<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
</TABLE>
<TABLE>
<S> <C>
LITTON INDUSTRIES, INC.
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
[LOGO]
October 29, 1999
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders, which
will be held at 11:00 a.m., Friday, December 3, 1999, at The Ritz Carlton,
Marina del Rey, California. At the meeting, we will present a brief report on
Litton's 1999 business results and outlook for the future.
Whether or not you plan to attend, you can be sure your shares are represented
at the meeting by promptly completing, signing, dating and returning your proxy
in the enclosed envelope.
Very truly yours,
[LOGO]
Michael R. Brown
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
<PAGE>
[LOGO]
October 29, 1999
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Litton Industries, Inc. ("Litton"), will
be held on December 3, 1999, at 11:00 a.m., at The Ritz Carlton, 4375 Admiralty
Way, Marina del Rey, California, 90292.
Shareholders at the close of business on October 15, 1999, will be entitled to
vote at the Annual Meeting. The items on the agenda are as follows:
1. Election of directors;
2. Ratification of the appointment of Deloitte & Touche LLP as independent
auditors;
3. Shareholder proposal regarding Shareholder Rights Plans; and
4. Other business as may properly come before the Annual Meeting or any
adjournment thereof.
A list of shareholders entitled to vote at the Annual Meeting shall be open to
the examination of any shareholder at the meeting, and for a period of ten days
prior to the date of the meeting, for any purpose relevant to the meeting,
during ordinary business hours at Litton's Corporate Office at 21240 Burbank
Blvd., Woodland Hills, California, 91367.
Holders of a majority of Litton's outstanding voting shares must be present
either in person or by proxy in order for the meeting to be held. WHETHER YOU
EXPECT TO ATTEND THE ANNUAL MEETING OR NOT, YOUR VOTE IS IMPORTANT. ACCORDINGLY,
YOU ARE REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE. If you plan to attend the meeting and wish to vote your
shares in person, you may do so at any time before the proxy is voted.
/s/ Jeanette M. Thomas
Jeanette M. Thomas
VICE PRESIDENT AND CORPORATE SECRETARY
1
<PAGE>
LITTON INDUSTRIES, INC.
21240 BURBANK BLVD.
WOODLAND HILLS, CA 91367-6675
PROXY STATEMENT
GENERAL INFORMATION
The Board of Directors of Litton Industries, Inc. ("Litton") is soliciting
proxies to be voted at the Annual Meeting of Shareholders to be held on December
3, 1999, and at any adjournment thereof. This Proxy Statement is being mailed to
shareholders beginning on or about October 29, 1999, accompanied by Litton's
annual report to shareholders for the fiscal year ended July 31, 1999.
OUTSTANDING SECURITIES
At the close of business on October 15, 1999, the record date, there were
45,550,873 shares of $1 par value Common Stock and 410,643 shares of Series B $2
Cumulative Preferred Stock, par value $5, outstanding and entitled to vote. Each
share of Common Stock or Series B Preferred Stock entitles the holder to one
vote.
VOTING
A proxy is enclosed for use at the meeting. Unless other instructions are
indicated on the proxy, all shares represented by valid proxies received from
this solicitation (and not revoked before they are voted) will be voted FOR
election of the nine nominees for directors; FOR ratification of the appointment
of Deloitte & Touche LLP as independent auditors; and AGAINST the shareholder
proposal regarding Shareholder Rights Plans.
The proxy may be revoked by the shareholder at any time before it is voted by
giving written notice to the Corporate Secretary. A shareholder attending the
meeting in person may revoke the proxy by giving notice of revocation to the
inspector of election at the meeting or voting at the meeting. If any other
matters are properly brought before the meeting, the enclosed proxy card gives
discretionary authority to the persons named on the card to vote the shares in
their best judgment. At this time, Litton does not know of any other such
business.
The holders of a majority of the issued and outstanding shares of Common Stock
represented in person or by proxy at the Annual Meeting will constitute a quorum
for the transaction of business at the meeting. With respect to the election of
directors, shareholders may vote in favor of all nominees, or withhold their
votes as to all nominees or specific nominees. There is no box to "abstain" but
checking the box on the enclosed proxy card that withholds authority to vote for
a nominee is the equivalent of abstaining. With respect to the two other items
relating to the independent auditors and the shareholder proposal, shareholders
may vote in favor of the proposals, or against the proposals, or abstain from
voting. The affirmative vote of the majority of shares entitled to vote and
present in person or by proxy at the Annual Meeting is required for approval of
the items. A shareholder who signs and submits a ballot or proxy is "present";
so an abstention and broker non-votes will have the same effect as a vote
against the proposals.
2
<PAGE>
ITEM ONE: ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL CANDIDATES.
Nine directors will be elected at the Annual Meeting to hold office for one year
and until their successors have been elected and qualified. If any nominee
becomes unavailable for election to the Board of Directors, an event which is
not anticipated, the persons named as proxies have full discretion and authority
to vote or refrain from voting for any other nominee in accordance with their
judgment. All of the nominees are presently serving on the Board of Directors.
The following information concerning the principal occupation, other
affiliations, and past business experience was furnished by the nominees for
directors.
<TABLE>
<S> <C> <C> <C>
ALTON J. BRANN MICHAEL R. BROWN
[PHOTO1] - Chairman and Chief [PHOTO1] - Chairman, President and
Executive Officer of Chief Executive Officer of
UNOVA, Inc. Litton Industries, Inc.
- Age 57 - Age 58
- Director since 1990 - Director since 1995
Background: UNOVA, Inc., is a global solutions
company providing information and systems Background: Joined Litton in 1968 and has been
integration technology for the industrial Chairman since March 1999, Chief Executive
markets. Former Litton Chairman of the Board Officer since March 1998, and President since
(1994-1995), President (1990-1994) and Chief 1995. Chief Operating Officer (1995-1998);
Executive Officer (1992-1994). Director of Baker Executive Vice President (1995); Group
Hughes, Inc. Director of the Los Angeles World Executive--Information Systems (1995-1997);
Affairs Council. Chairman of the Board of Senior Vice President (1992-1995); Group
Governors of Town Hall of Los Angeles. Member of Executive--Electronic Warfare Systems
the Board of the U.S.- Russia Business Council, (1989-1995). Director, Town Hall Los Angeles and
the Board of Overseers of the Executive Council the Los Angeles World Affairs Council.
on Foreign Diplomacy, the President's Cabinet of
California Polytechnic State University, the
Board of the Los Angeles Business Advisors, the
Institute of Electrical and Electronics
Engineers, the Optical Society of America, and
the Institute of Navigation. Trustee of the
Manufacturers Alliance. Chairman of the Board of
Directors of the Los Angeles Area Council of the
Boy Scouts of America.
