other than the
Disclosing Party or its directors, officers, or employees) that is not
prohibited from disclosing such information to the Receiving Party by a legal,
contractual or fiduciary obligation to the Disclosing Party, or (iii) is already
in the Receiving Party's possession or known by the Receiving Party prior to the
above date, provided such Information is not known by the Receiving Party to be
subject to another confidentiality agreement with or other obligation of secrecy
to the Disclosing Party or another party. It is the intent of the Parties that,
absent further agreement on this subject, the Information to be provided in
accordance with the terms of this Agreement
Mr. Kent Kresa
June 23, 2000
Page 2
shall be disclosed only to a limited group of each Parties' directors, officers
and senior employees and shall not be disclosed to any outside accountants,
attorneys or other advisors or representatives. Each party shall notify the
other of the identity of those persons included in the limited group for such
disclosures.
By signing this letter, each Party agrees that:
1. The Receiving Party (i) will keep the Information confidential and will not
(except as required by applicable law, regulation or legal process, and only
after compliance with paragraph 3 below), without the prior written consent of
the Disclosing Party, disclose any Information in any manner whatsoever, and
(ii) will not use any Information other than in connection with its
consideration, evaluation, negotiation or consummation of a Transaction.
2. Each Party agrees not to disclose (except as required by applicable law,
regulation or legal process, and only after compliance with paragraph 3 below),
without the prior written consent of the other Party to any person the fact
that the Information exists or has been made available, that a Transaction is
being considered or that discussions or negotiations are taking or have taken
place concerning a Transaction. If either Party is requested (whether by the
press, by any stock exchange or otherwise) to confirm, deny or otherwise comment
on the pendency of a Transaction which is subject to the terms of this
Agreement, the Parties agree that their responses with respect to such
Transaction will be limited to a statement that it is the company's policy not
to comment on merger and acquisition matters; provided, however, that if either
Party is advised by legal counsel that such a response will not satisfy any
applicable disclosure obligation, it will promptly advise the other Party and
the Parties will work in good faith to coordinate a response to such disclosure
obligation.
3. In the event that a Party is requested pursuant to, or required by,
applicable law, regulation or legal process to disclose any of the Information,
it will promptly so notify the other Party so that a protective order or other
appropriate remedy may be sought by the other Party. In the event that no such
protective order or other remedy is obtained, or that the other Party waives
compliance with the terms of this Confidentiality Agreement, such Party will
furnish only that portion of the Information that it is advised by legal counsel
is legally required and will exercise all reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded the Information.
4. If either Party decides not to proceed with a Transaction, it will promptly
inform the other Party of that decision and both Parties will either destroy all
written Information or return it to the Disclosing Party; provided however, that
the both parties
Mr. Kent Kresa
June 23, 2000
Page 3
shall be entitled to retain one copy of any such information in their respective
legal departments for the sole purpose of evaluating any claim of non-compliance
with this agreement. Any oral Information will continue to be subject to the
terms of this Confidentiality Agreement.
5. Each Party acknowledges that neither the other Party, nor any of its
officers, directors, employees, representatives, agents or controlling persons
within the meaning of Section 20 of the Securities Exchange Act of 1934 as
amended ("Affiliates") make any express or implied representation or warranty as
to the accuracy or completeness of the Information, and each Party agrees that
no such person will have any liability relating to the Information or for any
errors therein or omissions therefrom. Each Party further agrees that it is not
entitled to rely on the accuracy or completeness of the Information and that it
will be entitled to rely solely on such representations and warranties as may be
included in any definitive agreement with respect to the Transaction, subject to
such limitations and restrictions as may be contained therein.
6. Each Party will advise its officers, directors and employees who are
informed of the matters that are the subject of this Confidentiality Agreement
of the restrictions imposed by the United States securities laws on the
purchase or sale of securities by any person who has received material,
non-public Information from the issuer of such securities and on the
communication of such information to any other person when it is reasonably
foreseeable that such other person is likely to purchase or sell such securities
in reliance upon such Information.
