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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
COMMISSION FILE NUMBER 1-3998
LITTON INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 95-1775499
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
21240 BURBANK BOULEVARD
WOODLAND HILLS, CALIFORNIA 91367-6675
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 598-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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Common Stock, par value $1 per share New York Stock Exchange
Pacific Stock Exchange
Series B $2 Cumulative Preferred Stock, New York Stock Exchange
par value $5 per share Pacific Stock Exchange
</TABLE>
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 for 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. Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
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On September 29, 1995, the aggregate market value of the Registrant's
voting stock held by non-affiliates was $1.994 billion.
On September 29, 1995, there were 46,233,521 shares of Common Stock
outstanding, exclusive of treasury shares or shares held by subsidiaries of the
Registrant.
Part III incorporates information by reference from the definitive Proxy
Statement in connection with the Registrant's Annual Meeting of Shareholders to
be held on December 7, 1995.
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<PAGE> 2
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX TO ANNUAL REPORT
ON FORM 10-K
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PAGE
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PART I
Item 1: Business................................................................... 1
Item 2: Properties................................................................. 3
Item 3: Legal Proceedings.......................................................... 4
Item 4: Submission of Matters to a Vote of Security Holders........................ 5
PART II
Item 5: Market for the Registrant's Common Equity and Related Stockholder
Matters................................................................... 6
Item 6: Selected Financial Data.................................................... 6
Item 7: Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................ 6
Item 8: Financial Statements and Supplementary Data................................ 6
Item 9: Disagreements on Accounting and Financial Disclosure....................... 6
PART III
Item 10: Directors and Executive Officers of the Registrant......................... 12
Item 11: Executive Compensation..................................................... 13
Item 12: Security Ownership of Certain Beneficial Owners and Management............. 13
Item 13: Certain Relationships and Related Transactions............................. 13
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K............ 14
Signatures.............................................................................. 17
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
Litton Industries, Inc. (hereafter together with its consolidated
subsidiaries referred to as the "Company" or "Litton" unless the context
otherwise indicates) is mainly a high-technology aerospace and defense
corporation which provides advanced electronic and defense systems and marine
engineering and production to U.S. and world markets. The Company also provides
electronic components and interconnect products to customers worldwide. The
Company was founded in California in 1953 and has evolved into a major
international organization with approximately 29,100 employees at more than 20
divisions.
The Company's businesses are reported in three business segments: Advanced
Electronics, Marine Engineering and Production, and Interconnect Products.
Information about the Company's business segments appears on pages F-20 and F-21
of this Annual Report on Form 10-K. This information includes sales and service
revenues, operating profit (loss) and identifiable assets for each of the three
years ended July 31, 1995.
Advanced Electronics
The Company is a major supplier of electronic systems and related services
to the United States and international military electronics markets. Principal
programs and products include development, manufacture and assembly of inertial
navigation and guidance systems; command, control and communications; and
electronic warfare systems. The Company participates in ongoing development and
production programs as well as upgrade and retrofit business worldwide to serve
both defense and commercial aerospace markets. The Company also provides
navigation systems and electronic components to a variety of commercial
customers.
Sales backlog for the Advanced Electronics segment was $1.752 billion and
$1.703 billion at July 31, 1995 and 1994, respectively. Of the backlog at July
31, 1995, $1.105 billion has been funded and $541 million is expected to be
realized as sales in years after fiscal 1996.
Significant revenues of the Advanced Electronics segment in 1995 were
derived from sales to the U.S. Government (approximately 64%).
Marine Engineering and Production
The Company's Ingalls Shipbuilding subsidiary is a leading designer and
builder of complex surface combatant ships for the U.S. Navy. The division is
also a major provider of modernization, overhaul and repair work and continues
to explore opportunities internationally. Ingalls has delivered a total of 69
new destroyers, cruisers and amphibious assault ships to the Navy since 1975.
Current construction work includes eight Aegis destroyers and two amphibious
assault ships for the U.S. Navy.
Sales backlog for the Marine Engineering and Production segment was $3.310
billion and $3.694 billion at July 31, 1995 and 1994, respectively. Of the
backlog at July 31, 1995, $3.20 billion has been funded and approximately $1.948
billion is expected to be realized as sales in years after fiscal 1996.
Significant revenues of the Marine Engineering and Production segment in
1995 were derived from sales to the U.S. Government (approximately 97%).
Interconnect Products
The Interconnect Products group is an international supplier of electronic
connectors, multilayer circuit boards and other interconnect products, primarily
for the telecommunications and computer industries.
1
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Discontinued Operations
On March 17, 1994, Litton distributed all of the issued and outstanding
shares of common stock of its previously wholly-owned subsidiary, Western Atlas
Inc. ("WAI"). WAI owned and conducted the oilfield services and industrial
automation systems businesses. The accounts of WAI have been segregated and
reflected as discontinued operations in the Consolidated Financial Statements
included elsewhere in this Annual Report on Form 10-K. For further information,
see Note B of Notes to Consolidated Financial Statements.
Methods of Distribution
The Company principally markets its products and services throughout the
world through the home offices and branch offices of its various operations. In
general, each of the Company's operations is responsible for selecting,
implementing and maintaining an efficient and effective marketing program.
Raw Materials
The Company uses a wide variety of raw materials in the manufacture of its
many products. The availability of any individual raw material is not critical
to the Company's operations.
Working Capital
The working capital requirements of the Company's divisions and
subsidiaries are financed primarily from operations. The Company also has
available credit commitments of up to $400 million for its general use.
Patents
The Company owns a large number of patents, trademarks and copyrights
relating to its manufactured products, which have been obtained over a period of
years. These patents, trademarks and copyrights have been of value in the growth
of the Company's businesses and may continue to be of value in the future.
However, the Company's businesses generally are not dependent upon the
protection of any patent, patent application or patent license agreement, or
group thereof, and would not be materially affected by expiration thereof.
Competition
Competition exists with respect to all products manufactured and services
rendered by the Company. Competition ranges from companies which produce a
single product or offer a single service to some of the world's largest
corporations.
U.S. Government Contracts
Contracts with the U.S. Government are, in many cases, performed over
extended periods of time and are subject to changes in design, scope, schedules,
costs and funding. In addition, contracts with the U.S. Government are subject
to certain laws and regulations, with which non-compliance by the contractor may
result in various sanctions including monetary penalties and fines as well as
debarment or suspension from further Government contracts.
Substantially all of the Company's contracts for and with the U.S.
Government are terminable at the option of the Government whenever it believes
that such termination would be in its best interests. Under contracts so
terminated, the Company is generally entitled to receive payment for work
completed and reasonable allowable costs incurred. Whether the occurrence of any
such termination would have an adverse effect on the Company would depend upon
the particular contract and the nature of the termination. At the present time,
management is not aware of any circumstances which would result in a material
impact on its consolidated financial statements.
Approximately 73% of the Company's consolidated revenues for fiscal year
1995 were derived from sales to the U.S. Government.
2
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Research and Development
Worldwide expenditures on research and development activities amounted to
$227.1 million, $220.1 million and $254.6 million, of which approximately 28%,
26% and 21% were Company-sponsored in the years ended July 31, 1995, 1994 and
1993, respectively. In fiscal 1995, the Advanced Electronics segment accounted
for almost all of the total research and development expenditures.
Environmental Protection
During the fiscal year ended July 31, 1995, the amounts incurred in
compliance with federal, state and local regulations pertaining to environmental
standards did not have a material effect upon the capital expenditures or
earnings of the Company. For additional information with respect to
environmental matters, see Items 3, 7, and 8 of this Annual Report on Form 10-K.
Number of Employees
At July 31, 1995, the Company had approximately 29,100 full-time employees.
Employment by business segment was as follows:
<TABLE>
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Advanced Electronics............................................... 13,400
Marine Engineering and Production.................................. 13,700
Interconnect Products and Other.................................... 2,000
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29,100
======
</TABLE>
Financial Information by Geographic Area
See the table and related notes thereto, Operations by Geographic Area,
which appear on pages F-20 and F-21 of this Annual Report on Form 10-K.
ITEM 2. PROPERTIES
The Company's principal plants and offices have an aggregate floor area of
approximately 8,058,000 square feet, of which 6,920,000 square feet (85.9%) are
located in the United States, and 1,138,000 square feet (14.1%) are located
outside of the United States, primarily in Canada and Western Europe. The
Company's executive offices, in owned premises, are at 21240 Burbank Boulevard,
Woodland Hills, California.
These properties are used by the various business segments as follows:
<TABLE>
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SQUARE FEET
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Advanced Electronics........................................... 5,501,000
Marine Engineering and Production.............................. 1,890,000
Interconnect Products.......................................... 561,000
Corporate and Other Businesses................................. 106,000
---------
8,058,000
=========
</TABLE>
Approximately 6,765,000 square feet (84.0%) of the principal plant, office
and commercial floor area is owned by the Company, and the balance is held under
lease.
3
<PAGE> 6
The Company's principal plants and offices in the United States are
situated in 26 locations in 17 states as follows:
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STATE SQUARE FEET
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<S> <C>
California.......................................... 2,206,000
Mississippi......................................... 1,890,000
Massachusetts....................................... 375,000
Maryland............................................ 355,000
Texas............................................... 275,000
Pennsylvania........................................ 270,000
Utah................................................ 216,000
Iowa................................................ 203,000
Other states........................................ 1,130,000
---------
6,920,000
=========
</TABLE>
The above-mentioned facilities are in satisfactory condition and suitable
for the particular purposes for which they were acquired or constructed and are
adequate for present operations.
The foregoing information excludes Company held properties leased to others
and also excludes plants or offices which, when added to all other Company
plants and offices in the same city, have a total floor area of less than 50,000
square feet.
ITEM 3. LEGAL PROCEEDINGS
(a) On August 31, 1993 a U.S. District Court jury rendered a verdict in favor of
Litton against Honeywell, Inc. in the amount of $1.2 billion. The jury found
that Honeywell willfully infringed a Litton patent relating to the
manufacture of ring laser gyro navigation systems which are used in
commercial aircraft. The jury also found that Honeywell actively induced a
Litton licensee to infringe Litton's patent and Honeywell interfered with
Litton's prospective economic advantage. Thereafter, in response to certain
post trial motions filed by both Honeywell and Litton, on January 9, 1995,
the District Court released a Memorandum of Decision finding Litton's patent
invalid and unenforceable. As a result, the jury verdict was overturned. On
February 10, 1995 the District Court entered judgment to this effect. On
February 27, 1995 Litton filed a notice of appeal to the U.S. Court of
Appeals for the Federal Circuit (the "Federal Circuit") asking that the
District Court's finding that Litton's patent was invalid and unenforceable
be reversed and that the jury's verdict be reinstated. Final pre-hearing
briefs by the parties were submitted to the Federal Circuit in August 1995.
Litton is awaiting notification of the date for the hearing.
(b) The Company and certain of its divisions or subsidiaries have been named as
potentially responsible parties by the United States Environmental
Protection Agency, various state environmental agencies, and other
potentially responsible parties for costs associated with cleanup of several
sites to which they may have contributed wastes. Also, the Company and
certain of its divisions and subsidiaries have incurred costs, which have
not had a material impact on the Company's consolidated financial statements
in any one year, for cleaning up a number of sites owned or leased by the
Company (or by subsidiaries or divisions thereof). In addition, the Company
and certain of its divisions or subsidiaries have been named as defendants
in certain lawsuits for personal injuries allegedly resulting from
environmental contamination.
At this time, the Company believes that its ultimate liability for
additional expenditures associated with these matters will not materially
adversely affect its consolidated financial statements.
There are various other litigation proceedings in which the Company is
involved. Although the results of litigation proceedings cannot be predicted
with certainty, it is the opinion of the General Counsel that the ultimate
resolution of these other proceedings will not have a material adverse effect on
the Company's consolidated financial statements.
4
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the fiscal
year ended July 31, 1995.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
See the information with respect to the market for and number of holders of
the Company's Common stock and quarterly market information which is set forth
on pages F-22 and F-23 and dividend information which is set forth on page F-13
of this Annual Report on Form 10-K. The number of holders of record of the
Company's Common stock was computed by a count of record holders on September
29, 1995.
ITEM 6. SELECTED FINANCIAL DATA
See the information with respect to selected financial data on pages 7 and
8 of this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See the information under the caption "Financial Review and Analysis" on
pages 9 through 11 of this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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PAGE
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Management's Responsibility for Financial Reporting................................... F-1
Independent Auditors' Report.......................................................... F-2
Consolidated Statements of Operations................................................. F-3
Consolidated Balance Sheets........................................................... F-4
Consolidated Statements of Shareholders' Investment................................... F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
Quarterly Financial Information (unaudited)........................................... F-22
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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ITEM 6. SELECTED FINANCIAL DATA
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUMMARY OF FINANCIAL INFORMATION
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------------------------------------
1995 1994 1993 1992 1991
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<S> <C> <C> <C> <C> <C>
Operating Results
Sales and Service Revenues............... $3,319.7 $3,446.1 $3,474.2 $3,710.8 $3,526.2
Segment Operating Profit................. 280.5 181.4 264.1 289.9 178.9
Earnings before Interest Expense and
Taxes on Income....................... 239.9 149.4 227.7 275.8 207.2
Earnings (Loss) before Extraordinary Item
and Cumulative Effect of a Change in
Accounting Principle
Continuing Operations............... $ 135.0 $ 51.3 $ 87.3 $ 87.3 $ 6.0
Discontinued Operations............. -- (173.1) 95.0 87.1 57.5
Extraordinary Loss....................... -- (30.7) -- -- --
Cumulative Effect of a Change in
Accounting Principle
Continuing Operations............... -- -- (106.7) -- --
Discontinued Operations............. -- -- (10.4) -- --
-------- -------- -------- -------- --------
Net Earnings (Loss)...................... $ 135.0 $ (152.5) $ 65.2 $ 174.4 $ 63.5
======== ======== ======== ======== ========
Sales to the U.S. Government as a Percent
of Total Sales........................ 73% 73% 73% 70% 69%
Financial Position at Year End
Total Assets............................. $2,559.6 $2,254.3 $2,749.1 $2,953.1 $3,207.1
Shareholders' Investment................. 758.1 610.4 578.4 322.3 111.3
Long-term Obligations.................... 103.6 105.6 106.5 131.2 126.6
Convertible Subordinated Notes and Other
Subordinated Debentures............... -- -- 435.8 735.6 1,151.9
Working Capital.......................... 130.1 36.9 435.3 365.0 878.9
Current Ratio............................ 1.10 1.03 1.36 1.25 1.70
Common Share Data
Earnings (Loss) per Share
Primary
Earnings (Loss) before Extraordinary
Item and Cumulative Effect of a
Change in Accounting Principle
Continuing Operations............ $ 2.84 $ 1.10 $ 2.10 $ 2.10 $ 0.12
Discontinued Operations.......... -- (3.79) 2.31 2.12 1.33
Extraordinary Loss.................... -- (0.67) -- -- --
Cumulative Effect of a Change in
Accounting Principle
Continuing Operations............ -- -- (2.60) -- --
Discontinued Operations.......... -- -- (0.25) -- --
-------- -------- -------- -------- --------
Total Primary.................. $ 2.84 $ (3.36) $ 1.56 $ 4.22 $ 1.45
======== ======== ======== ======== ========
</TABLE>
See Notes on page 8.
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LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUMMARY OF FINANCIAL INFORMATION -- (CONTINUED)
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Fully Diluted
Earnings (Loss) before Extraordinary Item
and Cumulative Effect of a Change in
Accounting Principle
Continuing Operations............... $ 2.84 $ 1.10 $ 2.10 $ 2.10 $ 0.12
Discontinued Operations............. -- (3.79) 2.31 1.84 1.33
Extraordinary Loss....................... -- (0.67) -- -- --
Cumulative Effect of a Change in
Accounting Principle
Continuing Operations............... -- -- (2.60) -- --
Discontinued Operations............. -- -- (0.25) -- --
-------- -------- -------- -------- --------
Total Fully Diluted.............. $ 2.84 $ (3.36) $ 1.56 $ 3.94 $ 1.45
======== ======== ======== ======== ========
Book Value per Share....................... 16.19 13.07 12.48 7.71 2.55
Common Shares Outstanding at Year End (in
millions)................................ 46.2 45.9 45.5 40.5 39.7
Shares Used to Compute Primary Earnings
(Loss) per Share (in millions)........... 47.2 45.7 41.2 41.2 43.4
Shares Used to Compute Fully Diluted
Earnings (Loss) per Share (in
millions)................................ 47.3 45.7 41.2 47.3 43.5
Other Selected Financial Information
Capital Expenditures..................... $ 98.3 $ 80.6 $ 73.6 $ 81.5 $ 90.2
Depreciation and Amortization Expense.... 95.4 98.4 107.4 113.0 120.1
Research and Development Expenditures.... 227.1 220.1 254.6 201.9 224.5
Backlog at Year End...................... 5,137.8 5,466.6 6,700.4 6,570.0 6,654.4
Number of Employees at Year End.......... 29,100 29,000 32,300 34,700 36,900
</TABLE>
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Notes:
(A) Results for fiscal year 1994 included the settlement of a civil suit (see
Note J on page F-19) and extraordinary loss on early extinguishment of debt
(see Notes C and J on pages F-9 and F-19).
(B) Applicable information for fiscal year 1991 has been adjusted for a
two-for-one Common stock split that occurred in fiscal year 1992.
Additionally, amounts related to fiscal years 1992 and 1991 have been
restated to reflect the WAI businesses as discontinued operations in
connection with the Distribution discussed in Note B on page F-8.
(C) In the fourth quarter of fiscal year 1991, the Company provided for the loss
on sale of a division, which resulted in a charge to pre-tax earnings of
$120.0 million or $100.1 million after tax. The effect on primary earnings
per share for the year was a decrease of $2.31.
(D) During the five year period ended July 31, 1995, the Company declared no
cash dividends on its Common stock.
8
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ITEM 7. FINANCIAL REVIEW AND ANALYSIS
The Company operates principally in the defense industry which has
continued to consolidate and become increasingly competitive as a result of
worldwide reductions in defense spending. In response, Litton has initiated an
acquisition program focusing on businesses that will expand the Company's
business base and solidify its competitive position in the industry. During
fiscal year 1995, the Company made several strategic acquisitions to complement
existing businesses in the Advanced Electronics segment, including Teledyne,
Inc.'s Electronic Systems operation and the Electro-Optical Systems operation of
Imo Industries Inc. (see Note B). Although these acquisitions, with combined
annual revenues of approximately $280 million, did not significantly impact
consolidated results for the twelve months ended July 31, 1995, they are
expected to help stabilize the Company's sales base going forward. Additionally,
Litton has continued its efforts to improve cost efficiencies and to adjust
capacity of its operations to enhance competitiveness.
Segment information can be found on pages F-20 and F-21.
Fiscal Year Ended July 31, 1995 as compared to 1994
Earnings from continuing operations were significantly higher in 1995
primarily because the 1994 results were impacted by a charge to operations for
the settlement of a civil suit (see Note J). Additionally, interest expense was
significantly lower in 1995 as a result of the early extinguishment of certain
subordinated debt in July 1994 and there was a reduction in corporate expenses
as the 1994 results included costs related to WAI (see Note B).
Sales for the Advanced Electronics segment were substantially comparable
with the prior year. The impact of reduced defense spending was offset by
contributions from the previously discussed acquisitions and the effects of
non-recurring revenues recognized upon completion of a long-term contract.
Operating margin improved to 7.5% for fiscal year 1995 compared with 7.1% for
fiscal year 1994, exclusive of the settlement of a civil suit. This improvement
reflects increased operating efficiency as a result of continuing efforts to
adjust the cost structure of these businesses. Backlog increased slightly to
$1.75 billion at July 31, 1995 compared with $1.70 billion at July 31, 1994,
primarily due to acquisitions made during 1995.
While the outlook on defense spending remains uncertain, this segment's
base of programs and participation in high-priority defense requirements should
continue to help lessen the impact of further reductions. Additionally, the
Company will continue to focus on acquisitions which will enhance the
opportunity to participate in new programs.
The Marine Engineering and Production segment maintained a comparable
profit margin on slightly lower sales in comparison with the prior year. The
decline in sales reflects the transition from the completion and winding down of
certain contracts to the startup of new contracts. Contracts completed and
delivered during fiscal year 1995 included four Aegis guided missile destroyers
and one multipurpose amphibious assault ship to the U.S. Navy, and two SA'AR 5
class corvettes to the Israeli government. During fiscal year 1995, the Company
received funding for the construction of two additional destroyers with an
aggregate estimated contract value in excess of $700 million. Backlog at July
31, 1995 amounted to $3.31 billion compared with $3.69 billion at July 31, 1994.
Current backlog includes eight Aegis guided missile destroyers, of which six are
currently under construction, and two multipurpose amphibious assault ships,
both of which are currently in production.
The Interconnect Products segment maintained a comparable level of sales,
while operating profit was significantly higher in 1995. Operating profit for
1994 was affected by a charge recorded to adjust the carrying value of a
division which was subsequently sold.
9
<PAGE> 12
Fiscal Year Ended July 31, 1994 as compared to 1993
Overall sales for 1994 were comparable to 1993. Earnings from continuing
operations before extraordinary item for 1994 were $51.3 million compared with
$87.3 million for 1993, before the cumulative effect of a change in accounting
for retiree health and life insurance benefits. Results for 1994 were affected
by a charge of $86.0 million pre-tax, or $53.8 million after tax, for the
settlement of a civil suit.
Sales for the Advanced Electronics segment were lower in 1994 as a result
of continued reductions in defense spending. Although operating profit was
affected by the $86.0 million charge, the settlement brought a conclusion to an
uncertainty which would have required the commitment of company resources on a
long-term basis. Exclusive of the charge, operating margin improved to 7.1% in
1994 compared with 6.4% for 1993. While the Company continued to focus on
improving the cost structures and capacity of these operations during 1994,
operating margin benefited from the effects of earlier efforts.
The Marine Engineering and Production segment continued its solid
performance and strong cash flow during 1994. Sales and operating profit were
higher in 1994 as a result of an increased level of activity. Backlog at July
31, 1993 was $4.64 billion compared with $3.69 billion at July 31, 1994 which
did not include the options for two Aegis destroyers funded in 1995.
Discontinued Operations
On March 17, 1994, Litton distributed all of the issued and outstanding
shares of common stock of its previously wholly-owned subsidiary, WAI, which was
reflected as discontinued operations (see Note B) for fiscal years 1994 and
1993. The balance sheet effect of the distribution was a reduction to Litton's
Shareholders' Investment in the aggregate amount of $909.2 million representing
the book value of net assets distributed. Results for fiscal year 1994 included
special charges totalling $179 million, net of tax, recorded to reflect the
write-down of net assets of a certain division and to provide for obsolescence
of older technology equipment, vessels and inventory and the consolidation of
facilities.
Liquidity and Capital Resources
Cash and marketable securities of $110.7 million at July 31, 1995 remained
substantially comparable to the balance of $117.1 million at July 31, 1994.
During fiscal year 1995, cash flow from operations provided the funds to effect
the previously discussed acquisitions as well as reduce short-term borrowings by
more than $70 million. The Company expects strong cash flow from operations to
continue which, along with available borrowing capacity, will provide the
flexibility to make additional strategic acquisitions and the ability to meet
working capital requirements. At July 31, 1995, the Company has available credit
commitments of up to $400 million for its general use.
Interest expense was significantly lower in 1995 compared with 1994 as a
result of the early extinguishment of certain subordinated debt in July 1994
(see Note C). The use of cash for the extinguishment also resulted in lower
interest income in fiscal year 1995. Interest expense for fiscal year 1994 was
lower than fiscal year 1993 due mainly to the June 1993 call for redemption and
subsequent conversion of the zero coupon convertible subordinated notes.
Environmental Matters
As previously reported, the Company has been named as a potentially
responsible party in respect to various sites to which certain of its operations
may have contributed wastes. Also, the Company and certain of its divisions and
subsidiaries have incurred costs, which have not had a material impact on the
Company's consolidated financial statements in any one year, for cleaning up a
number of sites owned or leased by the Company. At this time, the Company
believes that its ultimate liability for additional expenditures associated with
sites owned and other sites to which it may have contributed wastes will not
have a material adverse effect on its consolidated financial statements.
10
<PAGE> 13
New Accounting Standards
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS No. 121), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS No. 121 requires that certain long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. The Company is not aware of any significant impact of
adopting SFAS No. 121 and has until its fiscal year 1997 to implement this
Standard.
11
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on directors of the Company will be included under the caption
"The Election of Directors" of the Company's definitive Proxy Statement relating
to the Annual Meeting of Shareholders to be held on December 7, 1995, which is
hereby incorporated by reference.
The executive officers of the Company are elected each year by the Board of
Directors at its first meeting following the Annual Meeting of Shareholders to
serve during the ensuing year and until their respective successors are elected
and qualify. There are no family relationships between any of the executive
officers of the Company. The following information indicates the position and
age of the executive officers at October 9, 1995 and their business experience
during the prior five years:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRESENTLY
NAME AGE HELD AND BUSINESS EXPERIENCE
- -------------------------------------- --- -----------------------------------------------
<S> <C> <C>
Michael R. Brown...................... 54 Executive Vice President and Chief Operating
Officer and a director since September, 1995.
Senior Vice President since June, 1992 and
Group Executive of the Electronic Warfare
Systems Group from 1988 to 1995; Group
Executive of the Command, Control and
Communications Systems Group since May, 1995.
Vice President from 1989 to 1992.
Larry A. Frame........................ 59 Senior Vice President and Group Executive of
the Navigation, Guidance and Control Systems
Group since March, 1994; prior thereto Division
President of the Guidance and Control Systems
Division since April, 1988; Vice President from
1990 to 1994.
Harry Halamandaris.................... 57 Vice President for Strategic Planning since
August, 1995. Group Executive of the Electronic
Warfare Systems Group since September, 1995;
prior thereto Vice President and Group
Executive of Kaiser Aerospace and Electronics
Corporation since 1994; Director of Corporate
Technology, Teledyne, Inc. since 1989 and
President of Teledyne Systems Company since
1980.
Rudolph E. Lang, Jr................... 59 Senior Vice President and Chief Financial
Officer and a director since March, 1994; prior
thereto Senior Vice President and Controller
since December, 1988.
John M. Leonis........................ 61 President and Chief Executive Officer and a
director since March, 1994; prior thereto
Senior Vice President since July, 1990 and
Group Executive of the Company's Navigation,
Guidance and Control Systems Group since 1988.
Vice President from 1988 to 1990.
Timothy G. Paulson.................... 48 Vice President and Treasurer since June, 1994;
prior thereto Vice President of Finance and
Administration of the Company's Amecom Division
since 1991; Division Controller since 1986.
John E. Preston....................... 54 Senior Vice President and General Counsel since
March, 1994; prior thereto Vice President and
Associate General Counsel since April, 1990.
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
POSITIONS AND OFFICES PRESENTLY
NAME AGE HELD AND BUSINESS EXPERIENCE
---- --- -------------------------------
<S> <C> <C>
Gerald J. St. Pe'..................... 55 Senior Vice President of the Company since 1986
and President of Ingalls Shipbuilding, Inc., a
subsidiary of the Company, since 1987.
Carol A. Wiesner...................... 56 Vice President and Controller since June, 1994;
prior thereto Vice President and Treasurer
since June, 1988. Chief Accounting Officer of
the Company.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
Information on executive compensation will be included under the caption
"Compensation of Executive Officers" of the Company's definitive Proxy Statement
relating to the Annual Meeting of Shareholders to be held on December 7, 1995,
which is hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on beneficial ownership of the Company's voting securities by
each director and all officers and directors as a group, and by any person known
to beneficially own more than 5% of any class of voting security of the Company
will be included under the caption "Beneficial Ownership of the Company's
Securities" of the Company's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on December 7, 1995, which is hereby
incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on certain relationships and related transactions including
information with respect to management indebtedness will be included under the
caption "Information Regarding Indebtedness of Management to the Company" of the
Company's definitive Proxy Statement relating to the Annual Meeting of
Shareholders to be held on December 7, 1995, which is hereby incorporated by
reference.
13
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(a)(1) Financial Statements
See Item 8 of Part II hereof.
(a)(2) Financial Statement Schedules
The schedules specified under Regulation S-X are either not applicable
or immaterial to the Company's consolidated financial statements for
each of the three years in the period ended July 31, 1995.
(a)(3) Executive Compensation Plans and Arrangements 15
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter ended
July 31, 1995.