</TABLE>
<TABLE>
<S> <C> <C> <C>
JOSEPH T. CASEY CAROL B. HALLETT
[PHOTO1] - Retired Vice Chairman and [PHOTO1] - President and Chief
Chief Financial Officer of Executive Officer of Air
Western Atlas Inc. Transport Association of
- Age 68 America
- Director since 1981 - Age 62
- Director since 1993
Background: Former Western Atlas Inc. Vice Background: Senior Government Relations Advisor,
Chairman and Chief Financial Officer (1994-1996). Collier, Shannon, Rill & Scott (1993-1995).
Former Litton Vice Chairman and Chief Financial Commissioner of United States Customs
Officer (1988-1994). Director, Baker (1989-1993). U.S. Ambassador to the Commonwealth
Hughes, Inc., UNOVA, Inc., and Pressure of the Bahamas (1986-1989). Director, Fleming
Systems, Inc. Trustee, Claremont McKenna College, Companies, Inc., Mutual of Omaha Companies, and
RAND Center for Russia and Urasia, and Don Bosco the American Association of Exporters and
Technical Institute. Importers. Member, President's Cabinet of
California Polytechnic State University. Trustee,
Junior Statesmen of America.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C>
ORION L. HOCH DAVID E. JEREMIAH
[PHOTO1] - Chairman Emeritus of [PHOTO1] - President of Technology
Litton Industries, Inc. Strategies & Alliances
- Age 70 - Age 65
- Director since 1982 - Director since 1994
Background: Technology Strategies and Alliances
Background: Former Litton Chairman of the Board is a consulting firm engaged in strategic
(1988-1994), President (1982-1988) and Chief planning for telecommunications and defense
Executive Officer (1986-1992). Director, industries. Retired Admiral, U.S. Navy (1994).
UNOVA, Inc., Bessemer Trust Companies, and The Vice Chairman, Joint Chiefs of Staff (1990-1994).
Bessemer Group, Inc. Trustee, Carnegie Mellon Commander-in-Chief, U.S. Pacific Fleet
University. (1987-1990). Director, Alliant Techsystems Inc.,
Geobiotics, Inc., Wang Government
Services, Inc., and National Committee on
U.S.-China Relations. Board of Visitors, Northrop
Grumman Corporation (Melbourne Division) and
Board of Advisors, Jewish Institute for National
Security Affairs. Member, ManTech International
Advisory Board and the National Defense Policy
Board.
</TABLE>
<TABLE>
<S> <C> <C> <C>
JOHN M. LEONIS WILLIAM P. SOMMERS
[PHOTO1] - Chairman Emeritus of [PHOTO1] - Retired President and
Litton Industries, Inc. Chief Executive Officer of
- Age 66 SRI International
- Director since 1994 - Age 66
- Director since 1994
Background: Former Director and President, Booz- Background: Former Executive Vice President,
Allen & Hamilton's Technology Management Group, Iameter, Inc. (1993-1994); Former Director and
and Former Executive Vice President of President, Booz-Allen & Hamilton's Technology
Iameter, Inc. Director of Evergreen Management Group (1963-1993); director, Evergreen
Solar, Inc., Pressure Systems, Inc., and Solar, Inc., Pressure Systems, Inc., SRI
SRI-Consulting. Trustee, Scudder/ Kemper Mutual Consulting. Trustee, Scudder/Kemper Mutual Funds.
Funds. Member of the The Major Gifts Committee of Members, Guckenheimer Enterprises, Inc. Advisory
the University of Michigan. Board and Executive Committee of World Affairs
Council, Jacksonville.
</TABLE>
<TABLE>
<S> <C> <C> <C>
C. B. THORNTON, JR.
[PHOTO1] - President of Thornton
Corporation
- Age 57
- Director since 1981
Background: Thornton Corporation is engaged in a
variety of private investments. Former managing
partner of T Lazy S Ranch in Nevada (1974-1982).
Former executive of Cessna Aircraft Company.
Former consultant with McKinsey & Company.
Member, Society of Experimental Test Pilots.
Trustee, Harvard-Westlake School. Overseer,
Hoover Institution and member of the Visiting
Committee of the Harvard Business School.
</TABLE>
4
<PAGE>
GENERAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD
The Board has established four standing committees to assist it in carrying out
its duties: the Executive Committee, the Audit and Compliance Committee, the
Compensation and Selection Committee, and the Nominating Committee.
The Executive Committee consists of Alton J. Brann (Chairman), Michael R. Brown,
Joseph T. Casey, and John M. Leonis. The Executive Committee exercises all
powers of the Board of Directors when the full Board is not in session and
supervises the management and business of Litton.
The Audit and Compliance Committee consists of C.B. Thornton, Jr. (Chairman),
Joseph T. Casey, Carol B. Hallett, and William P. Sommers. The Audit and
Compliance Committee is responsible for the oversight of Litton's accounting
policies and compliance functions. It reviews and recommends outside auditors
and determines the scope of the audit; it reviews the activities of Litton's
internal auditors; and it reviews and monitors Litton's ethics and compliance
programs.
The Compensation and Selection Committee consists of David E. Jeremiah
(Chairman), Carol B. Hallett, C.B. Thornton, Jr., and William P. Sommers. The
Compensation and Selection Committee has responsibility for the design,
implementation, and administration of Litton's executive compensation and
benefits program.
The Nominating Committee consists of Carol B. Hallett (Chairman), David E.
Jeremiah, Alton J. Brann, and Michael R. Brown. The Nominating Committee reviews
the qualifications of all Board of Directors candidates and recommends possible
candidates to fill vacancies on the Board of Directors.
BOARD AND COMMITTEE MEETINGS
During fiscal year 1999, the Board of Directors of Litton held 11 meetings. The
average attendance at Board meetings was 98%, and attendance at committee
meetings was 96%.
- The Executive Committee held one meeting in fiscal year 1999, and acted 13
times by unanimous written consent. Actions taken by the Executive
Committee are subsequently ratified by the full Board of Directors.
- The Audit and Compliance Committee held five meetings in fiscal year 1999.