7. Each Party will designate in writing a point of contact for all (i)
communications regarding a Transaction, (ii) requests for additional
Information, facility tours or management meetings, and (iii) discussions or
questions regarding procedures with respect to evaluation or negotiation of a
Transaction. Except for contacts specifically authorized in accordance with the
preceding sentence, each party agrees not to have any other contacts with the
other Party, or any of its officers, directors, employees or agents concerning
the consideration, evaluation, negotiation or consummation of a Transaction.
8. Unless and until a written definitive agreement that provides for a
Transaction has been executed, neither Party nor any Affiliate of a Party will
have any liability to the other Party with respect to a Transaction, whether by
virtue of this Confidentiality Agreement or any other written or oral expression
with respect to a Transaction or otherwise. Without limiting the generality of
the foregoing, the Parties acknowledge that, prior to the execution of such a
written definitive agreement providing for a
Mr. Kent Kresa
June 23, 2000
Page 4
Transaction, each of them may freely investigate, negotiate, commit to, and take
any other actions which they may in their sole discretion determine, with
respect to any type of business arrangement or transaction, regardless of
whether such actions or arrangements would be inconsistent with, or render
impractical, a Transaction between the Parties hereto and that either Party may
at any time terminate discussion of a Transaction with the other Party.
9. Each Party acknowledges that remedies at law are inadequate to protect the
Disclosing Party against any actual or threatened breach of this Confidentiality
Agreement by the Receiving Party and, without prejudice to any other rights and
remedies otherwise available to the Disclosing Party, the Receiving Party agrees
to the granting of injunctive relief in favor of the Disclosing Party without
proof of actual damages. In the event of litigation relating to this
Confidentiality Agreement, the prevailing Party will be entitled to recover from
the other Party its costs and expenses (including, without limitation,
reasonable legal fees and expenses) incurred in connection with all such
litigation.
10. Each Party agrees that no failure or delay by the other Party in exercising
any right, power, or privilege hereunder will operate as a waiver thereof, nor
will any single or partial exercise thereof preclude any other or further
exercise thereof of the exercise of any right, power or privilege hereunder.
11. In consideration of each Party providing the Information to the other,
without the other Party's prior written consent, for a period of two years from
the date hereof neither Party will solicit for employment any of the directors,
officers or employees of the other Party with whom they have had dealings under
the terms of this Agreement; provided, however, that each Party shall have the
right to hire any of the directors, officers or employees of the other Party who
may approach such Party on their own Initiative or in response to a newspaper
advertizement or similar general solicitation.
12. For a period of two (2) years from the date of this letter agreement,
unless specifically consented to in advance at the direction of the other Party,
neither Party shall, directly or indirectly: (i) in any manner acquire or offer
to acquire, or agree to acquire, directly or indirectly more than one percent
(1%) of any securities of the other Party or any of its subsidiaries or any
direct or indirect rights, options or interests with respect to any securities
or material assets of the other Party or any of its subsidiaries (provided,
however, that this subsection (I) shall not limit the exercise of fiduciary
duties with respect to either Parties' pension and employee savings plans by the
investment managers of such plans over whom the Parties' management exercises no
discretion and with whom the Parties' management has had, and will have, no
communications
Mr. Kent Kresa
June 23, 2000
Page 5
Whatsoever with respect to the subject matter of this Confidentiality
Agreement); (ii) solicit proxies or consents or become a "participant" in a
"solicitation" (as such terms are defined in Regulation 14A under the,Securities
Exchange Act of 1934, as amended (the "Exchange Act") of proxies or consents
with respect to securities of the other Party or any of its subsidiaries or
initiate any stockholder proposal with respect to the other Party or any of its
subsidiaries; (iii) seek to advise, control or influence the management, Board
of Directors or policies of the other Party or any of its subsidiaries(other
than with respect to matters and Issues not relating to the subject matter of
this paragraph), or take action for the purpose of convening a stockholders
meeting of the other Party; (iv) make any proposal or any public announcement
relating to a tender or exchange offer for securities of the other Party or any
of its subsidiaries or a merger, business combination, sale of substantially all
assets, liquidation, consolidation or other extraordinary corporate transaction
relating to the other Party or any of its subsidiaries or take action which
might require the other Party to make a public announcement regarding any of the
foregoing; (v) form, join or in any way participate in a "group" within the
meaning of Section 13 (d)(3) of the Exchange Act for the purpose of acquiring,
holding, voting or disposing of securities of the other Party or any of its
subsidiaries or taking any other actions restricted or prohibited under clauses
(i) through (iv) of this paragraph, or take any steps in connection therewith;
(vi) enter into any discussions, negotiations, arrangements or understandings
with any third party with respect to any of the foregoing; (vii) disclose any
Intention, plan or arrangements inconsistent with the foregoing; or (viii)
advise, assist or encourage any other person in connection with any of the
foregoing. If, in the absence of a violation of this paragraph 12 by either of
the Parties, any other person or entity undertakes, with respect to one of the
Parties (the "Target Party") an action or combination of actions which would
constitute a violation of this paragraph 12 if undertaken by either of the
Parties, then the non-Target Party shall be released from its obligations under
this paragraph 12 with respect to the Target Party.
