UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarter Ended
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Commission File Number
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March 31, 2001
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1-16411
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NORTHROP GRUMMAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
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No. 95-4840775
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(State or other jurisdiction of
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(I.R.S. Employer Identification
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incorporation or organization)
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Number)
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1840 Century Park East, Los Angeles, California 90067
www.northgrum.com
(Address of principal executive offices and internet site)
(310) 553-6262
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
As of April 25, 2001:
|
|
|
Common stock outstanding
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85,311,623 shares
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Preferred stock outstanding
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3,500,000 shares
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Northrop Grumman Corporation and Subsidiaries
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS
OF FINANCIAL POSITION
Dollars in millions
|
(Unaudited)
March 31,
2001
|
|
December 31,
2000
|
|
|
Assets:
|
Cash and cash equivalents
|
$
|
1,636
|
|
$
|
319
|
|
Accounts receivable, net of progress payments of $2,728 in 2001 and
|
|
|
|
|
|
|
$2,367 in 2000
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1,493
|
|
|
1,557
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|
Inventoried costs, net of progress payments of $560 in 2001 and $535
|
|
|
|
|
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|
in 2000
|
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749
|
|
|
585
|
|
Deferred income taxes
|
|
22
|
|
|
21
|
|
Prepaid expenses
|
|
66
|
|
|
44
|
|
|
Total current assets
|
|
3,966
|
|
|
2,526
|
|
|
Property, plant and equipment
|
|
2,370
|
|
|
2,343
|
|
Accumulated depreciation
|
|
(1,356
|
)
|
|
(1,328
|
)
|
|
|
|
1,014
|
|
|
1,015
|
|
|
Notes receivable
|
|
140
|
|
|
135
|
|
Goodwill, net of accumulated amortization of $569 in 2001 and
|
|
|
|
|
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$534 in 2000
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3,771
|
|
|
3,801
|
|
Other purchased intangibles, net of accumulated amortization of
|
|
|
|
|
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|
$489 in 2001 and $467 in 2000
|
|
609
|
|
|
631
|
|
Prepaid retiree benefit cost and intangible pension asset
|
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1,469
|
|
|
1,390
|
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Assets available for sale
|
|
23
|
|
|
23
|
|
Miscellaneous other assets
|
|
193
|
|
|
101
|
|
|
|
|
6,205
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|
|
6,081
|
|
|
|
$
|
11,185
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|
$
|
9,622
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Northrop Grumman Corporation and Subsidiaries
Dollars in millions
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|
(Unaudited)
March 31,
2001
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|
|
December 31,
2000
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|
|
Liabilities and Shareholders Equity:
|
Current portion of long-term debt
|
|
$
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|
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$ 10
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|
Trade accounts payable
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491
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|
564
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|
Accrued employees compensation
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325
|
|
|
365
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|
Advances on contracts
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468
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|
|
496
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|
Income taxes payable
|
|
78
|
|
|
86
|
|
Deferred income taxes
|
|
691
|
|
|
681
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|
Other current liabilities
|
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531
|
|
|
486
|
|
|
Total current liabilities
|
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2,584
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|
|
2,688
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Long-term debt
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3,105
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|
|
1,605
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|
Accrued retiree benefits
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1,108
|
|
|
1,095
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Other long-term liabilities
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62
|
|
|
39
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|
Deferred income taxes
|
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319
|
|
|
276
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|
Paid-in capital
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|
|
|
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Preferred stock, 10,000,000 shares authorized; none issued
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|
|
|
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Common stock, 200,000,000 shares authorized; issued and outstanding:
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|
|
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200172,290,457; 200072,058,436
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1,214
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|
|
1,200
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Retained earnings
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|
2,817
|
|
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2,742
|
|
Accumulated other comprehensive loss
|
|
(24
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)
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|
(23
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)
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|
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4,007
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|
|
3,919
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|
|
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$11,185
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|
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$9,622
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|
|
The accompanying notes are an integral part of these consolidated financial statements.
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS
OF INCOME
(Unaudited)
Three months ended March 31,
|
Dollars in millions, except per share amounts
|
2001
|
|
2000
|
|
|
Product sales and service revenue
|
$
|
1,986
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|
$
|
1,802
|
|
Cost of product sales and service revenue
|
|
|
|
|
|
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Operating costs
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1,548
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|
|
1,302
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|
Administrative and general expenses
|
|
248
|
|
|
213
|
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Operating margin
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190
|
|
|
287
|
|
Interest expense
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|
(47
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)
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|
(46
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)
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Other, net
|
|
17
|
|
|
2
|
|
|
Income from continuing operations before income taxes
|
|
160
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|
|
243
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Federal and foreign income taxes
|
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57
|
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|
87
|
|
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Income from continuing operations
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103
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|
|
156
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|
Income from discontinued operations, net of tax of $10
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|
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17
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Net income
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$
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103
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$
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173
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Weighted average shares outstanding, in millions
|
|
72.2
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|
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69.9
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Basic earnings per share
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Continuing operations
|
$
|
1.43
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|
$
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2.23
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Discontinued operations
|
|
|
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|
.24
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Basic earnings per share
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$
|
1.43
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$
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2.47
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Diluted earnings per share
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Continuing operations
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$
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1.42
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$
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2.23
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Discontinued operations
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|
.24
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Diluted earnings per share
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$
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1.42
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$
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2.47
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Dividends per share
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$
|
.40
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$
|
.40
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|
The accompanying notes are an integral part of these consolidated financial statements.
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS
OF CHANGES IN SHAREHOLDERS EQUITY
(Unaudited)
Three months ended March 31,
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Dollars in millions
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2001
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|
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2000
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Paid-in Capital
|
|
|
|
|
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At beginning of year
|
$
|
1,200
|
|
$
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1,028
|
|
Employee stock awards and options exercised
|
|
14
|
|
|
7
|
|
|
|
|
1,214
|
|
|
1,035
|
|
|
Retained Earnings
|
|
|
|
|
|
|
At beginning of year
|
|
2,742
|
|
|
2,248
|
|
Net income
|
|
103
|
|
|
173
|
|
Cash dividends
|
|
(28
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)
|
|
(28
|
)
|
|
|
|
2,817
|
|
|
2,393
|
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
At beginning of year
|
|
(23
|
)
|
|
(19
|
)
|
Change in cumulative translation adjustment
|
|
(1
|
)
|
|
|
|
|
|
|
(24
|
)
|
|
(19
|
)
|
|
Total shareholders equity
|
$
|
4,007
|
|
$
|
3,409
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS
(Unaudited)
Three months ended March 31,
|
Dollars in millions
|
2001
|
|
2000
|
|
|
Operating Activities
|
|
|
|
|
|
|
Sources of Cash
|
|
|
|
|
|
|
Cash received from customers
|
|
|
|
|
|
|
Progress
payments
|
$
|
383
|
|
$
|
380
|
|
Other
collections
|
|
1,687
|
|
|
1,763
|
|
Interest received
|
|
9
|
|
|
2
|
|
Income tax refunds received
|
|
|
|
|
7
|
|
Other cash receipts
|
|
1
|
|
|
1
|
|
|
Cash provided by operating activities
|
|
2,080
|
|
|
2,153
|
|
|
Uses of Cash
|
Cash paid to suppliers and employees
|
|
2,048
|
|
|
2,009
|
|
Interest paid
|
|
41
|
|
|
50
|
|
Income taxes paid
|
|
24
|
|
|
2
|
|
Other cash disbursements
|
|
|
|
|
1
|
|
|
Cash used in operating activities
|
|
2,113
|
|
|
2,062
|
|
|
Net cash (used in) provided by operating activities
|
|
(33
|
)
|
|
91
|
|
|
Investing Activities
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
(43
|
)
|
|
(36
|
)
|
Payment for business purchased
|
|
|
|
|
(3
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
|
|
7
|
|
Other investing activities
|
|
|
|
|
(3
|
)
|
|
Net cash used in investing activities
|
|
(43
|
)
|
|
(35
|
)
|
|
Financing Activities
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt
|
|
1,491
|
|
|
|
|
Repayment of borrowings under lines of credit
|
|
|
|
|
(80
|
)
|
Principal payments of long-term debt
|
|
(10
|
)
|
|
(50
|
)
|
Proceeds from issuance of stock
|
|
4
|
|
|
1
|
|
Dividends paid
|
|
(28
|
)
|
|
(28
|
)
|
Other financing activities
|
|
(64
|
)
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
1,393
|
|
|
(157
|
)
|
|
Increase (decrease) in cash and cash equivalents
|
|
1,317
|
|
|
(101
|
)
|
Cash and cash equivalents balance at beginning of period
|
|
319
|
|
|
142
|
|
|
Cash and cash equivalents balance at end of period
|
$
|
1,636
|
|
$
|
41
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Northrop Grumman Corporation and Subsidiaries
Three months ended March 31,
|
Dollars in millions
|
|
2001
|
|
|
2000
|
|
|
Reconciliation of Net Income to Net Cash Provided by Operating
Activities
|
|
|
|
|
|
|
Net income
|
|
$ 103
|
|
|
$ 173
|
|
Adjustments to reconcile net income to net cash (used) provided
|
|
|
|
|
|
|
Depreciation
|
|
42
|
|
|
45
|
|
Amortization of intangible assets
|
|
57
|
|
|
50
|
|
Common stock issued to employees
|
|
5
|
|
|
7
|
|
Loss on disposal of property, plant and equipment
|
|
2
|
|
|
|
|
Retiree benefits income
|
|
(53
|
)
|
|
(133
|
)
|
Increase in
|
|
|
|
|
|
|
Accounts receivable
|
|
(275
|
)
|
|
(53
|
)
|
Inventoried costs
|
|
(188
|
)
|
|
(127
|
)
|
Prepaid expenses
|
|
(23
|
)
|
|
(15
|
)
|
Increase (decrease) in
|
|
|
|
|
|
|
Progress payments
|
|
386
|
|
|
85
|
|
Accounts payable and accruals
|
|
(122
|
)
|
|
1
|
|
Provisions for contract losses
|
|
1
|
|
|
(20
|
)
|
Deferred income taxes
|
|
51
|
|
|
84
|
|
Income taxes payable
|
|
(8
|
)
|
|
23
|
|
Retiree benefits
|
|
(18
|
)
|
|
(33
|
)
|
Other transactions
|
|
7
|
|
|
4
|
|
|
Net cash (used in) provided by operating activities
|
|
$ (33
|
)
|
|
$ 91
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
Northrop Grumman Corporation and Subsidiaries
SELECTED INDUSTRY SEGMENT INFORMATION
(Unaudited)
Three months ended March 31,
|
Dollars in millions
|
|
2001
|
|
|
2000
|
|
|
Net Sales
|
|
|
|
|
|
|
Integrated Systems
|
|
$ 733
|
|
|
$ 856
|
|
Electronic Sensors & Systems
|
|
701
|
|
|
601
|
|
Logicon
|
|
589
|
|
|
378
|
|
Intersegment sales
|
|
(37
|
)
|
|
(33
|
)
|
|
|
|
$ 1,986
|
|
|
$1,802
|
|
|
Operating Margin
|
|
|
|
|
|
|
Integrated Systems
|
|
$ 80
|
|
|
$100
|
|
Electronic Sensors & Systems
|
|
36
|
|
|
34
|
|
Logicon
|
|
24
|
|
|
31
|
|
|
Total
|
|
140
|
|
|
165
|
|
Other items included in operating margin:
|
|
|
|
|
|
|
Corporate expenses
|
|
(9
|
)
|
|
(7
|
)
|
Deferred state tax provision
|
|
(10
|
)
|
|
(11
|
)
|
Pension income
|
|
69
|
|
|
140
|
|
|
Operating margin
|
|
$ 190
|
|
|
$ 287
|
|
|
Contract Acquisitions
|
|
|
|
|
|
|
Integrated Systems
|
|
$ 615
|
|
|
$ 462
|
|
Electronic Sensors & Systems
|
|
987
|
|
|
595
|
|
Logicon
|
|
636
|
|
|
437
|
|
Intersegment acquisitions
|
|
(38
|
)
|
|
(35
|
)
|
|
|
|
$ 2,200
|
|
|
$1,459
|
|
|
Funded Order Backlog
|
|
|
|
|
|
|
Integrated Systems
|
|
$ 4,173
|
|
|
$4,057
|
|
Electronic Sensors & Systems
|
|
5,265
|
|
|
3,518
|
|
Logicon
|
|
990
|
|
|
668
|
|
Intersegment backlog
|
|
(108
|
)
|
|
(87
|
)
|
|
|
|
$10,320
|
|
|
$8,156
|
|
|
Northrop Grumman Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(Unaudited)
Basis of Presentation
On April 2, 2001, NNG, Inc., a newly formed Delaware holding company, exchanged its common shares for all of the outstanding Northrop Grumman Corporation common shares
on a one-for-one basis, through a merger in which Northrop Grumman Corporation became a subsidiary of NNG, Inc. In connection with this merger, NNG, Inc. changed its name to Northrop Grumman Corporation and Northrop Grumman Corporation changed its
name to Northrop Grumman Systems Corporation. See Subsequent Events footnote for additional information.
The accompanying unaudited consolidated condensed financial statements of the company have been prepared by
management in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission. They do not include all information and notes necessary for a complete presentation of financial position, results of operations, changes in
shareholders equity, and cash flows in conformity with generally accepted accounting principles. They do, however, in the opinion of management, include all adjustments necessary for a fair statement of the results for the periods presented.
The financial statements should be read in conjunction with the Notes and Independent Auditors Report contained in Northrop Grumman Systems 2000 annual report.
Earnings Per Share
Basic earnings per share are calculated using the weighted average number of shares of common stock outstanding during each period, after giving recognition to stock
splits and stock dividends. Diluted earnings per share reflect the dilutive effect of stock options and other stock awards granted to employees under stock-based compensation plans.
Basic and diluted earnings per share are calculated as follows:
Three months ended March 31,
|
(in millions, except per share amounts)
|
|
2001
|
|
2000
|
|
Basic Earnings Per Share
|
|
|
|
|
Income from continuing operations
|
|
$ 103
|
|
$ 156
|
Weighted-average common shares outstanding
|
|
72.19
|
|
69.86
|
Basic earnings per share from continuing operations
|
|
$ 1.43
|
|
$ 2.23
|
|
Diluted Earnings Per Share
|
|
|
|
|
Income from continuing operations
|
|
$ 103
|
|
$ 156
|
|
|
|
Weighted-average common shares outstanding
|
|
72.19
|
|
69.86
|
Dilutive effect of stock options and awards
|
|
.57
|
|
|
|
Weighted-average diluted common shares outstanding
|
|
72.76
|
|
69.86
|
|
|
|
|
Diluted earnings per share from continuing operations
|
|
$ 1.42
|
|
$ 2.23
|
|
Northrop Grumman Corporation and Subsidiaries
Acquisitions
In 2000 Northrop Grumman Systems acquired four businesses, Federal Data Corporation, Sterling Software (U.S.) Inc., known as the Federal Systems Group, Comptek
Research, Inc., and Navia Aviation AS, an operating unit of Navia ASA in Norway, for a total of $643 million in cash and stock. The purchase method of accounting was used to record all four acquisitions with estimated fair values being assigned to
assets and liabilities. The excess of the purchase price over the net tangible assets acquired was assigned to identifiable intangible assets and the remaining balance was assigned to goodwill. The Federal Data and Sterling Federal Systems Group
valuations are based on preliminary estimates, which are expected to be finalized in the second quarter of 2001.