- The Compensation and Selection Committee held seven meetings in fiscal
year 1999.
- The Nominating Committee held one meeting in fiscal year 1999.
DIRECTOR COMPENSATION
Directors who are employees of Litton are not paid any fee or additional
remuneration for services as members of the Board of Directors or any of its
Committees.
ANNUAL FEES FOR NON-EMPLOYEE DIRECTORS
Non-employee directors receive the following compensation:
- A retainer of $27,500, payable in equal quarterly installments;
- Board and Committee meeting attendance fees of $1,500 per meeting ($2,500
per meeting for the Chairman of the Committee);
- Additional annual fee of $12,000 for members of the Executive Committee
($15,000 for the Chairman of the Executive Committee).
5
<PAGE>
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Under the Litton Industries, Inc. Non-Employee Director Stock Plan, approved by
the shareholders on December 3, 1998, non-employee directors may defer annual
retainers and meeting fees (hereafter "Compensation") in the form of shares of
Common Stock.
In addition, non-employee directors may defer Compensation in the form of cash
under a deferral plan adopted by the Board in 1998. Cash deferrals bear interest
at the prime rate in effect at Morgan Guaranty Trust Co., and are paid after the
end of the director's Board service either as a lump sum payment or in equal
annual installment payments.
Directors electing to defer their Compensation into shares of Common Stock
receive a premium on such Compensation. On the date the Compensation would
normally have been paid, Litton will convert the amount of the Compensation,
including the premium, into a number of stock units equal to the number of
shares of Common Stock which could have been purchased at fair market value on
that date. Stock units are paid in full shares of Common Stock after the end of
the director's Board service.
Directors may also elect to convert their Compensation into options to purchase
shares of Common Stock at fair market value. The number of options granted
pursuant to this election will reflect a formula reviewed and approved by the
Board from time to time, and are granted pursuant to the Litton
Industries, Inc. Non-Employee Director Stock Plan.
STOCK OPTIONS
Under the Litton Industries, Inc. Non-Employee Director Stock Plan, the Board
makes an initial grant of 10,000 options to new directors, and grants 2,000
options each year thereafter to each non-employee director. The plan authorizes
the Board to make additional grants to non-employee directors, for example, to
reward a director's exceptional or extraordinary services as a member of the
Board, or in consideration for services to Litton outside of the scope of a
director's normal duties. Options under the plan are granted at fair market
value and vest immediately upon grant.
RETIREMENT PROGRAM
In 1998, the Board amended the retirement program for directors by terminating
the retirement pension for future directors and preserving the pension rights of
directors who were non-employee directors at that time. Such members of the
Board who retire or die while in office, at or after age 65, will receive the
active Board members' annual fee (or, if larger, the fee in effect at the annual
meeting immediately following the earlier of their retirement or death) for the
shorter of ten years, the number of years as a non-employee director, or the
remaining life of the director or surviving spouse. The mandatory retirement age
remains 72.
STOCK OWNERSHIP GUIDELINES
Litton implemented ownership guidelines in 1998 requiring that non-employee
directors own a number of shares equal in value to at least four times their
annual retainer. Directors are given three years to attain this ownership
guideline.
OTHER INFORMATION ON DIRECTORS
The following individuals receive certain retirement benefits by reason of their
former employment by Litton. John M. Leonis, former Chairman and Chief Executive
Officer of Litton, who retired on April 1, 1999, receives a monthly benefit of
$48,554 in the form of a 100% joint and survivor annuity. Joseph T. Casey,
former Chief Financial Officer and Vice Chairman of Litton receives a monthly
benefit of $27,075, in the form of a 100% joint and survivor annuity. Orion L.
Hoch, a former President, Chief Executive Officer and Chairman of Litton
receives a monthly benefit of $60,391 in the form of a 100% joint and survivor
annuity.
In addition, during fiscal year 1999, Mr. Casey received $12,000 as a member of
Litton's Investment Committee. The Investment Committee is responsible for
managing and overseeing the assets and investment choices available under
certain of the Litton Retirement Plans and the FSSP.
6
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
LITTON COMMON STOCK
<TABLE>
SHARES DEFERRED
SHARES OF COMMON SUBJECT TO STOCK PERCENT
STOCK BENEFICIALLY OPTIONS UNITS AT OF CLASS
OWNED AS OF EXERCISABLE 9/30/99 BENEFICIALLY
9/30/99 AT 9/30/99 (#)(F) OWNED*
<S> <C> <C> <C> <C>
NON-EMPLOYEE DIRECTORS
Alton J. Brann 3,400 10,000 788 *
Joseph T. Casey 32,954(a) 76,000 805 *
Carol B. Hallett 690 20,000 817 *
Orion L. Hoch 89,399(b) 35,916 -0- *
David E. Jeremiah 500 17,500 836 *
John M. Leonis 42,912 159,277 -0- *
William P. Sommers 1,500 18,000 -0- *
C. B. Thornton, Jr. 832,874(b)(c) 30,000 -0- 1.8%
NAMED EXECUTIVE OFFICERS
Michael R. Brown 23,070 102,659 2,021 *
Gerald J. St. Pe 30,546 46,200 3,520 *
Larry A. Frame 18,808 38,000 4,575 *
Harry Halamandaris 33 24,500 6,935 *
John E. Preston 13,024(b) 44,058 1,777 *
GROUP
Directors, Nominees and
Executive Officers as a
Group (18 people) 1,185,427(b)(d)(e) 694,405 26,210 2.6%
</TABLE>
* Percentage of shares is given only where such percentage exceeds 1% of the
Common Stock outstanding on October 15, 1999, the record date, exclusive of
treasury shares.
(a) Excludes 8,500 shares held by a charitable corporation of which Mr. Casey
serves as trustee. Mr. Casey has voting and investment power with respect to
such 8,500 shares and may be deemed to have incidents of beneficial
ownership.
(b) Includes shares which are beneficially owned by certain family members of
certain directors and officers who disclaim beneficial ownership of such
shares. The shares are reported on the presumption that the individual may
share voting and/or investment power because of family relationships.
(c) Excludes 25,378 shares owned by a private foundation of which Mr. Thornton
is an officer and trustee. Mr. Thornton shares voting and investment power
with another trustee and may be deemed to have incidents of beneficial
ownership.
