<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 15, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1998
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)
<TABLE>
<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
------------------------
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 [ ]
On November 30, 1998 there were 45,432,392 shares of Common Stock
outstanding.
Page 1 of 11
Exhibit Index appears on Page 10.
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- --------------------------------------------------------------------------------
<PAGE> 2
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX
REPORT ON FORM 10-Q
FOR QUARTER ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
Three months ended October 31, 1998 and 1997................ 3
Consolidated Balance Sheets
October 31, 1998 and July 31, 1998.......................... 4
Consolidated Statements of Cash Flows
Three months ended October 31, 1998 and 1997................ 5
Notes to Consolidated Financial Statements.................. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 8
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 10
Item 6. Exhibits and Reports on Form 8-K............................ 10
Signature............................................................. 11
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Sales and Service Revenues.................................. $1,207,538 $1,039,035
---------- ----------
Costs and Expenses
Cost of sales............................................. 945,209 800,017
Selling, general and administrative....................... 127,526 121,991
Depreciation and amortization............................. 39,838 34,388
Interest -- net........................................... 16,250 10,231
---------- ----------
Total............................................. 1,128,823 966,627
---------- ----------
Earnings before Taxes on Income............................. 78,715 72,408
Taxes on Income............................................. (31,486) (28,963)
---------- ----------
Net Earnings...................................... $ 47,229 $ 43,445
========== ==========
Earnings per Share:
Basic..................................................... $ 1.03 $ 0.94
========== ==========
Diluted................................................... $ 1.01 $ 0.92
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1998 1998
----------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities............................ $ 56,152 $ 31,925
Accounts receivable, net.................................. 878,515 820,624
Inventories less progress billings........................ 638,856 635,942
Deferred tax assets....................................... 415,130 417,719
Prepaid expenses.......................................... 27,468 27,770
---------- ----------
Total Current Assets.............................. 2,016,121 1,933,980
---------- ----------
Property, Plant and Equipment -- at cost.................... 1,535,938 1,543,041
Less accumulated depreciation............................. (931,212) (929,527)
---------- ----------
Property, Plant and Equipment, Net.......................... 604,726 613,514
---------- ----------
Goodwill and Other Intangibles, Net......................... 1,050,770 1,075,299
---------- ----------
Other Assets and Long-term Investments...................... 444,664 427,022
---------- ----------
Total Assets...................................... $4,116,281 $4,049,815
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable.......................................... $ 820,263 $ 876,850
Payrolls and related expenses............................. 224,869 200,059
Taxes on income........................................... 87,919 74,040
Short-term debt........................................... 310,270 274,178
Contract liabilities and customer deposits................ 351,669 346,270
---------- ----------
Total Current Liabilities......................... 1,794,990 1,771,397
---------- ----------
Long-term Obligations....................................... 778,253 771,321
---------- ----------
Postretirement Benefit Obligations Other than Pensions...... 206,522 206,397
---------- ----------
Deferred Tax and Other Long-term Liabilities................ 115,258 113,461
---------- ----------
Shareholders' Investment
Capital stock
Voting preferred stock -- Series B..................... 2,053 2,053
Common stock........................................... 45,432 45,783
Additional paid-in capital................................ 315,460 316,628
Retained earnings......................................... 898,472 869,359
Accumulated other comprehensive loss -- Cumulative
currency translation adjustment........................ (40,159) (46,584)
---------- ----------
Total Shareholders' Investment.................... 1,221,258 1,187,239
---------- ----------
Total Liabilities and Shareholders' Investment.... $4,116,281 $4,049,815
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Cash and cash equivalents at beginning of period............ $ 16,175 $ 4,144
-------- --------
Operating activities
Net earnings.............................................. 47,229 43,445
Adjustments to reconcile net earnings to net cash provided
by (used for) operating activities
Depreciation and amortization.......................... 39,838 34,388
Changes in assets and liabilities
Accounts receivable.................................. (57,424) (37,949)
Inventories.......................................... (15,145) 30,003
Prepaid expenses..................................... 166 (100)
Accounts payable..................................... (56,458) (56,105)
Payrolls and related expenses........................ 17,291 17,263
Deferred and current taxes on income................. 16,729 14,645
Contract liabilities and customer deposits........... 5,399 14,192
Other operating activities............................. (11,262) (3,382)
-------- --------
Cash (used for) provided by operating activities............ (13,637) 56,400
-------- --------
Investing activities
Proceeds from sale of business............................ 43,522 --
Purchase of capital assets................................ (20,839) (19,360)
Other investing activities................................ 1,962 3,291
-------- --------
Cash provided by (used for) investing activities............ 24,645 (16,069)
-------- --------
Financing activities
Change in short-term obligations, net..................... 33,852 (2,553)
Purchase of Common stock.................................. (20,975) --
Other financing activities................................ 342 (1,147)
-------- --------
Cash provided by (used for) financing activities............ 13,219 (3,700)
-------- --------
Resulting in increase in cash and cash equivalents.......... 24,227 36,631
-------- --------
Cash and cash equivalents at end of period.................. $ 40,402 $ 40,775
======== ========
Supplemental disclosure of cash flow information
Interest paid............................................. $ 29,319 $ 17,569
Net income taxes paid..................................... $ 14,051 $ 8,108
Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents................................. $ 40,402 $ 40,775
Marketable securities..................................... 15,750 15,750
-------- --------
Total cash and marketable securities.............. $ 56,152 $ 56,525
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED OCTOBER 31, 1998
1. The amounts included in this report are unaudited; however, in the opinion of
management, all adjustments necessary for a fair statement of results for the
stated periods have been included. These adjustments are of a normal
recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These interim
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report to Shareholders for the fiscal year ended July 31, 1998. The results
of operations for the three months ended October 31, 1998 are not necessarily
indicative of operating results for the entire year.
2. The components of inventory balances are summarized below:
<TABLE>
<CAPTION>
OCTOBER 31, JULY 31,
1998 1998
----------- ----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in progress.................. $ 991,380 $1,036,492
Finished goods...................................... 47,955 42,746
---------- ----------
1,039,335 1,079,238
Less progress billings.............................. (400,479) (443,296)
---------- ----------
Net inventories..................................... $ 638,856 $ 635,942
========== ==========
</TABLE>
3. Interest (expense) income is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
----------------------
1998 1997
--------- ---------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Interest expense....................................... $(18,041) $(12,018)
Interest income........................................ 1,791 1,787
-------- --------
Net interest expense................................... $(16,250) $(10,231)
======== ========
</TABLE>
6
<PAGE> 7
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED OCTOBER 31, 1998
4. The Company computes basic and diluted earnings per share ("EPS") in
accordance with the Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128") which the Company adopted in the second
quarter of fiscal year 1998. Basic EPS is calculated based on the weighted
average number of shares outstanding and diluted EPS includes the effects of
dilutive potential common shares. EPS amounts for the first quarter of the
prior fiscal year have been restated to conform to the requirements of SFAS
128.