Subsequent Events
On December 21, 2000, Northrop Grumman Systems and Litton Industries, Inc.(Litton) jointly announced that they had entered into a definitive merger
agreement whereby Northrop Grumman Systems would acquire Litton through a cash tender offer followed by a merger for cash consideration of $80 per common share and $35 per preferred share.
On January 24, 2001, the transaction was amended to provide for the formation of the company as a new
Delaware holding company, NNG, Inc., and an exchange offer in which Litton common stockholders would be entitled to receive for each Litton common share $80 per share in cash, the equivalent of $80.25 in common stock of the company, or the
equivalent of $80 in liquidation value of a new preferred stock of the company. Holders of Litton preferred stock could exchange their Litton preferred stock only for $35 per share in cash. Under the terms of the merger agreement, the company could
not issue more than 13,000,000 shares of its common stock nor more than 3,500,000 shares of its new preferred stock in the exchange offer.
On April 2, 2001, NNG, Inc., exchanged its common shares for all of the outstanding Northrop Grumman
Corporation common shares on a one-for-one basis, through a merger in which Northrop Grumman Corporation became a subsidiary of the company. In connection with this merger, NNG, Inc. changed its name to Northrop Grumman Corporation and Northrop
Grumman Corporation changed its name to Northrop Grumman Systems Corporation.
On April 3, 2001, the company completed the exchange offer for the shares of Litton and accepted for
purchase or exchange 44,660,440 shares of Litton common stock and 240,632 shares of Litton preferred stock, which represented approximately 97.3 percent of the outstanding shares of Litton common stock and approximately 58.6 percent of the
outstanding shares of Litton preferred stock. The company issued the full allotment of 13,000,000 shares of its common stock and 3,500,000 shares of its preferred stock available for issuance pursuant to the offer and paid cash for the balance of
the shares. Pursuant to the merger agreement, a subsidiary of the company will be merged into Litton and the remaining common shareholders of Litton will receive $80 per share in cash. The companys common stock now trades on the New York and
Pacific Stock Exchanges, its preferred stock trades on the New York Stock Exchange and each of Northrop Grumman Systems Corporation and Litton are subsidiaries of the company. The acquisition, which is valued at approximately $5.3 billion, including
the assumption of Littons net debt of $1.4 billion, will be accounted for using the purchase method of accounting.
On April 20, 2001, the company announced that it had signed a definitive agreement to acquire the
Electronics and Information Systems Group of Aerojet-General Corporation for $315 million in cash. The transaction is subject to the completion of review by the appropriate United States government agencies under the Hart-Scott-Rodino Act and,
regarding environmental matters, the attainment of an approved Prospective Purchaser Agreement with the Environmental Protection Agency, a favorable IRS ruling, and an acceptable Advance Agreement with the U.S. Department of Defense Administrative
Contracting Officer. The acquisition is expected to be completed in the third quarter of 2001 and will be recorded using the purchase method of accounting. Upon completion of the transaction, Aerojet-Generals Electronics and Information
Systems Group will be integrated into the Electronic Sensors and Systems Sector.
Northrop Grumman Corporation and Subsidiaries
On May 9, 2001, the company announced that it has offered to acquire Newport News Shipbuilding, citing
concerns that the previously announced merger agreement between Newport News and General Dynamics Corporation presents serious antitrust issues. The offer matches General Dynamics offer of $67.50 per share for all the outstanding shares of
common stock of Newport News, payable 75 percent in Northrop Grumman stock, the remainder in cash. The company said it expects to commence an exchange offer shortly, subject to customary conditions. A copy of the press release announcing the offer
was filed by the company pursuant to Rule 425 of the Securities Act of 1933.
Notes Payable to Banks and Long-Term Debt
In February 2001, Northrop Grumman Systems Corporation issued $1.5 billion of indebtedness pursuant to its senior debt indenture consisting of $750 million of
7
1
/
8
% Notes due 2011 and $750 million of
7
3
/
4
% Debentures due 2031. In connection
with the closing of the Litton acquisition, the company entered into unsecured senior credit facilities with lenders which initially provided for borrowings of up to $5 billion (the New Credit Facilities) and which replaced the
companys previous credit agreement. The New Credit Facilities consist of a $2.5 billion 364-day revolving credit facility and a $2.5 billion five-year revolving credit facility. The availability under the 364-day revolving credit facility, as
reduced by the equity and other debt financing of the Litton acquisition, is now $527 million. Borrowings under the New Credit Facilities, together with the proceeds of the February issuance of notes and debentures, were used to finance the Litton
acquisition and to pay related expenses, to retire and refinance a portion of the Litton debt, and will be used to finance continuing operations. Borrowings under the New Credit Facilities bear interest at various rates, including adjusted LIBOR or
an alternate base rate plus in each case an incremental margin based on the combined companys credit rating. The New Credit Facilities also provide for a facility fee on the daily aggregate amount of commitments under the revolving facilities
(whether or not utilized). The facility fee is also based on the companys credit rating level. The company, Northrop Grumman Systems Corporation and Litton are co-borrowers on the New Credit Facilities. The company and Litton have guaranteed
the Northrop Grumman Systems outstanding indenture debt and the company and Northrop Grumman Systems have guaranteed the Litton outstanding indenture debt.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
Accounting for Derivative Instruments and Hedging Activities
, subsequently
amended by SFAS No. 138
Accounting for Certain Derivative Instruments and Certain Hedging Activities,
which became effective for fiscal years beginning after June 15, 2000. This standard provides authoritative guidance on accounting
and financial reporting for derivative instruments. The company adopted this standard on January 1, 2001. Adoption of this standard did not have a significant effect on the companys financial position, results of operations, or cash
flows.
Northrop Grumman Corporation and Subsidiaries
ITEM 2.
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF THE COMPANYS FINANCIAL CONDITION AND THE RESULTS OF
OPERATIONS
|
On April 3, 2001, the company completed the exchange offer made in connection with its acquisition of Litton Industries Inc. (See below for additional information.)
First quarter 2001 results do not include the Litton acquisition.
Sales for the first quarter of 2001 increased 10 percent to nearly $2 billion from $1.8 billion reported for
the first quarter of 2000. Increased sales at both the Electronic Sensors and Systems Sector (ES
3
) and Logicon, the companys information technology sector, more than offset the decrease at Integrated
Systems Sector (ISS).
Sales by business area in the first quarter were:
Three months ended March 31,
|
Dollars in millions
|
|
2001
|
|
|
2000
|
|
|
|
Integrated Systems
|
|
|
|
|
|
|
Air Combat Systems (ACS)
|
|
$ 406
|
|
|
$ 502
|
|
Airborne Early Warning and Electronic Warfare (AEW/EW)
|
|
166
|
|
|
183
|
|
Airborne Ground Surveillance and Battle Management (AGS/BM)
|
|
165
|
|
|
176
|
|
Intrasegment Eliminations
|
|
(4
|
)
|
|
(5
|
)
|
|
|
|
|
733
|
|
|
856
|
|
|
Electronic Sensors & Systems
|
|
|
|
|
|
|
Aerospace Electronic Systems
|
|
325
|
|
|
257
|
|
Command, Control, Communications,
Intelligence and Naval Systems (C3I&N)
|
|
200
|
|
|
177
|
|
Defensive Electronic Systems
|
|
83
|
|
|
96
|
|
Other
|
|
93
|
|
|
71
|
|
|
|
|
701
|
|
|
601
|
|
|
Logicon
|
|
|
|
|
|
|
Government Information Technology
|
|
276
|
|
|
183
|
|
Enterprise Information Technology
|
|
141
|
|
|
37
|
|
Technology Services
|
|
113
|
|
|
117
|
|
Commercial Information Technology
|
|
59
|
|
|
41
|
|
|
|
|
589
|
|
|
378
|
|
|
Intersegment eliminations
|
|
(37
|
)
|
|
(33
|
)
|
|
Total sales
|
|
$1,986
|
|
|
$1,802
|
|
|
ISS sales decreased by 14 percent in the first quarter of 2001 compared with the first quarter of 2000. The
decrease is primarily due to lower B-2 sales, which are included in the Air Combat Systems (ACS) business area. ISS operating margin for the quarter was $80 million, down 20 percent from the $100 million reported for the first quarter of 2000,
reflecting the lower B-2 revenue partially offset by an increase in operating margin on the Joint STARS production program. Last years first quarter results included one B-2 delivery and an $8 million upward cumulative margin rate adjustment
on the F/A-18E/F program.
ES
3
sales for the first quarter of 2001 increased 17 percent over the same period a year ago. Operating margin for the quarter was $36 million, up slightly from the $34 million
reported for last years first quarter. As compared with last years first quarter, this years first quarter sales included higher revenue on several programs: land combat systems in the Aerospace Electronic Systems business area,
marine systems in the Command, Control, Communications, Intelligence and Naval Systems (C3I&N) business area, and automation and information in the Other business area. Also reflected in the Aerospace Electronic Systems business
area are higher revenues on several new development programs, such as F-16 block upgrades and Wedgetail. No operating margin is being recorded on these Aerospace programs while they are in the early stages of development.
Logicon sales were 56 percent higher in the first quarter of 2001 versus the same period in 2000. The sales
growth is due to the sales generated by the businesses acquired in 2000: Federal Data, Sterlings Federal Systems Group, and the Federal Systems unit of Comptek Research Inc. The reseller portion of Federal Data and the existing reseller
business of Logicon are reported in the new business area, Enterprise Information Technology. Prior year business area sales have been restated to reflect the new business area and other organizational changes.
Logicon operating margin for the quarter was $24 million, down from the $31 million reported for the first
quarter of 2000. This years first quarter operating margin reflected a $7 million increase in amortization of goodwill and other purchased intangibles and a change in product mix to lower margin business as compared with last years first
quarter. In 2000 Logicon also benefited from a $5 million noncash positive adjustment related to retiree benefits.
Operating margin included pension income of $69 million in the first quarter of 2001 compared with $140
million in the first quarter of 2000. Pension income for 2001, excluding any income or expense from the Litton pension plans, is expected to be approximately $280 million. Including Litton, the preliminary estimate for 2001 pension income is $330
million to $350 million.
The increase in other income in 2001 over 2000 reflects $9 million of interest earned on the temporary
investment of excess cash and $5 million of interest earned on the note received in partial payment for the sale of the companys commercial aerostructures (Aerostructures) business. Interest expense for this years first quarter was $47
million compared with the $46 million reported for in the first quarter of 2000.
Income from discontinued operations, net of tax, was generated by the Aerostructures business, which was
sold in July 2000.
The companys effective tax rate was 36 percent for the first quarter of 2001, essentially unchanged
from the same period in 2000.
On December 21, 2000, Northrop Grumman Systems and Litton Industries, Inc. jointly announced that they had
entered into a definitive merger agreement whereby Northrop Grumman Systems would acquire Litton through a cash tender offer followed by a merger for cash consideration of $80 per common share and $35 per preferred share.
On January 24, 2001, the transaction was amended to provide for the formation of the company as a new
Delaware holding company, NNG, Inc., and an exchange offer in which Litton common stockholders would be entitled to receive for each Litton common share $80 per share in cash, the equivalent of $80.25 in common stock of the company, or the
equivalent of $80 in liquidation value of a new preferred stock of the company. Holders of Litton preferred stock could exchange their Litton preferred stock only for $35 per share in cash. Under the terms of the merger agreement, the company could
not issue more than 13,000,000 shares of its common stock nor more than 3,500,000 shares of its new preferred stock in the exchange offer.
On April 2, 2001, NNG, Inc., exchanged its common shares for all of the outstanding Northrop Grumman
Corporation common shares on a one-for-one basis, through a merger in which Northrop Grumman Corporation became a subsidiary of the company. In connection with this merger, NNG, Inc. changed its name to Northrop Grumman Corporation and Northrop
Grumman Corporation changed its name to Northrop Grumman Systems Corporation.
Northrop Grumman Corporation and Subsidiaries
On April 3, 2001, the company completed the exchange offer for the shares of Litton and accepted for
purchase or exchange 44,660,440 shares of Litton common stock and 240,632 shares of Litton preferred stock, which represented approximately 97.3 percent of the outstanding shares of Litton common stock and approximately 58.6 percent of the
outstanding shares of Litton preferred stock. The company issued the full allotment of 13,000,000 shares of its common stock and 3,500,000 shares of its preferred stock available for issuance pursuant to the offer and paid cash for the balance of
the shares. Pursuant to the merger agreement, a subsidiary of the company will be merged into Litton and the remaining common shareholders of Litton will receive $80 per share in cash. The companys common stock now trades on the New York and
Pacific Stock Exchanges, its preferred stock trades on the New York Stock Exchange and each of Northrop Grumman Systems Corporation and Litton are subsidiaries of the company. The acquisition, which is valued at approximately $5.3 billion including
the assumption of Littons net debt of $1.4 billion, will be accounted for using the purchase method of accounting.
On April 20, 2001, the company announced that it had signed a definitive agreement to acquire the
Electronics and Information Systems Group of Aerojet-General Corporation for $315 million in cash. The transaction is subject to the completion of review by the appropriate United States government agencies under the Hart-Scott-Rodino Act and,
regarding environmental matters, the attainment of an approved Prospective Purchaser Agreement with the Environmental Protection Agency, a favorable IRS ruling, and an acceptable Advance Agreement with the U.S. Department of Defense Administrative
Contracting Officer. The acquisition is expected to be completed in the third quarter of 2001 and will be recorded using the purchase method of accounting. Upon completion of the transaction, Aerojet-Generals Electronics and Information
Systems Group will be integrated into the Electronic Sensors and Systems Sector.
On May 9, 2001, the company announced that it has offered to acquire Newport News Shipbuilding, citing
concerns that the previously announced merger agreement between Newport News and General Dynamics Corporation presents serious antitrust issues. The offer matches General Dynamics offer of $67.50 per share for all the outstanding shares of
common stock of Newport News, payable 75 percent in Northrop Grumman stock, the remainder in cash. The company said it expects to commence an exchange offer shortly, subject to customary conditions. A copy of the press release announcing the offer
was filed by the company pursuant to Rule 425 of the Securities Act of 1933.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
Accounting for
Derivative Instruments and Hedging Activities
, subsequently amended by SFAS No. 138
Accounting for Certain Derivative Instruments and Certain Hedging Activities,
which became effective for fiscal years beginning after June 15,
2000. This standard provides authoritative guidance on accounting and financial reporting for derivative instruments. The company adopted this standard on January 1, 2001. Adoption of this standard did not have a significant effect on the
companys financial position, results of operations, or cash flows.
