LOS ANGELES, April 22, 2002 -- Northrop Grumman Corporation (NYSE:NOC) announced today that it will file with the Securities and Exchange Commission (SEC) a letter sent Sunday, April 21, 2002, to TRW's general counsel, detailing Northrop Grumman's specific concerns with TRW's confidentiality agreement.
April 21, 2002 William B. Lawrence Executive Vice President and General Counsel TRW Inc. 1900 Richmond Road Cleveland, Ohio 44124 Re: Confidentiality Agreement
Dear Mr. Lawrence:
We are in receipt of the form of Confidentiality Agreement you sent to us on April 18, 2002.
The confidentiality provisions you have proposed are generally acceptable and present no significant issues. We are prepared to agree to them without material modification.
In addition to the confidentiality provisions, however, TRW has added a number of unrelated provisions, including a three year standstill agreement which is quite inappropriate in the circumstances.
Northrop Grumman's strong and sincere desire is to enter into a negotiated transaction with the approval and whole-hearted support of both company's boards of directors and shareholders. We cannot accept a standstill agreement, however, which prohibits shareholders of Northrop Grumman and TRW from even learning of a Northrop Grumman proposal unless TRW's board of directors first decides that they may do so.
The following are among the specific concerns that we have:
1. Although the proposed agreement permits Northrop Grumman to
continue its pending offer and seek shareholder approval at the
Special Meeting, it prohibits the exchange of a single TRW share
without TRW's prior approval -- even if the TRW shareholders have
approved the control share acquisition and holders of a majority
of the TRW shares desire to accept Northrop Grumman's offer.
2. Should Northrop Grumman's present exchange offer be abandoned for
any reason, it prohibits Northrop Grumman from submitting any new
proposal without TRW's prior consent. For example, Northrop
Grumman would be prohibited from offering to acquire TRW after
completion of the automotive spinoff.
3. The three-year duration of the standstill would prohibit Northrop
Grumman from submitting any new acquisition proposal even if
present circumstances should radically change as the result of
the passage of time, TRW's present restructuring plan or
developments in our respective industries.
4. We believe the prohibition on publicly disclosing any new
proposal Northrop Grumman may wish to make for TRW serves only to
enable the TRW board to decide what information shareholders will
be able to consider, and deprive them of any voice in the
direction of their investment. Furthermore, it would prevent
Northrop Grumman from disclosing to its own shareholders
information which is important to their investment.
5. TRW's requirement that Northrop Grumman agree in advance that it
will abide by any procedures that TRW may adopt for the
submission of proposals could, obviously, bind us to a bidding
process designed to "tip the playing field" in favor of others.
We agree that the TRW Board of Directors or an independent committee of the board has a key role to play in the process. Such a role is guaranteed by Ohio's extraordinary antitakeover legislation. Ultimately, however, we believe the owners of the company should be able to decide for themselves what to do with their investment.
As you know, last Thursday we sent you a straightforward confidentiality agreement which had been used by our two companies in the past -- without the standstill and other extraneous provisions -- and we see no reason why that agreement is not perfectly acceptable for the purpose of exchanging non-public information. In an attempt to move the process ahead without delay, however, we are also returning herewith a second confidentiality agreement which is taken substantially verbatim from the draft we received last Thursday and excludes those provisions which are unrelated to the protection of proprietary information. We are prepared to commence our due diligence procedures as quickly as TRW is willing to schedule them. We believe the interests of TRW and its shareholders will best be served by moving ahead without delay in order that they may be informed as to the results. If you would provide us a suggested schedule for due diligence meetings, I believe we can reach agreement and begin the process very promptly.
Sincerely,
W. Burks Terry
Northrop Grumman also said that the filing will contain TRW's proposed confidentiality agreement, received April 18 by Northrop Grumman, and an edited version the company sent back to TRW Sunday, April 21. Both documents are available for review at the SEC's Web site, www.sec.gov.
The company said it remains committed to achieving a negotiated transaction with TRW, but must be able to conduct an effective due diligence process. Northrop Grumman reiterated its desire to enter into a negotiated transaction with TRW. Such a transaction that delivers full and fair value to TRW's shareholders is possible only if Northrop Grumman is able to conduct an effective due diligence. Northrop Grumman welcomes an opportunity to initiated these discussions.
Northrop Grumman Corporation is an $18 billion, global defense company with its worldwide headquarters in Los Angeles. Northrop Grumman provides technologically advanced, innovative products, services and solutions in defense and commercial electronics, systems integration, information technology and nuclear and non-nuclear shipbuilding and systems. With nearly 100,000 employees and operations in 44 states and 25 countries, Northrop Grumman serves U.S. and international military, government and commercial customers.
Northrop Grumman filed a registration statement on Form S-4 (File No. 333-83672) and a tender offer statement on Schedule TO with the Securities and Exchange Commission on March 4, 2002 with respect to its offer to exchange all outstanding shares of TRW Inc. stock for Northrop Grumman common stock. These documents, and any amendments or supplements thereto, contain important information which should be read by TRW Inc. shareholders before making any decision regarding the offer to exchange.
The directors, certain executive officers and other employees and representatives of Northrop Grumman may be deemed to be participants in the solicitation of proxies for the Special Meeting of TRW Inc. Shareholders to be held on May 3, 2002 and the 2002 Annual Meeting of TRW Inc. Shareholders to be held on April 24, 2002. Northrop Grumman's proxy materials contain important information regarding such potential participants and other matters and should be read by TRW Inc. shareholders.
Copies of any of the foregoing documents may be obtained without charge at the Securities and Exchange Commission's website at www.sec.gov or upon request from D.F. King & Co., Inc., the information agent for Northrop Grumman's offer to exchange, at 800-755-7250.
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