As filed with the Securities and Exchange Commission on March 4, 2002
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Northrop Grumman Corporation
(Exact name of registrant as specified in its charter)
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Delaware 3812 95-4840775
(State or other (Primary Standard (I.R.S.
jurisdiction Industrial Classification Employer Identification
of incorporation or Code Number) Numbers)
organization)
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1840 Century Park East
Los Angeles, California 90067
(310) 553-6262
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive offices)
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John H. Mullan
Corporate Vice President and Secretary
1840 Century Park East
Los Angeles, California 90067
(310) 553-6262
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies To:
Andrew E. Bogen
Peter F. Ziegler
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
(213) 229-7000
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Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this registration statement becomes
effective and upon completion of the transactions described in the enclosed
prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ______
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ______
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount to be Offering Price Aggregate Offering Amount of
to be Registered(1) Registered(2) Per Unit Price(3) Registration Fee
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Common Stock, par value
$1.00 per share (together with the
associated rights)................ 55,092,761 N/A $6,487,486,707.68 $596,849.08
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(1) This Registration Statement relates to securities of Northrop Grumman
Corporation ("Northrop Grumman") exchangeable for all of the issued and
outstanding shares of (a) common stock, par value $0.625 per share, of TRW
Inc., an Ohio corporation ("TRW"), (b) Cumulative Serial Preference
Stock II, $4.40 Convertible Series 1, no par value per share (the "Series 1
Shares"), of TRW and (c) Cumulative Serial Preference Stock II, $4.50
Convertible Series 3, no par value per share (the "Series 3 Shares" and,
together with the common stock and the Series 1 Shares, "capital stock"),
of TRW in the offer to exchange by registrant for all of the issued and
outstanding shares of TRW capital stock and in the proposed merger with TRW.
(2) This amount is based upon the maximum number of shares of common stock of
Northrop Grumman (together with the associated rights to purchase Series A
junior participating preferred stock) issuable upon completion of the offer
to exchange and merger for shares of TRW capital stock.
(3) Computed solely for purposes of calculating the registration fee. The
registration fee has been computed pursuant to Rule 457(f)(1) under the
Securities Act of 1933, as amended, based on the average of the high and
low prices for shares of TRW common stock as reported on the New York Stock
Exchange on March 1, 2002 ($51.08) and the maximum number of such shares
(127,006,396) that may be exchanged for the securities being registered
minus the maximum cash consideration payable for such shares.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this offer to exchange may change. Northrop Grumman may
not complete the offer to exchange and issue these securities until the
Registration Statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer is
not permitted.
The information in this offer to exchange may change. Northrop Grumman may not
complete the exchange offer and issue these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
offer to exchange is not an offer to sell these securities and Northrop Grumman
is not soliciting offers to buy these securities in any state where the offer
is not permitted.
[LOGO] Northrop Grumman
NORTHROP GRUMMAN CORPORATION
Offer To Exchange Each Outstanding Share of Common Stock
of
TRW INC.
for
Shares of Common Stock of Northrop Grumman Corporation valued at $47.00
and
Each Outstanding Share of Serial Preference Stock II
of
TRW INC.
for
Shares of Common Stock of Northrop Grumman Corporation valued at $47.00
multiplied by the then-effective conversion rate of the applicable Series
of Serial Preference Stock II
by
NORTHROP GRUMMAN CORPORATION
in each case subject to the procedures and limitations described in this offer
to exchange and the related letters of transmittal.
The offer to exchange of Northrop Grumman Corporation, a Delaware
corporation ("Northrop Grumman"), and the withdrawal rights of the shareholders
of TRW Inc., an Ohio corporation ("TRW"), will expire at 12:00 midnight, New
York City time, on March 29, 2002, unless extended. TRW shares tendered
pursuant to the offer to exchange may be withdrawn at any time prior to the
expiration of the offer to exchange, but not during any subsequent offering
period.
Northrop Grumman hereby offers upon the terms and subject to the conditions
set forth in this offer to exchange and in the related letters of transmittal,
to issue shares of Northrop Grumman common stock, par value $1.00 per share,
(together with associated rights to purchase Series A junior participating
preferred stock) for each of the issued and outstanding shares of (a) common
stock, par value $0.625 per share of TRW (the "common stock"), (b) Cumulative
Serial Preference Stock II, $4.40 Convertible Series 1, no par value per share,
of TRW (the "Series 1 Shares"), and (c) Cumulative Serial Preference Stock II,
$4.50 Convertible Series 3, no par value per share, of TRW (the "Series 3
Shares" and, together with the common stock and the Series 1 Shares, "capital
stock" or "TRW shares"). Each share of TRW common stock may be exchanged for a
number of shares of Northrop Grumman common stock equal to the exchange rate,
as defined below. Each Series 1 Share and each Series 3 Share may be exchanged
for a number of shares of Northrop Grumman common stock equal to the
then-effective conversion rate for the Serial Preference Stock II multiplied by
the exchange ratio. The method for calculating the conversion rates for the
Series 1 Shares and the Series 3 Shares is provided in TRW's Amended Articles
of Incorporation. See "The Offer to Exchange" beginning on page 25 for a
discussion of the conversion rates. As of March 13, 2001, TRW reported that the
conversion ratios for the Series 1 Shares and Series 3 Shares were 8.8 and
7.448.
Northrop Grumman will determine the exact exchange ratio (the "exchange
ratio") by dividing $47.00 by the average of the closing sale prices for a
share of Northrop Grumman common stock on the New York Stock Exchange as
reported in The Wall Street Journal over the five consecutive trading days
ending immediately prior to the second trading day prior to the expiration of
the offer to exchange but, in no event will the exchange ratio be more than
0.4563 ($47.00/$103.00) or less than 0.4159 ($47.00/$113.00). The closing price
of Northrop Grumman common stock on the New York Stock Exchange on March 1,
2002, the last trading day before the offer to exchange commenced, was $107.75.
The purpose of the offer to exchange is for Northrop Grumman to acquire
control of, and ultimately the entire equity interest in, TRW. Northrop Grumman
intends, promptly after completion of the offer to exchange, to seek to have
TRW complete a merger (the "TRW merger") with Northrop Grumman or a
wholly-owned subsidiary of Northrop Grumman, in which each outstanding share of
capital stock of TRW (except for treasury shares of TRW and shares beneficially
owned directly or indirectly by Northrop Grumman for its own account) would be
converted into the right to receive shares of Northrop Grumman common stock at
the same exchange ratio as used in the offer to exchange, subject to
dissenters' rights under Ohio law.
Tenders of TRW shares pursuant to the offer to exchange will be effective,
and Northrop Grumman shall have the right to acquire tendered TRW shares, only
at such time as Section 1704 of the Ohio Revised Code shall not prohibit or
delay the TRW merger. No tender of TRW shares shall be effective, and Northrop
Grumman shall have no right to acquire tendered TRW shares, prior to such time.
This provision is referred to herein as the "1704 Limitation."
Northrop Grumman's obligation to exchange Northrop Grumman common stock for
TRW capital stock is subject to the 1704 Limitation and each of the conditions
listed under "The Offer to Exchange--Conditions to the Offer to Exchange"
beginning on page 36.
Northrop Grumman's common stock trades on the New York Stock Exchange and
the Pacific Stock Exchange under the symbol "NOC," and TRW's common stock
trades on the New York Stock Exchange, the Pacific Stock Exchange, the Chicago
Stock Exchange and the Philadelphia Stock Exchange under the symbol "TRW."
See "Risk Factors" beginning on page 10 for a discussion of various factors
that shareholders should consider about Northrop Grumman's offer to exchange.
Northrop Grumman is not asking TRW shareholders for a proxy and TRW
shareholders are requested not to send a proxy. Any solicitation of proxies
only will be made pursuant to separate proxy solicitation materials complying
with the requirements of Section 14(a) of the Securities Exchange Act of 1934.
Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this offer to exchange. Any representation to
the contrary is a criminal offense.
The Dealer Manager for the Offer to Exchange is
Salomon Smith Barney
The date of this offer to exchange is March 4, 2002.
This offer to exchange incorporates important business and financial
information about Northrop Grumman and its subsidiaries, Litton Industries,
Inc. and Newport News Shipbuilding Inc., and TRW from documents filed with the
SEC that have not been included in, or delivered with, this offer to exchange.
This information is available on the SEC's website at http://www.sec.gov and
from other sources. See "Additional Information" on page 61.
TRW shareholders may also request copies of these documents from Northrop
Grumman, without charge, upon written or oral request to Northrop Grumman's
information agent, D. F. King & Co., Inc., 77 Water Street, New York, New York
10005, toll-free at (800) 755-7250 or by calling collect at (212) 269-5550. TRW
shareholders may call the toll free number above to learn the exchange ratio
starting on the second trading day prior to the expiration of the offer to
exchange.
In order to receive timely delivery of the documents, TRW shareholders must
make requests no later than March 22, 2002 (five business days before the
initially scheduled expiration date of the offer to exchange).
TABLE OF CONTENTS
Page
----
Summary.......................................................................................... 3
Risk Factors..................................................................................... 9
Ratio of Earnings to Fixed Charges............................................................... 12
Northrop Grumman Selected Historical and Unaudited Pro Forma Condensed Combined Financial Data... 13
Selected Historical Financial Data of TRW........................................................ 16
Comparative Per Share Information................................................................ 17
Comparative Market Data.......................................................................... 19
Information About Northrop Grumman and TRW....................................................... 20
Reasons for the Offer to Exchange................................................................ 22
Background of the Offer to Exchange.............................................................. 23
The Offer to Exchange............................................................................ 25
Consideration to Be Paid...................................................................... 25
Timing of the Offer to Exchange............................................................... 26
Extension, Termination and Amendment.......................................................... 26
Exchange of TRW Shares; Delivery of Northrop Grumman Common Stock............................. 27
Cash Instead of Fractional Shares of Northrop Grumman Common Stock............................ 28
Withdrawal Rights............................................................................. 28
Procedures for Tendering...................................................................... 29
Guaranteed Delivery........................................................................... 30
Material U.S. Federal Income Tax Consequence of the Offer to Exchange and the TRW Merger...... 31
Effect of the Offer to Exchange on the Market for TRW Shares; Registration Under the
Exchange Act................................................................................ 32
Purpose of the Offer to Exchange; the TRW Merger; Dissenters' Rights.......................... 33
Plans for TRW After the TRW Merger............................................................ 34
The 1704 Limitation........................................................................... 34
Conditions to the Offer to Exchange........................................................... 35
Ohio Litigation............................................................................... 40
Regulatory Approvals.......................................................................... 40
Source and Amount of Funds.................................................................... 40
Certain Relationships with TRW................................................................ 40
Fees and Expenses............................................................................. 41
Accounting Treatment.......................................................................... 41
Stock Exchange Listing........................................................................ 41
Comparative Per Share Market Price and Dividend Information...................................... 42
Unaudited Pro Forma Condensed Combined Financial Information..................................... 43
Description of Northrop Grumman Common Stock..................................................... 50
Comparison of Rights of Holders of Northrop Grumman Common Stock and TRW Capital Stock........... 51
Additional Information........................................................................... 57
TRW Information.................................................................................. 59
Forward-Looking Statements....................................................................... 60
Legal Matters.................................................................................... 61
Experts.......................................................................................... 61
Annex A Directors and Executive Officers of Northrop Grumman.................................... A-1
Annex B Sections 1701.84 and 1701.85 of the Ohio Revised Code--Rights of Dissenting Shareholders B-1
SUMMARY
This summary does not contain all of the information that is important to
TRW shareholders. To fully understand Northrop Grumman's offer to exchange, TRW
shareholders should carefully read this entire offer to exchange and all other
documents to which this offer to exchange refers. See "Additional Information"
on page 58. References to "Northrop Systems" refer to Northrop Grumman Systems
Corporation, formerly Northrop Grumman Corporation; references to "Northrop
Grumman" refer to Northrop Grumman Corporation, formerly NNG, Inc.; references
to Litton refer to Litton Industries, Inc.; references to Newport News refer to
Newport News Shipbuilding Inc., formerly Purchaser Corp. I; references to TRW
refer to TRW Inc.
The Offer to Exchange (Page 26)
Under the terms of the offer to exchange, Northrop Grumman will exchange
shares of newly issued Northrop Grumman common stock for each of the issued and
outstanding (a) shares of TRW common stock, (b) Series 1 Shares and (c) Series
3 Shares. Each share of TRW common stock may be exchanged for a number of
shares of Northrop Grumman common stock equal to the exchange rate. Each Series
1 Share may be exchanged for a number of shares of Northrop Grumman common
stock equal to the then-effective conversion rate for the Series 1 Shares
multiplied by the exchange rate, and each Series 3 Share may be exchanged for a
number of shares of Northrop Grumman common stock equal to the then-effective
conversion rate for the Series 3 Shares multiplied by the exchange ratio. See
"The Offer to Exchange" beginning on page 26for a discussion of the conversion
rates.
Northrop Grumman will determine the exact exchange ratio by dividing $47.00
by the average of the closing sale prices for a share of Northrop Grumman
common stock on the New York Stock Exchange as reported in The Wall Street
Journal over the five consecutive trading days ending immediately prior to the
second trading day before the expiration of the offer to exchange but, in no
event will the exchange ratio be more than 0.4563 ($47.00/$103.00) or less than
0.4159 ($47.00/$113.00). Northrop Grumman will issue a press release before
9:00 A.M., New York City time, on the second trading day before the offer to
exchange expires, announcing the (i) the exchange ratio assuming expiration of
the offer to exchange as scheduled, (ii) the average closing price of the
Northrop Grumman common stock over the previous five consecutive trading days
and (iii) the then-effective conversion rates of the Series 1 Shares and Series
3 Shares. If for any reason the expiration date is subsequently extended, a
revised exchange ratio will be announced prior to the new expiration date.
TRW shareholders will not receive any fractional Northrop Grumman common
stock. Instead, shareholders will receive cash in an amount equal to the value
of the fractional Northrop Grumman common stock that shareholders would
otherwise have been entitled to receive.
Northrop Grumman intends, promptly after completion of the offer to
exchange, to seek to merge TRW with Northrop Grumman or a wholly owned
subsidiary of Northrop Grumman. In the TRW merger, each share of TRW capital
stock that has not been exchanged in the offer to exchange (except for treasury
shares of TRW and shares beneficially owned directly or indirectly by Northrop
Grumman for its own account) would be converted into the right to receive
shares of Northrop Grumman common stock at the same exchange ratio as used in
the offer to exchange, subject to dissenters' rights under Ohio law. See "The
Offer to Exchange" on page 26.
Information About Northrop Grumman and TRW (Page 21)
Northrop Grumman
Northrop Grumman Corporation
1840 Century Park East
Los Angeles, California 90067
(310) 553-6262
3
Northrop Grumman provides technologically advanced, innovative products,
services and solutions in defense and commercial electronics, information
technology, systems integration and nuclear and non-nuclear shipbuilding and
systems. As a prime contractor, principal subcontractor, partner, or preferred
supplier, Northrop Grumman participates in many high-priority defense and
commercial technology programs in the United States and abroad. While Northrop
Grumman is subject to the usual vagaries of the marketplace, it is also
affected by the unique characteristics of the defense industry and by certain
elements peculiar to its own business mix. It is common in this industry for
work on major programs to be shared among a number of companies. A company
competing to be a prime contractor may, upon ultimate award of the contract,
turn out to be a subcontractor. It is not uncommon to compete with customers,
and simultaneously on other contracts, to be either a supplier to, or a
customer of, such competitor. The nature of major defense programs, conducted
under binding contracts, allows companies that perform well to benefit from a
level of program continuity unknown in many industries. While Northrop Grumman
conducts most of its business with the U.S. Government, principally the
Department of Defense (DOD), domestic and international commercial sales still
represent a significant portion of its business.
Based on the closing price of Northrop Grumman common stock on the New York
Stock Exchange on March 1, 2002, Northrop Grumman's market capitalization was
approximately $12.14 billion.
TRW
TRW Inc.
1900 Richmond Road
Cleveland, Ohio 44124
(216) 291-7000
TRW provides advanced technology products and services. The principal
business of TRW and its subsidiaries is the design, manufacture and sale of
products and the performance of systems engineering, research and technical
services for industry and the U.S. Government in the automotive, aerospace and
information systems markets. TRW operates its business in the following seven
operating segments:
. Occupant Safety Systems;
. Chassis Systems;
. Automotive Electronics;
. Other Automotive;
. Space and Electronics;
. Systems & Information Technology; and
. Aeronautical Systems.
Based on the closing price of TRW common stock on the New York Stock
Exchange on March 1, 2002, TRW's market capitalization was approximately $6.32
billion.
The Offer to Exchange Is Subject to the 1704 Limitation and Various Conditions
(pages 35-41)
Tenders of TRW shares pursuant to the offer to exchange will be effective,
and Northrop Grumman shall have the right to acquire tendered TRW shares, only
at such time as the 1704 Limitation shall not prohibit or delay the TRW merger.
No tender of TRW shares shall be effective, and Northrop Grumman shall have no
right to acquire tendered TRW shares, prior to that time.
Northrop Grumman's obligation to exchange shares of Northrop Grumman's
common stock for TRW shares pursuant to the offer to exchange is subject to a
number of conditions, including, but not limited to, the following:
. the tender of enough shares of TRW capital stock so that, after the
completion of the offer to exchange, Northrop Grumman owns a majority of
the then-outstanding TRW common stock on a fully diluted basis;
4
. the expiration or termination of any waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, Council
Regulation (EEC) No. 4064/89 of the Council of the European Union and any
other applicable similar foreign laws or regulations;
. the requisite approval of TRW's shareholders under the Ohio control share
acquisition law or Northrup Grumman being satisfied, in its sole
discretion, that such law is inapplicable or invalid;
. the expiration or termination of the waiting period during which the Ohio
Division of Securities may suspend the offer to exchange under the Ohio
Revised Code without the occurrence of any such suspension or Northrop
Grumman being satisfied, in its sole discretion, that such law is
inapplicable or invalid; and
. the approval of the issuance of shares of Northrop Grumman common stock
pursuant to the offer to exchange and the TRW merger by the stockholders
of Northrop Grumman.
These conditions and the other conditions to the offer to exchange are
discussed under "The Offer to Exchange--Conditions to the Offer to Exchange" on
page 36.
The Receipt of Northrop Grumman Common Stock in Exchange for TRW Shares
Pursuant to the Offer to Exchange and/or the TRW Merger is not Expected to be a
Taxable Transaction to TRW Shareholders (Page 32)
In the opinion of Gibson, Dunn & Crutcher LLP, counsel to Northrop Grumman,
the exchange of TRW shares for Northrop Grumman shares pursuant to the offer to
exchange and the TRW merger will be treated as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended,
which is referred to herein as the "Code," provided that certain factual
assumptions are satisfied. If the transactions so qualify, holders of TRW
shares generally will not recognize any gain or loss for United States federal
income tax purposes on the exchange of their TRW shares for Northrop Grumman
common stock in the offer to exchange and the TRW merger, except for any gain
or loss attributable to the receipt of cash in lieu of a fractional share of
Northrop Grumman common stock. The qualification of the offer to exchange and
the TRW merger as a reorganization is based on various factual assumptions, but
there can be no assurance at the present time that such factual assumptions
will in fact be satisfied. For more information, see "The Offer to
Exchange--Material United States Federal Income Tax Consequences of the Offer
to Exchange and the TRW Merger" on page 32.
The Offer to Exchange Is Currently Scheduled to Expire on March 29, 2002 (Page
27)
The offer to exchange is scheduled to expire at 12:00 midnight, New York
City time, on March 29, 2002. The term expiration date means 12:00 midnight,
New York City time, on March 29, 2002, unless Northrop Grumman extends the
period of time for which the offer to exchange is open, in which case the term
expiration date means the latest time and date on which the offer to exchange,
as so extended, expires.
The Offer to Exchange May Be Extended, Terminated or Amended (Page 27)
Northrop Grumman expressly reserves the right, in Northrop Grumman's sole
discretion, at any time or from time to time, to extend the period of time
during which the offer to exchange remains open, and Northrop Grumman can do so
by giving oral or written notice of the extension to the exchange agent.
Northrop Grumman is not providing any assurance that it will exercise this
right to extend the offer to exchange, although Northrop Grumman currently
intends to do so until all conditions have been satisfied or, to the extent
permissible, waived. During any extension, all TRW shares previously tendered
and not properly withdrawn will remain subject to the offer to exchange,
subject to the right of each shareholder of TRW to withdraw his or her TRW
shares.
5
Subject to the SEC's applicable rules and regulations, Northrop Grumman also
reserves the right, in its sole discretion, at any time or from time to time:
. to delay its acceptance for exchange or the exchange of any TRW shares, or
to terminate the offer to exchange, upon the failure of any of the
conditions of the offer to exchange to be satisfied prior to the
expiration date, or upon the failure of the condition relating to
antitrust approvals to be satisfied at any time after the expiration date;
and
. to waive any condition (other than the conditions relating to antitrust
approvals, the absence of an injunction and the effectiveness of the
registration statement for the Northrop Grumman common stock to be issued
in the offer to exchange) or otherwise to amend the offer to exchange in
any respect, by giving oral or written notice of such delay, termination
or amendment to the exchange agent and by making a public announcement.
However, Northrop Grumman may not waive the 1704 Limitation.
Northrop Grumman will follow any extension, termination, amendment or delay,
as promptly as practicable, with a public announcement. In the case of an
extension, any related announcement will be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act of 1934, as amended (the "Exchange Act'')),
which require that any material change in the information published, sent or
given to TRW's shareholders in connection with the offer to exchange be
promptly sent to those shareholders in a manner reasonably designed to inform
them of that change) and without limiting the manner in which Northrop Grumman
may choose to make any public announcement, Northrop Grumman assumes no
obligation to publish, advertise or otherwise communicate any public
announcement of this type other than by making a release to the Dow Jones News
Service.
The Exchange Shall Occur Promptly After the Expiration Date (Page 28)
Upon the terms and subject to the conditions of the offer to exchange
(including, if the offer to exchange is extended or amended, the terms and
conditions of any extension or amendment), Northrop Grumman will accept for
exchange, and will exchange, TRW shares validly tendered and not properly
withdrawn promptly after the expiration date and promptly after they are
tendered during any subsequent offering period that may apply.
Tendered Shares May Be Withdrawn at Any Time Prior to the Exchange of Those
Shares (Page 29)
TRW shares tendered pursuant to the offer to exchange may be withdrawn at
any time prior to the expiration date, and, unless Northrop Grumman previously
accepted them pursuant to the offer to exchange, may also be withdrawn at any
time after May 3, 2002.
Northrop Grumman May Provide a Subsequent Offering Period (Page 27)
Northrop Grumman may elect to provide a subsequent offering period of not
less than three nor more than twenty business days after the acceptance of TRW
shares pursuant to the offer to exchange if the requirements of Rule 14d-11
under the Exchange Act have been met. TRW's shareholders will not have the
right to withdraw TRW shares that they tender in the subsequent offering
period, if any.
Procedure for Tendering Shares (Page 30)
For TRW shareholders to validly tender TRW shares pursuant to the offer to
exchange, subject to the 1704 Limitation:
. a properly completed and duly executed letter of transmittal, along with
any required signature guarantees, or an agent's message in connection
with a book-entry transfer, and any other required documents, must be
received by the exchange agent at one of its addresses set forth on the
back cover of this offer to exchange, and certificates for tendered TRW
shares must be received by the exchange agent
6
at one of those addresses, or those TRW shares must be tendered pursuant
to the procedures for book- entry tender set forth (and a confirmation of
receipt of that tender received), in each case before the expiration date;
or
. shareholders must comply with the guaranteed delivery procedures set forth
in "The Offer to Exchange--Guaranteed Delivery" on page 31.
Reasons for the Offer to Exchange (Page 23)
Northrop Grumman is proposing the offer to exchange and the TRW merger
because it believes that the offer to exchange and the TRW merger will
significantly benefit Northrop Grumman's stockholders and customers. Northrop
Grumman believes that the offer to exchange and the TRW merger will provide
access to new product areas, increase diversification into new markets,
increase market presence and opportunities, provide a complimentary product mix
and increase operating efficiencies for the benefit of all Northrop Grumman
stockholders, including the former TRW shareholders.
Plans for TRW (Page 35)
Northrop Grumman is making the offer to exchange in order to acquire control
of, and ultimately the entire equity interest in, TRW. The offer to exchange is
the first step in its acquisition of TRW and is intended to facilitate the
acquisition of all TRW shares. Northrop Grumman intends, as soon as possible
after completion of the offer to exchange, to seek to have TRW merge with
Northrop Grumman or a wholly owned subsidiary of Northrop Grumman. The purpose
of the TRW merger would be to acquire all TRW shares not exchanged in the offer
to exchange. In the TRW merger, each outstanding share of TRW capital stock
(except for treasury shares of TRW and shares beneficially owned directly or
indirectly by Northrop Grumman for its own account) would be converted into the
right to receive shares of Northrop Grumman common stock at the same exchange
ratio used in the offer to exchange, subject to dissenters' rights under Ohio
law.
Once Northrop Grumman has completed the TRW merger, Northrop Grumman expects
that TRW would continue its current operations, except that it would cease to
be publicly owned and would instead be wholly owned by Northrop Grumman.
Northrop Grumman expects to promptly dispose of TRW's automotive business
either by selling that business to a third party or parties or by spinning it
off to the Northrop Grumman stockholders (including the former TRW
shareholders), or a combination thereof.
Dividend Policy of Northrop Grumman
The holders of Northrop Grumman common stock receive dividends if and when
declared by Northrop Grumman's board of directors out of legally available
funds. For the past 13 fiscal quarters, with the last quarter ended December
31, 2001, Northrop Grumman has paid a cash dividend of $0.40 per common share.
Following completion of the offer to exchange and the TRW merger, Northrop
Grumman expects to continue paying quarterly cash dividends on a basis
consistent with Northrop Grumman's past practice. However, the declaration and
payment of dividends will depend upon business conditions, operating results,
capital and reserve requirements, covenants in its debt instruments and
Northrop Grumman's board of directors' consideration of other relevant factors.
Northrop Grumman can give shareholders no assurance that Northrop Grumman will
continue to pay dividends on its common stock in the future.
No Dissenters' Rights in Connection with the Offer to Exchange Although
Dissenters' Rights Will Exist in Connection with the TRW Merger (Page 34)
No dissenters' rights are available in connection with the offer to
exchange. If the TRW merger is consummated, however, TRW shareholders will have
certain rights under the Ohio Revised Code to dissent and
7
demand dissenters' rights and to receive payment in cash of the fair value of
their shares. TRW shareholders who perfect such rights by complying with the
procedures set forth in Sections 1701.84 and Section 1701.85 will have the fair
value of their TRW shares determined by an Ohio trial court and will be
entitled to receive a cash payment equal to such fair value from the surviving
corporation. In addition, such dissenting shareholders would be entitled to
receive payment of a fair rate of interest at a rate determined by the trial
court on the amount determined to be the fair value of their TRW shares. In
determining the fair value of the shares, the court is required to take into
account all relevant factors, excluding any appreciation or depreciation in
market value resulting from the transactions. Accordingly, such determination
could be based upon considerations other than, or in addition to, the market
value of the TRW shares, including, among other things, asset values and
earning capacity. A copy of Sections 1701.84 and 1701.85 of the Ohio Revised
Code is provided in Annex B.
Material Differences in Rights of Stockholders (Page 52)
The governing documents of Northrop Grumman and TRW vary, and to that
extent, TRW shareholders will have different rights once they become Northrop
Grumman stockholders. Similarly, the laws of Ohio, TRW's state of
incorporation, differ from those of Delaware, Northrop Grumman's state of
incorporation. The differences are described in more detail under "Comparison
of Rights of Holders of Northrop Grumman Common Stock and TRW Capital Stock"
beginning on page 52.
Northrop Grumman Will Account for the Merger Using the Purchase Method (Page 42)
Northrop Grumman will account for the merger as a purchase for financial
reporting purposes.