During the first quarter of 2001, $33 million of cash was used by operating activities versus the $91
million generated in the same period last year. The use of cash in the first quarter is primarily due to the acceleration of planned first quarter 2001 cash collections to the fourth quarter of 2000. Last years fourth quarter included $414
million provided by operating activities. In February 2001, Northrop Grumman Systems Corporation issued $1.5 billion of indebtedness pursuant to its senior debt indenture consisting of $750 million of 7
1
/
8
% Notes due 2011 and $750 million of
7
3
/
4
% Debentures due 2031. In connection
with the closing of the Litton acquisition, the company entered into unsecured senior credit facilities with lenders which initially provided for borrowings of up to $5 billion (the New Credit Facilities) and which replaced the
companys previous credit agreement. The New Credit Facilities consist of a $2.5 billion 364-day revolving credit facility and a $2.5 billion five-year revolving credit facility. The availability under the 364-day revolving credit facility, as
reduced by the equity and other debt financing of the Litton acquisition, is now $527 million. Borrowings under the New Credit Facilities, together with the proceeds of the February issuance of notes and debentures, were used to finance the Litton
acquisition and to pay related expenses, to retire and refinance a portion of the Litton debt, and will be used to finance continuing operations. Borrowings under the New Credit Facilities bear
interest at various rates, including adjusted LIBOR or an alternate base rate plus in each case an incremental margin based on the combined companys credit rating. The New Credit Facilities also provide for a facility fee on the daily
aggregate amount of commitments under the revolving facilities (whether or not utilized). The facility fee is also based on the companys credit rating level. The company, Northrop Grumman Systems Corporation, and Litton are co-borrowers on the
New Credit Facilities. The company and Litton have guaranteed the Northrop Grumman Systems outstanding indenture debt and the company and Northrop Grumman Systems have guaranteed the Litton outstanding indenture debt.
For the remainder of 2001, cash generated from operations supplemented by borrowings under credit facilities
are expected to be more than sufficient in 2001 to service debt, finance capital expenditures, and continue paying dividends to the companys shareholders. The companys liquidity and financial flexibility is expected to be provided by
cash flow generated by operating activities, supplemented by the borrowing capacity available under the companys credit facilities. With the completion of the B-2 EMD contract, federal and state income taxes that have been deferred since the
inception of the contract in 1981 will become payable. The contract is expected to be completed in 2002 with associated taxes of approximately $1 billion due, to be paid that year. The company plans to use cash generated from operations supplemented
by additional borrowings under the credit agreement and/or additional funds raised from public or private capital markets to pay these taxes.
Forward-Looking Information
Certain statements and assumptions in Managements Discussion and Analysis and elsewhere in this quarterly report on Form 10-Q contain or are based on
forward-looking information (that the company believes to be within the definition in the Private Securities Litigation and Reform Act of 1995) and involve risk and uncertainties. Such forward-looking information includes
statements and assumptions with respect to future revenues, expected program performance and cash flows, the outcome of contingencies including litigation, environmental remediation, the effect of completed and planned acquisitions and divestitures
of businesses, and anticipated costs of capital investments. The companys operations are subject to various risks and uncertainties resulting from its position as a supplier, either directly or as subcontractor or team member, to the U.S.
Government and its agencies as well as to foreign governments and agencies. Actual outcomes are dependent upon factors, including, without limitation: the companys 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 issues and the timing of deliveries under existing contracts; continued
development and acceptance of new products; performance issues with key suppliers and subcontractors; ability to perform fixed price contracts within planned margins; government import and export policies; acquisition or termination of government
contracts; the outcome of political and legal processes including risk associated with pending litigation and unasserted claims; the ability of the company to integrate acquisitions and to make planned divestitures of noncore businesses;
environmental risks and unanticipated remediation costs; legal, financial, and governmental risks related to international transactions and global needs for military aircraft, military and civilian electronic systems and support and information
technology; market risks associated with pension income; risks associated with higher debt levels; and other economic, political risks and uncertainties. Additional information regarding these factors is contained in the companys other SEC
filings, including without limitation, the companys Annual Report on Form 10-K/A for the year ended December 31, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
The company is exposed to market risk, primarily related to interest rates and foreign currency exchange rates. Financial instruments subject to interest rate risk
include fixed-rate long-term debt obligations, variable-rate short-term debt outstanding under credit facilities, short-term investments, and long-term notes receivable. Most of the fixed-rate long-term debt obligations are not callable until
maturity. The company may enter into interest
rate swap agreements to manage its exposure to interest rate fluctuations. At March 31, 2001, no interest rate swap agreements were in effect. The company enters into foreign currency forward contracts to manage foreign currency exchange rate risk
related to receipts from customers and payments to suppliers denominated in foreign currencies. At March 31, 2001, the amount of foreign currency forward contracts outstanding was not material. The company does not consider the market risk exposure
relating to foreign currency exchange to be material. The company does not hold or issue derivative financial instruments for trading purposes.
Northrop Grumman Corporation and Subsidiaries
INDEPENDENT ACCOUNTANTS REPORT
To the Board of Directors and Shareholders of
Northrop Grumman Corporation
Los Angeles, California
We have reviewed the accompanying consolidated condensed statements of financial position of Northrop
Grumman Corporation and subsidiaries as of March 31, 2001, and the related consolidated condensed statements of income for the three-month periods ended March 31, 2001 and 2000, and the related consolidated condensed statements of changes in
shareholders equity and cash flows. These financial statements are the responsibility of the Corporations management.
We conducted our review in accordance with standards established by the American Institute of Certified
Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to such consolidated
condensed financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of
America, the consolidated statement of financial position of Northrop Grumman Corporation and subsidiaries as of December 31, 2000, and the related consolidated statements of income, comprehensive income, changes in shareholders equity, and
cash flows for the year then ended (not presented herein); and in our report dated January 24, 2001, except for the subsequent events footnote, as to which the date is March 1, 2001, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the accompanying condensed consolidated statement of financial position as of December 31, 2000 is fairly stated, in all material respects, in relation to the consolidated statement
of financial position from which it has been derived.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Los Angeles, California
May 10, 2001
Northrop Grumman Corporation and Subsidiaries
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Zabielski and related cases
In July and August 1998, three shareholder derivative lawsuits, respectively encaptioned
Zabielski v.
Kent Kresa, et al., Harbor Finance Partners v. Kent Kresa et al., and Clarren v. Kent Kresa, et al.
, were filed in the Superior Court of California for the County of Los Angeles. These lawsuits each contain similar allegations that the directors
of the company and certain of its officers breached their fiduciary duties in connection with the shareholder vote approving the proposed acquisition of the company by Lockheed Martin Corporation, and that certain defendants engaged in stock trades
in violation of federal and state securities laws. The lawsuits are purportedly brought on the companys behalf and do not seek relief against the company. On January 31, 2001, the State Court dismissed these actions with prejudice.
Honeywell
Litton brought suit against Honeywell, Inc. (Honeywell) for patent infringement relating to the
manufacture of ring laser gyro navigation systems used in commercial aircraft. In August 1993, the jury rendered a verdict in favor of Litton which the District Court rejected in January 1995. In July 1996, the Federal Circuit Court of Appeals
reversed the District Courts decision and reinstated parts of the jurys verdict related to liability in favor of Litton and ordered a new trial on the amount of damages. In March 1997, the U.S. Supreme Court vacated the Court of
Appeals ruling and remanded the case to the Court of Appeals for further consideration. On April 7, 1998, the Court of Appeals reinstated its finding that the patent was valid, however, it remanded the case back to the District Court for
determination on both liability and damages. In July 1999, the District Court heard motions for summary judgment filed on behalf of Litton and Honeywell. On September 23, 1999, the U.S. District Court granted Honeywells motions rejecting the
patent and state law claims. On February 28, 2000, Litton appealed the District Courts ruling to the Federal Circuit Court of Appeals. On February 5, 2001 the Court of Appeals reversed the District Courts dismissal of the state tort
claims and remanded the claims for further proceedings in accordance with state law. The Court of Appeals also upheld the trial courts finding that the Littons claims should be dismissed. Litton filed a petition for certiorari to the
United States Supreme Court seeking reversal of the order dismissing the patent claims.
Litton also brought suit against Honeywell for illegal monopolization of the market for inertial reference
systems for large commercial air transport, commuter and business aircraft. In February 1996, a jury rendered a verdict in favor of Litton. The District Court upheld the jurys verdict on liability, but declined to enter the jurys damage
award on the basis that Littons damages study did not segregate damages among legal and illegal conduct. A new trial limited to the amount of damages resulted in a jury verdict on December 9, 1998, of $250 million in favor of Litton. On
January 27, 1999, U.S. District Court Judge Mariana R. Pfaelzer entered a final judgment against Honeywell for $250 million which, by law, is trebled to $750 million, plus post-judgment interest from the date of entry of judgment, costs and attorney
fees. On May 20, 1999, the court heard Honeywells post trial motions. On September 23, 1999, the court denied Honeywells motions as they related to Litton Systems, Inc. but granted a motion regarding Litton Systems Canada, holding it did
not have standing or jurisdiction to bring its claims in the United States. As a result of that ruling, the judgment against Honeywell was reduced to $660 million plus interest, attorney fees and costs. Both Honeywell and Litton have appealed the
judges decision to the Ninth Circuit Court of Appeals. A hearing before the Appellate Court was held on March 5, 2001 and the company is awaiting the Courts decision.
General
The company, as a government contractor, is from time to time subject to U.S. Government investigations
relating to its operations. Government contractors that are found to have violated the False Claims Act, or are
indicted or convicted for violations of other Federal laws, or are considered not to be responsible contractors may be suspended or debarred from government contracting for some period of time. Such convictions could also result in fines. Given the
companys dependence on government contracting, suspension or debarment could have a material adverse effect on the company. The company is involved in certain other legal proceedings arising in the ordinary course of business, none of which
the companys management believes will have a material adverse effect on the companys financial condition.
Item 2. Changes in Securities and Use of Proceeds.
In connection with the acquisition of Litton Industries, Inc. (Litton), the company issued
13,000,000 shares of its Common Stock (Common Stock) and 3,500,000 shares of its Series B Preferred Stock (Preferred Stock) in exchange for shares of Litton common stock. The shares were issued pursuant to an Offer to
Purchase or Exchange filed with the Securities and Exchange Commission on February 1, 2001 by the company under its former name NNG, Inc. as a part of a Registration Statement on Form S-4 (SEC file number 333-54800) and amended March 5, 2001 and
March 27, 2001. The company, as a co-borrower with Northrop Grumman Systems and Litton, also entered into two new credit agreements, a $2.5 billion 364-day Revolving Credit Agreement and a $2.5 billion Five-Year Revolving Credit Agreement (the
Credit Agreements). The availability under the 364-day revolving credit facility, as reduced by the equity and other debt financing of the Litton acquisition, is now $527 million.
Credit Agreements
The Credit Agreements incorporate various financial convenants including restrictions upon the ability of
the company to pay dividends and to make other distributions with respect to its capital stock. Until the loan commitments have terminated and the principal and interest on all of the loans under the Credit Agreements have been repaid, the company
cannot declare, pay or authorize any dividend (other than a dividend payable solely in the stock of the company) or other distribution with respect to any stock of the company, or make any payment on account of the purchase, acquisition, redemption
or other retirement of any shares of such stock (each a Restricted Payment), if:
|
|
The Restricted Payment exceeds an amount equal to $300 million plus 80 percent of consolidated net income (or minus 100
percent in case of consolidated net loss) for the period subsequent to January 1, 2001, less (i) the amount of all dividends or other distributions made by the company after the effective date of the Credit Agreements (or made by Litton or Northrop
Grumman Systems prior to the effective date of the Credit Agreements and after January 1, 2001) and (ii) the excess of the amount expended by the company after the effective date of the Credit Agreements for acquiring shares of its capital stock (or
by Litton or Northrop Grumman Systems for acquiring shares of its capital stock prior to the effective date of the Credit Agreements and after January 1, 2001) over the amount of cash received by the company after such acquisition date as
consideration for the sale of any shares of its stock;
|
|
|
The Restricted Payment would cause the company to exceed specified leverage ratios (which decline from 60 percent through
September 30, 2001 to 50 percent on December 31, 2004 and thereafter); or
|
|
|
At the time of the Restricted Payment, or immediately thereafter, a default (as defined in the Credit Agreements) has
occurred and remains continuing.
|
Preferred Stock
The holders of Preferred Stock will be entitled to dividends at the rate of 9 percent annually, unless the
companys stockholders approve the issuance of Common Stock upon conversion of the Preferred Stock. The companys stockholders will vote on whether to approve the issuance of Common Stock upon conversion of the Preferred Stock at the
companys Annual Meeting of Stockholders scheduled for May 16, 2001. If approved, the conversion price will be $109.75. If stockholder approval is obtained, the Preferred Stock
dividend will be 7 percent annually and certain participating rights of holders of the Preferred Stock will be eliminated, as described below under Liquidation, Redemption, and Change in Control.
Description of Preferred Stock
The following is a summary of the rights, preferences and privileges of the Preferred Stock, as set forth in a
Certificate of Designations, Preferences and Rights of Series B Preferred Stock of the company filed with the Secretary of State of Delaware. This summary is not a complete description of such rights, preferences and privileges and the rights of
holders of the Preferred Stock are governed by the precise language of the certificate of designations, not this summary.
Conversion
The conversion rights of the Preferred Stock are subject to stockholder approval of the issuance of the shares of Common
Stock upon conversion of the Preferred Stock. No conversion rights may be exercised unless and until such stockholder approval is obtained.
Subject to stockholder approval, each share of Preferred Stock will be convertible, at any time, at the
option of the holder into the right to receive shares of Common Stock. Initially, each share of Preferred Stock will be convertible into the right to receive approximately .91 shares of Common Stock.
The conversion ratio is subject to adjustment in the event of certain dividends and distributions; upon a
subdivision or reclassification of the outstanding shares of Common Stock; a merger or consolidation of the company or the sale of substantially all of the companys assets; upon the liquidation of the company; upon the occurrence of certain
specified distributions with respect to the Common Stock; and certain other events described in the Certificate of Designations.
If any adjustment in the number of shares of Common Stock into which each share of Preferred Stock may be
converted would result in an increase or decrease of less than 1% in the number of shares of Common Stock into which each share of Preferred Stock is then convertible, the amount of the adjustment will be carried forward and the adjustment will be
made at the time of and together with any subsequent adjustment, which, together with any adjustment amounts carried forward, would equal at least 1% of the number of shares of Common Stock into which each share of Preferred Stock is then
convertible.