(d) Excludes 255,126 shares owned by the Litton Master Trust which holds certain
retirement funds of Litton and its subsidiaries. Messrs. Casey and Preston
are members of the Investment Committee which has sole investment and voting
power, and thus may be deemed to have incidents of beneficial ownership. If
these shares were included as beneficially owned shares, then the percentage
of Common Stock owned by the group would be 3.2%.
7
<PAGE>
(e) Includes 50,000 shares held by the Foundation of the Litton Industries whose
President and Treasurer vote the shares and are also officers of Litton, and
whose directors have investment power of the shares, and are elected and may
be removed by the Nominating Committee of the Board of Directors.
(f) Individuals with stock units in this column have elected to defer a portion
of their bonus awards, and in the case of directors, of their compensation.
The bonus or compensation is converted into a number of stock units equal to
the number of shares of Common Stock which could have been purchased at fair
market value on the date the award is made or the compensation is payable.
Deferred awards are paid in full shares of Common Stock upon termination of
service, death, or a change of control. Although individuals may be deemed
to have incidents of beneficial ownership, they do not have any voting power
with respect to these shares.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
COMPENSATION ALL OTHER
NAMED EXECUTIVE OFFICERS ANNUAL COMPENSATION AWARDS COMPENSATION
Fiscal Salary Bonus Options
Name and Principal Position Year ($) ($)(a) (#) ($)(b)
<S> <C> <C> <C> <C> <C>
Michael R. Brown 1999 675,772 350,000 75,000 8,596
CHAIRMAN, PRESIDENT AND CHIEF 1998 497,509 570,000 60,000 9,158
EXECUTIVE OFFICER 1997 441,542 440,000 35,000 7,740
Gerald J. St. Pe 1999 392,509 401,856 15,000 3,466
EXECUTIVE VICE PRESIDENT AND 1998 374,454 420,992 12,000 3,589
CHIEF OPERATING OFFICER, LITTON 1997 366,231 350,000 12,000 2,951
SHIP SYSTEMS
Larry A. Frame 1999 295,343 330,000 -0- -0-
SENIOR VICE PRESIDENT 1998 271,000 300,300 10,000 -0-
1997 263,272 240,000 10,000 -0-
Harry Halamandaris 1999 314,591 290,000 21,000 6,004
EXECUTIVE VICE PRESIDENT AND 1998 296,088 258,750 10,000 7,432
CHIEF OPERATING OFFICER, 1997 287,613 240,000 10,000 7,857
ELECTRONICS AND INFORMATION
SYSTEMS
John E. Preston 1999 315,483 171,000 14,000 7,055
SENIOR VICE PRESIDENT AND 1998 297,248 260,000 12,000 8,134
GENERAL COUNSEL 1997 284,964 246,000 15,000 7,270
</TABLE>
(a) Fiscal year 1999 bonus awards are paid in full in December 1999. Certain
executive officers have elected to defer the following portions of their
1999 bonus awards: Mr. St. Pe, 20%; Mr. Frame, 20%; and Mr. Halamandaris,
40%. As a result of such deferrals these officers have been credited the
following number of stock units included in the "deferred stock units"
column of the "Security Ownership of Directors and Executive Officers" table
on page 7: Mr. St. Pe, 1,396; Mr. Frame, 1,146; and Mr. Halamandaris, 2,015.
(b) Includes, if any, taxable amounts imputed under various life insurance
arrangements provided by Litton and amounts of imputed interest on the loans
described on page 12.
8
<PAGE>
OPTION GRANTS IN 1999 FISCAL YEAR
<TABLE>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
NAMED EXECUTIVE STOCK PRICE APPRECIATION
OFFICERS INDIVIDUAL GRANTS FOR OPTION TERM
HYPOTHETICAL HYPOTHETICAL
% OF TOTAL VALUE VALUE
OPTIONS REALIZED AT REALIZED AT
OPTIONS GRANTED TO EXERCISE 5% STOCK 10% STOCK
GRANTED EMPLOYEES IN PRICE EXPIRATION APPRECIATION APPRECIATION
NAME (#) FISCAL YEAR ($/SH) DATE ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Michael R. Brown 75,000 6.9% 68.8750 6/24/09 3,248,633 8,232,675
Gerald J. St. Pe 15,000 1.4% 68.8750 6/24/09 649,727 1,646,535
Larry A. Frame -0- -0- -0- -0- -0- -0-
Harry Halamandaris 21,000 1.9% 68.8750 6/24/09 909,617 2,305,149
John E. Preston 14,000 1.3% 68.8750 6/24/09 606,411 1,536,766
</TABLE>
AGGREGATED OPTION EXERCISES IN 1999 FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS AT JULY 31, IN-THE- MONEY OPTIONS AT
EXERCISE REALIZED 1999 (#) JULY 31, 1999 ($)
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Michael R. Brown 10,000 597,591 102,659 173,200 3,059,922 1,662,098
Gerald J. St. Pe 30,000 1,560,591 46,200 37,800 1,491,675 400,430
Larry A. Frame 6,000 269,024 38,000 18,000 1,279,812 308,561
Harry Halamandaris -0- -0- 24,500 43,500 691,935 473,937
John E. Preston -0- -0- 44,058 38,200 1,636,200 427,217
</TABLE>
RETIREMENT BENEFITS
THE FSSP AND RELATED RETIREMENT PLANS
Litton's Financial Security and Savings Program ("FSSP") is a defined
contribution plan intended to qualify under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Participation in the FSSP is
generally available to U.S. employees of Litton's corporate offices and
participating subsidiaries and divisions. All of the Named Executive Officers
participate in the FSSP.
The first 1% to 4% of pay a participant elects to deposit in the FSSP creates an
annual retirement benefit payable at age 65 equal to the greater of (a) 60% of
such deposits, or (b) 85% of such deposits, less 75% of estimated Social
Security primary insurance. The benefit is payable as an annuity and is reduced
by the actuarial equivalent of any elected lump sum distribution of the
deposits, as adjusted for earnings or losses. Participants may deposit an
additional 1% to 14% of pay into the Savings Account portion of the FSSP and
receive a 50% Company match on the first 1% to 4% of those deposits. For any
calendar year, a participant's deposits in the FSSP may not exceed the maximum
deferral amount prescribed by Section 401(k) of the Code or, if less, 20% of a
participant's annual compensation.
