EFiled: Dec 12 2011 8:19AM EST Transaction ID 41332874 Case No.

7102IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x : MARTIN MARIETTA MATERIALS, INC., : : : Plaintiff, : : v. : : VULCAN MATERIALS COMPANY, : : Defendant. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

C.A. No. _____-___

VERIFIED COMPLAINT FOR DECLARATORY JUDGMENT AND INJUNCTIVE RELIEF Plaintiff Martin Marietta Materials, Inc. (Martin Marietta), by and through its undersigned attorneys, as and for its complaint against Defendant Vulcan Materials Company (Vulcan), upon knowledge as to itself and its own acts and upon information and belief as to all other matters, alleges as follows: NATURE OF THE ACTION 1. This is an action for declaratory judgment and injunctive relief

enforcing the non-disclosure agreement between Martin Marietta and Vulcan dated May 3, 2010 (the Non-Disclosure Agreement or NDA). Martin Marietta seeks a declaration that the Non-Disclosure Agreement does not prohibit (i) Martin Mariettas public offer to purchase all issued and outstanding shares of Vulcans common stock in exchange for Martin Mariettas stock (the Exchange Offer); and (ii) Martin Mariettas proposal to Vulcans stockholders to vote for the election of Martin Mariettas five independent nominees to Vulcans board of directors. Martin Marietta also seeks an

injunction against Vulcan violating the exclusive Delaware forum selection clause in the Non-Disclosure Agreement. 2. Martin Marietta is a leading producer of aggregates, crushed stone,

sand and gravel used for public, commercial and residential construction. Vulcan is the nations largest producer of construction aggregates and a leader in the production of other construction materials. The Exchange Offer being commenced on December 12, 2011 is a non-coercive and non-discriminatory offer to purchase Vulcans shares, and proposes, promptly after completion of the Exchange Offer, to consummate a second-step merger of a wholly-owned subsidiary of Martin Marietta with and into Vulcan, thereby acquiring all of Vulcans shares not acquired pursuant to the Exchange Offer. Under the proposed terms of the Exchange Offer, each outstanding share of Vulcan common stock would be exchanged for 0.50 shares of Martin Marietta common stock, representing an 18% premium to Vulcans stockholders based on the average per share prices for both companies during the 30-day period ended December 9, 2011. 3. Concurrent with the commencement of the Exchange Offer and the

proposal for the second-step merger, Martin Marietta is notifying Vulcan of its intent to propose five individuals to be nominated for election to Vulcans currently 11-member board at Vulcans 2012 annual stockholders meeting, which Martin Marietta expects, based on Vulcans practice and bylaws, to be held on May 15, 2012. 4. Martin Marietta and Vulcan have at various times discussed a

combination of the companies. The combined business would present meaningful synergies and increased value for stockholders of both companies. More than a year and

a half ago, the companies engaged in active discussions to explore the financial and strategic merits, and potential terms, of a business combination. 5. In connection with the discussions in 2010, Martin Marietta and

Vulcan executed the Non-Disclosure Agreement dated May 3, 2010. Notably, the NonDisclosure Agreement does not contain a standstill provision prohibiting either party from making a public offer, or any agreement by Martin Marietta to limit its holdings of Vulcans shares. Martin Marietta and Vulcan instead excluded ordinary standstill provisions from their agreement, thereby preserving each partys right to make public offers in the future. 6. Consistent with its unwillingness to take the steps necessary to

reach a definitive agreement on a business combination that would present immediate and significant premium for its stockholders, it is anticipated that Vulcan will oppose and seek equitable relief enjoining Martin Mariettas Exchange Offer and proposal for the election of its director nominees, claiming that Martin Mariettas actions violate the NonDisclosure Agreement. An injunction barring Martin Mariettas Exchange Offer and proposal could prevent Vulcans stockholders from directly considering their merits and could permit Vulcans board of directors to avoid giving due consideration to Martin Mariettas Exchange Offer and proposal, which its fiduciary duties require. Martin Marietta brings this action now to ensure that any claim regarding the Non-Disclosure Agreement can be resolved expeditiously so as to allow the Exchange Offer and the proposal for director nominees to be fairly considered by Vulcans stockholders.

