Fill and Sign the In Re Browning Ferris Shareholders Derivative Lit 830 F Form

LITIGATIONIn October, 1991, two shareholders filed a derivative suit in the Denver District Court against the Company s four executive officers, who are also directors, and nominally, against the Company. Among other things, the suit asserts breaches of fiduciary duties and corporate law in regard to allegedly excessive compensation paid to the directors/executive officers since 1985, loans to Jerome 1. Goldstein, and loans from Mr. Goldstein s wife and other family members. (See “Transactions with Management”.) The plaintiffs also claim misleading information on these matters in proxy statements of the Company. The plaintiffs seek unspecified damages. The executive officers strongly dispute the allegations made in the suit. The executive officers have retained their own counsel, and it is expected that they will seek indemnification for their costs and expenses. In response to the suit, in November, 1991, the Board of Directors appointed a Special Litigation Committee. This Committee is comprised of two outside directors, Michael J. Sheets and Dennis H. Field. In establishing the Special Litigation Committee, the Board stated that the findings and determinations of the Committee will be final and not subject to review by the Board of Directors. The Company also filed a motion to dismiss the complaint or in the alternative to stay the proceedings pending the report of the Special Litigation Committee. The motion to stay the proceedings was granted on February 2, 1992. The Special Litigation Committee retained its own counsel and extensively investigated the allegations and claims set forth in the complaint. On March 23, 1992, the Special Litigation Committee issued a report which concluded that: The compensation paid to the director/executive officers since 1985 was fair and determined in accordance with applicable legal standards; the Company s borrowings from relatives of Jerome J. Goldstein were approved in accordance with applicable law and were fair; the Company s payment of personal expenses of Jerome I. Goldstein in the nature of advances was not fair and may not have been made in accordance with Colorado law and fiduciary principles, although, for a number of reasons, no purpose would be served by the Company in pursuing a claim on this particular matter, and the Company s proxy statements contain no material omissions or misrepresentations of facts. In regard to the personal advances to Mr. Goldstein, the Committee stated, among other things, that the advances were disclosed in proxy statements, were understood as amounts to be repaid by Mr. Goldstein, and have in fact been repaid in full, thus largely curing any possible damage to the Company. The Committee also concluded that the Company should charge interest at an appropriate rate for personal advances which were outstanding from time to time. It is the policy of the Company no longer to pay personal expenses of any director, officer, or employee. The Committee further stated a number of conclusions or recommendations for forward-looking actions, including the establishment of a Compensation Committee and an Audit Committee. All of these actions have been adopted as policies of the Company. Overall, the Committee concluded in its report that it is the considered judgement of the Committee, acting on behalf of and with the full authority of the Board of Directors, that it is in the best interest of the Company and all of its shareholders that no action on behalf of the Company should be brought or continued against the director/executive officers by reason of any matters alleged in the shareholders complaint. The Committee directed counsel for the Company to take such measures as necessary to give effect to this determination. The Special Litigation Committee report has been filed with the court, and based upon that report, the Company has moved to dismiss the complaint. Scott s Liquid Gold-Inc. 4/6/92 Certain LitigationAll nominees for the Company s Board of Directors, except Steven B. Sample, were i-tamed as defendants in a consolidated shareholder derivative action originally commenced as two separate actions in United States District Court for the Central District of California in April, 1989. The claims made in this lawsuit, which purportedly were made on behalf of the Company, alleged that the individual defendants violated their fiduciary duties, were negligent in fulfilling their responsibilities, and acted contrary to certain laws in connection with specified ongoing and terminated proceedings in which allegations of improper practices by subsidiaries of the Company related to U.S. Government contract procurement matters have been made. This shareholder derivative action sought to have the Company recover from the individual defendants (who include certain present and former executive officers of the Company in addition to the directors) compensation for the damages purportedly sustained by the Company as a result of the misconduct alleged and other relief. In response to a demand that the Company commence legal proceedings against the individual defendants named in the suit and against “all other persons responsible for the illegal activities” referred to in the plaintiffs action, the Company s Board of Directors on December 6, 1989, established a Special Litigation Committee to conduct an investigation of the allegations made in the plaintiffs demand. The Committee presented its findings and conclusions to the full Board of Directors on May 3, 1990, whereupon the Board adopted the Committee s recommendation that no suit be instituted by the Company against any of the defendants named in the derivative lawsuit or against any other person. After completion by plaintiffs of limited discovery with respect to the good faith and reasonableness of such investigation, defendants filed a motion for judgment on the pleadings or, in the alternative, summary judgment. On October 7, 1991, defendants motion for summary judgment was granted by the Court, resulting in the dismissal of plaintiffs claims. Such judgment has been appealed by the plaintiffs to the United States Court of Appeals for the Ninth Circuit. Appellate briefs have been filed by all parties, but a date for oral argument of the appeal has not yet been set by the Court. Further information with respect to this legal proceeding is set forth in the Company s Annual Report on Form 10-K for the fiscal year ended July 31, 1992, filed with the Securities and Exchange Commission, a copy of which may be obtained by any shareholder upon request made to the Company s Corporate and Law Library at the Company s address set forth on the first page of this Proxy Statement. Litton Industries, Inc. 10/26/92 LITIGATIONThe Corporation, Mr. Kennedy, Mr. Bentele, and two former officers no longer with the Corporation are named as defendants in two purported class actions brought in February 1992 by two alleged stockholders. These actions, which have been consolidated and are now pending in the United States District Court for the Southern District of New York, allege violations of federal securities laws and related state laws. The plaintiffs base their allegations principa lly on the Corporation s February 18, 1992, press release about an FDA inspection of Pitman-Moore s (now Mallinckrodt Veterinary s) Kansas City plant that also cautioned that estimates of security analysts regarding fiscal 1992 earnings from continuing operations in excess of $1.65 per share “were probably too optimistic.” The estimates had been marginally higher ($1.67). The thrust of the allegations is that disclosure of manufacturing deficiencies was not made on a timely basis. On October 4, 1993, the district court granted defendants motion to dismiss the complaint without leave to replead. Plaintiffs thereafter moved to reopen the judgment and for leave to ifie an amended pleading, which motion was denied. Plaintiffs have appealed both decisions and the appeal has been briefed and is awaiting argument. In September 1992, a stockholder s derivative suit was filed in the United States District Court for the Southern District of New York, purportediy on behalf of the Corporation, against all of the then directors of the Corporation asserting claims for alleged violation of the federal proxy rules, for alleged breach of fiduciary duty, and in Mr. Kennedy s ease for alleged misappropriation of confidential business information. The case was assigned to the same judge as the above class actions and was consolidated with them for pre-trial purposes. This case, like the class actions, arose as a consequence of the FDA inspection and the February 18, 1992, press release referred to above in the class actions. On October 4, 1993, the district court granted defendants motion to dismiss the complaint for, among other things, failure to make a demand on the Board before commencing suit. Plaintiff did not appeal this decision. Rather, plaintiffs counsel served a purported demand letter on the Board requesting that appropriate action be taken to redress the alleged misconduct that was the subject of plaintiffs prior complaint. By letter dated December 7, 1993, the Corporation requested further information from plaintiff regarding the allegations in the demand letter, but to date has not received any response to this request. The Corporation believes the aforementioned suits are without merit and will have no material effect. The Corporation is paying the legal fees and expenses incurred in defending these cases including advancing, in accordance with New York law, the fees and expenses attributable to the defense of the individual directors. A portion may be reimbursed by insurance. Mallinckrodt Group Inc. 9/13/94