9
<PAGE>
RESTORATION PLAN
The Litton Industries, Inc. Restoration Plan (the "Restoration Plan"), is an
unfunded, nonqualified retirement plan that restores company-provided retirement
benefits and FSSP Savings Account company-matching contributions which an FSSP
participant could have received if it were not for the limitations prescribed by
the Code. Such benefit is payable as an annuity at normal retirement from
Litton's general assets.
The following table sets forth the current estimated annual retirement benefits
of the Named Executive Officers assuming their continued maximum participation
in the above described plans, retirement at age 65 and election of a single life
annuity.
<TABLE>
COMPANY
TOTAL PROVIDED
NAME PENSION PORTION
<S> <C> <C>
Michael R. Brown $506,860 $460,053
Gerald J. St. Pe 407,651 354,723
Larry A. Frame 213,916 174,030
John E. Preston 341,532 292,954
Harry Halamandaris 141,895 133,882
</TABLE>
SUPPLEMENTAL PLAN
The Litton Industries, Inc. Supplemental Executive Retirement Plan ("SERP") is
an unfunded, nonqualified defined benefit retirement plan that provides certain
key employees of Litton with supplemental retirement benefits. In general,
participants must be at least age 50, and vesting occurs when a participant
reaches age 60 and has at least fifteen years of service with Litton. The SERP
retirement benefit is determined based on a participant's average earnings (for
the highest three twelve month periods out of their last 60 months of
compensation) and years of service since age 40 (up to a maximum of 25 years).
Under the SERP, the credited years of service at September 30, 1999, of the
Named Executive Officers are as follows: Mr. Brown, 18 years; Mr. St. Pe, 19
years; Mr. Frame, 23 years; Mr. Preston, 18 years; and Mr. Halamandaris, 4
years. In order to provide a comparable executive benefit, Litton will credit
Mr. Halamandaris with an additional 14 years of service at age 65 for benefit
accrual purposes.
The following table indicates the approximate annual benefit which would be
received by a participant in the SERP, based on the following assumptions: (i)
retirement at age 65 and (ii) payment as a single life annuity. Such benefit
would be reduced by the Social Security benefit and the greater of the maximum
10
<PAGE>
amount of Company provided pension benefits that the employee either actually
accrued or could have accrued under other Company sponsored retirement plans.
<TABLE>
PENSION PLAN TABLE
YEARS OF SERVICE
REMUNERATION 25 OR
(AVERAGE EARNINGS) 15 20 MORE
<S> <C> <C> <C>
600,000 $186,750 $249,000 $311,250
800,000 252,750 337,000 421,250
1,000,000 318,750 425,000 531,250
1,200,000 384,750 513,000 641,250
1,400,000 450,750 601,000 751,250
1,600,000 516,750 689,000 861,250
1,800,000 582,750 777,000 971,250
</TABLE>
CHANGE IN CONTROL AGREEMENTS
Litton is a party to change in control agreements with all of the Named
Executive Officers. The agreements become operative only upon the occurrence of
one of the following events: (1) a change in the majority of the members of
Litton's Board of Directors; (2) a third party acquires at least 30% of Litton's
outstanding voting stock, other than as a result of a repurchase by Litton of
its voting stock; (3) a merger, reorganization, or consolidation of Litton with
another party (other than certain limited types of mergers); (4) a sale or
disposition of substantially all of Litton's assets; or (5) the shareholders
approve the liquidation or dissolution of Litton.
Each change in control agreement provides that for three years after a change in
control there will be no adverse change in the executive's salary, bonus
opportunity, benefits, or location of employment. If, during this three-year
period, the executive's employment is terminated by Litton, the executive
terminates his or her employment, or voluntarily leaves during the 30-day period
following the first anniversary of the change in control, the executive is
entitled to receive an accrued salary and annual incentive payment through the
date of termination and a lump sum severance payment equal to three times the
sum of the executive's base salary and annual bonus. Litton will also provide
the executive with certain pension credits, insurance and other welfare plan
benefits.
The SERP and the Restoration Plan provide that in the event of a change in
control, all participants in such plans become fully vested in their benefit and
Litton becomes obligated to fund a trust with sufficient assets to adequately
satisfy the liabilities of the SERP and the Restoration Plan. The Compensation
and Selection Committee of the Board may direct Litton to pay the benefits from
such trust either as a lump sum payment based upon certain actuarial factors or
to pay the benefits monthly as an annuity. The assets of such trusts would be
subject to the claims of Litton's creditors in the event of the insolvency or
bankruptcy of Litton.
INDEBTEDNESS OF MANAGEMENT TO LITTON
As a form of additional incentive, Litton provides loans to certain key
employees. Under Litton's incentive loan program, unsecured loans, not to exceed
$6,000,000 in the aggregate outstanding at any one time, may be made to not more
than 50 employees and may not exceed the annual salary rate of the borrower.
These loans presently bear interest at the rate of 4% per annum and are payable
on Litton's demand, or by (i) termination of the borrower's employment or
(ii) December 31, 2001, whichever occurs first. Granting
11
<PAGE>
of loans to executive officers, including the Named Executive Officers, requires
the approval of the Compensation and Selection Committee.
As of August 3, 1999, loans upon the terms set forth above in the aggregate
amount of $695,000 were outstanding to three of the Named Executive Officers:
Mr. Brown, $275,000; Mr. Preston, $170,000; and Mr. Halamandaris, $250,000.
Litton had $458,000 in loans outstanding to two other executive officers at July
31, 1998, $308,000 of which was paid off by one of the executive officers by
September 30, 1999. The largest total amount of indebtedness of all executive
officers outstanding at any time since July 31, 1998 was $1,153,000.
12
<PAGE>
REPORT OF THE COMPENSATION AND SELECTION COMMITTEE
The Compensation and Selection Committee of the Board of Directors (the
"Committee") establishes the salaries and other compensation of the executive
officers of Litton, including its CEO and the other individuals listed in the
"Summary Compensation Table" ("Named Executive Officers"). The Committee
consists entirely of non-employee directors.
COMPENSATION PHILOSOPHY AND COMPONENTS
Litton's executive compensation program is designed to:
- provide the level of total compensation necessary to attract and retain
executives in its industries;
- link compensation to Litton's performance and to the interests of
shareholders;
- recognize both individual and team performance through incentive
compensation programs;
- balance rewards for short-term vs. long-term results; and
- encourage executives to make a long-term career commitment to Litton and
its shareholders.
The program consists of, and is intended to balance, three elements: (1) base
salaries payable in cash; (2) annual performance awards payable in cash or stock
or a combination of both; and (3) long-term, stock-based incentive awards.