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The business rationale behind Martin Mariettas proposal to

Vulcans stockholders is compelling. A combination of Vulcan and Martin Marietta is expected to result in significant benefits for Vulcans stockholders in the form of increased share prices and dividends. The combined entity will be a U.S.-based company that is the global leader in construction aggregates. Martin Mariettas and Vulcans complementary businesses and locations are expected to allow the combined company to improve efficiency in production and distribution. Significant cost synergies ranging from $200 to $250 million, derived from a combination of operating efficiencies and elimination of duplicative corporate functions, are anticipated with cost savings to benefit the stockholders of the combined company. 8. A combination of Martin Marietta and Vulcan is also compelling

because, in recent years, Vulcan has suffered from poor operating performance. The companys stock price declined by almost 75% from the second quarter of 2007 to the third quarter of 2011. Vulcan also failed to meet earnings estimates for eight consecutive quarters, cut its quarterly dividend from 49 cents to 25 cents per share, and then again to a penny, and had its credit rating downgraded from investment grade to non-investment grade by both Moodys Investor Services and Standard & Poors. In contrast, during the same period, Martin Marietta has set a strong track record for cost efficiency and operating performance. A recent report issued by Moodys Investor Services noted that Martin Marietta operates in geographic regions that have better withstood the contraction in public and private construction over the past several years, and that [t]he company has also been more effective at cutting costs and controlling its debt levels than

[Vulcan] and generates a larger percentage of revenue from the high-margin aggregates business. 9. Despite the significant stockholder value the proposed business

combination would create, Vulcan ceased participating in private discussions toward a negotiated transaction, compelling Martin Marietta to present its proposals directly to Vulcans stockholders. 10. Vulcan should not be allowed to obstruct Martin Mariettas

proposals by invoking the Non-Disclosure Agreement as a pretext. The NDA does not prohibit the Exchange Offer or Martin Mariettas proposal to submit five nominees as independent directors for election at Vulcans 2012 annual stockholder meeting. PARTIES 11. Plaintiff Martin Marietta is a North Carolina corporation, with its

principal place of business in Raleigh, North Carolina. The company is a leading producer of crushed stone, sand and gravel aggregates for the construction industry, including infrastructure, agricultural, nonresidential, and residential uses. Martin Marietta also has a specialty products segment that manufactures and markets magnesiabased chemical products used in industrial, agricultural, and environmental applications and dolomitic lime sold primarily to customers in the steel industry. The company's revenues were $1.20 billion for the nine months ended on September 30, 2011. Martin Marietta currently pays a cash dividend of $1.60 per Martin Marietta share annually. The company's shares publicly trade on the New York Stock Exchange (the NYSE) under the symbol "MLM" and, as of September 30, 2011, Martin Marietta had 45.70 million

common shares outstanding. Vulcan's institutional investors own over 60% of the outstanding shares of Martin Marietta common stock. 12. Defendant Vulcan is a New Jersey corporation headquartered in

Alabama. Vulcan produces aggregates and its primary markets include public, commercial and residential construction. Vulcan currently pays a quarterly cash dividend of a penny per Vulcan share. Vulcan's common shares publicly trade on the NYSE under the symbol "VMC" and, as of September 30, 2011, Vulcan had 129.23 million common shares outstanding. Martin Marietta's institutional stockholders own approximately 60% of the outstanding common stock of Vulcan. JURISDICTION AND VENUE 13. This Court has subject matter jurisdiction over the claims set forth

herein pursuant to 10 Del. C. 341 and the Delaware Declaratory Judgment Act, 10 Del. C. 6501, et seq. 14. This Court has jurisdiction over Vulcan pursuant to Article 10 of

the Non-Disclosure Agreement, which provides that: Each of the parties irrevocably agrees that any legal action or proceeding with respect to this letter agreement and the rights and obligations arising hereunder ... shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware). Each of the parties hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this letter agreement in any court other than the aforesaid courts.