Forward-Looking Statements May Prove Inaccurate (Page 61)
Certain statements and assumptions in this offer to exchange and in the
documents incorporated by reference contain or are based on "forward-looking"
information and involve risks and uncertainties. Such forward-looking
information includes statements as to the impact of the proposed acquisition on
revenues and earnings. Such statements are subject to numerous assumptions and
uncertainties, many of which are outside Northrop Grumman's control. These
include governmental regulatory processes, Northrop Grumman's ability to
successfully integrate the operations of TRW, achieve a successful disposition
or other resolution with respect to the TRW automotive business, assumptions
with respect to future revenues, expected program performance and cash flows,
the outcome of contingencies including litigation, environmental remediation,
divestitures of businesses, and anticipated costs of capital investments.
Northrop Grumman's operations are subject to various additional risks and
uncertainties resulting from its position as a supplier, either directly or as
subcontractor or team member, to the U.S. Government and its agencies as well
as to foreign governments and agencies. Actual outcomes are dependent upon many
factors, including, without limitation, Northrop Grumman's successful
performance of internal plans; government customers' budgetary restraints;
customer changes in short-range and long-range plans; domestic and
international competition in both the defense and commercial areas; product
performance; continued development and acceptance of new products; performance
issues with key suppliers and subcontractors; government import and export
policies; acquisition or termination of government contracts; the outcome of
political and legal processes; legal, financial, and governmental risks related
to international transactions and global needs for military aircraft, military
and civilian electronic systems and support and information technology; as well
as other economic, political and technological risks and uncertainties and
other risk factors set out in Northrop Grumman's filings from time to time with
the SEC, including, without limitation, Northrop Grumman's reports on Form 10-K
and Form 10-Q.
8
RISK FACTORS
In deciding whether to tender TRW shares for exchange pursuant to the offer
to exchange, TRW shareholders should read carefully this offer to exchange and
all other documents to which this offer to exchange refers. TRW shareholders
should also carefully consider the following factors:
Successful Integration of the Northrop Grumman and TRW Businesses Is Not Assured
Integrating and coordinating the operations and personnel of Northrop
Grumman and TRW will involve complex technological, operational and
personnel-related challenges. This process will be time-consuming and expensive
and may disrupt the business of the companies. Additional elements of
integration of the Litton and Newport News acquisitions may require significant
management time and attention. While the integration of Litton and Newport News
is expected to be substantially complete by the time of the TRW merger, the
integration of the companies may not timely result in the full benefits
expected by Northrop Grumman. The difficulties, costs and delays that could be
encountered may include:
. unanticipated issues in integrating the information, communications and
other systems;
. negative impacts on employee morale and performance as a result of job
changes and reassignments;
. loss of customers;
. unanticipated incompatibility of systems, procedures and operating methods;
. unanticipated costs in terminating or relocating facilities and
operations; and
. the effect of complying with any government imposed organizational
conflict-of-interest rules.
The Exchange Ratio Will Not be Known Until Two Full Trading Days Prior to
Expiration of the Offer to Exchange
The exchange ratio will be determined by dividing $47.00 by the average of
the closing sale prices for a share of Northrop Grumman common stock on the New
York Stock Exchange as reported in the The Wall Street Journal over the five
consecutive trading days ending immediately prior to the second trading day
prior to the expiration of the offer to exchange. Accordingly, TRW shareholders
will not know the exchange ratio until immediately prior to the opening of the
last two trading days during which the offer to exchange is open. Further, the
market price of Northrop Grumman common stock may change after the
determination of the exchange ratio, and therefore the exchange ratio may not
reflect the actual market price for Northrop Grumman common stock following
completion of the offer to exchange.
The Exchange Ratio of the Offer to Exchange Could Work to the Disadvantage of
TRW's Shareholders
Northrop Grumman is offering to exchange shares of Northrop Grumman common
stock designed to have a value of $47.00 for each outstanding share of TRW
common stock and for each outstanding share of the Serial Preference Stock II
multiplied by the applicable conversion rate of the Serial Preference Stock II.
However, because of the manner in which the exchange ratio is calculated, the
Northrop Grumman common stock to be received by holders of TRW capital stock
will have a value of $47.00 per share only if the market price of the Northrop
Grumman common stock is between $103.00 and $113.00. Holders of TRW capital
stock will receive less than $47.00 per share of value if the market price of
the Northrop Grumman common stock is less than $103.00 and will receive more
than $47.00 of value if the market price of the Northrop Grumman common stock
is more than $113.00.
The Receipt of Northrop Common Stock Could be Taxable to TRW Shareholders
Depending on Facts Surrounding the Offer to Exchange and the TRW Merger
Northrop Grumman does not plan to request a ruling from the Internal Revenue
Service with regard to the tax consequences of the offer to exchange and/or the
TRW merger. The offer to exchange and the TRW merger
9
are expected to qualify as a reorganization within the meaning of Section
368(a) of the Code provided that certain factual assumptions are satisfied,
including the following (i) the offer to exchange and the TRW merger are
consummated in the manner provided herein, (ii) none of Northrop Grumman, TRW
or any related party acquire or redeem, in connection with the offer to
exchange or the TRW merger, shares of Northrop Grumman common stock issued to
TRW shareholders pursuant to the offer or the TRW merger, and (iii) TRW will
continue a significant line of its business or will use a significant portion
of its historic business assets in a business. If such factual assumptions are
not satisfied, a TRW shareholder's exchange of TRW shares for Northrop Grumman
common stock in the offer to exchange or the TRW merger could be a taxable
transaction, depending on the surrounding facts. TRW shareholders are urged to
consult their tax advisors concerning the United States federal income and
other tax consequences of participation in the offer to exchange and/or the TRW
merger.
Resales of Northrop Grumman Common Stock Following the Offer to Exchange May
Cause the Market Price of that Stock to Fall
As of February 27, 2002, Northrop Grumman had 112,651,366 shares of common
stock outstanding and 18,900,993 shares subject to outstanding options and
other rights to purchase or acquire. Northrop Grumman expects that it will
issue a maximum of 55,092,761 shares in connection with the offer to exchange
and the TRW merger. The issuance of these new shares and the sale of additional
shares of Northrop Grumman's common stock that may become eligible for sale in
the public market from time to time upon exercise of options could have the
effect of depressing the market price for Northrop Grumman's common stock.
The Trading Price of Northrop Grumman Common Stock May Be Affected by Factors
Different from Those Affecting the Price of TRW Capital Stock
Upon completion of the offer to exchange and the TRW merger, holders of TRW
capital stock will become holders of Northrop Grumman common stock. Northrop
Grumman's business differs from that of TRW, and Northrop Grumman's results of
operations, as well as the trading price of Northrop Grumman common stock, may
be affected by factors different from those affecting TRW's results of
operations and the price of TRW capital stock.
Northrop Grumman's Indebtedness Following Completion of the Offer to Exchange
Will Be Higher Than Northrop Grumman's Existing Indebtedness
The indebtedness of Northrop Grumman as of March 1, 2001 was approximately
$5.1 billion. Northrop Grumman's pro forma indebtedness as of March 1, 2001
giving effect to the offer to exchange and the TRW merger (as described in
"Northrop Grumman Selected Historical and Unaudited Pro Forma Condensed
Combined Financial Data") is approximately $10.3 billion. As a result of the
increase in debt, demands on the cash resources of Northrop Grumman will
increase after the TRW merger, which could have important effects on an
investment in Northrop Grumman's common stock. For example, while the impact of
this increased indebtedness will be addressed by the combined cash flows of
Northrop Grumman and TRW, the increased levels of indebtedness could
nonetheless:
. reduce funds available for investment in research and development and
capital expenditures; or
. create competitive disadvantages compared to other companies with lower
debt levels.
Northrop Grumman expects that a significant portion of the debt assumed in
the acquisition of TRW will be transferred or reduced with the sale or spin off
of the TRW automotive business. However, no decisions have been made as to how
much debt will be transferred, and, as noted above, there can be no assurance
that the transfer of the TRW automotive business will occur.
10
Northrop Grumman May Be Unable to Retain Personnel Who Are Key to Northrop
Grumman's and TRW's Businesses
The success of Northrop Grumman's operations is dependent, among other
things, on Northrop Grumman's ability to attract and retain highly qualified
professional personnel. Competition for key personnel in the various localities
and business segments in which Northrop Grumman operates is intense. Northrop
Grumman's ability to attract and retain key personnel, in particular senior
officers and experienced and top rate engineers, is dependent on a number of
factors, including prevailing market conditions and compensation packages
offered by companies competing for the same talent, who may offer compensation
packages that include considerable equity based incentives through stock option
or similar programs. These same pressures and concerns also apply to TRW's
business.
Risks Related to the Business of Northrop Grumman and TRW
Results of operations of Northrop Grumman will be subject to numerous risks
affecting the businesses of Northrop Grumman and TRW, many of which are beyond
the companies' control. Many of the risks affecting Northrop Grumman are
identified under "Forward-Looking Statements" on page 61.
11
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the unaudited historical ratios of earnings
to fixed charges of Northrop Systems (formerly Northrop Grumman Corporation)
for each of the years in the five-year period ended December 31, 2000 and for
the nine months ended September 30, 2000 and for Northrop Grumman for the nine
months ended September 30, 2001 and the unaudited pro forma combined ratios of
earnings to fixed charges of Northrop Systems, Northrop Grumman, Litton,
Newport News and TRW for the year ended December 31, 2000 and the nine months
ended September 30, 2001.
The unaudited pro forma ratios of earnings to fixed charges are based upon
the historical financial statements of Northrop Systems, Northrop Grumman,
Litton, Newport News and TRW adjusted to give effect to the Litton, Newport
News and TRW acquisitions. The pro forma amounts have been developed from (a)
the audited consolidated financial statements of Northrop Systems contained in
Northrop Systems' Annual Report on Form 10-K/A for the fiscal year ended
December 31, 2000 and the unaudited consolidated financial statements of
Northrop Grumman contained in its Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2001, which are incorporated by reference in this
offer to exchange, (b) the audited consolidated financial statements contained
in Litton's Annual Report on Form 10-K for the fiscal year ended July 31, 2000
and from the unaudited consolidated financial statements contained in Litton's
Quarterly Report on Form 10-Q for the period ended January 31, 2001, which are
incorporated by reference in this offer to exchange, (c) the audited
consolidated financial statements of Newport News contained in its Annual
Report on Form 10-K for the fiscal year ended December 31, 2000 and the
unaudited consolidated financial statements of Newport News contained in its
Quarterly Report on Form 10-Q for the period ended September 16, 2001, which
are incorporated by reference in this offer to exchange, and (d) the audited
consolidated financial statements of TRW contained in its Annual Report on Form
10-K for the year ended December 31, 2000 and the unaudited consolidated
financial statements of TRW contained in its Quarterly Report on Form 10-Q for
the quarter ended September 30, 2001, which are incorporated by reference in
this offer to exchange. In addition, the audited consolidated financial
statements contained in Litton's Annual Report on Form 10-K for the fiscal year
ended July 31, 2000 and the unaudited consolidated financial statements of
Litton contained in Litton's Quarterly Report on Form 10-Q for the period ended
January 31, 2001 have been used to bring the financial reporting periods of
Litton to within 90 days of those of Northrop Systems and Northrop Grumman.
Pro Forma Northrop Grumman Historical Data
-------------------------- -------------------------------------
Nine Months Fiscal Year Nine Months Year Ended December 31
Ended Ended Ended ------------------------
September 30, December 31, September 30
------------
2001 2000 2001 2000 2000 1999 1998 1997 1996
------------- ------------ ---- ---- ---- ---- ---- ---- ----
1.56 2.13 2.32 5.32 5.26 3.78 2.11 2.68 2.50
For purposes of computing the ratios of earnings to fixed charges, earnings
represent earnings from continuing operations before income taxes and fixed
charges, and fixed charges consist of interest expense, the portion of rental
expense calculated to be representative of the interest factor, amortization of
discounts and capitalized expenses related to indebtedness, and preferred stock
dividends. The ratios should be read in conjunction with the financial
statements and other financial data included or incorporated by reference in
this Offer to Exchange. See "Additional Information" beginning on page 58.
12
NORTHROP GRUMMAN
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data for Northrop Systems (formerly Northrop Grumman Corporation) for each of
the years in the five-year period ended December 31, 2000 and for the nine
months ended September 30, 2000 and for Northrop Grumman for the nine months
ended September 30, 2001, and selected unaudited pro forma condensed combined
financial data of Northrop Systems, Northrop Grumman, Litton, Newport News and
TRW for the year ended December 31, 2000 and the nine months ended September
30, 2001. Historical consolidated financial data for the years ended December
31, 2000, 1999, 1998 and 1997 have been derived from, and are qualified by
reference to, the audited consolidated financial statements and notes thereto
filed by Northrop Systems with the SEC. Historical consolidated financial data
for the year ended December 31, 1996 and for the nine months ended September
30, 2001 and 2000 have been derived from unaudited consolidated financial
statements and notes thereto of Northrop Systems and Northrop Grumman. The
selected historical financial data for each of the years in the five-year
period ending December 31, 2000 do not give affect to the Litton or Newport
News acquisitions. The historical operating data for the nine months ended
September 30, 2001 include six months of Litton's operating results subsequent
to the acquisition on April 3, 2001.
The operating results for the nine months ended September 30, 2001 are not
necessarily indicative of results for the full fiscal year ending December 31,
2001. TRW shareholders should read this summary together with the financial
statements referred to below and incorporated by reference in this offer to
exchange, and the accompanying notes and management's discussion and analysis
of operations and financial conditions of Northrop Systems, Northrop Grumman,
Litton, Newport News and TRW contained in such reports.
The Unaudited Pro Forma Condensed Combined Financial Data is based upon the
historical financial statements of Northrop Systems, Northrop Grumman, Litton,
Newport News and TRW adjusted to give effect to the Litton, Newport News and
TRW acquisitions. The pro forma financial statements have been developed from
(a) the audited consolidated financial statements of Northrop Systems contained
in its Annual Report on Form 10-K/A for the year ended December 31, 2000 and
the unaudited consolidated financial statements of Northrop Grumman contained
in its Quarterly Report on Form 10-Q for the nine months ended September 30,
2001, which are incorporated by reference in this offer to exchange, (b) the
audited consolidated financial statements of Litton contained in its Annual
Report on Form 10-K for the fiscal year ended July 31, 2000 and the unaudited
consolidated financial statements of Litton contained in its Quarterly Report
on Form 10-Q for the period ended January 31, 2001, which are incorporated by
reference in this offer to exchange, (c) the audited consolidated financial
statements of Newport News contained in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 and the unaudited consolidated financial
statements of Newport News contained in its Quarterly Report on Form 10-Q for
the period ended September 16, 2001, which are incorporated by reference in
this offer to exchange, and (d) the audited consolidated financial statements
of TRW contained in its Annual Report on Form 10-K for the year ended December
31, 2000 and the unaudited consolidated financial statements of TRW contained
in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2001,
which are incorporated by reference in this offer to exchange. In addition, the
audited consolidated financial statements contained in Litton's Annual Report
on Form 10-K for the fiscal year ended July 31, 2000 and the unaudited
consolidated financial statements of Litton contained in Litton's Quarterly
Report on Form 10-Q for the period ended January 31, 2001 have been used to
bring the financial reporting periods of Litton to within 90 days of those of
Northrop Systems and Northrop Grumman.
The final determination and allocation of the purchase price paid for the
Litton, Newport News and TRW acquisitions may differ from the amounts assumed
in this Unaudited Pro Forma Condensed Combined Financial Data.
13
The acquisition of Litton, which is valued at approximately $5.2 billion,
including the assumption of Litton's net debt of $1.3 billion, is accounted for
using the purchase method of accounting. Under the purchase method of
accounting, the purchase price is allocated to the underlying tangible and
intangible assets acquired and liabilities assumed based on their respective
fair market values, with the excess recorded as goodwill. The Unaudited Pro
Forma Condensed Combined Financial Statements reflect preliminary estimates of
the fair market value of the Litton assets acquired and liabilities assumed and
the related allocations of purchase price, and preliminary estimates of
adjustments necessary to conform Litton data to Northrop Grumman's accounting
policies. The Unaudited Pro Forma Condensed Combined Financial Statements do
not include the recognition of liabilities associated with certain potential
restructuring activities. Northrop Grumman is currently reviewing the
preliminary estimates of the fair market value of the Litton assets acquired
and liabilities assumed, including valuations associated with certain contracts
and valuation study results for intangible assets, property, plant and
equipment, and retiree benefits assets and liabilities. Northrop Grumman also
is evaluating several possible restructuring activities of Litton operations.
The final determination of the fair market value of assets acquired and
liabilities assumed and final allocation of the purchase price may differ from
the amounts assumed in these Unaudited Pro Forma Condensed Combined Financial
Statements. Adjustments to the purchase price allocations will be finalized by
March 31, 2002, and will be reflected in future Northrop Grumman filings. There
can be no assurance that such adjustments will not be material.
With the exception of Newport News' long-term debt assumed, as of the date
of this offer to exchange Northrop Grumman has not completed the valuation
studies necessary to arrive at the required estimates of the fair market value
of the Newport News assets acquired and TRW assets to be acquired and the
Newport News liabilities assumed and TRW liabilities to be assumed and the
related allocations of purchase price, nor has it identified the adjustments
necessary, if any, to conform Newport News or TRW data to Northrop Grumman's
accounting policies. Accordingly, Northrop Grumman has used the historical book
values of the assets and liabilities of Newport News, other than long-term
debt, and TRW and has used the historical revenue recognition policies of
Newport News and TRW to prepare the Unaudited Pro Forma Condensed Combined
Financial Statements set forth herein, with the excess of the purchase price
over the historical net assets of Newport News and TRW recorded as goodwill and
other purchased intangibles. Once Northrop Grumman has completed the valuation
studies necessary to finalize the required purchase price allocations and
identified any necessary conforming changes, such pro forma financial
statements will be subject to adjustment. Such adjustments will likely result
in changes to the pro forma statement of financial position to reflect the
final allocations of purchase price and the pro forma statements of income, and
there can be no assurance that such adjustments will not be material.
The Unaudited Pro Forma Condensed Combined Financial Data is provided for
illustrative purposes only and does not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Northrop Grumman would have been had Northrop Grumman's offer to exchange and
the Litton, Newport News, and TRW acquisitions occurred on the dates assumed,
nor is it necessarily indicative of future consolidated results of operations
or financial position.
The Unaudited Pro Forma Condensed Combined Financial Data does not include
the realization of cost savings from operating efficiencies, synergies or other
restructurings resulting from the Litton, Newport News and TRW acquisitions.
The Unaudited Pro Forma Condensed Combined Financial Data should be read in
conjunction with the separate historical consolidated financial statements and
accompanying notes of Northrop Systems, Northrop Grumman, Litton, Newport News
and TRW that are incorporated by reference in this offer to exchange and the
Unaudited Pro Forma Condensed Combined Financial Statements on page .
14
Northrop Northrop
Grumman/ Grumman/
Litton/ Litton/
Newport Newport
News/TRW Northrop Grumman News/TRW Northrop Grumman Historical Data
Pro Forma Historical Data Pro Forma Year ended December 31,
------------- --------------------------- ------------ ----------------------------------
Nine Months Nine Months Nine Months Year
Ended Ended Ended Ended
September 30, September 30, September 30, December 31,
2001 2001 2000 2000 2000 1999 1998 1997 1996
------------- ------------- ------------- ------------ ------ ------ ------ ------ ------
Operating Data (in millions,
except per share data)
Net Sales......................... $24,488 $ 9,254 $5,389 $32,464 $7,618 $7,616 $7,367 $7,798 $7,667
Income from continuing operations,
net of tax...................... 267 296 481 1,073 625 474 193 318 330
Basic Earnings per share, from
continuing operations........... 1.60 3.53 6.86 6.82 8.86 6.84 2.82 4.76 5.27
Diluted Earnings per share, from
continuing operations........... 1.59 3.50 6.84 6.80 8.82 6.80 2.78 4.67 5.18
Cash Dividends per common share... 1.20 1.20 1.20 1.60 1.60 1.60 1.60 1.60 1.60
Balance Sheet Data
Total Assets...................... $39,814 $17,214 $9,354 N/A $9,622 $9,285 $9,536 $9,677 $9,645
Total long term obligations....... 16,689 7,636 3,111 N/A 3,015 3,564 4,319 4,339 4,694
Redeemable preferred stock........ 350 350 0 N/A 0 0 0 0 0
15
SELECTED HISTORICAL FINANCIAL DATA OF TRW
The following is a summary of selected consolidated financial data of TRW
for each of the years in the five-year period ended December 31, 2000 and the
nine months ended September 30, 2001 and September 30, 2000. The operating
results for the nine months ended September 30, 2001 are not necessarily
indicative of results for the full fiscal year ended December 31, 2001. This
information is derived from the audited consolidated financial statements of
TRW contained in its Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, the unaudited consolidated financial statements of TRW
contained in its Quarterly Report on Form 10-Q for the period ended September
30, 2001, and is qualified in its entirety by such documents. See "Additional
Information" on page 61. Shareholders should read this summary together with
the financial statements which are incorporated by reference in this offer to
exchange and their accompanying notes and management's discussion and analysis
of operations and financial conditions of TRW contained in such reports.
Nine Months ended Year Ended December 31
------------------- ---------------------------------------
Sept. 30, Sept. 30,
2001 2000 2000 1999 1998 1997 1996
--------- --------- ------- ------- ------- ------- ------
(in millions, except per share)
Operating Data
(in millions, except per share
data)
Revenues......................... $12,305 $13,094 $17,231 $16,969 $11,886 $10,831 $9,857
Net earnings (loss).............. (22) 441 438 469 477 (49) 480
Net earnings (loss) Per common
share basic.................... (0.18) 3.58 3.55 3.87 3.93 (0.40) 3.72
Net earnings (loss) per common
share diluted.................. (0.18) 3.52 3.51 3.80 3.83 (0.40) 3.62
Cash dividends declared per share 0.70 0.66 1.36 1.32 1.28 1.24 1.17
Balance Sheet Data
Total Assets..................... $15,350 $16,682 $16,467 $18,266 $ 7,169 $ 6,410 $5,899
Total long term obligations...... 7,640 8,082 7,956 8,825 2,273 2,067 1,553
16
COMPARATIVE PER SHARE INFORMATION
The following table summarizes unaudited per share information for Northrop
Systems, Northrop Grumman, Litton, Newport News and TRW on a historical basis,
pro forma combined basis for Northrop Grumman and equivalent pro forma combined
basis for TRW. The following information should be read in conjunction with the
audited consolidated financial statements of Northrop Systems, Litton, Newport
News and TRW, the unaudited interim consolidated financial statements of
Northrop Grumman, Litton, Newport News and TRW, and the unaudited pro forma
condensed combined financial information included elsewhere or incorporated by
reference in this offer to exchange. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if Northrop Grumman's
offer to exchange and the Litton, Newport News and TRW acquisitions had been
completed as of the beginning of the respective periods presented, nor is it
necessarily indicative of the future operating results or financial position of
the combined companies. The historical book value per share is computed by
dividing total stockholders' equity by the number of common shares outstanding
at the end of the period. The pro forma per share earnings from continuing
operations are computed by dividing the pro forma income from continuing
operations available to holders of common stock by the pro forma weighted
average number of shares outstanding. The pro forma combined book value per
share is computed by dividing total pro forma stockholders' equity by the pro
forma number of common shares outstanding at the end of the period. TRW
equivalent pro forma combined per share amounts are calculated by multiplying
Northrop Grumman pro forma combined per share amounts by 0.4204, the percentage
of a share of Northrop Grumman common stock that would be exchanged for each
share of TRW common stock in the offer to exchange, based upon a Northrop
Grumman common stock price of $111.79 per share, which represents the five-day
average of the closing sales prices for a share of Northrop Grumman common
stock on the New York Stock Exchange from February 20, 2002 through February
26, 2002. The historical per share information of Litton, Newport News and TRW
was derived from their respective historical annual and quarterly financial
statements and was adjusted as necessary to bring the information to within 90
days of the dates listed below.
Nine Months
Ended Year Ended
September 30, 2001 December 31, 2000
------------------ -----------------
Northrop Grumman and Northrop Systems--Historical
Historical per common share:
Income per basic share........................ $ 3.53 $ 8.86
Income per diluted share...................... 3.50 8.82
Dividends declared--Common.................... 1.20 1.60
Dividends declared--Preferred................. 3.44 --
Book value per share.......................... 61.57 54.38
Litton--Historical
Historical per common share:
Income per basic share........................ N/A $ 4.95
Income per diluted share...................... N/A 4.90
Dividends declared--Common.................... N/A --
Dividends declared--Preferred................. N/A 2.00
Book value per share.......................... N/A 35.24
Newport News--Historical
Historical per common share:
Income per basic share........................ $ 2.43 $ 2.91
Income per diluted share...................... 2.29 2.77
Dividends declared--Common.................... 0.12 0.16
Dividends declared--Preferred................. -- --
Book value per share.......................... 10.29 8.69
17
Nine Months
Ended Year Ended
September 30, 2001 December 31, 2000
------------------ -----------------
TRW--Historical
Historical per common share:
Income per basic share...................................... $(0.18) $ 3.55
Income per diluted share.................................... (0.18) 3.51
Dividends declared--Common.................................. 0.70 1.36
Dividends declared--Preferred............................... -- --
Book value per share........................................ 18.68 21.34
Unaudited Pro Forma Combined
Unaudited pro forma per share of Northrop Grumman common stock:
Income per basic share...................................... $ 1.60 $ 6.82
Income per diluted share.................................... 1.59 6.80
Dividends declared--Common.................................. 1.20 1.60
Dividends declared--Preferred............................... 5.25 7.00
Book value per share........................................ 82.76 N/A
Unaudited Pro Forma TRW Equivalents
Unaudited pro forma per share of TRW common shares:
Income per basic share...................................... $ 0.67 $ 2.87
Income per diluted share.................................... 0.67 2.86
Dividends declared--Common.................................. 0.50 0.67
Dividends declared--Preferred............................... 2.21 2.94
Book value per share........................................ 34.79 N/A
18
COMPARATIVE MARKET DATA
Northrop Grumman's common stock trades on the New York Stock Exchange and on
the Pacific Stock Exchange under the symbol NOC and TRW's common stock trades
on the New York Stock Exchange, the Pacific Stock Exchange, the Chicago Stock
Exchange and the Philadelphia Stock Exchange under the symbol TRW. The
following table presents trading information for Northrop Grumman and TRW
common stock on February 21, 2002 and March 1, 2002. February 21, 2002 was the
last trading day before the public announcement of Northrop Grumman's proposal
for a business combination of Northrop Grumman and TRW, and March 1, 2002 was
the last trading day before the date of this offer to exchange. TRW equivalent
per share amounts are calculated by multiplying Northrop Grumman per share
amounts by 0.4352, the percentage of a share of Northrop Grumman common stock
that would be exchanged for each share of TRW capital stock in Northrop
Grumman's offer to exchange, based upon a Northrop Grumman common stock price
of $108.00 per share. Shareholders should read the information presented below
in conjunction with "Comparative Per Share Market Price and Dividend
Information" on page 43.