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
OCTOBER 31,
----------------------------------
1998 1997
--------------- ---------------
(THOUSANDS OF DOLLARS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Net earnings...................................... $ 47,229 $ 43,445
Preferred stock dividends......................... (205) (205)
----------- -----------
Net earnings used for basic and diluted earnings
per share calculations.......................... $ 47,024 $ 43,240
=========== ===========
Weighted average common shares outstanding -- used
for basic earnings per share.................... 45,545,459 46,025,779
Dilutive effect of stock options.................. 934,868 1,176,796
----------- -----------
Number of shares used for diluted earnings per
share........................................... 46,480,327 47,202,575
=========== ===========
Basic earnings per share.......................... $ 1.03 $ 0.94
=========== ===========
Diluted earnings per share........................ $ 1.01 $ 0.92
=========== ===========
</TABLE>
5. Effective in the first quarter of fiscal year 1999, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income", which establishes standards for reporting and display of
comprehensive income and its components. Comprehensive income includes "all
changes in equity during a period except those resulting from investments by
owners and distributions to owners". Comprehensive income for the three
months ended October 31, 1998 amounted to $53,654, which represents net
earnings of $47,229 and currency translation adjustments totaling $6,425.
Comprehensive income for the three months ended October 31, 1997 amounted to
$44,983, which represents net earnings of $43,445 and currency translation
adjustments totaling $1,538.
7
<PAGE> 8
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company reported sales of $1.21 billion for the first quarter ended
October 31, 1998 compared with $1.04 billion for the first quarter of fiscal
year 1998. Operating profit for the first three months of fiscal year 1999
increased to $110.0 million from $96.0 for the corresponding period of the prior
fiscal year. Net earnings of $47.2 million for the quarter represent an increase
of 9% over the $43.4 million for the first quarter of the prior year, and
diluted earnings per share rose 10% to $1.01 for the current quarter from $.92
for the first quarter of the prior year.
Sales and operating profit for the Advanced Electronics segment were $403.2
million and $29.4 million, compared with $413.3 million and $27.1 million,
respectively, for the first quarter of the prior year. Although sales for the
quarter decreased slightly, operating margins and profit benefited from the
shift into the production phase with respect to certain defense electronics
programs, including the Euro Fighter program under which the Company is
supplying advanced avionics equipment for aircraft to be built by a consortium
consisting of Germany, Great Britain, Italy and Spain. Ongoing cost containment
efforts also contributed to the improved margins. Backlog for the Advanced
Electronics segment was $1.38 billion at October 31, 1998 compared with $1.46
billion at July 31, 1998. Subsequent to the end of the quarter, the Company
announced that it has entered into an agreement to acquire Denro, Inc. from
Firan Corporation, subject to government approval. Denro, with estimated annual
sales of approximately $50 million, manufactures voice and data electronic
switching equipment and data recorders used in air traffic control.
The Information Systems segment reported sales and operating profit of
$396.8 million and $20.5 million for the first quarter of fiscal year 1999,
representing increases over the $252.9 million and $17.4 million, respectively,
for the first quarter of the prior year. These improvements were primarily due
to the acquisition of TASC, Inc. ("TASC") in April 1998 and higher volume on
various contracts at the Company's PRC Inc. ("PRC") subsidiary to supply
information technology, services, systems integration and technical support to
various federal agencies. Profit margins for this segment, however, continued to
be impacted by investments in new programs and costs incurred for the
development of commercial information technology services. Firm backlog for the
Information Systems segment was $860.3 million at October 31, 1998 compared with
$877.7 million at July 31, 1998. In addition, TASC and PRC have non-firm,
unfunded backlog with potential contract values of $1.7 billion at October 31,
1998 compared with $1.8 billion at July 31, 1998.
The Marine Engineering and Production segment reported sales and operating
profit of $268.2 million and $35.0 million for the current quarter, compared
with $238.6 million and $30.1 million, respectively, for the prior year's first
quarter. These increases reflect a higher level of construction activities on
long-term contracts including three Aegis destroyers and a seventh LHD class
amphibious assault ship. The resulting improvements from these contracts were
partially offset by the effects of the completion and delivery of an Aegis
destroyer and a sixth LHD class amphibious assault ship during the second half
of fiscal year 1998. Operating margins benefited from increased earnings rates
on programs maturing in the production process and continued production
efficiencies. Backlog for this segment at October 31, 1998 was $3.31 billion,
compared with $3.47 billion at July 31, 1998.
Sales and operating profit for the Electronic Components and Materials
segment were $152.2 million and $25.8 million for the first quarter of fiscal
year 1999 compared with $147.2 million and $22.0 million, respectively, for the
first quarter of the prior year. The demand for this segment's commercial
electronic products by original equipment manufacturers in the
telecommunications and computer industries contributed to the slightly higher
sales for the current quarter. While the businesses in this segment continued to
invest in product development and expand production capacity, profit margins
benefited from management's ongoing program to improve process and cost
efficiencies.
Interest expense was higher for the first quarter of fiscal year 1999
compared with the first quarter of fiscal year 1998 as a result of the $300
million in certain long-term notes and debentures along with short-term
borrowings issued in connection with the acquisition of TASC and a payment of
prior years' taxes during fiscal year 1998. Higher interest payments due to
increased borrowings along with higher working capital
8
<PAGE> 9
PART I. FINANCIAL INFORMATION (CONTINUED)
requirements resulted in a net use of cash for operating activities in the first
quarter. Also during the quarter, the Company received $43.5 million in proceeds
from the sale of a division and repurchased 399,600 shares of Common stock for
approximately $21 million in cash, leaving approximately 1.7 million shares to
be repurchased under the Company's stock buyback program as of October 31, 1998.
The Company had unused credit commitments of $200 million available for its
general use at October 31, 1998 under a revolving credit agreement for $400
million. The Company also has another revolving credit agreement totaling $400
million which serves as a back-up facility for its commercial paper program.
EURO CONVERSION
On January 1, 1999, the majority of the European Union member countries
will convert to a common currency, the "Euro". The existing national currencies
of the participating countries will continue to be acceptable until January 1,
2002 after which the Euro will be the sole legal tender for the participating
countries. The Company is currently evaluating the economic and operational
impact, including competition, pricing, contracts, taxation and foreign currency
exchange rate risk, of the Euro conversion but does not expect it to have a
material effect on its financial condition or results of operations.