FACTUAL BACKGROUND 15. Martin Marietta is a multi-billion dollar, publicly traded company

that produces construction aggregates used for a wide range of commercial and residential applications. Vulcan is the largest producer of construction aggregates as measured by volume and revenue. By the same measure, Martin Marietta is the second largest producer. 16. On an ongoing basis, the Martin Marietta board of directors and

management are engaged in a strategic planning process designed to enhance stockholder value and position the company to take advantage of growth opportunities in its industry. As part of this process, the company has periodically evaluated a variety of possible business combinations, including a merger with Vulcan. 17. Martin Marietta has been interested in a combination of the

companies and the senior management of both companies have shared the view that combining the businesses would result in cost synergies and benefits to both companies stockholders. Following the economic crisis in late 2008, in about May 2010, Vulcan and Martin Marietta engaged in discussions to explore the strategic and financial merits, and potential terms of a business combination. Discussions and negotiations took place throughout the fall of 2010 and continued until May of 2011. 18. Effective May 3, 2010, Martin Marietta and Vulcan entered into

the Non-Disclosure Agreement in connection with their discussions. (A copy of the

NDA is attached as Exhibit A to the Verified Complaint.) Significantly, the parties excluded from the Non-Disclosure Agreement ordinary standstill provisions that would have prohibited or prevented either party from making a public offer, thereby preserving each partys right to make public or unsolicited offers or proposals for a combination of the companies. I. Vulcans Operating Performance Declines and Continues to Deteriorate 19. The parties most recent negotiations took place in an economic

environment and against a background of events that made and continue to make a combination of Martin Marietta and Vulcan most compelling. 20. Particularly since the beginning of the recent economic crisis,

Vulcan has suffered from poor operating performance. In the past several years, Vulcan has experienced a steady decline in its stock price, significant reduction of dividends, repeated failures to meet earnings estimates and multiple credit rating downgrades. 21. During the period of April 30, 2007 to November 18, 2011,

Vulcans stock price declined from $128.62 to $31.24 more than 75%. In 2009, Vulcans stock traded as low as $35 per share and this past October, Vulcans share price hit a 5-year low of $25. The stock is currently trading below $34 per share. 22. Faced with a shortage of cash, on October 14, 2011, Vulcan

drastically reduced its quarterly dividend by 96% announcing that stockholders would only receive a penny per share dividend. This represented a significant reduction from the 25 cents per share paid on September 10, 2011. Two weeks later on November 2, 2011, Vulcan announced earnings for the third quarter ending September 30, 2011,

failing to meet market projections as reported revenues of $715 million fell short by $46 million. Vulcan incurred a loss of $41 million from continuing operations, compared to a projected profit of 6 cents. Since the fourth quarter of 2008, Vulcan has missed earnings estimates every quarter except in the third quarter of 2009 when it barely met expectations. 23. In the last three years, both Moodys and S&P have downgraded

Vulcans credit rating multiple times, citing weaker than expected performance, lack of liquidity and inability of the company to reduce debt. 24. On October 24, 2011, Moodys issued a report titled Vulcan

Materials vs. Martin Marietta Materials, A Comparison of the Two Largest US Aggregates Producers. The report noted that Vulcan, once the stronger of the two US rated aggregates producer, is now the weaker one. In response to the companys deteriorating condition, weve downgraded its credit ratings five notches over the past three years. 25. The report contrasted the steady deterioration of Vulcans credit

rating with Martin Mariettas steady performance: Martin Marietta Materials, Inc., by contrast, has maintained its credit rating since late 2008. The company operates in geographic regions that have better withstood the contraction in public and private construction of the past several years. The company has also been more effective at cutting costs and controlling its debt levels than Vulcan and generates a larger percentage of revenue from the highmargin aggregates business.