Northrop Grumman TRW TRW
Common Stock Common Stock Equivalent Per Share
----------------------- --------------------- ---------------------
HIGH LOW CLOSING HIGH LOW CLOSING HIGH LOW CLOSING
February 21, 2002....... $118.89 $114.81 $117.80 $40.05 $38.91 $39.80 $51.74 $49.96 $51.26
March 1, 2002........... $108.00 $106.80 $107.75 $50.61 $50.00 $50.05 $47.00 $46.48 $46.89
19
INFORMATION ABOUT NORTHROP GRUMMAN AND TRW
Northrop Grumman Corporation
Northrop Grumman provides technologically advanced, innovative products,
services and solutions in defense and commercial electronics, information
technology, systems integration and nuclear and non-nuclear shipbuilding and
systems. As a prime contractor, principal subcontractor, partner, or preferred
supplier, Northrop Grumman participates in many high-priority defense and
commercial technology programs in the United States and abroad. While Northrop
Grumman is subject to the usual vagaries of the marketplace, it is also
affected by the unique characteristics of the defense industry and by certain
elements peculiar to its own business mix. It is common in this industry for
work on major programs to be shared among a number of companies. A company
competing to be a prime contractor may, upon ultimate award of the contract,
turn out to be a subcontractor. It is not uncommon to compete with customers,
and simultaneously on other contracts, to be either a supplier to or a customer
of such competitor. The nature of major defense programs, conducted under
binding contracts, allows companies that perform well to benefit from a level
of program continuity unknown in many industries. While Northrop Grumman
conducts most of its business with the U.S. Government, principally the
Department of Defense, domestic and international commercial sales still
represent a significant portion of our business.
Northrop Grumman is aligned into six business sectors as follows:
Integrated Systems. This sector includes the design, development and
production of airborne early warning, electronic warfare and surveillance and
battlefield management systems. Integrated Systems is the prime contractor for
the Joint STARS advanced airborne targeting and battle management system, the
U.S. Air Force's B-2 Spirit stealth bomber, unmanned vehicles including The
Global Hawk, and the EA-6B Prowler electronic countermeasures aircraft, and is
upgrading the E-2C Hawkeye early warning aircraft. Integrated Systems also has
a principal role in producing the U.S. Navy's F/A18 Hornet strike fighter and
in the development and future production of the F-35 Joint Strike Fighter.
Electronic Systems. This sector includes the design, development,
manufacture and integration of a wide variety of defense electronics and
systems, airspace management systems, precision weapons, marine systems,
logistics systems, space systems, and automation and information systems.
Significant programs include fire control radars for the F-16 and F-22 fighter
aircraft and the Longbow Apache helicopter, the AWACS airborne early warning
radar, the Joint STARS air-to-ground surveillance radar sensor, the Longbow
Hellfire missile and the BAT brilliant anti-armor submunition. This sector also
provides tactical military radars and country-wide air defense systems, plus
airborne electronic countermeasures systems intended to jam enemy aircraft and
weapons systems. The sector includes the advanced electronics businesses, which
design, develop and manufacture inertial navigation, guidance and control, IFF
(identification friend or foe), and marine electronic systems, and provide
electronic warfare systems and integrated avionics systems and shipboard
information and communication systems. The U.S. Government is a significant
customer.
Information Technology. This sector includes the design, development,
operation and support of computer systems for scientific and management
information. Information Technology has extensive expertise in command,
control, communications, computers, intelligence, surveillance and
reconnaissance (C4ISR). It is a key management support element for major
weapons systems, such as the U.S. Navy's AEGIS class destroyer, and also
provides mission planning for the U.S. Navy, Air Force and Special Operations
Command. Information Technology provides base operations support for NASA's
Kennedy Space Center, Cape Canaveral Air Station and Patrick Air Force Base,
among others. In addition, Information Technology provides information
technology services to commercial customers and to the other Northrop Grumman
sectors. Information Technology includes the information systems businesses,
which design, develop, integrate and support computer-based information systems
and provide information technology and services primarily for government
customers.
Ship Systems. This sector is engaged in the building of large multimission
non-nuclear surface ships for the U.S. Navy as well as for other government and
commercial customers worldwide and is a provider of overhaul, repair,
modernization, ship design and engineering services. The U.S. Government is a
significant customer.
20
Newport News. Newport News is the largest non-government-owned shipyard in
the U.S., as measured by each of revenues, size of facilities and number of
employees. Its primary business is the design, construction, repair,
maintenance, overhaul, life-cycle support and refueling of nuclear-powered
aircraft carriers and the design, life-cyle support and construction of nuclear
powered submarines for the U.S. Navy.
Component Technologies. This sector includes international suppliers of
complex backplanes, connectors, laser crystals, solder materials, specialty
products and other electronic components used primarily in the
telecommunications, industrial and computer markets.
The principal executive offices of Northrop Grumman are located at 1840
Century Park East, Los Angeles, California 90067 and its telephone number is
(310) 553-6262.
Additional information concerning Northrop Grumman is included in the
Northrop Grumman reports incorporated by reference in this offer to exchange.
See "Additional Information" beginning on page 61.
TRW
TRW provides advanced technology products and services. The principal
business of TRW and its subsidiaries is the design, manufacture and sale of
products and the performance of systems engineering, research and technical
services for industry and the U.S. Government in the automotive and aerospace
and information systems markets. In 2000, TRW operated its business in the
following seven operating segments:
. Occupant Safety Systems;
. Chassis Systems;
. Automotive Electronics;
. Other Automotive;
. Space and Electronics;
. Systems & Information Technology; and
. Aeronautical Systems.
The principal office of TRW is located at 1900 Richmond Road, Cleveland,
Ohio 44124, telephone number (216) 291-7000.
Additional information concerning TRW is included in the TRW reports
incorporated by reference in this offer to exchange. See "Additional
Information" beginning on page 61.
21
REASONS FOR THE OFFER TO EXCHANGE
Northrop Grumman believes that the proposed acquisition of TRW by means of
the offer to exchange and the TRW merger will produce the following benefits:
. Access to New Product Areas. TRW's proprietary technology and products
will provide Northrop Grumman with technology and products to complement
Northrop Grumman's existing technology and products.
. Increased Diversification into New Markets. The combination of Northrop
Grumman and TRW provides the affiliated entities with the opportunity for
diversification into new markets and access to new customers.
. Increased Market Presence and Opportunities. The combination of Northrop
Grumman and TRW provides the affiliated entities with increased market
presence and opportunities for growth that could allow them to be better
able to respond to the needs of customers, the increased competitiveness
of the marketplace and opportunities that changes in the market for their
respective products might bring.
. Product Mix. The complementary nature of Northrop Grumman's and TRW's
products and services will benefit clients of both companies.
. Operating Efficiencies. The combination of Northrop Grumman and TRW
provides the opportunity for potential economies of scale and cost savings.
22
BACKGROUND OF THE OFFER TO EXCHANGE
Background
Northrop Grumman's Proposal. On February 21, 2002, Northrop Grumman sent a
letter to TRW, setting forth a proposal for a business combination between TRW
and Northrop Grumman. On February 22, 2002, Northrop Grumman issued a press
release which attached a copy of the letter.
The full text of the Northrop Grumman letter is as follows:
February 21, 2002
Philip A. Odeen
Office of the Chief Executive
Kenneth W. Freeman
Lead Director
TRW Inc.
1900 Richmond Road
Cleveland, OH 44124
Gentlemen,
As you know from prior conversations between our companies, for quite some
time we have believed that a merger of the TRW Inc. ("TRW") aerospace and
information systems businesses with the complementary operations of Northrop
Grumman Corporation ("Northrop") would be a compelling strategic combination in
the best interests of stockholders, customers and employees of both
corporations. I am writing at this time to formally propose a transaction for
this purpose.
Based upon publicly available information, Northrop is prepared to provide
all TRW stockholders with $47.00 in Northrop common stock for each share of TRW
common stock. The transaction will be structured so that the receipt of
Northrop stock by TRW stockholders will be tax-free. The proposed $47.00 per
share of TRW common stock represents a premium of 18% over today's closing
price, a premium of 22% over the average trading price for the last twelve
months and is 4% over the highest closing price for the last twelve months. We
would welcome the opportunity to consider non-public information concerning
TRW, and we are prepared to consider in our offer any enhanced values that may
be demonstrated by such information. Naturally, we are prepared to provide TRW
and its representatives with a similar "due diligence" opportunity concerning
Northrop non-public information.
Upon completion of the acquisition transaction, it is Northrop's intention
to proceed with the separation of the TRW automotive business from the rest of
the company immediately. We recognize that the automotive business is an
outstanding operation in its own right, but we believe that it does not
logically fit with either your or our other business segments.
Northrop has successfully completed the integration of many large
acquisitions in recent years, and I believe we have earned the reputation for
recognizing the continuing value and contribution of the executives of those
acquired companies. We have also demonstrated fairness and evenhandedness in
dealing with employees of the acquired companies and for scrupulously observing
employees' rights to compensation and benefits.
Northrop is prepared to begin immediately with the due diligence process and
negotiation of a definitive acquisition agreement for the approval of our
respective Boards of Directors. With full cooperation from both
23
sides, we can conclude our agreement no later than March 11, 2002 and commence
immediately the necessary proceedings for stockholder approval in accordance
with Ohio law and for approval of our own stockholders. Our antitrust counsel
has advised us that delays in connection with the antitrust review process
should be minimal; and we believe a transaction could realistically be
completed in the third quarter of this year.
Ron and I sincerely believe that a combination of TRW's aerospace and
information systems businesses with our own will maximize the opportunities to
enhance the value of those operations for the benefit of all our stockholders.
Not only are the operations highly complementary, but the TRW operations will
enjoy the support of a stronger balance sheet.
In light of the importance of this proposal to Northrop's shareholders, we
will be publicly disclosing this letter. Should you have any questions
concerning our offer, I and our representatives are prepared to speak with you
at any time. We would appreciate your response to this offer by the close of
business February 27, 2002.
Sincerely,
/s/
_____________________________________
Kent Kresa
On March 3, 2002, Northrop Grumman publicly announced that in light of the
lack of a substantive response from TRW, it was commencing the offer to
exchange. Later on March 3, 2002 TRW publicly announced that it was sending a
letter to Northrop indicating that the TRW Board had concluded that the
Northrop Grumman proposal was "financially inadequate" and had decided not to
pursue discussions with regard to the proposal.
On March 4, 2002, Northrop Grumman commenced the offer to exchange and
delivered to TRW the acquiring person statement pursuant to Ohio law relating
to the offer to exchange. In addition, on March 4, 2002, in connection with the
delivery of the acquiring person statement, Northrop Grumman requested that
TRW's Board take appropriate action so that the Ohio business combination law
is not applicable to the acquisition of TRW capital stock pursuant to the offer
to exchange or the TRW merger.
Prior Contacts. Northrop Grumman has from time to time during the past few
years considered expanding its operations through acquisitions of other
companies, including TRW. In early 1999 officers of Northrop Grumman and TRW
informally discussed a possible transaction. On April 28, 1999, Kent Kresa,
Chairman and Chief Executive Officer of Northrop Grumman, sent a letter to TRW,
in which Northrop Grumman affirmed its interest in discussing a potential
acquisition of TRW. TRW did not respond to Northrop Grumman's proposal, and
Northrop Grumman did not pursue the matter.
In early October 2001, Mr. Kresa had one telephone conversation and one
meeting with David Cote, the then Chief Executive Officer of TRW, regarding a
possible transaction to combine the two companies but did not reach any
agreement.
24
THE OFFER TO EXCHANGE
Consideration to Be Paid
Under the terms of Northrop Grumman's offer to exchange, Northrop Grumman
will exchange shares of newly issued Northrop Grumman common stock for each of
the issued and outstanding (a) shares of TRW common stock, (b) Series 1 Shares
and (c) Series 3 Shares. Each share of TRW common stock may be exchanged for a
number of shares of Northrop Grumman common stock equal to the exchange ratio.
Pursuant to the terms of the offer to exchange, each Series 1 Share may be
exchanged for a number of shares of Northrop Grumman common stock equal to the
then-effective conversion rate for the Series 1 Shares multiplied by the
exchange ratio, and each Series 3 Share may be exchanged for a number of shares
of Northrop Grumman common stock equal to the then-effective conversion rate
for the Series 3 Shares multiplied by the exchange ratio.
Northrop Grumman will determine the exact exchange ratio by dividing $47.00
by the average of the closing sale prices for a share of Northrop Grumman
common stock on the New York Stock Exchange as reported in The Wall Street
Journal over the five consecutive trading days ending immediately prior to the
second trading day before the expiration of the offer to exchange but, in no
event will the exchange ratio be more than 0.4563 ($47.00/$103.00) or less than
0.4159 ($47.00/$113.00).
The Series 1 Shares are convertible into shares of TRW common stock, at the
holder's option, at the conversion rate set forth in TRW's Amended Articles of
Incorporation. Pursuant to TRW's charter, the number of shares of TRW common
stock issuable upon conversion of one Series 1 Share is determined by dividing
$100 by the conversion price then in effect. The conversion price was
originally set at $90.909 per share, subject to automatic adjustment upon the
occurrence of certain anti-dilutive events. As of March 13, 2001, TRW reported
that each Series 1 Share was convertible into the right to receive 8.8 shares
of TRW common stock. This conversion rate could change before the expiration of
the offer to exchange.
The Series 3 Shares are convertible into shares of TRW common stock, at the
holder's option, at the conversion rate set forth in TRW's charter. Pursuant to
the charter, Series 3 Shares were initially convertible into shares of common
stock at the rate of 1.862 shares of common stock for each share of Series 3,
subject to automatic adjustment upon the occurrence of certain anti-dilutive
events. As of March 13, 2001, TRW reported that each Series 3 Share was
convertible into the right to receive 7.448 shares of TRW common stock. This
conversion rate could change before the expiration of the offer to exchange.
The conversion rights of the Series 1 Shares and the Series 3 Shares
outlined above are subject to a number of other qualifications. Shareholders
seeking more information about the conversion rights should read TRW's Amended
Articles of Incorporation.
Northrop Grumman will issue a press release before 9:00 A.M., New York City
time, on the second trading day before expiration of the offer to exchange,
announcing (i) the exchange ratio, assuming expiration of the offer to exchange
as scheduled, (ii) the average closing price of the Northrop Grumman common
stock over the previous five consecutive trading days and (iii) the
then-effective conversion rates of the Series 1 Shares and Series 3 Shares. If
for any reason the expiration date is subsequently extended, a revised exchange
ratio will be announced prior to the new expiration date.
Other Aspects of the Offer to Exchange. Northrop Grumman is making the
offer to exchange in order to acquire control of, and ultimately the entire
equity interest in, TRW. The offer to exchange is the first step in Northrop
Grumman acquisition of TRW and is intended to facilitate the acquisition of all
TRW shares. Northrop Grumman intends, as soon as possible after completion of
the offer to exchange, to seek to have TRW merge with Northrop Grumman or a
wholly-owned subsidiary of Northrop Grumman. The purpose of the TRW merger
would be to acquire all TRW shares not exchanged in the offer to exchange. In
the TRW merger, each outstanding share of TRW capital stock (except for
treasury shares of TRW and shares beneficially owned directly or indirectly by
Northrop Grumman for its own account) would be converted into the right to
receive
25
shares of Northrop Grumman common stock at the same exchange ratio used in the
offer to exchange, subject to dissenters' rights under Ohio law.
Northrop Grumman's obligation to exchange shares of Northrop Grumman common
stock for TRW shares pursuant to the offer to exchange is subject to the 1704
Limitation and the conditions referred to under--"The 1704 Limitation" and
"Conditions to the Offer" beginning on page 35.
TRW shareholders who tender TRW shares pursuant to the offer to exchange,
will not be obligated to pay any charges or expenses of the exchange agent or
any brokerage commissions. Except as set forth in the instructions to the
letters of transmittal, transfer taxes on the exchange of TRW capital stock
pursuant to Northrop Grumman's offer to exchange will be paid by Northrop
Grumman or on its behalf.
On March 4, 2002, Northrop Grumman asked TRW for its shareholder list and
security position listings in order to communicate with shareholders and to
distribute the offer to exchange to the TRW shareholders.
Timing of the Offer to Exchange
Northrop Grumman's offer to exchange is scheduled to expire at 12:00
midnight, New York City time, on March 29, 2002. For more information, TRW
shareholders should read the discussion below under the caption "--Extension,
Termination and Amendment."
The term "expiration date" means 12:00 midnight, New York City time, on
March 29, 2002, unless Northrop Grumman extends the period of time for which
the offer to exchange is open, in which case the term "expiration date" means
the latest time and date on which the offer to exchange, as so extended,
expires.
Extension, Termination and Amendment
Northrop Grumman expressly reserves the right, in its sole discretion, at
any time or from time to time, to extend the period of time during which the
offer to exchange remains open, and Northrop Grumman can do so by giving oral
or written notice of that extension to the exchange agent. Northrop Grumman can
give TRW shareholders no assurance that it will exercise its right to extend
the offer to exchange, although currently Northrop Grumman intends to do so
until all conditions have been satisfied or, where permissible, waived. During
any extension, all TRW shares previously tendered and not withdrawn will remain
subject to the offer to exchange, subject to each shareholder's right to
withdraw his or her TRW shares. TRW shareholders should read the discussion
under the caption --"Withdrawal Rights" on page 29 for more details.
Subject to the SEC's applicable rules and regulations, Northrop Grumman also
reserves the right, in its sole discretion, at any time or from time to time:
. to delay acceptance for exchange or the exchange of any TRW shares
pursuant to the offer to exchange, or to terminate the offer to exchange
and not accept for exchange or exchange any TRW shares not previously
accepted for exchange or exchanged, upon the failure of any of the
conditions of the offer to exchange to be satisfied prior to the
expiration date; and
. to waive any condition (other than the antitrust condition, the conditions
relating to the absence of an injunction and the effectiveness of the
registration statement for the Northrop Grumman shares to be issued in the
offer to exchange) or otherwise amend the offer to exchange in any
respect, by giving oral or written notice of such delay, termination or
amendment to the exchange agent and by making a public announcement.
Northrop Grumman may not waive the 1704 Limitation.
Northrop Grumman will follow any extension, termination, amendment or delay,
as promptly as practicable, with a public announcement. In the case of an
extension, the related announcement will be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law (including Rules 14d-4(d) and
14d-6(c) under the Exchange Act, which require that any
26
material change in the information published, sent or given to TRW shareholders
in connection with the offer to exchange be promptly sent to shareholders in a
manner reasonably designed to inform shareholders of that change) and without
limiting the manner in which it may choose to make any public announcement,
Northrop Grumman assumes no obligation to publish, advertise or otherwise
communicate any public announcement of this type other than by issuing a press
release to the Dow Jones News Service.
If Northrop Grumman makes a material change in the terms of the offer to
exchange or the information concerning the offer to exchange, or if Northrop
Grumman waives a material condition of the offer to exchange, Northrop Grumman
will extend the offer to exchange to the extent required under the Exchange
Act. If, prior to the expiration date, Northrop Grumman changes the percentage
of TRW shares sought in the first exchange or the consideration offered to TRW
shareholders, that change will apply to all holders whose TRW shares are
accepted for exchange pursuant to the offer to exchange whether or not these
TRW shares were accepted for exchange prior to the change. If at the time
notice of such a change is first published, sent or given to TRW shareholders,
the offer to exchange is scheduled to expire at any time earlier than the tenth
business day from and including the date that the related notice is first so
published, sent or given, Northrop Grumman will extend the offer to exchange
until the expiration of that ten business-day period. For purposes of the offer
to exchange, a business day means any day other than a Saturday, Sunday or
federal holiday and consists of the time period from 12:01 A.M. through 12:00
midnight, New York City time.
Northrop Grumman may elect to provide a subsequent offering period of not
more than twenty business days after the acceptance of TRW shares pursuant to
Northrop Grumman's offer to exchange if the requirements under Exchange Act
Rule 14d-11 have been met. TRW shareholders will not have the right to withdraw
TRW shares that they tender in the subsequent offering period, if any.
If TRW agrees upon a negotiated merger with Northrop Grumman, Northrop
Grumman may amend or terminate the offer to exchange without purchasing any TRW
shares.
Exchange of TRW Shares; Delivery of Northrop Grumman Common Stock
Upon the terms and subject to the conditions of the offer to exchange
(including, if the offer to exchange is extended or amended, the terms and
conditions of any extension or amendment), Northrop Grumman will accept, and
will exchange, TRW shares validly tendered and not properly withdrawn promptly
after the expiration date and promptly after they are tendered during any
subsequent offering period. In all cases, exchange of TRW shares tendered and
accepted for exchange pursuant to the offer to exchange will be made only after
timely receipt by the exchange agent of:
. certificates for those TRW shares (or a confirmation of a book-entry
transfer of those TRW shares in the exchange agent's account at The
Depository Trust Company, which Northrop Grumman refers to as DTC);
. a properly completed and duly executed letter of transmittal or a manually
signed facsimile of that document; and
. any other required documents.
For purposes of the offer to exchange, Northrop Grumman will be deemed to
have accepted for exchange TRW shares validly tendered and not withdrawn if and
when Northrop Grumman notifies the exchange agent of Northrop Grumman's
acceptance for exchange of the tenders of those TRW shares pursuant to the
offer to exchange. The exchange agent will deliver Northrop Grumman common
stock in exchange for TRW shares pursuant to the offer to exchange and cash to
be paid instead of fractional shares of Northrop Grumman common stock as soon
as practicable after receipt of that notice. The exchange agent will act as
agent for tendering TRW shareholders for the purpose of receiving Northrop
Grumman common stock (including cash to be paid instead of fractional shares of
Northrop Grumman common stock) from Northrop Grumman and transmitting the stock
and cash, if any, to shareholders. TRW shareholders will not receive any
interest on any cash that Northrop Grumman pays TRW shareholders regardless of
any delay in making the exchange.
27
If Northrop Grumman does not accept any tendered TRW shares for exchange
pursuant to the terms and conditions of the offer to exchange for any reason,
or if certificates are submitted for more TRW shares than are tendered,
Northrop Grumman will return certificates for such TRW shares without expense
to the tendering shareholder or, in the case of TRW shares tendered by
book-entry transfer of those TRW shares into the exchange agent's account at
DTC pursuant to the procedures set forth below under the discussion
entitled--"Procedure for Tendering," those TRW shares will be credited to an
account maintained within DTC, as soon as practicable following expiration or
termination of the offer to exchange.
Cash Instead of Fractional Shares of Northrop Grumman Common Stock
Northrop Grumman will not issue fractional shares of Northrop Grumman's
common stock pursuant to the offer to exchange. Instead, each tendering TRW
shareholder who would otherwise be entitled to a fractional share of Northrop
Grumman's common stock will receive cash in an amount equal to that fraction
(expressed as a decimal, rounded to the nearest 0.01 of a share) multiplied by
the average of the closing sale prices for a share of Northrop Grumman common
stock on the New York Stock Exchange as reported in the Wall Street Journal
over the five consecutive trading days ending immediately prior to the second
trading days before the expiration of the offer.
Withdrawal Rights
TRW shares tendered pursuant to the offer to exchange may be withdrawn at
any time prior to the expiration date, and, unless Northrop Grumman previously
accepted them pursuant to the offer to exchange, may also be withdrawn at any
time after May 3, 2002. Once Northrop Grumman accepts tendered shares for
exchange, a TRW shareholder's tender is irrevocable. If Northrop Grumman elects
to provide a subsequent offering period under Exchange Act Rule 14d-11, TRW
shares tendered in the subsequent offering period will be accepted promptly
following the tender and shareholders will not have the right to withdraw such
TRW shares.
For a withdrawal to be effective, the exchange agent must receive from each
withdrawing TRW shareholder a written notice of withdrawal at one of its
addresses set forth on the back cover of this offer to exchange, and such
notice must include the TRW shareholder's name, address, social security
number, the certificate number(s) and the number of TRW shares to be withdrawn
as well as the name of the registered holder, if it is different from that of
the person who tendered those TRW shares.
A financial institution must guarantee all signatures on the notice of
withdrawal. Most banks, savings and loan associations and brokerage houses are
able to effect these signature guarantees for shareholders. The financial
institution must be a participant in the Securities Transfer Agents Medallion
Program, an eligible institution, unless those TRW shares have been tendered
for the account of any eligible institution.
If TRW shares have been tendered pursuant to the procedures for book-entry
tender discussed under the caption entitled --"Procedure for Tendering," any
notice of withdrawal must specify the name and number of the account at DTC to
be credited with the withdrawn TRW shares and must otherwise comply with DTC's
procedures. If certificates have been delivered or otherwise identified to the
exchange agent, the name of the registered holder and the serial numbers of the
particular certificates evidencing the withdrawn TRW shares withdrawn must also
be furnished to the exchange agent, as stated above, prior to the physical
release of those certificates.
Northrop Grumman will decide all questions as to the form and validity
(including time of receipt) of any notice of withdrawal in its sole discretion,
and Northrop Grumman's decision shall be final and binding. None of Northrop
Grumman, the exchange agent, the information agent, the dealer manager or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or will incur any liability for
failure to give any notification. Any TRW shares properly withdrawn will be
deemed not to have been validly tendered for purposes of the offer to exchange.
However, TRW shareholders may retender withdrawn TRW shares by following one of
the procedures discussed under the captions entitled --"Procedure for
Tendering" or --"Guaranteed Delivery" at any time prior to the expiration date.
28
Procedure for Tendering
For TRW shareholders to validly tender TRW shares pursuant to the offer to
exchange, (a) a properly completed and duly executed letter of transmittal,
along with any required signature guarantees, or an agent's message in
connection with a book-entry transfer, and any other required documents, must
be received by the exchange agent at one of its addresses set forth on the back
cover of this offer to exchange, and certificates for tendered TRW shares must
be received by the exchange agent at that address or those TRW shares must be
tendered pursuant to the procedures for book-entry tender set forth below (and
a confirmation of receipt of that tender received (Northrop Grumman refers to
this confirmation below as a book-entry confirmation)), in each case before the
expiration date, or (b) TRW shareholders must comply with the guaranteed
delivery procedures set forth below under --"Guaranteed Delivery." All tenders
will be subject to the 1704 Limitation.
The term "agent's message" means a message, transmitted by DTC to, and
received by, the exchange agent and forming a part of a book-entry
confirmation, that states that DTC has received an express acknowledgment from
the participant in DTC tendering the TRW shares that are the subject of that
book-entry confirmation, that the participant has received and agrees to be
bound by the terms of the letter of transmittal and that Northrop Grumman may
enforce that agreement against the participant.
The exchange agent has established accounts with respect to the TRW shares
at DTC for purposes of the offer to exchange, and any financial institution
that is a participant in DTC may make book-entry delivery of the TRW shares by
causing DTC to transfer the TRW shares into the exchange agent's account in
accordance with DTC's procedure for that transfer. However, although delivery
of TRW shares may be effected through book-entry at DTC, the letter of
transmittal with any required signature guarantees, or an agent's message in
connection with a book-entry transfer, and any other required documents, must,
in any case, be received by the exchange agent at one or more of its addresses
set forth on the back cover of this offer to exchange prior to the expiration
date, or the guaranteed delivery procedures described below must be followed.
Signatures on all letters of transmittal must be guaranteed by an eligible
institution, except in cases in which TRW shares are tendered either by a
registered holder of TRW shares who has not completed the box entitled "Special
Issuance Instructions" on the letter of transmittal or for the account of an
eligible institution.
If the certificates for TRW shares are registered in the name of a person
other than the person who signs the letter of transmittal, or if certificates
for unexchanged TRW shares are to be issued to a person other than the
registered holder(s), the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names of
the registered owner or owners appear on the certificates, with the
signature(s) on the certificates or stock powers guaranteed in the manner
Northrop Grumman has described above.
The method of delivery of share certificates and all other required
documents, including delivery through DTC, is at the TRW shareholder's option
and risk, and the delivery will be deemed made only when actually received by
the exchange agent. If delivery is by mail, Northrop Grumman recommends
registered mail with return receipt requested, properly insured. In all cases,
shareholders should allow sufficient time to ensure timely delivery.
To prevent backup federal income tax withholding with respect to cash
received pursuant to the offer to exchange, TRW shareholders must provide the
exchange agent with their correct taxpayer identification number and certify
whether TRW shareholders are subject to backup withholding of federal income
tax by completing the substitute Form W-9 included in the letter of
transmittal. Some TRW shareholders including, among others, all corporations
and some foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, the shareholders must submit a Form W-8, signed under penalty
of perjury, attesting to that individual's exempt status.