(c) Index to Exhibits E-1
</TABLE>
14
<PAGE> 17
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
<TABLE>
<CAPTION>
REPORT WITH
EXHIBIT WHICH EXHIBIT
DESCRIPTION NO. WAS FILED
- ------------------------------------------------------------------ -------- --------------
<S> <C> <C>
Directors' annual retainer and attendance fees. .................. 10.1(a) 1995 Form 10-K
Director retirement age and postretirement payments to
directors. ..................................................... 10.2(b) 1991 Form 10-K
Litton Supplemental Retirement Plan. ............................. 10.3 1983 Form 10-K
-- Amendment to the Litton Supplemental Retirement Plan. ....... 10.1 April, 1993
Form 10-Q
Form of the agreement under the Litton Industries, Inc. Executive
Survivor Benefit Plan. ......................................... 10.4(a) 1984 Form 10-K
-- Amendment to the Executive Survivor Benefit Plan, adopted
June 13, 1986. ............................................. 10.4(a) 1986 Form 10-K
Incentive loans. ................................................. 10.8(a) 1991 Form 10-K
Supplemental Medical Insurance Plan. ............................. 10.10 1990 Form 10-K
Orion L. Hoch Supplemental Retirement Agreement and Supplemental
Medical Insurance Plan. ........................................ 10.13(b) 1983 Form 10-K
-- First Amendment. ............................................ 10.13(c) 1984 Form 10-K
-- Second Amendment. ........................................... 10.4 April, 1994
Form 10-Q
-- Approval for participation in the Supplemental Medical
Insurance Plan. ............................................ 10.2 April, 1994
Form 10-Q
Lifetime participation of Fred W. O'Green and Mildred G. O'Green
in the Supplemental Medical Insurance Plan. .................... 10.13(e) 1988 Form 10-K
Litton Industries, Inc. 1984 Long-Term Stock Incentive Plan, as
amended. ....................................................... 10.14(a) 1992 Form 10-K
-- Amendment dated March 12, 1992 for the two-for-one Common
stock split. ............................................... 10.14(b) 1992 Form 10-K
-- Amendment dated August 2, 1993. ............................. 10.14(c) 1993 Form 10-K
-- Adjustment for the distribution of Western Atlas Inc. ....... 10.14(d) 1993 Form 10-K
Litton Industries, Inc. Performance Award Plan. .................. 10.15 1984 Form 10-K
-- Amendment dated December 2, 1992. ........................... 10.2 April, 1993
Form 10-Q
-- Amendment dated August 3, 1995. ............................. 10.11(c) 1995 Form 10-K
Litton Industries, Inc. Restoration Plan. ........................ 10.16 1989 Form 10-K
Litton Industries, Inc. Director Stock Option Plan. .............. 10.18(a) 1989 Form 10-K
-- Amendment dated March 12, 1992 for the two-for-one Common
stock split. ............................................... 10.18(b) 1992 Form 10-K
-- Adjustment for the distribution of Western Atlas Inc. ....... 10.18(c) 1993 Form 10-K
-- Board of Directors Resolution with respect to options issued
to directors of the Company who became directors of Western
Atlas Inc................................................... 10.13(d) 1995 Form 10-K
Consulting agreement between a subsidiary of the Company and
Thomas B. Hayward, a director. ................................. 10.5 Apri1, 1994
Form 10-Q
The Company's "Group Bonus Plan Fiscal 1993."..................... 10.16 1995 Form 10-K
Litton Industries, Inc. Supplemental Executive Retirement Plan.... 10.22 1995 Form 10-K
</TABLE>
15
<PAGE> 18
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
REPORT WITH
EXHIBIT WHICH EXHIBIT
DESCRIPTION NO. WAS FILED
- ----------- ------- -------------
<S> <C> <C>
Incentive compensation plan of Ingalls Shipbuilding, Inc., a
subsidiary of the Company. ...................................... 10.25 1992 Form 10-K
Litton Industries, Inc. Deferred Compensation Plan for
Directors. ...................................................... 10.26 April, 1993
Form 10-Q
Form of Change of Control Employment Agreement. .................. 10.27 1993 Form 10-K
</TABLE>
16
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LITTON INDUSTRIES, INC.
/s/ Carol A. Wiesner
------------------------------------
Carol A. Wiesner
Vice President and Controller
(Chief Accounting Officer)
October 16, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
/s/ Alton J. Brann /s/ Michael R. Brown
- -------------------------------------------- --------------------------------------------
Alton J. Brann, October 16, 1995 Michael R. Brown, October 16, 1995
Director and Chairman of the Board Director, Executive Vice President and
Chief Operating Officer
/s/ J. T. Casey /s/ Carol B. Hallett
- -------------------------------------------- --------------------------------------------
Joseph T. Casey, October 16, 1995 Carol B. Hallett, October 16, 1995
Director Director
/s/ Thomas B. Hayward /s/ O. L. Hoch
- -------------------------------------------- --------------------------------------------
Thomas B. Hayward, October 16, 1995 Orion L. Hoch, October 16, 1995
Director Director
/s/ David E. Jeremiah /s/ Rudolph E. Lang, Jr.
- -------------------------------------------- --------------------------------------------
David E. Jeremiah, October 16, 1995 Rudolph E. Lang, Jr., October 16, 1995
Director Director, Senior Vice President and
Chief Financial Officer
/s/ Robert H. Lentz /s/ John M. Leonis
- -------------------------------------------- --------------------------------------------
Robert H. Lentz, October 16, 1995 John M. Leonis, October 16, 1995
Director Director, President and Chief Executive
Officer
/s/ William P. Sommers /s/ C. B. Thornton, Jr.
- -------------------------------------------- --------------------------------------------
William P. Sommers, October 16, 1995 C. B. Thornton, Jr., October 16, 1995
Director Director
/s/ Carol A. Wiesner
- --------------------------------------------
Carol A. Wiesner, October 16, 1995
Vice President and Controller
(Chief Accounting Officer)
</TABLE>
17
<PAGE> 20
Litton Industries, Inc.
Management's Responsibility for Financial Reporting
The consolidated financial statements of Litton Industries, Inc. and
subsidiary companies, and related financial information included in this Annual
Report, have been prepared by the Company, whose management is responsible for
their integrity. These statements, which necessarily reflect estimates and
judgments, have been prepared in conformity with generally accepted accounting
principles.
The Company maintains a system of internal controls to provide reasonable
assurance that assets are safeguarded and transactions are properly executed and
recorded. As part of this system, the Company has an internal audit staff to
monitor the compliance with and the effectiveness of established procedures.
The consolidated financial statements have been audited by Deloitte &
Touche LLP, independent certified public accountants, whose report appears on
page F-2.
The Audit and Compliance Committee of the Board of Directors, which
consists solely of directors who are not employees of the Company, meets
periodically with management, the independent auditors and the Company's
internal auditors to review the scope of their activities and reports relating
to internal controls and financial reporting matters. The independent and
internal auditors have full and free access to the Audit and Compliance
Committee and meet with the Committee both with and without the presence of
Company management.
/s/ RUDOLPH E. LANG, JR.
- ---------------------------------
Rudolph E. Lang, Jr.
Senior Vice President and
Chief Financial Officer
September 21, 1995
F-1
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Litton Industries, Inc.
Woodland Hills, California
We have audited the accompanying consolidated balance sheets of Litton
Industries, Inc. and subsidiary companies as of July 31, 1995 and 1994, and the
related consolidated statements of operations, shareholders' investment and cash
flows for each of the three years in the period ended July 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Litton Industries, Inc. and
subsidiary companies as of July 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
July 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note H to the consolidated financial statements, in fiscal
year 1993 the Company changed its method of accounting for postretirement
benefits other than pensions to conform with Statement of Financial Accounting
Standards No. 106.
DELOITTE & TOUCHE LLP
Los Angeles, California
September 21, 1995
F-2
<PAGE> 22
LITTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
----------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Sales and Service Revenues............................. $3,319,725 $3,446,053 $3,474,158
---------- ---------- ----------
Costs and Expenses
Cost of sales........................................ 2,646,342 2,777,462 2,801,485
Selling, general and administrative.................. 348,014 360,875 354,826
Depreciation and amortization........................ 95,356 98,444 107,380
Interest -- net (Note C)............................. 3,053 32,624 66,101
Unusual item -- litigation settlement (Note J)....... -- 86,000 --
---------- ---------- ----------
Total........................................ 3,092,765 3,355,405 3,329,792
---------- ---------- ----------
Earnings from Continuing Operations before Taxes on
Income, Extraordinary Item and Cumulative Effect of a
Change in Accounting Principle........................ 226,960 90,648 144,366
Taxes on Income (Note G)............................... (91,945) (39,342) (57,025)
---------- ---------- ----------
Earnings from Continuing Operations before
Extraordinary Item and Cumulative Effect of a Change
in Accounting Principle............................... 135,015 51,306 87,341
Discontinued Operations (Note B)....................... -- (173,079) 94,962
---------- ---------- ----------
Earnings (Loss) before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle............................................. 135,015 (121,773) 182,303
Extraordinary Loss (Notes C and J)..................... -- (30,732) --
Cumulative Effect of a Change in Accounting Principle
(Note H)
Continuing Operations................................ -- -- (106,727)
Discontinued Operations.............................. -- -- (10,390)
---------- ---------- ----------
Net Earnings (Loss).......................... $ 135,015 $ (152,505) $ 65,186
========== ========== ==========
Primary Earnings (Loss) per Share (Notes A and F)
Earnings before Extraordinary Item and Cumulative
Effect of a Change in Accounting Principle
Continuing Operations.............................. $ 2.84 $ 1.10 $ 2.10
Discontinued Operations............................ -- (3.79) 2.31
Extraordinary Loss................................... -- (0.67) --
Cumulative Effect of a Change in Accounting Principle
Continuing Operations.............................. -- -- (2.60)
Discontinued Operations............................ -- -- (0.25)
---------- ---------- ----------
Total Primary................................ $ 2.84 $ (3.36) $ 1.56
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 23
LITTON INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JULY 31
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities (Note C)........................... $ 110,696 $ 117,104
Accounts receivable less allowance for doubtful accounts of
$13,189 (1995) and $12,866 (1994) (Note D)..................... 420,937 320,985
Inventories less progress billings (Notes A and D)................ 552,195 481,073
Deferred tax assets (Note G)...................................... 362,819 330,495
Prepaid expenses.................................................. 18,609 14,416
---------- ----------
Total Current Assets................................................ 1,465,256 1,264,073
---------- ----------
Property, Plant and Equipment, Net (Notes A and E).................. 621,839 597,616
---------- ----------
Goodwill and Other Intangibles, Net of Amortization of $56,762
(1995) and $46,728 (1994) (Notes A and B)......................... 218,283 138,395
---------- ----------
Other Assets and Long-term Investments (Includes $2,126 (1995) and
$1,951 (1994) Due from Related Parties) (Note H).................. 254,244 254,212
---------- ----------
Total Assets.............................................. $2,559,622 $2,254,296
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable.................................................. $ 702,897 $ 555,895
Payrolls and related expenses..................................... 238,999 225,124
Taxes on income................................................... 117,947 120,511
Notes payable and current portion of long-term
obligations (Note C)........................................... 25,106 97,734
Other current liabilities......................................... 250,174 227,877
---------- ----------
Total Current Liabilities........................................... 1,335,123 1,227,141
---------- ----------
Long-term Obligations (Note C)...................................... 103,631 105,621
---------- ----------
Postretirement Benefit Obligations Other than Pensions (Note H)..... 204,883 198,795
---------- ----------
Deferred Tax Liabilities (Note G)................................... 51,836 48,492
---------- ----------
Other Long-term Liabilities......................................... 106,006 63,833
---------- ----------
Shareholders' Investment (Notes A and F and accompanying statements)
Capital stock
Voting preferred stock -- Series B (liquidating preference
$8,213)....................................................... 2,053 2,053
Common stock (shares outstanding: 46,181,980 (1995)
and 45,913,646 (1994))....................................... 46,182 45,914
Additional paid-in capital........................................ 284,399 273,280
Retained earnings................................................. 451,862 317,681
Cumulative currency translation adjustment........................ (26,353) (28,514)
---------- ----------
Total Shareholders' Investment...................................... 758,143 610,414
---------- ----------
Total Liabilities and Shareholders' Investment............ $2,559,622 $2,254,296
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 24
LITTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
CAPITAL STOCK
--------------------
PREFERRED CUMULATIVE
TOTAL SERIES B COMMON ADDITIONAL CURRENCY
SHAREHOLDERS' PAR PAR PAID-IN RETAINED TRANSLATION
INVESTMENT VALUE $5 VALUE $1 CAPITAL EARNINGS ADJUSTMENT
------------- --------- -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JULY 31, 1992............. $1,364,061 $2,053 $40,455 $ 388,687 $ 939,279 $ (6,413)
Net earnings....................... 65,186 -- -- -- 65,186 --
Cash dividends on Preferred --
Series B ($2.00 per share)........ (821) -- -- -- (821) --
Purchase of Common stock........... (86,954) -- (1,679) (16,236) (69,039) --
Exercise of employee stock
options........................... 27,897 -- 630 27,267 -- --
Conversion of zero coupon
convertible subordinated
notes............................. 312,587 -- 6,114 306,473 -- --
Currency translation adjustment.... (18,238) -- -- -- -- (18,238)
---------- ------ ------- --------- --------- --------
BALANCE AT JULY 31, 1993............. 1,663,718 2,053 45,520 706,191 934,605 (24,651)
Net loss........................... (152,505) -- -- -- (152,505) --
Cash dividends on Preferred --
Series B ($2.00 per share)........ (821) -- -- -- (821) --
Purchase of Common stock........... (2,399) -- (31) (479) (1,889) --
Exercise of employee stock options. 15,513 -- 425 15,088 -- --
Currency translation adjustment.... 2,201 -- -- -- -- 2,201
Distribution of Western Atlas Inc.
(Note B).......................... (915,293) -- -- (447,520) (461,709) (6,064)
---------- ------ ------- --------- --------- --------
BALANCE AT JULY 31, 1994............. 610,414 2,053 45,914 273,280 317,681 (28,514)
Net earnings....................... 135,015 -- -- -- 135,015 --
Cash dividends on Preferred --
Series B ($2.00 per share)........ (821) -- -- -- (821) --
Exercise of employee stock options. 5,246 -- 268 4,991 (13) --
Currency translation adjustment.... 2,161 -- -- -- -- 2,161
Adjustments to Distribution of
Western Atlas Inc. (Note B)....... 6,128 -- -- 6,128 -- --
---------- ------ ------- --------- --------- --------
BALANCE AT JULY 31, 1995............. $ 758,143 $2,053 $46,182 $ 284,399 $ 451,862 $(26,353)
========== ====== ======= ========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 25
LITTON INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash and cash equivalents at beginning of period........ $ 44,526 $ 237,440 $ 169,972
--------- --------- ---------
Cash Was Provided by (Used for) Continuing Operations
Operating Activities
Net earnings (loss)................................... 135,015 20,574 (19,386)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities
Depreciation and amortization...................... 95,356 98,444 107,380
Extraordinary loss on early extinguishment of
debt............................................. -- 30,732 --
Cumulative effect of a change in accounting
principle........................................ -- -- 106,727
Deferred income tax charge (benefit)............... 22,034 (121,644) (55,861)
(Increase) decrease in accounts receivable......... (3,520) 152,523 101,072
(Increase) decrease in inventory................... (46,570) 16,714 60,222
(Increase) decrease in prepaid expenses............ (2,242) (1,445) 703
Increase in accounts payable....................... 64,113 12,632 48,876
Increase (decrease) in payrolls and related
expenses......................................... 9,301 (30,734) 2,791
Decrease in taxes on income........................ (5,645) (17,712) (29,384)
Increase (decrease) in other current liabilities... 18,224 30,542 (113,060)
Other operating activities......................... (12,859) 1,860 (14,834)
--------- --------- ---------
Cash provided by operating activities................... 273,207 192,486 195,246
--------- --------- ---------
Investing Activities
Purchase of businesses................................ (127,575) (21,919) (11,642)
Purchase of capital assets............................ (98,281) (80,599) (73,611)
Decrease in other current marketable securities....... 22,611 43,512 32,329
Proceeds from sale of business........................ 14,609 -- --
Proceeds from sale of property, plant and equipment... 8,392 14,594 15,517
Proceeds from sale of investments..................... -- 16,360 44,570
Other investing activities............................ 2,549 18,712 (5,853)
--------- --------- ---------
Cash (used for) provided by investing activities........ (177,695) (9,340) 1,310
--------- --------- ---------
Financing Activities
(Decrease) increase in short-term obligations, net.... (73,257) 33,614 (79,951)
Repayment of long-term obligations and early
extinguishment of debt............................. (10,226) (493,405) (9,413)
Purchase of Common stock.............................. -- (2,399) (86,954)
Other financing activities............................ 3,674 13,693 16,970
--------- --------- ---------
Cash used for financing activities...................... (79,809) (448,497) (159,348)
--------- --------- ---------
Net cash provided by (used for) continuing operations... 15,703 (265,351) 37,208
--------- --------- ---------
Net cash provided by discontinued operations............ -- 72,437 30,260
--------- --------- ---------
Resulting in Increase (Decrease) in Cash and Cash
Equivalents (Note A).................................. 15,703 (192,914) 67,468
--------- --------- ---------
Cash and cash equivalents at end of period.............. $ 60,229 $ 44,526 $ 237,440
========= ========= =========
Reconciliation to Consolidated Balance Sheets at July
31, 1995 and July 31, 1994:
Cash and cash equivalents.......................... $ 60,229 $ 44,526
Marketable securities:
Other time deposits and certificates of
deposit....................................... 19,784 23,899
U.S. Government obligations and other............ 30,683 48,679
--------- ---------
Total cash and marketable securities............. $ 110,696 $ 117,104
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 26
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION The accounts of Litton Industries, Inc. and
all its majority-owned subsidiaries (the "Company" or "Litton") are included in
the accompanying consolidated financial statements. All material intercompany
transactions have been eliminated. Certain reclassifications of prior period
information were made to conform to the current year presentation. The financial
information for fiscal years 1994 and 1993 included the results of Western Atlas
Inc. ("WAI"), a former subsidiary of Litton. The shares of common stock of WAI
were distributed to holders of Litton Common stock in the form of a dividend on
March 17, 1994. The accounts of WAI have been segregated and reflected as
discontinued operations (see Note B).
CASH EQUIVALENTS The Company considers securities purchased within three
months of their date of maturity to be cash equivalents.
EARNINGS PER SHARE Primary earnings per share computations are based on
the weighted average number of common shares outstanding and common share
equivalents with dilutive effects, if applicable. Computations were based on
47,187,934 (1995), 45,720,585 (1994) and 41,160,479 (1993) weighted average
shares and net earnings after provision for cash dividends on preferred stock.
Fully diluted earnings per share were the same as primary earnings per share in
each of the three years in the period ended July 31, 1995.
INVENTORIES AND LONG-TERM CONTRACTS Inventory costs under long-term
contracts generally reflect actual costs incurred and include general and
administrative costs of the Marine Engineering and Production segment.
Otherwise, general and administrative costs are expensed as incurred. Other
inventories are stated at the lower of cost or market, generally using the
average or actual cost method. Progress payments received are first offset
against the related balance of unbilled receivables and inventories. Any
remaining portion is included in other current liabilities.
Revenues and profits on long-term contracts, performed over extended
periods of time, are recognized under the percentage-of-completion method of
accounting, principally based on direct labor dollars incurred for the Marine
Engineering and Production segment and generally on the costs incurred or
units-of-delivery basis for the Company's other operations. Revenues and profits
on long-term contracts are based on the Company's estimates to complete and are
reviewed periodically, with adjustments recorded in the period in which the
revisions are made. Any anticipated losses on contracts are charged to
operations as soon as they are determinable.
RESEARCH AND DEVELOPMENT Company-sponsored research and development
expenditures are charged to expense as incurred. Worldwide expenditures on
research and development activities amounted to $227.1 million, $220.1 million
and $254.6 million, of which 28%, 26% and 21% were Company-sponsored, in the
years ended July 31, 1995, 1994 and 1993, respectively.
PROPERTY, PLANT AND EQUIPMENT Investment in property, plant and equipment
is stated at cost. Allowances for depreciation and amortization, computed
generally by the straight-line method for financial reporting purposes, are
provided over the estimated useful lives of the related assets.
INCOME TAXES The Company adopted the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS No. 109),
effective August 1, 1993 (see Note G). The adoption of this statement did not
have a material impact on the Company's consolidated financial statements. Prior
years' financial statements have not been restated.
FOREIGN EXCHANGE INSTRUMENTS The Company periodically enters into foreign
exchange and options contracts to minimize exposure to exchange rate
fluctuations, as gains and losses on these contracts generally offset losses and
gains on the assets and liabilities being hedged. Such gains and losses are
included in the results of operations in each of the three years in the period
ended July 31, 1995, and were not material. The carrying amounts, which
approximate fair value, of the hedging contracts and the amounts hedged at
F-7
<PAGE> 27
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
July 31, 1995 and 1994, were not material. Counterparties to these arrangements
are major financial institutions and loss from nonperformance is not
anticipated.
FOREIGN CURRENCIES The currency effects of translating the financial
statements of those non-U.S. subsidiaries and divisions of the Company which
operate in local currency environments are included in the "Cumulative currency
translation adjustment" component of Shareholders' Investment. Gains and losses
resulting from foreign currency transactions are included in results of
operations and were not material in each of the three years in the period ended
July 31, 1995.
PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS The Company adopted
Statement of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions (SFAS No. 106) in the fourth quarter
of fiscal year 1993. The Company's postretirement plans other than pensions
consist primarily of health care and life insurance benefits. The Company
elected immediate recognition of the transition liability. For further
discussion of accounting policies for pension and other postretirement benefit
plans see Note H.
GOODWILL AND OTHER INTANGIBLES For financial statement purposes, goodwill
and other intangibles are generally amortized using the straight-line method
over their estimated useful lives, not exceeding 40 years. The current and
future profitability of the operations to which the goodwill relates are
continually evaluated (at least annually). These factors, along with
management's plans with respect to the operations and the projected undiscounted
cash flows, are considered in assessing the recoverability of the goodwill.
ENVIRONMENTAL COSTS Provisions for environmental costs are recorded when
the Company determines its responsibility for remedial efforts and such amounts
are reasonably estimable. The Company's exposure is mitigated by potential
insurance reimbursements and to the extent such costs are recoverable under the
Company's U.S. Government contracts. These recoveries are not recorded until
collection is probable.
NOTE B: BUSINESS DIVESTITURES AND ACQUISITIONS
ACQUISITIONS During fiscal year 1995, the Company made several
acquisitions including Teledyne, Inc.'s Electronics Systems ("ES") operations
and the Electro-Optical Systems ("EOS") operations of Imo Industries Inc. The ES
operations manufacture airborne computers, avionics, doppler radars,
communications, controls, displays and identification friend-or-foe systems. The
EOS operations develop and produce laser and night vision equipment for U.S. and
international military markets. These acquisitions, with estimated annual
revenues of $280 million, have resulted in an increase to goodwill of
approximately $80 million which is being amortized over periods of up to 15
years. These acquisitions were paid for in cash and have been accounted for by
the purchase method of accounting.
Other acquisitions which were made during the three years ended July 31,
1995 are integral to the Company's goals though not material in aggregate to the
Company's consolidated financial statements in any one year.
DISTRIBUTION OF WAI On March 17, 1994, Litton distributed all of the
issued and outstanding shares of common stock of its previously wholly-owned
subsidiary WAI. The WAI operations, reflected herein as discontinued operations,
comprised substantially all of the Company's former oilfield services and
industrial automation systems businesses. The distribution ("Distribution") was
made in the form of a dividend to holders of record of Litton Common stock at
the close of business on March 14, 1994. Litton shareholders of record received
one share of WAI common stock for each share of Litton Common stock owned. The
consolidated financial statements reflected an accounting date for the
Distribution of February 28, 1994. Litton's Shareholders' Investment has been
reduced by an aggregate amount of $909.2 million representing the book value of
net assets distributed.
F-8
<PAGE> 28
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WAI's net earnings (loss) were ($173) million and $85 million for the seven
months ended February 28, 1994 and fiscal year 1993, respectively. Results for
the seven months ended February 28, 1994 included special charges totalling $179
million, net of tax, recorded to reflect the write-down of net assets of a
certain division and to provide for obsolescence of older technology equipment,
vessels and inventory and the consolidation of facilities. Corporate interest
costs of $7 million and $12 million have been attributed to WAI and, therefore,
reclassified to discontinued operations for the seven months ended February 28,
1994 and fiscal year 1993, respectively. Income tax expense (benefit) allocated
to WAI for the same periods was ($55) million and $79 million. Net earnings for
fiscal year 1993 included the cumulative effect of a change in accounting
principle for $10 million.
NOTE C: CASH AND MARKETABLE SECURITIES, DEBT AND INTEREST
Cash and marketable securities consist of the following interest-earning
investments:
<TABLE>
<CAPTION>
JULY 31
----------------------
1995 1994
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Time deposits and certificates of deposit...................... $ 80,013 $ 61,007
U.S. Government and U.S. Government agency obligations......... 30,683 54,097
Other short-term negotiable instruments........................ -- 2,000
-------- --------
$110,696 $117,104
======== ========
</TABLE>
Cash and cash equivalents (see Note A) at July 31, 1995 consisted of $60.2
million in time deposits. At July 31, 1994 cash and cash equivalents consisted
of $37.1 million in time deposits and certificates of deposit, $5.4 million in
U.S. Government obligations and $2.0 million in commercial paper.
The Company's marketable securities at July 31, 1995 consisted of
obligations issued by the U.S. Government and its agencies with an estimated
fair market value of $35.0 million based on quoted market price compared with
the carrying amount of $30.7 million. At July 31, 1994, the estimated fair
market value of marketable securities, which consisted mainly of U.S. Government
and U.S. Government agency obligations, was $59.3 million compared with the
carrying amount of $56.1 million.
In the first quarter of fiscal year 1995, the Company adopted SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, which
addresses the accounting and reporting for investments in equity securities that
have readily determinable fair values and for investments in debt securities.
The adoption of this statement had virtually no impact on the consolidated
financial statements. The Company's investments in such securities at July 31,
1995 consisted mainly of obligations issued by the U.S. Government and its
agencies and have been classified as held-to-maturity securities.
Notes payable and current portion of long-term obligations are composed of:
<TABLE>
<CAPTION>
JULY 31
----------------------
1995 1994
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Notes payable to banks, with average interest at 7.7% (1995)
and 5.8% (1994)............................................... $13,635 $86,443
Current portion of long-term obligations....................... 11,471 11,291
------- -------
$25,106 $97,734
======= =======
</TABLE>
F-9
<PAGE> 29
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
JULY 31
----------------------
1995 1994
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Capital lease commitments (Note E)............................. $ 16,671 $ 24,347
-------- --------
Other long-term obligations
Pension accruals (other than U.S. and Canadian plans)........ 57,421 49,480
Industrial Development Revenue Bonds, with interest based
generally on 70% of the current prime rate, due to 2008..... 21,215 21,315
Other debt, with average interest at 7.2% (1995) and 7.7%
(1994), due to 2002......................................... 8,324 10,479
-------- --------
86,960 81,274
-------- --------
$103,631 $105,621
======== ========
</TABLE>
Other long-term obligations at July 31, 1995 mature as follows:
<TABLE>
<CAPTION>
(THOUSANDS OF DOLLARS)
<S> <C>
Year ended July 31
1997.............................................................. $ 4,287
1998.............................................................. 4,244
1999.............................................................. 4,359
2000.............................................................. 8,063
Years subsequent to July 31, 2000................................... 66,007
-------
$86,960
=======
</TABLE>
On July 11, 1994 the Company effected an early extinguishment of debt
through an in-substance defeasance of its 12 5/8% Subordinated Debentures in the
principal amount of $435.8 million due July 1, 2005. The Company purchased
approximately $489 million face value in U.S. Government obligations and
deposited them in an irrevocable trust administered by The Bank of New York for
the sole purpose of satisfying the scheduled payments with respect to the
12 5/8% Subordinated Debentures. The trust could not be rescinded or revoked nor
its assets otherwise accessed by the Company or others. The U.S. Government
obligations provided cash flow, from interest at fixed rates and at maturity,
which coincided with the scheduled interest payments and the redemption, at
104.2% of par plus accrued interest, on July 1, 1995. Due to this in-substance
defeasance, results for the fourth quarter of fiscal year 1994 included an
extraordinary loss on early extinguishment of debt of $49.2 million pre-tax, or
$30.7 million after tax.
The Company also has various credit commitments which provide for revolving
credit or term loans of up to $400 million for its general use at July 31, 1995.