YEAR 2000 READINESS DISCLOSURES
The Company has developed plans and a program to address the potential
impact of the Year 2000 on its business systems, facilities and products which
may include imbedded software. Each of these areas has been inventoried for
potential Year 2000 impact. Detailed implementation plans are in place for the
required modifications or replacements. The process and progress is monitored on
a regular basis by a special corporate task group of management, audit and legal
personnel and reported to management and the Audit and Compliance Committee of
the Board of Directors. Implementation of the required changes to critical
systems, facilities and products is expected to be completed during fiscal year
1999. The Company is in contact with major suppliers and customers and is
developing backup and contingency plans both in relation to internal systems,
facilities and products and third parties. Incremental costs to address and
achieve Year 2000 compliance are expensed as incurred. Such costs are
approximately $12 million through October 31, 1998 and expected to total
approximately $22 million. In addition, the Company has continued its process of
replacing manufacturing and business systems with more efficient and
technologically up to date systems that are also Year 2000 compliant. The
Company believes it is taking reasonable steps to prevent a material adverse
operational or financial impact from a non-compliant situation. The effect, if
any, on the Company's results of operations if the Company, any of its customers
or suppliers is not Year 2000 compliant is not reasonably estimable. This
discussion contains forward-looking statements containing such words as
"expected", "estimated", "believes" and "reasonably estimable". The actual
results may differ if implementation plans, the backup and contingency plans are
not implemented by third parties or the information provided by third parties is
incorrect.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," of the Company's Annual Report on Form
10-K for the fiscal year ended July 31, 1998 for a discussion of its exposure to
market risks. There has been no significant change during the first quarter
ended October 31, 1998.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litton brought suit against Honeywell, Inc. ("Honeywell") for patent
infringement relating to the manufacture of ring laser gyro navigation systems
used in commercial aircraft. In August 1993, the jury rendered a verdict in
favor of Litton which the District Court rejected in January 1995. In July 1996,
the Federal Circuit Court of Appeals reversed the District Court's decision and
reinstated parts of the jury's verdict related to liability in favor of Litton
and ordered a new trial on the amount of damages. In March 1997, the U.S.
Supreme Court vacated the Court of Appeals' ruling and remanded the case to the
Court of Appeals for further consideration. On April 7, 1998, the Court of
Appeals reinstated its finding that the patent was valid, reversed in part, and
ordered a new trial on both liability and damages. A new trial date has not been
set.
Litton also brought suit against Honeywell for illegal monopolization of
the market for inertial reference systems for large commercial air transport,
commuter and business aircraft. In February 1996, a jury rendered a verdict in
favor of Litton. The District Court upheld the jury's verdict on liability, but
declined to enter the jury's damage award on the basis that Litton's damage
study did not disaggregate damages among legal and illegal conduct. A new trial
limited to the issue of the amount of damages resulted in a jury verdict on
December 9, 1998, in the amount of $250 million in favor of Litton. U.S.
District Court Judge Mariana R. Pfaelzer now will review the jury's verdict as
well as post trial motions of the parties and determine whether to enter the
jury's verdict as a judgment. If the jury's verdict is entered by Judge
Pfaelzer, by law the amount is trebled to $750 million plus attorneys' fees.
Honeywell has stated that it intends to appeal the judgment.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
Exhibit 10.1: Board of Directors Resolutions, adopted September 24, 1998,
amending the Litton Industries, Inc. Restoration Plan.
Exhibit 10.2: Board of Directors Resolutions, adopted December 3, 1998,
with respect to non-employee directors' remuneration.
Exhibit 10.3: Litton Industries, Inc. Non-Employee Director Stock Plan.
Exhibit 10.4: Litton Industries, Inc. Non-Employee Director Deferred
Compensation Plan.
Exhibit 10.5: Board of Directors Resolutions, adopted September 24, 1998,
amending the definition of the term "Annual Bonus" in the
Change of Control Employment Agreements between the Company
and certain executive officers and group executives.
Exhibit 10.6: Board of Directors Resolutions, adopted September 24, 1998,
limiting the retirement program to current directors.
Exhibit 27: Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
first quarter ended October 31, 1998.
10
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LITTON INDUSTRIES, INC.
(Registrant)
By /s/ CAROL A. WIESNER
------------------------------------
Carol A. Wiesner
Vice President and Controller
(Principal Financial Officer)
December 15, 1998
11
<PAGE> 1
EXHIBIT 10.1
[LITTON LOGO]
CERTIFICATION OF RESOLUTION
OF THE BOARD OF DIRECTORS OF
LITTON INDUSTRIES, INC.
I, the undersigned, ANA G. RODRIGUEZ, Assistant 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 September 24, 1998, in accordance with the laws of Delaware and the By-laws
of this corporation, and that said resolutions are in full force and effect as
of the date hereof:
RESOLVED, that the Litton Industries, Inc. Restoration Plan (the
"Restoration Plan") be amended to provide that in the event of a change of
control of the Corporation the retirement benefits provided thereunder
become fully vested, that all participants become immediately eligible for
the commencement of payment of such retirement benefits, that such
retirement benefits be protected under a newly adopted Litton Industries,
Inc. Restoration Plan Trust (the "Restoration Plan Trust") and that the
Compensation and Selection Committee of this Board of Directors be given
the authority to decide whether any such retirement benefits should be paid
in the form of a lump sum calculated to be present value equivalent of the
benefits otherwise payable and that the actuarial assumptions used to
determine such lump sum yield an amount sufficient for each participant to
purchase an adequate replacement annuity;
RESOLVED, that the Restoration Plan Trust be adopted to provide for the
payment of Restoration Plan retirement benefits in the event of a change of
control of the Corporation and that the Compensation and Selection
Committee of this Board of Directors be given the authority to decide
whether any such retirement benefits should be paid in the form of a lump
sum; and
RESOLVED FURTHER, that Carol A. Wiesner or Timothy G. Paulson be
individually authorized to approve and adopt such Restoration Plan Trust
and to approve the appropriate lump sum actuarial assumptions on behalf of
the
<PAGE> 2
Corporation and to take such other actions as may, in the judgment of
either such person, be necessary and appropriate to effectuate the purpose
and intent of the foregoing resolutions.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
said corporation at Woodland Hills, California, this 8th day of December, 1998.