Liquidation
In any liquidation of the company, each share of Preferred Stock will be entitled to a liquidation preference of $100.00
plus accrued but unpaid dividends, whether or not declared, before any distribution may be made on the Common Stock or any other class or series of capital stock of the company which is junior to the Preferred Stock. In any liquidation of the
company, no distribution may be made on any shares of capital stock of the company ranking on a parity with the Preferred Stock as to dividends, redemption payments and rights upon liquidation, dissolution or winding up of the company, unless the
holders of Preferred Stock participate ratably in the distribution along with the Preferred Stock as to such matters. In the event shareholder approval of the issuance of Common Stock upon conversion of the Preferred Stock has not occurred, the
amount payable in liquidation will be the greater of the amount described above and the amount that would be distributed if such share of Preferred Stock had been converted into Common Stock pursuant to the provision for conversion.
Reacquired Shares
Any shares of Preferred Stock converted, redeemed, purchased or otherwise acquired by the company will be retired and
canceled. The reacquired shares will become authorized but unissued shares of Preferred Stock, which the company may reissue at a later date.
Northrop Grumman Corporation and Subsidiaries
Rank
The Preferred Stock ranks with respect to payment of dividends, redemption payments and rights upon liquidation,
dissolution or winding up, prior to the Common Stock and any class or series of preferred stock which by its terms ranks junior to the Preferred Stock. The Preferred Stock ranks on parity with each other class or series of preferred
stock.
Voting Rights
Holders of Preferred Stock have no voting rights except in certain specified circumstances described below or as
required by applicable law. The affirmative vote of the holders of two-thirds of the aggregate number of outstanding shares of the Preferred Stock is required for an amendment of the companys restated Certificate of Incorporation, for a merger
of the company or any other action which would:
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authorize any class or series of stock ranking prior to the Preferred Stock as to dividends, redemption payments or rights
upon liquidation, dissolution or winding up;
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adversely alter the preference, special rights or powers given to the Preferred Stock; or
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cause or permit the purchase or redemption of less than all of the Preferred Stock unless all dividends to which such shares
are entitled have been declared and paid or provided for.
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If accrued dividends on the Preferred Stock are not paid for six quarterly dividend periods (whether or not
consecutive), a majority of the holders of the Preferred Stock, voting separately as a class, will have the right to elect two directors. If such holders exercise their right to elect two directors to the companys board, the size of the
companys board will be increased by two members until the dividends in default are paid in full or payment for the past-due dividends is set aside.
Dividends
Holders of Preferred Stock will be entitled to cumulative cash dividends, payable quarterly in April, July, October and
January of each year. The initial dividend rate per share will be $7.00 per year. Commencing after the dividend payable in October 2001, the dividend rate per share will be $7.00 per year if stockholder approval for the issuance of Common Stock upon
conversion of the Preferred Stock has been obtained, or $9.00 per year if it has not been obtained. The dividend rate per share will be reduced from $9.00 per year to $7.00 per year after stockholder approval of the issuance of Common Stock upon
conversion of the Preferred Stock is obtained.
If dividends are payable and have not been paid or set apart in full, the deficiency must be fully paid or
set apart for payment before:
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distributions or dividends are paid on stock ranking junior to the Preferred Stock; and
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the redemption, repurchase or other acquisition for consideration of any shares of capital stock of the company ranking
junior to the Preferred Stock.
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Redemption
Mandatory Redemption For Cash After Twenty Years
. The company is required to redeem all of
the shares of Preferred Stock for cash twenty years and one day from the date of issuance of the Preferred Stock. The redemption price per share is equal to the liquidation value of $100.00 per share of Preferred Stock plus accrued but unpaid
dividends, whether or not declared, to the mandatory redemption date. In the event that stockholder approval of the issuance of Common Stock upon conversion of the Preferred Stock has not occurred by the mandatory redemption date, the amount payable
for each share of Preferred Stock will be the greater of (a) the liquidation value of $100.00 per share of Preferred Stock plus accrued but unpaid dividends to the redemption date, whether or not declared, and (b) the current market price on the
redemption date of the number of shares of Common Stock which would be issued upon conversion of a share of Preferred Stock pursuant to the provision for conversion.
Northrop Grumman Corporation and Subsidiaries
Optional Redemption For Common Stock After Seven Years
. The company has the
option to redeem shares of the Preferred Stock in exchange for Common Stock seven years from the date of the initial issuance of the Preferred Stock. Upon redemption, holders of Preferred Stock will receive the number of shares of Common Stock equal
to the liquidation value of $100.00 per share of Preferred Stock plus accrued but unpaid dividends to the redemption date divided by the current market price of the Common Stock on the redemption date. In the event that shareholder approval of the
issuance of Common Stock upon conversion of the Preferred Stock has not occurred by the redemption date, the number to be divided in the above calculation will be the greater of the amount described above and the current market price on the
redemption date of the number of shares of Common Stock which would be issued if all shares of Preferred Stock were converted on the redemption date into Common Stock pursuant to the provision for conversion.
Change in Control
Upon a fundamental change in control of the company, as defined below, holders of Preferred Stock have the right, which
may be exercised during the period of 20 business days following notice from the company, to exchange their shares of Preferred Stock for Common Stock. Each share of Preferred Stock may be exchanged in such circumstances for that number of shares of
Common Stock determined by dividing the liquidation value of $100.00 per share of Preferred Stock, plus accrued but unpaid dividends to such date by the current market value of the Common Stock on the exchange date. In the event shareholder approval
has not been obtained for the issuance of Common Stock upon conversion of the Preferred Stock, the number to be divided in the above calculation will be the greater of the amount described above or the current market price of the number of shares of
Common Stock which would be issued if such share of Preferred Stock were converted into Common Stock pursuant to the provision for conversion.
A fundamental change in control is defined as any merger, consolidation, sale of all or
substantially all of the companys assets, liquidation or recapitalization (other than solely a change in the par value of equity securities) of the Common Stock in which more than one-third of the previously outstanding Common Stock is
exchanged for cash, property or securities other than capital stock of the company or another corporation.
If the fundamental change in control occurred as a result of a transaction (excluding certain dividends or
distributions on, and reclassifications of, Common Stock) in which the previously outstanding Common Stock is changed into or exchanged for different securities of the company or securities of another corporation or interests in a non-corporate
entity, the Common Stock that would otherwise have been issued to a holder of Preferred Stock for each share of Preferred Stock will be deemed instead to be the kind and amount of securities and property receivable upon completion of such
transaction in respect of the Common Stock that would result in the fair market value of such securities and property, measured as of the exchange date, being equal to the liquidation value plus accrued and unpaid dividends. In the event that
shareholder approval of the issuance of Common Stock upon conversion of the Preferred Stock has not occurred, the fair market value of the securities and property will instead be calculated to be equal to the greater of the amount described above,
and the fair market value of the securities and property, measured as of the exchange date, which would have been issued if such share of Preferred Stock had been converted into Common Stock, if conversion were permitted.
Northrop Grumman Corporation and Subsidiaries
Item 6.
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Exhibits and Reports on Form 8-K
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2.1
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Amended and Restated Agreement and Plan of Merger dated as of January 23, 2001, among
Systems, Litton, Northrop Grumman and LII Acquisition Corp., filed as exhibit 2.2 to
Form S-4 Registration Statement No. 333-54800 filed with the SEC on February 1, 2001 and
incorporated herein by reference.
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3.1
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Amended and Restated Certificate of Incorporation of Northrop Grumman Corporation, filed
as exhibit 3.1 to Registration Statement No. 333-54800 filed with the SEC on February 1,
2001 and incorporated herein by this reference.
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3.2
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Certificate of Amendment of Certificate of Incorporation of Northrop Grumman
Corporation.*
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4.1
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Registration Rights Agreement dated as of January 23, 2001 by and among Systems,
Northrop Grumman Corporation and Unitrin, Inc., filed as exhibit (d)(6) to Amendment No. 4
to the Schedule TO filed with the SEC on January 31, 2001 and incorporated herein by
reference.
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4.2
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Form of Certificate of Designations, Preferences and Rights of Series B Preferred Stock of
Northrop Grumman Corporation filed as exhibit 4.2 to Form S-4 Registration Statement
No. 333-54800 filed with the SEC on February 1, 2001 and incorporated herein by this
reference.
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4.3
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Rights Agreement dated as of January 31, 2001 between Northrop Grumman Corporation and
EquiServe Trust Company, N.A. filed as exhibit 4.3 to Form S-4 Registration Statement
No. 333-54800 filed with the SEC on March 27, 2001 and incorporated herein by this
reference.
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4.4
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Indenture dated as of April 13, 1998 between Litton and The Bank of New York, Trustee,
under which Littons 6.05% senior notes due 2003 and 6.75% senior debentures due 2018
were issued, filed as Exhibit 4.1 to Littons April 30, 1998 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
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4.5
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Supplemental Indenture with respect to the Indenture dated April 13, 1998, dated as of
April 3, 2001, among Litton, Northrop Grumman Corporation, Systems and The Bank of
New York, as trustee.*
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4.6
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Indenture dated as of December 15, 1991 between Litton and The Bank of New York,
Trustee, under which Littons 7.75% and 6.98% debentures due 2026 and 2036 were issued
and specimens of such debentures, filed as Exhibit 4.1 of Littons April 30, 1996 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
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4.7
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Supplemental Indenture with respect to the Indenture dated December 15, 1991, dated as of
April 3, 2001, among Litton, Northrop Grumman Corporation, Systems and The Bank of
New York, as trustee.*
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4.8
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Form of Exchange Security for Littons $400,000,000 8% senior notes due 2009, filed as
Exhibit 4.3 to Littons April 30, 2000 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
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Northrop Grumman Corporation and Subsidiaries
10.1
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Stockholders Agreement dated as of January 23, 2001 among Systems, Northrop Grumman
Corporation and Unitrin, Inc., including form of Stockholder Subsidiary Proxy, filed as
exhibit (d)(5) to Amendment No. 4 to the Schedule TO filed with the SEC on January 31,
2001 and incorporated herein by reference.
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10.2
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Employment Agreement with Dr. Ronald D. Sugar, filed as exhibit 99(e)(7) to the
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the SEC by Litton on
January 5, 2001 and incorporated herein by reference.
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10.6
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Form of $2,500,000,000 364-Day Revolving Credit Agreement among Northrop Grumman
Corporation, Systems, Litton, the Lenders party thereto, The Chase Manhattan Bank and
Credit Suisse First Boston, as Co-Administrative Agents, Salomon Smith Barney Inc., as
Syndication Agent, and The Bank of Nova Scotia and Deutsche Banc Alex. Brown, Inc. as
Co-Documentation Agents, filed as Exhibit 10.6 to Amendment No. 2 to Form S-4
Registration Statement No. 333-54800 filed with the SEC on March 27, 2001 and
incorporated herein by reference.
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10.7
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Form of $2,500,000,000 Five-Year Revolving Credit Agreement among Northrop Grumman,
Systems, Litton, the Lenders party thereto, The Chase Manhattan Bank and Credit Suisse
First Boston, as Co-Administrative Agents, Salomon Smith Barney Inc., as Syndication
Agent, and The Bank of Nova Scotia and Deutsche Banc Alex. Brown, Inc. as
Co-Documentation Agents, filed as Exhibit 10.7 to Amendment No. 2 to Form S-4
Registration Statement No. 333-54800 filed with the SEC on March 27, 2001 and
incorporated herein by reference.
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10.8
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Letter Agreement dated January 31, 2001 between Systems and Dr. Ronald D. Sugar, filed as
exhibit 99(e)(16) to Amendment No. 3 to Solicitation/Recommendation Statement on
Schedule 14D-9 filed with the SEC by Litton on February 1, 2001 and incorporated herein by
reference.
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10.9
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Form of Officers Certificate establishing the terms of Systems 7
1
/
8
% Notes due 2011 and
7
3
/
4
% Debentures due 2031, filed as
Exhibit 10.9 to Form 8-K filed by Northrop Grumman on
April 17, 2001 and incorporated herein by reference.
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10.10
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Form of Guarantee by Northrop Grumman of Litton Indenture Indebtedness, filed as
Exhibit 10.10 to Form 8-K filed by Northrop Grumman Corporation on April 17, 2001 and
incorporated herein by reference.
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10.11
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Form of Guarantee by Northrop Grumman of Systems Indenture Indebtedness, filed as
Exhibit 10.11 to Form 8-K filed by Northrop Grumman Corporation on April 17, 2001 and
incorporated herein by reference.
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10.12
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Form of Guarantee by Systems of Litton Indenture Indebtedness, filed as Exhibit 10.12 to
Form 8-K filed by Northrop Grumman Corporation on April 17, 2001 and incorporated herein
by reference.
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10.13
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Form of Guarantee by Litton of Systems Indenture Indebtedness, filed as Exhibit 10.13 to
Form 8-K filed by Northrop Grumman Corporation on April 17, 2001 and incorporated herein
by reference.
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15
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Letter from independent accountants regarding unaudited interim financial information.*
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*
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Filed with this report.
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Northrop Grumman Corporation and Subsidiaries
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No reports on Form 8-K were filed with the Securities and Exchange Commission during the quarter ended March 31,
2001.
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A report on Form 8-K was dated and filed April 17, 2001 by Northrop Grumman Systems Corporation (the former
Northrop Grumman Corporation) reporting pursuant to Item 5 the completion of a corporate reorganization on April 2, 2001 pursuant to Section 251 (g) of the Delaware General Corporation Law and filing pursuant to Item 7(c) an Agreement and Plan of
Merger, dated as of March 20, 2001 between Northrop Grumman Systems Corporation, Northrop Grumman Corporation and NGC Acquisition Corporation.
A report on Form 8-K was dated and filed April 17, 2001 by Northrop Grumman Corp. (the former NNG, Inc.)
reporting pursuant to Item 2 the acquisition of common stock and preferred stock of Litton Industries, Inc. and filing (i) pursuant to Item 7(a), certain Litton Industries, Inc. financial statements, and (ii) pursuant to Item 7(c) certain exhibits
relating to the Litton acquisition.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Northrop Grumman Corporation (Registrant)
Date: May 10, 2001
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by /s/ Robert B. Spiker
Robert B. Spiker
Corporate Vice President and Controller
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Date: May 10, 2001
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by /s/ J. H. Mullan
John H. Mullan
Corporate Vice President and Secretary
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EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NNG, INC.
(a Delaware corporation)
NNG, Inc., (the "Corporation"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, does
hereby certify that:
FIRST: The Corporation has received payment for its stock.
SECOND: The Board of Directors of the Corporation believes that it is in
the best interests of the Corporation to amend the First Article of the Amended
and Restated Certificate of Incorporation.