Net interest expense is composed of the following:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
---------------------------------
1995 1994 1993
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Interest expense.................................... $12,918 $ 58,738 $ 83,342
Interest income..................................... (9,865) (26,114) (17,241)
------- -------- --------
Net interest expense................................ $ 3,053 $ 32,624 $ 66,101
======= ======== ========
</TABLE>
Total cash interest payments made during fiscal year 1995 amounted to $5.3
million. Payments for fiscal year 1994 were $100.6 million, which included $37
million of prepaid interest in connection with the
F-10
<PAGE> 30
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
previously discussed early extinguishment of debt. Payments for fiscal year 1993
were $66.1 million. Capitalized interest costs in each of the three years in the
period ended July 31, 1995 were not material.
In addition to the previously discussed marketable securities, the
Company's other financial instruments include accounts receivable, accounts
payable, payrolls and related expenses, notes payable and current portion of
long-term obligations and other miscellaneous long-term assets and liabilities.
The carrying amounts of the short-term assets and liabilities approximate their
market values due to their short maturity. Differences between the recorded
amounts and market value of the remainder of the financial instruments were not
material. As discussed in Note I, the Company also has off-balance sheet
guarantees and letter of credit agreements with face values totalling $238
million at July 31, 1995, relating principally to the guarantee of future
performance on foreign government contracts.
NOTE D: ACCOUNTS RECEIVABLE AND INVENTORIES
Following are the details of accounts receivable:
<TABLE>
<CAPTION>
JULY 31
------------------------
1995 1994
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Receivables related to long-term contracts
Amounts billed
U.S. Government......................................... $162,995 $ 89,571
Other................................................... 43,028 43,821
Unbilled recoverable costs and accrued profit on progress
completed and retentions
U.S. Government......................................... 17,362 25,103
Other................................................... 27,304 11,404
-------- --------
250,689 169,899
Other receivables, principally from commercial customers.... 170,248 151,086
-------- --------
$420,937 $320,985
======== ========
</TABLE>
Of the $44.7 million in retentions and amounts not billed at July 31, 1995,
$31.2 million is expected to be collected in fiscal year 1996 with the balance
to be collected in subsequent years, as contract deliveries are made and
warranty periods expire.
Summarized below are the components of inventory balances:
<TABLE>
<CAPTION>
JULY 31
------------------------
1995 1994
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process........................... $ 230,642 $ 202,344
Finished goods.............................................. 44,565 40,768
Inventoried costs related to long-term contracts............ 752,188 723,071
---------- ---------
Gross inventories........................................... 1,027,395 966,183
Less progress billings related to long-term contracts....... (475,200) (485,110)
---------- ---------
Net inventories................................... $ 552,195 $ 481,073
========== =========
</TABLE>
The amounts included in "Inventoried costs related to long-term contracts"
representing general and administrative costs and production cost of delivered
units in excess of anticipated average cost of all units expected to be produced
are not significant.
F-11
<PAGE> 31
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E: PROPERTY, PLANT AND EQUIPMENT
Investment in property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
JULY 31
-------------------------
1995 1994
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Property, plant and equipment, at cost
Land...................................................... $ 45,097 $ 46,389
Buildings................................................. 623,712 594,736
Machinery and equipment................................... 877,455 843,413
---------- ----------
1,546,264 1,484,538
Less accumulated depreciation............................. (924,425) (886,922)
---------- ----------
Net investment in property, plant and equipment... $ 621,839 $ 597,616
========== ==========
</TABLE>
The net book value of assets utilized under capital leases was not material
at July 31, 1995 and 1994.
The range of estimated useful lives for determining depreciation and
amortization of the major classes of assets are:
<TABLE>
<S> <C>
Buildings....................................................... 10-45 years
Land improvements and building improvements..................... 2-20 years
Machinery and equipment......................................... 2-20 years
</TABLE>
As of July 31, 1995, minimum rental commitments under capital and
noncancellable operating leases were:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Year ended July 31
1996...................................................... $ 8,784 $22,759
1997...................................................... 8,776 17,079
1998...................................................... 8,711 12,226
1999...................................................... 50 8,863
2000...................................................... -- 6,363
Years subsequent to July 31, 2000........................... -- 21,844
------- -------
Total minimum lease payments................................ 26,321 $89,134
=======
Less amounts representing interest.......................... (1,903)
-------
Net minimum lease payments.................................. 24,418
Less current portion of capital lease commitments........... (7,747)
-------
Long-term portion of capital lease commitments.............. $16,671
=======
</TABLE>
Rental expense for operating leases, including amounts for short-term
leases with nominal, if any, future rental commitments, was $28.4 million, $32.4
million and $33.6 million for the years ended July 31, 1995, 1994 and 1993,
respectively. The minimum future rentals receivable under subleases and the
contingent rental expenses were not significant.
F-12
<PAGE> 32
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F: SHAREHOLDERS' INVESTMENT
SHARE INFORMATION At July 31, 1995, there were authorized 120 million
shares of Common stock, par value $1.00; 22 million shares of preferred stock,
par value $5.00 and 8 million shares of Preference stock, par value $2.50.
No cash dividends were paid on the Common stock in the three fiscal years
ended July 31, 1995.
The Series B preferred stock receives a $2.00 annual dividend, is not
convertible into Common stock and is redeemable at the option of the Company at
$80.00 plus accrued dividends and, in the event of liquidation, is entitled to
receive $25.00 plus accrued dividends. There were 410,643 shares of Series B
preferred stock outstanding for each of the three fiscal years ended July 31,
1995.
On June 28, 1993, the Company called for redemption its zero coupon
convertible subordinated notes due 2010. The notes were convertible into 6.126
shares of Litton Common stock per $1,000 principal amount of the notes. As of
July 31, 1993, substantially all of the notes outstanding had been converted
into 6,114,401 shares of Litton Common stock and the remainder had been settled
for cash. This transaction resulted in an increase to Shareholders' Investment
of $312.6 million.
STOCK OPTION INFORMATION The Company has stock option plans which provide
for the grant of incentive awards to officers and other key employees. Incentive
awards may be granted in the form of stock options at not less than 50% nor more
than 100% of the fair market value of the Company's Common stock on the date of
grant. The Company also has a Director Stock Option Plan which provides for the
grant of stock options to the Company's non-employee directors. Under this plan,
stock options are granted annually at the fair market value of the Company's
Common stock on the date of grant. The number of options so granted annually is
fixed by the plan. Such options become fully exercisable on the first
anniversary of their respective grant.
The following is a summary of stock options' activities:
<TABLE>
<S> <C>
Outstanding at July 31, 1992.............................................. 2,994,553
Grants (at $23.38 to $57.38 per share).................................. 396,000
Exercises (at $14.35 to $47.94 per share)............................... (719,424)
Cancellations........................................................... (49,000)
---------
Outstanding at July 31, 1993 ($14.35 to $57.38 per share)................. 2,622,129
Grants: Period prior to the Distribution (at $33.14 to $66.69 per
share).......................................................... 49,000
Period subsequent to the Distribution (at $15.19 to $37.19 per
share).......................................................... 421,000
Exercises: Period prior to the Distribution (at $14.35 to $47.94 per
share)....................................................... (341,638)
Period subsequent to the Distribution (at $7.41 to $20.18 per
share)....................................................... (99,070)
Cancellations........................................................... (6,000)
---------
Outstanding at July 31, 1994 ($7.40 to $37.19 per share).................. 2,645,421
Grants (at $17.09 to $34.19 per share).................................. 606,500
Exercises (at $7.40 to $20.83 per share)................................ (274,667)
Cancellations........................................................... (29,700)
---------
Outstanding at July 31, 1995 ($7.40 to $37.19 per share).................. 2,947,554
=========
</TABLE>
Exercisable options at July 31, 1995, 1994 and 1993 were 1,215,126,
1,083,111 and 1,245,019, respectively. At July 31, 1995, there were 1,029,655
shares available for grants of future awards under these plans.
F-13
<PAGE> 33
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Distribution of the shares of Western Atlas common
stock (see Note B) in fiscal year 1994, each option granted pursuant to the
plans was adjusted to account for the Distribution. Each Litton optionee with
options outstanding on the Distribution date received an equivalent number of
Western Atlas options. The option price was allocated in accordance with a
formula.
SHAREHOLDER RIGHTS PLAN On August 17, 1994 the Company's Board of
Directors adopted a Share Purchase Rights Plan (the "Plan") and, in accordance
with such Plan, declared a dividend of one preferred share purchase right for
each outstanding share of Common stock, payable August 31, 1994 to shareholders
of record on that date. The Plan contains provisions to protect shareholders in
the event of an unsolicited attempt to acquire the Company. The Plan should
deter any attempt to acquire the Company in a manner or on terms not approved by
the Board of Directors.
Once exercisable, each right will entitle the holder to purchase one
one-thousandth of a share of Series A Participating Preferred Stock, par value
$5, at a price of $150 per one one-thousandth of a Preferred Share, subject to
adjustment. Alternatively, under certain circumstances involving the acquisition
by a person or group of 15 percent or more of the Company's Common stock, each
right will entitle its holder to purchase a number of shares of the Company's
Common stock having a market value of two times the exercise price of the right.
In the event a merger or other business combination transaction is effected
after a person or group has acquired 15 percent or more of the Company's Common
shares, each right will entitle its holder to purchase a number of the resulting
company's common shares having a market value of two times the exercise price of
the right.
The Company may exchange the rights at an exchange ratio of one Common
share per right. The Company may also redeem the rights at $.01 per right at any
time prior to a 15 percent acquisition. The rights, which do not have voting
rights and are not entitled to dividends until such time as they become
exercisable, expire in August 2004.
NOTE G: TAXES ON INCOME
Earnings from continuing operations before taxes on income, extraordinary
item and cumulative effect of a change in accounting principle by geographic
area are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
---------------------------------
1995 1994 1993
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
United States...................................... $218,827 $102,453 $167,727
Other nations...................................... 8,133 (11,805) (23,361)
-------- -------- --------
$226,960 $ 90,648 $144,366
======== ======== ========
</TABLE>
F-14
<PAGE> 34
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of taxes on income consist of the following provisions
(benefits):
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
---------------------------------
1995 1994 1993
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
United States
Current........................................... $86,781 $ 67,637 $ 76,152
Deferred.......................................... (6,486) (33,203) (20,505)
------- -------- --------
80,295 34,434 55,647
------- -------- --------
Other nations
Current........................................... (4,112) (2,919) 7,373
Deferred.......................................... 6,457 518 (14,244)
------- -------- --------
2,345 (2,401) (6,871)
------- -------- --------
State and local, primarily current.................. 9,305 7,309 8,249
------- -------- --------
$91,945 $ 39,342 $ 57,025
======= ======== ========
</TABLE>
The primary components of the Company's deferred income tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
JULY 31
---------------------
1995 1994
---- ----
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Deferred Tax Assets:
Inventory and receivables.................................... $166,992 $163,338
Employee benefits............................................ 139,694 108,654
Accrued liabilities.......................................... 91,374 65,652
Other items.................................................. 48,417 87,016
-------- --------
446,477 424,660
-------- --------
Deferred Tax Liabilities:
Employee benefits............................................ 70,066 73,017
Depreciation................................................. 65,428 69,640
-------- --------
135,494 142,657
-------- --------
Net deferred tax assets.............................. $310,983 $282,003
======== ========
</TABLE>
The deferred tax assets and liabilities are classified on the Consolidated
Balance Sheets as follows:
<TABLE>
<CAPTION>
JULY 31
---------------------
1995 1994
---- ----
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Net current deferred tax assets................................ $362,819 $330,495
Net long-term deferred tax liabilities......................... 51,836 48,492
-------- --------
$310,983 $282,003
======== ========
</TABLE>
F-15
<PAGE> 35
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a reconciliation of income taxes at the U.S. statutory
rate to the provision for income taxes:
<TABLE>
<CAPTION>
JULY 31
-------------------------------
1995 1994 1993
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Tax at U.S. statutory rate............................ $79,436 $31,727 $49,084
State taxes net of federal benefit.................... 6,048 4,751 5,444
Earnings taxed at other than U.S. statutory rate...... 3,604 946 1,922
Other items........................................... 2,857 1,918 575
------- ------- -------
$91,945 $39,342 $57,025
======= ======= =======
Effective tax rate.................................... 40.5% 43.4% 39.5%
======= ======= =======
</TABLE>
Undistributed earnings of non-U.S. subsidiaries for which U.S. taxes have
not been provided are included in consolidated retained earnings in the amounts
of $152 million and $123 million at July 31, 1995 and 1994, respectively. If
such earnings were distributed, U.S. income taxes would be partially reduced by
available credits for taxes paid to the jurisdictions in which the income was
earned.
The Company made tax payments of $65.3 million, $195.0 million and $180.6
million in fiscal years 1995, 1994 and 1993, respectively.
The Company and WAI have entered into a tax-sharing agreement which, among
other items, provides for the treatment of tax matters for periods through the
Distribution date and responsibility for any adjustment as a result of audit by
any taxing authority. The general terms and conditions provide that Litton will
indemnify and hold harmless WAI and its subsidiaries included in Litton's
consolidated U.S. tax returns against all liabilities for Federal income taxes
with respect to periods prior to the Distribution date.
NOTE H: PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS
PENSION BENEFITS Most of the Company's U.S. employees are covered by
contributory defined benefit plans under which employees are eligible for
benefits at age 65. Generally, benefits are determined under a formula based
primarily on the participant's total plan contributions. The Company's funding
policy is to make annual contributions to the extent such contributions are
actuarially determined and tax deductible.
The Company has a defined contribution voluntary savings plan for eligible
U.S. employees. This 401(K) plan is designed to enhance the existing retirement
programs of participating employees. The Company matches 50% of a certain
portion of participants' contributions to the plan.
The Company's non-U.S. subsidiaries also have retirement plans for
long-term employees. These plans are not considered to be significant
individually or in the aggregate to the Company's consolidated financial
position. The pension liabilities and their related costs are computed in
accordance with the laws of the individual nations and appropriate actuarial
practices.
F-16
<PAGE> 36
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the components of net periodic pension income (cost) for the
U.S. defined benefit plans, defined contribution plans and non-U.S. pension
plans for fiscal years 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
----------------------------------
1995 1994 1993
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Defined benefit plans
Service cost -- benefits earned during the
period.......................................... $(26,880) $(24,543) $(23,996)
Interest cost on projected benefit obligation.... (64,566) (60,271) (61,071)
Actual return on plan assets..................... 120,009 114,769 113,479
Net amortization and deferral.................... (2,757) (1,607) (8,409)
-------- -------- --------
Net periodic pension income...................... 25,806 28,348 20,003
Defined contribution plans......................... (9,497) (10,246) (9,908)
Non-U.S. pension plans............................. (4,025) (3,445) 1,150
-------- -------- --------
Net pension income....................... $ 12,284 $ 14,657 $ 11,245
======== ======== ========
</TABLE>
A reconciliation of the funded status of the U.S. defined benefit plans is
as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
-------------------------
1995 1994
---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Fair value of plan assets................................... $1,237,771 $1,172,785
Projected benefit obligation................................ (855,423) (832,038)
Unrecognized net transition asset........................... (59,611) (70,371)
Unrecognized net gain....................................... (147,638) (116,625)
Unrecognized prior service costs............................ (9,679) (12,138)
---------- ----------
Prepaid pension cost.............................. $ 165,420 $ 141,613
========== ==========
</TABLE>
The accumulated benefit obligation was $778.5 million at July 31, 1995,
inclusive of the vested benefit obligation of $759.0 million. At July 31, 1994,
the accumulated benefit obligation was $743.1 million, inclusive of the vested
benefit obligation of $719.1 million.
The primary actuarial assumptions used include:
<TABLE>
<CAPTION>
YEAR ENDED
JULY 31
-------------
1995 1994
---- ----
<S> <C> <C>
Expected long-term rate of return...................................... 9 1/4% 9 1/4%
Weighted-average discount rate......................................... 8 1/4% 8 1/4%
Rate of increase on future compensation level.......................... 5% 5%
</TABLE>
The excess of plan assets over the projected benefit obligation at
August 1, 1986 (when the Company adopted SFAS No. 87) and subsequent
unrecognized gains and losses are fully amortized over the average remaining
service period of active employees expected to receive benefits under the
plans, generally 15 years. Pension assets included in Other Assets and
Long-term Investments were $204.0 million and $181.1 million at July 31, 1995
and 1994, respectively.
In fiscal years 1995, 1994 and 1993, the Company incurred $7.0 million,
$18.7 million and $13.5 million, respectively, in costs for special separation
and supplemental early retirement benefits for certain employees in connection
with workforce reductions at certain operations.
F-17
<PAGE> 37
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Distribution discussed in Note B, the Company and
WAI entered into an Employee Benefits Agreement which provided for, among other
items, the transfer to WAI of plan assets of approximately $189 million and the
assumption by WAI of a projected benefit obligation of approximately $120
million.
OTHER POSTRETIREMENT BENEFITS In addition to pension benefits, certain of
the Company's U.S. employees are covered by postretirement health care and life
insurance benefit plans. These benefit plans are unfunded. In the fourth quarter
of fiscal year 1993, the Company adopted, effective as of the beginning of the
fiscal year, the provisions of SFAS No. 106 related to these plans. The Company
elected immediate recognition of the transition liability for such benefits and
the resultant cumulative effect of a change in accounting principle amounted to
$106.7 million, net of tax.
The components of net periodic postretirement benefit costs for fiscal
years 1995, 1994 and 1993 recognized under the provisions of SFAS No. 106 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
-------------------------------
1995 1994 1993
---- ---- ----
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
Service cost -- benefits earned during the period..... $ 2,221 $ 2,073 $ 2,516
Interest cost on projected benefit obligation......... 14,712 14,049 13,014
------- ------- -------
Net postretirement benefit cost............. $16,933 $16,122 $15,530
======= ======= =======
</TABLE>
The following is a summary of the status of the plans:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
---------------------
1995 1994
---- ----
(THOUSANDS OF
DOLLARS)
<S> <C> <C>
Accumulated benefit obligation:
Retirees..................................................... $126,338 $148,636
Fully eligible plan participants............................. 23,616 27,198
Other active plan participants............................... 14,533 25,511
-------- --------
Total accumulated benefit obligation........................... 164,487 201,345
Unrecognized net gain (loss)................................... 40,396 (2,550)
-------- --------
Accrued benefit obligation........................... $204,883 $198,795
======== ========
</TABLE>
Actuarial assumptions used to measure the accumulated benefit obligation
include a discount rate of 8 1/4% at July 31, 1995 and 1994. The assumed health
care cost trend rate for fiscal year 1996 is 10 1/2%, decreasing over 22 years
to 6% where it is expected to remain thereafter. The effect of a
one-percentage-point increase in the assumed health care cost trend rate on the
service cost and interest cost components of the net periodic postretirement
benefit cost is not material. A one-percentage-point change in the assumed
health care cost trend rate would impact the accumulated benefit obligation by
approximately $12.8 million.
NOTE I: DEFENSE CONTRACTS, LITIGATION AND CONTINGENCIES
Approximately 73% of total sales and service revenues of the Company for
the years ended July 31, 1995, 1994 and 1993 were from U.S. Government contracts
and subcontracts. Approximately 86% of these revenues for 1995 related to
fixed-price type contracts. At July 31, 1995, of the total Company backlog of
$5.1 billion, the amount of worldwide defense contract backlog was approximately
$4.7 billion, of which $4.3 billion has been funded. At July 31, 1994 and 1993,
the amount of worldwide defense contract backlog was $5.2 billion and $6.3
billion, respectively.
F-18
<PAGE> 38
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As is common with U.S. Government contracts, the Company's U.S. defense
contracts are unilaterally terminable at the option of the U.S. Government with
compensation for work completed and costs incurred. Contracts with the U.S.
Government are subject to certain laws and regulations, the noncompliance with
which may result in various sanctions. In the current government contracting
environment, contractors, sometimes without their knowledge, are subject to
investigations by the U.S. Government initiated in various ways. Most
investigations result in no action being taken or administrative resolution.
Should any investigation result in the filing of formal charges against the
Company by the U.S. Government, disclosure will be made if the amount involved
or the relief sought is deemed by the Company to be material.
On August 31, 1993 a U.S. District Court jury rendered a verdict in favor
of Litton against Honeywell, Inc. in the amount of $1.2 billion. The jury found
that Honeywell willfully infringed a Litton patent relating to the manufacture
of ring laser gyro navigation systems which are used in commercial aircraft. The
jury also found that Honeywell actively induced a Litton licensee to infringe
Litton's patent and Honeywell interfered with Litton's prospective economic
advantage. Thereafter, in response to certain post trial motions filed by both
Honeywell and Litton, on January 9, 1995, the District Court released a
Memorandum of Decision finding Litton's patent invalid and unenforceable. As a
result, the jury verdict was overturned. On February 10, 1995 the District Court
entered judgment to this effect. On February 27, 1995 Litton filed a notice of
appeal to the U.S. Court of Appeals for the Federal Circuit (the "Federal
Circuit") asking that the District Court's finding that Litton's patent was
invalid and unenforceable be reversed and that the jury's verdict be reinstated.
Final pre-hearing briefs by the parties were submitted to the Federal Circuit in
August 1995. Litton is awaiting notification of the date for the hearing.
There are various other litigation proceedings in which the Company is
involved. Although the results of litigation proceedings cannot be predicted
with certainty, it is the opinion of the General Counsel that the ultimate
resolution of these other proceedings will not have a material adverse effect on
the Company's consolidated financial statements.
The Company has issued or is a party to various guarantees and letter of
credit agreements totalling $238 million at July 31, 1995. These arrangements
relate principally to the guarantee of future performance, mainly on foreign
government contracts.
NOTE J: EXTRAORDINARY ITEM AND UNUSUAL ITEM
On July 11, 1994, the Company effected an in-substance defeasance of its
12 5/8% Subordinated Debentures by placing direct U.S. Government obligations in
an irrevocable trust to provide for the redemption, according to their terms, on
July 1, 1995 at 104.2% of their principal amount, plus accrued interest (see
Note C). Due to this in-substance defeasance, results for fiscal year 1994
included an extraordinary loss on early extinguishment of debt of $49.2 million
pre-tax, or $30.7 million after tax. The effect on primary earnings per share
for the year was a decrease of $0.67.
On July 14, 1994, the Company settled a civil suit brought under the
so-called qui tam provisions of the False Claims Act and recorded a charge of
$86.0 million to the operating results of the Advanced Electronics segment. On
an after-tax basis, the impact of this settlement was a $53.8 million loss, or a
decrease of $1.18 to primary earnings per share for the year.
F-19
<PAGE> 39
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE K: BUSINESS SEGMENT REPORTING
The Company's primary operations are reported in three business segments:
Advanced Electronics, Marine Engineering and Production, and Interconnect
Products.
The Advanced Electronics segment designs, develops and manufactures
inertial navigation, guidance and control, command, control and communications
and electronic warfare systems. The fiscal year 1994 Advanced Electronics
segment operating profit included the effects of the settlement of a civil suit
(see Note J).
The Marine Engineering and Production segment is engaged in the building of
large multimission surface combatant ships and is a provider of overhaul,
repair, modernization, ship design and engineering services.
The U.S. Government is a significant customer of both the Advanced
Electronics and Marine Engineering and Production segments (see Note I).
The Interconnect Products segment manufactures and distributes
interconnection subsystems, electronic connectors, printed circuit boards,
backpanels and soldering materials to diverse markets worldwide. Operating
profit for fiscal year 1994 included a charge recorded to adjust the carrying
value of a division which was subsequently sold.
Intersegment sales, sales between geographic areas and export sales are not
material. All internal sales and transfers are based on negotiated prices.
Costs for Corporate and Other Amounts include net interest expense and
foreign currency adjustments. Assets classified as Corporate and Other Amounts
consist primarily of cash and marketable securities, deferred tax assets and,
for fiscal year 1993, net assets of WAI of $1,085 million. In fiscal year 1994,
the Company used cash and marketable securities to effect an early
extinguishment of debt as discussed in Note C.
F-20
<PAGE> 40
LITTON INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OPERATIONS BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
MARINE
YEAR ENGINEERING CORPORATE
ENDED ADVANCED AND INTERCONNECT AND OTHER
JULY 31 ELECTRONICS PRODUCTION PRODUCTS AMOUNTS TOTAL
------- ----------- ----------- ------------ --------- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Sales........................... 1995 $1,700 $1,396 $286 $ (62) $3,320
1994 1,732 1,484 289 (59) 3,446
1993 1,841 1,393 307 (67) 3,474
Operating profit (loss)......... 1995 128 132 22 (55) 227
1994 122* 141 8 (94) 177
1993 118 130 19 (123) 144
Capital expenditures............ 1995 49 26 12 11 98
1994 44 22 11 4 81
1993 43 23 7 1 74
Depreciation and amortization
expense........................ 1995 65 18 10 2 95
1994 67 19 11 1 98
1993 75 18 11 3 107
Identifiable assets at year
end............................ 1995 1,381 392 202 585 2,560
1994 1,156 330 197 571 2,254
1993 1,328 327 196 1,983** 3,834
</TABLE>
OPERATIONS BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
YEAR CORPORATE
ENDED UNITED OTHER AND OTHER
JULY 31 STATES NATIONS SUBTOTAL AMOUNTS TOTAL
------- ------ ------- -------- --------- ------
(MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C>
Sales............................... 1995 $3,039 $ 281 $3,320 $ -- $3,320
1994 3,160 286 3,446 -- 3,446
1993 3,140 334 3,474 -- 3,474
Operating profit (loss)............. 1995 267 13 280 (53) 227
1994 271* (4) 267 (90) 177
1993 283 (19) 264 (120) 144
Identifiable assets at year end..... 1995 1,742 233 1,975 585 2,560
1994 1,470 213 1,683 571 2,254
1993 1,585 266 1,851 1,983** 3,834
</TABLE>
- ---------------
* Excludes the effects of the settlement of a civil suit (see Note J).
** Includes net assets of WAI of $1,085 million.
F-21
<PAGE> 41
LITTON INDUSTRIES, INC.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4 TOTAL
--------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Fiscal Year 1995
Sales........................................... $ 789 $ 694 $ 862 $ 975 $3,320
Operating Profit................................ 54 48 60 65 227
Net Earnings.................................... 32 28 36 39 135
Primary Earnings per Share*..................... 0.68 0.60 0.75 0.81 2.84
Market Prices
Common Stock
High........................................ 40 38 7/8 38 38 7/8
Low......................................... 35 5/8 33 1/8 32 1/2 34 1/2
</TABLE>
- ---------------
Litton Common stock is traded principally on the New York Stock Exchange and
the Pacific Stock Exchange under the symbol "LIT".
As of September 29, 1995, there were approximately 26,700 holders of record of
the Common stock.
* Primary earnings per share also reflected fully diluted earnings per share in
each of the four quarters of fiscal year 1995.
F-22
<PAGE> 42
LITTON INDUSTRIES, INC.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4* TOTAL
--------- --------- --------- ---------- ------
<S> <C> <C> <C> <C> <C>
Fiscal Year 1994
Sales.......................................... $ 841 $ 804 $ 957 $ 844 $ 3,446
Operating Profit (Loss)........................ $ 44 $ 39 $ 51 $ (43) $ 91
Earnings (Loss) before Extraordinary Item
Continuing Operations........................ $ 26 $ 23 $ 30 $ (28) $ 51
Discontinued Operations...................... 9 (175) (7) -- (173)
Extraordinary Loss............................. -- -- -- (31) (31)
------ ------ ------ ------ ------
Net Earnings (Loss)............................ $ 35 $ (152) $ 23 $ (59) (153)
====== ====== ====== ====== ======
Primary Earnings (Loss) per Share before
Extraordinary Item**
Continuing Operations........................ $ 0.55 $ 0.51 $ 0.64 $(0.62) $ 1.10
Discontinued Operations...................... 0.20 (3.83) (0.16) -- (3.79)
Extraordinary Loss............................. -- -- -- (0.67) (0.67)
------ ------ ------ ------ ------
Total.......................................... $ 0.75 $(3.32) $ 0.48 $(1.29) $(3.36)
====== ====== ====== ====== ======
Market Prices
Common Stock
High....................................... 69 3/8 71 3/8 74 3/4 37 5/8
Low........................................ 58 1/2 62 5/8 28 7/8*** 30 1/4
</TABLE>
- ---------------
The total of quarterly amounts for earnings per share will not necessarily
equal the annual amount, since the computations are based on the average
number of common shares and dilutive common share equivalents outstanding
during each period.