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Moodys report also noted that Martin Mariettas sales and

earnings have held relatively steady, and recognized that the stability reflects both costcutting measures Martin Marietta has enacted over the past couple of years . II. A Business Combination is Expected to Generate Significant Value for Vulcans Stockholders 27. The trend in Vulcans operating performance shows the need for

change and improvement, which Martin Marietta's management, with a proven track record of managing costs effectively and producing positive operating results, can bring to Vulcan's stockholders. 28. To make the proposal even more compelling, a combination of

Martin Mariettas and Vulcans businesses is expected to generate significant value for both companies stockholders. The combined entity will be a U.S.-based company that is the global leader in construction aggregates with a footprint reaching across North America. The combined company will have a significantly stronger balance sheet than Vulcan currently has, which would help Vulcan achieve one of its core objectives of deleveraging. The credit rating of the combined company is expected to be higher than Vulcans current rating. Combining the companies will likely generate significant cash flow, allowing for payment of significantly higher cash dividends than currently received by Vulcans stockholders. The all-stock nature of the offer will allow stockholders of both companies to participate in the growth and long-term value creation potential of the combined company, including the significant synergies anticipated to exceed $200

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million, derived from a combination of operating efficiencies and elimination of duplicate corporate functions. III. Martin Marietta Is Commencing An Exchange Offer and Declaring Its Intention to Nominate Independent Directors for Election at Vulcans 2012 Annual Stockholder Meeting 29. Despite Martin Mariettas continued expression of interest and the

substantial benefits to stockholders of Vulcan and Martin Marietta that would result from the proposed transaction, by May of 2011, Vulcan discontinued discussions, declined to negotiate a definitive agreement with Martin Marietta. 30. As private discussions and negotiations between Martin Marietta

and Vulcan failed to lead to a definitive agreement, on December 12, 2011, Martin Marietta is announcing its proposal to Vulcan and commencing the Exchange Offer by filing with the SEC a registration statement on Form S-4 required by the Securities Act. The prospectus to be filed with the registration statement contains required disclosures including, but not limited to, the summary of the offer, background and reason for the offer, terms and conditions of the offer and risk factors associated with the proposed transaction, among other things. 31. Concurrent with the commencement of the Exchange Offer, Martin

Marietta is announcing its intention to nominate five independent directors of Vulcan for election at the 2012 annual stockholders meeting. The board currently consists of 11 directors, with 5 directors anticipated to stand for election at the 2012 stockholder meeting. Therefore, even if Martin Mariettas 5 director nominees are elected at the 2012

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stockholders meeting, they will still not constitute a majority of Vulcans board of directors. 32. In connection with the stockholder proposal, Martin Marietta

intends to file a proxy statement on Form 14A in advance of Vulcans 2012 annual stockholders meeting by which it will seek to obtain the votes of Vulcans stockholders in favor of Martin Mariettas board nominees. 33. It is anticipated that Vulcan will contend that the Non-Disclosure

Agreement prohibits Martin Mariettas Exchange Offer and proposal to nominate independent directors for election at the 2012 annual stockholders meeting and, invoking the NDA, that Vulcan will seek to enjoin Martin Mariettas actions, which would cause grave financial injury to Martin Marietta. To prevent Vulcan from interfering with Martin Mariettas Exchange Offer and stockholder proposal for director nominees, this Court should declare that the NDA does not prohibit Martin Mariettas actions and that Vulcan is not entitled to equitable relief to enjoin Martin Mariettas Exchange Offer and proposal. Vulcan should also be enjoined from filing or prosecuting in any other jurisdiction any legal action or proceeding with respect to the NDA in violation of the forum selection clause in the Non-Disclosure Agreement. FIRST CAUSE OF ACTION (Declaratory Judgment that the Non-Disclosure Agreement Does Not Prohibit Martin Mariettas Exchange Offer or Stockholder Proposal) 34. Martin Marietta repeats the allegations contained in the preceding

paragraphs as if fully set forth herein.

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35.