13. This Confidentiality Agreement will be governed by and construed in
accordance with the laws of the State of California applicable to contracts
between residents of that State and executed in and to be performed in that
State without regard to its conflicts of laws or choice of laws rules.
14. This Confidentiality Agreement contains the entire agreement between the
Parties with respect to the subject matter hereof, and no modification of this
Mr. Kent Kresa
June 23, 2000
Page 6
Confidentiality Agreement or waiver of the terms and condition hereof will be
binding upon either, unless approved in writing by both Parties.
15. Unless a shorter period is specified in a particular paragraph or section
of this Confidentiality Agreement with respect to the obligations set forth in
that paragraph or section, all obligations herein shall terminate three years
from the above date. Please confirm your agreement with the foregoing by
signing and returning the duplicate copy of this letter enclosed herewith.
Very truly yours,
/s/ Michael R. Brown
Michael R. Brown
Chairman and Chief Executive Officer
Litton Industries, Inc.
Accepted and Agreed as of the date
first written above:
Northrop Grumman Corporation
By: /s/ Kent Kresa
--------------------------------
Its: Chairman / Pres. & CEO
EXHIBIT 99.(d)(3)
[LETTERHEAD OF NORTHROP GRUMMAN]
December 21, 2000
Dr. Ronald D. Sugar
518 Lakeview Canyon Road
Westlake Village, California 91362
Dear Ron:
This letter (the "Northrop Grumman Agreement") will confirm our discussions
regarding your employment with Northrop Grumman Corporation following its
acquisition of Litton Industries, Inc. ("Litton").
Northrop Grumman is entering into a Merger Agreement with Litton, pursuant to
which Litton shall become a wholly owned subsidiary of Northrop Grumman (the
"Litton Transaction"). This transaction will constitute a "Change of Control"
as that term is used in your existing Change of Control Employment Agreement
("COCEA") and your existing June 21, 2000 agreement (the "Letter Agreement")
with Litton. (The COCEA and the Letter Agreement are collectively referred to
as the "Litton Agreements").
Following the closing of the transaction, you shall be employed as an elected
Corporate Vice President of Northrop Grumman and as President and Chief
Executive Officer of the Litton subsidiary of Northrop Grumman. You will report
to the Chief Executive Officer of Northrop Grumman. In addition, prior to the
closing date of the Litton Transaction you will be elected to the Northrop
Grumman Board of Directors effective as of the closing date.
Upon the closing of the Litton Transaction, Northrop Grumman will assume the
obligations of your Litton Agreements. However, in consideration for your
employment by Northrop Grumman on the terms set forth above, you agree to modify
these Agreements as set forth below. Specifically, notwithstanding anything to
the contrary in the Litton Agreements, you agree that:
1. The period of time commencing as of the closing date of the Litton
transaction and ending on the later of (i) six months after the
closing, or (ii) December 31, 2001 shall be the "Employment Period."