* Results for the fourth quarter of fiscal year 1994 included the settlement
of a civil suit (see Note J). The impact on fourth quarter and fiscal year
1994 primary and fully diluted earnings per share was a loss of $1.17 and
$1.18, respectively. In addition, the Company effected an early
extinguishment of debt in the fourth quarter of fiscal year 1994 which
resulted in an extraordinary loss (see Notes C and J).
** Primary earnings (loss) per share also reflected fully diluted earnings
(loss) per share in each of the four quarters of fiscal year 1994.
*** Subsequent to the Distribution, Western Atlas common stock began trading
separately from Litton Common stock in the third quarter of fiscal year 1994
(see Note B).
F-23
<PAGE> 43
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. AND
APPLICABLE SECTION
OF ITEM 601 OF
REGULATION S-K
- ------------------
<C> <S>
3.1(a) Restated Certificate of Incorporation of the Company, filed as Exhibit 3.1
to the Company's 1984 Annual Report on Form 10-K, and incorporated herein by
reference.
3.1(b) Amendment to the Company's Restated Certificate of Incorporation, filed as
Exhibit 3.1(a) to the Company's October 31, 1986 Quarterly Report on Form
10-Q, and incorporated herein by reference.
3.2(a) By-laws of the Company as amended through the date of this filing, and
incorporated herein by reference.
4.1 Indenture dated as of June 10, 1985 between the Company and The Bank of New
York, Trustee, under which the 12 5/8% Subordinated Debentures Due 2005 were
issued, filed as Exhibit 4.1 to the Company's April 30, 1985 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
4.2 Form of definitive 12 5/8% Subordinated Debenture Due 2005, filed as
Exhibit 4.4 to the Company's 1985 Annual Report on Form 10-K, and incorporated
herein by reference.
4.3 $400,000,000 Amended and Restated Credit Agreement dated December 22, 1994,
along with amendment dated March 17, 1995, among Litton Industries, Inc., a
group of banks and Morgan Guaranty Trust Company of New York, as Agent, and
Wells Fargo Bank, N.A., as Co-Agent.*
4.4 Other instruments defining the rights of holders of other long-term debt of
the Registrant are not filed as exhibits because the amount of debt
authorized under any such instrument does not exceed 10% of the total assets
of the Registrant and its consolidated subsidiaries. The Registrant hereby
undertakes to furnish a copy of any such instrument to the Commission upon
request.
4.5 Rights Agreement, together with exhibits thereto, dated August 17, 1994
between Litton Industries, Inc. and The Bank of New York, as Rights Agent,
filed as Exhibit 99.2 to Form 8-K dated August 17, 1994, and incorporated
herein by reference.
10.1(a) Board of Directors Resolutions, adopted December 8, 1994, with respect to
nonemployee directors' annual retainer and attendance fees.*
10.1(b) Board of Directors Resolutions with respect to director retirement age and
with respect to postretirement payments to directors, including those
payments made in the event of a change in control of the Company, adopted on
October 16, 1991, filed as Exhibit 10.2(b) to the Company's 1991 Annual
Report on Form 10-K, and incorporated herein by reference.
10.2(a) Litton Supplemental Retirement Plan, filed as Exhibit 10.3 to the Company's
1983 Annual Report on Form 10-K, and incorporated herein by reference.
10.2(b) Board of Directors Resolution, adopted December 2, 1992, amending the Litton
Supplemental Retirement Plan, filed as Exhibit 10.1 to the Company's
April 30, 1993 Quarterly Report on Form 10-Q, and incorporated herein by
reference.
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Copies of these documents have been included in this Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
</TABLE>
E-1
<PAGE> 44
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX TO EXHIBITS -- (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. AND
APPLICABLE SECTION
OF ITEM 601 OF
REGULATION S-K
- ------------------
<C> <S>
10.2(c) Agreement of Trust between the Company and First Interstate Bank of
California, dated December 20, 1988, regarding payments of pension benefits
under the Litton Supplemental Retirement Plan to certain former and present
employees or their beneficiaries, filed as Exhibit 10.17 to the Company's
1989 Annual Report on Form 10-K, and incorporated herein by reference.
10.2(d) Amendments, through the date of the filing, to the Agreement of Trust dated
December 20, 1988, and incorporated herein by reference.
10.2(e) Instruments dated April 16, 1990, and April 25, 1990, removing First
Interstate Bank of California as Trustee under Agreement of Trust dated
December 20, 1988, and appointing Wells Fargo Bank, N.A., as Successor
Trustee, filed as Exhibit 10.17(c) to the Company's 1990 Annual Report on
Form 10-K, and incorporated herein by reference.
10.2(f) Letter of Credit dated November 17, 1989, issued by Wells Fargo Bank, N.A.
pursuant to Agreement of Trust dated December 20, 1988, filed as Exhibit
10.17(d) to the Company's 1990 Annual Report on Form 10-K, and incorporated
herein by reference.
10.3(a) Specimen of the form of the agreement presently outstanding under the Litton
Industries, Inc. Executive Survivor Benefit Plan, applicable to officers and
certain key employees, filed as Exhibit 10.4 to the Company's 1984 Annual
Report on Form 10-K, and incorporated herein by reference.
10.3(b) Board of Directors Resolutions amending the Executive Survivor Benefit Plan,
adopted June 12, 1986, filed as Exhibit 10.4(a) to the Company's 1986 Annual
Report on Form 10-K, and incorporated herein by reference.
10.5(a) Board of Directors Resolution with respect to incentive loans, adopted
September 26, 1991, filed as Exhibit 10.8(a) to the Company's 1991 Annual
Report on Form 10-K, and incorporated herein by reference.
10.5(b) Specimen of the form of promissory note applicable to loans presently
outstanding under the Company's incentive loan program, filed as Exhibit
10.8(b) to the Company's 1991 Annual Report on Form 10-K, and incorporated
herein by reference.
10.7(a) Supplemental Medical Insurance Plan for Key Executive Employees
incorporating all amendments thereto through the date of this filing, filed
as Exhibit 10.10 to the Company's 1990 Annual Report on Form 10-K, and
incorporated herein by reference.
10.7(b) Resolution adopted by the Compensation and Selection Committee, dated
January 26, 1994, approving the participation by Orion L. Hoch and Catherine
Nan Hoch in the Supplemental Medical Insurance Plan, filed as Exhibit 10.2
to the Company's April 30, 1994 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
10.9(a) Supplemental Retirement Agreement between the Company and Orion L. Hoch,
filed as Exhibit 10.13(b) to the Company's 1983 Annual Report on Form 10-K,
and incorporated herein by reference.
10.9(b) Amendments, through the date of the filing, to the Supplemental Retirement
Agreement between the Company and Orion L. Hoch, and incorporated herein by
reference.
</TABLE>
E-2
<PAGE> 45
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX TO EXHIBITS -- (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. AND
APPLICABLE SECTION
OF ITEM 601 OF
REGULATION S-K
- ------------------
<C> <S>
10.9(c) Extract of the minutes of a meeting of the Compensation and Selection
Committee of the Board of Directors, held on March 31, 1988, with respect to
the lifetime participation of Fred W. O'Green and Mildred G. O'Green in the
Supplemental Medical Insurance Plan, filed as Exhibit 10.13(e) to the
Company's 1988 Annual Report on Form 10- K, and incorporated herein by
reference.
10.10(a) Litton Industries, Inc. 1984 Long-Term Stock Incentive Plan, as amended,
filed as Exhibit 10.14(a) to the Company's 1992 Annual Report on Form 10-K,
and incorporated herein by reference.
10.10(b) Compensation and Selection Committee Resolutions, adopted March 12, 1992,
amending the Litton Industries, Inc. 1984 Long-Term Stock Incentive Plan for
the effects of the two-for-one Common stock split which was effective May 8,
1992, filed as Exhibit 10.14(b) to the Company's 1992 Annual Report on Form
10-K, and incorporated herein by reference.
10.10(c) Board of Directors Resolutions, adopted August 12, 1993, amending the Litton
Industries, Inc. 1984 Long-term Stock Incentive Plan for employment and
option price in connection with the distribution of Western Atlas Inc.,
filed as Exhibit 10.14(c) to the Company's 1993 Annual Report on Form 10-K,
and incorporated herein by reference.
10.10(d) Compensation and Selection Committee Resolution, adopted September 29, 1993,
adjusting the options outstanding under the Litton Industries, Inc. 1984
Long-term Stock Incentive Plan for the distribution of Western Atlas Inc.
Common stock, filed as Exhibit 10.14(d) to the Company's 1993 Annual Report
on Form 10-K, and incorporated herein by reference.
10.11(a) Litton Industries, Inc. Performance Award Plan, filed as Exhibit 10.15 to
the Company's 1984 Annual Report on Form 10-K, and incorporated herein by
reference.
10.11(b) Board of Directors Resolution, adopted December 2, 1992, amending the Litton
Industries, Inc. Performance Award Plan, filed as Exhibit 10.2 to the
Company's April 30, 1993 Quarterly Report on Form 10-Q, and incorporated
herein by reference.
10.11(c) Board of Directors Resolution, adopted August 3, 1995, amending the Litton
Industries, Inc. Performance Award Plan.*
10.12 Litton Industries, Inc. Restoration Plan filed as Exhibit 10.16 to the
Company's 1989 Annual Report on Form 10- K, and incorporated herein by
reference.
10.13(a) Litton Industries, Inc. Director Stock Option Plan, filed as Exhibit
10.18(a) to the Company's 1989 Annual Report on Form 10-K, and incorporated
herein by reference.
10.13(b) Board of Directors Resolution, adopted March 12, 1992, amending the Litton
Industries, Inc. Director Stock Option Plan for the two-for-one Common stock
split which was effective May 8, 1992, filed as Exhibit 10.18(b) to the
Company's 1992 Annual Report on Form 10-K, and incorporated herein by
reference.
10.13(c) Board of Directors Resolution, adopted September 30, 1993, adjusting the
options outstanding under the Litton Industries, Inc. Director Stock Option
Plan for the distribution of Western Atlas Inc. Common stock, filed as
Exhibit 10.18(c) to the Company's 1993 Annual Report on Form 10-K, and
incorporated herein by reference.
</TABLE>
- ---------------
* Copies of these documents have been included in this Annual Report on Form
10-K filed with the Securities and Exchange Commission.
E-3
<PAGE> 46
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX TO EXHIBITS -- (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. AND
APPLICABLE SECTION
OF ITEM 601 OF
REGULATION S-K
- ------------------
<C> <S>
10.13(d) Board of Directors Resolution, adopted October 27, 1994, with respect to
options issued to directors of the Company who became directors of Western
Atlas Inc.*
10.14 Consulting agreement between a subsidiary of the Company and Thomas B.
Hayward, a director of the Company, dated December 17, 1993, filed as
Exhibit 10.5 to the Company's April 30, 1994 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
10.16 Copy of the Company's "Group Bonus Plan Fiscal 1993", which provides for
incentive compensation rewards for certain Group Executives and other key
group personnel.*
10.17 Copy of the Incentive Compensation Plan of Ingalls Shipbuilding, Inc., a
subsidiary of the Company, filed as Exhibit 10.25 to the Company's 1992
Annual Report on Form 10-K, and incorporated herein by reference.
10.18 Litton Industries, Inc. Deferred Compensation Plan for Directors together
with Board of Directors Resolution adopted December 2, 1992, filed as
Exhibit 10.3 to the Company's April 30, 1993 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
10.19 Form of Change of Control Employment Agreement between the Company and
certain executive officers, filed as Exhibit 10.27 to the Company's 1993
Annual Report on Form 10-K, and incorporated herein by reference.
10.20 Distribution and Indemnity Agreement between Litton Industries, Inc. and
Western Atlas Inc. dated March 17, 1994, filed as Exhibit 99.1 to Form 8-K
dated March 17, 1994, and incorporated herein by reference.
10.21 Tax Sharing Agreement between Litton Industries, Inc. and Western Atlas Inc.
dated March 17, 1994, filed as Exhibit 99.1 to Form 8-K dated March 17,
1994, and incorporated herein by reference.
10.22 Litton Industries, Inc. Supplemental Executive Retirement Plan, effective
August 1, 1995, to provide supplemental retirement benefits to certain key
executive employees.*
11 Statement of Computation of Earnings per Share included herein on pages E-5
and E-6.
21 Subsidiaries of the Registrant included herein on page E-7.
23 Independent Auditors' Consent included herein on page E-8.
27 Financial Data Schedule included herein.
99 Undertaking re: Indemnification for liabilities under Securities Act, filed
as Exhibit 19 to the Company's 1990 Annual Report on Form 10-K, and
incorporated herein by reference.
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Copies of these documents have been included in this Annual Report on Form 10-K filed with the
Securities and Exchange Commission.
</TABLE>
E-4
<PAGE> 47
EXHIBIT 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE(A)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE
Earnings available for common shares and
common stock equivalent shares deemed to
have a dilutive effect:
Earnings from continuing operations......... $ 135,015 $ 51,306 $ 87,341 $ 87,299 $ 5,964
Provision for cash dividends on preferred
stock (Series B)........................... (821) (821) (821) (821) (821)
---------- ---------- ---------- ---------- ----------
Net earnings from continuing operations....... 134,194 50,485 86,520 86,478 5,143
Discontinued operations....................... -- (173,079) 94,962 87,138 57,539
Extraordinary loss............................ -- (30,732) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations....................... -- -- (106,727) -- --
Discontinued operations..................... -- -- (10,390) -- --
---------- ---------- ---------- ---------- ----------
Net earnings (loss) available for common
shares and common stock equivalent shares
deemed to have a dilutive effect............. $ 134,194 $ (153,326) $ 64,365 $ 173,616 $ 62,682
========== ========== ========== ========== ==========
Primary earnings (loss) per share before
extraordinary item and cumulative effect of a
change in accounting principle:
Continuing operations....................... $ 2.84 $ 1.10 $ 2.10 $ 2.10 $ 0.12
Discontinued operations..................... -- (3.79) 2.31 2.12 1.33
Extraordinary loss............................ -- (0.67) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations....................... -- -- (2.60) -- --
Discontinued operations..................... -- -- (0.25) -- --
---------- ---------- ---------- ---------- ----------
Total primary....................... $ 2.84 $ (3.36) $ 1.56 $ 4.22 $ 1.45
========== ========== ========== ========== ==========
SHARES USED IN COMPUTATION
Weighted average common shares outstanding
(net of treasury shares)..................... 46,029,979 45,720,585 40,161,652 40,189,888 42,290,454
Common stock equivalents...................... 1,157,955 (B) 998,827 985,676 1,132,206
---------- ---------- ---------- ---------- ----------
Total common shares and common stock
equivalent shares deemed to have a dilutive
effect....................................... 47,187,934 45,720,585 41,160,479 41,175,564 43,422,660
========== ========== ========== ========== ==========
</TABLE>
- ---------------
NOTES:
(A) Applicable information for fiscal year 1991 has been adjusted for a
two-for-one Common stock split which occurred in fiscal year 1992.
Additionally, amounts related to fiscal years 1992 and 1991 have been
restated to reflect the WAI businesses as discontinued operations in
connection with the Distribution discussed in Note B of Notes to
Consolidated Financial Statements on page F-8 of this Annual Report on Form
10-K.
(B) The weighted average effect of stock options was anti-dilutive for fiscal
year 1994 and, therefore, not considered.
E-5
<PAGE> 48
EXHIBIT 11 (CONTINUED)
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE(A)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Earnings available for common shares and common stock
equivalent shares deemed to have a dilutive effect:
Earnings from continuing operations................ $ 135,015 $ 51,306 $ 87,341 $ 87,299 $ 5,964
Provision for cash dividends on preferred stock
(Series B)........................................ (821) (821) (821) (821) (821)
---------- ---------- ---------- ---------- ----------
Net earnings from continuing operations.............. 134,194 50,485 86,520 86,478 5,143
Discontinued operations.............................. -- (173,079) 94,962 87,138 57,539
Extraordinary loss................................... -- (30,732) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations.............................. -- -- (106,727) -- --
Discontinued operations............................ -- -- (10,390) -- --
---------- ---------- ---------- ---------- ----------
Net earnings (loss) available for common shares and
common stock equivalent shares deemed to have a
dilutive effect..................................... 134,194 (153,326) 64,365 173,616 62,682
Add: Interest expense on zero coupon convertible
subordinated notes (net of tax)..................... -- -- (B) 13,083 (B)
---------- ---------- ---------- ---------- ----------
Total...................................... $ 134,194 $ (153,326) $ 64,365 $ 186,699 $ 62,682
========== ========== ========== ========== ==========
Fully diluted earnings (loss) per share before
extraordinary item and cumulative effect of a
change in accounting principle:
Continuing operations.............................. $ 2.84 $ 1.10 $ 2.10 $ 2.10 $ 0.12
Discontinued operations............................ -- (3.79) 2.31 1.84 1.33
Extraordinary loss................................... -- (0.67) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations.............................. -- -- (2.60) -- --
Discontinued operations............................ -- -- (0.25) -- --
---------- ---------- ---------- ---------- ----------
Total fully diluted........................ $ 2.84 $ (3.36) $ 1.56 $ 3.94 $ 1.45
========== ========== ========== ========== ==========
SHARES USED IN COMPUTATION
Total common shares and common stock equivalent
shares deemed to have a dilutive effect............. 47,187,934 45,720,585 41,160,479 41,175,564 43,422,660
Additional potentially dilutive securities
(equivalent in common stock):
Stock options...................................... 73,964 -- -- 24,676 29,676
Zero coupon convertible subordinated notes......... -- -- (B) 6,126,000 (B)
---------- ---------- ---------- ---------- ----------
Total...................................... 47,261,898 45,720,585 41,160,479 47,326,240 43,452,336
========== ========== ========== ========== ==========
SUMMARY OF CASH DIVIDENDS DECLARED PER SHARE
Preferred -- Series B................................ $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00
</TABLE> `
- ---------------
NOTES:
(A) Applicable information for fiscal year 1991 has been adjusted for a
two-for-one Common stock split which occurred in fiscal year 1992.
Additionally, amounts related to fiscal years 1992 and 1991 have been
restated to reflect the WAI businesses as discontinued operations in
connection with the Distribution discussed in Note B of Notes to
Consolidated Financial Statements on page F-8 of this Annual Report on Form
10-K.
(B) The fully diluted earnings per share calculation for fiscal 1993 and 1991
did not include the assumed conversion of zero coupon convertible
subordinated notes issued September 26, 1990, because the effect on shares
used in the calculation and the related increase to income for the interest
expense adjustment, net of tax, would be anti-dilutive. As discussed in
Note F of Notes to Consolidated Financial Statements on page F-13 of this
Annual Report on Form 10-K, substantially all of these notes were converted
into Common stock and the remainder redeemed for cash in fiscal year 1993.
E-6
<PAGE> 49
EXHIBIT 21
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF PERCENTAGE OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
------------------ --------------- -------------
<S> <C> <C>
Ingalls Shipbuilding, Inc. ....................................... Delaware 100
Litton Systems, Inc. ............................................. Delaware 100
</TABLE>
The Registrant has additional operating subsidiaries, which considered in
the aggregate as a single subsidiary, do not constitute a significant
subsidiary.
All above listed subsidiaries have been consolidated in the Registrant's
financial statements.
E-7
<PAGE> 50
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in (i) Registration Statement
No. 2-93044 on Form S-8, (ii) Registration Statement No. 33-27467 on Form S-8,
(iii) Registration Statement No. 33-27468 on Form S-8, (iv) Registration
Statement No. 33-44684 on Form S-3 and (v) Registration Statement No. 33-55944
on Form S-8 of our report dated September 21, 1995, appearing in this Annual
Report on Form 10-K of Litton Industries, Inc. and subsidiary companies for the
year ended July 31, 1995.
DELOITTE & TOUCHE LLP
Los Angeles, California
October 16, 1995
E-8
<PAGE> 1
EXHIBIT 4.3
[EXECUTION COPY]
$400,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
December 22, 1994
among
Litton Industries, Inc.
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent, and
Wells Fargo Bank, N.A.,
as Co-Agent
<PAGE> 2
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.03 Types of Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.02 Notice of Committed Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.03 Money Market Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.04 Notice to Banks; Funding of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.06 Maturity of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.07 Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.08 Facility Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.09 Optional Termination or Reduction of Commitments . . . . . . . . . . . . . . . . . . 29
2.10 Scheduled Termination of Commitments . . . . . . . . . . . . . . . . . . . . . . . . 29
2.11 Optional Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.12 General Provisions as to Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.13 Funding Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.14 Computation of Interest and Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.15 Regulation D Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.02 Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
____________________
(1) The Table of Contents is not a part of this Agreement.
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.02 Corporate and Governmental Authorization; No Contravention . . . . . . . . . . . . 34
4.03 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.04 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.05 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.06 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.07 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.08 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.09 Material Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.10 Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.11 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.12 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE V
COVENANTS
SECTION 5.01 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.02 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . . . . . . 40
5.03 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.04 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.05 Leverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.06 Minimum Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . 41
5.07 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.08 Subsidiary Debt Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.09 Negative Pledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.10 Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . 42
5.11 Limitation on Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.02 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII
THE AGENT
SECTION 7.01 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.02 Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
7.03 Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.04 Consultation with Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.05 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.06 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.07 Credit Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.08 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.09 Agent's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
7.10 Co-Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair . . . . . . . . . . . . . . 48
8.02 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.03 Increased Cost and Reduced Return . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.04 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.05 Base Rate Loans Substituted for Affected Fixed Rate Loans. . . . . . . . . . . . . . 53
8.06 Substitution of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.02 No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.03 Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
9.04 Sharing of Set-Offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.05 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.06 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.07 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.08 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . 57
9.09 Counterparts; Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.10 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
</TABLE>
iii
<PAGE> 5
Pricing Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the Borrower
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Assignment and Assumption Agreement
iv
<PAGE> 6
AMENDED AND RESTATED
CREDIT AGREEMENT
AGREEMENT dated as of December 22, 1994 among LITTON INDUSTRIES, INC.,
the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent, and WELLS FARGO BANK, N.A., as Co-Agent.
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks listed on the signature pages hereof
and the Agent are parties to a Credit Agreement dated as of December 23, 1993
(as amended to the Effective Date (as defined below), the "Original
Agreement"); and
WHEREAS, the parties hereto wish to modify the Original Agreement by,
among other things, decreasing the interest rate applicable to the loans
outstanding or to be made thereunder and the amount of fees to be paid
thereunder;
NOW, THEREFORE, the parties hereto hereby agree that, on and as of the
Effective Date, the Original Agreement is hereby amended and restated in its
entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Bank.
"Affiliate" means any Person (other than a Subsidiary) directly or
indirectly controlling or controlled
<PAGE> 7
by or under direct or indirect common control with the Borrower. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Agreement" means the Original Agreement as amended and restated by
this Amended and Restated Agreement and as the same may be further amended or
restated from time to time in accordance with the terms hereof.
"Amended and Restated Agreement" means this Amended and Restated
Credit Agreement dated as of December 22, 1994, among the Borrower, the Banks,
the Agent and the Co-Agent.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each financial institution listed on the signature pages
hereof, each Assignee which becomes a Bank pursuant to Section 9.06(c), and
their respective successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Committed Borrowing or
pursuant to Article VIII.
2
<PAGE> 8
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Litton Industries, Inc., a Delaware corporation, and
its successors.
"Borrower's 1994 Form 10-K" means the Borrower's annual report on Form
10-K for the fiscal year ended July 31, 1994, as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means Chemical Bank, Union Bank of Switzerland
and Morgan Guaranty Trust Company of New York, or such other bank or banks as
the Borrower and the Agent may from time to time mutually designate.
"Change of Control" means any of the following:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of
either (i) the then outstanding shares of common stock of the Borrower (the
"Outstanding Borrower Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Borrower entitled to vote generally
in the election of directors (the "Outstanding Borrower Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions of stock shall not constitute a Change of Control: (i) any
acquisition by the Borrower, (ii) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Borrower or any corporation
controlled by the Borrower or (iii) any
3
<PAGE> 9
acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this definition;
(b) Individuals who, as of the date hereof, constitute the Board of
Directors of the Borrower (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Borrower's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board;
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Borrower
(a "Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Borrower Common
Stock and Outstanding Borrower Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Borrower or all or
substantially all of the Borrower's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Borrower
Common Stock and Outstanding Borrower Voting Securities, as the case may be,
(ii) no Person (excluding any employee benefit plan (or related trust) of the
Borrower or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation and (iii) at least a majority of the
members of the board of directors of the corporation
4
<PAGE> 10
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Borrower of a complete
liquidation or dissolution of the Borrower.
"Co-Agent" means Wells Fargo Bank, National Association in its
capacity as co-agent hereunder, and its successors in such capacity.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages of this Amended and
Restated Agreement, as such amount may be reduced from time to time pursuant to
Sections 2.09 and 2.10.
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01.
"Consolidated EBIT" means, for any period, the sum of Consolidated Net
Income for such period plus, to the extent deducted in the determination of
such Consolidated Net Income, Consolidated Interest Expense for such period and
the provision for income taxes for such period.
"Consolidated Interest Expense" means, for any period, the interest
expense of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis for such period.
"Consolidated Net Income" means, for any period, the net income of the
Borrower and its Consolidated Subsidiaries for such period, determined on a
consolidated basis except that Consolidated Net Income shall not include the
extraordinary loss on early debt extinguishment of the Borrower related to the
in-substance defeasance of the Borrower's 12-5/8% Subordinated Debentures due
July 1, 2005, the charges relating to amounts paid in connection with the
settlement on July 14, 1994 of all issues in connection with certain litigation
(the Carton case) and any related tax effects.
"Consolidated Net Worth" means at any date the shareholders'
investment in the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis as of such date.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be
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<PAGE> 11
consolidated with those of the Borrower in its consolidated financial
statements if such statements were prepared as of such date.
"Consolidated Tangible Net Worth" means at any date the shareholders'
investment in the Borrower and its Consolidated Subsidiaries less their
consolidated Intangible Assets, all determined as of such date. For purposes
of this definition "Intangible Assets" means the amount (to the extent
reflected in determining such consolidated shareholders' investment) of (i) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of assets of a going concern business made within twelve months
after the acquisition of such business) subsequent to July 31, 1994 in the book
value of any asset owned by the Borrower or a Consolidated Subsidiary, (ii) all
investments in unconsolidated Subsidiaries and, to the extent the same exceed
$20,000,000 in aggregate amount, all equity investments in Persons which are
not Subsidiaries (other than investments in readily marketable securities) and
(iii) all unamortized debt discount and expense, unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights,
organization or developmental expenses and other intangible assets. Publicly
traded securities will be deemed "readily marketable" if the investment of the
Borrower or a Subsidiary therein may be offered or sold to the public generally
without registration under the Securities Act of 1933, as amended.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable and deferred employee
compensation obligations arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in accordance with
generally accepted accounting principles, (v) all unpaid reimbursement
obligations of such Person in respect of letters of credit or similar
instruments but only to the extent that either (x) the issuer has honored a
drawing thereunder or (y) payment of such obligation is otherwise due under the
terms thereof, (vi) all Debt secured by a Lien on any asset of such Person,
whether or not such Debt is otherwise an obligation of such Person, and (vii)
all Debt of others Guaranteed by such Person; provided that Debt of the
Borrower shall not include Debt of Western Atlas Inc. or its subsidiaries in an
aggregate principal amount not exceeding $175,000,000 Guaranteed by the
Borrower prior to
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<PAGE> 12
the date of this Amended and Restated Agreement so long as Western Atlas Inc.
shall have counter-indemnified the Borrower with respect to such Guarantee and
is not in default with respect thereto.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Dividend Payment" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock or (ii) any payment on account of the
purchase, redemption, retirement or acquisition of (a) any shares of the
Borrower's capital stock or (b) any option, warrant or other right to acquire
shares of the Borrower's capital stock.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent; provided that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
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<PAGE> 13
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to the environment, the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
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<PAGE> 14
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices of
Chemical Bank, Union Bank of Switzerland and Morgan Guaranty Trust Company of
New York, or such other bank or banks as the Borrower and the Agent may from
time to time mutually designate.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day (the "accrual date"), the rate
per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on the
accrual date, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that (i) if the
accrual date is not a Domestic Business Day, the Federal Funds Rate for the
accrual date shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day, and (ii) if no such rate is so published on such next succeeding Domestic
Business Day, the Federal Funds Rate for the accrual date shall be the average
rate quoted to Morgan Guaranty Trust Company of New York on the accrual date
(or next preceding Domestic Business Day) on such transactions as determined by
the Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(a)) or any combination of the foregoing.