[SEAL]
/s/ ANA G. RODRIGUEZ
--------------------
Ana G. Rodriguez
Assistant Secretary
<PAGE> 1
EXHIBIT 10.2
[LITTON LOGO]
CERTIFICATION OF RESOLUTION
OF THE BOARD OF DIRECTORS OF
LITTON INDUSTRIES, INC.
I, the undersigned, ANA G. RODRIGUEZ, Assistant 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
a certain resolution duly adopted by the Executive Committee of the Board of
Directors of said corporation on December 3, 1998, in accordance with the laws
of Delaware and the By-laws of this corporation, and that said resolution is in
full force and effect as of the date hereof:
RESOLVED, that pursuant to Article III, Section 16, of the By-laws of
this corporation, during calendar year 1999, the members of the Board of
Directors of this corporation who are not employees of this corporation
("non-employee 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 1999 non-employee directors
of this corporation shall be paid a fee of $1,500 for attendance at each
Board committee meeting and each non-employee Chairman of the Committee
shall be paid a fee of $2,500 for attendance, with the exception of
attendance at meetings of the Executive Committee, payable following any
such meeting attended;
RESOLVED FURTHER, that during calendar year 1999 a non-employee 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 non-employee
director serving as a member of the Executive Committee (but not as
Chairman thereof) 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;
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;
<PAGE> 2
RESOLVED FURTHER, that in accordance with the terms of the Litton
Industries, Inc. Non-employee Director Stock Plan, stock options for
2,000 shares of the Corporation's Common Stock will be granted to each
non-employee member of the Board on December 4, 1998, the first business
day following the Organization Meeting of the Board, and that the option
price will be determined based on the average of the high and low trading
prices on that day;
RESOLVED FURTHER, that pursuant to the Non-employee Director Deferred
Compensation Plan (the "Plan") adopted by this Board on September 24,
1998, the Board hereby determines that an election by a non-employee
Director to defer annual retainer and meeting fees into shares of the
Company's Common Stock shall include a premium equal to ten percent (10%)
of such annual retainer and meeting fees; and
RESOLVED FURTHER, that pursuant to the Plan, the Board hereby determines
that the number of stock options to be granted pursuant to an election
by a non-employee Director to convert annual retainer and meeting fees
into options to purchase shares of the Company's Common Stock shall be
equal to four times the amount of the Director's annual retainer and
meeting fees divided by the fair market value of a share of common stock
on the day the annual retainer and meeting fees would otherwise have been
payable.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
said corporation at Woodland Hills, California, this 7th day of December, 1998.
[SEAL]
/s/ ANA G. RODRIGUEZ
--------------------------------------
Ana G. Rodriguez
Assistant Secretary
<PAGE> 1
EXHIBIT 10.3
LITTON INDUSTRIES, INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN
The purpose of this Plan is to encourage ownership in the Company by Directors
whose services are considered essential to the Company's continued progress, and
thus to provide them with a further incentive to continue to serve as Directors
of the Company. The Plan is also intended to assist the Company in attracting
and retaining experienced and qualified candidates for membership on the Board
of Directors.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan they shall have the meaning
specified below unless the context clearly indicates to the contrary:
1.1 "AWARD" shall mean an incentive grant of Options, or Options or shares of
Stock issued in respect of compensation to be earned but deferred, or any other
issuance of Options or shares of Stock as the Board may authorize from time to
time at its discretion.
1.2 "BOARD OF DIRECTORS" or "BOARD" shall mean the Board of Directors of the
Company.
1.3 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "COMPANY" shall mean Litton Industries, Inc., a Delaware corporation, and
any successor thereof.
1.5 "DIRECTOR" shall mean a member of the Board of Directors of the Company
who is not an officer or employee of the Company or any of its subsidiaries.
1.6 "DIRECTOR'S FEES" shall mean the fees payable to a Director for services
as a Director and for services on any committee of the Board, including any
amount of any retainer and meeting fees paid to a Director for services as
chairman of the Board.
1.7 "FAIR MARKET VALUE" shall mean (a) the average of the highest and lowest
quoted selling prices of a share of Stock on a particular day, or (b) if there
are no sales on such date, then the average of the highest and lowest prices of
the first preceding day and the first succeeding day on which sales were made.
Such prices shall be those reported in the New York Stock Exchange Composite
Transactions Index, or such other publication as the Board designates.
1.8 "OPTION" shall mean an option granted by the Company to purchase shares of
Stock pursuant to the provisions of this Plan and a Stock Option Agreement
executed pursuant hereto.
<PAGE> 2
1.9 "OPTION PRICE" shall mean the per share purchase price of the Stock subject
to the Option. The Option Price shall be determined by the Board of Directors
at the time of grant but shall not be less than the Fair Market Value of the
Stock on the date of grant.
1.10 "PLAN" shall mean the Litton Industries, Inc. Non-Employee Director Stock
Plan.
1.11 "STOCK" shall mean the common stock, par value $1 per share, of the
Company.
1.12 "STOCK UNITS" shall mean a non-voting unit of measurement which is deemed
for bookkeeping and payment purposes to represent one outstanding share of
Stock.
1.13 "STOCK OPTION AGREEMENT" shall mean the agreement between the Company and
the Director under which the Director receives a grant of Options under this
Plan.
ARTICLE II
PARTICIPATION
-------------
2.1 PARTICIPATION. Each Director shall participate in the Plan upon the
approval of a grant of Options to the Director, or upon an election to defer
Director's Fees into Options or shares of Stock, or upon such other
circumstances approved by the Board of Directors from time to time.
ARTICLE III
SHARES OF STOCK SUBJECT TO THE PLAN
-----------------------------------
3.1 SHARES AVAILABLE. An aggregate number not to exceed 460,000 shares of
Stock (subject to adjustments contemplated by Section 3.2) may be delivered
pursuant to this Plan. Shares of Stock under this Plan may be either authorized
and unissued shares of Stock or treasury Stock.
3.2 ADJUSTMENTS TO AWARDS ONCE ISSUED. In the event that the outstanding shares
of Stock are changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of
merger, consolidation, other reorganization, recapitalization,
reclassification, combination of shares, stock split-up, spin-off, or stock
dividend, the Board shall make such corresponding adjustments, if any, as
deemed appropriate in its sole discretion. The Board may adjust the number and
kind of shares which may be granted under the Plan, and the number, the Option
Price, and the kind of shares or property subject to each outstanding grant.
The adjustment by the Board shall be final, binding and conclusive.
Notwithstanding the foregoing, no fractional shares of Stock shall be issued
under the Plan as a result of such adjustment,but the Board in its discretion
may make a cash payment in lieu of fractional shares.