The market data used by the Committee to administer the executive compensation
program is provided through surveys conducted by external compensation
consultants and presented to the Committee annually as part of the determination
of the succeeding year's executive compensation structure.
SALARIES
The Committee determines the salary ranges for each of the executive officer
positions based upon the scope, level and strategic impact of the position, and
on the pay level for similarly positioned executive officers in comparable
companies. Annual base salary is designed to compensate executives for ongoing
performance throughout the year.
ANNUAL PERFORMANCE AWARDS
The Committee administers annual performance awards pursuant to Litton's
Performance Award Plan and Group Plans. Annual performance awards are generally
based on Litton's financial results as measured against pre-set targets such as
profits, profit growth, profit-related return ratios, cash flow, and total
shareholder return. Awards are payable in full in December following the end of
the fiscal year for which the awards are granted. For fiscal year 1999, the
Committee established a performance objective based on a formula which
calculates earnings per share and earnings per share growth.
As a result of certain non-recurring special charges taken by Litton, the
performance objective set by the Committee for the 1999 fiscal year was not
achieved. Under the Performance Award Plan, the Committee has discretion to
approve appropriate adjustments to the performance objective if the Committee
determines that external changes or other unanticipated business conditions have
materially affected the fairness of the performance objective. In that regard,
the Committee recognized that the decisions made by Litton during the 1999
fiscal year relating to such charges were designed to enhance shareholder value
and improve Litton's long-term performance. The Committee also recognized that
despite these special charges, there were significant management achievements
that deserved to be recognized, including success in many programs and funding
of programs, and the conclusion of the negotiation of the Avondale
Industries, Inc. acquisition which strengthened Litton's position in the
shipbuilding industry.
13
<PAGE>
For the foregoing reasons, the Committee decided to make an equitable adjustment
to the performance objective by excluding such charges from the computation of
the bonus pool. The bonus pool totaled $3,672,000; of this amount, awards
totaling $2,139,750 were approved. Awards were substantially reduced for certain
employees because of the special charges.
LONG-TERM STOCK INCENTIVES
The principal component of long-term compensation is stock options granted
annually. The Committee grants stock options pursuant to Litton's regular stock
options program, and sets guidelines for the number and terms of such grants
based on peer group data and Litton's business objectives. Options granted by
the Committee are at fair market value, and generally become exercisable in
cumulative installments over a period of five years.
The Committee's decisions concerning the fiscal year 1999 compensation elements
for the executive officers were made within this broad framework and in light of
each executive officer's level of responsibility, performance, current salary,
prior-year bonus and other compensation awards. The Committee's specific
decisions involving fiscal year 1999 compensation were ultimately based upon the
Committee's judgment about the individual executive officer's performance and
potential future contributions, and whether each particular payment or award
would provide an appropriate reward and incentive for the executive to sustain
and enhance Litton's long-term performance.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Brown became Chief Executive Officer in March 1998, and Chairman of the
Board in March 1999. Mr. Brown's total annual compensation earned for the 1999
fiscal year, including salary and annual performance award, was $1,025,772. The
Committee considered four factors in determining Mr. Brown's total compensation:
(1) a review of the total compensation of CEOs at the peer group of companies
and comparative general industry data; (2) Litton's performance during the 1998
fiscal year to determine fiscal year 1999 salary; (3) Litton's performance
during the 1999 fiscal year to determine annual performance award; and
(4) Mr. Brown's contributions to Litton's performance.
During fiscal year 1999, the Committee awarded Mr. Brown salary adjustments
totaling approximately 27%, increasing his salary to $725,000. In increasing
Mr. Brown's base salary, the Committee gave special recognition to the following
1998 accomplishments realized under Mr. Brown's leadership: a 5% increase in
sales and an 11% increase in operating profit; a net income and earnings per
share increase of 12%; the development of a strategic plan designed to generate
internal growth, investments and multi-division technology cooperation; the
successful acquisition and integration of the TASC group of companies; the
significant improvement in Litton's financial operations; the creation of
significant new business opportunities in all operating groups through technical
developments and alliances, and Mr. Brown's assumption of new responsibilities
as Chairman of the Board.
Based on Litton's performance for fiscal year 1999, Mr. Brown received an annual
performance award of $350,000. In determining Mr. Brown's performance award, the
Committee considered the achievements highlighted above under the heading
"Annual Performance Awards" and his contribution to those achievements. As noted
above, the amount of Mr. Brown's award was reduced because of the special
charges.
For the 1999 fiscal year, Mr. Brown received a grant of 75,000 stock options
under Litton's regular stock options program.
TAX POLICY
The Committee has reviewed the potential consequences for Litton of Section
162(m) of the Internal Revenue Code, which imposes a limit on tax deductions for
annual compensation in excess of $1 million paid to any of the Named Executive
Officers. Litton has designed its executive compensation programs to
14
<PAGE>
preserve its ability to deduct compensation paid to executives under these
programs. The Committee intends to weigh the benefits of full deductibility with
the objectives of the executive compensation program and, if the Committee
believes to do so is in the best interests of Litton and its shareholders, it
may make compensation arrangements which may not be fully deductible under
Section 162(m). This provision did not have a material impact on Litton during
the 1999 fiscal year.
THE FOREGOING REPORT HAS BEEN FURNISHED BY THE FOLLOWING MEMBERS OF THE
COMPENSATION AND SELECTION COMMITTEE:
<TABLE>
<S> <C>
DAVID E. JEREMIAH, CHAIRMAN William P. Sommers
Carol B. Hallett C.B. Thornton, Jr.
</TABLE>
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the dates indicated in the footnotes below, the following table sets
forth entities which were known to own beneficially more than 5% of Litton's
Common Stock.
<TABLE>
PERCENT OF
AMOUNT AND NATURE CLASS
NAME AND ADDRESS OF BENEFICIAL (AS OF RECORD
OF BENEFICIAL OWNER OWNERSHIP DATE)
<S> <C> <C>
Unitrin, Inc.
One East Wacker Drive
Chicago, Illinois 60601 12,657,764(a) 27.8%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 4,832,200(b) 10.6%
Boston Partners Asset
Management, L.P.