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<PAGE> 15
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the holder of
such Debt of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any constituent
elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Coverage Ratio" means, for any period, the ratio of
Consolidated EBIT for such period to Consolidated Interest Expense for such
period.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the
applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
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<PAGE> 16
Period) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date of
such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower
may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period (other than an Interest Period determined
pursuant to clause (b) below) which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period commencing
on the date of such Borrowing and ending such whole number of months thereafter
as the Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a
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<PAGE> 17
day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall, subject to clause (c)
below, end on the last Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 14 days) as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Leverage Ratio" means, at any date, the ratio of Total Borrowed Funds
at such date to Consolidated Net Worth at such date.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Borrower or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market
Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
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<PAGE> 18
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $25,000,000.
"Material Financial Obligations" means a principal amount of Debt
and/or payment obligations in respect of Derivatives Obligations of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, exceeding in the aggregate $25,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $10,000,000.
"Material Subsidiary" means a Subsidiary, including its Subsidiaries,
which meets any of the following conditions:
(1) the Borrower's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed 5 percent of the total assets of the Borrower
and its Subsidiaries consolidated as of the end of the most recently completed
fiscal year; or
(2) the Borrower's and its other Subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the Subsidiary exceeds 5
percent of the total assets of the Borrower and its Subsidiaries consolidated
as of the end of the most recently completed fiscal year; or
(3) the Borrower's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principle of the Subsidiary exceeds
5 percent of such income of the Borrower and its Subsidiaries consolidated for
the most recently completed fiscal year.
Computational note: For purposes of making the prescribed income test
the following guidance should be applied:
1. When a loss has been incurred by either the Borrower and its
Subsidiaries consolidated or the tested Subsidiary, but not both, the equity in
the income or loss of the tested Subsidiary should be excluded from the income
of the Borrower and its Subsidiaries consolidated for purposes of the
computation.
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2. If income of the Borrower and its Subsidiaries consolidated for
the most recent fiscal year is at least 5 percent lower than the average of the
income for the last five fiscal years, such average income should be
substituted for purposes of the computation. Any loss years should be omitted
for purposes of computing average income.
"Minimum Compliance Level" means, at any date, an amount equal to the
sum of (i) $368,157,000 plus (ii) for each fiscal quarter of the Borrower
commencing after July 31, 1994 and on or prior to such date for which
Consolidated Net Income is a positive number, an amount equal to 50% of
Consolidated Net Income for such fiscal quarter plus (iii) for each issuance
and/or sale subsequent to July 31, 1994 and on or prior to such date by the
Borrower of shares of its capital stock, an amount equal to 100% of the amount
by which Consolidated Tangible Net Worth is increased on account of such
transaction.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the
Borrower and the Agent; provided that any Bank may from time to time by notice
to the Borrower and the Agent designate separate Money Market Lending Offices
for its Money Market LIBOR Loans, on the one hand, and its Money Market
Absolute Rate Loans, on the other hand, in which case all references herein to
the Money Market Lending Office of such Bank shall be deemed to refer to either
or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
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<PAGE> 20
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
in an amount exceeding $1,000,000 per annum or has within the preceding five
plan years made such contributions, including for these purposes any Person
which ceased to be a member of the ERISA Group during such five year period.
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"Original Agreement" has the meaning set forth in the recitals hereto.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any Person
which was at such time a member of the ERISA Group.
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<PAGE> 21
"Pricing Schedule" means the Schedule attached hereto identified as
such.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 55% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 55% of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions are at
the time directly or indirectly owned by the Borrower (or, if such term is used
with reference to another Person, by such other Person).
"Termination Date" means December 22, 1999 or, if such day is not a
Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless
such Euro-Dollar Business Day falls in another calendar month, in which case
the Termination Date shall be the next preceding Euro-Dollar Business Day.
"Total Borrowed Funds" means, at any date, the Debt of the Borrower
and its Consolidated Subsidiaries determined on a consolidated basis as of such
date.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value
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<PAGE> 22
of all benefit liabilities under such Plan, determined on a plan termination
basis using the assumptions prescribed by the PBGC for purposes of Section 4044
of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to
such liabilities under Title IV of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies
the Agent that the Borrower wishes to amend any covenant in Article V to
eliminate the effect of any change in generally accepted accounting principles
on the operation of such covenant (or if the Agent notifies the Borrower that
the Required Banks wish to amend Article V for such purpose), then the
Borrower's compliance with such covenant shall be determined on the basis of
generally accepted accounting principles in effect immediately before the
relevant change in generally accepted accounting principles became effective,
until either such notice is withdrawn or such covenant is amended in a manner
satisfactory to the Borrower and the Required Banks.
SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to the Borrower pursuant
to Article II on a single date and for a single Interest Period. Borrowings
are classified for purposes of this Agreement either by
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<PAGE> 23
reference to the pricing of Loans comprising such Borrowing (e.g., a "Base Rate
Borrowing" is a Borrowing comprised of Base Rate Loans and a "Euro-Dollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to
the provisions of Article II under which participation therein is determined
(i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all
Banks participate in proportion to their Commitments, while a "Money Market
Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are
determined on the basis of their bids in accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in
this Agreement, to make loans to the Borrower pursuant to this Section from
time to time in amounts such that the aggregate principal amount of Committed
Loans by such Bank at any one time outstanding shall not exceed the amount of
its Commitment. Each Borrowing under this Section shall be in an aggregate
principal amount of $15,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount available in accordance
with Section 3.02(b)) and shall be made from the several Banks ratably in
proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section, repay, or to the extent permitted by
Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit
Period under this Section.
SECTION 2.02. Notice of Committed Borrowings. The Borrower shall
give the Agent notice (a "Notice of Committed Borrowing") not later than 10:30
A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the
second Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
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(c) whether the Loans comprising such Borrowing are to be CD Loans,
Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to the Borrower. The Banks may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received no later
than 10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day
prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction
or (y) the Domestic Business Day next preceding the date of Borrowing proposed
therein, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Borrower and the Agent shall have mutually agreed and
shall have notified to the Banks not later than the date of the Money Market
Quote Request for the first LIBOR Auction or Absolute Rate Auction for which
such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $15,000,000
or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject to
the provisions of the definition of Interest Period, and
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<PAGE> 25
(iv) whether the Money Market Quotes requested are to set forth a Money
Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Agent may agree) of any other Money
Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance
with this Section.
(d) Submission and Contents of Money Market Quotes.
(i) Each Bank may submit a Money Market Quote containing an offer or
offers to make Money Market Loans in response to any Invitation for Money
Market Quotes. Each Money Market Quote must comply with the requirements of
this subsection (d) and must be submitted to the Agent by telex or facsimile
transmission at its offices specified in or pursuant to Section 9.01 not later
than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day
prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y)
9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Agent shall have mutually agreed and shall have notified to
the Banks not later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the Agent (or any
affiliate of the Agent) in the capacity of a Bank may be submitted, and may
only be submitted, if the Agent or such affiliate notifies the Borrower of the
terms of the offer or offers contained therein not later than (x) 1:00 P.M.
(New York City time) on the fourth Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M.
(New York City time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction. Subject to Articles III and VI, any Money Market Quote
so made shall be irrevocable except with
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<PAGE> 26
the written consent of the Agent given on the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger
multiple of $1,000,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be subject to an
aggregate limitation as to the principal amount of Money Market Loans for
which offers being made by such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin") offered
for each such Money Market Loan, expressed as a percentage (specified to the
nearest 1/10,000th of 1%) to be added to or subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language (other than
the limitation set forth in clause (ii)(B)(z) above);
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<PAGE> 27
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request.
Any such subsequent Money Market Quote shall be disregarded by the Agent unless
such subsequent Money Market Quote is submitted solely to correct a manifest
error in such former Money Market Quote. The Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money Market Loans for
which offers have been received for each Interest Period specified in the
related Money Market Quote Request, (B) the respective principal amounts and
Money Market Margins or Money Market Absolute Rates, as the case may be, so
offered and (C) if applicable, limitations on the aggregate principal amount of
Money Market Loans for which offers in any single Money Market Quote may be
accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:30 A.M.
(New York City time) on (x) the third Euro-Dollar Business Day prior to the
proposed date of Borrowing, in the case of a LIBOR Auction or (y) the proposed
date of Borrowing, in the case of an Absolute Rate Auction (or, in either case,
such other time or date as the Borrower and the Agent shall have mutually
agreed and shall have notified to the Banks not later than the date of the
Money Market Quote Request for the first LIBOR Auction or Absolute Rate Auction
for which such change is to be effective), the Borrower shall notify the Agent
of its acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money
Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market Quote
Request,
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(ii) the principal amount of each Money Market Borrowing must be
$15,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the requirements
of this Agreement.
(g) Allocation by Agent. If offers are made by two or more Banks
with the same Money Market Margins or Money Market Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which such offers are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are accepted shall
be allocated by the Agent among such Banks as nearly as possible (in multiples
of $1,000,000, as the Agent may deem appropriate) in proportion to the
aggregate principal amounts of such offers. Determinations by the Agent of the
amounts of Money Market Loans shall be conclusive in the absence of manifest
error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable
by the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 9.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount
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<PAGE> 29
being borrowed and the amount being repaid shall be made available by such Bank
to the Agent as provided in subsection (b), or remitted by the Borrower to the
Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.04 and the Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and, if such Bank shall fail
to do so within one Domestic Business Day, the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at the Federal
Funds Rate. If such Bank shall repay to the Agent such corresponding amount,
such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be evidenced
by a single Note payable to the order of such Bank for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the Agent, request
that its Loans of a particular type be evidenced by a separate Note in an
amount equal to the aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the
relevant type. Each reference in this Agreement to the "Note" of such Bank
shall be deemed to refer to and include any or all of such Notes, as the
context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b), the
Agent shall forward such Note to such Bank. Each Bank shall record the date,
amount, type and maturity of each Loan made by it and the date and amount of
each payment of principal made by the Borrower with respect thereto, and may,
if such Bank so elects in connection with any transfer or enforcement of its
Note, endorse on the schedule forming a part thereof appropriate notations to
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<PAGE> 30
evidence the foregoing information with respect to each such Loan then
outstanding; provided that the failure of any Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so
to endorse its Note and to attach to and make a part of its Note a continuation
of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
Base Rate for such day. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of or interest on any
Base Rate Loan shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 2% plus the rate otherwise applicable
to Base Rate Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at
a rate per annum equal to the sum of the CD Margin for such day plus the
Adjusted CD Rate applicable to such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the
last day thereof and, if such Interest Period is longer than 90 days, at
intervals of 90 days after the first day thereof. Any overdue principal of or
interest on any CD Loan shall bear interest, payable on demand, for each day
until paid at a rate per annum equal to the sum of 2% plus the higher of (i)
the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to
such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
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<PAGE> 31
<TABLE>
<S> <C>
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
</TABLE>
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum
bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable)
on the first day of such Interest Period by two or more New York certificate of
deposit dealers of recognized standing for the purchase at face value from each
CD Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such Interest
Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
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<PAGE> 32
United States. The Adjusted CD Rate shall be adjusted automatically on and as
of the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to such Interest
Period. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than three months, at
intervals of three months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment, at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
applicable to such Loan and (ii) the Euro-Dollar Margin for such day plus the
quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than three months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
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<PAGE> 33
8.01 shall exist, at a rate per annum equal to the sum of 2% plus the rate
applicable to Base Rate Loans for such day).
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, at intervals of three months after the first day thereof. Any
overdue principal of or interest on any Money Market Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum equal to the sum
of 2% plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available
on a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. Facility Fee. The Borrower shall pay to the Agent for
the account of the Banks ratably in proportion to their Commitments a facility
fee at the Facility Fee Rate (determined daily in accordance with the Pricing
Schedule). Such facility fee shall accrue (i) from and including the Effective
Date to but excluding the Termination Date (or earlier date of termination of
the Commitments in their entirety), on the daily aggregate amount of the
Commitments (whether used or unused) and (ii) from and including the
Termination Date or such earlier date
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<PAGE> 34
of termination to but excluding the date the Loans shall be repaid in their
entirety, on the daily aggregate outstanding principal amount of the Loans.
Accrued fees under this Section shall be payable quarterly in arrears on the
last Euro-Dollar Business Day of each March, June, September and December, and
upon the date of termination of the Commitments in their entirety (and, if
later, the date the Loans shall be repaid in their entirety).
SECTION 2.09. Optional Termination or Reduction of Commitments. The
Borrower may, upon at least three Domestic Business Days' notice to the Agent,
(i) terminate the Commitments at any time, if no Loans are outstanding at such
time or (ii) ratably reduce from time to time by an aggregate amount of
$10,000,000 or any larger multiple thereof, the aggregate amount of the
Commitments in excess of the aggregate outstanding principal amount of the
Loans.
SECTION 2.10. Scheduled Termination of Commitments. The Commitments
shall terminate on the Termination Date, and any Loans then outstanding
(together with accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower may (i) upon
at least one Domestic Business Day's notice to the Agent, prepay any Base Rate
Borrowing (or any Money Market Borrowing bearing interest at the Base Rate
pursuant to Section 8.01(a)), (ii) upon at least three Domestic Business Days'
notice to the Agent, subject to Section 2.13, prepay any CD Borrowing and (iii)
upon at least three Euro-Dollar Business Days' notice to the Agent, subject to
Section 2.13, prepay any Euro-Dollar Borrowing, in whole at any time, or from
time to time in part in amounts aggregating $15,000,000 or any larger multiple
of $1,000,000, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment. Each such optional
prepayment shall be applied to prepay ratably the Loans of the several Banks
included in such Borrowing.
(b) Except as provided in Section 2.11(a), the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan
prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
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<PAGE> 35
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks. Whenever any payment of principal of, or interest
on, the Domestic Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day
which is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
such due date an amount equal to the amount then due such Bank. If and to the
extent that the Borrower shall not have so made such payment, each Bank shall
repay to the Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII
or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or the last day of an applicable period fixed pursuant to
Section 2.07(d), or if the Borrower fails to borrow or prepay any Fixed Rate
Loans after notice has been given to any Bank in accordance with Section
2.04(a) or 2.11(c), the Borrower shall reimburse each Bank within 15
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<PAGE> 36
days after demand for any resulting loss or expense incurred by it (or by an
existing or prospective Participant in the related Loan), including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties, but excluding loss of margin for the period after any such
payment or failure to borrow or prepay, provided that such Bank shall have
delivered to the Borrower a certificate as to the amount of such loss or
expense, setting forth the basis of calculation thereof, which certificate
shall be conclusive in the absence of manifest error.
SECTION 2.14. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
facility fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).
SECTION 2.15. Regulation D Compensation. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of such Bank to
United States residents), and as a result the cost to such Bank (or its
Euro-Dollar Lending Office) of making or maintaining its Euro-Dollar Loans is
increased, then such Bank may require the Borrower to pay, contemporaneously
(or at such other time or times as the Borrower and such Bank may mutually
agree) with each payment of interest on the Euro-Dollar Loans, additional
interest on the related Euro-Dollar Loan of such Bank at a rate per annum up to
but not exceeding the excess of (i) (A) the applicable London Interbank Offered
Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Bank wishing to require payment
of such additional interest (x) shall so notify the Borrower and the Agent, in
which case such additional interest on the Euro-Dollar Loans of such Bank shall
be payable to such Bank at the place indicated in such notice with respect to
each Interest Period commencing at least three Euro-Dollar Business Days after
the giving of such notice and (y) shall furnish to the Borrower at least five
Euro-Dollar Business Days prior to each date on which interest is payable on
the Euro-Dollar Loans (or at such other time or times as the Borrower and such
Bank may mutually agree) an officer's
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<PAGE> 37
certificate setting forth the amount to which such Bank is then entitled under
this Section (which shall be consistent with such Bank's good faith estimate of
the level at which the related reserves are maintained by it). Each such
certificate shall be accompanied by such information as the Borrower may
reasonably request as to the computation set forth therein.
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Amended and Restated Agreement
shall become effective on the date that each of the following conditions shall
have been satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex or other written confirmation from
such party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note dated on or before the Effective Date complying with the
provisions of Section 2.05;
(c) receipt by the Agent of an opinion of the principal legal officer
of the Borrower, substantially in the form of Exhibit E hereto and covering
such additional matters relating to the transactions contemplated hereby as
the Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F hereto
and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(e) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Borrower, the corporate authority for and
the validity of this Agreement and the Notes, and any other matters
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<PAGE> 38
relevant hereto, all in form and substance satisfactory to the Agent; and
(f) receipt by the Agent of evidence satisfactory to it of the
payment of all principal of and interest on any loans outstanding under, and
of all accrued fees under, the Original Agreement;
provided that this Amended and Restated Agreement shall not become effective or
binding on any party hereto unless all of the foregoing conditions are
satisfied not later than December 31, 1994. On the Effective Date the Original
Agreement will be automatically amended and restated in its entirety to read as
set forth herein. On and after the Effective Date the rights and obligations
of the parties hereto shall be governed by this Amended and Restated Agreement;
provided the rights and obligations of the parties hereto with respect to the
period prior to the Effective Date shall continue to be governed by the
provisions of the Original Agreement. On the Effective Date, any Bank whose
Commitment is changed to zero shall cease to be a Bank party to this Agreement
and all accrued fees and other amounts payable under this Agreement for the
account of such Bank shall be due and payable on such date; provided that the
provisions of Section 9.03 of this Agreement shall continue to inure to the
benefit of each such Bank. The Notes delivered to each Bank under the Original
Agreement shall be cancelled and Notes under this Amended and Restated
Agreement shall be given in substitution therefor. Each Bank shall promptly
after the Effective Date deliver to the Borrower for cancellation the Note
delivered to such Bank under the Original Agreement. The Agent shall promptly
notify the Borrower and each Bank of the effectiveness of this Amended and
Restated Agreement, and such notice shall be conclusive and binding on all
parties hereto.
SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments;
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(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Borrower
contained in this Agreement (except, in the case of a Refunding Borrowing,
the representations and warranties set forth in Section 4.04(b) as to any
matter which has theretofore been disclosed in writing by the Borrower to
the Banks) shall be true on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any Lien
on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding
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obligation of the Borrower, in each case enforceable in accordance with its
terms.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheets of the Borrower and its
Consolidated Subsidiaries as of July 31, 1993 and 1994 and the related
consolidated statements of operations, shareholders' investment and cash flows
for each of the three years ended July 31, 1994, reported on by Deloitte &
Touche and set forth in the Borrower's 1994 Form 10-K, a copy of which has been
delivered to each of the Banks, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such dates and their
consolidated results of operations and cash flows for such fiscal years.
(b) Since July 31, 1994 there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation.
(a) Except for actions, suits or proceedings (i) described in the
Borrower's 1994 Form 10-K or (ii) commenced after the date of this Agreement
and disclosed in writing to the Banks, there is no action, suit or proceeding
pending against, or to the knowledge of the Borrower threatened against or
affecting, the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official an adverse decision in
which might materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries taken as a whole.
(b) Since the date of the Borrower's 1994 Form 10-K, there has been
no change in the status of the actions, suits and proceedings described therein
which materially and adversely affects the business, financial position,
results of operations or prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole.
(c) There is no action, suit or proceeding pending against, or to the
knowledge of the Borrower threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official which in any manner questions the validity of this Agreement
or the Notes.
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SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of
the Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting
of a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital or
operating expenditures required for clean-up or closure of properties presently
or previously owned, any capital or operating expenditures required to achieve
or maintain compliance with environmental protection standards imposed by law
or as a condition of any license, permit or contract, any related constraints
on operating activities, including any periodic or permanent shutdown of any
facility or reduction in the level of or change in the nature of operations
conducted thereat, any costs or liabilities in connection with off- site
disposal of wastes or Hazardous Substances, and any actual or potential
liabilities to third parties, including employees, and any related costs and
expenses). On the basis of this review, and based upon conditions of which the
Borrower has knowledge and upon its estimates of the costs of compliance with
and/or remediation mandated by Environmental Laws, the Borrower has reasonably
concluded that Environmental Laws are unlikely to have a material adverse
effect on the business, financial condition, results of operations or prospects
of the Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.08. Taxes. United States Federal income tax returns of the
Borrower and its Subsidiaries have been examined and closed through the fiscal
year ended August 1, 1982. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all
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other material tax returns which are required to be filed by them and have paid
all taxes due pursuant to such returns or pursuant to any assessment received
by the Borrower or any Subsidiary. In the Borrower's opinion, all material tax
liabilities were adequately provided for as of July 31, 1994 and are now so
provided for in the books of the Borrower and its Consolidated Subsidiaries.
SECTION 4.09. Material Subsidiaries. Each of the Borrower's Material
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.10. Not an Investment Company. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.11. Use of Proceeds. The proceeds of the loans under this
Agreement will be used for general corporate purposes. None of such proceeds
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock", within the
meaning of Regulation U.
SECTION 4.12. Full Disclosure. All information heretofore furnished
by the Borrower to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agent or any Bank will
be, true and accurate in all material respects on the date as of which such
information is stated or certified. The Borrower has disclosed to the Banks in
writing any and all facts which materially and adversely affect or may affect
(to the extent the Borrower can now reasonably foresee), the business,
operations or financial condition of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or the ability of the Borrower to perform its
obligations under this Agreement.
ARTICLE V
COVENANTS
The Borrower agrees that, from and after the Effective Date for so
long as any Bank has any Commitment
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hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated financial statements in the form then required
to be filed with the Securities and Exchange Commission on Form 10-K or its
then equivalent, all reported on by Deloitte & Touche or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the Borrower,
a consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such quarter and the related consolidated
financial statements in the form then required to be filed with the
Securities and Exchange Commission on Form 10-Q or its then equivalent, all
certified (subject to normal year-end audit adjustments) by the chief
financial officer or the chief accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of the Borrower (i)
setting forth in reasonable detail the calculations required to establish
whether the Borrower was in compliance with the requirements of Sections
5.05 to 5.08, inclusive, on the date of such financial statements and (ii)
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements whether
anything has come to their attention to cause them to believe that any
Default existed on the date of such statements;
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(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the Securities
and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Material Plan which might
constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows that the plan administrator of any Material Plan has given or is
required to give notice of any such reportable event, a copy of the notice
of such reportable event given or required to be given to the PBGC; (ii)
receives notice of complete or partial withdrawal liability under Title IV
of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives
notice from the PBGC under Title IV of ERISA of an intent to terminate,
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or appoint a trustee to administer, any Material Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v)
gives notice of intent to terminate any Material Plan under Section 4041(c)
of ERISA, a copy of such notice and other information filed with the PBGC;
(vi) gives notice of withdrawal from any Material Plan pursuant to Section
4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Material Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any Material Plan or Benefit
Arrangement which has resulted or could result in the imposition of a Lien
or the posting of a
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bond or other security, a certificate of the chief financial officer or the
chief accounting officer of the Borrower setting forth details as to such
occurrence and action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take;
(i) forthwith, notice of any change of which the Borrower becomes
aware in the rating by any Rating Agency (as defined in the Pricing
Schedule) of the Borrower's long-term debt; and
(j) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as the
Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Maintenance of Property; Insurance.
(a) The Borrower will keep, and will cause each Subsidiary to keep,
all property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts and against at least such
risks (and with such risk retention) as are usually insured against in the same
general area by companies of established repute engaged in the same or a
similar business; and will furnish to the Banks, upon request from the Agent,
information presented in reasonable detail as to the insurance so carried.
SECTION 5.03. Maintenance of Existence. The Borrower will renew and
keep in full force and effect its corporate existence and its rights,
privileges and franchises necessary or desirable in the normal conduct of
business.
SECTION 5.04. Compliance with Laws. The Borrower will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and
the rules and regulations thereunder) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings.
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SECTION 5.05. Leverage Ratio. The Leverage Ratio will not exceed (i)
175% at any date prior to July 31, 1995 or (ii) 50% at any date on or after
July 31, 1995.
SECTION 5.06. Minimum Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth will at no time be less than the Minimum Compliance Level.
SECTION 5.07. Interest Coverage Ratio. The Interest Coverage Ratio
will not be less than (i) 300% for any period of four consecutive fiscal
quarters ending prior to July 31, 1995 or (ii) 350% for any period of four
consecutive fiscal quarters ending on or after July 31, 1995.
SECTION 5.08. Subsidiary Debt Limitation. The aggregate outstanding
amount of Debt of Subsidiaries (exclusive of (i) Debt secured by a Lien
permitted by clause (g) of Section 5.09 and (ii) Debt owing to the Borrower or
another Subsidiary) will at no time exceed $175,000,000.
SECTION 5.09. Negative Pledge. The Borrower will not, and will not
permit any Consolidated Subsidiary to, create, assume or suffer to exist any
Lien securing Debt or Derivative Obligations on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal amount
not exceeding $60,000,000;
(b) any Lien existing on the assets of any Person at the time such
Person becomes a Consolidated Subsidiary;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the purchase price or cost of
construction of such asset, provided that such Lien attaches to such asset
within 270 days after the acquisition or completion of construction and
commencement of full operations thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is acquired by, merged into or consolidated with the Borrower or a
Consolidated Subsidiary;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Borrower or a Consolidated
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Subsidiary and not created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens on real property (and ancillary personalty) not otherwise
permitted by the foregoing clauses of this Section securing Debt in an
aggregate principal amount at any time outstanding not to exceed
$75,000,000; and
(h) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $25,000,000.
SECTION 5.10. Consolidations, Mergers and Sales of Assets. The
Borrower will not (i) consolidate or merge with or into any other Person or
(ii) sell, lease or otherwise transfer, directly or indirectly, all or any
substantial part of the assets of the Borrower and its Subsidiaries, taken as a
whole, to any other Person; provided that the Borrower may merge with another
Person if the Borrower is the surviving corporation and, after giving effect
thereto, no Default exists.
SECTION 5.11. Limitation on Affiliate Transactions. The Borrower
will not, and will not permit any of its Subsidiaries to, enter into any
material transaction, including, without limitation, the purchase, sale or
exchange of property or assets or the rendering of any services, with any
Affiliate, except (i) a transaction in the ordinary course of business which is
upon terms no less favorable to the Borrower or such Subsidiary, as the case
may be, than it would obtain in a comparable transaction on an arm's length
basis with a Person not an Affiliate, (ii) a Dividend Payment permitted by
Sections 5.05 and 5.06 and (iii) the arrangements with Western Atlas Inc.
entered into in connection with the Spin-Off, as disclosed in the Registration
Statement on Form 10 of Western Atlas Inc., as filed with the Securities and
Exchange Commission on October 12, 1993, as amended on December 13, 1993,
copies of which have been delivered to each of the Banks.
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ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower (i) shall fail to pay when due any principal of any
Loan or (ii) shall fail to pay any interest on any Loan, any fees or any
other amount payable hereunder within five days after the due date thereof;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.05 through 5.11, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 30 days after notice thereof has been given to the
Borrower by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made (or
deemed made) by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or
deemed made) or delivered;
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period (or in the case of any Derivatives Obligation for
which no grace period is otherwise provided, within five days of the due
date);
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (with the
giving of appropriate notice if required) the holder of such Debt or any
Person acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
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insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Material Subsidiary under the federal bankruptcy
laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts aggregating in excess of $10,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, to impose liability (other than for premiums under Section
4007 of ERISA) in respect of, or to cause a trustee to be appointed to
administer, any Material Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any Material
Plan must be terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could cause
one or more members of the ERISA Group to incur a current payment obligation
in excess of $10,000,000;
(j) a judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against the
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Borrower or any Material Subsidiary and such judgment or order shall
continue unsatisfied and unstayed for a period of 30 days; or
(k) a Change of Control shall occur;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Borrower
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 50% in aggregate
principal amount of the Loans, by notice to the Borrower declare the Notes
(together with accrued interest thereon) to be, and the Notes (together with
accrued interest thereon) shall thereupon become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; provided that in the case of any of the
Events of Default specified in clause (g) or (h) above with respect to the
Borrower, without any notice to the Borrower or any other act by the Agent or
any Bank, the Commitments shall thereupon terminate and the Notes (together
with accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by any
Bank and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement and the Notes as are delegated
to the Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any
other Bank and may exercise or refrain from exercising the same as though it
were not the Agent, and Morgan Guaranty Trust Company of New York and its
affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with
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the Borrower or any Subsidiary or Affiliate of the Borrower as if it were not
the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the Agent
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agent shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent may consult with
legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of the directors, officers, agents or employees of the
foregoing shall be liable for any action taken or not taken by it or them in
connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its or their own gross negligence or willful
misconduct. Neither the Agent nor any of its affiliates nor any of the
directors, officers, agents or employees of the foregoing shall be responsible
for or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of the Borrower; (iii) the satisfaction of any condition
specified in Article III, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or genuineness of this
Agreement, the Notes or any other instrument or writing furnished in connection
herewith. The Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this
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Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. Successor Agent. The Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent, subject to the approval of the Borrower. If no successor Agent shall
have been so appointed by the Required Banks, with the approval of the
Borrower, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a Bank, if any
Bank is willing to accept such appointment, and in any event shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $50,000,000. Upon the acceptance of its appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and
become vested with all the rights and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations hereunder.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Article shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent.