The Non-Disclosure Agreement between Martin Marietta and

Vulcan provided for the parties to exchange certain nonpublic information concerning the respective companies in connection with an evaluation of a potential business combination. 36. The Non-Disclosure Agreement does not contain a standstill

provision or other limitation on each partys right to make public offers to the others stockholders. Nor is there any agreement by Martin Marietta to limit its holdings of Vulcans shares. By excluding any such provision purporting to prohibit or deter public offers, the parties preserved their right to commence public offers for the purchase of one anothers stock. 37. Therefore, by commencing the Exchange Offer and making a

proposal to Vulcans stockholders to support its nominees to Vulcans board, Martin Marietta will not violate the Non-Disclosure Agreement. 38. Once the Exchange Offer is commenced, it is anticipated that

Vulcan will seek to prevent its stockholders from duly considering the offer by seeking to enjoin it on the ground that Martin Mariettas actions violate the Non-Disclosure Agreement. Martin Marietta, thus, has an actual interest in the resolution of this issue now through a declaration that the Non-Disclosure Agreement is inapplicable to and does not prohibit Martin Mariettas Exchange Offer or stockholder proposal to elect Martin Mariettas nominees to Vulcans board. 39. Under the Delaware Declaratory Judgment Act, 10 Del. C. 6501,

et seq., Delaware courts have power to declare rights, status and other legal relations,

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whether or not further relief is or could be claimed. 10 Del. C. 6501. According to the Act, [a] person ... whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract or franchise and obtain a declaration of rights, status or other legal relations thereunder. Id. 6502. A contract may be construed either before or after there has been a breach thereof. Id. 6503. The power of Delaware courts to grant declaratory relief is to be liberally construed and administered. Id. 6512. 40. Pursuant to Rule 57 of the Court of Chancery of the State of

Delaware, [t]he existence of another adequate remedy does not preclude a judgment for declaratory relief in cases where it is appropriate. The adequacy of a potentially available remedy at law which Martin Marietta does not currently have, in any case is, therefore, irrelevant to the entertainment of the present cause of action. 41. Court of Chancery Rule 57 also authorizes the Court to order a

speedy hearing of an action for a declaratory judgment, which Martin Marietta hereby seeks this Court to order. 42. The existing controversy as to the applicability of the Non-

Disclosure Agreement to Martin Mariettas Exchange Offer and stockholder proposal is substantial and justiciable, because it affects the parties in a concrete manner so as to provide the factual predicate for reasoned adjudication. The controversy is also of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. A declaratory judgment in this matter will conclusively clarify the legal rights and

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obligations of the parties, and will be of practical assistance to them. The judgment sought will terminate the controversy and remove an uncertainty regarding Martin Mariettas rights and obligations under the Non-Disclosure Agreement. (See 10 Del. C. 6505.) 43. Accordingly, and based on the facts and circumstances alleged

herein, Plaintiffs are entitled to a judicial declaration that the Non-Disclosure Agreement does not apply to and, in any case, does not prohibit (i) Martin Mariettas Exchange Offer; and (ii) Martin Mariettas proposal to Vulcans stockholders to vote for the election of Martin Mariettas five nominees to Vulcans board of directors. SECOND CAUSE OF ACTION (Declaratory Judgment that Vulcan is not Entitled to Equitable Relief under the Non-Disclosure Agreement to Enjoin Martin Mariettas Exchange Offer or Stockholder Proposal) 44. Martin Marietta repeats the allegations contained in the preceding

paragraphs as if fully set forth herein. 45. As stated above, by commencing the Exchange Offer and making

proposals to Vulcans stockholders to support its proposed nominees to Vulcans board, Martin Marietta has not violated the Non-Disclosure Agreement. 46. Vulcan, however, is expected to contend that the Non-Disclosure

Agreement has been violated and that Martin Mariettas actions should be enjoined, an injunction that would threaten grave financial injury to Martin Marietta. To prevent Vulcan from interfering with Martin Mariettas Exchange Offer and stockholder proposal, this Court should declare that Vulcan is not entitled to equitable relief enjoining Martin