2
<PAGE> 3
ARTICLE IV
STOCK OPTIONS
-------------
4.1 GRANT. A Director may be granted Options pursuant to this Plan as a form of
incentive payment. Options may also be granted as a result of an election to
convert Director's Fees into Options; the number of Options to be granted as a
result of a deferral election shall be calculated under a formula as determined
by the Board from time to time.
4.2 EXERCISE. Subject to Federal and State statutes then applicable, the terms
and procedures by which any Option may be exercised shall be set forth in the
Director's Stock Option Agreement or in procedures established by the Board.
Options may be exercised only by prior written notice to the Company at its
corporate office accompanied by payment of the full consideration for the
shares as to which they are exercised.
4.3 OPTION PRICE. The Option Price is to be paid (a) by cash, including a
personal check payable to the order of the Company, or (b) by delivering Stock
owned by the Director for at least six months and valued at Fair Market Value as
of the date of delivery (Directors are also permitted to deliver such stock
through attestation or other similar procedures approved by the Board), or (c)
by any combination of (a) and (b).
4.4 STOCK OPTION AGREEMENTS. Each grant of an Option under this Plan shall be
evidenced by a written Stock Option Agreement dated as of the date of the grant
and executed by the Company and the Director. The Stock Option Agreement shall
set forth the terms and conditions of such grant as approved by the Board of
Directors consistent with this Plan.
ARTICLE V
STOCK UNITS AND OTHER DEFERRAL
------------------------------
5.1 STOCK UNITS. Stock Units will be credited to a Director as a result of an
election to have Director's Fees not yet earned, plus any additional premium
which may be determined by the Board from time to time, deferred and converted
into Stock Units valued at Fair Market Value as of the respective dates on
which such Director's Fees would otherwise have been payable to the Director.
5.2 MANNER OF DISTRIBUTION. Any amounts deferred pursuant to Section 5.1 will
be maintained and paid in accordance with the provisions of the Litton
Industries, Inc. Non-Employee Director Deferred Compensation Plan.
ARTICLE VI
PLAN ADMINISTRATION
-------------------
6.1 ADMINISTRATION. Except as otherwise specifically provided herein, the Plan,
all Stock Option Agreements, and any other distribution of Stock authorized
by the Board, shall be
3
<PAGE> 4
administered by the Board. The Board shall have the full authority and absolute
sole discretion:
(a) to determine, consistent with the provisions of this Plan, which of the
Directors shall be granted Options and the form and term of such
Options; the timing of such Option grants; the number of shares subject
to each Award and the Option Price, subject to Section 1.9 hereof,
covered by each Option;
(b) to determine the terms and provisions of each respective Stock Option
Agreement, which need not be identical;
(c) to make all other determinations and take all other actions deemed
necessary or advisable for the proper administration of the Plan, or
otherwise contemplated by the Plan;
(d) to adopt, alter, and repeal such rules, guidelines, and practices for
administration of the Plan and for its own acts and proceedings as it
shall deem advisable;
(e) to construe and interpret the terms and provisions of the Plan and any
Award (including the related Stock Option Agreements);
(f) to decide all disputes arising in connection with the Plan; and
(g) to otherwise supervise the administration of the Plan.
6.2. DELEGATION. The Board may delegate ministerial, non-discretionary
functions to individuals who are officers or employes of the Company.
6.3. LIMITATION ON LIABILITY. Neither the Company nor any member of the Board,
nor any other person participating in any determination of any question under
this Plan, or in the interpretation, administration or application of this
Plan, shall have any liability to any party for any action taken (or not taken)
in good faith under this Plan or for the failure of an Award (or action or
payment in respect of any Award) to satisfy Code requirements for realization
of intended tax consequences, to qualify for exemption or relief under federal
securities laws and regulations promulgated thereunder, or to comply with any
other law, compliance with which is not required on the part of the Company.
4
<PAGE> 5
ARTICLE VII
AMENDMENTS AND TERMINATION
7.1 AMENDMENTS. The Board of Directors shall have the right to amend this Plan
or any Stock Option Agreement in whole or in part from time to time or may at
any time suspend or terminate this Plan or any Stock Option Agreement; provided,
however, that no amendment or termination shall cancel or otherwise adversely
affect in any way, without a Director's written consent, any Director's rights
under this Plan as of the date of such amendment or termination; and provided
further, that no amendment shall be made without the approval of the
shareholders of the Company which increases the maximum number of shares of
Stock which may be issued under the Plan or changes the price at which shares of
Stock may be purchased. Any amendments authorized hereby shall be stated in an
instrument in writing, and all Directors shall be bound by such amendment upon
receipt of notice of the amendment.
7.2 TERMINATION. The Plan shall terminate on December 31, 2008.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 LIMITATION ON DIRECTOR'S RIGHTS. Participation in this Plan shall not give
any Director the right to continue to serve as a member of the Board or any
rights or interests other than as herein provided. No Director shall have any
right to any payment or benefit hereunder except to the extent provided in this
Plan.
8.2 BENEFICIARIES.
(a) BENEFICIARY DESIGNATION. Subject to applicable laws (including any
applicable community property and probate laws), each Director may
designate in writing the beneficiary that the Director chooses to
receive any payments that become payable after the Director's death. A
Director's beneficiary designation shall be made on form(s) provided
by, and in accordance with procedures established by, the Company and
may be changed by the Director at any time before the Director's
death.
(b) DEFINITION OF BENEFICIARY. A Director's beneficiary or beneficiaries
shall be the person(s), including a revocable living trust established
by and for the benefit of the Director alone, or for the benefit of
the Director and one or more immediate family members, validly
designated by the Director or, in the absence of a valid designation,
entitled by will or the laws of descent and distribution to receive
the amounts otherwise payable to the Director under this Plan in the
event of the Director's death.
8.3 TRANSFERABILITY OF OPTIONS. Each Option granted pursuant to this Plan shall,
during a Director's lifetime, be exercisable only by the Director or his or her
permitted
5
<PAGE> 6
transferees, and neither the Option nor any right thereunder shall be
transferable by the Director, by operation of law or otherwise, other than as
may be provided in the Director's Stock Option Agreement evidencing such Option
or as may be provided by will or the laws of descent and distribution. Except as
may be provided in the Stock Option Agreement evidencing an Option, no Option
shall be pledged or hypothecated (by operation of law or otherwise) or subject
to execution, attachment or similar processes.
8.4 GOVERNING LAW; SEVERABILITY. The validity of this Plan or any of its
provisions shall be construed, administered and governed in all respects under
and by the laws of the State of Delaware. If any provisions of this Plan shall
be held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective.