SECTION 7.09. Agent's Fees. The Borrower shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and the Agent.
SECTION 7.10. Co-Agent. Nothing in this Agreement shall impose upon
the Co-Agent, in such capacity, any duty or responsibility whatsoever.
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<PAGE> 53
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Agent that the Adjusted
CD Rate or the London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly reflect the cost to
such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless
the Borrower notifies the Agent at least two Domestic Business Days before the
date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously
been given that it elects not to borrow on such date, (i) if such Fixed Rate
Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a
Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market
LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall
bear interest for each day from and including the first day to but excluding
the last day of the Interest Period applicable thereto at the Base Rate for
such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable
48
<PAGE> 54
agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank
shall so notify the Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Borrower, whereupon until such Bank notifies the Borrower
and the Agent that the circumstances giving rise to such suspension no longer
exist, the obligation of such Bank to make Euro-Dollar Loans shall be
suspended. Before giving any notice to the Agent pursuant to this Section
8.02, such Bank shall designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, the Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks), and such Bank shall make such a
Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to
make Committed Loans or (y) the date of the related Money Market Quote, in the
case of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, central bank or comparable agency
shall impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding (i) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve Percentage and (ii) with
respect to any Euro-Dollar Loan any such requirement with respect to which such
Bank is entitled to compensation during the relevant Interest Period
49
<PAGE> 55
under Section 2.15), special deposit, insurance assessment (excluding, with
respect to any CD Loan, any such requirement reflected in an applicable
Assessment Rate) or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its Applicable Lending
Office) or shall impose on any Bank (or its Applicable Lending Office) or on
the United States market for certificates of deposit or the London interbank
market any other condition affecting its Fixed Rate Loans, its Note or its
obligation to make Fixed Rate Loans and the result of any of the foregoing is
to increase the cost to such Bank (or its Applicable Lending Office) of making
or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received
or receivable by such Bank (or its Applicable Lending Office) under this
Agreement or under its Note with respect thereto, by an amount deemed by such
Bank to be material, then, within 15 days after demand by such Bank (with a
copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank (or
its Parent) for such reduction; provided that the Borrower shall not be liable
for any such amounts attributable to a period more than three months prior to
the date of notice by such Bank to the Borrower of its intention to seek
compensation under this subsection (b).
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will
50
<PAGE> 56
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section, setting forth
the additional amount or amounts to be paid to it hereunder and the basis of
calculation thereof, shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods.
SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to or
for the account of any Bank or the Agent hereunder or under any Note shall be
made free and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, charges and withholdings, and all
liabilities with respect thereto, excluding, in the case of each Bank and the
Agent, taxes imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Bank or the Agent (as the case may
be) is organized or any political subdivision thereof and, in the case of each
Bank, taxes imposed on its income, and franchise or similar taxes imposed on
it, by the jurisdiction of such Bank's Applicable Lending Office or any
political subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct
any Taxes from or in respect of any sum payable hereunder or under any Note to
any Bank or the Agent, (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section 8.04) such Bank or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions, (iii)
the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall furnish to the Agent, at its address referred to in Section
9.01, the original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or charges
or similar levies which arise from any payment made hereunder or under any Note
or from the execution or delivery of, or otherwise with respect to, this
Agreement or any Note (hereinafter referred to as "Other Taxes").
51
<PAGE> 57
(c) The Borrower agrees to indemnify each Bank and the Agent for the
full amount of Taxes and Other Taxes (including, without limitation, any Taxes
and Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section 8.04) paid by such Bank or the Agent (as the case may be)
and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within
15 days from the date such Bank or the Agent (as the case may be) makes demand
therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying that
such Bank is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States. If the form provided by a Bank at the time such Bank first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from "Taxes" as defined in Section 8.04(a).
(e) For any period with respect to which a Bank has failed to provide
the Borrower with the form required pursuant to Section 8.04(d), if any (unless
such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Bank shall not be entitled to indemnification under Section 8.04(a) with
respect to Taxes imposed by the United States; provided, however, that should a
Bank, which is otherwise exempt from or subject to a reduced rate of
withholding tax, become subject to Taxes because of its failure to deliver a
form required hereunder, the Borrower shall take such steps as such Bank shall
reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Bank pursuant to this
52
<PAGE> 58
Section 8.04, then such Bank will change the jurisdiction of its Applicable
Lending Office so as to eliminate or reduce any such additional payment which
may thereafter accrue if such change, in the judgment of such Bank, is not
otherwise disadvantageous to such Bank.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans
and the Borrower shall, by at least five Euro-Dollar Business Days' prior
notice to such Bank through the Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as CD Loans
or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate
Loans (on which interest and principal shall be payable contemporaneously
with the related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, has been repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to repay its Base
Rate Loans instead.
SECTION 8.06. Substitution of Bank. If (i) the obligation of any
Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or
(ii) any Bank has demanded compensation under Section 8.03 or 8.04, the
Borrower shall have the right, with the assistance of the Agent, to seek a
mutually satisfactory substitute bank or banks (which may be one or more of the
Banks) to purchase the Note and assume the Commitment of such Bank.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x)
53
<PAGE> 59
in the case of the Borrower or the Agent, at its address or facsimile or telex
number set forth on the signature pages hereof, (y) in the case of any Bank, at
its address or facsimile or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or facsimile
or telex number as such party may hereafter specify for the purpose by notice
to the Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agent, including fees and disbursements
of special counsel for the Agent, in connection with the preparation and
administration of this Agreement, any waiver or consent hereunder or any
amendment hereof or any Default or alleged Default hereunder and (ii) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Agent or
any Bank, including fees and disbursements of outside counsel (or, in lieu
thereof, the allocated cost of in-house counsel), in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be
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<PAGE> 60
designated a party thereto) brought or threatened relating to or arising out of
this Agreement or any actual or proposed use of proceeds of Loans hereunder;
provided that no Indemnitee shall have the right to be indemnified hereunder
for such Indemnitee's own gross negligence or willful misconduct.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall impair the right of
any Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of the
Borrower other than its indebtedness under the Notes. The Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
holder of a participation in a Note, whether or not acquired pursuant to the
foregoing arrangements, may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of the Agent or Co-Agent are affected thereby, by
the Agent or Co-Agent); provided that no such amendment or waiver shall, unless
signed by all the Banks, (i) increase or decrease the Commitment of any Bank
(except for a ratable decrease in the Commitments of all Banks) or subject any
Bank to any additional obligation, (ii) reduce the principal of, accrued
interest on or rate of interest on any Loan or any fees hereunder, (iii)
postpone the date fixed for any payment of principal of or interest on any Loan
or any fees hereunder or for termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Notes, or the number of Banks, which shall be required for the Banks
55
<PAGE> 61
or any of them to take any action under this Section or any other provision of
this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in up to 45% of its
Commitment or in any or all of its Loans. In the event of any such grant by a
Bank of a participating interest to a Participant, whether or not upon notice
to the Borrower and the Agent, such Bank shall remain responsible for the
performance of its obligations hereunder, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement. Any agreement pursuant to
which any Bank may grant such a participating interest shall provide that such
Bank shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such Bank will not
agree to any modification, amendment or waiver of this Agreement described in
clause (i), (ii) or (iii) of Section 9.05 without the consent of the
Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Section
2.15 and Article VIII with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (c) or (d)
below shall be given effect for purposes of this Agreement only to the extent
of a participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to a
Commitment of not less than $5,000,000) of all, of its rights and obligations
under this Agreement and the Notes, and such Assignee shall assume such rights
and obligations, pursuant to an Assignment and Assumption Agreement in
substantially the form of Exhibit G hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Borrower
and the Agent; provided that if an Assignee is an affiliate of such transferor
Bank, no such
56
<PAGE> 62
consent shall be required; provided further that such assignment may, but need
not, include rights of the transferor Bank in respect of outstanding Money
Market Loans; and provided further that if an Assignee is another Bank, such
consent shall not be unreasonably withheld. Upon execution and delivery of
such instrument and payment by such Assignee to such transferor Bank of an
amount equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (c), the transferor Bank, the Agent and the
Borrower shall make appropriate arrangements so that, if required, a new Note
is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Agent an administrative fee for processing
such assignment in the amount of $2,500. If the Assignee is not incorporated
under the laws of the United States of America or a state thereof, it shall
deliver to the Borrower and the Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in
accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04
than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances.
SECTION 9.07. Collateral. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the
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<PAGE> 63
State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement, the
Notes or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT,
THE CO-AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and
year first above written.
LITTON INDUSTRIES, INC.
By: /s/ Timothy G. Paulson
----------------------------
Title: Vice President and Treasurer
360 North Crescent Drive
Beverly Hills, California 90210
Telex number: 674991
Telecopy number: (310) 859-5940
<PAGE> 65
<TABLE>
<CAPTION>
Commitments
- -----------
<S> <C>
$45,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ Diana H. Imhof
-----------------------
Title: Vice President
$33,000,000 BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Lori Y. Kannegieter
-------------------------
Title: Vice President
$33,000,000 THE BANK OF NEW YORK
By: /s/ Craig J. Rethmeyer
-------------------------
Title: Vice President
$33,000,000 CHEMICAL BANK
By: /s/ Robert M. Wood, Jr.
-------------------------
Title: Vice President
$33,000,000 UNION BANK OF SWITZERLAND,
Los Angeles Branch
By: /s/ James I. Chu
-------------------------
Title: Assistant Vice President
By: /s/ Thomas G. Jackson
--------------------------
Title: First Vice President
</TABLE>
<PAGE> 66
<TABLE>
<S> <C>
$33,000,000 WELLS FARGO BANK, N.A.
By: /s/ David A. Neumann
--------------------------
Title: Vice President
$20,000,000 THE BANK OF NOVA SCOTIA
By: /s/ Maarten Van Otterloo
-------------------------
Title: Senior Relationship
Manager
$20,000,000 CIBC INC.
By: /s/ Robert J. Wagner
-------------------------
Title: Vice President
$20,000,000 CREDIT SUISSE
By: /s/ Stephen M. Flynn
-------------------------
Title: Member of Senior
Management
By: /s/ Deborah A. Shea
-------------------------
Title: Associate
$20,000,000 DRESDNER BANK AG
By: /s/ Jon M. Bland
-------------------------
Title: Senior Vice President
By: /s/ Sidney S. Jordan
-------------------------
Title: Vice President
</TABLE>
<PAGE> 67
<TABLE>
<S> <C>
$20,000,000 MELLON BANK, N.A.
By: /s/ Edwin H. Wiest
-----------------------
Title: First Vice President
$20,000,000 NATIONSBANK OF TEXAS, N.A.
By: /s/ Tom F. Scharfenberg
-------------------------
Title: Vice President
$20,000,000 SWISS BANK CORPORATION,
San Francisco Branch
By: /s/ David L. Parrot
-------------------------
Title: Associate Director
By: /s/ Hans-Ueli Surber
-------------------------
Title: Executive Director
$10,000,000 BANK OF HAWAII
By: /s/ Marcy E. Fleming
-------------------------
Title: Vice President
$10,000,000 FIRST INTERSTATE BANK OF
CALIFORNIA
By: /s/ David H. Hom
-------------------------
Title: Vice President
</TABLE>
<PAGE> 68
<TABLE>
<S> <C>
$10,000,000 NBD BANK, N.A.
By: /s/ James R. Frye
-------------------------
Title: First Vice President
$10,000,000 THE NORTHERN TRUST COMPANY
By: /s/ Robert J. Stegmann
-------------------------
Title: Vice President
$10,000,000 TORONTO DOMINION (TEXAS), INC.
By: /s/ Frederic B. Hawley
--------------------------
Title:
$-0- BANK OF AMERICA ILLINOIS
By: /s/ Lori Y. Kannegieter
--------------------------
Title: Authorized Officer
</TABLE>
_________________
Total Commitments
$400,000,000
=================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /s/ Diane H. Imhof
---------------------------
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Robert M. Osieski
Telex number: 177615
<PAGE> 69
WELLS FARGO BANK, N.A.,
as Co-Agent
By: /s/ David A. Neumann
------------------------------
Title: Vice President
420 Montgomery Street
San Francisco, California 94163
Telex number: 184904
64
<PAGE> 70
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for any
day are the respective percentages set forth below in the applicable row under
the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
Level Level Level Level Level
Status I II III IV V
------------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Euro-Dollar Margin .215% .25% .30% .40% .50%
CD Margin .34% .375% .425% .525% .625%
Facility Fee Rate .11% .15% .175% .225% .3125%
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"D&P" means Duff & Phelps Credit Rating Co.
"Level I Status" exists at any date if, at such date, the Borrower's
long-term debt is rated A-/A3 or higher by at least two Rating Agencies.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+/Baa1 or higher by at least two Rating
Agencies and (ii) Level I Status does not exist at such date.
"Level III Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB/Baa2 or higher by at least two Rating
Agencies and (ii) neither Level I Status nor Level II Status exists at such
date.
"Level IV Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB-/Baa3 or higher by at least two Rating
Agencies and (ii) none of Level I Status, Level II Status or Level III Status
exists at such date.
"Level V Status" exists at any date, if at the close of business on
such date, none of Level I Status, Level II Status, Level III Status or Level
IV Status exists.
<PAGE> 71
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Rating Agencies" means D&P, Moody's and S&P.
"S&P" means Standard & Poor's Ratings Group, and its successors.
"Status" refers to the determination of which of Level I Status, Level
II Status, Level III Status, Level IV Status or Level V Status exists at any
date.
The credit ratings to be utilized for purposes of determining a Status
hereunder are those assigned to the senior unsecured long-term debt of the
Borrower without third-party credit enhancement, and any rating assigned to any
other debt of the Borrower shall be disregarded; provided that if at any time
the Borrower's senior unsecured long-term debt is rated by exactly two Rating
Agencies and the ratings assigned to such debt by such two Rating Agencies are
more than one full rating category apart, Status shall be determined based on a
rating one category higher than the lower of such two ratings (e.g., if the S&P
rating is BBB+, the Moody's rating is Baa3 and there is no D&P rating, then
Level III Status shall exist); provided further that if the Borrower's senior
unsecured long-term debt is not rated by at least two Rating Agencies but the
Borrower's subordinated unsecured long-term debt, without third party credit
enhancement, is rated by at least two Rating Agencies, then Status shall be
determined upon the basis of the rating for such subordinated debt and the
rating threshold for each Status shall be adjusted downward by one whole rating
category (e.g., Level I Status shall exist if such subordinated debt is rated
BBB+/Baa1 or higher by at least two Rating Agencies); provided further that if
at any time neither the Borrower's senior unsecured long-term debt nor the
Borrower's subordinated unsecured long-term debt, without third party credit
enhancement, is rated by at least two Rating Agencies, then Status shall be
Level V Status. The rating in effect at any date is that in effect at the
close of business on such date.
2
<PAGE> 72
EXHIBIT A
NOTE
New York, New York
[Date]
For value received, Litton Industries, Inc. a Delaware corporation
(the "Borrower"), promises to pay to the order of (the "Bank"),
for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the last day of the Interest Period relating to
such Loan. The Borrower promises to pay interest on the unpaid principal
amount of each such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Morgan Guaranty Trust Company of New York, 60
Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding may be endorsed by the Bank on the
schedule attached hereto, or on a continuation of such schedule attached to and
made a part hereof; provided that the failure of the Bank to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Amended and Restated
Credit Agreement dated as of December 22, 1994 among the Borrower, the banks
parties thereto and Morgan Guaranty Trust Company of New York, as Agent, and
Wells Fargo Bank, N.A., as Co-Agent (as the same may be amended from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement
<PAGE> 73
for provisions for the prepayment hereof and the acceleration of the maturity
hereof.
LITTON INDUSTRIES, INC.
By________________________
Title:
2
<PAGE> 74
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
_____________________________________________________________________________________________________
</TABLE>
3
<PAGE> 75
EXHIBIT B
FORM OF MONEY MARKET QUOTE REQUEST
[Date]
To: Morgan Guaranty Trust Company of New York
From: Litton Industries, Inc.
Re: Amended and Restated Credit Agreement (as amended from time to time,
the "Credit Agreement") dated as of December 22, 1994 among the
Borrower, the Banks parties thereto and Morgan Guaranty Trust Company
of New York, as Agent, and Wells Fargo Bank, N.A., as Co-Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement
that we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
<TABLE>
<CAPTION>
Principal Amount(2) Interest Period(3)
- ------------------- ------------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
____________________
(2) Amount must be $15,000,000 or a larger multiple of $1,000,000.
(3) Not less than one month (LIBOR Auction) or not less than 14 days
(Absolute Rate Auction), subject to the provisions of the definition of
Interest Period.
<PAGE> 76
Terms used herein have the meanings assigned to them in the
Credit Agreement.
LITTON INDUSTRIES, INC.
By________________________
Title:
2
<PAGE> 77
EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to Litton Industries, Inc. (the
"Borrower")
Pursuant to Section 2.03 of the Amended and Restated Credit Agreement
(as amended from time to time, the "Credit Agreement") dated as of December 22,
1994 among the Borrower, the Banks parties thereto and the undersigned, as
Agent, and Wells Fargo Bank, N.A., as Co-Agent, we are pleased on behalf of the
Borrower to invite you to submit Money Market Quotes to the Borrower for the
following proposed Money Market Borrowing(s):
Date of Borrowing: __________________
<TABLE>
<CAPTION>
Principal Amount Interest Period
- ---------------- ---------------
<S> <C>
$
</TABLE>
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30
A.M.] (New York City time) on [date].
Terms used herein have the meanings assigned to them in the Credit
Agreement.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By______________________
Authorized Officer
<PAGE> 78
EXHIBIT D
FORM OF MONEY MARKET QUOTE
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
60 Wall Street
New York, New York 10260-0060
Attention:
Re: Money Market Quote to
Litton Industries, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
_____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the
following rates:
<TABLE>
<CAPTION>
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- -------- --------- ------------ --------------------
<S> <C> <C> <C>
$
$
</TABLE>
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$____________.]**
__________
* As specified in the related Invitation.
(notes continued on following page)
<PAGE> 79
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in
the Amended and Restated Credit Agreement (as amended from time to
time, the "Credit Agreement") dated as of December 22, 1994 among the
Borrower, the Banks parties thereto and yourselves, as Agent, and
Wells Fargo Bank, N.A., as Co-Agent, irrevocably obligates us to make
the Money Market Loan(s) for which any offer(s) are accepted, in whole
or in part.
Terms used herein have the meanings assigned to them in the
Credit Agreement.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
*** Not less than one month or not less than 14 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 80
EXHIBIT E
OPINION OF
COUNSEL FOR THE BORROWER
[Dated the Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
I am the chief legal officer of Litton Industries, Inc. (the
"Borrower") and have acted in that capacity in connection with the Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of December 22,
1994 among the Borrower, the banks listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent, and Wells Fargo Bank,
N.A., as Co-Agent. Terms defined in the Credit Agreement are used herein as
therein defined.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of Delaware and has all corporate powers
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require no action by or
<PAGE> 81
in respect of, or filing with, any governmental body, agency or official and do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the Borrower
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or result in the creation or imposition of any Lien
on any asset of the Borrower or any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
4. (a) Except for actions, suits or proceedings described in the
Borrower's 1994 Form 10-K, there is no action, suit or proceeding pending
against, or to the best of my knowledge threatened against or affecting, the
Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official, in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, consolidated financial position or consolidated results of operations
of the Borrower and its Consolidated Subsidiaries, taken as a whole.
(b) There is no action, suit or proceeding pending against, or to
the best of my knowledge threatened against or affecting, the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental body,
agency or official which in any manner questions the validity of the Credit
Agreement or the Notes.
5. Each of the Borrower's Material Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
I am a member of the Bar of the State of California, and the foregoing
opinion is limited to the laws of the State of California, the General
Corporation Law of the State of Delaware and the Federal laws of the United
States of America. Inasmuch as the Credit Agreement and the Notes are governed
by the law of the State of New York, I
2
<PAGE> 82
have assumed for purposes of the foregoing opinion that such law is the same as
the law of the State of California.
Very truly yours,
3
<PAGE> 83
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
[Dated the Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the Amended and Restated
Credit Agreement (the "Credit Agreement") dated as of December 22, 1994 among
Litton Industries, Inc., a Delaware corporation (the "Borrower"), the banks
listed on the signature pages thereof (the "Banks") and Morgan Guaranty Trust
Company of New York, as Agent (the "Agent"), and Wells Fargo Bank, N.A., as Co-
Agent, and have acted as special counsel for the Agent for the purpose of
rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes
<PAGE> 84
a valid and binding obligation of the Borrower, in each case enforceable in
accordance with its terms, except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
3. The documents delivered to the Agent by the Borrower pursuant to
Section 3.01 of the Credit Agreement are substantially responsive to the
requirements of said Section.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York)
in which any Bank is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 85
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), LITTON INDUSTRIES, INC. (the
"Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Amended and Restated Credit Agreement dated as of December 22,
1994 among the Borrower, the Assignor and the other Banks party thereto, as
Banks, and the Agent and Wells Fargo Bank, N.A., as Co-Agent (as amended from
time to time, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Committed Loans to the Borrower in an aggregate principal
amount at any time outstanding not to exceed $__________;
WHEREAS, Committed Loans made to the Borrower by the Assignor under
the Credit Agreement in the aggregate principal amount of $__________ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of
its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
<PAGE> 86
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Borrower and
the Agent and the payment of the amounts specified in Section 3 required to be
paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed
to the rights and be obligated to perform the obligations of a Bank under the
Credit Agreement with a Commitment in an amount equal to the Assigned Amount,
and (ii) the Commitment of the Assignor shall, as of the date hereof, be
reduced by a like amount and the Assignor released from its obligations under
the Credit Agreement to the extent such obligations have been assumed by the
Assignee. The assignment provided for herein shall be without recourse to the
Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them. It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof in respect of the Assigned Amount are for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
[SECTION 4. Consent of the Borrower and the Agent. This Agreement is
conditioned upon the consent of the Borrower and the Agent, pursuant to Section
9.06(c) of the Credit Agreement. The execution of this Agreement by the
Borrower and the Agent is evidence of this consent. Pursuant to Section
9.06(c) the Borrower agrees to execute and deliver a Note payable to the order
of the Assignee to evidence the assignment and assumption provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection
2
<PAGE> 87
with, and shall have no responsibility with respect to, the solvency, financial
condition, or statements of the Borrower, or the validity and enforceability of
the obligations of the Borrower in respect of the Credit Agreement or any Note.
The Assignee acknowledges that it has, independently and without reliance on
the Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
LITTON INDUSTRIES, INC.
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
3
<PAGE> 88
By___________________________
Title:
4
<PAGE> 89
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of March 17, 1995 among LITTON INDUSTRIES, INC. (the
"Borrower") and the BANKS listed on the signature pages hereof (the "Banks").
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a Credit
Agreement dated as of December 22, 1994 (as heretofore amended, the
"Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement as set forth
below.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is defined in the Agreement shall
have the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby.
SECTION 2. AMENDMENT OF LEVERAGE RATIO. Section 5.05 of the Agreement
is amended by changing Section 5.05 (ii) so that, as so amended, such Section
5.05 shall read in its entirety as follows:
LEVERAGE RATIO. The Leverage Ratio will not exceed (i) 175% at any date
prior to July 31, 1995 or (ii) 85% at any date on or after July 31, 1995.
<PAGE> 90
SECTION 3. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 4. COUNTERPARTS; EFFECTIVENESS. This Amendment may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Amendment shall become effective as of the date hereof when
the Agent shall have received duly executed counterparts hereof signed by the
Borrower and the Required Banks (or, in the case of any party as to which an
executed counterpart shall not have been received, the Agent shall have
received telegraphic, telex or other written confirmation from such party of
execution of a counterpart hereof by such party).
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly excuted as of the date first above written.
LITTON INDUSTRIES, INC.
By /s/ Timothy G. Paulson
------------------------------------
Title: Vice President and Treasurer
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ Diana H. Imhof
------------------------------------
Title: Vice President
-2-
<PAGE> 91
WELLS FARGO BANK, N.A.
By /s/ David A. Neumann
-------------------------------------
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ Lori Y. Kannegieter
-------------------------------------
Title: Vice President
THE BANK OF NEW YORK
By /s/ Craig J. Rethmeyer
-------------------------------------
Title: Vice President
CHEMICAL BANK
By /s/ Robert M. Wood, Jr.
-------------------------------------
Title: Vice President
UNION BANK OF SWITZERLAND,
Los Angeles Branch
By /s/ James I. Chu
-------------------------------------
Title: Vice President
By /s/ L. Scott Sommers
-------------------------------------
Title: Vice President
-3-
<PAGE> 92
THE BANK OF NOVA SCOTIA
By /s/ M. Van Otterloo
-------------------------------------
Title: Senior Relationship Manager
By /s/ J. S. York
-------------------------------------
Title: Officer
CIBC INC.
By /s/ Paul M. Mohme
-------------------------------------
Title: Assistant Vice President
CREDIT SUISSE
By /s/ Marilou Palenzuela
-------------------------------------
Title: Member of Senior Management
By /s/ Deborah A. Shea
-------------------------------------
Title: Associate
DRESDNER BANK AG
By /s/ Barbara J. Readick
-------------------------------------
Title: Vice President
By /s/ Jon M. Bland
-------------------------------------
Title: Senior Vice President
-4-
<PAGE> 93
MELLON BANK, N. A.
By /s/ Gary J. Gegick
--------------------------------------
Title: Vice President
NATIONSBANK OF TEXAS, N. A.
By /s/ Tom F. Scharfenberg
--------------------------------------
Title: Vice President
SWISS BANK CORPORATION
SAN FRANCISCO BRANCH
By /s/ Jamie Dillon
--------------------------------------
Title: Director
By /s/ Hans-Ueli Surber
--------------------------------------
Title: Executive Director
BANK OF HAWAII
By /s/ Marcy E. Fleming
--------------------------------------
Title: Vice President
FIRST INTERSTATE BANK
OF CALIFORNIA
By /s/ Daniel H. Hom
--------------------------------------
Title: Vice President
-5-
<PAGE> 94
N B D BANK, N.A.
By /s/ Curtis A. Price
--------------------------------------
Title: Vice President
THE NORTHERN TRUST COMPANY
By /s/ Michelle D. Griffin
--------------------------------------
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By /s/ Frederic B. Hawley
--------------------------------------
Title: Vice President
-6-
<PAGE> 1
EXHIBIT 10.1(A)
LOGO
CERTIFICATION OF RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
LITTON INDUSTRIES, INC.
I, the undersigned JEANETTE M. THOMAS, Secretary of LITTON INDUSTRIES,
INC., a corporation organized and existing under the laws of the State of
Delaware, DO HEREBY CERTIFY that the following is a true and correct extract of
certain resolutions duly adopted by the Board of Directors of said corporation
on December 8, 1994, in accordance with the laws of Delaware and the By-laws of
this corporation, and that these resolutions are in full force and effect as of
the date hereof:
RESOLVED, that pursuant to Article III, Section 11, of the By-laws of
this corporation, during calendar year 1995 the members of the Board of
Directors of this corporation who are not employees of this corporation
("nonemployee directors") shall be paid a fixed fee of $27,500 for
services to be rendered as members of the Board of Directors, payable in
quarterly installments of $6,875 at the beginning of each calendar
quarter, and, in addition thereto, they shall be paid an attendance fee
of $1,500 for each Board meeting attended by them, payable following any
such meeting attended;
RESOLVED FURTHER, that during calendar year 1995 nonemployee directors
of this corporation shall be paid a fee of $1,500 for attendance at each
Board committee meeting, with the exception of attendance at meetings of
the Executive Committee, payable following any such meeting attended;
RESOLVED FURTHER, that during calendar year 1995 a nonemployee director
serving as Chairman of the Board of the Corporation shall be paid a
fixed fee for services to be rendered as Chairman of the Board of
$60,000, payable in quarterly installments of $15,000 at the beginning
of each calendar quarter; a nonemployee director serving as Chairman of
the Executive Committee of the Corporation shall be paid a fixed fee for
services to be rendered as Chairman of the Executive Committee of
$15,000, payable in quarterly installments of $3,750 at the beginning of
each calendar quarter; and any nonemployee director serving as a member
of the Executive Committee (but not as Chairman thereof or the Chairman
of the Board) shall be paid a fixed fee for services to be rendered as a
member of the Executive Committee of $12,000, payable in quarterly
installments of $3,000 at the beginning of each calendar quarter; and
RESOLVED FURTHER, that the members of the Board shall be paid their
normal travel and incidental expenses incurred in traveling to any Board
or Board committee meeting upon presentment of invoices covering such
expenditures to the Secretary of the Corporation.