THIRD: The amendment to the Amended and Restated Certificate of
Incorporation of the Corporation set forth below was approved by unanimous
written consent of the Corporation's Board of Directors and was duly adopted in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
FOURTH: The sole stockholder of the Corporation considered and voted in
favor of the amendment.
FIFTH: The First Article of the Amended and Restated Certificate of
Incorporation of the Corporation is hereby amended and restated in its entirety
as follows:
"FIRST: The name of the corporation is Northrop Grumman
Corporation. (the "Corporation")."
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment on this 2nd day of April, 2001
NNG, INC.
By:
John H. Mullan, Secretary
2
EXHIBIT 4.5
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as
of April 3, 2001, is by and among Litton Industries, Inc., a Delaware
corporation ("Litton"), The Bank of New York, as trustee ("Trustee"), Northrop
Grumman Corporation, a Delaware corporation, formerly NNG, Inc. ("NGC"), and
Northrop Grumman Systems Corporation, a Delaware corporation, formerly Northrop
Grumman Corporation ("NGSC"). Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in the Indenture (as defined
below).
WHEREAS, Litton and the Trustee are parties to that certain Indenture
dated as of April 13, 1998 between Litton and the Trustee (as supplemented
and/or amended to date, the "Indenture"), providing for the issuance from time
to time of Litton's unsecured debentures, notes or other evidences of
indebtedness to be issued in one or more series as might be determined by Litton
under the Indenture;
WHEREAS, Litton has issued its 6.05% Senior Notes due 2003, the 6.75%
Senior Debentures due 2018 and the 8.00% Senior Notes due 2009 pursuant to the
terms of the Indenture (the "Securities");
WHEREAS, NGSC is a wholly-owned subsidiary of NGC and Litton is a
majority-owned subsidiary of NGC;
WHEREAS, in consideration of a reciprocal guarantee to be given by
Litton with respect to the outstanding indenture debt of NGSC, NGC and NGSC
desire to guarantee the Securities pursuant to the terms of the forms of
Guarantee attached hereto as Exhibits A and B (the "Guarantees");
NOW, THEREFORE, in consideration of a reciprocal guarantee to be given
by Litton with respect to the outstanding indenture debt of NGSC, NGC, NGSC and
Litton covenant and agree to and with the Trustee, for the equal and
proportionate benefit of all present and future Holders of the Securities, as
follows:
1. Guarantee of Outstanding Indenture Debt. Upon the execution and
delivery of the Guarantees to the Trustee, the obligations of Litton with
respect to the Securities issued pursuant to the Indenture, including, but not
limited to, the payment of principal and interest on the Securities and the
payment of all other amounts due under the Indenture, will be unconditionally
guaranteed by NGC and NGSC as provided in the Guarantees.
-1-
2. Acknowledgment of Trustee.
The Trustee hereby acknowledges receipt of the following documents
pursuant to the provisions of the Indenture:
(a) An Officers' Certificate of Litton stating that, among other
things, to the knowledge of the signing officers, all conditions precedent
provided for in the Indenture relating to the execution and delivery of this
Supplemental Indenture have been complied with.
(b) A Certificate of Board Resolution certifying the adoption of
certain resolutions by the board of directors of Litton.
(c) An Opinion of Counsel specifying, among other things, that all
conditions precedent provided for in the Indenture relating to the execution and
delivery of this Supplemental Indenture have been complied with.
3. Incorporation by Reference.
This Supplemental Indenture shall be construed as supplemental to the
Indenture and shall form a part thereof. The Indenture is hereby incorporated by
reference herein and is hereby ratified, approved, and confirmed.
4. Effect of Headings.
The headings herein are for convenience and reference only, are not to
be considered a part hereof, and shall not affect the construction hereof.
5. Successors and Assigns.
All covenants and agreements in this Supplemental Indenture by NGC,
NGSC and Litton shall bind their successors and assigns, whether so expressed or
not.
6. Separability Clause.
In case any provision in this Supplemental Indenture or in the
Guarantees shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
7. Governing Law.
This Supplemental Indenture shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to any
otherwise governing principles of conflicts of law.
-2-
8. Additional Supplemental Indentures.
Nothing contained herein shall alter or impair the rights of the
parties to enter into one or more additional supplemental indentures in the
manner provided in the Indenture.
9. Counterparts.
This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
[SIGNATURE PAGES BELOW]
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of April ___, 2001
LITTON INDUSTRIES, INC.
-------------------------------------------
By: Albert F. Myers
Its: Corporate Vice President and Treasurer
Attest:
-----------------------------------
By: John H. Mullan
Its: Corporate Vice President and
Secretary
THE BANK OF NEW YORK, as Trustee
-------------------------------------------
By:
Its:
Attest:
-----------------------------------
By:
Its:
NORTHROP GRUMMAN
CORPORATION
-------------------------------------------
By: Albert F. Myers
Its: Corporate Vice President and Treasurer
Attest:
-----------------------------------
By: John H. Mullan
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Its: Corporate Vice President and
Secretary
NORTHROP GRUMMAN SYSTEMS CORPORATION
By: Albert F. Myers
Its: Corporate Vice President and Treasurer
Attest:
By: John H. Mullan
Its: Corporate Vice President and
Secretary
EXHIBIT A
GUARANTEE BY NORTHROP GRUMMAN CORPORATION
GUARANTEE
(NGC of Litton 1998 Indenture Debt)
GUARANTEE dated as of ______________, 2001 (this "Guarantee") made by
Northrop Grumman Corporation, a Delaware corporation (formerly NNG, Inc.)
("Guarantor"), in favor of and for the benefit of The Bank of New York, as
trustee (the "Trustee") for the Holders (as such term is defined in the
Indenture referred to below) of the 6.05% Senior Notes due 2003, the 6.75%
Senior Debentures due 2018 and the 8.00% Senior Notes due 2009 (collectively,
the "Securities") of Litton Industries, Inc. (the "Company").
WHEREAS, the Company has entered into an Indenture dated as of April
13, 1998 between the Company and the Trustee (as amended, modified and
supplemented from time to time with respect to the Securities, the "Indenture").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Indenture; and
WHEREAS, the Company is a subsidiary of the Guarantor.
NOW, THEREFORE, in consideration of the foregoing, the Guarantor
hereby agrees as follows:
SECTION 1. Guarantee; Limitation of Liability.
(a) The Guarantor irrevocably and unconditionally guarantees as a
primary obligor and not merely as a surety, to the Trustee and to each Holder of
a Security authenticated and delivered by the Trustee the due and punctual
payment of the principal of and any premium and interest on such Security
(including, in case of default, interest on overdue principal and interest) and
including any additional interest required to be paid according to the terms of
the Securities or the Indenture, when due, whether at stated maturity, upon
redemption or repayment, upon declaration of acceleration or otherwise according
to the terms of the Securities or the Indenture and the due and punctual
performance of all other obligations of the Company to such Holder or the
Trustee, all in accordance with the terms of the Securities and the Indenture
(such obligations being the "Guaranteed Obligations"), and agrees to pay any and
all expenses (including reasonable counsel fees and expenses) incurred by such
Holder or the Trustee in enforcing any rights under this Guarantee. Without
limiting the generality of the foregoing, the Guarantor's liability shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Company to such Holder or the Trustee under the Securities or the
Indenture but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Company because it is
the intention of the Guarantor, the Trustee and the Holders that the Guaranteed
Obligations should be determined without regard to any rule of law or order that
might relieve the Company of any portion of the Guaranteed Obligations.
(b) Notwithstanding anything to the contrary in this Agreement, the
Guarantor hereby, and the Trustee and each Holder by accepting the benefits of
this Guarantee, confirms that it is its intention that the guarantee by the
Guarantor pursuant to this Guarantee together with each other guarantee by such
Guarantor of Participating Indebtedness (as defined below) shall not constitute
a fraudulent transfer or conveyance for purposes of any applicable provisions of
Title 11 of the United States Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act, or any similar federal or state law. To
effectuate the foregoing intention, the obligations of the Guarantor under this
Guarantee and each other guarantee of Participating Indebtedness shall be
limited, collectively, to such maximum amount as will, after giving effect to
such maximum amount and all other liabilities of such Guarantor, contingent or
otherwise, that are relevant under such laws, and after giving effect to any
rights to subrogation, reimbursement, indemnification or contribution of such
Guarantor pursuant to applicable law or pursuant to any agreement, result in the
obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent transfer or conveyance. The Trustee and each Holder by accepting
the benefits of this Guarantee confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of the Guarantor in which
concurrent claims are made upon such Guarantor hereunder and under any other
guarantee of Participating Indebtedness, to the extent such claims will not be
fully satisfied, each such claimant with a valid claim against the Guarantor
shall be entitled to a ratable share of all payments by such Guarantor in
respect of such concurrent claims. For purposes of this Section l(b),
"Participating Indebtedness" means any Indebtedness (as defined below) of the
Company that is guaranteed by such Guarantor pursuant to a guarantee (i) the
incurrence of which is not prohibited by the terms of the Indenture or any
agreement governing any other Participating Indebtedness then outstanding (or,
if so prohibited by the Indenture or any such agreement, is permitted as a
result of a consent or waiver thereunder) and (ii) that contains a limitation of
liability and confirmation of intention regarding ratability of payments on
substantially the terms set forth in this Section l(b). "Indebtedness" means any
indebtedness, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit and, to the extent not otherwise included, the guarantee by the Company
of any indebtedness of any other Person.
(c) Anything contained herein to the contrary notwithstanding, the
liability of the Company in respect of the Securities guaranteed by the
Guarantor hereunder shall not be limited by the terms of Section l(b).
SECTION 2. Guarantee Absolute. The Guarantor guarantees that the
Guaranteed Obligations will be paid or performed strictly in accordance with the
terms of the Securities and the Indenture, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Holder with respect thereto. The obligations of the
Guarantor under this Guarantee are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against such
Guarantor to enforce this Guarantee, irrespective of whether any action is
brought against the Company or whether the Company is joined in any such action
or actions. The liability of the Guarantor under this Guarantee shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Securities or the
Indenture or any agreement or instrument relating to the Securities or the
Indenture or any failure to enforce the provisions thereof;
(b) any renewal, extension or other change in the time, manner or
place of payment or performance of, or in any other term of, all or any of
the Guaranteed Obligations, or any other amendment or waiver of or any
consent to the departure from the Securities or the Indenture;
(c) any settlement, compromise, release or discharge, or acceptance or
refusal of any offer of performance with respect to, or any substitution
for, the Guaranteed Obligations or any agreement related thereto and/or any
subordination of the payment of the same to the payment of any other
obligations;
(d) any taking, exchange, release or non-perfection of any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind, whether
or not filed, recorded or otherwise perfected under applicable law (each a
"Lien"), in any real or personal property to secure payment or performance
of any or all of the Guaranteed Obligations (whether now or hereafter
granted, the "Collateral"), or any taking, release, amendment, waiver of,
or consent to the departure from, any other guarantee, for all or any of
the Guaranteed Obligations;
(e) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral or any other assets of the Company or any
Subsidiary;
(f) any change, restructuring or termination of the corporate
structure or existence of the Company or any Subsidiary; or
(g) any other circumstance (including, without limitation, any statute
of limitations) that might otherwise constitute a defense available to, or
a discharge of, the Company or the Guarantor of the Guaranteed Obligations.
This Guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Holder or the Trustee upon the
insolvency, bankruptcy or reorganization of the Company or for any other reason,
all as though such payment had not been made. The Guarantor further agrees, to
the fullest extent that it may lawfully do so, that, as between such Guarantor
on the one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article VI of the Indenture for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition extant under any applicable bankruptcy
law preventing such acceleration in respect of the obligations guaranteed hereby
and (ii) in the event of any declarations of acceleration of such obligations as
provided in Article VI of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantor for the
purpose of this Guarantee. In addition, without limiting the foregoing
provision, upon effectiveness of an acceleration under Article VI of the
Indenture, the Trustee shall promptly make a demand for payment on the
Securities under this Guarantee provided for hereunder and not discharged.
SECTION 3. Waivers.
(a) The Guarantor hereby waives: (i) promptness, diligence,
presentment, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this Guarantee, (ii) any requirement to file any
claims with a court in the event of merger or bankruptcy of the Company or any
guarantor of the Guaranteed Obligations, (iii) any right to require a proceeding
first against the Company or any other guarantor of the Guaranteed Obligations,
(iv) the benefit of discussion or protest or notice with respect to any such
Securities or the Indebtedness evidenced thereby, (v) any requirement that any
Holder or the Trustee protect, secure, perfect or insure any Lien or any
Collateral subject thereto or exhaust any right or take any action against the
Company or any other Person or any Collateral, (vi) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of the Company, (vii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
any other respects more burdensome than that of the principal, (viii) any
defense based upon any errors or omissions of the Trustee or the Holders'
administration of the Guaranteed Obligations, and (ix) any rights to set-offs,
recoupments and counterclaims.
(b) The Guarantor hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Securities or the Indenture,
the transactions contemplated thereby or the actions of the Trustee in the
negotiation, administration, performance or enforcement thereof.
SECTION 4. Financial Condition of the Company. The Guarantor
represents and warrants that it is presently informed of the financial condition
of the Company and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.
The Guarantor hereby covenants that it will continue to keep itself informed of
the Company's financial condition and of all other circumstances which bear upon
the risk of nonpayment and hereby waives any duty on the part of the Trustee or
any Holder to disclose or discuss with such Guarantor its assessment, or such
Guarantor's assessment, of the financial condition of the Company.
SECTION 5. Subrogation. The Guarantor will not exercise any rights
that it may acquire by way of subrogation under this Guarantee, by any payment
made hereunder or otherwise, until all the Guaranteed Obligations shall have
been indefeasibly paid in full in cash. If any amount shall be paid to the
Guarantor on account of any such subrogation rights at any time when all the
Guaranteed Obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Holders and the Trustee and shall forthwith
be paid to the Trustee, on behalf of the Holders, to be credited and applied to
the Guaranteed Obligations, whether matured or unmatured.
SECTION 6. Amendments, Etc. No amendment or waiver of any provision
of this Guarantee and no consent to any departure by the Guarantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by the Trustee, on behalf of the Holders, pursuant to the provisions of Article
IX of the Indenture, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and delivered in person or mailed by
first-class mail, if to the Guarantor, addressed to it at the address of the
Company at 1840 Century Park East, Los Angeles, California 90067, Attention:
Corporate Vice President and Secretary, if to any Holder, addressed to it c/o
the Trustee at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Administration, and if to the Trustee, addressed to
it at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention:
Corporate Trust Administration or as to any party at such other address as shall
be designated by such party in a written notice to each other party. All such
notices and other communications shall, when mailed by first class mail, be
effective when deposited in the first class mails.