29
Guaranteed Delivery
If TRW shareholders wish to tender TRW shares pursuant to the offer to
exchange and their certificates are not immediately available or shareholders
cannot deliver the certificates and all other required documents to the
exchange agent prior to the expiration date or cannot complete the procedure
for book-entry transfer on a timely basis, their TRW shares may nevertheless be
tendered, so long as all of the following conditions are satisfied:
. shareholders make their tender by or through an eligible institution
(see--"Withdrawal Rights" above);
. a properly completed and duly executed notice of guaranteed delivery,
substantially in the form made available by Northrop Grumman, is received
by the exchange agent as provided below on or prior to the expiration
date; and
. the certificates for all tendered TRW shares (or a confirmation of a
book-entry transfer of such securities into the exchange agent's account
at DTC as described above), in proper form for transfer, together with a
properly completed and duly executed letter of transmittal with any
required signature guarantees (or, in the case of a book-entry transfer,
an agent's message) and all other documents required by the letter of
transmittal are received by the exchange agent within three New York Stock
Exchange trading days after the date of execution of the notice of
guaranteed delivery.
TRW shareholders may deliver the notice of guaranteed delivery by hand or
transmit it by facsimile transmission or mail to the exchange agent and
shareholders must include a guarantee by an eligible institution in the form
set forth in that notice.
In all cases, Northrop Grumman will exchange TRW shares tendered and
accepted for exchange pursuant to the offer to exchange only after timely
receipt by the exchange agent of certificates for TRW shares (or timely
confirmation of a book-entry transfer of those securities into the exchange
agent's account at DTC as described above), properly completed and duly
executed letter(s) of transmittal, or an agent's message in connection with a
book-entry transfer, and any other required documents.
By executing a letter of transmittal as set forth above, subject to the 1704
Limitation, TRW shareholders irrevocably appoint Northrop Grumman's designees
as their attorneys-in-fact and proxies, each with full power of substitution,
to the full extent of their rights with respect to their TRW shares tendered
and accepted for exchange by Northrop Grumman and with respect to any and all
other TRW shares and other securities issued or issuable in respect of the TRW
shares on or after March 4, 2002. That appointment is effective, and voting
rights will be affected, when and only to the extent that Northrop Grumman
deposits the shares of Northrop Grumman's common stock issuable with respect to
the TRW shares that shareholders have tendered with the exchange agent. Subject
to the 1704 Limitation, all proxies shall be considered coupled with an
interest in the tendered TRW shares and therefore shall not be revocable once
the appointment is effective. Upon the effectiveness of the appointment, all
prior proxies that TRW shareholders have given will be revoked, and TRW
shareholders may not give any subsequent proxies (and, if given, they will not
be deemed effective). Northrop Grumman's designees will, with respect to the
TRW shares for which the appointment is effective, be empowered, among other
things, to exercise all of the TRW shareholders' voting and other rights as
they, in their sole discretion, deem proper at any annual, special or adjourned
meeting of TRW's shareholders or otherwise. Northrop Grumman reserves the right
to require that, in order for TRW shares to be deemed validly tendered,
immediately upon Northrop Grumman's exchange of those TRW shares, Northrop
Grumman must be able to exercise full voting rights with respect to those TRW
shares. However, prior to acceptance for exchange by Northrop Grumman in
accordance with terms of the offer to exchange, the appointment will not be
effective, and, Northrop Grumman shall have no voting rights as a result of the
tender of TRW shares.
Northrop Grumman will determine questions as to the validity, form,
eligibility (including time of receipt) and acceptance for exchange of any
tender of TRW shares, in Northrop Grumman's sole discretion, and its
determination shall be final and binding. Northrop Grumman reserves the
absolute right to reject any and all tenders of TRW shares that Northrop
Grumman determines are not in proper form or the acceptance of or
30
exchange for which may, in the opinion of Northrop Grumman's counsel, be
unlawful. Northrop Grumman also reserves the absolute right to waive any of the
conditions of Northrop Grumman's offer to exchange (other than the antitrust
condition, the conditions relating to the absence of an injunction and the
effectiveness of the registration statement for Northrop Grumman shares to be
issued in the offer to exchange), or any defect or irregularity in the tender
of any TRW shares. However, Northrop Grumman cannot waive the 1704 Limitation.
No tender of TRW shares will be deemed to have been validly made until all
defects and irregularities in tenders of TRW shares have been cured or waived.
None of Northrop Grumman, the exchange agent, the information agent, the dealer
manager or any other person will be under any duty to give notification of any
defects or irregularities in the tender of any TRW shares or will incur any
liability for failure to give any notification. Northrop Grumman's
interpretation of the terms and conditions of the offer to exchange (including
the letter of transmittal and its instructions) will be final and binding.
The tender of TRW shares pursuant to any of the procedures described above
will constitute a binding agreement between Northrop Grumman and shareholders
upon the terms and subject to the conditions of Northrop Grumman's offer to
exchange and the letter of transmittal.
Material U.S. Federal Income Tax Consequences of the Offer to Exchange and the
TRW Merger
The following discussion summarizes the material U.S. federal income tax
considerations that are generally applicable to holders of TRW capital stock
who exchange their TRW capital stock in the offer to exchange and the TRW
merger for shares of Northrop Grumman common stock. This discussion is based on
currently existing provisions of the Code, existing and proposed Treasury
Regulations thereunder and current administrative rulings and court decisions,
all of which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences of the offer to exchange and the
merger that are described below. TRW shareholders should be aware that this
discussion does not deal with all federal income tax considerations that may be
relevant to particular TRW shareholders in light of their individual
circumstances, such as TRW shareholders who:
. are dealers in securities;
. are subject to the alternative minimum tax provisions of the Code;
. are foreign persons;
. do not hold their shares of TRW capital stock as capital assets;
. acquired their shares of TRW capital stock in connection with stock option
or stock purchase plans or in other compensatory transactions;
. hold their shares of TRW capital stock as part of an integrated investment
(including a ''straddle'') comprised of shares of TRW capital stock and
one or more other positions; or
. are subject to the constructive sale or constructive ownership provisions
of the Code under Sections 1259 or 1260, respectively, with respect to
their TRW capital stock.
In addition, the following discussion does not address:
. the tax consequences of the offer to exchange and the merger to any person
under foreign, state or local tax laws; or
. the tax consequences of transactions effectuated prior or subsequent to,
or concurrently with, the merger, including a potential sale or spin-off
of the TRW automotive business.
Accordingly, TRW shareholders are urged to consult their own tax advisors as
to the specific tax consequences to them of the offer to exchange and the TRW
merger, including the applicable federal, state, local and foreign tax
consequences.
In the opinion of Gibson, Dunn & Crutcher LLP, counsel to Northrop Grumman,
the exchange of TRW shares for Northrop Grumman shares pursuant to the offer to
exchange and the merger will be treated as a
31
reorganization within the meaning of Section 368(a) of the Code provided that
certain factual assumptions are satisfied. Among such factual assumptions are
the following: (i) the offer to exchange and the TRW merger are consummated in
the manner provided herein, (ii) none of Northrop Grumman, TRW or any related
party acquires or redeems, in connection with the offer to exchange or the TRW
merger, shares of Northrop Grumman common stock issued to TRW shareholders
pursuant to the offer to exchange or the TRW merger and (iii) TRW will continue
a significant line of its business or will use a significant portion of its
historic business assets in a business.
Assuming that the offer to exchange and the TRW merger qualify as a
reorganization within the meaning of Section 368(a) of the Code:
. A holder of TRW shares will not recognize any gain or loss upon exchange
of its TRW shares solely for Northrop Grumman common stock in the offer to
exchange or the TRW merger;
. If a holder of TRW shares receives cash instead of a fractional share of
Northrop Grumman common stock, the holder will be required to recognize
gain or loss, measured by the difference between the amount of cash
received instead of that fractional share of Northrop Grumman common stock
and the portion of the tax basis of that holder's TRW shares allocable to
that fractional share. Such gain or loss will be a capital gain or loss,
and will be a long-term capital gain or loss if the TRW shares that would
otherwise have been exchanged for that fractional share of Northrop
Grumman common stock were held for more than one year;
. A holder of TRW shares will have a tax basis in the Northrop Grumman
shares received in the offer to exchange and the TRW merger equal to (a)
the tax basis of the TRW shares surrendered by that holder pursuant to the
offer to exchange or in the TRW merger, less (b) any tax basis of the TRW
shares surrendered that is allocable to any fractional share of Northrop
Grumman common stock for which cash is received;
. The holding period for shares of Northrop Grumman common stock received in
exchange for TRW shares in the offer to exchange and the TRW merger will
include the holding period for TRW shares surrendered in the offer to
exchange and the TRW merger; and
. If a TRW shareholder, pursuant to the exercise of its right to seek an
appraisal, exchanges all of its TRW shares solely for cash, such
shareholder generally will recognize a capital gain or loss equal to the
difference between the amount of cash received and its adjusted tax basis
in the TRW shares surrendered. Such gain or loss generally will be a
long-term capital gain or loss if the holder held the TRW shares
surrendered for more than one year as of the date of the exchange.
Currently, Northrop Grumman does not plan to request a ruling from the
Internal Revenue Service with regard to the tax consequences of the offer to
exchange and/or the TRW merger. Whether or not the offer to exchange and the
TRW merger qualify as a tax-free reorganization depends in part on certain
factual assumptions, including the assumptions set forth above. If such factual
assumptions are not satisfied, a TRW shareholder's exchange of TRW shares for
Northrop Grumman common stock in the offer to exchange or the TRW merger could
be a taxable transaction, depending on the surrounding facts.
The foregoing discussion is intended only as a summary and does not purport
to be a complete analysis or listing of all potential U.S. federal income tax
consequences of the offer to exchange and the TRW merger. TRW shareholders are
urged to consult their tax advisors concerning the U.S. federal, state, local
and foreign tax consequences of participation in the offer to exchange and/or
the TRW merger to them.
Effect of the Offer to Exchange on the Market for TRW Shares; Registration
Under the Exchange Act
Reduced Liquidity; Possible Delisting. The tender of TRW shares pursuant to
the offer to exchange will reduce the number of holders of TRW shares and the
number of TRW shares that might otherwise trade publicly and could adversely
affect the liquidity and market value of the remaining TRW shares held by the
public. TRW
32
shares are listed and principally traded on the New York Stock Exchange.
Depending on the number of TRW shares acquired pursuant to the offer to
exchange, following the completion of the offer to exchange, TRW shares may no
longer meet the requirements of the New York Stock Exchange for continued
listing. For example, published guidelines of the New York Stock Exchange
indicate that the New York Stock Exchange would consider delisting the
outstanding TRW shares if, among other things:
. the number of publicly held TRW shares (exclusive of holdings of officers,
directors and members of their immediate families and other concentrated
holdings of 10 percent or more) should fall below 600,000;
. the number of record holders of 100 or more TRW shares should fall below
1,200; or
. the aggregate market value of publicly held shares should fall below $5
million.
Based on TRW's Quarterly Report on Form 10-Q for the quarter ended September
30, 2001 as of November 2, 2001, there were 126,286,307 shares of TRW common
stock outstanding, held by approximately 22,500 holders of record. As of
February 9, 2001, the most recent available public information, there were
31,710 Series 1 Shares and 59,216 Series 3 Shares outstanding.
If the New York Stock Exchange were to delist the TRW shares, including
after the exchange of TRW shares in Northrop Grumman's offer to exchange but
prior to the TRW merger, the market for TRW shares could be adversely affected.
It is possible that TRW shares would be traded on other securities exchanges or
in the over-the-counter market, and that price quotations would be reported by
those exchanges, or through the Nasdaq Stock Market or by other sources. The
extent of the public market for the TRW shares and the availability of such
quotations would, however, depend upon the number of holders and/or the
aggregate market value of the TRW shares remaining at that time, the interest
in maintaining a market in the TRW shares on the part of securities firms, the
possible termination of registration of TRW shares under the Exchange Act, as
described below, and other factors.
Status as Margin Securities. The TRW shares are presently margin securities
under the regulations of the Federal Reserve Board, which has the effect, among
other things, of allowing brokers to extend credit on the collateral of TRW
shares. Depending on factors similar to those described above with respect to
listing and market quotations, following completion of the offer to exchange,
the TRW shares may no longer constitute margin securities for the purposes of
the Federal Reserve Board's margin regulations, in which event the TRW shares
would be ineligible as collateral for margin loans made by brokers.
Registration Under the Exchange Act. TRW shares are currently registered
under the Exchange Act. TRW can terminate that registration upon application to
the SEC if the outstanding shares are not listed on a national securities
exchange and if there are fewer than 300 holders of record of TRW shares.
Termination of registration of the TRW shares under the Exchange Act would
reduce the information that TRW must furnish to its shareholders and to the SEC
and would make some provisions of the Exchange Act, including the short-swing
profit recovery provisions of Section 16(b) and the requirement of furnishing a
proxy statement in connection with shareholders meetings pursuant to Section
14(a) and the related requirement of furnishing an annual report to
stockholders, no longer applicable with respect to TRW shares. Furthermore, the
ability of TRW affiliates and persons holding restricted securities of TRW to
dispose of securities pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act") may be impaired or eliminated. If registration
of the TRW shares under the Exchange Act were terminated, TRW shares would no
longer be eligible for New York Stock Exchange listing or for continued
inclusion on the Federal Reserve Board's list of margin securities.
Purpose of the Offer to Exchange; the TRW Merger; Dissenters' Rights
Northrop Grumman is making the offer to exchange in order to acquire control
of, and ultimately the entire equity interest in, TRW. The offer to exchange is
the first step in Northrop Grumman's acquisition of TRW, and is intended to
facilitate the acquisition of all TRW shares. TRW shareholders will not have
dissenters' rights as a result of the completion of the offer to exchange.
33
Northrop Grumman intends, as soon as practicable after the completion of the
offer to exchange, to seek to merge TRW with Northrop Grumman or a wholly-owned
subsidiary. The purpose of the TRW merger is to acquire all TRW shares not
tendered and exchanged pursuant to the offer to exchange. In the TRW merger,
each then-outstanding share of TRW capital stock (except for treasury shares of
TRW and shares beneficially owned directly or indirectly by Northrop Grumman
for its own account) will be converted into the right to receive shares of
Northrop Grumman common stock at the same exchange ratio used in the offer to
exchange, subject to dissenters' rights under Ohio law. Assuming the minimum
tender condition is satisfied and Northrop Grumman completes the offer to
exchange, Northrop Grumman would have sufficient voting power to effect the TRW
merger under Section 1701.80 of the Ohio Revised Code without the vote of any
other shareholder of TRW.
The TRW merger may be completed pursuant to Section 1701.80 of the Ohio
Revised Code and Section 253 of the Delaware General Corporation Law. Under
Section 1701.80, a foreign parent corporation owning at least 90% of the
outstanding shares of each class of a domestic subsidiary corporation may merge
the subsidiary corporation into itself without the approval of the shareholders
of the subsidiary corporation but with the approval of the board of directors
of the subsidiary corporation. Under Section 253 of the Delaware General
Corporation Law such a merger may be completed without the approval of the
stockholders of the parent corporation.
No dissenters' rights are available in connection with the offer to
exchange. If the TRW merger is consummated, however, TRW shareholders will have
certain rights under the Ohio Revised Code to dissent and demand dissenters'
rights and to receive payment in cash of the fair value of, their TRW shares.
TRW Shareholders that vote in favor of the TRW merger will not be entitled to
relief as dissenting shareholders. TRW Shareholders who perfect their rights by
complying with the procedures set forth in Sections 1701.84 and Section 1701.85
will have the fair value of their shares determined by an Ohio trial court and
will be entitled to receive a cash payment equal to such fair value from the
surviving corporation. In addition, such dissenting shareholders would be
entitled to receive payment of a fair rate of interest at a rate determined by
the trial court on the amount determined to be the fair value of their shares.
In determining the fair value of the TRW shares, a court is required to take
into account all relevant factors, excluding any appreciation or depreciation
in market value resulting from the transactions. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the TRW shares, including, among other things, asset values
and earning capacity.
The foregoing summary of the rights of dissenting shareholders does not
purport to be a complete statement of the procedures to be followed by
shareholders desiring to exercise any available dissenters' rights and is
qualified in its entirety by reference to the full text of Sections 1701.84 and
section 1701.85 included herewith in Annex B. The preservation and exercise of
dissenters' rights are conditioned on strict adherence to the applicable
provisions of the Ohio Revised Code.
Rule 13e-3 of the General Rules and Regulations under the Exchange Act,
which Northrop Grumman does not believe would apply to the TRW merger if the
merger occurred within one year of the completion of the offer to exchange,
would require, among other things, that some financial information concerning
TRW, and some information relating to the fairness of the proposed transaction
and the consideration offered to shareholders of TRW, be filed with the SEC and
disclosed to shareholders prior to the completion of the TRW merger.
Plans for TRW After the TRW Merger
Once Northrop Grumman has completed the TRW merger, it expects that TRW
would continue its current operations, except that it would cease to be
publicly owned and would instead be wholly-owned by Northrop Grumman. Northrop
Grumman expects to promptly dispose of TRW's automotive business either by
selling that business to a third party or parties or by spinning it off to the
Northrop Grumman stockholders (including the former TRW shareholders) or by a
combination thereof.
The 1704 Limitation
Tenders of TRW shares pursuant to the offer to exchange will be effective,
and Northrop Grumman shall have the right to acquire tendered TRW shares, only
at such time as Section 1704 of the Ohio Revised Code (the
34
"Ohio business combination law") shall not prohibit or delay the TRW merger. No
tender of TRW shares shall be effective, and Northrop Grumman shall have no
right to acquire tendered TRW shares, prior to such time.
The Ohio business combination law prohibits certain business combinations
and other transactions (each, a "Chapter 1704 transaction"), such as the TRW
merger, between an issuing public corporation (such as TRW) and any "interested
shareholder" (defined generally as any person who, directly or indirectly, is
entitled to exercise or direct the exercise of 10% or more of the outstanding
voting power of a corporation in the election of directors) for a period of
three years after the date that person becomes an interested shareholder. After
such three-year period, a Chapter 1704 transaction between an issuing public
corporation and such interested shareholder is prohibited unless either certain
"fair price" provisions are complied with or the Chapter 1704 transaction is
approved by certain supermajority shareholder votes. The Ohio business
combination law restrictions do not apply to a Chapter 1704 transaction with an
interested shareholder if either the acquisition of the corporation's shares
that would cause the interested shareholder to become an interested
shareholder, or the Chapter 1704 transaction, is approved by a resolution of
the board of directors of the corporation adopted prior to the date on which
the interested shareholder became an interested shareholder.
On March 4, 2002, Northrop Grumman requested that TRW's board of directors
take appropriate action so that the Ohio business combination law is not
applicable to the acquisition of TRW capital stock pursuant to the offer to
exchange or the TRW merger. There can be no assurance that TRW's board of
directors will do so.
Conditions to the Offer to Exchange
In addition to the 1704 Limitation, the offer to exchange is also subject to
a number of conditions, which are described below:
Minimum Tender Condition
Consummation of the offer to exchange is conditioned upon there being
validly tendered and not withdrawn prior to the expiration of the offer to
exchange, a number of TRW shares which, together with any TRW shares that
Northrop Grumman beneficially owns for its own account, will constitute at
least a majority of the total number of outstanding shares of TRW common stock
on a fully diluted basis (as though all options or other securities convertible
into or exercisable or exchangeable for TRW shares had been so converted,
exercised or exchanged) as of the date that Northtrop Grumman accepts the TRW
shares for exchange pursuant to the offer to exchange.
Antitrust Condition
The offer to exchange is also subject to the condition that any applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, Council Regulation (EEC) No. 4064/89 of the Council of the European
Union, and any other applicable similar foreign laws or regulations will have
expired or been terminated.
Under the provisions of the Hart-Scott-Rodino Act applicable to the offer to
exchange, the acquisition of TRW shares pursuant to the offer to exchange may
be completed following the expiration of a 30-calendar day waiting period (if
the thirtieth day falls on a weekend or holiday, the waiting period will expire
on the next business day) following the filing by Northrop Grumman of a
Notification and Report Form, which Northrop Grumman intends to file shortly,
with respect to the offer to exchange, unless Northrop Grumman receives a
request for additional information and documentary material from the Antitrust
Division of the Department of Justice or the Federal Trade Commission. If,
within the initial 30-day waiting period, either the Antitrust Division or the
Federal Trade Commission requests additional information and documentary
material from Northrop Grumman concerning the offer to exchange, the waiting
period will be extended and will expire at 11:59 P.M., New York City time, on
the thirtieth calendar day after the date of substantial compliance by Northrop
Grumman with that request. If the thirtieth day falls on a weekend or holiday,
the waiting period will expire on the next business day. Only one extension of
the waiting period pursuant to a request for additional information is
authorized by the Hart-Scott-Rodino Act. After that time, Northrop Grumman and
TRW may close the transaction, unless Northrop Grumman agrees with the
Antitrust Division or Federal Trade Commission to
35
delay closing the transaction or the Antitrust Division or Federal Trade
Commission seek a court order staying the transaction. In practice, complying
with a request for additional information or material can take a significant
amount of time. In addition, if the Antitrust Division or the Federal Trade
Commission raises substantive issues in connection with a proposed transaction,
the parties frequently engage in negotiations with the relevant governmental
agency concerning possible means of addressing those issues and may agree to
delay completion of the transaction while those negotiations continue.
Under the laws of certain foreign nations and multinational authorities,
such as the European Commission (under Council Regulation (EEC) 4064/89, or
"ECMR"), the transaction may not be completed or control may not be exercised
unless certain filings are made with these nations' antitrust regulatory
authorities or multinational antitrust authorities and these antitrust
authorities approve or clear closing of the transaction. Other foreign nations
and multinational authorities have voluntary and/or post-merger notification
systems. Northrop Grumman intends to file shortly all other non-United States
pre-merger notifications that it believes are required. Should any other
approval or action be required, Northrop Grumman currently contemplates that
such approval or action would be sought. Although Northrop Grumman believes
that it will obtain all other material required regulatory approvals in a
timely manner, it is not certain that all other such approvals will be received
in a timely manner or at all or that foreign or multinational antitrust
authorities will not impose unfavorable conditions for granting the required
approvals.
Control Share Condition
Consummation of the offer to exchange is conditioned upon the acquisition of
TRW capital stock by Northrop Grumman being authorized by the shareholders of
TRW pursuant to Section 1701.831 of the Ohio Revised Code (the "control share
acquisition law") at a special meeting of shareholders of TRW (the "Ohio
control share acquisition meeting") in accordance with the Ohio control share
acquisition law, or Northrop Grumman being satisfied, in its sole discretion,
that the control share acquisition law is invalid or inapplicable to the
acquisition of TRW capital stock pursuant to the offer to exchange.
Under the Ohio control share acquisition law, unless a corporation's
articles of incorporation or regulations otherwise provide, any "control share
acquisition" of an "issuing public corporation" (such as TRW) may be made only
with the prior authorization of its shareholders in accordance with the control
share acquisition law. Neither TRW's Amended Articles of Incorporation nor its
regulations currently contain a provision by which TRW "opts out" of the
control share acquisition law.
Unless and until such time as TRW's articles or regulations are amended to
include such an "opt out" provision or the law is determined to be invalid, the
control share acquisition law requires shareholder approval of any proposed
"control share acquisition" of TRW. A "control share acquisition" is the
acquisition, directly or indirectly, by any person of shares of a corporation
that, when added to all other shares of such corporation of which such person
may exercise or direct the exercise of voting power, entitles such person to
exercise or direct the exercise of one-fifth or more, one third or more, or a
majority or more of the voting power in the election of directors. A control
share acquisition must be authorized in advance (i) by the holders of at least
a majority of the voting power of the corporation in the election of directors
represented at the meeting in person or by proxy and (ii) by the holders of a
majority of the portion of the voting power excluding the voting power of
interested shares at the meeting in person or by proxy. Ohio's control share
acquisition law provides that a quorum shall be deemed to be present at the
meeting if at least a majority of the voting power of the shares are
represented at such meeting in person or by proxy.
For purposes of the control share acquisition law, "interested shares" means
shares as to which any of the following may exercise or direct the exercise of
voting power in the election of directors (i) an acquiring person, (ii) an
officer elected or appointed by the directors of the issuing public
corporation, (iii) any employee of the issuing public corporation who is also a
director of such corporation and (iv) any person that acquires such shares for
valuable consideration during the period beginning with the date of the first
public disclosure of a proposed control share acquisition of the issuing public
corporation or any proposed merger, consolidation or other transaction which
would result in a change in control of the corporation or all or substantially
all of its assets, and ending on the record date for the meeting if either of
the following applies:
36
. the aggregate consideration paid or otherwise given by the person who
acquired the shares, and any other persons acting in concert with such
person for all shares exceeds $250,000; or
. the number of shares acquired by the person who acquired the shares, and
any other persons acting in concert with such person, exceeds 1/2 of 1%
of the outstanding shares of the corporation entitled to vote in the
election of directors. "Interested shares" also includes shares held by a
person that transfers interested shares after the record date if
accompanied by an instrument (such as a proxy or voting agreement) that
gives the transferee the power to vote those shares.
Under the control share acquisition law, TRW must call a meeting to vote
upon a proposed control share acquisition no later than 10 days, and it must be
held no later than 50 days, following its receipt of an "acquiring person
statement" from the acquiring person.
Without waiving its right to challenge the validity of all or any part of
the control share acquisition law or to seek an amendment to TRW's regulations
opting out of the control share acquisition law, and reserving its right to
take actions inconsistent with the applicability of the control share
acquisition law, Northrop Grumman delivered to TRW on March 4, 2002 an
acquiring person statement relating to the offer to exchange and the TRW
merger. Pursuant to the provisions of the control share acquisition law, the
Ohio control share acquisition meeting must be held no later than April 23,
2002.
Northrop Grumman expects to file suit in the United States District Court
for the Northern District of Ohio challenging the application of the control
share acquisition law to the offer to exchange and the TRW merger. See "Ohio
Litigation" on page 41.
Control Bid Condition
Consummation of the offer to exchange is conditioned upon the expiration of
the period during which the Ohio Division of Securities may suspend the offer
to exchange pursuant to Sections 1707.01, 1707.041, and 1707.042 (collectively,
the "control bid law") of the Ohio revised code, without the occurrence of any
such suspension or the invalidity of the control bid law.
The control bid law regulates tender offers for any equity security of a
subject company from a resident of Ohio if, after the purchase, the offeror
would directly or indirectly be the beneficial owner of more than 10% of any
class of issued and outstanding equity securities of such company (a "control
bid"). A subject company includes an issuer (such as TRW) that (i) either (a)
has its principal place of business or principal executive offices located in
Ohio or (b) owns or controls assets located in Ohio that have a fair market
value of at least $1.0 million and (ii) has more than 10% of its beneficial or
record equity security holders resident in Ohio, has more than 10% of its
equity securities owned, beneficially or of record, by residents of Ohio or has
1,000 beneficial or record equity security holders who are resident in Ohio.
The control bid law prohibits an offeror from making a control bid for
securities of a subject company pursuant to a tender offer until the offeror
has filed specified information with the Ohio Division of Securities. In
addition, the offeror is required to deliver a copy of such information to the
subject company not later than the offeror's filing with the Ohio Division of
Securities and to send or deliver such information and the material terms of
the proposed offer to exchange to all offerees in Ohio as soon as practicable
after the offeror's filing with the Ohio Division of Securities.
Within five calendar days of such filing, the Ohio Division of Securities
may, by order, summarily suspend the continuation of the control bid if it
determines that the offeror has not provided all of the specified information
or that the control bid materials provided to offerees do not provide full
disclosure of all material information concerning the control bid. If the Ohio
Division of Securities summarily suspends a control bid, it must schedule and
hold a hearing within 10 calendar days of the date on which the suspension is
imposed and must make its determination within three calendar days after the
hearing has been completed but no later than 14 calendar days after the date on
which the suspension is imposed. The Ohio Division of Securities may maintain
its suspension of the continuation of the control bid if, based upon the
hearing, it determines that all of the information required to be provided by
the control bid law has not been provided by the offeror, that the control
37
bid materials provided to offerees do not provide full disclosure of all
material information concerning the control bid or that the control bid is in
material violation of any provision of the Ohio securities laws. If, after the
hearing, the Ohio Division of Securities maintains the suspension, the offeror
has the right to correct the disclosure and other deficiencies identified by
the Ohio Division of Securities and to reinstitute the control bid by filing
new or amended information pursuant to the control bid law.