8.5 COMPLIANCE WITH LAWS. This Plan and the offer, issuance and delivery of
shares of Stock are subject to compliance with all applicable Federal and State
laws, rules and regulations (including but not limited to State and Federal
reporting, registration, insider trading and other securities laws) and to such
approvals by any listing agency or any regulatory or governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring the securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements.
8.6 PLAN BINDING ON SUCCESSORS. This Plan shall be binding upon the successors
and assigns of the Company.
8.7 HEADINGS NOT PART OF PLAN. Headings and subheadings in this Plan are
inserted for reference only and are not to be considered in the construction of
this Plan.
6
<PAGE> 1
EXHIBIT 10.4
LITTON INDUSTRIES, INC.
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN
PURPOSE
The purpose of this Plan is to give each non-employee Director of Litton
Industries, Inc., the opportunity to be compensated for service as a Director on
a deferred basis. The Plan is also intended to establish a method of paying
Director's compensation which will aid the Company in attracting and retaining,
as members of the Board, persons whose abilities, experience, and judgment can
contribute to the success of the Company. In addition, by providing Directors
with the opportunity to receive additional value based on the performance of the
Company Stock, the Plan is intended to more closely align the economic interests
of Directors with the interest of stockholders generally by encouraging
deferrals payable in Stock.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Plan, they shall have the meaning
specified below, unless the context clearly indicates to the contrary:
1.1 "ACCOUNT" shall mean one or more of a Director's Cash Account(s) or Stock
Unit Account(s), as the context requires.
1.2 "APPLICABLE PERCENTAGE" shall mean the percentage of Eligible Compensation
subject to deferral or payment in Shares.
1.3 "AWARD DATE" shall mean, in the case of Cash Account deferrals, each date
on which cash would otherwise have been paid; in the case of Stock Unit Account
deferrals, the last day of each calendar quarter.
1.4 "BOARD OF DIRECTORS" or "BOARD" shall mean the Board of Directors of the
Company.
1.5 "CASH ACCOUNT" shall mean the bookkeeping account maintained by the Company
on behalf of a Director who elects to defer Eligible Compensation in cash.
1.6 "CHANGE OF CONTROL" shall mean the happening of any of the following
events:
(a) an acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d) of the Securities Exchange
Act of 1934 as amended from time to time, and any successor
thereto, [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 (1) the then
outstanding shares of common stock of the Company (the
"Outstanding
<PAGE> 2
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"); excluding, however, the following acquisitions of
Outstanding Company Common Stock and Outstanding Company Voting
Securities: (i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or (iv) any acquisition
by any Person pursuant to a transaction which complies with clauses
(1), (2) and (3) of subsection (c) hereof; or
(b) individuals who, as of the Effective 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 who
becomes a member of the Board subsequent to the Effective Date, whose
election, or nomination for election by the shareholders, was approved
by a vote of at least a majority of directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board; but, provided further, that any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board; or
(c) consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of its assets ("Business Combination"); excluding, however, such a
Business Combination pursuant to which (1) all or substantially all of
the individuals and entities who are the beneficial owners of both the
Outstanding Company Common Stock and the Outstanding Company Voting
Securities immediately prior to such Business Combination own,
directly or indirectly, more than 60% of both the 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, 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 its
assets either directly or indirectly 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 (other than any employee
benefit plan (or related trust) sponsored or maintained by the Company
or such corporation resulting from such Business Combination) will
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<PAGE> 3
beneficially own, directly or indirectly, 30% or more of either the
outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the
outstanding voting securities of such corporation entitled to vote
generally in the election of directors, except to the extent that such
ownership existed with respect to the Company 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) the approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
1.7 "COMPANY" shall mean Litton Industries, Inc., a Delaware corporation and
its successors (other than a successor as a result of a Business Combination
that would constitute a Change of Control under Section 1.6 (c)).
1.8 "DIRECTOR" or "DIRECTORS" shall mean, at any given time, a member of the
Board of Directors who is eligible to receive compensation in the form of
Eligible Compensation and who is not, at that time, an officer or employee of
the Company or any of its subsidiaries.
1.9 "ELIGIBLE COMPENSATION" shall mean retainer and meeting fees for services
as a Director.
1.10 "EFFECTIVE DATE" shall mean October 22, 1998.
1.11 "FAIR MARKET VALUE" shall mean (a) the average of the highest and lowest
quoted selling prices of a share of Stock on a particular day, or (b) if there
are no sales on such date, then the average of the highest and lowest prices of
the first preceding day and the first succeeding day on which sales were made.
Such prices shall be those reported in the New York Stock Exchange Composite
Transactions Index, or such other publication as the Board designates.
1.12 "PLAN" shall mean the Litton Industries, Inc. Non-Employee Director
Deferred Compensation Plan.
1.13 "STOCK" shall mean the common stock, par value $1 per share, of the
Company.
1.14 "STOCK UNIT" shall mean a non-voting unit of measurement which is deemed
for bookkeeping and payment purposes to represent one outstanding share of
Stock.
1.15 "YEAR" shall mean each calendar year during the term of this Plan,
commencing with the year 1999.
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<PAGE> 4
ARTICLE II
PARTICIPATION
2.1 PARTICIPATION. Each Director may elect to defer, under and subject to
Section 2.2 and 2.3 of this Plan, his or her Eligible Compensation for any Year.
2.2 TIMING AND TYPES OF ELECTIONS. On or before the December 30 immediately
preceding each Year (or, in the case of a person who first becomes a Director
during the Year, within 30 days after becoming a Director), each Director may
make an irrevocable election, subject to Section 2.3, to (a) receive his or her
Eligible Compensation for the Year in Stock Options, or (b) defer:
(1) in a Cash Account the Eligible Compensation for services to be
rendered by the Director during the next Year; or
(2) in a Stock Unit Account the Eligible Compensation for services to be
rendered during the next Year.
2.3 ELECTION AMOUNTS. The portion of the Eligible Compensation subject to
deferral or payment in Stock Options shall be 100%. All elections shall be in
writing on forms provided by the Company. Deferral elections are not continuous
from year to year, and are only effective for the calendar year indicated on
the written election form.
ARTICLE III
DEFERRAL ACCOUNTS
3.4 CASH ACCOUNT. If a Director has made a cash election under Section
2.2(b)(1), the Company shall establish and maintain a Cash Account for the
Director under this Plan, which Account shall be on the books of the Company. A
Director's Cash Account shall be credited as follows:
(a) as of the date the Eligible Compensation would have been otherwise
payable, the Company shall credit the Director's Cash Account with an
amount equal to the Applicable Percentage of the Eligible
Compensation; and
(b) as of the last day of each calendar quarter, the Director's Cash
Account shall be credited to reflect investment earnings for such
calendar quarter, calculated at an interest rate equal to the prime
rate as reported by Morgan Guaranty Trust Co., on the first business
day of such calendar quarter.