Except as expressly set forth in Sections 2 and 3 below, you hereby
agree to waive any claims you may have to terminate
Dr. Ronald D. Sugar
December 21, 2000
Page 2
your employment during the Employment Period for "Good Reason" (as
that term is defined in Section 5(c) of the COCEA), or to terminate
your employment and claim a "Constructive Termination Without Cause,"
as that term is defined in Section 9(ii) of your Letter Agreement.
Therefore, if you terminate your employment during the Employment
Period (except for the reasons set forth in Sections 2 and 3 below)
you shall not be entitled to any severance benefits under either the
COCEA or the Letter Agreement.
2. If during the Employment Period Northrop Grumman fails to pay you your
Annual Base Salary or Annual Bonus as those terms are defined in
Sections 4(b)(i) and (ii) of the COCEA, or if you no longer report to
the Chief Executive Officer of Northrop Grumman, you shall have the
right to terminate your employment at that time for Good Reason and
receive the benefits set forth in Section 6(a) of the COCEA, provided
you have given Northrop Grumman prior written notice of such failure
to pay or of such change in reporting relationship and a reasonable
opportunity to cure.
3. Similarly, if during the Employment Period Northrop Grumman reduces
your current base salary or target bonus opportunity as a percentage
of base salary as set forth in Section (9)(ii)(A) of the Letter
Agreement, or fails to make any other payments due you under that
Agreement, or if you no longer report to the Chief Executive Officer
of Northrop Grumman, you shall have the right to terminate employment
based on a Constructive Termination Without Cause and receive
severance benefits pursuant to the terms of the Letter Agreement,
provided you have given Northrop Grumman prior written notice of such
reduction or failure to pay, or change in reporting relationship, and
a reasonable opportunity to cure.
4. Nothing in this Northrop Grumman Agreement shall affect your right to
terminate from employment after the Employment Period and claim Good
Reason or a Constructive Termination Without Cause based on events
which occurred during the Employment Period. Nothing in this Northrop
Grumman Agreement shall affect whatever rights you may have to
accelerated vesting of unvested stock options, restricted stock, or
Performance-Based Restricted Stock upon the occurrence of a change of
control.
Dr. Ronald D. Sugar
December 21, 2000
Page 3
5. You agree that your employment in the position of Chief Executive
Officer of the Litton subsidiary of Northrop Grumman fully satisfies
the contingency set forth in the first paragraph of Section 7 of the
Letter Agreement relating to your election as Chief Executive Officer
of Litton.
6. You shall have the right to voluntarily terminate your employment
during the thirty day period following the Employment Period, and
such termination shall be a termination for Good Reason and therefore
entitle you to severance benefits under the COCEA. Such termination
shall also be a Constructive Termination Without Cause and shall
entitle you to severance benefits under Section 7 (but not Section 8)
of the Letter Agreement. In accordance with Section 7(vi) of the
Letter Agreement, your combined total severance benefit under both
Section 7(i) of the Letter Agreement and Section 6(a)(i)(B) of the
COCEA shall be the greater of (i) $5,000,000 or (ii) three times the
sum of your Annual Base Salary and Annual Bonus, or if higher, any
bonus paid with respect to any fiscal year during the Employment
Period (as those terms are defined in the COCEA).
This Northrop Grumman Agreement shall be effective only in the event
that the Litton Transaction closes on or before December 31, 2001, and
shall have no force or effect in the event that the Litton Transaction
falls to close by that date. If the Litton Transaction closes, then
this Northrop Grumman Agreement along with your Litton Agreements as
modified hereby shall constitute the entire agreement between you and
Northrop Grumman pertaining to the subject matters covered by those
Agreements. In the event the Litton Transaction fails to close by
December 31, 2001, then your Litton Agreements shall remain in full
force and effect and unmodified. This Northrop Grumman Agreement shall
not be assignable by either party.
Dr. Ronald D. Sugar
December 21, 2000
Page 4
This is a tremendous opportunity for Northrop Grumman and Litton. I look
forward to working with you in bringing about a smooth integration.
Sincerely,
/s/ Kent Kresa
Kent Kresa
AGREED TO:
/s/ Ronald D. Sugar
- -----------------------------
Ronald D. Sugar
Dated: 12/21/00
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