Northrop Grumman filed the information required under the control bid law.
Northrop Grumman expects to file suit in the United States District Court for
the Northern District of Ohio challenging the application of the control bid
law to the offer to exchange and the TRW merger. See "Ohio Litigation" on page
41.
Northrop Grumman Stockholder Approval Condition
Consummation of the offer to exchange is conditioned upon the approval by
the stockholders of Northrop Grumman of the issuance of Northrop Grumman common
stock pursuant to the offer to exchange and the TRW merger.
Pursuant to the rules of the New York Stock Exchange, upon which Northrop
Grumman's common stock is listed, the issuance of Northrop Grumman common stock
pursuant to the offer to exchange and the TRW merger must be approved by
holders of a majority of the shares voted at a meeting of such holders at which
the total number of votes cast represents over 50% in interest of all shares of
Northrop Grumman securities entitled to vote on the proposal. This approval is
required because the number of shares of Northrop Grumman's common stock to be
issued will be equal to or in excess of 20% of the shares outstanding prior to
such issuance. Northrop Grumman intends to seek this approval at a meeting of
its stockholders to be held as soon as practicable.
Certain Other Conditions to the Offer to Exchange
Notwithstanding any other provision of the offer to exchange, Northrop
Grumman shall not be required to accept for exchange or exchange any TRW
shares, may postpone the acceptance for exchange of or the exchange for
tendered TRW shares, and may, in Northrop Grumman's sole discretion, terminate
or amend the offer to exchange as to any TRW shares not then exchanged if:
. at the expiration date, any of the minimum tender condition, the antitrust
condition, the control share condition, the control bid condition or any
of the other conditions to the offer to exchange set forth in clauses (a)
through (g) below has not been satisfied or, in the case of any condition
other than the antitrust condition or the conditions set forth in clauses
(b) or (c) below, waived; or
. on or after the date of this offer to exchange and at or prior to the time
of exchange of any TRW shares (whether or not any TRW shares have
theretofore been accepted for exchange or exchanged pursuant to the offer
to exchange), and subject to the applicable rules and regulations of the
SEC (including Rule 14e-1(c) under the Exchange Act relating to Northrop
Grumman's obligation to exchange or return tendered TRW shares promptly
after the termination or withdrawal of the offer to exchange) the
antitrust condition is not satisfied.
The other conditions to the offer to exchange are as follows:
(a) the shares of Northrop Grumman's common stock to be issued to TRW
shareholders in the offer to exchange and the TRW merger have been authorized
for listing on the New York Stock Exchange, subject to official notice of
issuance;
(b) the registration statement shall have become effective under the
Securities Act, and no stop order suspending the effectiveness of the
registration statement or a proceeding seeking a stop order shall have been
issued nor shall there have been proceedings for that purpose initiated or
threatened by the SEC, and Northrop Grumman shall have received all necessary
state securities law or blue sky authorizations;
38
(c) no temporary restraining order, preliminary or permanent injunction or
other order or decree issued by any court or agency of competent jurisdiction
or other legal restraint or prohibition preventing the completion of the offer
to exchange, the TRW merger or any of the other transactions contemplated by
the offer to exchange shall be in effect; no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or enforced
by any court, administrative agency or commission or other governmental
authority or instrumentality which prohibits, restricts or makes illegal the
completion of the offer to exchange or the TRW merger;
(d) there shall not be pending or threatened any suit, action or proceeding
by any governmental entity (1) challenging the offer to exchange, seeking to
restrain or prohibit the completion of the offer to exchange or seeking to
obtain from TRW or Northrop Grumman any damages that are material in relation
to TRW and its subsidiaries taken as a whole or Northrop Grumman and its
subsidiaries taken as a whole, (2) seeking to prohibit or limit the ownership
or operation by TRW or Northrop Grumman or any of Northrop Grumman's
subsidiaries of any material portion of the business or assets of TRW or
Northrop Grumman or any of Northrop Grumman's subsidiaries or to compel TRW or
Northrop Grumman or any of Northrop Grumman's subsidiaries to dispose of or
hold separate any material portion of the business or assets of TRW or Northrop
Grumman or any of Northrop Grumman's subsidiaries as a result of Northrop
Grumman's offer to exchange, (3) seeking to prohibit Northrop Grumman from
effectively controlling in any material respect the business or operations of
TRW or (4) which otherwise is reasonably likely to have a material adverse
effect on Northrop Grumman or TRW;
(e) no change shall have occurred or been threatened (or any condition,
event or development shall have occurred or been threatened involving a
prospective change) in the business, properties, assets, liabilities,
capitalization, stockholders' equity, condition (financial or otherwise),
operations, licenses or franchises, results of operations or prospects of TRW
or any of its subsidiaries that, in the reasonable judgment of Northrop
Grumman, is or may be materially adverse to TRW or any of its subsidiaries, or
Northrop Grumman shall have become aware of any facts that, in its reasonable
judgment, have or may have material adverse significance with respect to either
the value of TRW or any of its subsidiaries or the value of the capital stock
of TRW to Northrop Grumman;
(f) there shall not have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the United
States, (ii) any extraordinary or material adverse change in the financial
markets or major stock exchange indices in the United States or abroad or in
the market price of the TRW shares, (iii) any change in the general political,
market, economic or financial conditions in the U.S. or abroad that could, in
the sole judgment of Northrop Grumman, have a material adverse effect upon the
business, properties, assets, liabilities, capitalization, stockholders equity,
condition (financial or otherwise), operations, licenses or franchises, results
of operations or prospects of TRW or any of its subsidiaries, (iv) any material
change in U.S. currency exchange rates or any other currency exchange rates or
a suspension of, or limitation on, the markets therefor, (v) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (vi) any limitation (whether or not mandatory) by any
government, domestic, foreign or supranational, or governmental entity on, or
other event that, in the sole judgment of Northrop Grumman, might affect the
extension of credit by banks or other lending institutions, (vii) a
commencement of war or armed hostilities or other national or international
calamity directly or indirectly involving the U.S., or (viii) in the case of
any of the foregoing existing at the time of the commencement of the offer to
exchange, a material acceleration or worsening thereof; and
(g) TRW shall not have entered into or effectuated any other agreement or
transaction with any person or entity having the effect of impairing Northrop
Grumman's ability to acquire TRW or otherwise diminishing the expected economic
value to Northrop Grumman of the acquisition of TRW including, but not limited
to, any material issuance of new securities of TRW, the declaration of any
extraordinary dividend, the adoption of a shareholder rights plan or any other
transaction not in the ordinary course of TRW's business.
The conditions listed above are solely for Northrop Grumman's benefit and
Northrop Grumman may assert them regardless of the circumstances giving rise to
any of the conditions (including any action or inaction by
39
Northrop Grumman). Northrop Grumman may waive any of these conditions in whole
or in part (other than the antitrust condition and the conditions set forth in
clauses (b) and (c) above). The determination as to whether any condition has
been satisfied shall be in Northrop Grumman's reasonable judgment and will be
final and binding on all parties. The failure by Northrop Grumman at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
right and each right shall be deemed a continuing right which may be asserted
at any time and from time to time.
Ohio Litigation
Northrop Grumman expects to file a lawsuit in the United States District
Court for the Northern District of Ohio against TRW and certain other persons,
seeking declaratory and injunctive relief with respect to the Ohio control
share acquisition law, the Ohio business combination law and the Ohio control
bid law. The lawsuit will allege that such statutes conflict with the U.S.
Constitution and U.S. laws governing the conduct of tender offers. No assurance
can be provided as to the time which may be required for a final decision with
respect to the issues presented, or as to the outcome of this lawsuit.
Regulatory Approvals
Other than clearance under the antitrust laws applicable to the offer to
exchange and the TRW merger which are described above under --"Conditions to
the Offer to Exchange--Antitrust Condition," the SEC declaring the
effectiveness of the registration statement of which this offer to exchange is
a part and the filings under the control bid law, Northrop Grumman does not
believe that any additional material governmental filings are required with
respect to the offer to exchange and the TRW merger.
Source and Amount of Funds
Northrop Grumman's offer to exchange is not conditioned upon any financing
arrangements. Northrop Grumman will use working capital to pay any cash
requirements of the offer to exchange.
Certain Relationships with TRW
Except as set forth in this proposal, neither Northrop Grumman nor, to the
best of its knowledge, any of Northrop Grumman's directors, executive officers
or other affiliates has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of TRW,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies. Except as
described in this offer to exchange, there have been no contacts, negotiations
or transactions since January 1, 1999, between Northrop Grumman or, to the best
of its knowledge, any of Northrop Grumman's directors, executive officers or
other affiliates on the one hand, and TRW or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer to exchange
or other acquisition of securities, an election of directors, or a sale or
other transfer of a material amount of assets. In the normal course of their
businesses, Northrop Grumman and TRW are parties to transactions and
agreements. Since January 1, 1999, Northrop Grumman believes that no such
transaction had an aggregate value in excess of 1%, of TRW consolidated
revenues. Neither Northrop Grumman, nor, to the best of its knowledge, any of
Northrop Grumman's directors, executive officers or other affiliates has since
January 1, 1999 had any transaction with TRW or any of its executive officers,
directors or affiliates that would require disclosure under the rules and
regulations of the SEC applicable to the offer to exchange. As of the date of
this offer to exchange, Northrop Grumman beneficially owns for its own account
4 shares of TRW common stock. In addition, Dr. Ronald D. Sugar, President and
Chief Operating Officer and a director of Northrop Grumman, owns 21,475 shares
of TRW common stock as trustee of Ronald D. Sugar Revocable Trust dated as of
October 29, 1995. Dr. Ronald Sugar was employed by TRW through June 2000. In
accordance with the terms of his employment with TRW, Dr. Sugar continues to
receive compensation benefits from TRW relating to his past employment with
TRW. To the best of Northrop Grumman's knowledge, no other officers or
directors own TRW capital stock or have interests in TRW.
40
Fees and Expenses
Northrop Grumman has retained Salomon Smith Barney to act as the dealer
manager in connection with the offer to exchange and to provide various
financial advisory services to Northrop Grumman in connection with the offer to
exchange and the TRW merger. Salomon Smith Barney will receive reasonable and
customary compensation for these services and will be reimbursed for
out-of-pocket expenses, including reasonable expenses of counsel and other
advisors. Northrop Grumman has agreed to indemnify Salomon Smith Barney and
related persons against various liabilities and expenses in connection with its
services as the dealer manager and financial advisor, including various
liabilities and expenses under the U.S. federal securities laws. From time to
time, Salomon Smith Barney and its affiliates may actively trade the debt and
equity securities of Northrop Grumman and TRW for their own account or for the
accounts of customers and, accordingly, may hold a long or short position in
those securities. Salomon Smith Barney has in the past performed various
investment banking and financial advisory services for Northrop Grumman for
which they have received customary compensation.
Northrop Grumman has retained D. F. King & Co., Inc. as information agent in
connection with Northrop Grumman's offer to exchange. The information agent may
contact holders of TRW shares by mail, telephone, telex, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward material relating to Northrop Grumman's offer to exchange to beneficial
owners of TRW shares. Northrop Grumman will pay the information agent
reasonable and customary compensation for these services in addition to
reimbursing the information agent for its reasonable out-of- pocket expenses.
Northrop Grumman has agreed to indemnify the information agent against various
liabilities and expenses in connection with Northrop Grumman's offer to
exchange, including various liabilities under the U.S. federal securities laws.
In addition, Northrop Grumman has retained Equiserve Trust Company as the
exchange agent. Northrop Grumman will pay the exchange agent reasonable and
customary compensation for its services in connection with Northrop Grumman's
offer to exchange, will reimburse the exchange agent for its reasonable
out-of-pocket expenses and will indemnify the exchange agent against various
liabilities and expenses, including various liabilities under the U.S. federal
securities laws.
Northrop Grumman will not pay any fees or commissions to any broker, dealer
or other person for soliciting tenders of TRW shares pursuant to Northrop
Grumman's offer to exchange. Northrop Grumman will reimburse brokers, dealers,
commercial banks and trust companies and other nominees, upon request, for
customary clerical and mailing expenses incurred by them in forwarding offering
materials to their customers.
Accounting Treatment
The acquisition of TRW by Northrop Grumman would be accounted for under the
purchase method of accounting under U.S. generally accepted accounting
principles, which means that TRW's results of operations will be included with
ours from the closing date and its consolidated assets and liabilities will be
recorded at their fair values at the same date.
Stock Exchange Listing
Northrop Grumman's common stock is listed on the New York Stock Exchange and
the Pacific Stock Exchange. Northrop Grumman will make an application to list
on the New York Stock Exchange and the Pacific Stock Exchange the Northrop
Grumman common stock that will be issued pursuant to the offer to exchange and
the TRW merger.
41
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Northrop Grumman common stock is listed on the New York Stock Exchange and
the Pacific Stock Exchange under the symbol "NOC." TRW common stock is listed
on the New York Stock Exchange, the Pacific Stock Exchange, the Chicago Stock
Exchange and the Philadelphia Stock Exchange under the symbol "TRW." The table
below sets forth, for the calendar quarters indicated, the high and low sales
prices per share reported on the New York Stock Exchange and the dividends
declared on Northrop Grumman common stock and on TRW common stock.
Northrop Grumman TRW Common
Common Stock Stock
---------------- -------------
High Low Dividends High Low Dividends
------- ------ --------- ------ ------ ---------
1999
March 31, 1999.... $ 73.25 $57.00 $0.40 $58.63 $44.75 $0.33
June 30, 1999..... 73.31 57.75 0.40 54.94 41.94 0.33
September 30, 1999 75.69 59.94 0.40 57.19 48.06 0.33
December 31, 1999. 62.31 49.00 0.40 53.94 41.50 0.33
2000
March 31, 2000.... 55.19 43.56 0.40 64.13 39.81 0.33
June 30, 2000..... 80.25 52.44 0.40 59.94 43.19 0.33
September 30, 2000 91.81 65.63 0.40 52.13 40.31 0.33
December 31, 2000. 92.50 74.13 0.40 42.00 29.88 0.35
2001
March 31, 2001.... 97.54 79.81 0.40 40.34 33.86 0.35
June 30, 2001..... 95.37 77.60 0.40 44.95 33.48 0.35
September 30, 2001 102.97 77.00 0.40 44.35 28.01 0.35
December 31, 2001. 108.97 89.02 0.40 40.51 30.01 0.18
2002
March 1, 2002..... 117.80 96.00 0.40 51.55 34.82 0.18
On March 1, 2002, the last full trading day prior to the date of this offer
to exchange, the last sale price per share of Northrop Grumman common stock on
the New York Stock Exchange was $107.75 and the last sale price per share of
TRW common stock was $50.05.
Northrop Grumman urges TRW's shareholders to obtain current market
quotations for Northrop Grumman and TRW common stock before making any decision
regarding the offer to exchange.
42
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Condensed Combined Financial Statements presented
below are derived from the historical consolidated financial statements of each
of Northrop Systems, Northrop Grumman, Litton, Newport News and TRW. The
Unaudited Pro Forma Condensed Combined Financial Statements are prepared using
the purchase method of accounting, with Northrop Grumman treated as the
acquiror and as if the Litton, Newport News and TRW acquisitions had been
completed as of the beginning of the periods presented for statements of
operations purposes and on September 30, 2001 for balance sheet purposes.
For a summary of the business combination, see "The Offer to Exchange"
beginning on page 26 of this offer to exchange.
The Unaudited Pro Forma Condensed Combined Financial Statements are based
upon the historical financial statements of Northrop Systems, Northrop Grumman,
Litton, Newport News and TRW adjusted to give effect to the Litton, Newport
News and TRW acquisitions. The pro forma adjustments are described in the
accompanying notes presented on the following pages. The pro forma financial
statements have been developed from (a) the audited consolidated financial
statements of Northrop Systems contained in its Annual Report on Form 10-K/A
for the year ended December 31, 2000 and the unaudited consolidated financial
statements of Northrop Grumman contained in its Quarterly Report on Form 10-Q
for the nine months ended September 30, 2001, which are incorporated by
reference in this offer to exchange, (b) the audited consolidated financial
statements of Litton contained in its Annual Report on Form 10-K for the fiscal
year ended July 31, 2000 and the unaudited consolidated financial statements of
Litton contained in its Quarterly Report on Form 10-Q for the period ended
January 31, 2001, which are incorporated by reference in this offer to
exchange, (c) the audited consolidated financial statements of Newport News
contained in its Annual Report on Form 10-K for the fiscal year ended December
31, 2000 and the unaudited consolidated financial statements of Newport News
contained in its Quarterly Report on Form 10-Q for the period ended September
16, 2001, which are incorporated by reference in this offer to exchange, and
(d) the audited consolidated financial statements of TRW contained in its
Annual Report on Form 10-K for the year ended December 31, 2000 and the
unaudited consolidated financial statements of TRW contained in its Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001, which are
incorporated by reference in this offer to exchange. In addition, the audited
consolidated financial statements contained in Litton's Annual Report on Form
10-K for the fiscal year ended July 31, 2000 and the unaudited consolidated
financial statements of Litton contained in Litton's Quarterly Report on Form
10-Q for the period ended January 31, 2001 have been used to bring the
financial reporting periods of Litton to within 90 days of those of Northrop
Systems and Northrop Grumman.
The acquisition of Litton, on April 2, 2001, which is valued at
approximately $5.2 billion, including the assumption of Litton's net debt of
$1.3 billion, is accounted for using the purchase method of accounting. Under
the purchase method of accounting, the purchase price is allocated to the
underlying tangible and intangible assets acquired and liabilities assumed
based on their respective fair market values, with the excess recorded as
goodwill. The Unaudited Pro Forma Condensed Combined Financial Statements
reflect preliminary estimates of the fair market value of the Litton assets
acquired and liabilities assumed and the related allocations of purchase price,
and preliminary estimates of adjustments necessary to conform Litton data to
Northrop Grumman's accounting policies. The Unaudited Pro Forma Condensed
Combined Financial Statements do not include the recognition of liabilities
associated with certain potential restructuring activities. Northrop Grumman is
currently reviewing the preliminary estimates of the fair market value of the
Litton assets acquired and liabilities assumed, including valuations associated
with certain contracts and valuation study results for intangible assets,
property, plant and equipment, and retiree benefits assets and liabilities.
Northrop Grumman also is evaluating several possible restructuring activities
of Litton operations. The final determination of the fair market value of
assets acquired and liabilities assumed and final allocation of the purchase
price may differ from the amounts assumed in these Unaudited Pro Forma
Condensed Combined Financial Statements. Adjustments to the purchase price
allocations will be finalized by March 31, 2002, and will be reflected in
future Northrop Grumman filings. There can be no assurance that such
adjustments will not be material.
43
With the exception of Newport News' long-term debt assumed, as of the date
of the offer to exchange Northrop Grumman has not completed the valuation
studies necessary to arrive at the required estimates of the fair market value
of the Newport News assets acquired and TRW assets to be acquired and the
Newport News liabilities assumed and the TRW liabilities to be assumed and the
related allocations of purchase price, nor has it identified the adjustments
necessary, if any, to conform Newport News or TRW data to Northrop Grumman's
accounting policies. Accordingly, Northrop Grumman has used the historical book
values of the assets and liabilities of Newport News, other than long-term
debt, and TRW and has used the historical revenue recognition policies of
Newport News and TRW to prepare the Unaudited Pro Forma Condensed Combined
Financial Statements set forth herein, with the excess of the purchase price
over the historical net assets of Newport News and TRW recorded as goodwill and
other purchased intangibles. Once Northrop Grumman has determined the final
purchase price for TRW and has completed the valuation studies necessary to
finalize the required purchase price allocations and identified any necessary
conforming changes for Newport News and TRW, such pro forma financial
statements will be subject to adjustment. Such adjustments will likely result
in changes to the pro forma statement of financial position to reflect the
final allocations of purchase price and the pro forma statements of income, and
there can be no assurance that such adjustments will not be material.
The Unaudited Pro Forma Condensed Combined Financial Statements are provided
for illustrative purposes only and do not purport to represent what the actual
consolidated results of operations or the consolidated financial position of
Northrop Grumman would have been had Northrop Grumman's offer to exchange and
the Litton, Newport News and TRW acquisitions occurred on the dates assumed,
nor are they necessarily indicative of future consolidated results of
operations or financial position.
The Unaudited Pro Forma Condensed Combined Financial Statements do not
include the realization of cost savings from operating efficiencies, synergies
or other restructurings resulting from the Litton, Newport News and TRW
acquisitions.
The Unaudited Pro Forma Condensed Combined Financial Statements should be
read in conjunction with the separate historical consolidated financial
statements and accompanying notes of Northrop Systems, Northrop Grumman,
Litton, Newport News and TRW that are incorporated by reference in this offer
to exchange.
44
Unaudited Pro Forma Condensed Combined
Statement of Financial Position
September 30, 2001
($ in millions)
Pro Forma Pro Forma
Northrop Newport ---------------------- -----------------------
Grumman News Adjustment Combined TRW Adjustment Combined
-------- ------- ---------- -------- ------- ---------- --------
Assets:
Current assets......................
Cash and cash equivalents......... $ 310 $ 66 $ -- $ 376 $ 242 $ -- $ 618
Accounts receivable............... 2,297 131 (7)(a) 2,421 2,201 -- 4,622
Inventoried costs................. 1,222 409 -- 1,631 871 -- 2,502
Deferred income taxes............. 35 110 -- 145 210 -- 355
Prepaid expenses and other
current assets................... 140 19 -- 159 147 -- 306
------- ------ ------ ------- ------- ------- -------
Total current assets............. 4,004 735 (7) 4,732 3,671 -- 8,403
------- ------ ------ ------- ------- ------- -------
Property, plant and equipment....... 3,297 1,616 -- 4,913 8,206 -- 13,119
Accumulated depreciation............ (1,211) (950) -- (2,161) (4,720) -- (6,881)
------- ------ ------ ------- ------- ------- -------
Property, plant and equipment, net.. 2,086 666 -- 2,752 3,486 -- 6,238
------- ------ ------ ------- ------- ------- -------
Other assets
Goodwill and other purchased
intangibles, net................. 7,956 -- 1,976(a)(k) 9,932 3,909 3,643(l)(m) 17,484
Prepaid retiree benefits cost and
intangible pension asset......... 2,773 -- -- 2,773 3,014 -- 5,787
Other assets...................... 395 237 -- 632 1,270 -- 1,902
------- ------ ------ ------- ------- ------- -------
11,124 237 1,976 13,337 8,193 3,643 25,173
------- ------ ------ ------- ------- ------- -------
$17,214 $1,638 $1,969 $20,821 $15,350 $ 3,643 $39,814
======= ====== ====== ======= ======= ======= =======
Liabilities and Shareholders' Equity
Current liabilities
Notes payable and current portion
of long term debt................ $ 134 $ 46 $ -- $ 180 $ 1,540 $ -- $ 1,720
Accounts payable.................. 757 87 (7)(a) 837 1,744 -- 2,581
Accrued employees'
compensation..................... 629 -- -- 629 -- -- 629
Advances on contracts............. 837 -- -- 837 -- -- 837
Income taxes...................... 373 -- -- 373 -- -- 373
Other current liabilities......... 1,223 484 -- 1,707 2,100 -- 3,807
------- ------ ------ ------- ------- ------- -------
Total current liabilities........ 3,953 617 (7) 4,563 5,384 -- 9,947
------- ------ ------ ------- ------- ------- -------
Long-term debt...................... 5,185 432 696(a)(k) 6,313 4,942 -- 11,255
Accrued retiree benefits............ 1,478 -- -- 1,478 -- -- 1,478
Deferred tax and other long-term
liabilities........................ 973 285 -- 1,258 2,698 -- 3,956
Redeemable preferred stock.......... 350 -- -- 350 -- -- 350
Shareholders' equity
Paid in capital and unearned
compensation..................... 2,366 452 1,132(a) 3,950 559 5,410(l)(m) 9,919
Retained earnings................. 2,928 236 (236)(a) 2,928 2,426 (2,426)(l)(m) 2,928
Accumulated other comprehensive
loss............................. (19) -- -- (19) (269) 269(l)(m) (19)
Stock Employee Compensation
Trust............................ -- (384) 384(a) -- -- -- --
Treasury Shares--cost in excess
of par value..................... -- -- -- -- (390) 390(l)(m) --
------- ------ ------ ------- ------- ------- -------
5,275 304 1,280 6,859 2,326 3,643 12,828
------- ------ ------ ------- ------- ------- -------
$17,214 $1,638 $1,969 $20,821 $15,350 $ 3,643 $39,814
======= ====== ====== ======= ======= ======= =======
45
Unaudited Pro Forma Condensed Combined
Statement of Income
Year Ended December 31, 2000
($ in millions, except per share)
Pro Forma Pro Forma
Northrop ------------------------- Newport --------------------------
Grumman Litton Adjustments Combined News Adjustments Combined TRW
-------- ------ ----------- -------- ------- ----------- -------- -------
Sales and service revenues...... $7,618 $5,626 $ (61)(b) $13,183 $2,072 $ (22)(b) $15,233 $17,231
Cost of sales
Operating Costs.............. 5,446 4,669 88(b)(c)(d) 10,203 1,870 (261)(b)(h)(j) 11,812 14,520
Administrative and
general expenses........... 1,074 491 -- 1,565 -- 271(j) 1,836 1,115
------ ------ ----- ------- ------ ----- ------- -------
Operating margin................ 1,098 466 (149) 1,415 202 (32) 1,585 1,596
Interest expense................ (175) (105) (191)(e) (471) (53) (21)(i) (545) (524)
Other, net...................... 52 16 -- 68 4 -- 72 (366)
------ ------ ----- ------- ------ ----- ------- -------
Income from continuing
operations before income
taxes......................... 975 377 (340) 1,012 153 (53) 1,112 706
Federal and foreign income taxes 350 151 (119)(f) 382 63 (27)(f)(j) 418 268
------ ------ ----- ------- ------ ----- ------- -------
Income from continuing
operations.................... $ 625 $ 226 $(221) $ 630 $ 90 $ (26) $ 694 $ 438
====== ====== ===== ======= ====== ===== ======= =======
Less, dividends paid to
preferred shareholders........ -- -- (25)(g) (25) -- -- (25) --
------ ------ ----- ------- ------ ----- ------- -------
Income available to common
shareholders.................. $ 625 $ 226 $(246) $ 605 $ 90 $ (26) $ 669 $ 438
====== ====== ===== ======= ====== ===== ======= =======
Average shares basic............ 70.58 83.58 100.22
Average shares diluted.......... 70.88 84.00 100.64
Basic earnings per share:
Continuing operations........ $ 8.86 $ 7.24 $ 6.68
Diluted earnings per share:
Continuing operations........ $ 8.82 $ 7.20* $ 6.65*
Pro Forma
-----------------------
Adjustments Combined
----------- --------
Sales and service revenues...... $ -- $32,464
Cost of sales
Operating Costs.............. 91 (l)(h) 26,423
Administrative and
general expenses........... -- 2,951
----- -------
Operating margin................ (91) 3,090
Interest expense................ -- (1,069)
Other, net...................... -- (294)
----- -------
Income from continuing
operations before income
taxes......................... (91) 1,727
Federal and foreign income taxes (32)(f)(l) 654
----- -------
Income from continuing
operations.................... $ (59) $ 1,073
===== =======
Less, dividends paid to
preferred shareholders........ -- (25)
----- -------
Income available to common
shareholders.................. $ (59) $ 1,048
===== =======
Average shares basic............ 153.62
Average shares diluted.......... 154.04
Basic earnings per share:
Continuing operations........ $ 6.82
Diluted earnings per share:
Continuing operations........ $ 6.80 *
--------
* Calculated by dividing income available to common shareholders by average
shares diluted, which is calculated assuming preferred shares are not
converted to common shares, resulting in the most dilutive effect.