SECTION 8. No Waiver; Remedies. No failure on the part of any Holder
or the Trustee to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9. Continuing Guarantee. This Guarantee is a continuing
guarantee and shall (a) remain in full force and effect until the earlier of the
payment in full (including deemed payment pursuant to Section VIII.4 of the
Indenture) of the Guaranteed Obligations and all other amounts payable under
this Guarantee, and the termination of this Guarantee pursuant to Section 10 of
this Guarantee, (b) subject to the terms hereof, be binding upon the Guarantor,
its respective successors and assigns and (c) inure to the benefit of and be
enforceable by each Holder and the Trustee and their respective successors,
transferees and assigns.
SECTION 10. Guarantor May Consolidate, Etc., on Certain Terms. Except
with the consent of the Holders of Securities as provided in the Indenture, the
Guarantor may not consolidate with or merge into another Person or convey or
transfer (by lease, assignment, sale or otherwise) all or substantially all its
properties and assets to another Person or group of affiliated Persons, unless:
(a) any successor entity is a corporation, partnership, limited
liability company or trust organized and validly existing under the laws of
the United States or any state thereof;
(b) the successor entity assumes the Guarantor's obligations under
this Guarantee;
(c) after giving effect to the transaction, no Event of Default has
occurred and is continuing; and
(d) the Guarantor delivers to the Trustee certificates and opinions to
the effect that the transaction complies with the Indenture.
Upon any such consolidation or merger or conveyance, transfer or lease
of substantially all the properties and assets of the Guarantor any person, the
successor Person will succeed to, and be substituted for, such Guarantor under
the Indenture and this Guarantee, and the Guarantor, except in the case of a
lease of its properties and assets substantially as an entirety, will be
relieved of all obligations and covenants under the Indenture and this
Guarantee.
SECTION 13. Governing Law. This Guarantee shall be governed by, and
construed in accordance with, the law of the State of New York, without regard
to any otherwise governing principles of conflicts of law.
SECTION 14. Counterparts. This Guarantee may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NORTHROP GRUMMAN
CORPORATION (formerly NNG,Inc.)
By ___________________________________
Albert F. Myers,
Corporate Vice President and
Treasurer
Attest:
By ___________________________________
John H. Mullan,
Corporate Vice President and
Secretary
EXHIBIT B
GUARANTEE BY NORTHROP GRUMMAN SYSTEMS CORPORATION
GUARANTEE
(NGSC of Litton 1998 Indenture Debt)
GUARANTEE dated as of ______________, 2001 (this "Guarantee") made by
Northrop Grumman Systems Corporation, a Delaware corporation (formerly Northrop
Grumman Corporation) ("Guarantor"), in favor of and for the benefit of The Bank
of New York, as trustee (the "Trustee") for the Holders (as such term is defined
in the Indenture referred to below) of the 6.05% Senior Notes due 2003, the
6.75% Senior Debentures due 2018 and the 8.00% Senior Notes due 2009
(collectively, the "Securities") of Litton Industries, Inc. (the "Company").
WHEREAS, the Company has entered into an Indenture dated as of April
13, 1998 between the Company and the Trustee (as amended, modified and
supplemented from time to time with respect to the Securities, the "Indenture").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Indenture; and
WHEREAS, the Guarantor and the Company are both subsidiaries of
Northrop Grumman Corporation (formerly NNG, Inc.); and
WHEREAS, in consideration for the guarantee of the Securities by the
Guarantor, the Company has agreed to guarantee certain outstanding indenture
debt of the Guarantor.
NOW, THEREFORE, in consideration of the foregoing, the Guarantor
hereby agrees as follows:
SECTION 1. Guarantee; Limitation of Liability.
(a) The Guarantor irrevocably and unconditionally guarantees as a
primary obligor and not merely as a surety, to the Trustee and to each Holder of
a Security authenticated and delivered by the Trustee the due and punctual
payment of the principal of and any premium and interest on such Security
(including, in case of default, interest on overdue principal and interest) and
including any additional interest required to be paid according to the terms of
the Securities or the Indenture, when due, whether at stated maturity, upon
redemption or repayment, upon declaration of acceleration or otherwise according
to the terms of the Securities or the Indenture and the due and punctual
performance of all other obligations of the Company to such Holder or the
Trustee, all in accordance with the terms of the Securities and the Indenture
(such obligations being the "Guaranteed Obligations"), and agrees to pay any and
all expenses (including reasonable counsel fees and expenses) incurred by such
Holder or the Trustee in enforcing any rights under this Guarantee. Without
limiting the generality of the foregoing, the Guarantor's liability shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Company to such Holder or the Trustee under the Securities or the
Indenture but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Company because it is the intention of the Guarantor, the Trustee and the
Holders that the Guaranteed Obligations should be determined without regard to
any rule of law or order that might relieve the Company of any portion of the
Guaranteed Obligations.
(b) Notwithstanding anything to the contrary in this Agreement, the
Guarantor hereby, and the Trustee and each Holder by accepting the benefits of
this Guarantee, confirms that it is its intention that the guarantee by the
Guarantor pursuant to this Guarantee together with each other guarantee by such
Guarantor of Participating Indebtedness (as defined below) shall not constitute
a fraudulent transfer or conveyance for purposes of any applicable provisions of
Title 11 of the United States Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act, or any similar federal or state law. To
effectuate the foregoing intention, the obligations of the Guarantor under this
Guarantee and each other guarantee of Participating Indebtedness shall be
limited, collectively, to such maximum amount as will, after giving effect to
such maximum amount and all other liabilities of such Guarantor, contingent or
otherwise, that are relevant under such laws, and after giving effect to any
rights to subrogation, reimbursement, indemnification or contribution of such
Guarantor pursuant to applicable law or pursuant to any agreement, result in the
obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent transfer or conveyance. The Trustee and each Holder by accepting
the benefits of this Guarantee confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of the Guarantor in which
concurrent claims are made upon such Guarantor hereunder and under any other
guarantee of Participating Indebtedness, to the extent such claims will not be
fully satisfied, each such claimant with a valid claim against the Guarantor
shall be entitled to a ratable share of all payments by such Guarantor in
respect of such concurrent claims. For purposes of this Section l(b),
"Participating Indebtedness" means any Indebtedness (as defined below) of the
Company that is guaranteed by such Guarantor pursuant to a guarantee (i) the
incurrence of which is not prohibited by the terms of the Indenture or any
agreement governing any other Participating Indebtedness then outstanding (or,
if so prohibited by the Indenture or any such agreement, is permitted as a
result of a consent or waiver thereunder) and (ii) that contains a limitation of
liability and confirmation of intention regarding ratability of payments on
substantially the terms set forth in this Section l(b). "Indebtedness" means any
indebtedness, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit and, to the extent not otherwise included, the guarantee by the Company
of any indebtedness of any other Person.
(c) Anything contained herein to the contrary notwithstanding, the
liability of the Company in respect of the Securities guaranteed by the
Guarantor hereunder shall not be limited by the terms of Section l(b).
SECTION 2. Guarantee Absolute. The Guarantor guarantees that the
Guaranteed Obligations will be paid or performed strictly in accordance with the
terms of the Securities and the Indenture, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Holder with respect thereto. The obligations of the
Guarantor under this Guarantee are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against such
Guarantor to enforce this Guarantee, irrespective of whether any action is
brought against the Company or whether the Company is joined in any such action
or actions. The liability of the Guarantor under this Guarantee shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Securities or the
Indenture or any agreement or instrument relating to the Securities or the
Indenture or any failure to enforce the provisions thereof;
(b) any renewal, extension or other change in the time, manner or
place of payment or performance of, or in any other term of, all or any of
the Guaranteed Obligations, or any other amendment or waiver of or any
consent to the departure from the Securities or the Indenture;
(c) any settlement, compromise, release or discharge, or acceptance or
refusal of any offer of performance with respect to, or any substitution
for, the Guaranteed Obligations or any agreement related thereto and/or any
subordination of the payment of the same to the payment of any other
obligations;
(d) any taking, exchange, release or non-perfection of any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind, whether
or not filed, recorded or otherwise perfected under applicable law (each a
"Lien"), in any real or personal property to secure payment or performance
of any or all of the Guaranteed Obligations (whether now or hereafter
granted, the "Collateral"), or any taking, release, amendment, waiver of,
or consent to the departure from, any other guarantee, for all or any of
the Guaranteed Obligations;
(e) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral or any other assets of the Company or any
Subsidiary;
(f) any change, restructuring or termination of the corporate
structure or existence of the Company or any Subsidiary; or
(g) any other circumstance (including, without limitation, any statute
of limitations) that might otherwise constitute a defense available to, or
a discharge of, the Company or the Guarantor of the Guaranteed Obligations.
This Guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Holder or the Trustee upon the
insolvency, bankruptcy or reorganization of the Company or for any other reason,
all as though such payment had not been made. The Guarantor further agrees, to
the fullest extent that it may lawfully do so, that, as between such Guarantor
on the one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article VI of the Indenture for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition extant under any applicable bankruptcy
law preventing such acceleration in respect of the obligations guaranteed hereby
and (ii) in the event of any declarations of acceleration of such obligations as
provided in Article VI of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantor for the
purpose of this Guarantee. In addition, without limiting the foregoing
provision, upon effectiveness of an acceleration under Article VI of the
Indenture, the Trustee shall promptly make a demand for payment on the
Securities under this Guarantee provided for hereunder and not discharged.
SECTION 3. Waivers.
(a) The Guarantor hereby waives: (i) promptness, diligence,
presentment, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this Guarantee, (ii) any requirement to file any
claims with a court in the event of merger or bankruptcy of the Company or any
guarantor of the Guaranteed Obligations, (iii) any right to require a proceeding
first against the Company or any other guarantor of the Guaranteed Obligations,
(iv) the benefit of discussion or protest or notice with respect to any such
Securities or the Indebtedness evidenced thereby, (v) any requirement that any
Holder or the Trustee protect, secure, perfect or insure any Lien or any
Collateral subject thereto or exhaust any right or take any action against the
Company or any other Person or any Collateral, (vi) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of the Company, (vii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
any other respects more burdensome than that of the principal, (viii) any
defense based upon any errors or omissions of the Trustee or the Holders'
administration of the Guaranteed Obligations, and (ix) any rights to set-offs,
recoupments and counterclaims.
(b) The Guarantor hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Securities or the Indenture,
the transactions contemplated thereby or the actions of the Trustee in the
negotiation, administration, performance or enforcement thereof.
SECTION 4. Financial Condition of the Company. The Guarantor
represents and warrants that it is presently informed of the financial condition
of the Company and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.
The Guarantor hereby covenants that it will continue to keep itself informed of
the Company's financial condition and of all other circumstances which bear upon
the risk of nonpayment and hereby waives any duty on the part of the Trustee or
any Holder to disclose or discuss with such Guarantor its assessment, or such
Guarantor's assessment, of the financial condition of the Company.
SECTION 5. Subrogation. The Guarantor will not exercise any rights
that it may acquire by way of subrogation under this Guarantee, by any payment
made hereunder or otherwise, until all the Guaranteed Obligations shall have
been indefeasibly paid in full in cash. If any amount shall be paid to the
Guarantor on account of any such subrogation rights at any time when all the
Guaranteed Obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Holders and the Trustee and shall forthwith
be paid to the Trustee, on behalf of the Holders, to be credited and applied to
the Guaranteed Obligations, whether matured or unmatured.
SECTION 6. Amendments, Etc. No amendment or waiver of any provision
of this Guarantee and no consent to any departure by the Guarantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by the Trustee, on behalf of the Holders, pursuant to the provisions of Article
IX of the Indenture, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and delivered in person or mailed by
first-class mail, if to the Guarantor, addressed to it at the address of the
Company at 1840 Century Park East, Los Angeles, California 90067, Attention:
Corporate Vice President and Secretary, if to any Holder, addressed to it c/o
the Trustee at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Administration, and if to the Trustee, addressed to
it at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention:
Corporate Trust Administration or as to any party at such other address as shall
be designated by such party in a written notice to each other party. All such
notices and other communications shall, when mailed by first class mail, be
effective when deposited in the first class mails.
SECTION 8. No Waiver; Remedies. No failure on the part of any Holder
or the Trustee to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 9. Continuing Guarantee. This Guarantee is a continuing
guarantee and shall (a) remain in full force and effect until the earlier of the
payment in full (including deemed payment pursuant to Section VIII.4 of the
Indenture) of the Guaranteed Obligations and all other amounts payable under
this Guarantee, and the termination of this Guarantee pursuant to Section 10 of
this Guarantee, (b) subject to the terms hereof, be binding upon the Guarantor,
its respective successors and assigns and (c) inure to the benefit of and be
enforceable by each Holder and the Trustee and their respective successors,
transferees and assigns.
SECTION 10. Guarantor May Consolidate, Etc., on Certain Terms. Except
with the consent of the Holders of Securities as provided in the Indenture, the
Guarantor may not consolidate with or merge into another Person or convey or
transfer (by lease, assignment, sale or otherwise) all or substantially all its
properties and assets to another Person or group of affiliated Persons, unless:
(a) any successor entity is a corporation, partnership, limited
liability company or trust organized and validly existing under the laws of
the United States or any state thereof;
(b) the successor entity assumes the Guarantor's obligations under
this Guarantee;
(c) after giving effect to the transaction, no Event of Default has
occurred and is continuing; and
(d) the Guarantor delivers to the Trustee certificates and opinions to
the effect that the transaction complies with the Indenture.
Upon any such consolidation or merger or conveyance, transfer or lease
of substantially all the properties and assets of the Guarantor any person, the
successor Person will succeed to, and be substituted for, such Guarantor under
the Indenture and this Guarantee, and the Guarantor, except in the case of a
lease of its properties and assets substantially as an entirety, will be
relieved of all obligations and covenants under the Indenture and this
Guarantee.
SECTION 13. Governing Law. This Guarantee shall be governed by, and
construed in accordance with, the law of the State of New York, without regard
to any otherwise governing principles of conflicts of law.
SECTION 14. Counterparts. This Guarantee may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NORTHROP GRUMMAN SYSTEMS
CORPORATION (formerly Northrop
Grumman Corporation)
By ______________________________
Albert F. Myers,
Corporate Vice President and
Treasurer
Attest:
By ______________________________
John H. Mullan,
Corporate Vice President and
Secretary
EXHIBIT 4.7
SUPPLEMENTAL INDENTURE
THIS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated as
of April 3, 2001, is by and among Litton Industries, Inc., a Delaware
corporation ("Litton"), The Bank of New York, as trustee ("Trustee"), Northrop
Grumman Corporation, a Delaware corporation, formerly NNG, Inc. ("NGC"), and
Northrop Grumman Systems Corporation, a Delaware corporation, formerly Northrop
Grumman Corporation ("NGSC"). Capitalized terms used but not defined herein
shall have the meanings assigned to such terms in the Senior Indenture (as
defined below).