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<PAGE> 5
3.2 STOCK UNIT ACCOUNT. If a Director has made a Stock Unit election under
Section 2.2(b)(2), the Company shall credit the Director's Stock Unit Account,
as of the date the Eligible Compensation would have been otherwise payable, with
a number of Stock Units determined by dividing an amount which is equal to the
Applicable Percentage of 110% of the Director's Eligible Compensation by the
Fair Market Value of a share of Stock as of the Award Date.
3.3 LIMITATIONS ON RIGHTS ASSOCIATED WITH STOCK UNITS. A Director's Stock Unit
Account shall be an account on the books of the Company. The Stock Units
credited to a Director's Stock Unit Account shall be used solely as a device for
the determination of the number of shares of Stock to be eventually distributed
to the Director in accordance with this Plan. The Stock Units shall not be
treated as property or as a trust fund of any kind. No Director shall be
entitled to any voting or other stockholder rights with respect to Stock Units
credited under this Plan.
3.4 ACCOUNT BALANCE AS MEASURE OF ELIGIBLE COMPENSATION. The Eligible
Compensation payable to a Director (or the Director's Beneficiary) shall be
measured by, and shall in no event exceed, the sum of the amounts credited to
the Director's Account.
ARTICLE IV
STOCK OPTIONS
4.1 STOCK OPTIONS. A Director may, in lieu of receiving Eligible Compensation
in the form of cash, elect to receive stock options to purchase shares of the
Company's Stock. The number of options to be granted as a result of such an
election shall be calculated under a formula as determined by the Board from
time to time. The options resulting from such election shall be granted under,
and subject to the provisions of, the Litton Industries, Inc. Non-Employee
Director Stock Plan. Such election shall be in writing on forms provided by the
Company.
ARTICLE V
DISTRIBUTION OF CASH OR SHARES
5.1 MANNER OF DISTRIBUTION OF ACCOUNT. The cash or shares of Stock
respectively payable under this Plan in respect of Cash Accounts or Stock Unit
Accounts shall be distributed to the Director (or, in the event of his or her
death, the Director's Beneficiary) in such manner as elected by the Director and
set forth in the Director's written deferral election form.
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<PAGE> 6
(a) CHANGE IN MANNER OF DISTRIBUTION OF CASH ACCOUNTS OR STOCK UNIT
ACCOUNTS. A director may change the manner of any distribution election
with respect to amounts credited under a Cash Account or Stock Unit
Account by filing a written election with the Board on a form provided
by the Company; provided however, that no such election shall be
effective until 12 months after such election is filed with the
Company, and no such election shall be effective with respect to any
Account after benefits with respect to such Account have commenced.
(b) FORM OF DISTRIBUTION OF STOCK UNIT ACCOUNTS. Stock Units credited to a
Director's Stock Unit Account shall be distributed in an equivalent
whole number of shares of Stock. Any fractional share interests shall
be accumulated and paid in cash with the last distribution.
5.2 COMMENCEMENT OF PAYMENTS. Subject to the provisions of Section 5.6 and
except as provided in Section 5.4, the payment of Eligible Compensation to a
Director shall commence in January of the first calendar year following the
year in which the Director ceases to be a Director, whether due to resignation,
retirement, disability, death or otherwise. Installment payments of cash
deferrals or Stock deferrals shall continue to be made in January of each
succeeding year until all installments have been paid.
5.3 DEATH BENEFITS. Subject to the provisions of Section 5.6, in the event that
a Director dies before payment of the Director's Eligible Compensation has
commenced or has been completed, the balance(s) of the Director's Account(s)
shall be distributed to the Director's Beneficiary commencing in the January
following the date of the Director's death in accordance with the manner of
distribution elected by the Director for payments during the Director's
lifetime. However, upon good cause shown by a Beneficiary or personal
representative of the Director, the Board, in its sole discretion, may reject a
Director's installment election for a cash deferral and instead cause the
Director's death benefits to be paid in a lump sum.
5.4 EMERGENCY WITHDRAWALS. In the event of an unforeseeable emergency prior to
the commencement of distribution or after the commencement of installment
payments, the Board may approve a distribution to a Director (or Beneficiary
after the death of a Director) of the part of the Director's Account balance
that is reasonably needed to satisfy the emergency need. An emergency
withdrawal will be approved only in a circumstance of severe financial hardship
to the Director (or Beneficiary after the death of the Director) resulting from
a sudden and unexpected illness or accident of the Director (or Beneficiary, as
applicable) or of a dependent of the Director (or Beneficiary, as applicable),
loss of property due to casualty, or other similar extraordinary or
unforeseeable circumstance arising from events beyond the control of the
Director (or Beneficiary, as applicable). The investment earnings credited to
the Director's Account shall be determined as if the withdrawal had been
debited from the Director's Account on the first day of the month in which the
withdrawal occurs.
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<PAGE> 7
5.5 RESPONSIBILITY FOR TAXES. The Directors and their Beneficiaries will be
liable for payment of any and all income or other taxes imposed on Eligible
Compensation payable under this Plan.
5.6 CHANGE OF CONTROL. In the event a Change of Control occurs, each Director's
Account shall be immediately due and payable in a lump sum to the Director or to
the Director's Beneficiary or estate.
ARTICLE VI
ADMINISTRATION, AMENDMENT AND TERMINATION
6.1 ADMINISTRATION BY THE BOARD. This Plan shall be interpreted and administered
by the Compensation and Selection Committee of the Board of Directors. The
Board's determinations made pursuant to this Plan shall be final and binding on
all parties.
6.2 AMENDMENT AND TERMINATION. This Plan may be amended, modified, or terminated
by the Board at any time, except that no such action shall (without the consent
of affected Directors or, if appropriate, their Beneficiaries or personal
representatives) adversely affect the rights of Directors or Beneficiaries with
respect to compensation earned and deferred under this Plan prior to the date of
such amendment, modification, or termination.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 LIMITATION ON DIRECTOR'S RIGHTS. Participation in this Plan shall not give
any Director the right to continue to serve as a member of the Board or any
rights or interests other than as herein provided. No Director shall have any
right to any payment or benefit hereunder except to the extent provided in this
Plan. This Plan shall create only a contractual obligation on the part of the
Company as to such amounts and shall not be construed as creating a trust. The
Plan, in and of itself, has no assets. Directors shall have only the rights of
general unsecured creditors of the Company with respect to amounts credited to
or payable from their Accounts.