46
Unaudited Pro Forma Condensed Combined
Statement of Income
Nine Months Ended September 30, 2001
($ in millions, except per share)
Pro Forma Pro Forma
---------------------- -----------------------
Northrop Adjustments Newport Adjustments
Grumman Litton Combined News Combined TRW
-------- ------ ---------------------- ------- ----------------------- -------
Sales and service revenues.... $9,254 $1,345 $ (18)(b) $10,581 $1,639 $ (37)(b) $12,183 $12,305
Cost of sales
Operating Costs............ 7,656 1,120 19(b)(c)(d) 8,795 1,481 (168)(b)(h)(j) 10,108 10,467
Administrative and
general expenses......... 908 121 -- 1,029 -- 153(j) 1,182 795
------ ------ ----- ------- ------ ----- ------- -------
Operating margin.............. 690 104 (37) 757 158 (22) 893 1,043
Interest expense.............. (269) (27) (64)(e) (360) (37) (15)(i) (412) (368)
Other, net.................... 64 3 -- 67 (1) -- 66 (683)
------ ------ ----- ------- ------ ----- ------- -------
Income from continuing
operations before income
taxes....................... 485 80 (101) 464 120 (37) 547 (8)
Federal and foreign income
taxes....................... 189 30 (35)(f) 184 48 (18)(f)(j) 214 14
------ ------ ----- ------- ------ ----- ------- -------
Income from continuing
operations.................. $ 296 $ 50 (66) 280 $ 72 (19) 333 $ (22)
====== ====== ===== ======= ====== ===== ======= =======
Less, dividends paid to
preferred shareholders...... (12) -- (6)(g) (18) -- -- (18) --
------ ------ ----- ------- ------ ----- ------- -------
Income available to
common shareholders......... $ 284 $ 50 $ (72) $ 262 $ 72 $ (19) $ 315 $ (22)
====== ====== ===== ======= ====== ===== ======= =======
Average shares basic.......... 80.34 85.32 101.96
Average shares diluted........ 81.03 86.11 102.75
Basic earnings per share:
Continuing operations...... $ 3.53 $ 3.07 $ 3.09
Diluted earnings per share:
Continuing operations...... $ 3.50* $ 3.04 * $ 3.07 *
Pro Forma
-------------------
Adjustments
Combined
-------------------
Sales and service revenues.... $ -- $24,488
Cost of sales
Operating Costs............ 68 (l)(h) 20,643
Administrative and
general expenses......... -- 1,977
---- -------
Operating margin.............. (68) 1,868
Interest expense.............. -- (780)
Other, net.................... -- (617)
---- -------
Income from continuing
operations before income
taxes....................... (68) 471
Federal and foreign income
taxes....................... (24)(l)(f) 204
---- -------
Income from continuing
operations.................. $(44) 267
==== =======
Less, dividends paid to
preferred shareholders...... -- (18)
---- -------
Income available to
common shareholders......... $(44) $ 249
==== =======
Average shares basic.......... 155.36
Average shares diluted........ 156.15
Basic earnings per share:
Continuing operations...... $ 1.60
Diluted earnings per share:
Continuing operations...... $ 1.59 *
--------
* Calculated by dividing income available to common shareholders by average
shares diluted, which is calculated assuming preferred shares are not
converted to common shares, resulting in the most dilutive effect.
47
Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)
(a) Adjustments to (i) eliminate the equity of Newport News, (ii) eliminate
intercompany receivables and payables between Northrop Grumman and Newport
News, (iii) record issuance of common stock, (iv) record debt financing for
the Newport News acquisition along with additional acquisition related
costs, and (v) record goodwill and other purchased intangibles arising from
the acquisition of Newport News.
The amount of the purchase price allocated to goodwill and other purchased
intangibles is subject to change and is calculated based on the
assumption that Northrop Grumman has acquired 100% of Newport News
common stock and, accordingly, has issued 16,636,885 shares of
Northrop Grumman common stock available to be exchanged in the Newport
News acquisition.
The value ascribed to the Northrop Grumman common stock exchanged in the
Newport News acquisition is $95.22. This value was determined based on
a measurement date of December 5, 2001. Accordingly, this value
represents the 5-day average of the Northrop Grumman closing stock
prices from December 3, 2001 through December 7, 2001.
(b) Adjustment to eliminate intercompany sales and cost of sales transactions
between Northrop Grumman and Litton, and between Northrop Grumman and
Newport News.
(c) Adjustment to amortize the preliminary estimate of goodwill and other
purchased intangible assets arising out of the acquisition of Litton over
an estimated weighted average life of 26 years on a straight line basis.
(d) Adjustment to record depreciation of property, plant and equipment and
amortization of capitalized software arising from fair market value
adjustments for the Litton acquisition.
(e) Adjustment to record interest expense and the amortization of debt issuance
costs on new financing for the acquisition of Litton at a weighted average
rate of 7.5 and 6.8 percent for the year ended December 31, 2000 and the
nine months ended September 30, 2001, respectively.
(f) Adjustment to record income tax effects on pre-tax pro forma adjustments,
using a statutory tax rate of thirty-five percent.
(g) Adjusted, pro rata, for dividends to preferred shareholders using $7 per
share dividend rate for redeemable preferred stock issued in the
acquisition of Litton.
(h) Adjustment to amortize estimated purchased intangible assets arising out of
the Newport News and TRW acquisitions over estimated lives of 10 years on a
straight line basis. Goodwill arising from the Newport News and TRW
acquisitions has not been amortized, in accordance with the provisions of
SFAS No. 142: Goodwill and Other Intangible Assets.
(i) Adjustment to record interest on debt financing for the Newport News
acquisition at the current rate of 3.1 percent for both the year ended
December 31, 2000 and the nine months ended September 30, 2001.
(j) Adjustments to reclassify (i) G&A expense from operating costs to
administrative and general expenses and (ii) state income tax expense from
federal and foreign income taxes to operating costs to conform Newport News
data to classifications utilized by Northrop Grumman.
(k) Includes fair market value adjustment of $38 million for Newport News
long-term debt acquired.
(l) The pro-forma adjustments contained herein for TRW are based solely upon
publicly available information in TRW's quarterly and annual SEC filings.
Accordingly, we were unable to obtain adequate data to show the pro-forma
impact of Northrop Grumman's intention to divest TRW's automotive business
concurrently with the acquisition.
48
(m) Adjustments to (i) eliminate the equity of TRW, (ii) record issuance of
Northrop Grumman common stock, and (iii) record goodwill and other
purchased intangibles arising from the acquisition of TRW.
The amount of purchase price allocated to goodwill and other purchased
intangibles is subject to change and is calculated based on the assumption
that Northrop Grumman has acquired 100% of the TRW common stock and Serial
Preference Stock II, and, accordingly, has issued 53,396,492 shares of
Northrop Grumman common stock in the TRW acquisition.
The value ascribed to the Northrop Grumman common stock exchanged in the TRW
acquisition is $111.79. This value was determined based on a measurement
date of February 22, 2002. As such, the value represents the 5-day average
of the Northrop Grumman closing stock prices from February 20, 2002 through
February 26, 2002.
49
DESCRIPTION OF NORTHROP GRUMMAN COMMON STOCK
The following description of the terms of the common stock of Northrop
Grumman is not meant to be complete and is qualified by reference to Northrop
Grumman's Certificate of Incorporation, which is incorporated by reference. See
"Additional Information" beginning on page 61.
Northrop Grumman is authorized to issue 400,000,000 shares of common stock,
par value $1.00 per share. As of February 27, 2002, 112,651,366 shares of
Northrop Grumman common stock were outstanding and 18,900,993 shares were
subject to outstanding options and other rights to purchase or acquire.
Northrop Grumman's common stock is listed on the New York Stock Exchange and on
the Pacific Stock Exchange.
Dividends. Dividends may be paid on the common stock and on any class or
series of stock entitled to participate with the common stock as to dividends,
but only when and as declared by Northrop Grumman's board of directors.
Voting Rights. Each holder of Northrop Grumman's common stock is entitled
to one vote per share on all matters submitted to a vote of stockholders and
does not have cumulative voting rights.
Liquidation. If Northrop Grumman liquidates, holders of common stock are
entitled to receive all remaining assets available for distribution to
stockholders after satisfaction of Northrop Grumman's liabilities and the
preferential rights of any preferred stock that may be outstanding at that
time. Northrop Grumman's outstanding shares of common stock are fully paid and
nonassessable. The holders of Northrop Grumman's common stock do not have any
preemptive, conversion or redemption rights. The registrar and transfer agent
for Northrop Grumman's common stock is EquiServe Trust Company.
Preferred Stock Purchase Rights. Northrop Grumman's preferred share
purchase rights when exercisable, entitle the registered holder to purchase
from Northrop Grumman one one-thousandth of a share of Northrop Grumman's
Series A junior participating preferred stock, $1.00 par value per share, at a
price of $250.00 per one one-thousandth of a preferred share, subject to
adjustment. These rights are attached to all shares of Northrop Grumman common
stock outstanding until the distribution date described below. The rights will
separate from the shares of Northrop Grumman common stock on the distribution
date. Distribution date means the date which is the earlier to occur of:
. a person or group of affiliated or associated persons having acquired
beneficial ownership of 15% or more of Northrop Grumman's outstanding
common shares, except pursuant to a permitted offer; and
. 10 days, or such later date as Northrop Grumman's board of directors may
determine, following the commencement of, or announcement of an intention
to make, a tender offer or offer to exchange, the completion of which
would result in a person or group acquiring 15% of Northrop Grumman's
outstanding voting power.
Northrop Grumman may redeem the rights at the option of Northrop Grumman's
board of directors for $0.01 per right at any time prior to the earlier of the
expiration of the rights or on the date that a person or persons acquire 15% of
Northrop Grumman's voting power. Northrop Grumman's board of directors may
amend the rights at any time without stockholder approval. Unless earlier
redeemed, the rights will expire by their terms on October 31, 2008.
Convertible Debt Securities. In November 2001, Northrop Grumman issued
6,900,000 units of 7.25% Equity Security Units, each convertible into (i) a
contract to purchase, for $100, shares of Northrop Grumman common stock and
(ii) a senior note with a principal amount of $100 at an initial interest rate
of 5.25%. As of February 27, 2002, there were 6,900,000 outstanding units of
7.25% Equity Security Units convertible into 7,796,310 shares of Northrop
Grumman common stock.
50
COMPARISON OF RIGHTS OF HOLDERS
OF NORTHROP GRUMMAN COMMON STOCK AND
TRW CAPITAL STOCK
Upon completion of the offer to exchange and the TRW merger, TRW
shareholders will become stockholders of Northrop Grumman, rather than
shareholders of TRW. Since Northrop Grumman is a Delaware corporation, the
rights of the stockholders of Northrop Grumman are governed by the applicable
laws of the State of Delaware, including the Delaware General Corporation Law,
and by Northrop Grumman's charter and bylaws. Since TRW is an Ohio corporation,
the rights of the shareholders of TRW are governed by the applicable laws of
the State of Ohio, including the Ohio Revised Code, and by TRW's charter and
regulations.
The following is a summary comparison of:
. the current rights of TRW shareholders under the Ohio Revised Code and the
TRW charter and regulations; and
. the rights TRW shareholders will have as Northrop Grumman stockholders
under the Delaware General Corporation Law and the Northrop Grumman
charter and bylaws upon the completion of Northrop Grumman's offer to
exchange and the TRW merger.
The following summary discusses of some of the material differences between
the current rights of Northrop Grumman stockholders and TRW shareholders under
the Delaware General Corporation Law and Ohio Revised Code, and under the
charter and bylaws of Northrop Grumman and the Amended Articles of
Incorporation and regulations of TRW. The statements in this section are
qualified in their entirety by reference to, and are subject to, the detailed
provisions of the Delaware General Corporation Law, the Ohio Revised Code,
Northrop Grumman's charter, Northrop Grumman's bylaws, TRW's Amended Articles
of Incorporation and TRW's regulations. Copies of the Northrop Grumman charter
and bylaws and the TRW Articles of Incorporation and regulations are
incorporated by reference herein and will be sent to TRW shareholders, upon
request. See "Additional Information" beginning on page 61.
Corporate Governance
Northrop Grumman. The rights of Northrop Grumman stockholders are governed
by Delaware corporate law and the charter and bylaws of Northrop Grumman.
TRW. The rights of TRW shareholders are governed by Ohio corporate law and
the Amended Articles of Incorporation and regulations of TRW.
Authorized Capital Stock
Northrop Grumman. The authorized capital stock of Northrop Grumman
currently consists of 410,000,000 shares of capital stock consisting of (i)
400,000,000 shares of common stock, par value $1.00 per share and (ii) 10
million shares of preferred stock, par value $1.00 per share.
TRW. The authorized capital stock of TRW currently consists of 505,099,536
shares of capital stock consisting of (i) 500,000,000 shares of common stock,
no par value per share, (ii) 99,536 shares of Serial Preference Stock, no par
value per share and (iii) 5 million shares of Serial Preference Stock II, no
par value per share.
51
Number, Classification and Election Board of Directors
Northrop Grumman. The Northrop Grumman charter provides that the board of
directors is to be divided into three classes of directors, each as nearly
equal in number as possible, with each director elected for a term expiring at
the third succeeding annual meeting of stockholders after his or her election.
The bylaws of Northrop Grumman provide that the number of directors will be
fixed by resolution of the board of directors, but will be no less than three
members. As of March 1, 2002, the Northrop Grumman board consisted of 10
directors.
Neither the Northrop Grumman charter nor the Northrop Grumman bylaws permits
cumulative voting for the election of directors.
TRW. The TRW regulations provide that the board of directors is to be
divided into three classes of directors with each director elected for a term
expiring at the third succeeding annual meeting of shareholders after his or
her election. The number of directors will be fixed by action of the board of
directors, but will be no less than twelve members and no more than eighteen
members. As of March 1, 2002, the TRW board consisted of 14 directors with five
directors per class.
The Ohio Revised Code provides that any shareholder may give written notice
requesting that cumulative voting be used for the election of directors. The
notice must be given to the President, a Vice-President or the Secretary of a
corporation, generally not less than 48 hours before the time fixed for holding
a meeting of shareholders for the purpose of electing directors. Furthermore,
an announcement of the giving of such notice must be made upon the convening of
the meeting by the Chairman or Secretary or by or on behalf of such shareholder.
Removal of Directors
Northrop Grumman. The Northrop Grumman charter provides that directors may
be removed only for cause and only by the affirmative vote of the holders of
not less than 80% of all outstanding shares of capital stock of Northrop
Grumman having general voting power entitled to vote in connection with the
election of a director, regardless of class and voting together as a single
voting class; provided, however, that where the removal is approved by a
majority of Continuing Directors (as defined in the Northrop Grumman charter),
the affirmative vote of a majority of the voting power of all outstanding
shares of voting stock entitled to vote in connection with the election of that
director, regardless of class and voting together as a single voting class, is
required for approval of removal.
TRW. Under the TRW Amended Articles of Incorporation and the Ohio Revised
Code, directors may be removed only for cause and only by the affirmative vote
of the holders of not less than two-thirds of all outstanding shares of capital
stock of TRW.
Newly Created Directorships and Vacancies
Northrop Grumman. The charter and bylaws of Northrop Grumman provide that
any vacancies on the board or newly created directorships may be filled solely
by the affirmative vote of a majority of the remaining directors, although less
than a quorum. However, the Delaware General Corporation Law also provides that
if the directors then in office constitute less than a majority of the board of
directors, then, upon application by stockholders representing at least 10% of
the outstanding shares entitled to vote for those directors, the Court of
Chancery may order a stockholder election of director to be held.
TRW. TRW's regulations and the Ohio Revised Code provide that any vacancies
on the board and newly created directorships may be filled by the affirmative
vote of a majority of the directors then in office.
52
Quorum
Northrop Grumman. Northrop Grumman's bylaws provide for a quorum of a
majority of the board of directors, except that when the board of directors
consists of one director, then the one director will constitute a quorum.
TRW. The regulations of TRW provide that a quorum of the board of directors
is the lesser of a majority of the board of directors then in office or five
directors.
Annual Meetings of Stockholders/Shareholders
Northrop Grumman. The bylaws of Northrop Grumman provide that the annual
meeting of stockholders will be held between May 1 and July 1 of each year on
such date and time fixed by the board of directors.
TRW. The regulations of TRW provide that the annual meeting of shareholders
will be held on the last Wednesday in April of each year, unless such day is a
legal holiday, in which case the annual meeting will be held on the next day
that is not a legal holiday.
Special Meetings of Stockholders/Shareholders
Northrop Grumman. Under the charter and bylaws of Northrop Grumman, special
meetings of the stockholders may be called at any time by a majority of the
board of directors, the Chairman of the board of directors or by the President
and Chief Executive Officer.
TRW. TRW's regulations provide that special meeting of the shareholders may
be called at any time by (i) the Chairman of the board of directors, (ii) the
President, (iii) a Vice President, (iv) the board of directors acting at a
meeting, (v) a majority of the board of directors acting without a meeting, or
(vi) holders of not less than 35% of all of the outstanding shares entitled to
vote at such meeting.
Quorum
Northrop Grumman. Northrop Grumman's bylaws provide that the presence in
person or by proxy of the holders of a majority of the shares entitled to vote
at a meeting constitutes a quorum for that meeting, except as otherwise
provided by the Delaware General Corporation Law.
TRW. TRW's regulations provide that the presence in person or by proxy of
the holders of not less than 35% of the shares entitled to vote at the meeting
with respect to a purpose stated in the notice of such meeting constitutes a
quorum for that meeting.
Certain Voting Requirements
Northrop Grumman. Under the Northrop Grumman bylaws, except as otherwise
provided by the Northrop Grumman charter or by applicable law, action by
Northrop Grumman stockholders generally is taken by the affirmative vote, at a
meeting at which a quorum is present, of a majority of the votes cast on that
action, including certain extraordinary actions, such as mergers,
consolidations and amendments to the Northrop Grumman charter. However, the
Northrop Grumman charter requires the affirmative vote of the holders of not
less than 80% of the outstanding shares of voting stock to approve an amendment
of certain articles in the charter. The charter also requires the affirmative
vote of at least 80% of all outstanding shares entitled to vote to approve a
Business Combination (as defined in the Northrop Grumman charter) involving
specific related persons.
53
Each share of Northrop Grumman common stock entitles the holder to one vote
on each matter upon which stockholders have the right to vote.
TRW. Under the TRW regulations, except as otherwise provided by the TRW
charter or by applicable law, action by TRW shareholders generally is taken by
the affirmative vote, at a meeting at which a quorum is present, of a majority
of the votes cast on that action. However, the TRW Amended Articles of
Incorporation requires the affirmative vote of the holders of at least
two-thirds of the outstanding shares of Serial Preference Stock II or at least
two-thirds of the outstanding shares of Serial Preference Stock II, as the case
may be, voting separately as a class, to approve the amendment of certain
articles in the charter or the regulations.
Each share of TRW common stock and each share of Serial Preference Stock II
entitles the holder to one vote on each matter upon which TRW shareholders have
the right to vote. Each share of Serial Preference Stock II entitles the holder
to two votes on each matter upon which TRW shareholders have the right to vote.
Stockholder/Shareholder Action by Written Consent
Northrop Grumman. Under the Northrop Grumman charter and bylaws, any action
required or permitted to be taken by the stockholders must be effected at a
duly called annual meeting or at special meeting of stockholders, unless such
action requiring or permitting stockholder approval is approved by a majority
of the continuing directors (as defined in the Northrop Grumman charter), in
which case that action may be authorized or taken by the written consent of the
holders of outstanding shares of voting stock having not less than the minimum
voting power that would be necessary to authorize or take such action at a
meeting of stockholders at which all shares entitled to vote thereon were
present and voted provided all other requirements of applicable law and the
charter have been satisfied.
TRW. The Ohio Revised Code provides that shareholder action may be taken
without a meeting upon the written consent of the holders of all the
outstanding shares entitled to vote. Shareholder action to amend the TRW
regulations may be taken without a meeting upon the written consent of the
holders of two-thirds of the outstanding shares entitled to vote.
Business Conducted at Stockholders'/Shareholders' Meetings
Northrop Grumman. The Northrop Grumman bylaws provide that with respect to
any stockholder meeting, nominations of persons election to the board and the
proposal of business to be considered by stockholders may be made only (a) by
or at the direction of the board of directors, (b) by a stockholder of record
who is entitled to vote and who has complied with the advance notice procedures
set forth in the bylaws or (c) pursuant to Northrop Grumman's notice with
respect to that meeting.
TRW. Under the Ohio Revised Code, shareholders must be given written notice
of the time, place and purpose or purposes of every shareholder meeting, except
as otherwise provided in the Ohio Revised Code.
Amendments of Charter/Articles of Incorporation
Northrop Grumman. Under the Delaware General Corporation Law, the
affirmative vote of the holders of a majority of the outstanding shares
entitled to vote is required to amend the Northrop Grumman charter. In
addition, amendments that make changes relating to the capital stock by
increasing or decreasing the par value or the aggregate number of authorized
shares of a class or otherwise adversely affecting the rights of that class,
must be approved by the majority vote of each class of stock affected, unless,
in the case of an increase in the number of shares, the certificate of
incorporation takes away that right, and provided that, if the amendment
affects some series, then only those series have such vote. The Northrop
Grumman charter provides that specified articles may be adopted, repealed,
rescinded, altered or amended only by the affirmative vote of the holders of
not less than 80% of the voting power of all outstanding shares of voting
stock, regardless of class and voting
54
together as a single voting class, and where that action is proposed by an
interested stockholder (as defined in the Northrop Grumman charter) or an
associate or affiliate (each as defined in the Northrop Grumman charter) of an
interested stockholder, by the majority of the voting power of all of the
outstanding shares of voting stock, voting together as a single class, other
than shares held by the interested person; provided, however, that where the
action is approved by a majority of the continuing directors (as defined in the
Northrop Grumman charter), the affirmative vote of a majority of the voting
power of all outstanding shares of voting stock, regardless of class and voting
together as a single voting class shall be required for approval of that action.
TRW. Under the Ohio Revised Code, the articles of incorporation may be
amended by the affirmative vote of two-thirds of the voting power of the
corporation, unless otherwise specified in the corporation's articles of
incorporation. The TRW articles of incorporation provides that the affirmative
vote of the holders of at least two-thirds of the outstanding shares of Serial
Preference Stock or at least two-thirds of the outstanding shares of Serial
Preference Stock II, as the case may be, voting separately as a class, is
required to amend, alter or repeal any of the provisions of the charter which
(i) adversely affects the voting powers, rights or preferences of the holders
of Serial Preference Stock or the holders of Serial Preference Stock II,
respectively or (ii) reduces the time for any notice to which the holders of
Serial Preference Stock or the holders of Serial Preference Stock II may be
entitled.
Amendments of Bylaws/Regulations
Northrop Grumman. Under the Northrop Grumman charter and bylaws, the bylaws
may be adopted, repealed, rescinded, altered or amended by stockholders, but
only by the affirmative vote of the holders of not less than 80% of the voting
power of all outstanding shares of voting stock, regardless of class and voting
together as a single voting class and, where such action is proposed by an
interested stockholder or by any associate or affiliate of an interested
stockholder, by a majority of the voting power of all outstanding shares or
voting stock, regardless of class and voting together as a single class, other
than the shares held by such interested stockholders; provided, however, that
where such action is approved by a majority of the continuing directors, the
affirmative vote of the holders of a majority of the voting power of all
outstanding shares of voting stock, regardless of class and voting together as
a single voting class shall be required for approval of that action.
TRW. The TRW regulations may be amended at a meeting of the shareholders by
the affirmative vote of the holders of not less than two-thirds of all
outstanding shares of capital stock of TRW having the general voting power
entitled to vote on such amendment. The TRW articles of incorporation provides
that the affirmative vote of the holders of at least two-thirds of the
outstanding shares of Serial Preference Stock or at least two-thirds of the
outstanding shares of Serial Preference Stock II, as the case may be, voting
separately as a class, is required to amend, alter or repeal any of the
provisions of the regulations which (i) adversely affects the voting powers,
rights or preferences of the holders of Serial Preference Stock or the holders
of Serial Preference Stock II, respectively or (ii) reduces the time for any
notice to which the holders of Serial Preference Stock or the holders of Serial
Preference Stock II may be entitled.
Business Combinations
Northrop Grumman. Under the Delaware General Corporation Law, a majority of
the outstanding shares is needed to adopt a plan of merger or consolidation.
The Delaware General Corporation Law prohibits a Delaware corporation which has
a class of stock which is listed on a national stock exchange or which has
2,000 or more stockholders of record from engaging in a business combination
with an interested stockholder (generally, the beneficial owner of 15% or more
of the corporation's outstanding voting stock) for three years following the
time the stockholder became an interested stockholder, unless, prior to that
time, the corporation's board of directors approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder, or if at least two-thirds of the outstanding shares not
owned by that interested stockholder approve the business combination, or if,
upon becoming an interested stockholder, that stockholder owned at least 85% of
the outstanding shares (excluding those held by officers, directors and some
55
employee stock plans). In addition to the Delaware General Corporation Law
requirements, the Northrop Grumman charter provides that, subject to various
exceptions, any business combination between Northrop Grumman or any subsidiary
and an interested stockholder (as defined in the Northrop Grumman Charter) must
be approved by the holders of at least 80% of the voting power of all
outstanding voting stock, regardless of class and voting together as a single
class, and a majority of the voting power of all outstanding shares of voting
stock, other than the shares held by any interested stockholder which is a
party to such business combination or by any affiliate or associates of such
interested stockholder, regardless of class and voting together as single
voting class.
TRW. Under the Ohio Revised Code, the affirmative vote of two-thirds of the
outstanding shares is needed to adopt a plan of merger or consolidation. The
Ohio Revised Code prohibits an Ohio corporation which has 50 or more
shareholders of record and that has its principal place of business, its
principal executive offices, assets having substantial value or a substantial
percentage of its assets within Ohio from engaging in a business combination
with an interested shareholder (a shareholder that can exercise, directly or
indirectly, 10% of the voting power of the corporation) for three years
following the time the shareholder became an interested shareholder, unless,
(i) the directors of the corporation have approved the transactions or the
interested shareholder's acquisition of shares of the corporation prior to the
date such shareholder became an interested shareholder of the corporation, or
(ii) the corporation, by action of its shareholders holding at least two-thirds
of the voting power of the corporation, adopts an amendment to its charter
specifying that Chapter 1704 of the Ohio Revised Code shall not be applicable
to the corporation. This prohibition also applies to a person or entity,
whether or not an interested shareholder, that is or after the business
combination would be, an affiliate or associate of an interested shareholder.
The Ohio Revised Code further provides that the business combination may still
be prohibited after the three-year period unless either (i) certain
"fair-price" provisions are complied with or (ii) the transaction is approved
by certain super majority shareholder votes.
Under Chapter 1704 of the Ohio Revised Code, an interested shareholder
includes a shareholder of the corporation that can exercise directly or
indirectly 10% of the voting power of the corporation (i) who owns shares of
the corporation and (ii) also can exercise or direct the exercise of the voting
power of the corporation such that (i) and (ii) of 10% or more of the voting
power of the corporation.
Under Section 1701.831 of the Ohio Revised Code, unless the charter or
regulations of a corporation otherwise provide, any control share acquisition
(as defined herein) of an issuing public corporation can only be made with the
prior approval of the corporation's shareholders. A "control share acquisition"
is defined as any acquisition of shares of a corporation that, when added to
all other shares of that corporation that the acquiring person may exercise or
direct the exercise of the voting power of, would enable that person to
exercise or direct the exercise of levels of voting power in any of the
following ranges: at least 20% but less than 33 1/3 %; at least 33 1/3 but less
than 50%; or 50% or more.