WHEREAS, Litton and the Trustee are parties to that certain Senior
Indenture dated as of December 15, 1991 between Litton and the Trustee (as
supplemented and/or amended to date, the "Senior Indenture"), providing for the
issuance from time to time of Litton's unsecured debentures, notes or other
evidences of indebtedness to be issued in one or more series as might be
determined by Litton under the Senior Indenture;
WHEREAS, Litton has issued its 7.75% Debentures due 2026 and its 6.98%
Debentures due 2036 pursuant to the terms of the Senior Indenture (the
"Securities");
WHEREAS, NGSC is a wholly-owned subsidiary of NGC and Litton is a
majority-owned subsidiary of NGC;
WHEREAS, in consideration of a reciprocal guarantee to be given by
Litton with respect to the outstanding indenture debt of NGSC, NGC and NGSC
desire to guarantee the Securities pursuant to the terms of the forms of
Guarantee attached hereto as Exhibits A and B (the "Guarantees");
NOW, THEREFORE, in consideration of a reciprocal guarantee to be given
by Litton with respect to the outstanding indenture debt of NGSC, NGC, NGSC and
Litton covenant and agree to and with the Trustee, for the equal and
proportionate benefit of all present and future Holders of the Securities, as
follows:
1. Guarantee of Outstanding Indenture Debt. Upon the execution and
delivery of the Guarantees to the Trustee, the obligations of Litton with
respect to the Securities issued pursuant to the Senior Indenture, including,
but not limited to, the payment of principal and interest on the Securities and
the payment of all other amounts due under the Senior Indenture, will be
unconditionally guaranteed by NGC and NGSC as provided in the Guarantees.
-1-
2. Acknowledgment of Trustee.
The Trustee hereby acknowledges receipt of the following documents
pursuant to the provisions of the Senior Indenture:
(a) An Officers' Certificate of Litton stating that, among other
things, to the knowledge of the signing officers, all conditions precedent
provided for in the Senior Indenture relating to the execution and delivery of
this Supplemental Indenture have been complied with.
(b) A Certificate of Board Resolution certifying the adoption of
certain resolutions by the board of directors of Litton.
(c) An Opinion of Counsel specifying, among other things, that all
conditions precedent provided for in the Senior Indenture relating to the
execution and delivery of this Supplemental Indenture have been complied with.
3. Incorporation by Reference.
This Supplemental Indenture shall be construed as supplemental to the
Senior Indenture and shall form a part thereof. The Senior Indenture is hereby
incorporated by reference herein and is hereby ratified, approved, and
confirmed.
4. Effect of Headings.
The headings herein are for convenience and reference only, are not to
be considered a part hereof, and shall not affect the construction hereof.
5. Successors and Assigns.
All covenants and agreements in this Supplemental Indenture by NGC,
NGSC and Litton shall bind their successors and assigns, whether so expressed or
not.
6. Separability Clause.
In case any provision in this Supplemental Indenture or in the
Guarantees shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
7. Governing Law.
This Supplemental Indenture shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to any
otherwise governing principles of conflicts of law.
-2-
8. Additional Supplemental Indentures.
Nothing contained herein shall alter or impair the rights of the
parties to enter into one or more additional supplemental indentures in the
manner provided in the Senior Indenture.
9. Counterparts.
This Supplemental Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
[SIGNATURE PAGES FOLLOW]
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of April ___, 2001
LITTON INDUSTRIES, INC.
By: Albert F. Myers
Its: Corporate Vice President and Treasurer
Attest:
By: John H. Mullan
Its: Corporate Vice President and
Secretary
THE BANK OF NEW YORK, as Trustee
By:
Its:
Attest:
By:
Its:
NORTHROP GRUMMAN CORPORATION
By: Albert F. Myers
Its: Corporate Vice President and Treasurer
Attest:
By: John H. Mullan
Its: Corporate Vice President and
Secretary
NORTHROP GRUMMAN SYSTEMS CORPORATION
By: Albert F. Myers
Its: Corporate Vice President and Treasurer
Attest:
By: John H. Mullan
Its: Corporate Vice President and
Secretary
EXHIBIT A
GUARANTEE BY NORTHROP GRUMMAN CORPORATION
GUARANTEE
(NGC of Litton 1991 Indenture Debt)
GUARANTEE dated as of ______________, 2001 (this "Guarantee") made by
Northrop Grumman Corporation, a Delaware corporation (formerly NNG, Inc.)
("Guarantor"), in favor of and for the benefit of The Bank of New York, as
trustee (the "Trustee") for the Holders (as such term is defined in the
Indenture referred to below) of the 7.75% Debentures due 2026 and the 6.98%
Debentures due 2036 (collectively, the "Securities") of Litton Industries, Inc.
(the "Company").
WHEREAS, the Company has entered into a Senior Indenture dated as of
December 15, 1991 between the Company and the Trustee (as amended, modified and
supplemented from time to time with respect to the Securities, the "Indenture").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Indenture; and
WHEREAS, the Company is a subsidiary of the Guarantor.
NOW, THEREFORE, in consideration of the foregoing, the Guarantor
hereby agrees as follows:
SECTION 1. Guarantee; Limitation of Liability.
(a) The Guarantor irrevocably and unconditionally guarantees as a
primary obligor and not merely as a surety, to the Trustee and to each Holder of
a Security authenticated and delivered by the Trustee the due and punctual
payment of the principal of and any premium and interest on such Security
(including, in case of default, interest on overdue principal and interest) and
including any additional interest required to be paid according to the terms of
the Securities or the Indenture, when due, whether at stated maturity, upon
redemption or repayment, upon declaration of acceleration or otherwise according
to the terms of the Securities or the Indenture and the due and punctual
performance of all other obligations of the Company to such Holder or the
Trustee, all in accordance with the terms of the Securities and the Indenture
(such obligations being the "Guaranteed Obligations"), and agrees to pay any and
all expenses (including reasonable counsel fees and expenses) incurred by such
Holder or the Trustee in enforcing any rights under this Guarantee. Without
limiting the generality of the foregoing, the Guarantor's liability shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Company to such Holder or the Trustee under the Securities or the
Indenture but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Company because it is the intention of the Guarantor, the Trustee and the
Holders that the Guaranteed
Obligations should be determined without regard to any rule of law or order that
might relieve the Company of any portion of the Guaranteed Obligations.
(b) Notwithstanding anything to the contrary in this Agreement, the
Guarantor hereby, and the Trustee and each Holder by accepting the benefits of
this Guarantee, confirms that it is its intention that the guarantee by the
Guarantor pursuant to this Guarantee together with each other guarantee by such
Guarantor of Participating Indebtedness (as defined below) shall not constitute
a fraudulent transfer or conveyance for purposes of any applicable provisions of
Title 11 of the United States Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act, or any similar federal or state law. To
effectuate the foregoing intention, the obligations of the Guarantor under this
Guarantee and each other guarantee of Participating Indebtedness shall be
limited, collectively, to such maximum amount as will, after giving effect to
such maximum amount and all other liabilities of such Guarantor, contingent or
otherwise, that are relevant under such laws, and after giving effect to any
rights to subrogation, reimbursement, indemnification or contribution of such
Guarantor pursuant to applicable law or pursuant to any agreement, result in the
obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent transfer or conveyance. The Trustee and each Holder by accepting
the benefits of this Guarantee confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of the Guarantor in which
concurrent claims are made upon such Guarantor hereunder and under any other
guarantee of Participating Indebtedness, to the extent such claims will not be
fully satisfied, each such claimant with a valid claim against the Guarantor
shall be entitled to a ratable share of all payments by such Guarantor in
respect of such concurrent claims. For purposes of this Section l(b),
"Participating Indebtedness" means any Indebtedness (as defined below) of the
Company that is guaranteed by such Guarantor pursuant to a guarantee (i) the
incurrence of which is not prohibited by the terms of the Indenture or any
agreement governing any other Participating Indebtedness then outstanding (or,
if so prohibited by the Indenture or any such agreement, is permitted as a
result of a consent or waiver thereunder) and (ii) that contains a limitation of
liability and confirmation of intention regarding ratability of payments on
substantially the terms set forth in this Section l(b). "Indebtedness" means any
indebtedness, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit and, to the extent not otherwise included, the guarantee by the Company
of any indebtedness of any other Person.
(c) Anything contained herein to the contrary notwithstanding, the
liability of the Company in respect of the Securities guaranteed by the
Guarantor hereunder shall not be limited by the terms of Section l(b).
SECTION 2. Guarantee Absolute. The Guarantor guarantees that the
Guaranteed Obligations will be paid or performed strictly in accordance with the
terms
of the Securities and the Indenture, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of any Holder with respect thereto. The obligations of the Guarantor
under this Guarantee are independent of the Guaranteed Obligations, and a
separate action or actions may be brought and prosecuted against such Guarantor
to enforce this Guarantee, irrespective of whether any action is brought against
the Company or whether the Company is joined in any such action or actions. The
liability of the Guarantor under this Guarantee shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Securities or the
Indenture or any agreement or instrument relating to the Securities or the
Indenture or any failure to enforce the provisions thereof;
(b) any renewal, extension or other change in the time, manner or
place of payment or performance of, or in any other term of, all or any of
the Guaranteed Obligations, or any other amendment or waiver of or any
consent to the departure from the Securities or the Indenture;
(c) any settlement, compromise, release or discharge, or acceptance or
refusal of any offer of performance with respect to, or any substitution
for, the Guaranteed Obligations or any agreement related thereto and/or any
subordination of the payment of the same to the payment of any other
obligations;
(d) any taking, exchange, release or non-perfection of any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind, whether
or not filed, recorded or otherwise perfected under applicable law (each a
"Lien"), in any real or personal property to secure payment or performance
of any or all of the Guaranteed Obligations (whether now or hereafter
granted, the "Collateral"), or any taking, release, amendment, waiver of,
or consent to the departure from, any other guarantee, for all or any of
the Guaranteed Obligations;
(e) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral or any other assets of the Company or any
Subsidiary;
(f) any change, restructuring or termination of the corporate
structure or existence of the Company or any Subsidiary; or
(g) any other circumstance (including, without limitation, any statute
of limitations) that might otherwise constitute a defense available to, or
a discharge of, the Company or the Guarantor of the Guaranteed Obligations.
This Guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Holder or the Trustee upon the
insolvency, bankruptcy or reorganization of the Company or for any other reason,
all as though such payment had not been made. The Guarantor further agrees, to
the fullest extent that it may lawfully do so, that, as between such Guarantor
on the one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Five of the Indenture for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition extant under any
applicable bankruptcy law preventing such acceleration in respect of the
obligations guaranteed hereby and (ii) in the event of any declarations of
acceleration of such obligations as provided in Article Five of the Indenture,
such obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Guarantee. In addition, without
limiting the foregoing provision, upon effectiveness of an acceleration under
Article Five of the Indenture, the Trustee shall promptly make a demand for
payment on the Securities under this Guarantee provided for hereunder and not
discharged.
SECTION 3. Waivers.
(a) The Guarantor hereby waives: (i) promptness, diligence,
presentment, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this Guarantee, (ii) any requirement to file any
claims with a court in the event of merger or bankruptcy of the Company or any
guarantor of the Guaranteed Obligations, (iii) any right to require a proceeding
first against the Company or any other guarantor of the Guaranteed Obligations,
(iv) the benefit of discussion or protest or notice with respect to any such
Securities or the Indebtedness evidenced thereby, (v) any requirement that any
Holder or the Trustee protect, secure, perfect or insure any Lien or any
Collateral subject thereto or exhaust any right or take any action against the
Company or any other Person or any Collateral, (vi) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of the Company, (vii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
any other respects more burdensome than that of the principal, (viii) any
defense based upon any errors or omissions of the Trustee or the Holders'
administration of the Guaranteed Obligations, and (ix) any rights to set-offs,
recoupments and counterclaims.
(b) The Guarantor hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Securities or the Indenture,
the transactions contemplated thereby or the actions of the Trustee in the
negotiation, administration, performance or enforcement thereof.
SECTION 4. Financial Condition of the Company. The Guarantor
represents and warrants that it is presently informed of the financial condition
of the Company and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.
The Guarantor hereby covenants that it will continue to keep itself informed of
the Company's financial condition and of all other circumstances which bear upon
the risk of nonpayment and hereby waives any duty on the part of the Trustee or
any Holder to disclose or discuss with such Guarantor its assessment, or such
Guarantor's assessment, of the financial condition of the Company.
SECTION 5. Subrogation. The Guarantor will not exercise any rights
that it may acquire by way of subrogation under this Guarantee, by any payment
made hereunder or otherwise, until all the Guaranteed Obligations shall have
been indefeasibly paid in full in cash. If any amount shall be paid to the
Guarantor on account of any such subrogation rights at any time when all the
Guaranteed Obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Holders and the Trustee and shall forthwith
be paid to the Trustee, on behalf of the Holders, to be credited and applied to
the Guaranteed Obligations, whether matured or unmatured.
SECTION 6. Amendments, Etc. No amendment or waiver of any provision
of this Guarantee and no consent to any departure by the Guarantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by the Trustee, on behalf of the Holders, pursuant to the provisions of Article
Nine of the Indenture, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 7. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and delivered in person or mailed by
first-class mail, if to the Guarantor, addressed to it at the address of the
Company at 1840 Century Park East, Los Angeles, California 90067, Attention:
Corporate Vice President and Secretary, if to any Holder, addressed to it c/o
the Trustee at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Administration, and if to the Trustee, addressed to
it at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention:
Corporate Trust Administration, or as to any party at such other address as
shall be designated by such party in a written notice to each other party. All
such notices and other communications shall, when mailed by first class mail, be
effective when deposited in the first class mails.
SECTION 8. No Waiver; Remedies. No failure on the part of any Holder
or the Trustee to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 9. Continuing Guarantee. This Guarantee is a continuing
guarantee and shall (a) remain in full force and effect until the earlier of the
payment in full (including deemed payment pursuant to Section 403 of the
Indenture) of the Guaranteed Obligations and all other amounts payable under
this Guarantee, and the termination of this Guarantee pursuant to Section 10 of
this Guarantee, (b) subject to the terms hereof, be binding upon the Guarantor,
its respective successors and assigns and (c) inure to the benefit of and be
enforceable by each Holder and the Trustee and their respective successors,
transferees and assigns.
SECTION 10. Guarantor May Consolidate, Etc., on Certain Terms. Except
with the consent of the Holders of Securities as provided in the Indenture, the
Guarantor may not consolidate with or merge into any other Person or transfer
(by lease, assignment, sale or otherwise) all or substantially all its
properties and assets to another Person or group of affiliated Persons, unless:
(a) any successor entity is a corporation, partnership or trust
organized and validly existing under the laws of the United States or any
state thereof;
(b) the successor entity assumes the Guarantor's obligations under
this Guarantee;
(c) after giving effect to the transaction, no Event of Default, and
no event which, after notice and lapse of time, or both, would become an
Event of Default, has occurred and is continuing; and
(d) the Guarantor delivers to the Trustee certificates and opinions to
the effect that the transaction complies with the Indenture.