IN WITNESS WHEREOF, I have here unto subscribed my name and affixed the
seal of said corporation at Woodland Hills, California, this 10th day of
October, 1995.
[SEAL] /s/ JEANETTE M. THOMAS
--------------------------------------
Jeanette M. Thomas
Secretary
<PAGE> 1
EXHIBIT 10.11(C)
LOGO
CERTIFICATION OF RESOLUTIONS
THE BOARD OF DIRECTORS OF
LITTON INDUSTRIES, INC.
I, the undersigned JEANETTE M. THOMAS, Secretary of Litton Industries,
Inc., a corporation organized and existing under the laws of the State Delaware,
DO HEREBY CERTIFY that the following is a true and correct extract of certain
resolutions duly adopted by the Board of Directors of said corporation on August
3, 1995, in accordance with the laws of Delaware and By-laws of this
corporation, and that these resolutions are in full force and effect as of the
date hereof:
RESOLVED, that Sections (b) and (c) of Article 3 of the Corporation's
Performance Award Plan be amended to read as follows:
(b) For each fiscal year commencing with the fiscal year beginning
August 1, 1995, the Committee shall determine if an amount is to
be credited to the Account. The Committee may credit any amount
that is not in excess of 5% of the amount by which the Net
Earnings Before Taxes exceeds 18% of the Shareholders Investment
as of the end of the preceding fiscal year. If total awards are
not made in accordance with Article 4 equal to the credit, then
the credit shall then be reduced to equal the aggregate amount of
awards.
(c) At any time, the Account will be equal to the aggregate amount of
awards previously made and awaiting payment plus the amount of
the credit for the then fiscal year made pursuant to this Article
3, less payments made pursuant to Article 5.
IN WITNESS WHEREOF, I have here unto subscribed my name and affixed the
seal of said corporation at Woodland Hills, California, this 12th day of
September, 1995.
[SEAL] /s/ JEANETTE M. THOMAS
--------------------------------------
Jeanette M. Thomas
Secretary
<PAGE> 1
EXHIBIT 10.13(D)
LOGO
CERTIFICATION OF RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
LITTON INDUSTRIES, INC.
I, the undersigned JEANETTE M. THOMAS, Secretary of LITTON INDUSTRIES,
INC., a corporation organized and existing under the laws of the State of
Delaware, DO HEREBY CERTIFY that the following is a true and correct extract of
certain resolutions duly adopted by the Board of Directors of said corporation
on October 27, 1994, in accordance with the laws of Delaware and the By-laws of
this corporation, and that these resolutions are in full force and effect as of
the date hereof:
RESOLVED, that this Board of Directors hereby adopts, pursuant to
Section 2 of the Litton Industries, Inc., Director Stock Option Plan
(the "Director Plan"), the following interpretation with respect to each
option to purchase shares of the Corporation's Common Stock ("Litton
Common Stock") which was outstanding under the Director Plan immediately
prior to the distribution of the shares of Western Atlas Inc.
Each stock option which was issued under the Director Plan to a
director of the Corporation who became a director of Western Atlas
Inc. on March 17, 1994, shall be amended for the purposes of
Subsection E of Section 5 of the Director Plan to provide that such
director shall be deemed to be a director of the Company for the
period of time such person continues as a director of
Western Atlas Inc.
IN WITNESS WHEREOF, I have here unto subscribed my name and affixed the
seal of said corporation at Woodland Hills, California, this 10th day of
October, 1995.
[SEAL] /s/ JEANETTE M. THOMAS
--------------------------------------
Jeanette M. Thomas
Secretary
<PAGE> 1
Exhibit 10.16
GROUP BONUS PLAN
FISCAL 1993
I. PURPOSE
The purpose of this bonus plan is to reward Group Executives and key
personnel for achieving Group financial performance consistent with
Litton corporate goals. The affected personnel are expected to conduct
their business in an ethical manner, consistent with the Litton
Standards of Conduct and to make decisions that ensure the long-term
viability of the Group as well as the success of the current plan
period. For this reason, the Litton President and Chief Operating
Officer and Litton Chairman and Chief Executive Officer will eliminate
or reduce bonus payments under this Plan if they believe that a
participant has sacrificed long-term objectives to make short-term
profits.
II. PARTICIPANTS
Group Executives and other key group personnel.
III. BONUS PLAN
Each Group Executive will be informed of the maximum percent of base
salary (target bonus) that can be earned as a bonus. The base salary is
the salary on the first day of the fiscal year that this plan covers.
The base salary can be adjusted for salary increases that are
retroactive to the beginning of the fiscal year. This maximum percent
of base salary will vary as a function of group size, number of
divisions and other factors. Each Group Executive, Group Controller and
Group V.P. - Marketing will be given their individual target bonuses by
the Litton Corporate President. The earned bonus percent of this target
is a function of Return on Capial Utilized, as is explained in
Paragraph V.
IV. PARTICIPANT LEVEL
Individual bonuses will be determined at the discretion of the Litton
President and Chief Operating Officer and the Chairman and Chief
Executive Officer.
<PAGE> 2
V. FINANCIAL PERFORMANCE
A minimum Group Return on Capital Utilized of 15% (ROCU) must be made
before any bonuses can be earned. After which, bonuses will be earned
pro rata, linearly as follows:
EARNED BONUS PERCENT
OF
ROCU TARGET BONUS
---- --------------------
15% 50%
28% 100%
VI. BONUS PAYMENTS
Each year earned bonus will be paid to Plan participants in the January
following the close of the Fiscal Year of performance. Participants
must be employed by Litton on payment date to be eligible for any
payment bonus.
A. APPROVED LEAVES -- A participant in the Bonus Plan who leaves
the Company to (1) enter any of the Armed Services of the
United States; (2) is transferred to another division of
Litton; (3) is on approved leave of absence; (4) is on sick
leave of absence in excess of thirty days; or (5) has retired
either during the fiscal year or after the close of the fiscal
year, but prior to the payment date, shall share in the Bonus
Plan. In such cases, employee will participate through the date
of the month in which he is transferred or terminates
employment.
B. DECEASED -- In the event of death of participant prior to the
payment date, the Company will pay the pro rata portion of the
bonus to date of death to the beneficiary as stipulated on the
employee's group insurance card, and such payment will be made
on the regular payment date.
VII. AGREEMENT
It is understood that this Bonus Plan does not constitute a contract
between the Company and the participating personnel and may be changed,
modified, amended, or terminated at any time by the Compensation
Committee of Litton Industries. It must also be clear that an
individual's performance during the plan period will have a bearing on
the actual bonus paid regardless of the MAX earned potential bonus.
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<PAGE> 1
EXHIBIT 10.22
LITTON INDUSTRIES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE I -- INTRODUCTION AND PURPOSE
Litton Industries, Inc., establishes this Litton Industries,
Inc., Supplemental Executive Retirement Plan (the "Supplemental Plan"). The
purpose of the Supplemental Plan is to provide for supplemental retirement
benefits to certain key executive employees and thereby encourage those
employees to continue providing services to the Company until retirement. The
Supplemental Plan is intended to provide benefits solely for a select group of
management or highly compensated employees within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1) of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Payments under the Supplemental Plan
shall be made either from general assets of Litton Industries, Inc., or from the
assets of the Litton Industries, Inc., Supplemental Executive Retirement Plan
Trust (the "Trust"), as provided under the terms of the Supplemental Plan and
the Trust. It is intended that the Supplemental Plan remain at all times an
unfunded plan for purposes of ERISA and that the Trust shall constitute a
grantor trust under Sections 671 through 679 of the Internal Revenue Code of
1986, as amended (the "Code").
<PAGE> 2
ARTICLE II -- DEFINITIONS
Section 2.1 "Active Participant" shall mean a key executive
employee who has been designated as a Participant in the Supplemental Plan
pursuant to Article III, and who continues to be employed by the Company. A
Participant shall be treated as having terminated from employment during any
period of leave of absence, unless the Committee, in its sole and absolute
discretion, and subject to such terms and conditions as the Committee may
specify, approve the Participant's absence. However, a Disabled or deceased
Participant shall continue to be treated as an Active Participant and, thus,
continue to accrue additional Years of Service until the earlier of the calendar
month that the Participant attains (or would have attained) age 65, or the date
that the Participant is no longer Disabled. A Participant who terminates
employment with the Company and is subsequently re-employed with the Company
shall not be treated as an Active Participant unless the Committee re-designates
the Participant as an Active Participant.
Section 2.2 "Actuarial Equivalent" shall mean as follows --
(a) The adjustment of an amount or amounts by using the
actuarial factors set forth in Appendix A hereof.
(b) On or after a Change of Control, the adjustment of an
amount or amounts by using the actuarial factors set forth in Appendix B hereof.
Section 2.3 "Average Earnings" shall mean the sum, divided by
three, of "base pay" and "incentive compensation payments."
(a) "Base pay," for purposes of determining Average Earnings of
an Active Participant, shall be the base pay from the Company during any three
periods of
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<PAGE> 3
twelve consecutive months that comprise thirty-six months out of the sixty
consecutive months that include and immediately precede the month in which an
Active Participant terminates employment with the Company.
(b) "Incentive compensation payments," for purposes of
determining Average Earnings of an Active Participant, shall be the single
largest payment received as an Active Participant from the Litton Industries,
Inc., Performance Award Plan (or a similar plan) in each of three periods of
twelve consecutive months selected under Section 2.3(a) above.
(c) A Disabled Participant's Average Earnings shall be
calculated using the sixty consecutive months that include and precede the month
that his or her Disability commenced.
(d) In the case of an Active Participant who dies prior to
attaining age 65, the deceased Participant's Average Earnings shall be
calculated using the sixty consecutive months that include and precede the month
of the Participant's death (or Disability, in the case of a Disabled Participant
who dies).
(e) If a Participant is eligible to receive payments under this
Supplemental Plan but does not have thirty-six consecutive months of employment,
then Average Earnings are the amount obtained by annualizing the Active
Participant's average base pay for the actual period of employment, plus the
average of incentive compensation payments received, if any. However, the
Committee may determine Average Earnings for the purposes of Section 2.3(e) by
other methodology which it determines to be more appropriate under the facts and
circumstances.
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<PAGE> 4
Section 2.4 "Base Compensation Amount" shall mean the
applicable dollar amount on the date that the Active Participant terminates from
employment with the Company, calculated as follows --
(a) $125,000, for the first twelve months beginning on the
effective date of the Supplemental Plan.
(b) For each twelve-month period following the period described
above in Section 2.4(a), the dollar amount applicable for the immediately
preceding twelve month-period increased by a percentage, which shall be the sum
of (1) the percentage increase in the U.S. Department of Labor consumer price
index for all urban consumers for the immediately preceding twelve-month period
and (2) one percent.
(c) In the case of a deceased or Disabled Participant, the Base
Compensation Amount shall be the dollar amount in effect under Section 2.4(a) or
(b) for the earlier of the month in which the Participant died or became
Disabled.
Section 2.5 "Beneficiary" shall mean those who are designated
to receive payment of a benefit under the Supplemental Plan on account of a
Participant's death.
Section 2.6 "Board" or "Board of Directors" shall mean the
Board of Directors of Litton Industries, Inc.
Section 2.7 "Change of Control" shall mean --
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty
percent (30%) or more of either (1) the then outstanding shares of common stock
of the Company (the "Outstanding
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<PAGE> 5
Company Common Stock") or (2) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
Directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this Section 2.7(a), the following acquisitions of stock shall
not constitute a Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (1), (2) and (3) of
Section 2.7(c); or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
Director subsequent to the date hereof whose election, or nomination subsequent
to the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the Directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless following such Business
Combination, (1) all or
- 5 -
<PAGE> 6
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (2) no
Person (excluding any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, thirty percent (30%) or more of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business Combination and (3)
at least a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
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<PAGE> 7
Section 2.8 "Chief Executive Officer" shall mean the chief
executive officer of Litton Industries, Inc.
Section 2.9 "Committee" shall mean --
(a) The Compensation and Selection Committee of the Board of
Directors.
(b) Notwithstanding Section 2.9(a), upon a Change of Control,
the Committee shall mean exclusively the "special administrators." The "special
administrators" shall be the individuals who constituted the Company's
Compensation and Selection Committee of the Board of Directors immediately prior
to the Change of Control. The "special administrators" shall constitute the
Committee until the last day of the eighteenth month following the month in
which the Change of Control occurred. The "special administrators" shall have
all rights and authority reserved to the Committee under this Supplemental Plan,
including, but not limited to, the rights specified in Section 12.2.
(c) If a "special administrator" dies, becomes disabled, or
resigns as "special administrator" during the period that the "special
administrators" constitute the Committee, the remaining "special
administrator(s)" shall continue to serve as the Committee without interruption.
A successor "special administrator" shall be required only if there are less
than three (3) remaining "special administrators." If a successor "special
administrator" is required, the successor shall be the individual who, at that
time, (1) is not already a "special administrator," and (2) is not a Participant
or currently an employee of the Company, and (3) was the member of the Board
immediately prior to the Change of Control with the longest period of service on
the Board, and (4) agrees to serve
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<PAGE> 8
as a "special administrator."
(d) If a successor "special administrator" is required and
there are no individuals remaining who satisfy the criteria described in Section
2.9(c), then a successor "special administrator" shall either be appointed by
the Trustee or, in the Trustee's discretion, the Trustee shall submit the
selection of the "special administrator(s)" to an arbitrator, the costs of which
shall be borne fully by the Company, to be decided in accordance with the
American Arbitration Association Commercial Arbitration Rules then in effect. If
at any time, there are no remaining "special administrators," the Trustee shall
act as the "special administrator" until the successor(s) is selected.
Section 2.10 "Company" shall mean Litton Industries, Inc., a
Delaware corporation, and its subsidiaries, except that any reference to stock
or securities of the Company shall mean only the stock or securities of Litton
Industries, Inc.
Section 2.11 "Death Benefit" shall mean the benefit payable
under Section 4.2(a) to the Participant's Beneficiary, if any.
Section 2.12 "Dependent Children" shall mean a son or daughter
who either (a) has not attained age 19, or (b) has not attained age 23 and is a
full-time student at an accredited educational institution.
Section 2.13 "Director" shall mean a member of the Board of
Directors of Litton Industries, Inc.
Section 2.14 "Disability" or "Disabled" shall mean a total
disability, as determined in the discretion of the Committee, that prevents an
Active Participant from providing the services that he or she was performing for
the Company.
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<PAGE> 9
Section 2.15 "Disability Benefit" shall mean the benefit
payable under Section 4.3(a) to an Active Participant who becomes Disabled.
Section 2.16 "Mandatory Contribution" shall mean, as of a
Change of Control, an amount equal to the excess of "A" over "B," where --
(a) "A" is 120 percent of the present value of all vested
benefits under the Supplemental Plan determined under the factors set forth in
Appendix B; and
(b) "B" is the current value of the Trust as determined by the
Trustee on the business day immediately preceding the day that a Mandatory
Contribution is paid to the Trustee.
Section 2.17 "Normal Form" shall mean the form of Retirement
Benefit payable under Section 6.2 to a Retired Participant if the Participant
has not elected another form of payment or, if applicable, the form of payment
of a Retirement Benefit to the Beneficiary of a deceased Participant.
Section 2.18 "Offset Amount" shall mean the sum of the annual
"primary insurance amount" and the annual "Company-provided pension."
(a) The "primary insurance amount" shall mean the annual
benefit determined under the Social Security Act that is payable to the
Participant as of the calendar year that the Participant commences Retirement
Benefits under this Supplemental Plan. If no "primary insurance amount" is
actually paid to a Participant as of the calendar year in which the Retirement
Benefit commences under the Supplemental Plan, then the "primary insurance
amount" shall be deemed to be the "primary insurance amount" that would be
payable at the earliest date to the Participant (or would have been payable, in
the case of a deceased Participant). The "primary insurance amount" shall also
include any
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<PAGE> 10
annual retirement benefit payable under any public retirement program of a
foreign country that the Committee determines is comparable in purpose to the
benefits payable under the Social Security Act.
(b) The "Company-provided pension" shall mean the annual amount
that would be payable to a Participant under any other defined benefit plan
sponsored by the Company, which is either intended to qualify under Section
401(a) of the Code or is intended to restore benefits under such plan (excluding
this Supplemental Plan). The amount of the "Company-provided pension" shall be
determined as if the Participant joined a plan at the earliest date on which the
Participant was eligible and participated in the plan to the fullest extent
possible and withdrew his or her presumed contributions, plus income thereon.
The amount of the "Company-provided pension" shall be calculated under the terms
that were in effect during the Participant's presumed participation, except that
a subsequent, retroactive amendment to a plan shall be taken into account only
to the extent that it actually increased the Participant's benefit under that
plan. The "Company-provided pension" shall be computed as if the Participant
actually received the plan benefits as a single life annuity beginning on the
earlier of the Participant's attainment of age 65 or the date that Retirement
Benefits commence under this Supplemental Plan.
Section 2.19 "Participant" shall mean any key executive
employee who has been designated as an Active Participant in the Supplemental
Plan by the Committee, including a Retired Participant.
Section 2.20 "Retired Participant" shall mean a Participant who
has terminated from employment with the Company and who is vested in a
Retirement Benefit.
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<PAGE> 11
Section 2.21 "Retirement Benefit" shall mean the benefits
payable to a Participant and, if applicable, the Beneficiary of a Participant,
as provided under Section 4.1.
Section 2.22 "Supplemental Plan" shall mean the Litton
Industries, Inc., Supplemental Executive Retirement Plan that is described in
this document and Appendices, as amended from time to time, and including any
rules and regulations promulgated by the Committee for purposes of administering
this Supplemental Plan.
Section 2.23 "Trust" shall mean the Litton Industries, Inc.,
Supplemental Executive Retirement Plan Trust, as amended from time to time.
Section 2.24 "Trustee" shall mean the trustee of the Trust.
Section 2.25 "Trust Agreement" shall mean the terms of the
agreement entered into between Litton Industries, Inc., and the Trustee that
establish the Trust.
Section 2.26 "Years of Service" shall mean --
(a) The number of consecutive calendar months divided by twelve
that elapse from the later of (1) the month that an Active Participant first
commenced employment with the Company, or (2) the month in which the Active
Participant attained age 40, until the earlier of the calendar month in which an
Active Participant terminates employment with the Company. An Active Participant
who dies or becomes Disabled shall continue to accrue Years of Service until the
earlier of the calendar month in which he or she attains (or would have
attained) age 65, is no longer Disabled, or Retirement Benefits commence.
(b) Notwithstanding the provisions above in Section 2.26(a)
that limit Years of Service to those after attainment of age 40, solely for
purposes of determining
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<PAGE> 12
whether a deceased or Disabled Participant has satisfied the vesting requirement
of Section 5.3(a), such Participant's Years of Service shall be determined with
regard to all consecutive calendar months following the date of the
Participant's commencement of employment with the Company.
(c) In its discretion, the Committee may (1) compute a
Participant's Years of Service by treating separate periods of employment as
continuous periods of employment with the Company; (2) credit a Participant with
Years of Service in addition to the Years of Service accrued while actually
employed with the Company; and (3) credit a Participant for Years of Service
solely for purposes of satisfying the vesting requirements of Section 5.3(a).
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<PAGE> 13
ARTICLE III -- PARTICIPATION
Section 3.1 General. Participation in the Supplemental Plan is
limited solely to key executive employees of the Company who are designated by
the Committee, after nomination by the Chief Executive Officer. A key executive
employee shall not be designated as an Active Participant prior to attaining age
50. A key executive employee shall not be disqualified from becoming an Active
Participant solely because the key executive employee is also a Director.
Section 3.2 Entry and Continuing Participation. A key executive
employee shall become an Active Participant as of the date specified by the
Committee. A key executive employee who is designated as an Active Participant
shall continue to be an Active Participant until termination of employment with
the Company. Any key executive employee who is employed with the Company at any
time during the Company's fiscal year ending in 1996 may be designated as an
Active Participant.
Section 3.3 Change of Control. On or after a Change of Control,
no additional Participants shall be designated under this Supplemental Plan.
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<PAGE> 14
ARTICLE IV -- BENEFIT ELIGIBILITY
Section 4.1 Eligibility for Retirement Benefit.
(a) General. A Participant shall be eligible to begin receiving
a Retirement Benefit if the Participant has (1) filed an election to receive
payments under Article VII; (2) satisfied the vesting requirement of Section
5.3; (3) terminated employment with the Company; and (4) either attained age 65
or satisfied the conditions in Section 4.1(b) or (c) below.
(b) Retirement Benefits at Age 62. A Participant who has
attained age 62, but not yet attained age 65, shall be eligible to begin
receiving a Retirement Benefit only if the Committee determines, in its
discretion, that the Participant has entered into and continues to satisfy an
agreement not to engage in any activity or perform services for any entity in
competition with a business of the Company. Such agreement not to compete with
the Company's business shall terminate upon the Participant's attainment of age
65.
(c) Retirement Benefits Prior to Age 62. A Participant shall
not be entitled to begin receiving a Retirement Benefit prior to attainment of
age 62, except in the sole and absolute discretion of the Committee, and subject
to such terms and conditions, including the imposition of Retirement Benefit
reductions, that the Committee may specify.
(d) Change of Control. Notwithstanding the foregoing provisions
of this Section 4.1, as of a Change of Control, an Active Participant shall be
vested as provided under Section 5.3(b) and there shall be waiver of any
condition concerning
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<PAGE> 15
eligibility for payment of a Retirement Benefit that requires (1) the filing of
any election, (2) the attainment of a specified age, (3) an agreement not to
engage in competitive activities with the Company, (4) satisfaction of any other
terms or conditions or the application of any benefit reductions described in
Sections 4.1(c), and (5) termination of employment with the Company in order to
begin receiving Retirement Benefits.
Section 4.2 Eligibility for Death Benefit.
(a) Death Prior to Age 65. The Beneficiary of an Active
Participant who dies prior to attaining age 65 shall be eligible to begin
receiving a Death Benefit if the Beneficiary has filed a claim under Article
VII. A Death Benefit shall cease on the earlier of (1) the date on which there
are no individuals who are eligible to be Beneficiaries under Section 6.5(a);
(2) the first day of the calendar month following the date on which the
Participant would have attained age 65 if the Participant were still living; or
(3) the date that payment of a Retirement Benefit commences, but not including a
Retirement Benefit that commences pursuant to a Change of Control.
(b) Death On or After Age 65. An Active Participant who dies on
or after attaining age 65 shall not be eligible for the Death Benefit.
(c) Death of a Retired Participant. A Retired Participant shall
not be eligible for the Death Benefit.
Section 4.3 Eligibility for Disability Benefit.
(a) Disability Prior to Age 65. An Active Participant who
becomes Disabled prior to attaining age 65 shall be eligible to begin receiving
a Disability Benefit if the Disabled Participant has filed a claim under Article
VII. The Disability Benefit shall cease on the earlier of (1) the first day of
the calendar month following the Disabled
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Participant's attainment of age 65; (2) the date on which the Committee
determines that the Participant is no longer Disabled; (3) the date of the
Disabled Participant's death (in which case a Death Benefit may be payable under
Section 4.2); or (4) the date that payment of a Retirement Benefit commences,
but not including a Retirement Benefit that commences pursuant to a Change of
Control.
(b) Disability After Attaining Age 65. An Active Participant
who becomes Disabled on or after attaining age 65 shall not be eligible for the
Disability Benefit.
(c) Retired Participant. A Retired Participant shall not be
eligible for the Disability Benefit.
- 16 -
<PAGE> 17
ARTICLE V -- CALCULATION OF BENEFITS AND VESTING
Section 5.1 Retirement Benefit Formula. A Participant's
Retirement Benefit shall be calculated under the formula [(A + B) x C] - D =
Retirement Benefit, where --
(a) "A" is Average Earnings up to the Base Compensation Amount
multiplied by 1.6 percent;
(b) "B" is Average Earnings in excess of the Base Compensation
Amount multiplied by 2.2 percent;
(c) "C" is Years of Service not in excess of 25; and
(d) "D" is the Offset Amount.
Section 5.2 Death or Disability Benefit Formula.
(a) Death Benefit Formula. A Death Benefit shall be equal to
forty percent of the Participant's Average Earnings. If Dependent Children are
the Beneficiaries of a Death Benefit, the amount of the Death Benefit payable
may be reduced, as provided in Section 6.5(a).
(b) Disability Benefit Formula. A Disability Benefit shall be
equal to forty percent of the Participant's Average Earnings, offset by any
other payments to the Disabled Participant that would be made by or on behalf of
the Company on account of the Disability (including a Company-sponsored
disability insurance plan), calculated as if the Participant participated to the
fullest extent possible in the Company's disability programs. For purposes of
determining any offset under the preceding sentence, any
- 17 -
<PAGE> 18
payments that are not made on a monthly basis shall be converted to monthly
payments under a methodology approved by the Committee.
Section 5.3 Vesting.
(a) Vesting in Retirement Benefit. A Participant shall have no
vested right to a Retirement Benefit prior to the later of attaining (1) age 60
while an Active Participant or (2) fifteen Years of Service, except that an
Active Participant who dies shall be vested if he or she has attained fifteen
Years of Service, regardless of his or her age.
(b) Change of Control. Upon a Change of Control and thereafter,
an Active Participant shall be vested in his or her Retirement Benefit
regardless of Years of Service or age.
(c) Death or Disability Benefit Coverage. A Participant shall
at all times be entitled to Death Benefit and Disability Benefit coverage while
he or she is an Active Participant under age 65.
- 18 -
<PAGE> 19
ARTICLE VI -- FORMS OF BENEFIT AND COMMENCEMENT OF
PAYMENTS
Section 6.1 Retirement Benefit Forms.
(a) General Rule. Unless a Participant has made an election to
receive payment of Retirement Benefits in an alternative form, a Participant
shall be deemed to have elected the Normal Form.
(b) Actuarial Equivalent. All forms of payment of Retirement
Benefits shall be the Actuarial Equivalent of a single life annuity.
Section 6.2 Normal Form of Retirement Benefit.
(a) Single Life Annuity. The Normal Form of Retirement Benefit
shall be a single life annuity for a Participant who is unmarried at the time
that payment of the Retirement Benefit commences. Under a single life annuity, a
Retired Participant shall receive a monthly benefit for life equal to 1/12 of
his or her Retirement Benefit and all payments shall cease upon the Retired
Participant's death.
(b) Joint and Survivor Annuity. If a Participant is married,
the Normal Form of Retirement Benefit shall be a joint and survivor annuity
(which shall be the Actuarial Equivalent of a single life annuity) for the
benefit of the Participant's spouse as of the date that payment of the
Retirement Benefit commences. Under the Normal Form, a Participant shall receive
a monthly benefit for life and, upon the Participant's death, the spouse, if
living, shall receive a monthly benefit for life equal to 100 percent of the
monthly benefit that was payable to the Participant.
- 19 -
<PAGE> 20
(c) Deceased Participants. If a deceased Participant is vested
in a Retirement Benefit, the Normal Form of Retirement Benefit shall be either
the benefit under Section 6.2(a) or (b), determined with regard to the
Participant's marital status on the date of death. If the Normal Form of
Retirement Benefit for a deceased Participant is a joint and survivor annuity
(which shall be the Actuarial Equivalent of a single life annuity), then the
spouse's benefit shall be calculated as if the Participant began receiving
payment of the Retirement Benefit as a joint and 100 percent survivor annuity on
the day preceding the commencement of Retirement Benefit payments to the spouse,
and then died the following day. The Retirement Benefit shall be calculated on
the basis of the age that the Participant would have attained as of the
commencement date.
Section 6.3 Alternative Forms of Benefit.
(a) Election of Forms of Benefit. Prior to the commencement of
payment of a Retirement Benefit, a Participant may file an election designating
a payment form other than the Normal Form of Retirement Benefit. If a
Participant is married, an election to receive a Retirement Benefit in a form
other than the Normal Form shall be valid only if such election includes the
written consent of the Participant's spouse in the form and manner specified by
the Committee. If a Participant elects an annuity form of payment of pension
benefits under a plan sponsored by the Company that is intended to be
tax-qualified under Section 401(a) of the Code, such form of payment shall be
available for the payment of Retirement Benefits under this Supplemental Plan.