In addition to the requirements of the Ohio Revised Code, the TRW Amended
Articles of Incorporation requires the affirmative vote of at least two-thirds
of the outstanding shares of Serial Preference Stock or at least two-thirds of
the outstanding shares of Serial Preference Stock II, as the case may be,
voting separately as a class, to approve a merger or consolidation of the
corporation.
Rights Plan
Northrop Grumman. Northrop Grumman entered into a Rights Agreement, dated
January 31, 2001, between Northrop Grumman and EquiServe Trust Company, N.A.,
as amended.
TRW. TRW does not have a shareholders' rights plan.
56
ADDITIONAL INFORMATION
Northrop Grumman and TRW file annual, quarterly and special reports, proxy
statements and other information with the SEC. Shareholders may read and copy
this information at the following locations of the SEC:
Public Reference Room North East Regional Office Midwest Regional Office
450 Fifth Street, N.W. 233 Broadway 175 Jackson Boulevard
Room 1024 13th Floor Chicago, Illinois 60604
Washington, D.C. 20549 New York, New York 10279
Shareholders may obtain information on the operation of the Public Reference
Rooms by calling the SEC at 1-800-SEC-0330. Shareholders may also obtain copies
of this information by mail from the Public Reference Section of the SEC, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
The SEC also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers like Northrop
Grumman and TRW who file electronically with the SEC. The address of that site
is http://www.sec.gov.
Northrop Grumman filed a registration statement on Form S-4 with the SEC
under the Securities Act to register the Northrop Grumman common stock to be
issued in Northrop Grumman's offer to exchange and the TRW merger. This offer
to exchange is a part of that registration statement. As allowed by SEC rules,
this offer to exchange does not contain all the information shareholders can
find in the registration statement or the exhibits to the registration
statement. In addition, on March 4, 2002 Northrop Grumman also filed with the
SEC a statement on Schedule TO pursuant to Rule 14d-3 under the Exchange Act to
furnish various information about Northrop Grumman's offer to exchange.
Shareholders may obtain copies of the Form S-4 and the Schedule TO, and any
amendments to those documents, in the manner described above.
The SEC allows Northrop Grumman to incorporate by reference information into
this offer to exchange, which means that Northrop Grumman can disclose
important information to shareholders by referring shareholders to another
document filed separately with the SEC. The information incorporated by
reference is deemed to be part of this offer to exchange, except for any
information superseded by information contained directly in this offer to
exchange.
This offer to exchange incorporates by reference the documents listed below
that Northrop Grumman, Litton, Newport News and TRW have previously filed with
the SEC. These documents contain important information about Northrop Grumman
and TRW and their business, financial condition and results of operations.
The following documents filed by Northrop Grumman or Northrop Systems with
the SEC are incorporated by reference:
. Annual Report on Form 10-K/A, for the fiscal year ended December 31, 2000,
as filed on March 8, 2001;
. Quarterly Reports on Form 10-Q for the period ended March 31, 2001, as
filed on May 10, 2001, for the period ended June 30, 2001, as filed on
August 9, 2001, and for the period ended September 30, 2001, as filed on
November 5, 2001;
. Proxy Statement for the Annual Meeting of Stockholders held on May 16,
2001, as filed on April 13, 2001;
. The description of Northrop Grumman's common stock set forth in Northrop
Grumman's registration statement on Form S-3 filed by Northrop Grumman
pursuant to Section 12 of the Exchange Act, including any amendment or
report filed for purposes of updating the description as filed on January
18, 2002;
57
. Current Report on Form 8-K, as filed on April 3, 2001 and amended on Form
8K/A, as filed on June 14, 2001;
. Current Report on Form 8-K, as filed on April 17, 2001;
. Current Report on Form 8-K, as filed on November 14, 2001;
. Current Report on Form 8-K, as filed on November 16, 2001;
. Current Report on Form 8-K, as filed on November 21, 2001;
. Current Report on Form 8-K, as filed on December 14, 2001; and
. Current Report on Form 8-K, as filed on December 14, 2001, as amended on
Form 8-K/A, as filed on January 14, 2002 and amended on Form 8-K/A, as
filed on February 1, 2002
. Tender Offer Statement on Schedule TO, as filed on March 4, 2002, as it
may be amended from time to time.
The following documents filed by Litton with the SEC are incorporated by
reference:
. Annual Report on Form 10-K for the fiscal year ended July 31, 2000, as
filed on October 11, 2000;
. Quarterly Reports on Form 10-Q for the period ended October 31, 2000, as
filed on December 12, 2000, and for the period ended January 31, 2001, as
filed on March 16, 2001;
. Current Report on Form 8-K, as filed on January 30, 2001; and
. Current Report on Form 8-K, as filed on April 17, 2001.
The following documents filed by Newport News with the SEC are incorporated
by reference:
. Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as
filed on March 13, 2001;
. Quarterly Reports on Form 10-Q for the period ended March 18, 2001, as
filed on April 27, 2001, for the period ended June 17, 2001, as filed on
July 19, 2001, and for the period ended September 16, 2001, as filed on
October 25, 2001;
. Current Report on Form 8-K, as filed on April 25, 2001;
. Current Report on Form 8-K, as filed on November 8, 2001;
. Current Report on Form 8-K, as filed on November 14, 2001; and
. Current Report on Form 8-K, as filed on November 30, 2001.
The following documents filed by TRW with the SEC are incorporated by
reference:
. Annual Report on Form 10-K for the fiscal year ended December 31, 2000, as
filed on March 13, 2001 (except for the report of TRW's independent
accountants contained in that report which is not incorporated in this
offer to exchange by reference because the consent of TRW's independent
accountants has not yet been obtained);
. Quarterly Reports on Form 10-Q for the period ended March 31, 2001, as
filed on May 1, 2001, for the period ended June 30, 2001, as filed on July
31, 2001, and for the period ended September 30, 2001, as filed on
November 7, 2001;
. The description of TRW's common stock set forth in TRW's registration
statement on Form S-3 filed by TRW pursuant to Section 12 of the Exchange
Act, including any amendment or report filed for purposes of updating the
description, as filed on October 15, 1999;
. Current Report on Form 8-K, as filed on January 31, 2002;
. Current Report on Form 8-K, as filed on February 20, 2002;
58
. Current Report on Form 8-K, as filed on February 22, 2002; and
. Current Report on Form 8-K, as filed on February 27, 2002.
All documents filed by Northrop Grumman or TRW pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act from the date of this offer to exchange
to the date that shares are accepted for exchange pursuant to Northrop
Grumman's offer to exchange (or the date that Northrop Grumman's offer to
exchange expires or is terminated) shall also be deemed to be incorporated in
this offer to exchange by reference.
Documents incorporated by reference are available from Northrop Grumman
without charge upon request to Northrop Grumman's information agent, D. F. King
& Co., Inc., 77 Water Street, New York, New York 10005, toll-free at
1-800-755-7250. In order to ensure timely delivery, any request should be
submitted no later than March 22, 2002 (five business days before the initial
scheduled expiration date of Northrop Grumman's offer to exchange). If
shareholders request any incorporated documents from Northrop Grumman, Northrop
Grumman will mail them to shareholders by first class mail, or another equally
prompt means, within one business day after Northrop Grumman receives their
request.
Northrop Grumman has not authorized anyone to give any information or make
any representation about Northrop Grumman's offer to exchange that is different
from, or in addition to, that contained in this offer to exchange or in any of
the materials that Northrop Grumman has incorporated by reference into this
offer to exchange. Therefore, if anyone does give shareholders information of
this sort, shareholders should not rely on it. If shareholders are in a
jurisdiction where offers to exchange or sell, or solicitations of offers to
exchange or purchase, the securities offered by this offer to exchange are
unlawful, or if shareholders are a person to whom it is unlawful to direct
these types of activities, then Northrop Grumman's offer presented in this
offer to exchange does not extend to shareholders. The information contained in
this offer to exchange speaks only as of the date of this offer to exchange
unless the information specifically indicates that another date applies.
TRW INFORMATION
While Northrop Grumman has included in this offer to exchange information
concerning TRW known to Northrop Grumman based on publicly available
information (primarily filings by TRW with the SEC), Northrop Grumman is not
affiliated with TRW, and TRW has not permitted Northrop Grumman to have access
to their books and records. Therefore, non-public information concerning TRW
was not available to Northrop Grumman for the purpose of preparing this offer
to exchange. Although Northrop Grumman has no knowledge that would indicate
that statements relating to TRW contained or incorporated by reference in this
offer to exchange are inaccurate or incomplete, Northrop Grumman was not
involved in the preparation of those statements and cannot verify them.
Pursuant to Rule 409 under the Securities Act and Rule 12b-21 under the
Exchange Act, Northrop Grumman is requesting that TRW provide Northrop Grumman
with information required for complete disclosure regarding the businesses,
operations, financial condition and management of TRW. Northrop Grumman will
amend or supplement this offer to exchange to provide any and all information
Northrop Grumman receives from TRW, if Northrop Grumman receives the
information before Northrop Grumman's offer to exchange expires and Northrop
Grumman considers it to be material, reliable and appropriate. In addition,
pursuant to Rule 439 under the Securities Act, Northrop Grumman is requesting
that TRW's independent accountants, Ernst & Young LLP, provide Northrop Grumman
with the consent required for Northrop Grumman to incorporate by reference into
this offer to exchange the Ernst & Young LLP audit report included in TRW's
Annual Report on Form 10-K for the year ended December 31, 2000. If Northrop
Grumman receives this consent, Northrop Grumman will promptly file it as an
exhibit to Northrop Grumman's registration statement of which this offer to
exchange forms a part.
59
FORWARD-LOOKING STATEMENTS
Certain statements and assumptions in this offer to exchange and in the
documents incorporated by reference contain or are based on "forward-looking"
information and involve risks and uncertainties. Such forward-looking
information includes the statements as to the impact of the proposed
acquisition on revenues and earnings. Such statements are subject to numerous
assumptions and uncertainties, many of which are outside Northrop Grumman's
control. These include governmental regulatory processes, Northrop Grumman's
ability to successfully integrate the operations of TRW, achieve a successful
transaction or other resolution with respect to the TRW automotive sector,
assumptions with respect to future revenues, expected program performance and
cash flows, the outcome of contingencies including litigation, environmental
remediation, divestitures of businesses, and anticipated costs of capital
investments. Northrop Grumman's operations are subject to various additional
risks and uncertainties resulting from its position as a supplier, either
directly or as subcontractor or team member, to the U.S. Government and its
agencies as well as to foreign governments and agencies. Actual outcomes are
dependent upon many factors, including, without limitation, Northrop Grumman's
successful performance of internal plans; government customers' budgetary
restraints; customer changes in short-range and long-range plans; domestic and
international competition in both the defense and commercial areas; product
performance; continued development and acceptance of new products; performance
issues with key suppliers and subcontractors; government import and export
policies; acquisition or termination of government contracts; the outcome of
political and legal processes; legal, financial, and governmental risks related
to international transactions and global needs for military aircraft, military
and civilian electronic systems and support and information technology; as well
as other economic, political and technological risks and uncertainties and
other risk factors set out in Northrop Grumman's filings from time to time with
the SEC, including, without limitation, Northrop Grumman's reports on Form 10-K
and Form 10-Q.
Important factors that could cause actual results to differ materially from
those suggested by the forward-looking statements include:
. Northrop Grumman's dependence on sales to the U.S. Government;
. Northrop Grumman's successful performance of internal plans;
. government customers' budgetary restraints;
. customer changes in short-range and long-range plans;
. domestic and international competition in both the defense and commercial
areas;
. product performance;
. continued development and acceptance of new products;
. performance issues with key suppliers and subcontractors;
. government import and export policies;
. termination of government contracts, which may include termination for the
convenience of the government;
. the outcome of political and legal processes;
. legal, financial and governmental risks related to international
transactions and global needs for military and commercial aircraft,
electronic systems and support, information technologies and ships; and
. other economic, political and technological risks and uncertainties.
See also "Risk Factors" beginning on page 9, and the risk factors disclosed
in Northrop Grumman's Annual Report on Form 10-K/A, for the fiscal year ended
December 31, 2000, Northrop Grumman's Quarterly
60
Reports on Form 10-Q, for the periods ended March 31, 2001, June 30, 2001 and
September 30, 2001, and Northrop Grumman's Registration Statement on Form S-3
as filed on January 18, 2002 which are incorporated herein by reference.
Readers are cautioned not to put undue reliance on forward-looking statements.
Northrop Grumman disclaims any intent or obligation to update these
forward-looking statements, whether as a result of new information, future
events or otherwise.
LEGAL MATTERS
The legality of Northrop Grumman common stock offered by this offer to
exchange will be passed upon by John H. Mullan, Corporate Vice President and
Secretary of Northrop Grumman. Mr. Mullan is paid a salary by Northrop Grumman,
is a participant in various employee benefit plans offered to employees of
Northrop Grumman generally and owns and has options to purchase shares of
Northrop Grumman common stock.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated in this offer to exchange by reference from Northrop
Systems' Annual Report on Form 10-K/A for the year ended December 31, 2000 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
With respect to the unaudited interim financial information of Northrop
Grumman Corporation for the periods ended March 31, 2001, June 30, 2001 and
September 30, 2001 and of Northrop Systems for the periods ended March 31,
2000, June 30, 2000 and September 30, 2000 is incorporated in this offer to
exchange by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in Northrop Grumman's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001 and
September 30, 2001 and incorporated by reference herein, they did not audit and
they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act for their report on the unaudited interim financial
information because such report is not a "report" or a "part" of the
registration statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
The consolidated financial statements incorporated in this offer to exchange
by reference from Litton's Annual Report on Form 10-K for the year ended July
31, 2000 have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have
been so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The financial statements of Newport News Shipbuilding Inc. incorporated by
reference in this offer to exchange have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said
firm as experts in giving said reports.
61
ANNEX A
DIRECTORS AND EXECUTIVE OFFICERS OF NORTHROP GRUMMAN
The name, age, business address, present principal occupation or employment
and five-year employment history of each of the directors and executive
officers of Northrop Grumman are set forth below. Unless otherwise indicated,
each position set forth opposite an individual's name refers to employment with
Northrop Grumman and each individual has held that position for at least the
last five years. Each director and executive officer listed below is a citizen
of the United States of America. Unless otherwise indicated below, the business
address of each person is c/o Northrop Grumman, 1840 Century Park East, Los
Angeles, California 90067.
Directors (Including Executive Officers Who Are Directors)
Present Principal Occupation or Employment;
Name and Business Address Age Five Year Employment History
------------------------- --- -------------------------------------------
John T. Chain, Jr..... 67 Director of Northrop Grumman since 1991. General,
United States Air Force (Ret.) and Chairman of the
Board, Thomas Group, Inc., a management consulting
company. General Chain has been Chairman of Thomas
Group, Inc. since May 1998 and has been a member of
the Board of Directors of Thomas Group since May
1995. He has also served as the President of Quarterback
Equity Partners, Inc. since December 1996. He served as
Special Assistant to the Chairman of Burlington
Northern Santa Fe Corporation from November 1995 to
March 1996, and as an Executive Vice President of
Burlington Northern from 1991 to November 1995.
During his military career, General Chain's commands
included military assistant to the Secretary of the Air
Force, Director of Politico-Military Affairs, Department
of State and Chief of Staff of Supreme Headquarters
Allied Powers Europe. After serving as Commander in
Chief, Strategic Air Command, he retired from the Air
Force in February 1991. General Chain serves as a
director of R.J. Reynolds, Inc. and Kemper Insurance
Company.
Lewis W. Coleman...... 60 Director of Northrop Grumman since 2001. President,
Gordon and Betty Moore Foundation. Mr. Coleman
became President of the Gordon and Betty Moore
Foundation in January 2001. In December 2000, he
resigned as Chairman of Banc of America Securities
LLC, a subsidiary of Bank of America Corporation, after
having served in that position since joining Banc of
America Securities, LLC in December 1995. Prior to
that, he spent ten years at BankAmerica Corporation
where he held various positions including Chief
Financial Officer, head of World Banking Group and
head of Capital Markets. Previous to that he spent
thirteen years with Wells Fargo & Co. in a variety of
wholesale and retail banking positions. He is also on the
Board of Directors of Chiron Corporation.
A-1
Present Principal Occupation or Employment;
Name and Business Address Age Five Year Employment History
------------------------- --- -------------------------------------------
Vic Fazio.......... 59 Director of Northrop Grumman since 2000. Senior
Partner, Clark & Weinstock, a consulting firm. Mr. Fazio
served as a Member of Congress for 20 years
representing California's third congressional district.
During that time he served as a member of the Armed
Services, Budget and Ethics Committees and was a
member of the House Appropriations Committee where
he served as Subcommittee Chair or ranking member for
18 years. Mr. Fazio was a member of the elected
Democratic Leadership in the House from 1991-1998
including four years as Chair of the Democratic Caucus,
the third ranking position in the party. From 1975 to
1978 Mr. Fazio served in the California Assembly and
was a member of the staff of the California Assembly
Speaker from 1971 to 1975. Upon leaving Congress in
early 1999, he became a Senior Partner at Clark &
Weinstock, a strategic communications consulting firm.
He is a member of numerous boards including The
California Institute, Coro National Board of Governors,
which he chairs, the U.S. Capitol Historical Society, the
Board of the U.S. Capitol Visitors Center and the Board
of Visitors, The University of California at Davis
Medical School.
Phillip Frost...... 65 Director of Northrop Grumman since 1996. Chairman of
the Board of Directors and Chief Executive Officer of
IVAX Corporation, a pharmaceutical company. Dr. Frost
has served as Chairman of the Board of Directors and
Chief Executive Officer of IVAX Corporation since
1987 and served as President from 1991 to 1995. Dr.
Frost was Chairman of the Department of Dermatology
at Mt. Sinai Medical Center of Greater Miami, Miami
Beach, Florida from 1972 to 1990 and was Chairman of
the Board of Directors of Key Pharmaceuticals, Inc.
from 1972 to 1986. He is Chairman of Whitman
Education Group and Vice Chairman of Continucare
Corporation. He is also Chairman of the Board of
Trustees of the University of Miami, a member of the
Board of Governors of the American Stock Exchange
and a director of Landenburg Thalmann & Co.), an
investment banking and brokerage company.
Kent Kresa......... 63 Director of Northrop Grumman since 1987. Chairman
and Chief Executive Officer. Mr. Kresa was elected
President and Chief Operating Officer of the company in
1987. He was named Chief Executive Officer in 1989
and Chairman of the Board in 1990. Mr. Kresa is a
member of the National Academy of Engineering and is
a past Chairman of the Board of Governors of the
Aerospace Industries Association.
A-2
Present Principal Occupation or Employment;
Name and Business Address Age Five Year Employment History
------------------------- --- -------------------------------------------
Charles R. Larson.... 65 Director of Northrop Grumman since 2000. Admiral,
United States Navy (Ret.). Admiral Larson is recognized
as the first Naval officer to be selected as a White House
Fellow. He also served as Naval aide to the President. He
served as superintendent of the U.S. Naval Academy from
1983 to 1986 and in 1991 he became senior military
commander in the Pacific. He returned to U.S. Naval
Academy in 1994, where he served as superintendent until
1998. Currently, Admiral Larson is Chairman of the
Board of the U.S. Naval Academy Foundation, Vice
Chairman of the Board of Regents of the University
System of Maryland and serves on the board of directors
of such organizations as Unocal Corporation,
Constellation Energy Group, Inc., Edge Technologies,
Inc., Fluor Global Services, the Atlantic Council,
Military.com and the National Academy of Sciences'
Committee on International Security and Arms Control. In
addition, he is a member of the Council on Foreign
Relations and is a senior fellow of The CNA Corporation.
Jay H. Nussbaum...... 58 Director of Northrop Grumman since 2001. Mr.
Nussbaum became an Executive Vice President of KPMG
Consulting, Inc. in January 2002. Prior to this, he was
Executive Vice President for Oracle Service Industries
and was a member of Oracle Corporation's Executive
Committee. He began his career at Oracle in 1991 as the
Senior Vice President and General Manager of what was
then Oracle Federal. Mr. Nussbaum also spent 24 years at
Xerox Corporation where his last position was President,
Integrated Systems Operations. Mr. Nussbaum has served
on a number of advisory boards and committees for the
University of Maryland and has served in various advisory
capacities at George Mason University and James
Madison University. He is also on the board of directors
of Sideware, Inc. and MicroStrategy, Inc.
Aulana L. Peters..... 60 Director of Northrop Grumman since 1992. Ms. Peters is a
retired partner of the law firm of Gibson, Dunn & Crutcher
where she was a partner from 1988 to December 2000.
Effective January 1, 2001 she was elected to the Public
Oversight Board of the AICPA. From 1984 to 1988 she
served as Commissioner of the Securities and Exchange
Commission. Ms. Peters is a director of Callaway Golf
Company, Minnesota Mining and Manufacturing
Company, Merrill Lynch & Co., Inc. and 3M Corporation.
She is also a member of the Board of Directors of
Community Television for Southern California (KCET).
Ms. Peters served as a member of the Financial Accounting
Standards Board Steering Committee for its Financial
Reporting Project and as a member of the Public Oversight
Board's Panel on Audit Effectiveness.
A-3
Present Principal Occupation or Employment;
Name and Business Address Age Five Year Employment History
------------------------- --- -------------------------------------------
John Brooks Slaughter.. 67 Director of Northrop Grumman since 1993. President
and Chief Executive Officer, The National Action
Council for Minorities in Engineering, Inc. Dr. Slaughter
held electronics engineering positions with General
Dynamics Convair and the U.S. Navy Electronics
Laboratory. In 1975, he became Director of the Applied
Physics Laboratory of the University of Washington. In
1977, he was appointed Assistant Director for
Astronomics, Atmospherics, Earth and Ocean Sciences
at the National Science Foundation. From 1979 to 1980,
he served as Academic Vice President and Provost of
Washington State University. In 1980, he returned to the
National Science Foundation as Director and served in
that capacity until 1982 when he became Chancellor of
the University of Maryland, College Park. From 1988 to
July 1999, Dr. Slaughter was President of Occidental
College in Los Angeles and in August 1999, he assumed
the position of Melbo Professor of Leadership in
Education at the University of Southern California. In
June 2000, Dr. Slaughter was named President and Chief
Executive Officer of The National Action Council for
Minorities in Engineering, Inc. He is a member of the
National Academy of Engineering, a fellow of the
American Academy of Arts and Sciences and serves as a
director of Solutia, Inc. and International Business
Machines Corporation.
Ronald D. Sugar........ 53 Director of Northrop Grumman since 2001. President
and Chief Operating Officer since September 2001.
Dr. Sugar was elected President and Chief Executive
Officer of Litton Industries, Inc. when it became a
subsidiary of Northrop Grumman on April 3, 2001, and
was also elected as Corporate Vice President and a
member of the Board of Directors of Northrop Grumman
at that time. He joined Litton Industries as President and
Chief Operating Officer in June 2000 and was elected to
the Board of Directors of Litton Industries in September
2000. Dr. Sugar served as President and Chief Operating
Officer of TRW Aerospace & Informations System and
as a Member of the Chief Executive Office of TRW, Inc.
from 1998 to 2000. He joined TRW in 1981 and served
as Executive Vice President and Chief Financial Officer
from 1994 to 1996 and Executive Vice President and
General Manager of the TRW Automotive Electronics
Group from 1996 to 1998. He is also a member of the
National Security Telecommunications Advisory
Committee, the Conference Board Council of Operating
Executives and the Board of Governors of the Aerospace
Industries Association and is a Trustee of the National
Defense Industrial Association.
A-4
Executive Officers Who Are Not Directors (as of March 2001)
Present Principal Occupation or Employment;
Name and Business Address Age Five Year Employment History
------------------------- --- -------------------------------------------
Herbert W. Anderson.... 62 Corporate Vice President and President, Information
Technology Sector (formerly known as Loxicon, Inc.).
Mr. Anderson was Corporate Vice President, President
and Chief Executive Officer, of Logicon, Inc. Prior to
January, 1999, Mr. Anderson was Corporate Vice
President and General Manager of Data Systems and
Services Division (1995-1998).
Frank G. Brandenberg... 55 Corporate Vice President and President, Component
Technologies Sector since September 2001. Prior to May
2001, Mr. Brandenberg was Senior Vice President,
Electronic Components and Materials Group, Litton
Industries, Inc. from 1997 to 1999, he served as
President and Chief Executive Officer of EA Industries
Inc. Mr. Brandenberg also served as President of the
Client/Server Systems Business Unit and Deputy
President of the Computer Systems Group, UNISYS
Corporation from 1990 to 1997.
Phillip A. Dur......... 57 Corporate Vice President and President, Ship Systems
Sector since October 2001. Mr. Dur served as Vice
President, Program Operations, Electronic Systems
Sector from December 1999 until October 2001. Before
joining Northrop Grumman in 1999, Mr. Dur served as
Vice President, Worldwide Business Development and
Strategy, of Tenneco, Inc., a position he held from July
1997 to 1999. Prior to 1997, he served as the Executive
Vice President of Walter Gillet Europe.
J. Michael Hateley..... 55 Corporate Vice President and Chief Human Resources
and Administrative Officer of Northrop Grumman since
2000. Prior to January 1999, Mr. Hateley was Vice
President, Human Resources, Security and
Administration Military Aircraft Systems Division. Prior
to 1996, he was Vice President, Human Resources,
Security and Administration, B-2 Division.
Robert W. Helm......... 50 Corporate Vice President, Government Relations of
Northrop Grumman since 1994.
Robert P. Iorizzo...... 61 Corporate Vice President and President, Electronic
Systems Sector since August 2001. Previously, Mr.
Iorizzo was Vice President and General Manager of
Command, Control, Communications, Intelligence and
Naval Systems Division, Electronic Systems Sector.
John H. Mullan......... 59 Corporate Vice President and Secretary of Northrop
Grumman since 1999. Prior to this, Mr. Mullan was
Acting Secretary. Prior to May 1998, he was Senior
Corporate Counsel.
Albert F. Myers........ 56 Corporate Vice President and Treasurer of Northrop
Grumman since 1994. Mr. Myers also serves on the
Board of Directors of Moog, Inc.
A-5
Present Principal Occupation or Employment;
Name and Business Address Age Five Year Employment History
------------------------- --- -------------------------------------------
Roseanne P. O'Brien..... 58 Corporate Vice President, Communications of Northrop
Grumman since August 2000. Prior to this, Ms. O'Brien
was Vice President, Communications since January
1999. Prior to 1999, Ms. O'Brien was Vice President,
Corporate Relations for Allegheny Teledyne, Inc. Ms.
O'Brien serves as a Director of Los Angeles Educational
Partnership and is also a Trustee of California Sciences
Center.
W. Burks Terry.......... 51 Corporate Vice President and General Counsel of
Northrop Grumman since August 2000. Prior to this, Mr.
Terry became Vice President, Deputy General Counsel
and Sector Counsel in October 1998 and prior to
October, 1998 he was Vice President and Assistant
General Counsel.
Thomas C. Schievelbein.. 48 Corporate Vice President and President, Newport News
Sector since November 2001. Prior to this appointment,
Mr. Schievelbein served as Executive Vice President and
Chief Operating Officer, Newport News Shipbuilding,
Inc. from 1995 to 1999.
Scott J. Seymour........ 51 Corporate Vice President and President, Integrated
Systems Sector since January 2002. Mr. Seymour served
as Sector Vice President, Air Combat Systems from
1998 to 2002, and B2 Program Manager from 1996 to
1998.
Richard B. Waugh, Jr.... 58 Corporate Vice President and Chief Financial Officer of
Northrop Grumman since 1993.
Sandra J. Wright........ 46 Corporate Vice President and Controller since June
2001. Prior to May 2001, Ms. Wright served as Vice
President and Controller of Litton Industries, Inc. From
1999 to 2000, she served as Vice President and
Controller of Aeroject, a GenCorp company, and
Director of Financial Planning and Aeroject prior to that.