Upon any such consolidation or merger or conveyance, transfer or lease
of substantially all the properties and assets of the Guarantor any person, the
successor person will succeed to, and be substituted for, such Guarantor under
the Indenture and this Guarantee, and the Guarantor, except in the case of a
lease of its properties and assets substantially as an entirety, will be
discharged and released from all obligations and covenants under the Indenture
and this Guarantee.
SECTION 13. Governing Law. This Guarantee shall be governed by, and
construed in accordance with, the law of the State of New York, without regard
to any otherwise governing principles of conflicts of law.
SECTION 14. Counterparts. This Guarantee may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NORTHROP GRUMMAN
CORPORATION (formerly NNG, Inc.)
By _________________________________
Albert F. Myers,
Corporate Vice President and
Treasurer
Attest:
By__________________________________
John H. Mullan,
Corporate Vice President and
Secretary
EXHIBIT B
GUARANTEE BY NORTHROP GRUMMAN SYSTEMS CORPORATION
GUARANTEE
(NGSC of Litton 1991 Indenture Debt)
GUARANTEE dated as of ______________, 2001 (this "Guarantee") made by
Northrop Grumman Systems Corporation, a Delaware corporation (formerly Northrop
Grumman Corporation) ("Guarantor"), in favor of and for the benefit of The Bank
of New York, as trustee (the "Trustee") for the Holders (as such term is defined
in the Indenture referred to below) of the 7.75% Debentures due 2026 and the
6.98% Debentures due 2036 (collectively, the "Securities") of Litton Industries,
Inc. (the "Company").
WHEREAS, the Company has entered into a Senior Indenture dated as of
December 15, 1991 between the Company and the Trustee (as amended, modified and
supplemented from time to time with respect to the Securities, the "Indenture").
Capitalized terms not otherwise defined herein shall have the meanings set forth
in the Indenture; and
WHEREAS, the Guarantor and the Company are both subsidiaries of
Northrop Grumman Corporation (formerly NNG, Inc.); and
WHEREAS, in consideration for the guarantee of the Securities by the
Guarantor, the Company has agreed to guarantee certain outstanding indenture
debt of the Guarantor.
NOW, THEREFORE, in consideration of the foregoing, the Guarantor
hereby agrees as follows:
SECTION 1. Guarantee; Limitation of Liability.
(a) The Guarantor irrevocably and unconditionally guarantees as a
primary obligor and not merely as a surety, to the Trustee and to each Holder of
a Security authenticated and delivered by the Trustee the due and punctual
payment of the principal of and any premium and interest on such Security
(including, in case of default, interest on overdue principal and interest) and
including any additional interest required to be paid according to the terms of
the Securities or the Indenture, when due, whether at stated maturity, upon
redemption or repayment, upon declaration of acceleration or otherwise according
to the terms of the Securities or the Indenture and the due and punctual
performance of all other obligations of the Company to such Holder or the
Trustee, all in accordance with the terms of the Securities and the Indenture
(such obligations being the "Guaranteed Obligations"), and agrees to pay any and
all expenses (including reasonable counsel fees and expenses) incurred by such
Holder or the Trustee in enforcing any rights under this Guarantee. Without
limiting the generality of the foregoing, the Guarantor's liability shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Company to such Holder or the Trustee under the Securities or the
Indenture but for the fact that they are unenforceable or not allowable due to
the existence of a bankruptcy, reorganization or similar proceeding involving
the Company because it is the intention of the Guarantor, the Trustee and the
Holders that the Guaranteed Obligations should be determined without regard to
any rule of law or order that might relieve the Company of any portion of the
Guaranteed Obligations.
(b) Notwithstanding anything to the contrary in this Agreement, the
Guarantor hereby, and the Trustee and each Holder by accepting the benefits of
this Guarantee, confirms that it is its intention that the guarantee by the
Guarantor pursuant to this Guarantee together with each other guarantee by such
Guarantor of Participating Indebtedness (as defined below) shall not constitute
a fraudulent transfer or conveyance for purposes of any applicable provisions of
Title 11 of the United States Code, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act, or any similar federal or state law. To
effectuate the foregoing intention, the obligations of the Guarantor under this
Guarantee and each other guarantee of Participating Indebtedness shall be
limited, collectively, to such maximum amount as will, after giving effect to
such maximum amount and all other liabilities of such Guarantor, contingent or
otherwise, that are relevant under such laws, and after giving effect to any
rights to subrogation, reimbursement, indemnification or contribution of such
Guarantor pursuant to applicable law or pursuant to any agreement, result in the
obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent transfer or conveyance. The Trustee and each Holder by accepting
the benefits of this Guarantee confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of the Guarantor in which
concurrent claims are made upon such Guarantor hereunder and under any other
guarantee of Participating Indebtedness, to the extent such claims will not be
fully satisfied, each such claimant with a valid claim against the Guarantor
shall be entitled to a ratable share of all payments by such Guarantor in
respect of such concurrent claims. For purposes of this Section l(b),
"Participating Indebtedness" means any Indebtedness (as defined below) of the
Company that is guaranteed by such Guarantor pursuant to a guarantee (i) the
incurrence of which is not prohibited by the terms of the Indenture or any
agreement governing any other Participating Indebtedness then outstanding (or,
if so prohibited by the Indenture or any such agreement, is permitted as a
result of a consent or waiver thereunder) and (ii) that contains a limitation of
liability and confirmation of intention regarding ratability of payments on
substantially the terms set forth in this Section l(b). "Indebtedness" means
any indebtedness, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit and, to the extent not otherwise included, the guarantee by the Company
of any indebtedness of any other Person.
(c) Anything contained herein to the contrary notwithstanding, the
liability of the Company in respect of the Securities guaranteed by the
Guarantor hereunder shall not be limited by the terms of Section l(b).
SECTION 2. Guarantee Absolute. The Guarantor guarantees that the
Guaranteed Obligations will be paid or performed strictly in accordance with the
terms of the Securities and the Indenture, regardless of any law, regulation or
order now or hereafter in effect in any jurisdiction affecting any of such terms
or the rights of any Holder with respect thereto. The obligations of the
Guarantor under this Guarantee are independent of the Guaranteed Obligations,
and a separate action or actions may be brought and prosecuted against such
Guarantor to enforce this Guarantee, irrespective of whether any action is
brought against the Company or whether the Company is joined in any such action
or actions. The liability of the Guarantor under this Guarantee shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Securities or the
Indenture or any agreement or instrument relating to the Securities or the
Indenture or any failure to enforce the provisions thereof;
(b) any renewal, extension or other change in the time, manner or
place of payment or performance of, or in any other term of, all or any of
the Guaranteed Obligations, or any other amendment or waiver of or any
consent to the departure from the Securities or the Indenture;
(c) any settlement, compromise, release or discharge, or acceptance
or refusal of any offer of performance with respect to, or any substitution
for, the Guaranteed Obligations or any agreement related thereto and/or any
subordination of the payment of the same to the payment of any other
obligations;
(d) any taking, exchange, release or non-perfection of any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind, whether
or not filed, recorded or otherwise perfected under applicable law (each a
"Lien"), in any real or personal property to secure payment or performance
of any or all of the Guaranteed Obligations (whether now or hereafter
granted, the "Collateral"), or any taking, release, amendment, waiver of,
or consent to the departure from, any other guarantee, for all or any of
the Guaranteed Obligations;
(e) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral or any other assets of the Company or any
Subsidiary;
(f) any change, restructuring or termination of the corporate
structure or existence of the Company or any Subsidiary; or
(g) any other circumstance (including, without limitation, any
statute of limitations) that might otherwise constitute a defense available
to, or a discharge of, the Company or the Guarantor of the Guaranteed
Obligations.
This Guarantee shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by any Holder or the Trustee upon the
insolvency, bankruptcy or reorganization of the Company or for any other reason,
all as though such payment had not been made. The Guarantor further agrees, to
the fullest extent that it may lawfully do so, that, as between such Guarantor
on the one hand, and the Holders and the Trustee, on the other hand, (i) the
maturity of the obligations guaranteed hereby may be accelerated as provided in
Article Five of the Indenture for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition extant under any
applicable bankruptcy law preventing such acceleration in respect of the
obligations guaranteed hereby and (ii) in the event of any declarations of
acceleration of such obligations as provided in Article Five of the Indenture,
such obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Guarantee. In addition,
without limiting the foregoing provision, upon effectiveness of an acceleration
under Article Five of the Indenture, the Trustee shall promptly make a demand
for payment on the Securities under this Guarantee provided for hereunder and
not discharged.
SECTION 3. Waivers.
(a) The Guarantor hereby waives: (i) promptness, diligence,
presentment, notice of acceptance and any other notice with respect to any of
the Guaranteed Obligations and this Guarantee, (ii) any requirement to file any
claims with a court in the event of merger or bankruptcy of the Company or any
guarantor of the Guaranteed Obligations, (iii) any right to require a proceeding
first against the Company or any other guarantor of the Guaranteed Obligations,
(iv) the benefit of discussion or protest or notice with respect to any such
Securities or the Indebtedness evidenced thereby, (v) any requirement that any
Holder or the Trustee protect, secure, perfect or insure any Lien or any
Collateral subject thereto or exhaust any right or take any action against the
Company or any other Person or any Collateral, (vi) any defense arising by
reason of the incapacity, lack of authority or any disability or other defense
of the Company, (vii) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
any other respects more burdensome than that of the principal, (viii) any
defense based upon any errors or omissions of the Trustee or the Holders'
administration of the
Guaranteed Obligations, and (ix) any rights to set-offs, recoupments and
counterclaims.
(b) The Guarantor hereby irrevocably waives all right to trial by jury
in any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to any of the Securities or the Indenture,
the transactions contemplated thereby or the actions of the Trustee in the
negotiation, administration, performance or enforcement thereof.
SECTION 4. Financial Condition of the Company. The Guarantor
represents and warrants that it is presently informed of the financial condition
of the Company and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.
The Guarantor hereby covenants that it will continue to keep itself informed of
the Company's financial condition and of all other circumstances which bear upon
the risk of nonpayment and hereby waives any duty on the part of the Trustee or
any Holder to disclose or discuss with such Guarantor its assessment, or such
Guarantor's assessment, of the financial condition of the Company.
SECTION 5. Subrogation. The Guarantor will not exercise any rights
that it may acquire by way of subrogation under this Guarantee, by any payment
made hereunder or otherwise, until all the Guaranteed Obligations shall have
been indefeasibly paid in full in cash. If any amount shall be paid to the
Guarantor on account of any such subrogation rights at any time when all the
Guaranteed Obligations shall not have been paid in full, such amount shall be
held in trust for the benefit of the Holders and the Trustee and shall forthwith
be paid to the Trustee, on behalf of the Holders, to be credited and applied to
the Guaranteed Obligations, whether matured or unmatured.
SECTION 6. Amendments, Etc. No amendment or waiver of any provision
of this Guarantee and no consent to any departure by the Guarantor therefrom
shall in any event be effective unless the same shall be in writing and signed
by the Trustee, on behalf of the Holders, pursuant to the provisions of Article
Nine of the Indenture, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 7. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and delivered in person or mailed by
first-class mail, if to the Guarantor, addressed to it at the address of the
Company at 1840 Century Park East, Los Angeles, California 90067, Attention:
Corporate Vice President and Secretary, if to any Holder, addressed to it c/o
the Trustee at 101 Barclay Street, Floor 21 West, New York, New York 10286,
Attention: Corporate Trust Administration, and if to the Trustee, addressed to
it at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention:
Corporate Trust Administration, or as
to any party at such other address as shall be designated by such party in a
written notice to each other party. All such notices and other communications
shall, when mailed by first class mail, be effective when deposited in the first
class mails.
SECTION 8. No Waiver; Remedies. No failure on the part of any Holder
or the Trustee to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 9. Continuing Guarantee. This Guarantee is a continuing
guarantee and shall (a) remain in full force and effect until the earlier of the
payment in full (including deemed payment pursuant to Section 403 of the
Indenture) of the Guaranteed Obligations and all other amounts payable under
this Guarantee, and the termination of this Guarantee pursuant to Section 10 of
this Guarantee, (b) subject to the terms hereof, be binding upon the Guarantor,
its respective successors and assigns and (c) inure to the benefit of and be
enforceable by each Holder and the Trustee and their respective successors,
transferees and assigns.
SECTION 10. Guarantor May Consolidate, Etc., on Certain Terms. Except
with the consent of the Holders of Securities as provided in the Indenture, the
Guarantor may not consolidate with or merge into any other Person or transfer
(by lease, assignment, sale or otherwise) all or substantially all its
properties and assets to another Person or group of affiliated Persons, unless:
(a) any successor entity is a corporation, partnership or trust
organized and validly existing under the laws of the United States or any
state thereof;
(b) the successor entity assumes the Guarantor's obligations under
this Guarantee;
(c) after giving effect to the transaction, no Event of Default, and
no event which, after notice and lapse of time, or both, would become an
Event of Default, has occurred and is continuing; and
(d) the Guarantor delivers to the Trustee certificates and opinions
to the effect that the transaction complies with the Indenture.
Upon any such consolidation or merger or conveyance, transfer or lease
of substantially all the properties and assets of the Guarantor any person, the
successor person will succeed to, and be substituted for, such Guarantor under
the Indenture and this Guarantee, and the Guarantor, except in the case of a
lease of its properties and
assets substantially as an entirety, will be discharged and released from all
obligations and covenants under the Indenture and this Guarantee.
SECTION 13. Governing Law. This Guarantee shall be governed by, and
construed in accordance with, the law of the State of New York, without regard
to any otherwise governing principles of conflicts of law.
SECTION 14. Counterparts. This Guarantee may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
NORTHROP GRUMMAN SYSTEMS CORPORATION
(formerly Northrop Grumman
Corporation)
By __________________________________
Albert F. Myers,
Corporate Vice President and
Treasurer
Attest:
By __________________________________
John H. Mullan,
Corporate Vice President and
Secretary
Northrop Grumman Corporation and Subsidiaries
EXHIBIT (15)
Letter from Independent Accountants Regarding
Unaudited Interim Financial Information
May 10, 2001
Northrop Grumman Corporation
Los Angeles, California
We have made a review, in accordance with standards established by the American Institute of Certified
Public Accountants, of the unaudited interim financial information of Northrop Grumman Corporation and subsidiaries for the periods ended March 31, 2001 and 2000, as indicated in our report dated May 10, 2001; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for
the quarter ended March 31, 2001, is incorporated by reference in Registration Statement Nos. 33-59815, 33-59853, 333-68003 and 333-40862-01 on Form S-8, Registration Statement Nos. 333-78251 and 333-85633 on Form S-3 and Registration Statement Nos.
333-40862 and 333-54800 on Form S-4.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933,
is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Los Angeles, CA