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Mariettas Exchange Offer or Martin Mariettas stockholder proposal for director nominees on the alleged ground that the Non-Disclosure Agreement has been violated. 47. This Court, as stated above, may grant the requested declaratory

relief under the Delaware Declaratory Judgment Act, 10 Del. C. 6501, et seq., and Chancery Court Rule 57. (See supra paragraphs 39-40.) 48. The existing controversy as to Vulcans entitlement to injunctive

relief under the Non-Disclosure Agreement against Martin Mariettas Exchange Offer and stockholder proposal is substantial and justiciable, because it affects the parties in a concrete manner so as to provide the factual predicate for reasoned adjudication. The controversy is also of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. A declaratory judgment in this matter will conclusively clarify the legal rights and obligations of the parties, and will be of practical assistance to them. The judgment sought will terminate the controversy and remove an uncertainty regarding Martin Mariettas rights and obligations under the Non-Disclosure Agreement. (See 10 Del. C. 6505.) 49. Article 9 of the Non-Disclosure Agreement also allows the parties

to seek equitable relief, including injunction and specific performance. 50. Accordingly, and based on the facts and circumstances alleged

herein, Plaintiffs are entitled to a judicial declaration that Vulcan has no right to an injunction against (i) Martin Mariettas Exchange Offer; and (ii) Martin Mariettas proposal to Vulcans stockholders to vote for the election of Martin Mariettas five nominees to Vulcans board of directors.

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THIRD CAUSE OF ACTION (Injunction Prohibiting Vulcan from Prosecuting any Action under the NonDisclosure Agreement in any other Jurisdiction) 51. Martin Marietta repeats the allegations contained in the preceding

paragraphs as if fully set forth herein. 52. Article 10 of the Non-Disclosure Agreement between Martin

Marietta and Vulcan provides that the Delaware Court of Chancery is the exclusive forum for the parties to resolve any dispute. Article 10 contains a forum selection clause, which provides that any legal action or proceeding with respect to [the Non-Disclosure Agreement] and the rights and obligations arising [there]under shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware . As expressly provided by the NonDisclosure Agreement, therefore, the parties must resolve any dispute in this Court. 53. In the wake of Martin Mariettas Exchange Offer, however,

Vulcan is expected to sue Martin Marietta for alleged breaches of the Non-Disclosure Agreement and to enjoin the Exchange Offer in a jurisdiction other than this one, in violation of the Non-Disclosure Agreements forum selection clause. By bringing an action in another jurisdiction, Vulcan will prejudice Martin Mariettas bargained for rights under the Non-Disclosure Agreement. 54. Accordingly, and based on the facts and circumstances alleged

herein, Martin Marietta is entitled to specific performance of the forum selection clause in Article 10 of the Non-Disclosure Agreement and an injunction prohibiting Vulcan from filing or prosecuting in any other jurisdiction any legal action or proceeding with

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respect to [the Non-Disclosure Agreement] and the rights and obligations arising [there]under. PRAYER FOR RELIEF WHEREFORE, Martin Marietta demands judgment against Vulcan as follows: (i) Declaring that the Non-Disclosure Agreement does not apply to and, in

any case, does not prohibit (i) Martin Mariettas Exchange Offer; and (ii) Martin Mariettas proposal to Vulcans stockholders to vote for the election of Martin Mariettas five nominees to Vulcans board of directors; (ii) Declaring that Vulcan has no right to enjoin (i) Martin Mariettas

Exchange Offer; and (ii) Martin Mariettas proposal to Vulcans stockholders to vote for the election of Martin Mariettas five nominees to Vulcans board of directors; (iii) Enforcing the forum selection clause in Article 10 of the Non-Disclosure

Agreement and enjoining Vulcan from filing or prosecuting in any other jurisdiction any legal action or proceeding with respect to the Non-Disclosure Agreement and the rights and obligations arising thereunder; (iv) (v) Awarding Martin Marietta its fees and costs of this action; and Granting such other relief as the Court deems just and proper.

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Of the New York Bar: Robert E. Zimet, Esq. Susan L. Saltzstein, Esq. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, New York 10036 Tel.: (212) 735-3000 Fax: (212) 735-2000

/s/ Robert S. Saunders Robert S. Saunders (ID No. 3027) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP One Rodney Square P.O. Box 636 Wilmington, Delaware 19899-0636 Tel.: (302) 651-3000 Fax: (302) 651-3001 Attorneys for Plaintiff Martin Marietta Materials, Inc.

DATED: December 12, 2011

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