However, a joint and survivor annuity shall not be available under this
Supplemental Plan with respect to any Beneficiary other than the spouse of the
Participant as of the date that the Retirement Benefit commences.
- 20 -
<PAGE> 21
(b) Additional Forms of Benefit. From time to time, the
Committee may make other forms of payment of Retirement Benefits available in
its sole discretion.
Section 6.4 Form of Benefit on Change of Control.
(a) Single Sums. Notwithstanding the provisions of Sections
6.1(a), 6.2, 6.3, 6.6, and 6.7, upon a Change of Control, all Retirement
Benefits shall be payable in a single sum payment that is the Actuarial
Equivalent of a single life annuity.
(b) Committee Discretion. Section 6.4(a) shall not apply if the
Committee, within thirty days following the Change of Control, determines, in
its discretion, that single sum payments shall not be provided.
Section 6.5 Form of Payment of Death or Disability Benefit.
(a) Form of Death Benefit. The class of individuals who are
eligible to be Beneficiaries of a Death Benefit is limited to the Participant's
spouse, as of the date of the Participant's death, and the Participant's
Dependent Children. If there is both a living spouse and Dependent Children, the
Beneficiary shall be the spouse. A spouse Beneficiary shall receive a monthly
benefit equal to 1/12 of the Death Benefit. If a spouse Beneficiary dies prior
to the cessation of the Death Benefit payments, then the remaining Death
Benefits shall be paid to any Dependent Children. The amount of any Death
Benefit payable to Dependent Children on a monthly basis is the amount equal to
the Death Benefit that would be payable to a spouse Beneficiary multiplied by a
fraction (not greater than one), the numerator of which is the number of
Dependent Children and the denominator of which is three. If there are no living
Beneficiaries, no Death Benefit shall be paid.
- 21 -
<PAGE> 22
(b) Form of Disability Benefit. A Disabled Participant shall
receive a monthly benefit equal to 1/12 of the Disability Benefit.
Section 6.6 Commencement of Payments. Payment of benefits under
this Supplemental Plan shall begin as soon as administratively feasible after
the Participant (or Beneficiary, if applicable) has provided a claim for
benefits in writing to the Committee, including any supporting documentation
required by the Committee, and the Committee has determined that the Participant
(or Beneficiary, if applicable) satisfies the requirements for payment.
Section 6.7 Form of Benefit Irrevocable. Once Retirement
Benefits have commenced under this Supplemental Plan, the form of the Retirement
Benefit payable is irrevocable.
- 22 -
<PAGE> 23
ARTICLE VII -- BENEFIT ELECTIONS AND BENEFICIARY DESIGNATIONS
Section 7.1 General. All elections to receive benefits under
this Supplemental Plan must be made in writing to the Committee in the form
specified by the Committee and include the information or documentation that the
Committee deems necessary. The Committee, in its discretion, may request
additional information or reasonable documentation from time to time in order to
determine whether a Participant receiving a Disability Benefit continues to be
Disabled.
Section 7.2 Form of Benefit Elections. An election to receive
payment of Retirement Benefits in a form other than the Normal Form must be
submitted to the Committee in writing at any time prior to the commencement of
payments. An election must be made in the form specified by the Committee and
include the information or documentation that the Committee deems necessary,
including written consent of the spouse in the case of a married Participant who
elects a Retirement Benefit in a form other than the Normal Form. The filing of
an election as to the form of Retirement Benefits shall revoke any pre-existing
election, except that a revocation of an election for a married Participant
shall be valid only if accompanied by the spouse's written consent to the
subsequent election (other than a subsequent election to receive payments in the
Normal Form).
Section 7.3 Beneficiaries. If the Committee makes available
alternative benefit forms that provide for payments after a Participant's death,
the Participant shall designate the Beneficiary under such payment form in
accordance with the procedures set forth by the Committee.
- 23 -
<PAGE> 24
ARTICLE VIII -- ADMINISTRATION
The Committee shall administer the Supplemental Plan in
accordance with its terms and purposes. The Committee shall have authority to
interpret the Supplemental Plan, to determine benefits under the Supplemental
Plan, to establish rules and procedures necessary to carry out the terms of the
Supplemental Plan, and, in its discretion, to waive or modify any requirements
or conditions on the receipt or calculation of benefits under the Supplemental
Plan where the Committee determines that such a waiver is appropriate. The
Committee may appoint one or more officers or employees of the Company to act on
the Committee's behalf with respect to administrative matters related to the
Supplemental Plan.
- 24 -
<PAGE> 25
ARTICLE IX -- SOURCE OF PAYMENTS
Section 9.1 General Assets of Company. Benefits payable under
this Supplemental Plan shall be paid directly to the Participant, or to the
Participant's Beneficiary, as applicable, from the general assets of the
Company, including the assets of the Trust to the extent that the Trust so
provides. If any person acquires a right to receive payments from the Company
under this Supplemental Plan, such right shall be no greater than the right of
any unsecured general creditor of the Company. In the event that the Company
establishes an advance accrual reserve on its books against its future liability
under the Supplemental Plan, such reserve shall not constitute an asset of the
Supplemental Plan but shall at all times remain part of the general assets of
the Company subject to the claims of the Company's creditors.
Section 9.2 Payments to Trust.
(a) Mandatory Contribution. Upon a Change of Control, the
Company shall make Mandatory Contributions to the Trustee by wire transfer in
immediately available funds of United States dollars. A Mandatory Contribution
shall be made as soon as possible upon the Change of Control, but in no event
more than ten days from the date of the Change of Control. In addition, a
Mandatory Contribution shall be made every six months thereafter, provided that
the calculation of the Mandatory Contribution on the sixth-month date yields a
positive dollar amount. Mandatory Contributions shall continue to be required
semi-annually until all Retirement Benefits, Disability Benefits, and Death
Benefits have been paid to all Participants and Beneficiaries. The Company shall
- 25 -
<PAGE> 26
immediately notify the Committee in writing when payment of the Mandatory
Contribution is made to the Trustee.
(b) Continuing Obligation of Company. Subsequent to the payment
of a Mandatory Contribution, Participants and Beneficiaries shall be paid
benefits under the Supplemental Plan from the Trust pursuant to the Trust
Agreement, but in no event shall the making of a Mandatory Contribution relieve
the Company of its obligation under this Supplemental Plan.
- 26 -
<PAGE> 27
ARTICLE X -- CLAIMS AND ENFORCEMENT
Section 10.1 Administrative Procedures.
(a) Notice of Denial. If the Committee determines that any
person who has submitted a claim for payment of benefits under this Supplemental
Plan is not eligible for payment of benefits or, if applicable, is not eligible
for payment of benefits in the form requested, then the Committee shall, within
a reasonable period of time, but no later than 90 days after receipt of the
written claim, notify the claimant of the denial of the claim. Such notice of
denial: (1) shall be in writing; (2) shall be written in a manner calculated to
be understood by the claimant; and (3) shall contain (A) the specific reason or
reasons for denial of the claim; (B) a specific reference to the pertinent
Supplemental Plan provisions or administrative rules and regulations upon which
the denial is based; (C) a description of any additional material or information
necessary for the claimant to perfect the claim; and (D) an explanation of the
Supplemental Plan's appeal procedures.
(b) Review Procedures. Within 90 days of the receipt by the
claimant of the written notice of denial of the claim, or if the claim has not
been granted or denied within 120 days of the claimant's original claim, the
claimant may file a written request with the Board that it conduct a full and
fair review of the denial of the claimant's claim for benefits. The claimant's
written request must include a statement of the grounds on which the claimant
appeals the original claim denial. The Board shall deliver to the claimant a
written decision on the claim promptly, but not later than 60 days after the
receipt of the claimant's request for review, except that if there are special
circumstances that require an extension of time for processing, the 60-day
period shall be extended to 120 days, in
- 27 -
<PAGE> 28
which case written notice of the extension shall be furnished to the claimant
prior to the end of the 60-day period.
Section 10.2 Enforcement.
(a) Right to Enforce. The Company's obligations under the
Supplemental Plan may be enforced by the filing of an action by any Participant
or by any Participant's spouse, Dependent Child, Beneficiary, or personal
representative.
(b) Attorneys Fees and Costs. If, on or after a Change of
Control, any claimant is denied a claim for benefits under the Supplemental
Plan, and the claimant requests a review under the procedures described in
Section 10.1(b), or files a claim in a court of law or any other tribunal to
enforce any obligation of the Company under this Supplemental Agreement, which
is based on a failure to administer the Plan in accordance with its terms,
including the requirement that the Company make a Mandatory Contribution to the
Trust, the Company shall pay such claimant all attorneys fees and costs incurred
in connection with the claim, regardless of the outcome of the claim, provided
that the claim is not frivolous. All attorneys fees and costs under this Section
10.2(b) shall be paid by the Company as they are incurred by the claimant, but
no later than 30 days from the date that the claimant submits a bill or other
statement to the Company.
(c) Interest. If any claimant prevails in a review procedure
described in Section 10.1(b), or if a claimant prevails in an action in a court
of law or any other tribunal to enforce the payment of benefits under the
Supplemental Plan, the Company shall pay interest to the claimant on any unpaid
benefits accruing from the date that benefit payments should have commenced and
continuing until the date that such owed and
- 28 -
<PAGE> 29
unpaid benefits are paid to the claimant in full. For purposes of the preceding
sentence, interest shall accrue at an annual rate equal to one percent, plus the
prime rate reported by the Wall Street Journal.
- 29 -
<PAGE> 30
ARTICLE XI -- AMENDMENT AND TERMINATION
Section 11.1 Amendment and Termination of the Plan.
(a) General. Although the Company intends to maintain the
Supplemental Plan, the Company reserves the right to amend or terminate the
Supplemental Plan at any time for whatever purposes it may deem appropriate,
except as specifically limited by this Article XI. The Company shall amend,
terminate, or suspend the Supplemental Plan only by the action of the Board,
except that the Committee shall have the authority to make any amendments that
do not decrease the level of benefits payable and that it deems necessary for
the proper administration of the Supplemental Plan.
(b) Automatic Termination. The Supplemental Plan may be
terminated or suspended only by action of the Board, except that the
Supplemental Plan shall terminate automatically if there are no Active
Participants remaining and all Retirement Benefits, Death Benefits, and
Disability Benefits have been paid.
(c) Protection of Benefits. No amendment, termination, or
suspension of the Supplemental Plan shall be effective to the extent that it
reduces (1) the Retirement Benefit accrued or payable to any Participant; (2)
Retirement Benefits that have commenced to be paid; or (3) Death or Disability
Benefits that have commenced to be paid.
(d) Protection of Active Participants. No amendment,
termination, or suspension of the Supplemental Plan shall be effective to the
extent that it reduces the Retirement Benefits that an Active Participant may
accrue unless the amendment,
- 30 -
<PAGE> 31
termination, or suspension also provides that the Active Participant is
immediately vested in a Retirement Benefit calculated as if the Active
Participant terminated employment immediately prior to the later of the date
that the amendment, termination, or suspension is enacted or is effective.
(e) Change of Control. On or after a Change of Control, any
amendment, termination, or suspension of the Plan shall be effective only upon
the written consent of at least eighty-five percent of all Participants. The
preceding sentence shall not apply to (1) a termination that occurs under
Section 11.1(b); or (2) any amendment, termination, or suspension that affects
the accrual of Retirement Benefits and that complies with the terms of Section
11.1(c) and (d).
Section 11.2 Contractual Obligation. The Company makes a
contractual obligation that any amendment, suspension, or termination of the
Supplemental Plan shall comply with the terms of Section 11.1.
- 31 -
<PAGE> 32
ARTICLE XII -- MISCELLANEOUS
Section 12.1 Employment Rights. Nothing contained in the
Supplemental Plan shall be construed as a contract of employment between the
Company and the Participant, or as a right of any employee to be continued in
the employment of the Company, or as a limitation of the right of the Company to
discharge any of its employees, with or without cause.
Section 12.2 Rights of the Committee. To the extent permitted
by law, the Company shall indemnify the Committee (including any officers and
employees of the Company appointed to act on behalf of the Committee) and hold
such individuals harmless from and against any damages, losses, costs and
expenses incurred (including without limitation, expenses of investigation and
the fees and expenses of counsel) in the course of administering the
Supplemental Plan. The Company shall bear all expenses of the Committee incurred
in the course of administering the Supplemental Plan.
Section 12.3 Benefit Statements. At least annually, the Company
shall provide a statement of benefits under the Supplemental Plan to all
Participants (or Beneficiaries) that includes the information necessary to
calculate the accrued Retirement Benefit, Disability Benefit, and Death Benefit
with respect to the Participant.
Section 12.4 Assignment. The benefits payable under the
Supplemental Plan may not be assigned or alienated.
Section 12.5 Applicable Law. The Supplemental Plan shall be
governed by the laws of Delaware.
- 32 -
<PAGE> 33
Section 12.6 Effective Date. The Supplemental Plan shall take
effect as of August 1, 1995.
Section 12.7 Entire Agreement. This writing is the final
expression of the Supplemental Plan and a complete and exclusive statement of
its terms, except that to the extent that this Supplement Plan refers to the
Trust, the terms of the Trust Agreement, as of the date immediately preceding a
Change of Control, shall be deemed to be incorporated herein.
Section 12.8 Terms. Except as required otherwise by the
context, capitalized terms that are used in this Supplemental Plan shall have
the meaning assigned to them in Article II. Feminine or neuter pronouns shall be
substituted for those of the masculine form, and the plural shall be substituted
for the singular, in any place or places herein where the context may require
such substitution or substitutions.
- 33 -
<PAGE> 34
APPENDIX A
LITTON INDUSTRIES, INC.
ASSUMPTION TO CALCULATE PRESENT VALUE OF REMAINING PROJECTED SERP BENEFITS
<TABLE>
<CAPTION>
ITEM ASSUMPTION OTHER REQUIRED DATA
- ----------------------- ---------- -----------------------------------------------------
<S> <C> <C>
Salary scale 6.00% 1. Past 60 months' earnings
2. Defined Benefit After-tax Deposits and Part I
Deposits(1)
3. Interest on the actual and hypothetical Defined
Benefit After-tax Deposits at the rate
specified under IRC Section 411(c)2
4. Earnings on the actual and hypothetical Part I
Deposits at the rates actually earned
under the plans.
Age at Retirement The later of age 65
or current age
SERP Benefit Percentage Between 1.6% and 2.2% per Credited years of service, including dates of Litton
(From Document) year of credited service employment, Average Compensation, Base
Compensation Amount
Social Security Wage Base Increases 5.00% Date of Birth, Current year's Social Security Wage
Base
Social Security CPI 4.00% Section 415 Limit,
(415, 401(k) Limit Index, Base Section 401(k) Limit
Compensation Amount Index)
Part I Rate of Earnings 8.00%
Mortality (Post-retirement Only) 83 GAM
Present Value Interest Rate 8.00% Calculation Date
Form of Payment Life Annuity Spouse DOB, J&S% (If not Life Annuity); 10-Year
certain data (commencement date)
Interest Rate of Annuity Equivalents See Note(2) Qualified Plan Joint and Survivor Factor Tables,
LRP and FSSP deposit conversion factors
411(c)2 Interest Rate Current Rate 120% of Average Federal Rate as of the beginning of
the calendar year
FORMULA: [SERP % x Projected Final Average Earnings (highest 36 of last 60 months using three nonoverlapping
periods of 12 consecutive months) minus Projected Primary Insurance Amount minus Projected Qualified
Plan Benefit minus Projected Part I Restoration Plan Benefit] x Present Value Factor
Where: Projected Qualified Plan Benefit (Limited to the Projected 415 Limit) =
85%(3) x [Defined Benefit After-tax Deposits + Part I Deposits + Projected Part I Deposits
(Reflecting 401(k) Limit)] minus
75% x Projected Primary Insurance Amount minus
[(Part I Annuity Equivalent Factor for age at Retirement x
Projected Part I Deposits with Earnings) + (LRP Annuity Equivalent Factor for age at Retirement x
Projected Defined Benefit After-tax Deposits with interest)]
Projected Part I Restoration Plan Benefit = 85% x Projected Part I Restricted Amount minus
(Part I Annuity Equivalent Factor for age at Retirement x Projected Part I Restricted Amount
with interest)
Present Value Factor = Deferred to Retirement Age Actuarial Factor Based on the Present Value Interest
Rate and The Form of Payment Specified Above
</TABLE>
- ----------
(1) Including Restoration Plan part I and hypothetical deposits equal to the
difference between the maximum pension deposits that could have been made
for all years eligible for participation and those actually made.
(2) Litton Industries, Inc., Retirement Plan "B", Interest Rate
(3) Applies to all actual and all hypothetical deposits made after 1982.
Hypothetical deposits before 1983 are credited at 50%
<PAGE> 35
APPENDIX B
LITTON INDUSTRIES, INC.
ASSUMPTION TO CALCULATE PRESENT VALUE OF REMAINING PROJECTED SERP BENEFITS
<TABLE>
<CAPTION>
ITEM ASSUMPTION OTHER REQUIRED DATA
- --------------------------- ---------- ---------------------------------------------------
<S> <C> <C>
Salary scale 6.00% 1. Past 60 months' earnings
2. Defined Benefit After-tax Deposits and Part I
Deposits(1)
3. Interest on the actual and hypothetical Defined
Benefit After-tax Deposits at the rate
specified under IRC Section 411(c)2
4. Earnings on the actual and hypothetical Part I
Deposits at the rates actually earned
under the plans.
Age at Retirement Current Age
SERP Benefit Percentage Between 1.6% and 2.2% per Credited years of service, including dates of Litton
(From Document) year of credited service employment, Average Compensation, Base
Compensation Amount
Social Security Wage Base Increases 5.00% Date of Birth, Current year's Social Security Wage
Base
Social Security CPI 4.00% Section 415 Limit,
(415, 401(k) Limit Index, Base Section 401(k) Limit
Compensation Amount Index)
Part I Rate of Earnings 8.00%
Mortality (Post-retirement Only) 83 GAM
Present Value Interest Rate See Note(2) Calculation Date
Form of Payment Life Annuity/Lump Sum Spouse DOB, J&S% (If not Life Annuity); 10-Year
certain data (commencement date)
Interest Rate of Annuity Equivalents See Note(2) Litton Industries, Inc. Retirement Plan "B",
Interest Rate, Qualified Plan Joint and
Survivor Factor Tables, LRP and FSSP
deposit conversion factors
411(c)2 Interest Rate Current Rate 120% of Average Federal Rate as of the beginning of
the calendar year
FORMULA: [SERP % x Projected Final Average Earnings (highest 36 of last 60 months using three nonoverlapping
periods of 12 consecutive months) minus Projected Primary Insurance Amount minus Projected Qualified
Plan Benefit minus Projected Part I Restoration Plan Benefit] x Present Value Factor
Where: Projected Qualified Plan Benefit (Limited to the Projected 415 Limit) =
85%(3) x [Defined Benefit After-tax Deposits + Part I Deposits + Projected Part I Deposits
(Reflecting 401(k) Limit)] minus
75% x Projected Primary Insurance Amount minus
[(Part I Annuity Equivalent Factor for age at Retirement x
Projected Part I Deposits with Earnings) + LRP Annuity Equivalent Factor for age at Retirement x
Projected Defined Benefit After-tax Deposits with interest)]
Projected Part I Restoration Plan Benefit = 85% x Projected Part I Restricted Amount minus
(Part I Annuity Equivalent Factor for age at Retirement x Projected Part I Restricted Amount
with Interest)
Present Value Factor = Deferred to Retirement Age Actuarial Factor Based on the Present Value Interest
Rate and The Form of Payment Specified Above
</TABLE>
- --------
1 Including Restoration Plan part I and hypothetical deposits equal to the
difference between the maximum pension deposits that could have been made for
all years eligible for participation and those actually made.
2 Yield on 10 Year AAA California Municipal Bond as of the Calculation Date
3 Applies to all actual and all hypothetical deposits made after 1982.
Hypothetical deposits before 1983 are credited at 50%
<PAGE> 1
EXHIBIT 11
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE(A)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE
Earnings available for common shares and
common stock equivalent shares deemed to
have a dilutive effect:
Earnings from continuing operations......... $ 135,015 $ 51,306 $ 87,341 $ 87,299 $ 5,964
Provision for cash dividends on preferred
stock (Series B)........................... (821) (821) (821) (821) (821)
---------- ---------- ---------- ---------- ----------
Net earnings from continuing operations....... 134,194 50,485 86,520 86,478 5,143
Discontinued operations....................... -- (173,079) 94,962 87,138 57,539
Extraordinary loss............................ -- (30,732) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations....................... -- -- (106,727) -- --
Discontinued operations..................... -- -- (10,390) -- --
---------- ---------- ---------- ---------- ----------
Net earnings (loss) available for common
shares and common stock equivalent shares
deemed to have a dilutive effect............. $ 134,194 $ (153,326) $ 64,365 $ 173,616 $ 62,682
========== ========== ========== ========== ==========
Primary earnings (loss) per share before
extraordinary item and cumulative effect of a
change in accounting principle:
Continuing operations....................... $ 2.84 $ 1.10 $ 2.10 $ 2.10 $ 0.12
Discontinued operations..................... -- (3.79) 2.31 2.12 1.33
Extraordinary loss............................ -- (0.67) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations....................... -- -- (2.60) -- --
Discontinued operations..................... -- -- (0.25) -- --
---------- ---------- ---------- ---------- ----------
Total primary....................... $ 2.84 $ (3.36) $ 1.56 $ 4.22 $ 1.45
========== ========== ========== ========== ==========
SHARES USED IN COMPUTATION
Weighted average common shares outstanding
(net of treasury shares)..................... 46,029,979 45,720,585 40,161,652 40,189,888 42,290,454
Common stock equivalents...................... 1,157,955 (B) 998,827 985,676 1,132,206
---------- ---------- ---------- ---------- ----------
Total common shares and common stock
equivalent shares deemed to have a dilutive
effect....................................... 47,187,934 45,720,585 41,160,479 41,175,564 43,422,660
========== ========== ========== ========== ==========
</TABLE>
- ---------------
NOTES:
(A) Applicable information for fiscal year 1991 has been adjusted for a
two-for-one Common stock split which occurred in fiscal year 1992.
Additionally, amounts related to fiscal years 1992 and 1991 have been
restated to reflect the WAI businesses as discontinued operations in
connection with the Distribution discussed in Note B of Notes to
Consolidated Financial Statements on page F-8 of this Annual Report on Form
10-K.
(B) The weighted average effect of stock options was anti-dilutive for fiscal
year 1994 and, therefore, not considered.
E-5
<PAGE> 2
EXHIBIT 11 (CONTINUED)
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
EARNINGS (LOSS) PER SHARE AND FULLY DILUTED EARNINGS (LOSS) PER SHARE(A)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
FULLY DILUTED EARNINGS (LOSS) PER SHARE
Earnings available for common shares and common stock
equivalent shares deemed to have a dilutive effect:
Earnings from continuing operations................ $ 135,015 $ 51,306 $ 87,341 $ 87,299 $ 5,964
Provision for cash dividends on preferred stock
(Series B)........................................ (821) (821) (821) (821) (821)
---------- ---------- ---------- ---------- ----------
Net earnings from continuing operations.............. 134,194 50,485 86,520 86,478 5,143
Discontinued operations.............................. -- (173,079) 94,962 87,138 57,539
Extraordinary loss................................... -- (30,732) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations.............................. -- -- (106,727) -- --
Discontinued operations............................ -- -- (10,390) -- --
---------- ---------- ---------- ---------- ----------
Net earnings (loss) available for common shares and
common stock equivalent shares deemed to have a
dilutive effect..................................... 134,194 (153,326) 64,365 173,616 62,682
Add: Interest expense on zero coupon convertible
subordinated notes (net of tax)..................... -- -- (B) 13,083 (B)
---------- ---------- ---------- ---------- ----------
Total...................................... $ 134,194 $ (153,326) $ 64,365 $ 186,699 $ 62,682
========== ========== ========== ========== ==========
Fully diluted earnings (loss) per share before
extraordinary item and cumulative effect of a
change in accounting principle:
Continuing operations.............................. $ 2.84 $ 1.10 $ 2.10 $ 2.10 $ 0.12
Discontinued operations............................ -- (3.79) 2.31 1.84 1.33
Extraordinary loss................................... -- (0.67) -- -- --
Cumulative effect of a change in accounting
principle:
Continuing operations.............................. -- -- (2.60) -- --
Discontinued operations............................ -- -- (0.25) -- --
---------- ---------- ---------- ---------- ----------
Total fully diluted........................ $ 2.84 $ (3.36) $ 1.56 $ 3.94 $ 1.45
========== ========== ========== ========== ==========
SHARES USED IN COMPUTATION
Total common shares and common stock equivalent
shares deemed to have a dilutive effect............. 47,187,934 45,720,585 41,160,479 41,175,564 43,422,660
Additional potentially dilutive securities
(equivalent in common stock):
Stock options...................................... 73,964 -- -- 24,676 29,676
Zero coupon convertible subordinated notes......... -- -- (B) 6,126,000 (B)
---------- ---------- ---------- ---------- ----------
Total...................................... 47,261,898 45,720,585 41,160,479 47,326,240 43,452,336
========== ========== ========== ========== ==========
SUMMARY OF CASH DIVIDENDS DECLARED PER SHARE
Preferred -- Series B................................ $ 2.00 $ 2.00 $ 2.00 $ 2.00 $ 2.00
</TABLE> `
- ---------------
NOTES:
(A) Applicable information for fiscal year 1991 has been adjusted for a
two-for-one Common stock split which occurred in fiscal year 1992.
Additionally, amounts related to fiscal years 1992 and 1991 have been
restated to reflect the WAI businesses as discontinued operations in
connection with the Distribution discussed in Note B of Notes to
Consolidated Financial Statements on page F-8 of this Annual Report on Form
10-K.
(B) The fully diluted earnings per share calculation for fiscal 1993 and 1991
did not include the assumed conversion of zero coupon convertible
subordinated notes issued September 26, 1990, because the effect on shares
used in the calculation and the related increase to income for the interest
expense adjustment, net of tax, would be anti-dilutive. As discussed in
Note F of Notes to Consolidated Financial Statements on page F-13 of this
Annual Report on Form 10-K, substantially all of these notes were converted
into Common stock and the remainder redeemed for cash in fiscal year 1993.
E-6
<PAGE> 1
EXHIBIT 21
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF PERCENTAGE OF
NAME OF SUBSIDIARY INCORPORATION OWNERSHIP
------------------ --------------- -------------
<S> <C> <C>
Ingalls Shipbuilding, Inc. ....................................... Delaware 100
Litton Systems, Inc. ............................................. Delaware 100
</TABLE>
The Registrant has additional operating subsidiaries, which considered in
the aggregate as a single subsidiary, do not constitute a significant
subsidiary.
All above listed subsidiaries have been consolidated in the Registrant's
financial statements.
E-7
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in (i) Registration Statement
No. 2-93044 on Form S-8, (ii) Registration Statement No. 33-27467 on Form S-8,
(iii) Registration Statement No. 33-27468 on Form S-8, (iv) Registration
Statement No. 33-44684 on Form S-3 and (v) Registration Statement No. 33-55944
on Form S-8 of our report dated September 21, 1995, appearing in this Annual
Report on Form 10-K of Litton Industries, Inc. and subsidiary companies for the
year ended July 31, 1995.
DELOITTE & TOUCHE LLP
Los Angeles, California
October 16, 1995
E-8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JULY 31, 1995 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE TWELVE MONTHS ENDED JULY 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-END> JUL-31-1995
<CASH> 80,013
<SECURITIES> 30,683
<RECEIVABLES> 434,126
<ALLOWANCES> 13,189
<INVENTORY> 552,195
<CURRENT-ASSETS> 1,465,256
<PP&E> 1,546,264
<DEPRECIATION> 924,425
<TOTAL-ASSETS> 2,559,622
<CURRENT-LIABILITIES> 1,335,123
<BONDS> 103,631
0
2,053
<COMMON> 46,182
<OTHER-SE> 709,908
<TOTAL-LIABILITY-AND-EQUITY> 2,559,622
<SALES> 3,319,725
<TOTAL-REVENUES> 3,319,725
<CGS> 2,646,342
<TOTAL-COSTS> 2,646,342
<OTHER-EXPENSES> 95,356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,053
<INCOME-PRETAX> 226,960
<INCOME-TAX> 91,945
<INCOME-CONTINUING> 135,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,015
<EPS-PRIMARY> 2.84
<EPS-DILUTED> 2.84
</TABLE>