7.2 BENEFICIARIES.
(a) BENEFICIARY DESIGNATION. Subject to applicable laws (including any
applicable community property and probate laws), each Director may
designate in writing the Beneficiary that the Director chooses to
receive any payments that become payable after the Director's death. A
Director's Beneficiary designation shall be made on forms provided and
in accordance with procedures established by the Company and may be
changed by the Director at any time before the Director's death.
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<PAGE> 8
(b) DEFINITION OF BENEFICIARY. A Director's "Beneficiary" or
"Beneficiaries" shall be the person(s), including a revocable living
trust established by and for the benefit of the Director alone or for
the benefit of the Director and one or more immediate family members,
validly designated by the Director or, in the absence of a valid
designation, entitled by will or the laws of descent and distribution
to receive the amounts otherwise payable to the Director under this
Plan in the event of the Director's death.
7.3 BENEFITS NOT TRANSFERABLE; OBLIGATIONS BINDING UPON SUCCESSORS. Benefits of
a Director under this Plan shall not be assignable or transferable and any
purported transfer, assignment, pledge or other encumbrance or attachment of
any payments or benefits under this Plan, or any interest thereon, other than
pursuant to Section 7.2, shall not be permitted or recognized. Obligations of
the Company under this Plan shall be binding upon successors of the Company.
7.4 GOVERNING LAW; SEVERABILITY. The validity of this Plan or any of its
provisions shall be construed, administered, and governed in all respects under
and by the laws of the State of Delaware. If any provisions of this instrument
shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective.
7.5 HEADINGS NOT PART OF PLAN. Headings and subheadings in this Plan are
inserted for reference only and are not to be considered in the construction of
this Plan.
7.6 CONSENT TO PLAN TERMS. By electing to participate in this Plan, a Director
shall be deemed conclusively to have accepted and consented to all of the terms
of this Plan and to all actions and decisions of the Company and/or Board. Such
terms and consent shall also apply to and be binding upon each Director's
Beneficiary or Beneficiaries, personal representative(s), and other successors
in interest.
-8-
<PAGE> 1
EXHIBIT 10.5
[LITTON LOGO]
CERTIFICATION OF
RESOLUTIONS
OF THE BOARD OF DIRECTORS
OF
LITTON INDUSTRIES, INC.
I, the undersigned, ANA G. RODRIGUEZ, Assistant 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 Executive Committee of the
Board of Directors of said corporation on September 24, 1998, in accordance
with the laws of Delaware and the By-laws of this corporation, and that said
resolutions are in full force and effect as of the date hereof:
RESOLVED, that this Board of Directors hereby amends
Subsection 4(b)(ii) of the existing Change of Control
Employment Agreements to provide that the term "Annual
Bonus" shall be the highest bonus award of any type,
including, but not limited to, any sign-on bonus during the
last three full fiscal years prior to the effective date of the
change of control period, and hereby ratifies and approves
all other aspects of the existing Change of Control
Employment Agreements currently in effect and previously
granted to certain Executive Officers and Group Executives
of the Corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name at Woodland Hills,
California, this 14th day of December, 1998.
/s/ ANA G. RODRIGUEZ
-----------------------------
Ana G. Rodriguez
Assistant Secretary
<PAGE> 1
EXHIBIT 10.6
[LITTON LOGO]
CERTIFICATION OF RESOLUTIONS
OF THE BOARD OF DIRECTORS OF
LITTON INDUSTRIES, INC.
I, the undersigned JEANETTE M. THOMAS, Vice President and 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 September 24, 1998, 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 the following resolutions shall amend and supersede those
resolutions pertaining to the retirement of Directors and Advisory
Directors adopted by the Board of Directors on October 16, 1991;
RESOLVED FURTHER, that the mandatory retirement date of each Director or
Advisory Director be and it is hereby established as of the date of the
next Annual Meeting of Shareholders following his or her 72nd birthday;
provided, however, that a Director or Advisory Director may retire at any
time after attaining age 65;
RESOLVED FURTHER, that each current non-employee Director, upon retirement
after attaining age 65, or death while a Director after attaining age 65,
shall be entitled in subsequent years to an annual fee in the same amount
as the annual fee paid to active members of the Board of Directors that is
in effect from time to time (but in no event less than the annual fee
which was in effect on the date of the next Annual Meeting of Shareholders
following either the retirement date of the Director or the date of the
Director's death, if earlier) said annual fee shall be paid to the
Director, or the surviving spouse, for the shorter period of ten years or
the number of years such Director served as a member of the Board of
Directors, provided, however, that in no event shall payment continue
beyond the death of the surviving spouse;
RESOLVED FURTHER, that in the event of the resignation, removal or
failure to be re-elected of a current non-employee Director, prior to the
date of his or her 65th birthday, and in the event such resignation,
removal or failure shall occur in connection with, and as a result of, a
"change of control", such Director, or the surviving spouse, shall be
paid such annual fee as was in effect for active members of the Board of
Directors immediately prior to said change in control, commencing upon
such Director's resignation, removal, or failure to be re-elected a
Director under the circumstances set forth above in this resolution and
continuing for the period of time set forth in the preceding resolution.
<PAGE> 2
RESOLVED FURTHER, that the current employee Directors and all future
Directors and Advisory Directors of the Board shall not receive retirement
benefits for their service on the Board of Directors.
IN WITNESS WHEREOF, I have here unto subscribed my name and affixed the seal of
said corporation at Woodland Hills, California, this 4th day of November, 1998.
[SEAL] /s/ Jeanette M. Thomas
------------------------------
Jeanette M. Thomas
Vice President and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1998 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 40,402
<SECURITIES> 15,750
<RECEIVABLES> 878,515
<ALLOWANCES> 0
<INVENTORY> 638,856
<CURRENT-ASSETS> 2,016,121
<PP&E> 1,535,938
<DEPRECIATION> (931,212)
<TOTAL-ASSETS> 4,116,281
<CURRENT-LIABILITIES> 1,794,990
<BONDS> 778,253
0
2,053
<COMMON> 45,432
<OTHER-SE> 1,173,773
<TOTAL-LIABILITY-AND-EQUITY> 4,116,281
<SALES> 1,207,538
<TOTAL-REVENUES> 1,207,538
<CGS> 945,209
<TOTAL-COSTS> 945,209
<OTHER-EXPENSES> 39,838
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,041
<INCOME-PRETAX> 78,715
<INCOME-TAX> 31,486
<INCOME-CONTINUING> 47,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,229
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.01
</TABLE>