28 State Street, 20th Floor
Boston, MA 02109 2,472,836(c) 5.4%
</TABLE>
(a) Unitrin, Inc. ("Unitrin") has reported in a filing with the SEC on Schedule
13D that, as of October 5, 1995, shares of Litton's Common Stock are owned
by Unitrin (1,827,893 shares) and two of its subsidiaries, Trinity Universal
Insurance Company (5,378,883 shares) and United Insurance Company of America
(5,450,988 shares). Unitrin reported that such subsidiaries each share
voting and dispositive power with Unitrin over the shares respectively
reported by them.
(b) FMR Corp., Edward C. Johnson, 3d, and Abigail P. Johnson (together "FMR")
have reported in a filing with the SEC on Schedule 13G that, as of
February 1, 1999, shares of Litton's Common Stock are beneficially owned by
FMR. FMR reported that it exercises sole voting power over 69,000 shares,
and sole dispositive power over all of these shares.
(c) Boston Partners Asset Management, L.P., Boston Partners, Inc., and Desmond
John Heathwood (together "BPAM") have reported in a filing with the SEC on
Form 13G that, as of February 12, 1999, shares of Litton's Common Stock are
beneficially owned by BPAM. BPAM reported that it exercises shared voting
and dispositive over all of the shares.
16
<PAGE>
PERFORMANCE GRAPH
(COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN)
The following graph illustrates the performance of Litton's Common Stock
over the five-year period from August 1, 1994 through July 31, 1999, compared to
the performance of the S&P 500 Index and the S&P Aerospace/Defense Index:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
LITTON INDUSTRIES INC S&P AEROSPACE/DEFENSE INDEX S&P 500 INDEX
<S> <C> <C> <C>
1994 $100 $100 $100
1995 $104 $149 $126
1996 $116 $193 $147
1997 $140 $274 $224
1998 $154 $208 $267
1999 $185 $218 $321
</TABLE>
- ------------------------
* Assumes $100 invested August 1, 1994 in Litton's Common Stock, the S&P 500
Index and the S&P Aerospace/Defense Index (dividends reinvested).
17
<PAGE>
ITEM TWO: RATIFICATION OF APPOINTMENT OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE 2000 FISCAL
YEAR.
Deloitte & Touche LLP has served as Litton's independent auditors continuously
since 1954, is familiar with the business and operations of Litton and its
subsidiaries, and has offices in, or convenient to, most of the localities in
the United States and in most other countries where Litton and its subsidiaries
operate.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting. They will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
ITEM THREE: SHAREHOLDER PROPOSAL
REGARDING SHAREHOLDER RIGHTS PLANS
Proponents of a shareholder proposal have stated that they intend to present a
proposal at the Annual Meeting. The name, address and number of shares held by
the proponents will be furnished by the Company upon request to the Corporate
Secretary. The proposal and supporting statement, for which the Board of
Directors accepts no responsibility, is set forth below. The Board of Directors
opposes the proposal for the reasons stated after this proposal.
SHAREHOLDERS TO HAVE THE OPPORTUNITY TO VOTE ON POISON PILLS
Proposal
RESOLVED: Recommend the company shall not adopt or maintain any poison
pill--euphemistically called a rights plan, share purchase rights plan or
similar agreement--designed to block, the acquisition of stock in excess of a
specified amount:
Unless such plan or agreement has previously been approved by a majority of
the outstanding shares of stock at a general or special meeting of shareholders.
The company shall redeem or terminate any such plan or agreement with a
simple-majority shareholder vote. This Resolution is not to be amended, modified
or repealed, except by a majority vote of the outstanding shares of stock. The
Company will resolve all potential conflicts with the Company's Certificate of
Incorporation and by-laws to enact shareholder voting on poison pills.
Supporting Statement
WHY SUBMIT LITTON'S POISON PILL TO A SIMPLE-MAJORITY SHAREHOLDER VOTE?
- The poison pill is an anti-takeover device, which injures shareholders by
reducing management accountability. It adversely affects shareholder
value.
- Poison pills are a major shift of shareholder rights from shareholders to
management. Pills give directors absolute veto power over any proposed
business combination, no matter how beneficial it might be for the
shareholders.
Nell Minow and Robert Monks in their book
POWER AND ACCOUNTABILITY
- Poison pills like Litton's are increasingly unpopular. Shareholder
proposals seeking to redeem poison pills or subject pills to shareholder
vote achieved 56% approval from shareholders.
CORPORATE GOVERNANCE BULLETIN, April 1998
18
<PAGE>
- The Council of Institutional Investors (Internet address:
www.ciicentral.com)--an organization of institutional
investors--recommends poison pills be subject to shareholder approval.
- Institutional investors own 70% of Litton stock.
- A study by Harvard University Professor John Pound found a link between
high corporate performance and the absence of poison pills.
- An unprecedented number of shareholder proposals opposing poison pills
have received majority votes.
Nell Minow April 2, 1999
WHAT ISSUES HIGHLIGHT CONCERN ABOUT IMPROVING LITTON'S PERFORMANCE?
- Litton will bear charges of $88 million to close its sagging Litton
Enterprise Solutions and 2 other plants.
LOS ANGELES TIMES August 3, 1999
- Two Litton firms plea guilt to criminal complaints. Litton agrees to pay
$18 million in fines and restitution for hidden payments to Taiwan and
Greek agents. U.S. companies paying bribes can be barred from doing
business with the federal government.
LOS ANGELES TIMES July 1, 1999
- Litton's appreciation potential is limited.
VALUE LINE July 2, 1999
- Litton is bearish since Oct. 1998.
STANDARD AND POORS May 8, 1999
Institutional shareholders own 70% of Litton stock. A large number, or a
majority of institutional investors, are opposed to poison pills like Litton's,
plus these additional poor Litton practices:
1) Non-Independent board:
- At the 1999 shareholder meeting a 54% majority of the board was not
independent.
- 50% of the key board nominating committee, which controls management
succession, was not independent.
2) Underwater options:
- Directors get underwater options.
- Thus directors, unlike shareholders, can still profit if Litton stock
drops.
The existence of these additional poor corporate practices emphasize the
importance for Litton to improve corporate practices--starting with this
resolution.
Management will be asked at the annual meeting to formally present the
advantages found by nationally-known, independent corporate governance
organizations for giving shareholders the opportunity to vote on poison pills.
To increase shareholder value vote yes:
SHAREHOLDERS TO HAVE THE OPPORTUNITY TO VOTE ON POISON PILLS
YES ON 3
19
<PAGE>
BOARD OF DIRECTORS' POSITION
Litton disagrees with many of the "supporting statements" contained in this
proposal and believes many are simply incorrect.