A-6
ANNEX B
SECTIONS 1701.84 AND 1701.85 OF THE OHIO REVISED CODE
RIGHTS OF DISSENTING SHAREHOLDERS
1701.84 DISSENTING SHAREHOLDERS ENTITLED TO RELIEF
The following are entitled to relief as dissenting shareholders under
section 1701.85 of the Revised Code:
(A) Shareholders of a domestic corporation that is being merged or
consolidated into a surviving or new entity, domestic or foreign, pursuant
to section 1701.78, 1701.781, 1701.79, 1701.791, or 1701.801 of the Revised
Code;
(B) In the case of a merger into a domestic corporation, shareholders of
the surviving corporation who under section 1701.78 or 1701.781 of the
Revised Code are entitled to vote on the adoption of an agreement of merger,
but only as to the shares so entitling them to vote;
(C) Shareholders, other than the parent corporation, of a domestic
subsidiary corporation that is being merged into the domestic or foreign
parent corporation pursuant to section 1701.80 of the Revised Code;
(D) In the case of a combination or a majority share acquisition,
shareholders of the acquiring corporation who under section 1701.83 of the
Revised Code are entitled to vote on such transaction, but only as to the
shares so entitling them to vote;
(E) Shareholders of a domestic subsidiary corporation into which one or
more domestic or foreign corporations are being merged pursuant to section
1701.801 of the Revised Code.
1701.85 QUALIFICATIONS OF AND PROCEDURES FOR DISSENTING SHAREHOLDERS
(A) (1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the corporation
involved, the dissenting shareholder shall be a record holder of the shares of
the corporation as to which he seeks relief as of the date fixed for the
determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall
not have been voted in favor of the proposal. Not later than ten days after the
date on which the vote on the proposal was taken at the meeting of the
shareholders, the dissenting shareholder shall deliver to the corporation a
written demand for payment to him of the fair cash value of the shares as to
which he seeks relief, which demand shall state his address, the number and
class of such shares, and the amount claimed by him as the fair cash value of
the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record
holder of the shares of the corporation as to which he seeks relief as of the
date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 of the Revised Code, the dissenting shareholder
shall deliver to the corporation a written demand for payment with the same
information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the
new entity, whether the demand is served before, on, or after the effective
date of the merger or consolidation.
B-1
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on
them a legend to the effect that demand for the fair cash value of such shares
has been made. The corporation promptly shall return such endorsed certificates
to the dissenting shareholder. A dissenting shareholder's failure to deliver
such certificates terminates his rights as a dissenting shareholder, at the
option of the corporation, exercised by written notice sent to the dissenting
shareholder within twenty days after the lapse of the fifteen-day period,
unless a court for good cause shown otherwise directs. If shares represented by
a certificate on which such a legend has been endorsed are transferred, each
new certificate issued for them shall bear a similar legend, together with the
name of the original dissenting holder of such shares. Upon receiving a demand
for payment from a dissenting shareholder who is the record holder of
uncertificated securities, the corporation shall make an appropriate notation
of the demand for payment in its shareholder records. If uncertificated shares
for which payment has been demanded are to be transferred, any new certificate
issued for the shares shall bear the legend required for certificated
securities as provided in this paragraph. A transferee of the shares so
endorsed, or of uncertificated securities where such notation has been made,
acquires only such rights in the corporation as the original dissenting holder
of such shares had immediately after the service of a demand for payment of the
fair cash value of the shares. A request under this paragraph by the
corporation is not an admission by the corporation that the shareholder is
entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of
the county in which the principal office of the corporation that issued the
shares is located or was located when the proposal was adopted by the
shareholders of the corporation, or, if the proposal was not required to be
submitted to the shareholders, was approved by the directors. Other dissenting
shareholders, within that three-month period, may join as plaintiffs or may be
joined as defendants in any such proceeding, and any two or more such
proceedings may be consolidated. The complaint shall contain a brief statement
of the facts, including the vote and the facts entitling the dissenting
shareholder to the relief demanded. No answer to such a complaint is required.
Upon the filing of such a complaint, the court, on motion of the petitioner,
shall enter an order fixing a date for a hearing on the complaint and requiring
that a copy of the complaint and a notice of the filing and of the date for
hearing be given to the respondent or defendant in the manner in which summons
is required to be served or substituted service is required to be made in other
cases. On the day fixed for the hearing on the complaint or any adjournment of
it, the court shall determine from the complaint and from such evidence as is
submitted by either party whether the dissenting shareholder is entitled to be
paid the fair cash value of any shares and, if so, the number and class of such
shares. If the court finds that the dissenting shareholder is so entitled, the
court may appoint one or more persons as appraisers to receive evidence and to
recommend a decision on the amount of the fair cash value. The appraisers have
such power and authority as is specified in the order of their appointment. The
court thereupon shall make a finding as to the fair cash value of a share and
shall render judgment against the corporation for the payment of it, with
interest at such rate and from such date as the court considers equitable. The
costs of the proceeding, including reasonable compensation to the appraisers to
be fixed by the court, shall be assessed or apportioned as the court considers
equitable. The proceeding is a special proceeding and final orders in it may be
vacated, modified, or reversed on appeal pursuant to the Rules of Appellate
Procedure and, to the extent not in conflict with those rules, Chapter 2505. of
the Revised Code. If, during the pendency of any proceeding instituted under
this section, a suit or proceeding is or has been instituted to enjoin or
otherwise to prevent the carrying out of the action as to which the shareholder
has dissented, the proceeding instituted under this section shall be stayed
until the final determination of the other suit or proceeding. Unless any
provision in division (D) of this section is applicable, the fair cash value of
the shares that is agreed upon by the parties or fixed under this section shall
be paid within thirty days after the date of final determination of such value
under this division, the effective date of the amendment to the articles, or
the consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event,
B-2
payment shall be made immediately to a holder of uncertificated securities
entitled to such payment. In the case of holders of shares represented by
certificates, payment shall be made only upon and simultaneously with the
surrender to the corporation of the certificates representing the shares for
which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and,
in the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting
from the proposal submitted to the directors or to the shareholders shall be
excluded.
(D) (1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The dissenting shareholder has not complied with this section, unless
the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally enjoined
or prevented from carrying it out, or the shareholders rescind their
adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent of
the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B) of
this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand until
either the termination of the rights and obligations arising from it or the
purchase of the shares by the corporation, all other rights accruing from such
shares, including voting and dividend or distribution rights, are suspended. If
during the suspension, any dividend or distribution is paid in money upon
shares of such class or any dividend, distribution, or interest is paid in
money upon any securities issued in extinguishment of or in substitution for
such shares, an amount equal to the dividend, distribution, or interest which,
except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair
cash value of the shares. If the right to receive fair cash value is terminated
other than by the purchase of the shares by the corporation, all rights of the
holder shall be restored and all distributions which, except for the
suspension, would have been made shall be made to the holder of record of the
shares at the time of termination.
B-3
The Exchange Agent for Northrop Grumman's offer to exchange is:
EQUISERVE TRUST COMPANY
By Mail: By Hand Delivery: By Overnight Delivery:
EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY EQUISERVE TRUST COMPANY40
P.O. Box 43034 c/o Securities Transfer Campanelli Drive
Providence, RI 02940-3034 and Braintree, Massachusetts
Reporting Services, Inc. 02184
100 William
Street--Galleria
New York, New York 10038
Confirm by Telephone:
(781) 575-4816
Any questions or requests for assistance or additional copies of the offer
to exchange, the letter of transmittal and the notice of guaranteed delivery
and related exchange offer materials may be directed to the information agent
at its telephone number and location listed below. Shareholders may also
contact their local broker, commercial bank, trust company or nominee for
assistance concerning the offer to exchange.
The Information Agent for Northrop Grumman's offer to exchange is:
D. F. King & Co., Inc.
U.S. and Canada Europe
77 Water Street No. 2 London Wall Buildings, 2nd Floor
New York, New York 10005 London Wall
Banks and Brokers Call London EC2M 5PP, United Kingdom
Collect: 1-212-269-5550
All Others Call Tel.: +(44) 207 920 9700
Toll-Free: 1-800-755-7250
The Dealer Manager for Northrop Grumman's offer to exchange is:
Salomon Smith Barney
388 Greenwich Street
New York, New York 10013
(888) 328-4596
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation-a derivative action), if
they acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action or proceedings, had no reasonable cause to believe their
conduct was unlawful.
A similar standard is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
actually and reasonably incurred in connection with the defense or settlement
of such action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
indemnification that may be granted by a corporation's certificate of
incorporation, bylaws, disinterested director vote, stockholder vote, agreement
or otherwise.
As permitted by Section 145 of the Delaware General Corporation Law, Article
EIGHTEENTH of Northrop Grumman's restated certificate of incorporation, as
amended, provides:
A director of the Corporation shall not be personally liable to the
Corporation or to its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the directors'
duty of loyalty to the Corporation or to its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation
Law of the State of Delaware, or (iv) for any transaction from which the
director derives any improper personal benefit. If, after approval of this
Article by the stockholders of the Corporation, the General Corporation Law of
the State of Delaware is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a director of
the Corporation shall be eliminated or limited to the fullest extent permitted
by the General Corporation Law of the State of Delaware, as so amended. Any
repeal or modification of this Article by the stockholders of the Corporation
as provided in Article SEVENTEENTH hereof shall not adversely affect any right
or protection of a director of the Corporation existing at the time of such
repeal or modification.
Northrop Grumman has purchased insurance on behalf of any person who is or
was a director, officer, employee or agent of Northrop Grumman, or is or was
serving at the request of Northrop Grumman as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not
Northrop Grumman would have the power to indemnify him against such liability
under the provisions of Northrop Grumman's restated certificate of
incorporation, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
2.1 Agreement and Plan of Merger among Northrop Grumman Corporation, Purchaser Corp. I and Newport
News Shipbuilding Inc. dated as of November 7, 2001 (incorporated by reference to Annex C to
Amendment No. 5 to Form S-4 Registration Statement No. 333-61506 filed November 13, 2001)
2.2 Amended and Restated Agreement and Plan of Merger dated as of January 23, 2001 among Northrop
Grumman Systems Corporation, Litton Industries, Inc., Northrop Grumman Corporation and LII
Acquisition Corp. (incorporated by reference to Exhibit 2.2 to Form S-4 Registration Statement
No. 333-54800 filed February 1, 2001)
II-1
3.1 Amended and Restated Certificate of Incorporation of Northrop Grumman Corporation (incorporated
by reference to Exhibit D to the Definitive Proxy Statement filed April 13, 2001)
3.2 Certificate of Amendment of Certificate of Incorporation of Northrop Grumman Corporation filed as
exhibit 3.2 to Form 10-Q filed with the SEC on May 10, 2001 and incorporated herein by this
reference (incorporated by reference to Exhibit 3.2 to Form 10-Q filed with the SEC on May 10, 2001)
3.3 Restated Bylaws of Northrop Grumman Corporation (incorporated by reference to Exhibit 3.2 to Form
S-4 Registration Statement No. 333-54800 filed February 1, 2001)
4.1 Registration Rights Agreement dated as of January 23, 2001 by and among Northrop Grumman
Systems Corporation, Northrop Grumman Corporation and Unitrin, Inc. (incorporated by reference to
Exhibit (d)(6) to Amendment No. 4 to Schedule TO filed January 31, 2001)
4.2 Certificate of Designations, Preferences and Rights of Series B Preferred Stock of Northrop Grumman
Corporation (incorporated by reference to Exhibit C to the Definitive Proxy Statement filed April 13,
2001)
4.3 Rights Agreement dated as of January 31, 2001 between Northrop Grumman Corporation and
EquiServe Trust Company, N.A. (incorporated by reference to Exhibit 4.3 to Amendment No. 2 to
Form S-4 Registration Statement No. 333-54800 filed March 27, 2001)
4.4 Indenture dated as of October 15, 1994 between Northrop Grumman Systems Corporation and
JPMorgan Chase Bank (formerly The Chase Manhattan Bank), as trustee (incorporated by reference to
Exhibit 4.1 to Form 8-K filed October 25, 1994)
4.5 Form of Officer's Certificate (without exhibits) establishing the terms of Northrop Grumman Systems
Corporation's 7% Notes due 2006, 7 3/4% Debentures due 2016 and 7 7/8% Debentures due 2026
(incorporated by reference to Exhibit 4-3 to Form S-4 Registration Statement filed April 19, 1996)
4.6 Form of Northrop Grumman Systems Corporation's 7% Notes due 2006 (incorporated by reference to
Exhibit 4-4 to Form S-4 Registration Statement filed April 19, 1996)
4.7 Form of Northrop Grumman Systems Corporation's 7 3/4% Debentures due 2016 (incorporated by
reference to Exhibit 4-5 to Form S-4 Registration Statement filed April 19, 1996)
4.8 Form of Northrop Grumman Systems Corporation's 7 7/8% Debentures due 2026 (incorporated by
reference to Exhibit 4-6 to Form S-4 Registration Statement filed April 19, 1996)
4.9 Purchase Contract Agreement dated as of November 21, 2001 between Northrop Grumman
Corporation and JPMorgan Chase Bank, as Purchase Contract Agent (incorporated by reference to
Exhibit 4.3 to Form 8-K dated and filed November 21, 2001)
4.10 Pledge Agreement dated as of November 21, 2001 among Northrop Grumman Corporation, The Bank
of New York, as Collateral Agent, Custodial Agent and Securities Intermediary, and JPMorgan Chase
Bank, as Purchase Contract Agent (incorporated by reference to Exhibit 4.4 to Form 8-K dated and
filed November 21, 2001)
4.11 Form of Remarketing Agreement (incorporated by reference to Exhibit 4.5 to Form 8-K dated and
filed November 21, 2001)
4.12 Form of Officers' Certificate establishing the terms of Northrop Grumman Corporation's 7 1/8% Notes
due 2011 and 7 3/4% Debentures due 2031 (incorporated by reference to Exhibit 10.9 to Form 8-K
dated and filed April 17, 2001)
4.13 Indenture dated as of November 21, 2001 between Northrop Grumman Corporation and JPMorgan Chase
Bank, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K dated and filed November 21, 2001)
4.14 Officers' Certificate dated as of November 21, 2001 describing the terms of the Senior Notes that are a
component of Northrop Grumman Corporation's Equity Security Units (incorporated by reference to
Exhibit 4.2 to Form 8-K dated and filed November 21, 2001)
II-2
4.15 Indenture dated as of April 13, 1998 between Litton Industries, Inc. and The Bank of New York, as
trustee, under which Litton's 6.05% Senior Notes due 2003 and 6.75% Senior Debentures due 2018
were issued (incorporated by reference to Exhibit 4.1 to Litton Industries, Inc.'s Form 10-Q for the
quarter ended April 30, 1998 and filed June 15, 1998)
4.16 Supplemental Indenture with respect to Indenture dated April 13, 1998, dated as of April 3, 2001
among Litton Industries, Inc., Northrop Grumman Corporation, Northrop Grumman Systems
Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.5 to Form
10-Q for the quarter ended March 31, 2001 filed May 10, 2001)
4.17 Senior Indenture dated as of December 15, 1991 between Litton Industries, Inc. and The Bank of
New York, as trustee, under which Litton's 7.75% and 6.98% debentures due 2026 and 2036 were
issued and specimens of such debentures (incorporated by reference to Exhibit 4.1 to Litton
Industries Inc.'s Form 10-Q for the quarter ended April 30, 1996 filed June 11, 1996)
4.18 Supplemental Indenture with respect to Indenture dated December 15, 1991, dated as of April 3,
2001, among Litton Industries, Inc., Northrop Grumman Corporation, Northrop Grumman Systems
Corporation and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.7 to Form
10-Q for the quarter ended March 31, 2001 filed May 10, 2001)
4.19 Form of Exchange Security for Litton's $400,000,000 8% senior notes due 2009 (incorporated by
reference to Exhibit 4.3 to Litton Industries Inc.'s Form 10-Q for the quarter ended April 30, 2000
filed August 19, 2000)
*5.1 Form of Opinion of John H. Mullan regarding the validity of the securities being registered
*8.1 Opinion of Gibson, Dunn & Crutcher LLP regarding certain tax matters
10.1 Northrop Grumman 2001 Long-Term Incentive Stock Plan (incorporated by reference to Exhibit B to
the Definitive Proxy Statement on Schedule 14A filed April 13, 2001)
10.2 Amendment Agreement between Kent Kresa and Northrop Grumman Corporation dated August 3,
2001 (incorporated by reference to Exhibit 10.2 to Form 10-Q for the quarter ended June 30, 2001
filed August 9, 2001)
10.3 Employment Agreement between Dr. Ronald D. Sugar and Northrop Grumman Corporation dated
September 19, 2001 (incorporated by reference to Exhibit 10.3 to Form 10-Q for the quarter ended
September 30, 2001 filed November 5, 2001)
10.4 Form of Notice of Grant of Restricted Performance Stock Rights and Rights Agreement under the
Northrop Grumman Corporation 2001 Long-Term Incentive Stock Plan (incorporated by reference to
Exhibit 10.4 to Form 10-Q for the quarter ended September 30, 2001 filed November 5, 2001)
*10.5 Form of Notice of Grant of Stock Options and Option Agreement under the Northrop Grumman
Corporation 2001 Long-Term Incentive Stock
10.6 Notice of Grant of Restricted Performance Stock Rights and Rights Agreement of Kent Kresa, dated
August 15, 2001 under the Northrop Grumman Corporation 2001 Long-Term Incentive Stock Plan
(incorporated by reference to Exhibit 10.6 to Form 10-Q for the quarter ended September 30, 2001
filed November 5, 2001)
10.7 Notice of Grant of Stock Options and Option Agreement of Kent Kresa, dated August 15, 2001 under
the Northrop Grumman Corporation 2001 Long-Term Incentive Stock Plan (incorporated by
reference to Exhibit 10.7 to Form 10-Q for the quarter ended September 30, 2001 filed November 5,
2001)
10.8 Form of $2,500,000,000 Five-Year Revolving Credit Agreement dated as of March 30, 2001 among
Northrop Grumman Corporation, Northrop Grumman Systems Corporation and Litton Industries,
Inc., the Lenders party thereto, The Chase Manhattan Bank and Credit Suisse First Boston, as Co-
Administrative Agents, Salomon Smith Barney Inc., as Syndication Agent, and The Bank of Nova
Scotia and Deutsche Banc Alex. Brown, Inc. as Co-Documentation Agents (incorporated by
reference to Exhibit 10.7 to Amendment No. 2 to Form S-4 Registration Statement No. 333-54800
filed March 27, 2001)
II-3
10.9 Retention Bonus Agreement between Northrop Grumman Corporation and Thomas C. Schievelbein
dated November 7, 2001 (incorporated by reference to Exhibit 10.32 to Amendment No. 5 to Form S-4
Registration Statement No. 333-61506 filed November 13, 2001)
10.10 Form of Guarantee dated as of April 3, 2001 by Northrop Grumman Corporation of Litton Industries,
Inc. indenture indebtedness (incorporated by reference to Exhibit 10.10 to Form 8-K filed dated and
April 17, 2001)
10.11 Form of Guarantee dated as of April 3, 2001 by Northrop Grumman Corporation of Northrop
Grumman Systems Corporation indenture indebtedness (incorporated by reference to Exhibit 10.11 to
Form 8-K dated and filed April 17, 2001)
10.12 Form of Guarantee dated as of April 3, 2001 by Northrop Grumman Systems Corporation of Litton
Industries, Inc. indenture indebtedness (incorporated by reference to Exhibit 10.12 to Form 8-K dated
and filed April 17, 2001)
10.13 Form of Guarantee dated as of April 3, 2001 by Litton Industries, Inc. of Northrop Grumman Systems
Corporation indenture indebtedness (incorporated by reference to Exhibit 10.13 to Form 8-K dated and
filed April 17, 2001)
10.14 1973 Incentive Compensation Plan as amended December 16, 1998 (incorporated by reference to
Exhibit 10(c) to Form 10-K filed March 23, 1999)
10.15 1973 Performance Achievement Plan (incorporated by reference to Form 8-B filed June 21, 1985)
10.16 Northrop Grumman Corporation Supplemental Plan 2 (incorporated by reference to Exhibit 10(e) to
Form 10-K filed February 22, 1996) and amended as of June 19, 1996 (incorporated by reference to
Exhibit 10(e) to Form 10-K filed February 27, 1997)
10.17 Northrop Grumman Corporation ERISA Supplemental Plan I (incorporated by reference to Exhibit
10(d) to Form 10-K filed February 28, 1994)
10.18 Retirement Plan for Independent Outside Directors as amended April 24, 1998 (incorporated by
reference to Exhibit 10(g) to Form 10-K filed March 23, 1999)
10.19 1987 Long-Term Incentive Plan, as amended (incorporated by reference to Form SE filed March 30, 1989)
10.20 Executive Life Insurance Policy (incorporated by reference to Exhibit 10(i) to Form 10-K filed
February 22, 1996)
10.21 Executive Accidental Death, Dismemberment and Plegia Insurance Policy (incorporated by reference
to Exhibit 10(j) to Form 10-K filed February 22, 1996)
10.22 Executive Long-Term Disability Insurance Policy (incorporated by reference to Exhibit 10(k) to Form
10-K filed February 22, 1996)
10.23 Key Executive Medical Plan Benefit Matrix (incorporated by reference to Exhibit 10(l) to Form 10-K
filed February 22, 1996)
10.24 Executive Dental Insurance Policy Group Numbers 5134 and 5135 (incorporated by reference to
Exhibit 10(m) to Form 10-K filed February 22, 1996)
10.25 Group Excess Liability Policy (incorporated by reference to Exhibit 10(n) to Form 10-K filed February
22, 1996)
10.26 Northrop Grumman 1993 Long-Term Incentive Stock Plan, as amended and restated (incorporated by
reference to Exhibit 4.1 to Form S-8 Registration Statement filed November 25, 1998)
10.27 Northrop Corporation 1993 Stock Plan for Non-Employee Directors (incorporated by reference to
Exhibit B to the Northrop Corporation 1993 Proxy Statement filed March 30, 1993), amended as of
September 21, 1994 (incorporated by reference to Exhibit 10(q) to Form 10-K filed March 21, 1995)
10.28 Northrop Grumman Corporation 1995 Stock Option Plan for Non-Employee Directors (incorporated
by reference to Exhibit A to the Definitive Proxy Statement on Schedule 14A filed March 30, 1995)
10.29 Northrop Grumman Corporation March 2000 Change-in-Control Severance Plan (incorporated by
reference to Exhibit 10(b) to Form 10-Q filed November 4, 1999)
10.29 Northrop Grumman Corporation March 2000 Change-in-Control Severance Plan (incorporated by
reference to Exhibit 10(b) to Form 10-Q filed November 4, 1999)
II-4
10.30 Form of Northrop Grumman Corporation March 2000 Special Agreement (effective March 1, 2000)
(incorporated by reference to Exhibit 10(a) to Form 10-Q filed November 4, 1999)
*10.31 Northrop Grumman Executive Deferred Compensation Plan (effective December 29, 1994, as
amended and restated effective November 2, 2000 and amended March 1, 2001
10.32 Northrop Grumman Corporation Non-Employee Directors Equity Participation Plan, as amended
March 15, 2000 (incorporated by reference to Exhibit 10(a) to Form 10-Q filed May 9, 2000)
10.33 CPC Supplemental Executive Retirement Program (incorporated by reference to Exhibit 10(u) to
Form 10-K filed March 30, 1998)
10.34 Northrop Grumman Estate Enhancement Program, effective November 1, 2000 (incorporated by
reference to Exhibit 10(v) to Form 10-K/A filed March 8, 2001)
10.35 Special Officer Retiree Medical Plan as amended December 19, 2000 (incorporated by reference to
Exhibit 10(w) to Form 10-K/A filed March 8, 2001)
*10.36 Northrop Grumman Deferred Compensation Plan (effective December 1, 2000) and amended March
1, 2001, March 30, 2001 and September 14, 2001
*10.37 Consultant Agreement dated January 7, 2002 between Northrop Grumman Corporation and
Ralph D. Crosby, Jr.
*10.38 Agreement dated December 22, 2001 between Northrop Grumman Corporation and Ralph D. Crosby,
Jr.
*10.39 Form of Indemnification Agreement between Northrop Grumman Corporation and its directors and
executive officers
*12.1 Ratios of Earnings to Fixed Charges
*15.1 Letter from Independent Accountants Regarding Unaudited Interim Financial Information
*21.1 Subsidiaries
*23.1 Consent of Deloitte & Touche LLP (for Northrop Systems)
*23.2 Consent of Deloitte & Touche LLP (for Litton Industries)
*23.3 Consent of Arthur Andersen LLP (for Newport News)
*23.4 Consent of John H. Mullan (included in Exhibit 5.1)
*23.5 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 8.1)
*24.1 Power of Attorney
*99.1 Form of Letter of Transmittal for Common Shares
*99.2 Form of Letter of Transmittal for Serial Preference Shares
*99.3 Form of Notice of Guaranteed Delivery for Common Shares
*99.4 Form of Notice of Guaranteed Delivery for Serial Preference Shares
*99.5 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees,
Common Shares and Serial Preference Shares
*99.6 Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees, Common Shares
*99.7 Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees, Serial Preference Shares
*99.8 Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
*99.9 Form 041 Filing of Information Pertaining to a Control Bid
*99.10 Acquiring Person Statement, dated March 4, 2002
99.11 Press Release, dated February 22, 2002 (incorporated by reference to Rule 425 filing filed
February 27, 2002)
99.12 Slide Presentation, dated February 27, 2002 (incorporated by reference to Rule 425 filing filed
February 27, 2002)
II-5
*99.13 Press Release, dated March 3, 2002
*99.14 Summary Advertisement as published in the Wall Street Journal on March 4, 2002
* Filed with this offer to exchange
(b) None
(c) None
ITEM 22. UNDERTAKINGS.
(A) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(B) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
(C)(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(D) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-6
(E) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(F) The undersigned registrant hereby undertakes to supply by means of a
post- effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not subject of and included
in the registration statement when it became effective.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on this 4th day of March, 2002.
/S/ JOHN H. MULLAN
By: _______________________________
John H. Mullan
Corporate Vice President and
Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Richard B. Waugh, Jr., W. Burks Terry
and John H. Mullan with full power to act alone, as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his or her substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original, but which taken together, shall constitute
one instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ KENT KRESA Chairman of the Board, March 4, 2002
----------------------------- President and Chief
Kent Kresa Executive Officer and
Director (Principal
Executive Officer)
/S/ RONALD D. SUGAR President and Chief Operating March 4, 2002
----------------------------- Officer and Director
Ronald D. Sugar
/S/ RICHARD B. WAUGH, JR. Corporate Vice President and March 4, 2002
----------------------------- Chief Financial Officer
Richard B. Waugh, Jr. (Principal Financial
Officer)
/S/ SANDRA J. WRIGHT Corporate Vice President and March 4, 2002
----------------------------- Controller (Principal
Sandra J. Wright Accounting Officer)
/S/ JOHN T. CHAIN, JR. Director March 4, 2002
-----------------------------
John T. Chain, Jr.
II-8
Signature Title Date
--------- ----- ----
/S/ LEWIS W. COLEMAN Director March 4, 2002
-----------------------------
Lewis W. Coleman
/S/ VIC FAZIO Director March 4, 2002
-----------------------------
Vic Fazio
/S/ PHILLIP FROST Director March 4, 2002
-----------------------------
Phillip Frost
/S/ CHARLES R. LARSON Director March 4, 2002
-----------------------------
Charles R. Larson
/S/ JAY H. NUSSBAUM Director March 4, 2002
-----------------------------
Jay H. Nussbaum
/S/ AULANA L. PETERS Director March 4, 2002
-----------------------------
Aulana L. Peters
/S/ JOHN BROOKS SLAUGHTER Director March 4, 2002
-----------------------------
John Brooks Slaughter
II-9