The Shareholder Rights Plan (the "Rights Plan") does not block the acquisition
of Litton, nor does it convey to management any powers nor does it reduce
management's accountability. The Rights Plan invests certain powers in the Board
of Directors, not management, which can be utilized by your Board to obtain a
fair price in any acquisition. Avondale Industries, Inc., recently acquired by
Litton, had such a Rights Plan.
In a recent study, Georgeson & Company, a nationally-recognized proxy
solicitation firm, found that companies with rights plans receive takeover
premiums averaging 8% higher than those received by companies not protected by
such plans, and that there is no evidence that rights plans deter bids or
increase the probability that bids will be withdrawn without a completed
transaction. Georgeson also estimated that rights plans contributed an
additional $13 billion in shareholder value during the last five years, and that
the shareholders of acquired companies without rights plans gave up $14.5
billion in potential premiums.
Georgeson's two pioneering Poison Pill Impact Studies in 1988 and a 1996 report
from JP Morgan have reached the same conclusions. These conclusions have been
supported by Patrick McGurn, director of corporate programs for Institutional
Shareholder Services, who was quoted as saying that "companies with poison pills
tend to get higher premiums paid on average than companies that don't have
pills." (Wall Street Journal, January 29, 1999). Thus, experience indicates that
rights plans neither prevent unsolicited offers from occurring, nor prevent
companies from being acquired at prices that are fair and adequate to
shareholders.
Litton and its Board of Directors are firmly committed to maximizing shareholder
value. The Board adopted a Rights Plan in 1994 in order to preserve and maximize
value for Litton's shareholders by protecting shareholders against abusive
takeover tactics. The Rights Plan is designed to deal with the problem of
another entity using abusive tactics to deprive the Board and Litton's
shareholders of any real opportunity to determine Litton's destiny. The Rights
Plan is also intended to protect shareholders against tactics that do not treat
all shareholders fairly and equally, such as partial and two-tiered tender
offers and creeping stock accumulation programs. Litton is one of more than
2,200 public companies that have a rights plan in place.
Litton believes that the Board is in the best position to evaluate and negotiate
any potential offer. In the Board's view, the Rights Plan will provide the Board
adequate flexibility in any negotiations and will enhance the Board's ability to
negotiate the highest possible bid from a potential acquirer.
This proposal requires the approval of holders of a majority of the shares
voting at the Annual Meeting. Redemption of the existing rights under the Rights
Plan requires Board action. Implementation of a requirement for shareholder
approval of future shareholder rights plans would require either Board action or
a shareholder amendment of Litton's by-laws, which in turn requires approval by
the affirmative vote of a majority of Litton's issued and outstanding voting
stock.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for shareholder action
at Litton's annual meetings consistent with regulations adopted by the SEC. For
such proposals to be considered for inclusion in the Proxy Statement and form of
proxy relating to the 2000 Annual Meeting, they must be received by Litton no
later than July 28, 2000. Such proposals should be directed to the attention of
the Secretary of Litton at 21240 Burbank Boulevard, Woodland Hills, California
91367-6675.
20
<PAGE>
OTHER MATTERS
The cost of soliciting proxies will be borne by Litton. Proxies may be solicited
by directors, officers, or regular employees of Litton in person or by
telephone, telegraph, facsimile transmission, or telex. Litton also has retained
D. F. King & Co., Inc., to aid in the solicitation at an estimated cost of
$12,000 plus out-of-pocket expenses. Arrangements have been made for brokerage
houses, nominees, and other custodians to send proxy materials to their
principals, and Litton will reimburse them for doing so.
Notwithstanding anything to the contrary set forth in any of Litton's previous
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the Performance Graph on page 17 and the Report
of the Compensation and Selection Committee on pages 13 through 15 shall not be
incorporated by reference into any such filings.
The Board of Directors does not know of any other matters that are to be
presented for action at the Annual Meeting. Should any other matter come before
the meeting, the accompanying proxy will be voted with respect to the matter in
accordance with the best judgment of the persons voting the proxy.
THE BOARD OF DIRECTORS
LITTON INDUSTRIES, INC.
21
<PAGE>
LITTON INDUSTRIES, INC. PROXY
Michael R. Brown and Jeanette M. Thomas, or each of them individually and each
of them with power of substitution, are hereby appointed Proxies of the
undersigned to vote all Common Stock and Series B Preferred Stock of Litton
Industries, Inc. owned on the record date by the undersigned at the Annual
Meeting of Shareholders to be held at The Ritz Carlton, 4375 Admiralty Way,
Marina del Rey, California at 11:00 a.m. on Friday, December 3, 1999, or any
adjournment thereof, upon such business as may properly come before the meeting,
including the items on the reverse side of this form, as set forth in the Notice
of Annual Meeting of Shareholders and the Proxy Statement dated October 29,
1999.
Directors recommend a vote "FOR" items 1 and 2.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors / / FOR all nominees / / WITHHOLD AUTHORITY / / EXCEPTIONS*
listed below to vote for ALL nominees listed below as indicated
</TABLE>
Alton J. Brann, Michael R. Brown, Joseph T. Casey, Carol B. Hallett,
Orion L. Hoch, David E. Jeremiah, John M. Leonis, William P. Sommers,
C. B. Thornton, Jr.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
"EXCEPTIONS" BOX AND PRINT THAT NOMINEE'S NAME(S) ON THE SPACE PROVIDED
BELOW.
*EXCEPTIONS
- ----------------
- ----------------
- ----------------
- ----------------
- ----------------
2. Proposal to ratify the selection of Deloitte & Touche LLP as independent
auditors for the fiscal year ending July 31, 2000.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED, AND TO BE SIGNED AND DATED, ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM REVERSE SIDE)
Directors recommend a vote "AGAINST" item 3.
3. Shareholder proposal regarding the shareholder rights plan.
/ / FOR / / AGAINST / / ABSTAIN
Unless otherwise specified, this proxy will be voted FOR items 1 and 2 and
AGAINST item 3.
Dated: _____________________, 1999
__________________________________
Signature
__________________________________
Signature
(if jointly held)
Please sign exactly as shown at
left, If stock is jointly held,
each owner should sign. Executors,
administrators, trustees,
guardians, attorneys and corporate
officers should indicate their
fiduciary capacity or full title
when signing.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE
