Filed Pursuant to Rule 424(b)(3)
Registration No. 333-61478,
333-61478-01 &
333-61478-02
NORTHROP GRUMMAN SYSTEMS CORPORATION
(formerly Northrop Grumman Corporation)
OFFER TO EXCHANGE ITS
7 1/8% EXCHANGE NOTES DUE 2011 FOR ITS OUTSTANDING 7 1/8% NOTES DUE 2011
7 3/4% EXCHANGE DEBENTURES DUE 2031 FOR ITS OUTSTANDING 7 3/4% DEBENTURES DUE
2031
THE EXCHANGE NOTES AND EXCHANGE DEBENTURES TO BE UNCONDITIONALLY GUARANTEED BY
NORTHROP GRUMMAN CORPORATION
(formerly NNG, Inc.)
and
LITTON INDUSTRIES, INC.
The Exchange Securities:
. We hereby offer up to $750 million aggregate principal amount of our 7
1/8% Exchange Notes due 2011 in exchange for an equal aggregate principal
amount of our outstanding 7 1/8% Notes due 2011, and up to $750 million
aggregate principal amount of our 7 3/4% Exchange Debentures due 2031 in
exchange for an equal aggregate principal amount of our outstanding 7
3/4% Debentures due 2031.
. The terms of the Exchange Notes and Exchange Debentures are substantially
identical to the terms of the Outstanding Notes and Debentures for which
they are to be exchanged, except that the Exchange Notes and Debentures
will be free of restrictive legends and registration rights.
. The Exchange Notes and Exchange Debentures are direct senior unsecured
obligations and are equal in right of payment to any other existing and
future senior unsecured obligations of Northrop Grumman Systems
Corporation.
The Exchange Offer:
. The exchange offer will expire at 5:00 p.m., New York City time on July
9, 2001 unless extended by us.
. The exchange offer is subject to conditions, which we may waive.
. You may withdraw your tender of Outstanding Notes or Debentures at any
time before the expiration of the exchange offer.
. All Outstanding Notes and Debentures that are validly tendered and not
validly withdrawn will be exchanged for an equal principal amount of
Exchange Notes and Exchange Debentures that are registered under the
Securities Act of 1933.
. We will not receive any cash proceeds from the exchange offer.
The Outstanding Notes and Debentures listed above are referred to
collectively in this prospectus as the Outstanding Securities. The Exchange
Notes and Exchange Debentures we are offering in the exchange for the
Outstanding Securities are referred to collectively in this prospectus as the
Exchange Securities. The Exchange Securities and the Outstanding Securities are
referred to collectively in this prospectus as the Securities.
----------------
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Securities. The
letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-
dealer in connection with resales of Exchange Securities received in exchange
for Outstanding Securities where such Outstanding Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The issuers have agreed that, for a period of 180 days after the
expiration date of the exchange offer, it will make this prospectus available
to any broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
----------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------
The date of this prospectus is June 4, 2001
TABLE OF CONTENTS
Page
----
SUMMARY.................................................................... 3
WHERE YOU CAN FIND MORE INFORMATION........................................ 8
FORWARD-LOOKING STATEMENTS AND IMPORTANT FACTORS........................... 9
NORTHROP GRUMMAN........................................................... 11
THE LITTON ACQUISITION..................................................... 13
NEW CREDIT FACILITIES...................................................... 13
USE OF PROCEEDS............................................................ 14
CAPITALIZATION............................................................. 14
RATIO OF EARNINGS TO FIXED CHARGES......................................... 15
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA............................ 16
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA...................... 18
THE EXCHANGE OFFER......................................................... 22
DESCRIPTION OF THE SECURITIES.............................................. 29
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS........................... 43
PLAN OF DISTRIBUTION....................................................... 47
LEGAL MATTERS.............................................................. 48
EXPERTS.................................................................... 48
EXCHANGE AGENT............................................................. 48
SUMMARY
This summary highlights certain information appearing elsewhere in this
prospectus. This summary is not complete and does not contain all of the
information that you should consider before exchanging the Outstanding
Securities for the Exchange Securities. 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.
Unless the context requires otherwise, references to "we," "us" or "our" refer
collectively to Northrop Grumman and its subsidiaries.
The Companies
Northrop Grumman
We are a leading global aerospace and defense company providing products and
services in defense and commercial electronics, systems integration,
information technology and non-nuclear shipbuilding and systems. Northrop
Grumman is a holding company formed in connection with the Litton acquisition.
Northrop Systems is a wholly-owned subsidiary of Northrop Grumman. Northrop
Grumman owns 100% of the common stock of Litton.
Northrop Systems
Northrop Systems is a leading defense electronics, systems integration and
information technology company with strong capabilities in military aircraft
systems and modifications and marine systems. As a prime contractor, principal
subcontractor, partner, or preferred supplier, Northrop Systems participates in
many high-priority defense and commercial programs in the United States and
abroad.
Northrop Systems is aligned into three business sectors as follows:
The Integrated Systems Sector (ISS) is a leader in design, development and
production of airborne early warning, electronic warfare and surveillance and
battlefield management systems. ISS is the prime contractor for the Joint STARS
advanced airborne targeting and battle management system and the U.S. Air
Force's B-2 Spirit stealth bomber. ISS has a principal role in producing the
U.S. Navy's F/A-18 Hornet strike fighter, unmanned vehicles including The
Global Hawk, and the EA-6B Prowler electronic countermeasures aircraft, and is
upgrading the E-2C Hawkeye early warning aircraft.
The Electronic Sensors and Systems Sector (ES/3/) designs and manufactures 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" antiarmor submunition. ES3 also provides tactical military radars
and country-wide air defense systems, plus airborne electronic countermeasures
systems intended to jam enemy aircraft and weapons systems.
Logicon, Inc. is a leader in advanced information technologies, systems and
services. Logicon 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. Logicon provides base operations support
for NASA's Kennedy Space Center, Cape Canaveral Air Station and Patrick Air
Force Base, among others. In addition, Logicon provides information technology
services to commercial customers and to the other Northrop Systems sectors.
3
Litton
Litton designs, builds and overhauls non-nuclear surface ships and is a
provider of defense and commercial electronics technology, components and
materials for government and commercial customers world wide. In addition,
Litton is a prime contractor to the U.S. Government for information technology
services and provides specialized information technology services to commercial
customers and governments in local and foreign jurisdictions.
The principal executive offices of Northrop Grumman, Northrop Systems and
Litton are located at 1840 Century Park East, Los Angeles, California 90067 and
their telephone number is (310) 553-6262.
The Litton Acquisition
On April 3, 2001, pursuant to the Offer to Purchase or Exchange all
outstanding shares of the Common Stock and Preferred Stock of Litton made by
Northrop Grumman, we purchased approximately 97.3% of the outstanding shares of
common stock of Litton and approximately 58.6% of the preferred stock of
Litton. The offer was made pursuant to an Amended and Restated Agreement and
Plan of Merger dated as of January 23, 2001 among Northrop Systems, Litton,
Northrop Grumman and LII Acquisition Corp. Pursuant to the plan of merger, a
subsidiary of Northrop Grumman was merged into Litton on May 30, 2001 and the
remaining holders of common shares of Litton received $80.00 in cash per common
share. Subsequently, another newly-organized subsidiary of Northrop Grumman
will be merged into Litton in a short-form merger and the remaining holders of
preferred shares will receive $35.00 in cash per preferred share. The value of
the Litton acquisition, when completed, is expected to be approximately $5.3
billion, which includes the assumption of Litton's approximately $1.4 billion
in net debt. We refer to these transactions as the Litton acquisition.
Summary of the Exchange Offer
The Exchange Offer...... In the exchange offer, Northrop Systems will issue:
. up to $750 million aggregate principal amount of 7
1/8% Exchange Notes due 2011 in exchange for an
equal aggregate principal amount of outstanding 7
1/8% Notes due 2011; and
. up to $750 million aggregate principal amount of 7
3/4% Exchange Debentures due 2031 in exchange for
an equal aggregate principal amount of outstanding
7 3/4% Debentures due 2031;
which Exchange Notes and Exchange Debentures will be
guaranteed by Northrop Grumman and Litton.
Resale.................. Based on an interpretation by the staff of the SEC
set forth in no-action letters issued to third
parties, we believe that, after issuance, the
Exchange Securities may be offered for resale, resold
and otherwise transferred by you (unless you are a
broker-dealer as discussed below) without compliance
with the registration and prospectus delivery
provisions of the Securities Act. The Outstanding
Securities, however, must have been acquired by you
in the ordinary course of your business and you must
have no arrangement or understanding with any person
to participate in the distribution of the Exchange
Securities.
Each broker-dealer that receives Exchange Securities
issued in this exchange offer for its own account in
exchange for Outstanding
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Securities that were acquired as a result of market-
making or other trading activity must follow the
procedures set forth in the section of this
prospectus called "Plan of Distribution."
The exchange offer is not being made to, nor will
tenders be accepted from, holders of Outstanding
Securities in any jurisdiction in which this exchange
offer would not be in compliance with the securities
laws of such jurisdiction.
Expiration Date......... 5:00 p.m., New York City time, , 2001,
unless the exchange offer is extended. Any
extension, if made, will be publicly announced
through a release to PR Newswire and as otherwise
required by applicable law or regulations. We may
extend the expiration date in our sole and
absolute discretion.
Conditions to the
Exchange Offer......... The only conditions to the exchange offer are
that it not violate applicable law, any
applicable interpretation of the staff of the SEC
or any standing order or judgment. The exchange
offer is not conditioned upon any minimum
principal amount of Outstanding Securities being
tendered.
Procedures for
Tendering Outstanding
Securities............. If you wish to accept the exchange offer, you
must complete, sign and date the letter of
transmittal, or a facsimile copy, in accordance
with the instructions contained in this
prospectus and the letter of transmittal, and
mail or otherwise deliver the letter of
transmittal together with the Outstanding
Securities to be exchanged and any other required
documentation to The Chase Manhattan Bank.
Special Procedures for
Beneficial Owners...... If you are a beneficial owner whose Outstanding
Securities are registered in the name of a
broker, commercial bank, trust company or other
nominee, and you wish to tender in the exchange
offer, you should contact your registered holder
promptly and instruct the registered holder to
tender on your behalf.
Guaranteed Delivery
Procedures for
Outstanding
Securities............. If you wish to tender your Outstanding Securities
and they are not immediately available or you
cannot otherwise deliver your Outstanding
Securities and the required documentation to the
applicable exchange agent prior to the expiration
date, you may tender your Outstanding Securities
under a guaranteed delivery procedure. Under this
procedure, you must deliver to the exchange agent
a letter stating that a tender is being made and
guaranteeing that all the required documentation
will be delivered to the exchange agent within
three New York Stock Exchange trading days, and
then you must deliver your Outstanding Securities
and all other required documentation within that
time period.
5
Acceptance of
Outstanding Securities
and Delivery of
Exchange Securities.... Subject to certain qualifications, we will accept
for exchange any and all Outstanding Securities
which are properly tendered in the exchange offer
and not withdrawn, prior to 5:00 p.m., New York
City time, on the expiration date.
Withdrawal Rights....... Subject to the conditions set forth in this
prospectus, you may withdraw your tender of
Outstanding Securities at any time prior to 5:00
p.m., New York City time on the expiration date.
Certain United States
Federal Income Tax
Considerations......... The exchange of Outstanding Securities for
Exchange Securities in the exchange offer does
not constitute a taxable exchange for federal
income tax purposes. Each Exchange Security will
be treated as having been originally issued as of
the date the Outstanding Security being exchanged
was originally issued. However, you should
consult your own tax advisor.
Paying and Exchange
Agent.................. The Chase Manhattan Bank, the trustee under the
Indenture, is serving as exchange agent and
paying agent with respect to the 7 1/8% Notes due
2011 and the 7 3/4% Debentures due 2031.
The Exchange Securities
The form and terms of each series of Exchange Securities will be the same as
the form and terms of the series of Outstanding Securities for which they are
exchanged, except that the Exchange Securities will be registered under the
Securities Act and, therefore, will not bear legends restricting their
transfer. The Exchange Securities will evidence the same debt as the
Outstanding Securities for which they are exchanged, and the Exchange
Securities will be entitled to the benefits of the Indenture. Upon consummation
of the exchange offer, any Outstanding Securities that are not exchanged for
Exchange Securities will not be entitled to further registration rights under
the registration rights agreement.
Maturity Dates:
7 1/8% Exchange Notes
due 2011............... February 15, 2011
7 3/4% Exchange
Debentures due 2031.... February 15, 2031
Guarantees.............. Northrop Grumman and Litton will fully and
unconditionally guarantee all the obligations of
Northrop Systems under the Exchange Securities.
Interest................ Interest on the Exchange Securities will accrue
from their date of issuance and will be paid on
the basis of a 360-day year comprised of twelve
30-day months. Interest on the Exchange
Securities will be payable semi-annually on
February 15 and August 15 of each year,
commencing August 15, 2001. Holders of
Outstanding Securities accepted for exchange will
be deemed to have waived the right to receive any
payments in respect of interest on the
Outstanding Securities accrued
6
from February 27, 2001 to the date of issuance of
the Exchange Securities and will receive interest
for that period pursuant to the Exchange
Securities.
Optional Redemption..... Northrop Systems may redeem all or part of the
Exchange Securities at any time at its option at a
redemption price equal to the greater of (1) the
principal amount of the Exchange Securities being
redeemed plus accrued and unpaid interest to the
redemption date or (2) the Make-Whole Amount for the
series of Exchange Securities being redeemed.
Make-Whole Amount....... "Make-Whole Amount" means the sum of the present
values of the principal amount of the Exchange
Securities to be redeemed, together with the
scheduled payments of interest (exclusive of interest
to the redemption date) from the redemption date to
the maturity date of the series of Exchange
Securities being redeemed, in each case discounted to
the redemption date on a semi-annual basis, assuming
a 360-day year consisting of twelve 30-day months, at
the Adjusted Treasury Rate, plus accrued and unpaid
interest on the principal amount of the Exchange
Securities being redeemed to the redemption date.
Ranking................. The Exchange Securities will be Northrop Systems'
senior unsecured obligations and will rank pari passu
with Northrop Systems' other existing and future
senior unsecured debt. The guarantees will be senior
unsecured obligations of Northrop Grumman and Litton
and will rank equally in right of payment with any
other existing and future senior unsecured debt of
each guarantor.
Limitation on Liens and
Restrictive
Covenants.............. The Indenture provides that neither Northrop Systems
nor its Restricted Subsidiaries will subject Northrop
Systems' Principal Properties to any mortgage or
other encumbrance securing indebtedness unless the
debt securities issued under the Indenture, including
the Exchange Securities, are secured equally with the
other indebtedness. The Indenture also contains
limitations on Northrop Systems' ability to enter
into certain sale and leaseback arrangements and
contains limitations on the issuance of indebtedness
by Northrop Systems' Restricted Subsidiaries. These
restrictive covenants are subject to exceptions
described in the Indenture.
Use of Proceeds......... We will not receive any cash proceeds from the
issuance of the Exchange Securities offered hereby.
In consideration for issuing the Exchange Securities
in exchange for the Outstanding Securities, we will
receive Outstanding Securities in like principal
amount. The Outstanding Securities surrendered in
exchange for the Exchange Securities will be retired
and cancelled.
The proceeds from the placement of the Outstanding
Securities were used by us to purchase Litton common
and preferred shares in the Litton acquisition.
For additional information regarding the Exchange Securities, see the
"Description of the Securities" section of this prospectus.
7
WHERE YOU CAN FIND MORE INFORMATION
Northrop Systems, Northrop Grumman and Litton have filed annual, quarterly
and current reports, proxy statements and other information with the SEC. You
may read and copy any such report, statement or other information at the SEC's
public reference rooms at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, Seven World Trade Center, Suite 1300, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
You may obtain additional information about the public reference rooms by
calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a site on
the Internet at http://www.sec.gov that contains reports, proxy statements and
other information regarding issuers that file electronically with the SEC. You
may also read such reports, proxy statements and other documents at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005.
We are "incorporating by reference" information into this prospectus. This
means that we are disclosing important information to you by referring you to
another document that has been filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus.
Information that is filed with the SEC after the date of this prospectus will
automatically modify and supersede the information included or incorporated by
reference in this prospectus to the extent that the subsequently filed
information modifies or supersedes the existing information. We incorporate by
reference Northrop Systems', Northrop Grumman's and Litton's future filings
with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 until we complete the offering of the Exchange
Securities.
The following documents filed with the SEC by Northrop Systems are hereby
incorporated by reference:
. Annual Report on Form 10-K/A for the fiscal year ended December 31,
2000; and
. Current Report on Form 8-K dated and filed April 17, 2001.
The following documents filed with the SEC by Litton (SEC File Number 1-
3998) are hereby incorporated by reference:
. Annual Report on Form 10-K for the fiscal year ended July 31, 2000;
. Quarterly Reports on Form 10-Q for the fiscal quarters ended October
31, 2000 and January 31, 2001; and
. Current Reports on Form 8-K filed January 30, 2001 and April 17, 2001.
The following documents filed with the SEC by Northrop Grumman (SEC file
Number 1-16411) are hereby incorporated by reference:
. Current Report on Form 8-K dated and filed April 17, 2001; and
. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
2001.
You may request a copy of any of these filings at no cost by writing to or
telephoning us at the following address and telephone number: John H. Mullan,
Corporate Vice President and Secretary, 1840 Century Park East, Los Angeles,
California 90067, telephone (310) 201-3081.
We maintain an Internet site at http://www.northgrum.com. The information
contained at our Internet site is not incorporated by reference in this
prospectus, and you should not consider it a part of this prospectus.
Any statement made in this prospectus concerning the contents of any
contract, agreement or other document is only a summary of the actual
document. You may obtain a copy of any document summarized in this prospectus
at no cost by writing to or telephoning us at the address and telephone number
given above. Each statement regarding a contract, agreement or other document
is qualified in its entirety by reference to the actual document.
8
FORWARD-LOOKING STATEMENTS AND IMPORTANT FACTORS
Some of the information included in this prospectus and in the documents
incorporated by reference are forward-looking statements within the meaning of
the securities laws. These statements concern our plans, expectations and
objectives for future operations. These include statements and assumptions with
respect to expected future revenues, margins, program performance, earnings and
cash flows, acquisitions of new contracts, the outcome of competitions for new
programs, the outcome of contingencies including litigation and environmental
remediation, the effect of completed and planned acquisitions and divestitures
of businesses or business assets, the anticipated costs of capital investments,
and anticipated industry trends. Our actual results and trends may differ
materially from the information, statements and assumptions as described, and
actual results could be materially less than our planned results.
Important factors that could cause actual results to differ materially from
those suggested by the forward-looking statements include:
. We depend on a limited number of customers. We are heavily dependent on
government contracts many of which are only partially funded; the
termination or failure to fund one or more significant contracts could
have a negative impact on our operations. We are a supplier, either
directly or as a subcontractor or team member, to the U.S. Government
and its agencies as well as foreign governments and agencies. These
contracts are subject to each customers' political and budgetary
constraints, changes in short-range and long-range plans, the timing of
contract awards, the congressional budget authorization and
appropriation processes, the government's ability to terminate
contracts for convenience or for default, as well as other risks such
as contractor debarment in the event of certain violations of legal and
regulatory requirements.
. Many of our contracts are fixed price contracts. While firm, fixed
price contracts allow us to benefit from cost savings, they also expose
us to the risk of cost overruns. If our initial estimates used for
calculating the contract price are incorrect, we can incur losses on
those contracts. In addition, some of our contracts have provisions
relating to cost controls and audit rights and if we fail to meet the
terms specified in those contracts then we may not realize their full
benefits. Our ability to manage costs on these contracts may effect our
financial condition. Lower earnings caused by cost overruns and cost
controls would have an adverse effect on our financial results.
. We are subject to significant competition. Our markets include defense
and commercial areas where we compete with companies of substantial
size and resources. Our success or failure in winning new contracts or
follow on orders for our existing or future products may cause material
fluctuations in our future revenues and operating results.
. Our operations may be subject to events that cause adverse effects on
our ability to meet contract obligations within anticipated cost and
time parameters. We may encounter internal problems and delays in
delivery as a result of issues with respect to design, technology,
licensing and patent rights, labor or materials and components that
prevent us from achieving contract requirements. We may be affected by
delivery or performance issues with key suppliers and subcontractors,
as well as other factors inherent in our businesses which may cause
operating results to be adversely affected. Changes in inventory
requirements or other production cost increases may also have a
negative impact on our operating results.
. We must integrate our acquisitions successfully. Acquiring businesses
is a significant challenge. If we do not execute our acquisition and
integration plans for these businesses in accordance with our strategic
timetable, our operating results may be adversely affected. We acquired
several businesses in 2000 and we have acquired Litton. We believe our
integration processes are well-suited to achieve the anticipated
strategic and operating benefits of these acquisitions, but if we do
not perform our plans as intended, or if we encounter unforeseen
problems in the acquired businesses, or problems in those businesses
develop subsequent to acquisition, our operating results may be
adversely affected. Among the factors that may be involved would be
unforeseen costs and expenses, previously undisclosed
9
liabilities, diversion of management focus, and any effects of complying
with government-imposed organizational conflicts of interest rules as a
result of the acquisitions.
. We rely on continuous innovation. We are dependent upon our ability to
anticipate changing needs for defense products, military and civilian
electronic systems and support, and information technology. Our success
is dependent on designing new products which will respond to such
requirements within customers' price limitations.
. We face significant challenges in the international marketplace. Our
international business is subject to changes in import and export
policies, technology transfer restrictions, limitations imposed by
United States law that are not applicable to our foreign competitors,
and other legal, financial and governmental risks.
. We assume that any divestiture of non-core businesses and assets will
be completed successfully. Our performance may be affected by our
inability to successfully dispose of assets and businesses that do not
fit with or are no longer appropriate to our strategic plan. If any
sales of such businesses or assets can only be made at a loss, our
earnings will be negatively impacted.
. We are subject to environmental and other liabilities. Our performance
may be affected by known environmental risks, pending litigation and
other loss contingencies, if not resolved within the parameters of our
internal plans, and by unanticipated environmental or other
liabilities.
. Our pension income may fluctuate. Pension income, a non-cash item which
is included in our earnings, is based on assumptions of market
performance and actual performance may differ. If an event causes us to
revalue our pension income during the calendar year, the portion of our
earnings attributed to pension income could vary significantly.
. Our indebtedness, incurred in connection with the Litton acquisition,
is higher than our indebtedness at December 31, 2000. The increase in
debt will increase demands on our cash resources.
Additional information with respect to risks and uncertainties in our
business is contained in our SEC filings, including, without limitation,
Northrop Systems' Annual Report on Form 10-K/A for the year ended December 31,
2000 and Northrop Grumman's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001.
Accordingly, you should not rely on the accuracy of predictions contained in
forward-looking statements. These statements speak only as of the date of this
prospectus, or, in the case of documents incorporated by reference, the date of
those documents. We cannot undertake any obligation to update our forward-
looking statements to reflect events, circumstances, changes in expectations or
the occurrence of unanticipated events occurring after the date of those
statements.
10
NORTHROP GRUMMAN
We are a leading global aerospace and defense company providing products and
services in defense and commercial electronics, systems integration,
information technology and non-nuclear shipbuilding and systems. As a prime
contractor, principal subcontractor, partner, or preferred supplier, we
participate in many high-priority defense and commercial technology programs in
the United States and abroad.
Business Segments
Northrop Systems is aligned into three business sectors: the Integrated
Systems Sector, based in Dallas, Texas; the Electronic Sensors and Systems
Sector, headquartered in Baltimore, Maryland; and Logicon, Inc., based in
Herndon, Virginia.
The Integrated Systems Sector (ISS) is a leader in design, development and
production of airborne early warning, electronic warfare and surveillance and
battlefield management systems. ISS is the prime contractor for the Joint STARS
advanced airborne targeting and battle management system and the U.S. Air
Force's B-2 Spirit stealth bomber. ISS has a principal role in producing the
U.S. Navy's F/A-18 Hornet strike fighter. The sector also produces the EA-6B
Prowler electronic countermeasures aircraft and is upgrading the E-2C Hawkeye
early-warning aircraft. We have a principal role in the Global Hawk program, a
development stage integrated unmanned aerial vehicle for reconnaissance and
surveillance. We are also a principal subcontractor to Lockheed Martin in the
joint strike fighter competition, a competition expected to be decided in 2001.
The Electronic Sensors and Systems Sector (ES/3/) designs, develops and
manufactures a wide variety of defense electronics and systems, airspace
management systems, precision weapons, marine systems, logistic systems, space
systems, and automation and information systems. These include fire control
radars for the F-16 fighter aircraft, the F-22 fighter aircraft, and the
Longbow Apache helicopter. Other key programs include the AWACS airborne early
warning radar, the Joint STARS air-to-ground surveillance radar sensor, the
Longbow Hellfire missile and the BAT "brilliant" antiarmor submunition. ES/3/
also provides tactical military radars and countrywide air defense systems, as
well as airborne electronic countermeasures systems intended to jam enemy
aircraft and weapons systems. ES/3/ is a world leader in airspace management as
a producer of civilian air traffic control systems. The sector also makes
sophisticated undersea warfare systems, and naval propulsion and power
generation systems. Additionally, ES/3/ provides postal automation, image
processing, material management, asset track and trace, and data communication
systems.
Logicon, Inc. is a leader in advanced information technologies, systems and
services. Logicon is the prime contractor with the General Services
Administration ANSWER and Millennia programs. Logicon is also part of a team
working with the Internal Revenue Service to modernize the nation's tax system.
Logicon 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 as well as mission planning for the U.S. Navy, Air Force and Special
Operations Command. Logicon provides base operations support for NASA's Kennedy
Space Center, Cape Canaveral Air Station and Patrick Air Force Base, among
others. In addition, Logicon provides information technology services to
commercial customers and to the other Northrop Systems sectors.
Litton will initially constitute a separate business segment. Litton
designs, builds and overhauls non-nuclear surface ships and is a provider of
defense and commercial electronics technology, components and materials for
government and commercial customers worldwide. In addition, Litton is a prime
contractor to the U.S. Government for information technology services and
provides specialized information technology services to commercial customers
and governments in local and foreign jurisdictions. We plan to integrate Litton
operations other than ship systems and electronic components into the existing
Northrop Systems business segments during 2001 and expect to operate in five
segments when this integration is accomplished.
11
Strategy
We expect the Litton acquisition to further strengthen the position of the
combined company as a leader in the defense industry as it pursues the
following business strategies:
. Transforming the combined company into a systems integrator, defense
electronics leader and information technology provider;
. Positioning the combined company to meet the emerging defense needs of
the United States and foreign allied governments;
. Reinforcing leading competitive positions in niche markets:
. Key business areas with significant growth prospects;
. Growth positions in niche business areas;
. Preferred contracts as a systems integrator, principal subcontractor,
teammate or preferred supplier;
. Enhancing the combined company's importance to customers; and
. Diversifying the combined company's program positions and sources of
revenues.
Recent Acquisition and Disposition History
Strategic acquisitions have played a critical role in our transformation to
a leading diversified technology company to the U.S. Department of Defense. In
1992 we acquired 49% of Vought Aircraft Company. In 1994 we made the first of
our major acquisitions by purchasing Grumman Corporation and we also acquired
the remaining 51% of Vought. This was followed by the acquisition of the
defense electronic systems group of Westinghouse Electric Corporation in 1996.
In August 1997, we consummated our merger with Logicon, Inc.
Since 1997, we have continued to sharpen our focus through several smaller
significant strategic acquisitions as well as the divestiture of non-core
businesses. In 1998, we acquired Inter-National Research Institute Inc. (INRI).
In 1999, we acquired the Information Systems Division of California Microwave,
Inc., Data Procurement Corporation (DPC), and Ryan Aeronautical, an operating
unit of Allegheny Teledyne Inc. In 2000, we acquired Navia Aviation SA, Comptek
Research, Federal Data Corporation and Sterling Software FSG. Also in 2000, we
divested our Commercial Aerostructures business, which generated $1.38 billion
in net sales in 1999. In April 2001 we acquired Litton. See "The Litton
Acquisition" for more information on the Litton acquisition.
In April, 2001, we announced that we had signed a definitive agreement to
acquire the Electronics and Information Systems Group of Aerojet-General
Corporation for $315 million in cash. This Aerojet General unit had year 2000
revenues of approximately $323 million and specialized in space-borne sensing
for early warning systems, ground systems that process data from space-based
platforms and smart weapons technology for U.S. Government national security
programs. Completion of this transaction is subject to conditions including
antitrust review.
On May 9, 2001, we announced our intention to offer to acquire Newport News
Shipbuilding for $67.50 per share for all of the outstanding shares of common
stock of Newport News, payable 75% in our stock and the remainder in cash. Our
exchange offer is subject to various conditions including the acceptance of our
offer by at least a majority of the Newport News shareholders, the termination
of the definitive acquisition agreement between Newport News and General
Dynamics, the execution of a definitive merger agreement with Newport News and
the receipt of regulatory approvals.
Overview of the Defense Industry
The defense requirements of the United States and NATO countries have
shifted from defending against threats imposed by the former Soviet Union to a
focus upon the management of one or more regional conflicts. These engagements
may require unilateral or cooperative initiatives, ranging from passive
surveillance to active engagement, deterrence, policing or peacekeeping. In
addition, the Department of Defense's strategy has been
12
impacted by the general public's increasing intolerance for military action
which puts military or civilian personnel at risk. As a result of these trends,
both the United States and NATO countries are increasingly relying on
sophisticated weapon systems which provide long-range surveillance and
intelligence, battle management and precision strike capabilities. Accordingly,
defense procurement spending is expected to be weighted towards the development
and procurement of advanced electronics and software that enhance the
capabilities of individual weapons systems and provide for the real-time
integration of individual surveillance, information management, strike and
battle management platforms.
United States defense contractors have also been influenced by two trends in
defense spending over recent years. First, following a period of budget
decreases in the post-Cold War era, the aggregate U.S. defense budget, as
appropriated by Congress, has increased for each of the past five years.
Second, equipment procurement and research and development spending have grown
more quickly than the overall defense budget over this same period and have
become an increasingly large portion of the overall budget as the Pentagon has
focused on the development and procurement of these next generation smart
weapons systems. Defense spending by other NATO countries has stabilized,
following decreases in the immediate post-Cold War era, while they continue to
increase their focus upon the development and procurement of advanced
electronics and information systems capabilities.
THE LITTON ACQUISITION
On April 3, 2001, pursuant to the Offer to Purchase or Exchange all
outstanding shares of the Common Stock and Preferred Stock of Litton made by
Northrop Grumman, Northrop Grumman purchased approximately 97.3% of the
outstanding shares of common stock of Litton and approximately 58.6% of the
preferred stock of Litton. The offer was made pursuant to Registration
Statement No. 333-54800 which became effective on March 28, 2001, and the
Amended and Restated Agreement and Plan of Merger dated as of January 23, 2001
among Northrop Systems, Litton, Northrop Grumman and LII Acquisition Corp.
Pursuant to the plan of merger, a subsidiary of Northrop Grumman was merged
into Litton on May 30, 2001 and the remaining holders of common shares of
Litton received $80.00 in cash per common share. Subsequently, another newly-
organized subsidiary of Northrop Grumman will be merged into Litton in a short-
form merger and the remaining holders of preferred shares will receive $35.00
in cash per preferred share. The value of the Litton acquisition, when
completed, is expected to be approximately $5.3 billion, which includes the
assumption of Litton's approximately $1.4 billion in net debt. The
consideration for the common stock and preferred stock included cash, common
stock of Northrop Grumman and preferred stock of Northrop Grumman. Northrop
Grumman obtained the cash portion of the purchase price from the offering of
the Outstanding Securities and from advances under the New Credit Facilities.
NEW CREDIT FACILITIES
We have entered into unsecured senior credit facilities with lenders which
initially provided for borrowings of up to $5 billion (the "New Credit
Facilities"). The New Credit Facilities consist of a $2.5 billion five-year
revolving credit facility and a $2.5 billion 364-day revolving credit facility.
The availability under the 364-day revolving credit facility, as reduced by the
equity and other debt financing of the Litton acquisition, is now $527 million.
Borrowings under the New Credit Facilities along with the net proceeds of the
offering of the Outstanding Securities were used to finance the purchase of
shares in the Litton acquisition, to pay related expenses, and to retire and
refinance a portion of the former Litton debt. The New Credit Facilities will
be available to finance our continuing operations. Borrowings under the New
Credit Facilities will bear interest, at our option, at various rates of
interest, including adjusted LIBOR or an alternate base rate plus in each case
an incremental margin based on our credit rating. The New Credit Facilities
also provide for a facility fee on the daily aggregate amount of commitments
under the revolving facilities (whether or not utilized). The facility fee is
also based on our credit rating level. Northrop Grumman, Northrop Systems and
Litton are all co-borrowers on the New Credit Facilities.
13
USE OF PROCEEDS
Northrop Systems will not receive any cash proceeds from the issuance of the
Exchange Securities offered hereby. In consideration for issuing the Exchange
Securities in exchange for the Outstanding Securities, Northrop Systems will
receive Outstanding Securities in like principal amount. The Outstanding
Securities surrendered in exchange for the Exchange Securities will be retired
and cancelled. The proceeds from the placement of the Outstanding Securities
were used to purchase Litton common and preferred shares in the Litton
acquisition.
CAPITALIZATION
The following table sets forth:
. our capitalization as of March 31, 2001, and
. our capitalization as adjusted to reflect the Litton acquisition and the
New Credit Facilities.
The as adjusted pro forma amounts have been developed from (1) the unaudited
consolidated financial statements of Northrop Grumman contained in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, which is
incorporated by reference in this prospectus and (b) the unaudited consolidated
financial statements for the period ended January 31, 2001 contained in
Litton's Quarterly Report on Form 10-Q which is incorporated by reference in
this prospectus. See "Unaudited Pro Forma Condensed Combined Financial Data."
As of March 31, 2001
--------------------------
As adjusted for the
Litton acquisition
and the New
Actual Credit Facilities
------ -------------------
Current portion of long-term debt................ $ -- $ 184
Long-term debt:
Notes and Debentures--Northrop Systems......... 3,100 3,100
Notes, Debentures and Bonds--Litton............ -- 1,184
Other.......................................... 5 114
Long Term Revolver............................. -- 882
Total long-term debt, less current maturities.... 3,105 5,280
Mandatorily redeemable preferred stock........... -- 350
Total debt....................................... 3,105 5,814
Shareholders' equity............................. 4,007 5,130
Total capitalization......................... $7,112 $10,944
14
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
Northrop Systems and Northrop Grumman for each of the fiscal years ended
December 31, 1996 through December 31, 2000 and for the three months ended
March 31, 2001 and the pro forma combined ratios of earnings to fixed charges
of Northrop Systems and Litton for the year ended December 31, 2000 and for
Northrop Grumman and Litton for the three months ended March 31, 2001.
The pro forma ratios of earnings to fixed charges are based upon the
historical financial statements of Northrop Systems, Northrop Grumman and
Litton adjusted to give effect to the Litton acquisition. 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 our Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 2001, which are incorporated
by reference in this prospectus, and (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 six months ended
January 31, 2001, incorporated by reference in this prospectus. In addition,
the audited consolidated financial statements contained in Litton's Annual
Report on Form 10-K for the fiscal year ended July 31, 1999 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 Actual
-------------------------- --------------------------------------
Three Months Fiscal Year
Ended Ended Three Months
March 31, December 31, Ended
2001 2000 March 31 Year Ended December 31
------------ ------------ ------------- ------------------------
2001 2000 2000 1999 1998 1997 1996
------ ------ ---- ---- ---- ---- ----
2.09 2.76 3.67 5.26 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 prospectus. See "Where You Can Find More Information."
15
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
Northrop Grumman and Northrop Systems
The following table sets forth selected consolidated financial data for
Northrop Systems and Northrop Grumman for each of the periods indicated.
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 us with the SEC,
which are incorporated in this prospectus by reference. Consolidated financial
data for the year ended December 31, 1996 and for the three months ended March
31, 2001 and 2000 have been derived from unaudited consolidated financial
statements and notes thereto of Northrop Systems and Northrop Grumman. This
data does not give effect to the Litton acquisition or the New Credit
Facilities. See also "Where You Can Find More Information" and "Unaudited Pro
Forma Condensed Combined Financial Data."
Three Months
Ended
March 31, Year ended December 31,
--------------- ----------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------ ------- ------ ------ ------ -------
(in millions, except per share)
Operating data:
Net sales............. $ 1,986 $1,802 $ 7,618 $7,616 $7,367 $7,798 $ 7,667
Operating margin...... 190 287 1,098 954 752 741 752
Interest expense
(net)................ (32) (44) (146) (206) (221) (240) (261)
Income from continuing
operations before
accounting changes... 103 156 625 474 193 318 330
Diluted earnings per
share from continuing
operations before
accounting change.... $ 1.42 $ 2.23 $ 8.82 $ 6.80 $ 2.78 $ 4.67 $ 5.18
Cash dividends per
common share......... .40 .40 1.60 1.60 1.60 1.60 1.60
Balance sheet data:
Total assets.......... $11,185 $9,389 $ 9,622 $9,285 $9,536 $9,677 $ 9,645
Net working capital... 1,382 269 (162) 329 666 221 106
Total debt............ 3,105 2,095 1,615 2,225 2,831 2,791 3,378
Shareholders' equity.. 4,007 3,409 3,919 3,257 2,850 2,623 2,282
Other data:
Net cash from
operations........... $ (33) $ 91 $ 1,010 $1,207 $ 244 $ 730 $ 743
Funded order backlog.. 10,320 8,156 10,106 8,499 8,415 9,700 10,451
Depreciation and
amortization......... 99 87 381 353 359 380 340
Earnings before
interest, taxes,
depreciation and
amortization
(EBITDA)(a).......... 291 374 1,502 1,306 889 1,132 1,079
- --------
(a) We calculated EBITDA by adding back net interest expense and depreciation
and amortization expense to income from continuing operations before taxes
and accounting change. Since all companies do not calculate EBITDA or
similarly titled financial measures in the same manner, disclosures by
other companies may not be comparable with EBITDA as defined herein. EBITDA
is a financial measure used by analysts to value companies. Therefore, our
management believes that the presentation of EBITDA provides relevant
information to investors. EBITDA should not be construed as an alternative
to operating income or cash flows from operating activities as determined
in accordance with United States generally accepted accounting principles
("GAAP") or as a measure of liquidity. Amounts reflected as EBITDA are not
necessarily available for discretionary use as a result of restrictions
imposed by applicable law upon the payment of dividends or distributions,
among other things.
16
Litton Industries, Inc.
The following is a summary of selected consolidated financial data of Litton
for each of the years in the five-year period ended July 31, 2000 and the six-
month periods ended January 31, 2001 and January 31, 2000. The operating
results for the six months ended January 31, 2001 are not necessarily
indicative of results for the full fiscal year ended July 31, 2001. This
information is derived from the audited consolidated financial statements of
Litton contained in its Annual Report on Form 10-K for the fiscal year ended
July 31, 2000, the unaudited consolidated financial statements of Litton
contained in its Quarterly Report on Form 10-Q for the period ended January 31,
2001, and from Litton's Quarterly Report on Form 10-Q for the period ended
January 31, 2000, and is qualified in its entirety by such documents. See
"Where You Can Find More Information." You should read this summary together
with the financial statements which are incorporated by reference in this
prospectus and their accompanying notes and in conjunction with management's
discussion and analysis of operations and financial conditions of Litton
contained in such reports.
Six months ended
January 31, Year ended July 31,
----------------- ----------------------------------
2001 2000 2000 1999 1998 1997 1996
-------- -------- ------ ------ ------ ------ ------
($ in millions, except per share)
Operating data:
Sales and service
revenues.............. $ 2,758 $ 2,720 $5,588 $4,828 $4,400 $4,176 $3,612
Total segment operating
profit................ 245 238 562 339 410 370 320
Interest expense
(net)................. 52 55 108 67 52 44 14
Income before
accounting change..... 95 90 221 121 181 162 151
Diluted earnings per
share before
accounting change..... $ 2.03 $ 1.93 $ 4.80 $ 2.58 $ 3.82 $ 3.40 $ 3.15
Cash dividends per
common share.......... 0 0 0 0 0 0 0
Balance sheet data:
Total assets........... $ 4,908 $ 4,967 $4,836 $4,260 $4,114 $3,545 $3,454
Net working capital.... 597 321 500 295 164 163 107
Total debt............. 1,477 1,690 1,399 1,033 1,046 680 787
Total stockholders'
investment............ 1,611 1,385 1,496 1,300 1,187 1,039 917
Other Data:
Net cash from
operations............ $ 20 $ (16) $ 250 $ 244 $ 228 $ 223 $ 70
Depreciation and
amortization.......... 92 96 190 161 148 138 114
Earnings before
interest, taxes,
depreciation and
amortization
(EBITDA)(a)........... 304 302 683 441 502 452 381
- --------
(a) We calculated EBITDA by adding back net interest expense and depreciation
and amortization expense to income from continuing operations before taxes
and accounting change. Since all companies do not calculate EBITDA or
similarly titled financial measures in the same manner, disclosures by
other companies may not be comparable with EBITDA as defined herein. EBITDA
is a financial measure used by analysts to value companies. Therefore, our
management believes that the presentation of EBITDA provides relevant
information to investors. EBITDA should not be construed as an alternative
to operating income or cash flows from operating activities as determined
in accordance with GAAP or as a measure of liquidity. Amounts reflected as
EBITDA are not necessarily available for discretionary use as a result of
restrictions imposed by applicable law upon the payment of dividends or
distributions, among other things.
17
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The Unaudited Pro Forma Condensed Combined Financial Data presented below is
derived from the historical consolidated financial statements of each of
Northrop Systems, Northrop Grumman and Litton. The Unaudited Pro Forma
Condensed Combined Financial Data is prepared using the purchase method of
accounting, with Northrop Grumman treated as the acquiror and as if the Litton
acquisition had been completed as of the beginning of the periods presented for
statements of operations purposes and on March 31, 2001 for balance sheet
purposes.
For a summary of the business combination, see "The Litton Acquisition."
The Unaudited Pro Forma Condensed Combined Financial Data is based upon the
historical financial statements of Northrop Systems, Northrop Grumman and
Litton adjusted to give effect to the Litton acquisition. The pro forma
adjustments are described in the accompanying notes presented on the following
pages. The pro forma statements have been developed from (a) the audited
consolidated financial statements of Northrop Systems contained in the 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 the
Quarterly Report on Form 10-Q for the three months ended March 31, 2001, which
are incorporated by reference in this prospectus, and (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 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 prospectus. In addition, the audited consolidated financial statements
contained in Litton's Annual Report on Form 10-K for the fiscal year ended July
31, 1999 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 acquisition may differ from the amounts assumed in this Unaudited Pro
Forma Condensed Combined Financial Data.
Under the purchase method of accounting, the purchase price will be
allocated to the underlying tangible and intangible assets and liabilities
acquired based on their respective fair market values, with the excess recorded
as goodwill. As of the date of this prospectus, Northrop Grumman has not
completed the valuation studies necessary to arrive at the required estimates
of the fair market value of the assets and liabilities to be acquired and the
related allocations of purchase price, nor has it identified the adjustments
necessary, if any, to conform Litton data to Northrop Grumman's accounting
policies. Accordingly, Northrop Grumman has used the historical book values of
the assets and liabilities of Litton and has used the historical revenue
recognition policies of Litton to prepare the unaudited pro forma financial
statements set forth herein, with the excess of the purchase price over the
historical net assets of Litton recorded as goodwill and other purchased
intangibles. Once Northrop Grumman has completed the valuation studies
necessary to finalize the required purchase price allocation 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 allocation of
purchase price and the pro forma statement 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 the offer and the Litton acquisition
occurred on the date 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 acquisition.
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 and Litton that are
incorporated by reference in this prospectus.
18
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION
March 31, 2001
($ in millions)
Pro
Northrop Pro Forma Forma
Grumman Litton Adjustments Combined
-------- ------ ----------- --------
ASSETS
Current assets
Cash and cash equivalents............ $ 1,636 $ 74 $(1,500)(a) $ 210
Accounts receivable.................. 1,493 794 2,287
Inventoried costs.................... 749 784 1,533
Deferred income taxes................ 22 372 394
Prepaid expenses..................... 66 33 99
------- ------ ------- -------
Total current assets............... 3,966 2,057 (1,500) 4,523
------- ------ ------- -------
Property, plant and equipment.......... 2,370 1,860 4,230
Accumulated depreciation............... (1,356) (990) (2,346)
------- ------ ------- -------
1,014 870 -- 1,884
------- ------ ------- -------
Other assets
Goodwill and other purchased
intangibles......................... 4,380 1,230 2,244 (a) 7,854
Prepaid retiree benefits cost and
intangible pension asset............ 1,469 1,469
Other assets......................... 356 751 1,107
------- ------ ------- -------
6,205 1,981 2,244 10,430
------- ------ ------- -------
$11,185 $4,908 $ 744 $16,837
======= ====== ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current portion of
long term debt...................... $ -- $ 184 $ -- $ 184
Accounts payable..................... 491 310 801
Accrued employees' compensation...... 325 226 551
Advances on contracts................ 468 204 672
Income taxes......................... 769 62 831
Other current liabilities............ 531 474 1,005
------- ------ ------- -------
Total current liabilities.......... 2,584 1,460 4,044
------- ------ ------- -------
Long-term debt......................... 3,105 1,293 882 (a) 5,280
Accrued retiree benefits............... 1,108 303 1,411
Deferred tax and other long-term
liabilities........................... 381 241 622
Redeemable Preferred Stock............. -- -- 350 (a) 350
Shareholders' equity
Paid in Capital...................... 1,214 413 710 (a) 2,337
Retained earnings.................... 2,817 1,254 (1,254)(a) 2,817
Accumulated other comprehensive
loss................................ (24) (56) 56 (a) (24)
------- ------ ------- -------
4,007 1,611 (488) 5,130
------- ------ ------- -------
$11,185 $4,908 $ 744 $16,837
======= ====== ======= =======
19
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Year Ended December 31, 2000
($ in millions, except per share data)
Northrop Pro Forma Pro Forma
Grumman Litton Adjustments Combined
-------- ------ ----------- ---------
Sales and service revenues............ $7,618 $5,626 $ -- $13,244
Cost of sales
Operating Costs..................... 5,446 4,669 83(b) 10,198
Administrative and general
expenses........................... 1,074 491 -- 1,565
------ ------ ----- -------
Operating margin...................... 1,098 466 (83) 1,481
Interest expense...................... (175) (105) (190)(c) (470)
Other, net............................ 52 16 -- 68
------ ------ ----- -------
Income from continuing operations
before income taxes.................. 975 377 (273) 1,079
Federal and foreign income taxes...... 350 151 (96)(d) 405
------ ------ ----- -------
Income from continuing operations..... $ 625 $ 226 $(177) $ 674
====== ====== ===== =======
Less, dividends paid to preferred
shareholders......................... (25)(e) (25)
Income available to common
shareholders......................... $(202) $ 649
===== =======
Average shares basic.................. 70.58 83.58
Average shares diluted................ 70.88 84.00
Basic earnings per share:
Continuing operations............... $ 8.86 $ 7.77
Diluted earnings per share:
Continuing operations............... $ 8.82 $ 7.73
Quarter ended March 31, 2001
($ in millions, except per share data)
Northrop Pro Forma Pro Forma
Grumman Litton Adjustments Combined
-------- ------ ----------- ---------
Sales and service revenues............ $1,986 $1,345 $-- $3,331
Cost of sales
Operating Costs..................... 1,548 1,120 21(b) 2,689
Administrative and general
expenses........................... 248 121 -- 369
------ ------ ---- ------
Operating margin...................... 190 104 (21) 273
Interest expense...................... (47) (27) (46)(c) (120)
Other, net............................ 17 3 -- 20
------ ------ ---- ------
Income from continuing operations
before income taxes.................. 160 80 (67) 173
Federal and foreign income taxes...... 57 30 (23)(d) 64
------ ------ ---- ------
Income from continuing operations..... $ 103 $ 50 $(44) $ 109
====== ====== ==== ======
Less, dividends paid to preferred
shareholders......................... (6)(e) (6)
Income available to common
shareholders......................... $(50) $ 103
==== ======
Average shares basic.................. 72.19 85.19
Average shares diluted................ 72.76 86.01
Basic earnings per share:
Continuing operations............... $ 1.43 $ 1.21
Diluted earnings per share:
Continuing operations............... $ 1.42 $ 1.20
20
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
(a) Adjustments to (i) eliminate the equity of Litton (ii) record issuance of
preferred and common stock and (iii) record new financing for the Litton
acquisition along with additional acquisition related costs and refinancing
of debt using the New Credit Facilities.
(b) Adjustment to amortize goodwill and other purchased intangible assets
arising out of the Litton acquisition over an estimated weighted average
life of 27 years on a straight line basis.
(c) Adjustment to record interest on new financing for the Litton acquisition
at an annual weighted average rate of 7.20 and 7.52 percent for the quarter
ended March 31, 2001 and the year ended December 31, 2000 plus the
amortization of debt issuance costs, respectively.
(d) Adjustment to record income tax effects on pre-tax pro forma adjustments,
using a statutory tax rate of thirty-five percent.
(e) Adjusted, pro rata, for dividends to preferred shareholders using $7 per
share dividend rate for equity issuance of 3,500,000 shares of preferred
stock.
21
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
Northrop Systems is making this exchange offer to comply with the
requirements of the registration rights agreement which applies to the
Outstanding Securities. The Exchange Securities will constitute registered
securities which can be resold without being subject to the transfer
restrictions applicable to the Outstanding Securities which have not been so
registered.
Following the consummation of the exchange offer, any Outstanding Securities
not tendered will no longer have registration rights and will continue to be
subject to certain restrictions on transfer.
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Outstanding Securities, where such Outstanding Securities were
acquired by the broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. See "Plan of
Distribution."
Resale of Exchange Securities
We are not requesting, and do not intend to request, an interpretation by
the staff of the SEC with respect to whether the Exchange Securities issued in
exchange for the Outstanding Securities may be offered for sale, resold or
otherwise transferred by you without compliance with the registration and
prospectus delivery provisions of the Securities Act. Based on interpretations
by the staff of the SEC set forth in no-action letters issued to third parties,
we believe that the Exchange Securities may be offered for resale, resold and
otherwise transferred by you unless you are a broker-dealer, as set forth below
(see "Plan of Distribution"), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that, among
other things:
. you acquire the Exchange Securities in the ordinary course of your
business; and
. you have no arrangement or understanding with any person to participate
in the distribution of the Exchange Securities.
If you tender Outstanding Securities in the exchange offer for the purpose
of participating in a distribution of the Exchange Securities, you may not rely
on the interpretations by the staff of the SEC and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction.
Terms of the Exchange Offer
Upon the terms set forth in this prospectus and in the letter of
transmittal, we will accept any and all Outstanding Securities properly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on the
expiration date. You may tender some or all of your Outstanding Securities in
the exchange offer. However, Outstanding Securities may be tendered only in
multiples of $1,000 principal amount. Northrop Systems will issue $1,000 of
principal amount of Exchange Securities of the corresponding series in exchange
for each $1,000 principal amount of Outstanding Securities accepted in the
exchange offer.
The form and terms of the Exchange Securities will be substantially
identical to the form and terms of the Outstanding Securities for which they
are exchanged, except that the Exchange Securities will be registered under the
Securities Act, will not bear legends restricting their transfer and will not
provide for any additional interest upon the failure on our part to fulfill our
obligations under the registration rights agreements to file, and cause to be
effective, a registration statement. The Exchange Securities will evidence the
same debt as the Outstanding Securities and will be guaranteed in the same
manner as the Outstanding Securities. The Exchange Securities will be issued
under and entitled to the benefits of the same indenture that authorized the
issuance of the Outstanding Securities.
22
The exchange offer is not conditioned upon any minimum amount of Outstanding
Securities of any series being tendered for exchange. We intend to conduct the
exchange offer in accordance with the applicable provisions of the registration
rights agreements, the applicable requirements of the Securities Act and the
Securities Exchange Act of 1934 and the rules and regulations of the SEC.
Northrop Systems will be deemed to have accepted properly tendered
Outstanding Securities when it has given written notice of the acceptance to
the exchange agent. The exchange agent will act as agent for the purpose of
receiving the Exchange Securities from us and delivering them to you. If any of
the Outstanding Securities that you tender are not accepted for exchange, the
exchange agent will return them to you, without expense, promptly after the
expiration date.
You will not be required to pay brokerage commissions or fees or, subject to
the instructions in the letter of transmittal, transfer taxes with respect to
the exchange offer. We will pay all charges and expenses, other than certain
taxes, in connection with the exchange offer.
Expiration Date
The expiration date shall be 5:00 p.m., New York City time, on July 9, 2001
unless we, in our sole discretion, extend the exchange offer. Although we have
no current intention to extend the exchange offer, we reserve the right to
extend the exchange offer at any time and from time to time by giving written
notice to the exchange agent and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a release
to PR Newswire. During any extension of the exchange offer, all Outstanding
Securities previously tendered in the exchange offer and not withdrawn will
remain subject to the exchange offer.
Amendments
We expressly reserve the right to:
. delay acceptance for exchange of any Outstanding Securities;
. terminate the exchange offer and not accept for exchange any Outstanding
Securities if any of the events set forth below under "--Conditions to
the Exchange Offer" shall have occurred and shall not have been waived
by us; and
. amend the terms of the exchange offer in any manner consistent with the
registration rights agreement.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of Outstanding Securities. If we amend the exchange offer in a manner
that we determine to constitute a material change, or if we waive a material
condition, we will promptly disclose the amendment or waiver in a manner
reasonably calculated to inform the holders of Outstanding Securities of the
amendment, and extend the offer if required by law.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the exchange offer, we shall have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
Conditions to the Exchange Offer
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any Exchange Securities for, any Outstanding
Securities, and we may terminate the exchange offer as provided in this
prospectus before accepting any Outstanding Securities for exchange if in our
reasonable judgment:
23
. the Exchange Securities to be received will not be tradeable by the
holder, without restriction under the Securities Act, the Securities
Exchange Act of 1934 and the blue sky or securities laws of
substantially all of the states of the United States;
. the exchange offer, or the making of any exchange by a holder of
Outstanding Securities, would violate applicable law or any applicable
interpretation of the staff of the SEC; or
. any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in our judgment, would reasonably be expected to impair our
ability to proceed with the exchange offer.
These conditions are for our sole benefit, and we may assert them regardless
of the circumstances that may give rise to them or waive them, in whole or in
part, at any or at various times. A failure on our part to exercise any of the
foregoing rights will not constitute a waiver of such right.
Procedures for Tendering
Your tender to us of Outstanding Securities under one of the procedures set
forth below will constitute an agreement between you and Northrop Systems,
Northrop Grumman and Litton in accordance with the terms of this prospectus and
the letter of transmittal.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, and acceptance and withdrawal of
tendered Outstanding Securities. Our determination will be final and binding on
all parties. We reserve the absolute right to reject any Outstanding Securities
not properly tendered or any Outstanding Securities our acceptance of which
would, in the opinion of our counsel, be unlawful. We also reserve the right to
waive any defects, irregularities or conditions of tender as to any Outstanding
Securities. Our interpretation of the terms and conditions of the exchange
offer, including the instructions in the letter of transmittal, will be final
and binding on all parties.
Neither the exchange agent, us, nor any other person will be under any duty
to give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. If any Outstanding
Securities received by the exchange agent are not validly tendered by you and
as to which the defects or irregularities have not been cured or waived, or if
Outstanding Securities are submitted in a principal amount greater than the
principal amount of Outstanding Securities being tendered by you, such
unaccepted or non-exchanged Outstanding Securities will be returned to you by
the exchange agent, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
We reserve the right in our sole discretion, to the extent permitted by the
indenture under which the Securities are issued and applicable law, to purchase
or make offers for any Outstanding Securities that remain outstanding
subsequent to the expiration date in the open market, in privately negotiated
transactions or otherwise. The terms of any purchases or offers made after the
expiration of the exchange offer may differ from the terms of the exchange
offer.
To tender your Outstanding Securities:
. you must complete, sign and date the letter of transmittal, or a
facsimile copy; have the signature on the letter of transmittal
guaranteed if the letter of transmittal so requires; and mail or deliver
the letter of transmittal or facsimile along with your Outstanding
Securities to The Chase Manhattan Bank at the address set forth below
prior to the expiration date; or
. The Chase Manhattan Bank must have received, prior to the expiration
date, a timely confirmation of book-entry transfer of your Outstanding
Securities into its account at DTC according to the procedure for book-
entry transfer described below, including a completed and signed letter
of transmittal or an agent's message in lieu thereof; or
. you must comply with the guaranteed delivery procedures described below.
24
The term "agent's message" means a message, transmitted by DTC to and
received by the exchange agent and forming a part of the confirmation of book
entry transfer, which states that DTC has received an express acknowledgment
from the tendering participant, stating that such participant has received and
agrees to be bound by the letter of transmittal and that we may enforce the
letter of transmittal against such participant.
If tendered Outstanding Securities are registered in the name of the signer
of the letter of transmittal and the Exchange Securities are to be issued, and
any Outstanding Securities not tendered are to be reissued, in the name of the
registered holder and delivered to the address of the registered holder
appearing on the register for the Outstanding Securities, the signature of such
signer need not be guaranteed.
In any other case, the tendered Outstanding Securities must be endorsed or
accompanied by written instruments of transfer in form satisfactory to us and
duly executed by the registered holder and the signature on the endorsement or
instrument of transfer must be guaranteed by an eligible institution: a member
firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc.; a commercial bank or trust company
having an office or correspondent in the United States; or an eligible
guarantor institution as defined by Rule 17Ad-15 under the Exchange Act.
The method of delivery of Outstanding Securities, letter of transmittal and
all other documents is at your election and risk. If delivery is made by mail,
it is recommended that registered mail, properly insured, with return receipt
requested, be used. In all cases, sufficient time should be allowed to assure
timely delivery. No letter of transmittal or Outstanding Securities should be
sent to us.
Your tender will be deemed to have been received as of the date when:
. your properly completed and duly signed letter of transmittal or agent's
message in lieu thereof, accompanied by your Outstanding Securities or a
confirmation of book-entry transfer of your Outstanding Securities into
The Chase Manhattan Bank's account at DTC, is received by The Chase
Manhattan Bank, or
. your notice of guaranteed delivery or letter, telegram or facsimile
transmission to similar effect from an eligible institution is received
by The Chase Manhattan Bank, provided that the exchange agent receives
your Outstanding Securities or confirmation of book-entry transfer, and
all other documents required by the letter of transmittal, within three
New York Stock Exchange trading days thereafter.
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Outstanding Securities, where such Outstanding Securities were
acquired by the broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Securities. See "Plan of
Distribution."
Book-Entry Transfer
The Chase Manhattan Bank will make a request to establish an account with
respect to the Outstanding Securities at DTC for purposes of the exchange offer
promptly after the date of this prospectus; and any financial institution
participating in DTC's system may make book-entry delivery of Outstanding
Securities by causing DTC to transfer the Outstanding Securities into The Chase
Manhattan Bank's account at DTC in accordance with DTC's procedures for
transfer. If you wish to tender your Outstanding Securities, The Chase
Manhattan Bank must have received confirmation of the book-entry transfer of
your Outstanding Securities into its account at DTC, together with a letter of
transmittal or an agent's message in lieu thereof, and all other documents
required by the letter of transmittal, on or prior to the expiration date;
otherwise you must comply with the guaranteed delivery procedures described
below.
Guaranteed Delivery Procedures for Securities
If you desire to accept the exchange offer and time will not permit a letter
of transmittal or Outstanding Securities to reach The Chase Manhattan Bank
before the expiration date or the procedure for book-entry
25
transfer cannot be completed on a timely basis, a tender may be effected if The
Chase Manhattan Bank has received at its office, on or prior to the expiration
date, a letter, telegram or facsimile transmission from an eligible institution
setting forth:
. the name and address of the tendering holder;
. the name(s) in which the Outstanding Securities are registered;
. the certificate number(s) of the Outstanding Securities to be tendered;
and
. a statement that the tender is being made and guaranteeing that, within
three New York Stock Exchange trading days after the date of execution
of the letter, telegram or facsimile transmission by the eligible
institution, the Outstanding Securities, in proper form for transfer, or
a confirmation of book-entry transfer of such Outstanding Securities
into the exchange agent's account at DTC, will be delivered by the
eligible institution, together with a properly completed and duly
executed letter of transmittal or an agent's message in lieu thereof, as
well as any other required documents.
Unless you tender your Outstanding Securities by one of the above-described
methods within the time period set forth above accompanied or preceded by a
properly completed letter of transmittal or an agent's message in lieu thereof,
as well as any other required documents, we may, at our option, reject the
tender. Copies of a notice of guaranteed delivery which may be used by eligible
institutions for the purposes described in this paragraph are available from
The Chase Manhattan Bank.
Issuances of Exchange Securities in connection with a notice of guaranteed
delivery or letter, telegram or facsimile transmission to similar effect by an
eligible institution will be made only against submission of a duly signed
letter of transmittal or an agent's message in lieu thereof, and any other
required documents, and deposit of the tendered Outstanding Securities.
Terms and Conditions of the Letter of Transmittal
Under the terms of the letter of transmittal, if you tender Outstanding
Securities:
. you agree to exchange, assign and transfer the Outstanding Securities to
us;
. you represent and warrant that you have full power and authority to
tender, exchange, assign and transfer the Outstanding Securities and to
acquire Exchange Securities issued in the exchange offer;
. you represent and warrant that when the Outstanding Securities are
accepted for exchange, Northrop Systems will acquire good and
unencumbered title to the tendered Outstanding Securities, free and
clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim;
. you represent and warrant that you will, upon request, execute and
deliver any additional documents deemed by us to be necessary or
desirable to complete the exchange, assignment and transfer of tendered
Outstanding Securities or transfer ownership of such Outstanding
Securities on the account books maintained by DTC; and
. you agree that all authority conferred by you pursuant to the letter of
transmittal will survive your death, bankruptcy or incapacity and each
of your obligations will be binding upon your heirs, legal
representatives, successors, assigns, executors and administrators.
Withdrawal of Tenders
Tenders of Outstanding Securities may be withdrawn at any time prior to 5:00
p.m., New York City time, on the expiration date.
To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be received by the exchange agent at the address set forth in
the letter of transmittal prior to 5:00 p.m., New York City time, on the
expiration date. Any notice of withdrawal must specify:
26
. the name of the holder originally listed in the letter of transmittal;
. the certificate numbers of the Outstanding Securities to be withdrawn,
and the principal amount of Outstanding Securities delivered for
exchange;
. a statement that the holder is withdrawing the election to have the
applicable Outstanding Securities exchanged; and
. the name of the registered holder of the Outstanding Securities.
The notice must be signed by the holder in the same manner as the original
signature on the letter of transmittal, including any required signature
guarantees, or be accompanied by evidence satisfactory to us that the person
withdrawing the tender has succeeded to the beneficial ownership of the
Outstanding Securities being withdrawn. The exchange agent will return the
properly withdrawn Outstanding Securities promptly following the receipt of
notice of withdrawal.
If Outstanding Securities have been tendered under the procedure for book-
entry transfer, any notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawn Outstanding Securities and
otherwise comply with the procedures of DTC.
Withdrawals of tenders of Outstanding Securities may not be rescinded.
Outstanding Securities properly withdrawn will not be deemed validly tendered
for purposes of the exchange offer, but may be retendered at any subsequent
time on or prior to the expiration date by following the procedures described
under "--Procedures for tendering."
We will determine the validity, form and eligibility (including time of
receipt) of withdrawal notices, in our sole discretion, which shall be final
and binding on all parties. Neither we, nor any of our affiliates or assignees,
nor the exchange agent or any other person shall be under any duty to give any
notification of any irregularities in any notice of withdrawal or incur any
liability for failure to give notification. Any Outstanding Securities which
have been tendered but which are withdrawn will be returned to the holder
promptly after withdrawal.
Exchange Agent
The Chase Manhattan Bank has been appointed as exchange agent for the
exchange of the Outstanding Securities. You should direct questions and
requests for assistance with regard to these Exchange Securities, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery to the exchange agent addressed as
follows:
THE CHASE MANHATTAN BANK
By Mail:
P.O. Box 2320
Dallas, TX 75221-2320
Attn: Events
By Hand Delivery or Overnight Courier:
2001 Bryan Street, 9th Floor
Dallas, TX 75201
Attn: Events
By Facsimile Transmission:
(214) 468-6494
For Information or Confirmation by Telephone:
(800) 275-2048
27
Delivery of a letter of transmittal to any address or facsimile number other
than one set forth above will not constitute a valid delivery.
Fees and Expenses
We will bear the expense of soliciting tenders. The solicitation is being
made principally by mail. However, solicitations also may be made by facsimile,
telephone or in person by our officers and regular employees of our affiliates.
We will not pay any additional compensation to any of these officers and
employees for soliciting tenders.
We have not retained any dealer-manager or other soliciting agent in
connection with the exchange offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the exchange offer. We,
however, will pay the exchange agent reasonable and customary fees for their
services and will reimburse them for their reasonable out-of-pocket expenses in
connection with the exchange. We will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this prospectus, the letter of
transmittal and related documents to the beneficial owners of the Outstanding
Securities and in handling or forwarding tenders for exchange.
We will pay all the cash expenses to be incurred by us in connection with
the exchange offer, including fees and expenses of the exchange agent and the
indenture trustee, accounting and legal fees. We will not, however, pay the
costs incurred by a holder in delivering its Outstanding Securities to the
exchange agent or any underwriting fees, commissions or transfer taxes.
Transfer Taxes
Holders who tender their Outstanding Securities for exchange will not be
required to pay any transfer taxes. However, holders who instruct us to
register Exchange Securities in the name of, or request that Outstanding
Securities not tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder will be required to pay any
applicable transfer tax.
Consequences Of Failure To Exchange
If you do not exchange your Outstanding Securities for Exchange Securities,
you will remain subject to the restrictions on transfer of the Outstanding
Securities:
. as set forth in the legend printed on the Outstanding Securities as a
consequence of the issuance of the Outstanding Securities pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws;
and
. otherwise set forth in the offering circular distributed in connection
with the private offering of the Outstanding Securities.
In general, you may not offer or sell the Outstanding Securities unless the
offer or sale is registered under the Securities Act or unless the offer or
sale is exempt from registration under the Securities Act and applicable state
securities laws. Completion of the exchange offer will satisfy most of our
obligations under the registration rights agreement, and we do not intend to
register resales of the Outstanding Securities under the Securities Act. Based
on interpretations of the SEC, the Exchange Securities may be freely offered
for resale, resold or otherwise transferred by their holders, subject to the
limitations discussed under "--Resale of Exchange Securities" and "Plan of
Distribution."
Accounting Treatment
The Exchange Securities will generally be recorded at the same carrying
value as the Outstanding Securities as reflected in our accounting records on
the date of the exchange because the exchange of the
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Outstanding Securities for the Exchange Securities is the completion of the
selling process contemplated in the issuance of the Outstanding Securities.
Accordingly, we will not recognize any gain or loss for accounting purposes. We
will amortize the expenses of the exchange offer and the unamortized expenses
related to the issuance of the Outstanding Securities over the term of the
Exchange Securities.
Use of Proceeds
We will not receive any cash proceeds from the issuance of the Exchange
Securities offered in this prospectus. In consideration for issuing the
Exchange Securities, we will receive the corresponding Outstanding Securities.
Outstanding Securities surrendered in exchange for Exchange Securities will be
retired and canceled and cannot be reissued. The issuance of the Exchange
Securities will not result in a change in our indebtedness.
Other Matters
Participation in the exchange offer is voluntary and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your decisions on what action to take.
No person has been authorized to give any information or to make any
representations in connection with the exchange offer other than those
contained in this prospectus. If any such information or representations are
given or made, they should not be relied upon as having been authorized by us.
Neither the delivery of this prospectus nor any exchange made hereunder shall,
under any circumstances, create any implication that there has been no change
in our affairs since the dates as of which information is given. The exchange
offer is not being made to, nor will tenders be accepted from or on behalf of,
holders of Outstanding Securities in any jurisdiction in which the making of
the exchange offer or its acceptance would not be in compliance with the laws
of such jurisdiction. However, we may, at our discretion, take such action as
we may deem necessary to make the exchange offer in any such jurisdiction and
extend the exchange offer to holders of Outstanding Securities in such
jurisdiction.
As a result of the making of the exchange offer, we will have fulfilled a
covenant contained in the registration rights agreement. Holders of the
Outstanding Securities to which the registration rights agreement apply who do
not tender their Outstanding Securities in the exchange offer will continue to
hold Outstanding Securities and will be entitled to all the rights and
limitations applicable under the indenture except for certain rights under the
registration rights agreement. All untendered Outstanding Securities will
continue to be subject to the restrictions on transfer set forth in the
indenture and the Outstanding Securities.
DESCRIPTION OF THE SECURITIES
Northrop Systems issued the Outstanding Securities, and will issue the
Exchange Securities, as separate series under an Indenture entered into as of
October 15, 1994 between Northrop Systems and The Chase Manhattan Bank as
trustee, as supplemented by a board resolution with respect to the Securities.
We refer to the indenture, as amended and supplemented, as the "Indenture."
Pursuant to guarantees which the guarantors have issued and delivered to the
indenture trustee, the guarantors have guaranteed the Outstanding Securities
and will guarantee the Exchange Securities at the time of issuance of the
Exchange Securities. This section summarizes the material provisions of the
Securities, the guarantees and the Indenture but does not contain a complete
description of them. The description of the Securities is qualified in its
entirety by the provisions of the Indenture and the guarantees. A copy of the
Indenture, the guarantees and certain other information regarding Northrop
Systems, Northrop Grumman and Litton is available as set forth under "Where You
Can Find More Information." Capitalized terms used and not otherwise defined in
the following discussion are defined below under "--Certain Definitions." In
this description, the words "Northrop Systems" refer only to Northrop Grumman
Systems Corporation and not to any of its subsidiaries.
29
General
The Exchange Securities:
. will be senior unsecured obligations of Northrop Systems;
. will be equal in right of payment to any existing and future senior
unsecured debt of Northrop Systems; and
. will be guaranteed by Northrop Grumman and Litton.
We refer to each of Northrop Grumman and Litton as a "guarantor" and
collectively as the "guarantors." Each guarantor will guarantee the Exchange
Securities and each such guarantee will be:
. a senior unsecured obligation of the guarantor; and
. equal in right of payment to any other existing and future senior
unsecured debt of the guarantor.
The aggregate principal amount of debt securities that Northrop Systems may
issue under the Indenture is not limited. Northrop Systems may issue debt
securities, including the Exchange Securities, under the Indenture from time to
time in one or more series. The Indenture does not limit Northrop Systems'
ability to incur indebtedness or require the maintenance of financial ratios or
specified levels of net worth or liquidity. However, the Indenture restricts
the ability of Northrop Systems and its Restricted Subsidiaries to enter into
certain transactions. See "--Certain Covenants." The Indenture does not contain
any provisions which would require Northrop Systems to repurchase or redeem or
otherwise modify the terms of any of the Securities upon a change of control.
Principal, Maturity and Interest
Northrop Systems will issue the Exchange Notes and Exchange Debentures as
separate series, in denominations of $1,000 and any integral multiple of
$1,000. The 7 1/8% Exchange Notes will mature on February 15, 2011, and the 7
3/4% Exchange Debentures will mature on February 15, 2031.
The 7 1/8% Exchange Notes and the 7 3/4% Exchange Debentures are being
offered in the principal amounts of $750,000,000, and $750,000,000,
respectively.
Interest on the Exchange Securities will be payable semiannually in arrears
on February 15 and August 15 commencing on August 15, 2001. Northrop Systems
will make each interest payment to the holders of record of the Exchange
Securities on the immediately preceding February 1 and August 1.
Interest on the Exchange Securities will accrue from February 27, 2001.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Holders of Outstanding Securities accepted for exchange will be
deemed to have waived the right to receive any payments in respect of interest
on the Outstanding Securities accrued from February 27, 2001 to the date of
issuance of the Exchange Securities and will receive interest for that period
pursuant to the Exchange Securities.
Additional Securities
Northrop Systems may, without the consent of the holders of the Securities,
create and issue additional securities ranking equally with the Securities in
all respects, including having the same CUSIP number, so that such additional
securities, as applicable, shall be consolidated and form a single series of
securities with the Securities offered hereby and shall have the same terms as
to status, redemption or otherwise as the securities of that series. No
additional securities may be issued if an Event of Default has occurred and is
continuing with respect to the Securities.
30
Guarantees
Northrop Grumman and Litton fully and unconditionally guaranteed, jointly
and severally, all of the obligations of Northrop Systems under the Outstanding
Securities and will guarantee, in the same manner, all of the obligations of
Northrop Systems under the Exchange Securities, including the punctual payment
of the principal of, any premium and interest (including additional interest)
on the Exchange Securities. In addition, if a direct or indirect significant
subsidiary, as that term is defined for purposes of Regulation S-X as adopted
by the SEC, of Northrop Grumman enters into a guarantee of the New Credit
Facilities (or any replacement facility), then such subsidiary shall execute a
guarantee of the Exchange Securities substantially similar to the guarantee of
Northrop Grumman provided that such guarantee is not otherwise prohibited by
the terms of the Indenture. The obligation of each guarantor under its
guarantee will be limited as necessary to prevent that guarantee from
constituting a fraudulent conveyance under applicable law.
Without the consent of the holders of the Securities, a guarantor may not
consolidate with or merge into another entity, or convey, transfer or lease its
properties and assets substantially as an entirety to any entity unless:
. any successor entity is a corporation, partnership or trust organized and
validly existing under the laws of the United States or any state
thereof;
. the successor entity assumes the guarantor's obligations under the
guarantee;
. after giving effect to the transaction, no Event of Default, and no event
which, after notice or lapse of time or both, would become an Event of
Default, has occurred and is continuing; and
. the guarantor delivers to the indenture trustee certificates and opinions
to the effect that the transaction complies with the Indenture.
Upon any such consolidation or merger or conveyance, transfer or lease of
the properties and assets of a guarantor substantially as an entirety, the
successor entity will succeed to, and be substituted for, such guarantor and
the guarantee, and the guarantor, except in the case of a lease, will be
relieved of all obligations and covenants under the guarantee.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfers laws, each of the guarantees could be voided or claims in
respect of a guarantee could be subordinated to all other debts of the
guarantor if, among other things, the guarantor, at the time it incurred the
indebtedness evidenced by its guarantee:
. received less than reasonably equivalent value or fair consideration for
the incurrence of its guarantee and was insolvent or rendered insolvent
by reason of such incurrence;
. was engaged in a business or transaction for which such guarantor's
remaining assets constituted unreasonably small capital; or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by a guarantor pursuant to its guarantee could be
voided and required to be returned to the guarantor or to a fund for the
benefit of the creditors of the guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, the guarantor would be
considered insolvent if:
. the sum of its debts, including contingent liabilities, were greater
than the fair saleable value of all of its assets;
31
. if the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature; or
. it could not pay its debts as they become due.
Optional Redemption
Northrop Systems may redeem all or part of the Securities at any time at its
option at a redemption price equal to the greater of (1) the principal amount
of the Securities being redeemed plus accrued and unpaid interest to the
redemption date or (2) the Make-Whole Amount for the Securities being redeemed.
As used in this prospectus:
"Make Whole Amount" means the sum, as determined by a Quotation Agent, of
the present values of the principal amount of the Securities to be redeemed,
together with scheduled payments of interest (exclusive of interest to the
redemption date) from the redemption date to the maturity date of the
Securities being redeemed, in each case discounted to the redemption date on a
semi-annual basis, assuming a 360-day year consisting of twelve 30-day months,
at the Adjusted Treasury Rate, plus accrued and unpaid interest on the
principal amount of the Securities being redeemed to the redemption date.
"Adjusted Treasury Rate" means, with respect to any redemption date, (i) the
yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical release
designated "H.15 (519)" or any successor publication which is published weekly
by the Board of Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities adjusted to
constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the remaining term of the Securities of the
series being redeemed, yields for the two published maturities most closely
corresponding to the Comparable Treasury Issue shall be determined and the
Adjusted Treasury Rate shall be interpolated or extrapolated from such yields
on a straight line basis, rounding to the nearest month) or (ii) if such
release (or any successor release) is not published during the week preceding
the calculation date or does not contain such yields, the rate per year equal
to the semi-annual equivalent yield to maturity of the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such redemption date, in each case calculated on
the third business day preceding the redemption date, plus .25% for the
Exchange Notes due 2011 and .30% for the Exchange Debentures due 2031.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the
remaining term from the redemption date to the maturity date of the Securities
being redeemed that would be utilized, at the time of selection and in
accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
Securities.
"Comparable Treasury Price" means, with respect to any redemption date, if
clause (ii) of the Adjusted Treasury Rate is applicable, the average of three,
or such lesser number as is obtained by the indenture trustee, Reference
Treasury Dealer Quotations for such redemption date.
"Quotation Agent" means the Reference Treasury Dealer selected by the
indenture trustee after consultation with Northrop Systems.
"Reference Treasury Dealer" means any of Chase Securities, Inc. and Credit
Suisse First Boston Corporation, and their respective successors and assigns,
and one other nationally recognized investment banking firm selected by
Northrop Systems that is a primary U.S. Government securities dealer.
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"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
indenture trustee, of the bid and asked prices for the Comparable Treasury
Issue, expressed in each case as a percentage of its principal amount, quoted
in writing to the indenture trustee by such Reference Treasury Dealer at 5:00
p.m., New York City time, on the third business day preceding such redemption
date.
Selection and Notice of Redemption
If Northrop Systems is redeeming less than all the Securities in a series at
any time, the indenture trustee will select Securities to be redeemed using a
method it considers fair and appropriate.
Northrop Systems will redeem Securities in increments of $1,000. Northrop
Systems will cause notices of redemption to be mailed by first class mail at
least 30 but not more than 60 days before the redemption date of each holder of
Securities to be redeemed at its registered address. However, Northrop Systems
will not know the exact redemption price until three business days before the
redemption date. Therefore, the notice of redemption will only describe how the
redemption price will be calculated.
If any Security is to be redeemed in part only, the notice of redemption
that relates to that Security will state the portion of the principal amount
thereof to be redeemed. We will issue a Security in principal amount equal to
the unredeemed portion of the original Security in the name of the holder
thereof upon cancellation of the original Security. Securities called for
redemption will become due on the date fixed for redemption. On and after the
redemption date, interest will cease to accrue on Securities or portions of
them called for redemption.
Consolidation, Merger and Sale of Assets
Northrop Systems, without the consent of the holders of any of the
Securities under the Indenture, may consolidate with or merge into, or convey,
transfer or lease its properties and assets substantially as an entirety to any
entity, and may permit any entity to merge into, or convey, transfer or lease
substantially all of its properties and assets to Northrop Systems, on the
condition that:
. any successor entity must be a corporation, partnership or trust
organized and validly existing under the laws of the United States or
any state thereof;
. the successor entity must assume Northrop Systems' obligations on the
Securities and under the Indenture;
. after giving effect to the transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an
Event of Default, has occurred and is continuing; and
. Northrop Systems delivers to the indenture trustee certificates and
opinions to the effect that the transaction complies with the Indenture.
Upon any such consolidation or merger into any other entity or any
conveyance, transfer or lease of the properties and assets of Northrop Systems
substantially as an entirety, the successor entity will succeed to, and be
substituted for, Northrop Systems under the Indenture, and Northrop Systems,
except in the case of a lease, will be relieved of all obligations and
covenants under the Indenture and the Securities.
Certain Covenants
Limitations on Liens. Northrop Systems will not create, incur, assume or
guarantee, and will not permit any Restricted Subsidiary to create, incur,
assume or guarantee, any debt secured by a mortgage, security interest, pledge,
charge or similar encumbrance upon a Principal Property of Northrop Systems or
any Restricted Subsidiary or upon any shares of stock or debt of any Restricted
Subsidiary without also securing the
33
Securities and other outstanding debt securities issued pursuant to the
Indenture equally and ratably with the new debt. The foregoing restriction,
however, does not apply to:
. encumbrances on property, shares of stock or indebtedness of any
corporation existing at the time the corporation becomes a Restricted
Subsidiary;
. encumbrances on property existing at the time Northrop Systems or a
Restricted Subsidiary acquired the property or encumbrances to secure
all or part of the purchase price of the acquired property;
. encumbrances to secure any debt incurred prior to, at the time of, or
within 180 days after, the acquisition, completion of construction
(including improvements on existing property) or commencement of full
operation of the property to finance all or part of the purchase price
of the property, or construction of improvements on the property;
. encumbrances to secure debt of a Restricted Subsidiary owed to Northrop
Systems or another Restricted Subsidiary;
. encumbrances existing on October 15, 1994;
. encumbrances on property of a corporation existing at the time that
corporation is merged into or consolidated with Northrop Systems or a
Restricted Subsidiary or at the time of a sale, lease, or other
disposition of properties of a corporation as an entirety or
substantially as an entirety to Northrop Systems or a Restricted
Subsidiary;
. encumbrances on property of Northrop Systems or a Restricted Subsidiary
in favor of the United States of America or any State thereof, or any
department, agency, instrumentality or political subdivision thereof, to
secure any payments pursuant to any contract or statute or to secure any
debt incurred or guaranteed for the purpose of financing all or part of
the purchase price or the cost of construction of the property subject
to such encumbrances (such as encumbrances incurred in connection with
pollution control bonds, industrial revenue bonds or similar
financings); or
. extensions, renewals or replacements of any encumbrances referred to in
the foregoing bullet points.
Notwithstanding the restrictions outlined in the preceding paragraph, Northrop
Systems or any Restricted Subsidiary may create, incur, assume or guarantee any
debt secured by an encumbrance without equally and ratably securing the
Securities and the other outstanding debt securities issued pursuant to the
Indenture if, after giving effect to the new debt, the aggregate amount of all
debt (other than the Securities and the other outstanding debt securities
issued under the Indenture) secured by encumbrances (not including encumbrances
permitted under the bullet points above) does not exceed the greater of
$300,000,000 or 10% of Consolidated Net Tangible Assets.
Sale and Leaseback Arrangements. Northrop Systems will not, and will not
permit any Restricted Subsidiary to, enter into any arrangement with a person
that provides for the leasing to Northrop Systems or any Restricted Subsidiary
of certain property (other than any such transaction involving a lease for a
term of not more than three years or an intercompany transaction) which has
been or will be sold or transferred by Northrop Systems or the Restricted
Subsidiary to such person, unless either:
. Northrop Systems or the Restricted Subsidiary would be entitled to
create, incur, assume or guarantee debt secured by an encumbrance on the
Principal Property at least equal in amount to the Attributable Debt
with respect to such arrangement, without equally and ratably securing
the Securities and the other outstanding debt securities issued under
the Indenture if the Attributable Debt is deemed to be debt subject to
the provisions of the second paragraph under "--Certain Covenants--
Limitations on Liens" above; or
. Northrop Systems applies an amount equal to the greater of the net
proceeds of the sale or the Attributable Debt with respect to the
arrangement to the retirement of debt of Northrop Systems or any
34
Restricted Subsidiary that matures at or is extinguishable or renewable at
the option of the obligor to a date more than twelve months after the
creation of the debt.
Funded Debt of Restricted Subsidiaries. No Restricted Subsidiary may issue,
assume or guarantee any Funded Debt unless the aggregate amount of all Funded
Debt of all Restricted Subsidiaries (excluding Funded Debt permitted by the
clauses below) does not exceed 10% of Consolidated Net Tangible Assets. This
limitation will not apply to:
. any Funded Debt owed to Northrop Systems or a Restricted Subsidiary;
. Funded Debt existing on October 15, 1994, and extensions, renewals or
replacements thereof;
. Funded Debt secured by an encumbrance permitted as described in the
bullet points listed under "--Certain Covenants--Limitations on Liens"
above;
. any guarantee by a Restricted Subsidiary of Funded Debt of Northrop
Systems incurred in connection with the acquisition of the Restricted
Subsidiary; and
. Funded Debt of a corporation outstanding at the time the corporation
first becomes a Restricted Subsidiary.
Events of Default
Each of the following events constitute an "Event of Default" under the
Indenture with respect to each series of Securities:
. Northrop Systems fails to pay the principal of or any premium on any
Security of that series when due, whether at maturity or otherwise;
. Northrop Systems fails to pay any interest on any Security of that
series when due, and the failure continues for 30 days;
. Northrop Systems fails to perform any other of its covenants or
agreements in the Indenture or in the Security of that series (other
than a covenant or agreement included in the Indenture solely for the
benefit of a series other than that series), and the failure continues
for 90 days after written notice has been given by the indenture
trustee, or by the holders of at least 10% in principal amount of the
outstanding Securities of that series, as provided in the Indenture;
. certain events in bankruptcy, insolvency or reorganization; and
. except as permitted by the Indenture or the guarantee, any guarantee
shall be held in any judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect or any
guarantor, or any entity or person acting on behalf of any guarantor,
shall deny or disaffirm its obligations under such guarantor's
guarantee.
If an Event of Default (other than an Event of Default described in the
fourth bullet point above) with respect to the Securities of any series at the
time outstanding occurs and is continuing, either the indenture trustee or the
holders of at least 25% in aggregate principal amount of the outstanding
Securities of that series may declare the principal amount of the Securities
of that series due and payable immediately. If an Event of Default described
in the fourth bullet point above occurs, the principal amount of all the
Securities will automatically, and without any action by the indenture trustee
or any holder, become immediately due and payable. At any time after the
holders of the Securities of a series declare that the Securities of that
series are due and immediately payable, a majority in principal amount of the
outstanding holders of Securities of that series may, under certain
circumstances, rescind and cancel the declaration and its consequences:
. before the indenture trustee has obtained a judgment or decree for
money; and
. if all Events of Default, other than the non-payment of accelerated
principal or other specified amounts, have been waived or cured as
provided in the Indenture.
35
For information as to waiver of defaults, see "--Modification and Waiver."
Subject to the provisions of the Indenture relating to the duties of the
indenture trustee in case an Event of Default occurs and is continuing, the
indenture trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any of the holders,
unless the holders have offered to the indenture trustee indemnity satisfactory
to it. Subject to the provisions for the indemnification of the indenture
trustee, the holders of a majority in aggregate principal amount of the
outstanding Securities of any series will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
indenture trustee or exercising any trust or power conferred on the indenture
trustee with respect to the Securities of that series.
No holder of a Security of any series will have any right to institute any
proceeding with respect to the Indenture, or for the appointment of a receiver
or a trustee, or for any other remedy under the Indenture, unless:
. the holder has previously given to the indenture trustee written notice
of a continuing Event of Default with respect to the Securities of that
series;
. the holders of at least 25% in aggregate principal amount of the
outstanding Securities of that series have requested in writing that the
indenture trustee institute a proceeding, and the holder or holders have
offered indemnity satisfactory to it to the indenture trustee to
institute the proceeding; and
. the indenture trustee has failed to institute the proceeding, and has
not received from the holders of a majority in aggregate principal
amount of the outstanding Securities of that series a direction
inconsistent with the request, within 60 days after such notice, request
and offer.
These limitations do not apply to a suit instituted by a holder of a
Security for the enforcement of payment of the principal of or any premium or
interest on a Security on or after the applicable due date specified in the
Security.
Northrop Systems is required to furnish to the indenture trustee annually a
written statement by certain of its officers as to whether or not Northrop
Systems is, to the knowledge of the officers, in default in the performance or
observance of any of the terms, provisions and conditions of the Indenture and,
if so, specifying all the known defaults.
Modification and Waiver
Northrop Systems and the indenture trustee may modify or amend the Indenture
with the consent of the holders of a majority in aggregate principal amount of
each series of the outstanding Securities issued under the Indenture and
affected by such modification or amendment.
Without the consent of the holders of the Securities, Northrop Systems and
the indenture trustee may modify or amend the Indenture for any of the
following purposes:
. to evidence the succession of another person as obligor under the
Indenture;
. to add to covenants of Northrop Systems or to surrender any right or
power conferred on Northrop Systems under the Indenture;
. to add Events of Default;
. to secure the debt securities issued under the Indenture;
. to evidence or provide for the acceptance or appointment by a successor
indenture trustee or facilitate the administration of the trusts under
the Indenture by more than one indenture trustee;
. to cure any ambiguity, defect or inconsistency in the Indenture (so
long as the cure or modification does not adversely affect the interest
of the holders of the Securities in any material respect);
36
. to facilitate the issuance of debt securities under the Indenture in
bearer or uncertificated form;
. to establish the terms of new series of debt securities or to modify
provisions applicable to a series of debt securities not then
outstanding; or
. to add provisions with respect to conversion.
The consent of each holder of an outstanding Security affected thereby is
required if an amendment or modification would:
. change the stated maturity of the principal of, or any installment of
principal of or interest on, any Security;
. reduce the principal amount of, or any premium or interest on, any
Security;
. reduce the amount of principal of any Security payable upon
acceleration of the maturity thereof;
. change the place or currency of payment of principal of, or any premium
or interest on, any Security;
. impair the right to institute suit for the enforcement of any payment
on or with respect to any Security;
. reduce the percentage in principal amount of outstanding Securities of
any series, the consent of whose holders is required for modification
or amendment of the Indenture;
. modify the obligations of a guarantor under its guarantee in a manner
adverse to the interests of the holders of the Securities;
. reduce the percentage in principal amount of outstanding Securities of
any series necessary for waiver of compliance with certain provisions
of the Indenture or for waiver of certain defaults; or
. modify such provisions with respect to modification and waiver.
The holders of a majority in principal amount of the outstanding Securities
of any series may waive compliance by Northrop Systems with certain restrictive
provisions of the Indenture and, if applicable, the Securities. The holders of
a majority in principal amount of the outstanding Securities of any series may
waive any past default under the Indenture, except a default in the payment of
principal, premium or interest and certain covenants and provisions of the
Indenture and, if applicable, such Securities which may not be amended without
the consent of the holder of each outstanding Security of such series affected.
Outstanding Securities
The Indenture provides that in determining whether the holders of the
requisite principal amount of the outstanding Securities have given or taken
any direction, notice, consent, waiver or other action under the Indenture and,
if applicable, the Securities, as of any date, Securities for whose payment or
redemption money has been deposited or set aside in trust for the holders and
those that have been fully defeased, will not be deemed to be outstanding. In
addition, Securities owned by Northrop Systems or any of its affiliates will
not be deemed to be outstanding.
Defeasance and Covenant Defeasance
Upon deposit with the indenture trustee (or other qualifying trustee), in
trust for such purpose, money or U.S. Government obligations, or both, which
will provide money in an amount sufficient to pay the principal of and interest
on the Securities, Northrop Systems may elect either:
. to defease and be discharged from any and all its obligations with
respect to the Securities and the Indenture and have the obligations of
each guarantor discharged with respect to its guarantee, except for the
rights of holders of Securities to receive payments on the Securities
solely from the trust fund established pursuant to the Indenture and
the obligations to exchange or register the transfer of the
37
Securities, to replace temporary or mutilated, destroyed, lost or
stolen Securities, to maintain an office or agency with respect to the
Securities and to hold moneys for payment in trust ("defeasance"); or
. to be released from its obligations with respect to the Securities
concerning restrictive covenants which are subject to covenant
defeasance, and the occurrence of certain Events of Default with
respect to such restrictive covenants shall no longer be an Event of
Default with respect to Northrop Systems or any guarantor ("covenant
defeasance").
As a condition to defeasance or covenant defeasance, Northrop Systems must
deliver to the indenture trustee an opinion of counsel (as specified in the
Indenture) stating that holders of the Securities will not recognize gain or
loss for federal income tax purposes as a result of the defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if Northrop
Systems did not elect the defeasance or covenant defeasance. Northrop Systems
may exercise its defeasance option with respect to the Securities
notwithstanding its prior exercise of its covenant defeasance option. If
Northrop Systems exercises its defeasance option, payment of the Securities may
not be accelerated by reference to the covenants noted under the second bullet
point above. If Northrop Systems does not comply with its remaining obligations
after exercising its covenant defeasance option and the Securities are declared
due and payable because of the occurrence of any Event of Default, the amount
of money and U.S. Government obligations on deposit in the defeasance trust may
be insufficient to pay amounts due on the Securities at the time of the
acceleration. However, Northrop Systems and the guarantors will remain liable
for such payments.
Certain Definitions
"Attributable Debt" when used in connection with a sale and leaseback
transaction referred to above shall mean, at the time of determination, the
lesser of (a) he fair value of the property (as determined by the Board of
Directors of Northrop Systems) or (b) he present value (discounted at the rate
implicit in the terms of the relevant lease) of the obligation of the lessee
for net rental payments during the remaining term of the lease (including any
period for which such lease has been extended).
"Consolidated Net Tangible Assets" means, as of any particular time, the
aggregate amount of assets (less applicable reserves and other properly
deductible items) minus (a) all current liabilities except for (i) notes and
loans payable, (ii) current maturities of long-term debt, (iii) current
maturities of obligations under capital leases and (iv) deferred income taxes,
and (b) all goodwill, tradenames, trademarks, patents, unamortized debt
discount and expenses (to the extent included in said aggregate amount of
assets) and other like intangibles, all as set forth on the most recent
quarterly or annual consolidated balance sheet of Northrop Systems and its
consolidated subsidiaries and computed in accordance with generally accepted
accounting principles.
"Funded Debt" means any debt or guarantee of debt, whether or not secured,
maturing more than one year from the date of its creation. Funded Debt includes
any debt or guarantee of debt renewable or extendable at the option of the
obligor to a date more than one year from the date of original issuance of the
debt or guarantee, but does not include any portion of such debt or guarantee
which is included in current liabilities.
"Principal Property" means any manufacturing plant or manufacturing facility
which is (i) owned by Northrop Systems or any Restricted Subsidiary and (ii)
located within the continental United States of America, except any plant
which, in the opinion of the Board of Directors, is not of material importance
to the total business conducted by Northrop Systems and the Restricted
Subsidiaries taken as a whole.
"Restricted Subsidiary" means any subsidiary of Northrop Systems except any
subsidiary substantially all the assets of which are located, or substantially
all of the business of which is carried on, outside of the United States of
America, or any subsidiary substantially all of the assets of which consists of
stock or other securities of such a subsidiary.
38
Book-Entry Issuance; Depository Procedures
Northrop Systems will issue the Exchange Securities as "global securities."
The Depository Trust Company ("DTC") will act as the depositary for the
global securities. Northrop Systems will issue global securities as fully
registered securities registered in the name of DTC's nominee, Cede & Co.
Northrop Systems will issue one or more fully registered global securities for
Exchange Securities and will deposit the global securities with DTC.
The following description of the operations and procedures of DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them. Northrop Systems takes no responsibility for these
operations and procedures and urges investors to contact the system or their
participants directly to discuss these matters.
DTC has advised Northrop Systems that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic book-
entry changes in accounts of its Participants. The Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly (collectively, the "Indirect Participants"). Persons who
are not Participants may beneficially own securities held by or on behalf of
DTC only through the Participants or the Indirect Participants. The ownership
interests in, and transfers of ownership interests in, each security held by or
on behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised Northrop Systems that, pursuant to procedures
established by it:
(1) upon deposit of the global securities, DTC will credit the accounts
of Participants with portions of the principal amount of the global
securities; and
(2) ownership of these interests in the global securities will be shown
on, and the transfer of ownership of these interests will be effected
only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants
(with respect to other owners of beneficial interest in the global
securities).
Investors in the global securities who are Participants in DTC's system may
hold their interests therein directly through DTC. Investors in the global
securities who are not Participants may hold their interests therein indirectly
through organizations which are Participants in such system. Euroclear System
("Euroclear") and Clearstream Bank, S.A. ("Clearstream") are indirect
participants in DTC. Investors that are originally required to hold Outstanding
Securities consisting of Regulation S Global Securities for a restricted period
only through Euroclear or Clearstream may now also hold interests in the Global
Securities through Participants in the DTC system other than Euroclear and
Clearstream. All interests in a global security, including those held through
Euroclear or Clearstream, may be subject to the procedures and requirements of
DTC. Those interests held through Euroclear or Clearstream may also be subject
to the procedures and requirements of such systems. The laws of some states
require that certain Persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a global security to such Persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a Person having beneficial interests
in a global security to pledge such interests to Persons that do not
participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of interest in the global securities will
not have Exchange Securities registered in their names, will not receive
physical delivery of Exchange Securities in certificated form and will not be
considered the registered owners or "Holders" thereof under the Indenture for
any purpose.
39
Payments in respect of the principal of, and interest and premium and
additional interest, if any, on a global security registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, Northrop Systems and the
indenture trustee will treat the Persons in whose names the Securities,
including the global securities, are registered as the owners of the Securities
for the purpose of receiving payments and for all other purposes. Consequently,
neither Northrop Systems, the indenture trustee nor any agent of Northrop
Systems or the indenture trustee has or will have any responsibility or
liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the global securities or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the global securities; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised Northrop Systems that its current practice, upon receipt of
any payment in respect of securities such as the Securities (including
principal and interest), is to credit the accounts of the relevant Participants
with the payment on the payment date unless DTC has reason to believe it will
not receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Securities will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the indenture trustee
or Northrop Systems. Northrop Systems understands that under existing industry
practice, if Northrop Systems requests any action of Holders of Securities or a
Holder that is an owner of a beneficial interest in a global security desires
to take any action, that DTC, as the Holder of the global security, is entitled
to take, then DTC would authorize the Participants to take the action and the
Participants would authorize Holders owning through Participants to take the
action or would otherwise act upon the instruction of the Holders. Neither
Northrop Systems nor the indenture trustee will be liable for any delay by DTC
or any of its Participants in identifying the beneficial owners of the
Securities, and Northrop Systems and the indenture trustee may conclusively
rely on and will be fully protected in relying on instructions from DTC or its
nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Clearstream will be effected in accordance with
their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
global security in DTC, and making or receiving payment in accordance with
normal procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositories for Euroclear or Clearstream.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants and by direct and
indirect participants to beneficial owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
40
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the global securities among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform such procedures, and may discontinue such
procedures at any time. Neither Northrop Grumman nor the indenture trustee nor
any of their respective agents will have any responsibility for the performance
by DTC, Euroclear or Clearstream or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
DTC may discontinue providing its services as securities depositary with
respect to the global securities at any time by giving reasonable notice to
Northrop Systems or the indenture trustee. Under such circumstances, in the
event that a successor securities depositary is not obtained, certificates for
the securities are required to be printed and delivered.
Northrop Systems may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
certificates for the securities will be printed and delivered.
Certificated Securities
Subject to certain conditions, the Securities represented by the Global
Securities are exchangeable for certificated Securities of the same series in
definitive form of like tenor in denominations of $1,000 and integral multiples
thereof if:
. DTC notifies Northrop Systems that it is unwilling or unable to
continue as depositary for the global securities or the depositary
ceases to be a clearing agency registered under the Exchange Act and,
in either case, Northrop Systems is unable to locate a qualified
successor within 90 days;
. Northrop Systems in its discretion at any time determines not to have
all or any of the Securities represented by a global security; or
. a default entitling the holders of the Securities to accelerate the
maturity thereof has occurred and is continuing.
Any Security that is exchangeable as above is exchangeable for certificated
Securities of the same series as issuable in authorized denominations and
registered in such names as DTC shall direct. Subject to the foregoing, the
Global Securities are not exchangeable, except for Global Securities of the
same aggregate denomination to be registered in the name of the depositary or
its nominee.
Same Day Settlement and Payment
Northrop Systems will make payments in respect of the Securities represented
by the Global Securities (including principal, premium, if any, interest,
additional interest, if any) by wire transfer of immediately available funds to
the accounts specified by the Global Security holder. Northrop Systems will
make all payments of principal, interest and premium and additional interest,
if any, with respect to certificated Securities by wire transfer of immediately
available funds to the accounts specified by the holders of the certificated
Securities or, if no such account is specified, by mailing a check to each such
holder's registered address. The Securities represented by the Global
Securities are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Securities will, therefore, be required by DTC to be settled in immediately
available funds. Northrop Systems expects that secondary trading in any
certificated Securities will also be settled in immediately available funds.
Governing Law
The Indenture, the Exchange Securities and the guarantees will be governed
by, and construed in accordance with, the law of the State of New York, without
regard to principles of conflicts of laws.
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Information Regarding the Indenture Trustee
The Chase Manhattan Bank is the indenture trustee under the Indenture. The
indenture trustee or its affiliates perform certain commercial banking services
for Northrop Systems in the ordinary course of business. The indenture trustee
is also a co-agent and lender with respect to Northrop Systems' existing credit
facilities. The indenture trustee may be deemed to have a conflicting interest
and may be required to resign as indenture trustee if at the time of a default
under the Indenture it is a creditor of Northrop Systems. Notices to the
indenture trustee should be directed to Institutional Trust Services, 450 West
33rd Street, 15th Floor, New York, NY 10001.
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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
consequences of the purchase, ownership and disposition of the Securities as of
the date hereof. Except where noted, it deals only with Securities held as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended, does not deal with special situations, such as those of
dealers in securities or currencies, financial institutions, tax-exempt
entities, life insurance companies, persons holding Securities as a part of a
hedging or conversion transaction or a straddle or persons whose functional
currency is not the United States dollar. In addition, this discussion does not
address the tax consequences to persons who purchase Securities other than
pursuant to their initial issuance and distribution. Furthermore, the
discussion below is based upon the provisions of the Code, final and proposed
Treasury regulations under the Code, and administrative rulings and judicial
decisions as of the date of this prospectus. Such authorities may be repealed,
revoked or modified at any time, with either forward-looking or retroactive
effect, which could result in United States federal income tax consequences
being different from those discussed below.
PROSPECTIVE PURCHASERS OF SECURITIES ARE ADVISED TO CONSULT THEIR TAX ADVISORS
AS TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF SECURITIES IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
As used in this prospectus, a "United States Holder" means a beneficial
owner of a Security that is a citizen or resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, an estate, the income of
which is subject to United States federal income taxation regardless of its
source, or a trust, the administration of which is subject to the primary
supervision of a court within the United States and for which one or more
United States persons have the authority to control all substantial decisions.
As used herein, the term "Non-United States Holder" means a beneficial owner of
a Security that is not a United States Holder.
United States Holders
Payments of Interest
Stated interest on a Security will generally be taxable to a United States
Holder as ordinary income at the time it is paid or accrued in accordance with
the United States Holder's method of accounting for tax purposes.
Exchange Offer
The exchange of an Outstanding Security for an Exchange Security pursuant to
the exchange offer will not constitute a "significant modification" of the
Outstanding Security for the United States federal income tax purposes and,
accordingly, the Exchange Security received will be treated as a continuation
of the Outstanding Security in the hands of a holder. As a result, (i) a United
States Holder will not recognize taxable gain or loss as a result of exchanging
Outstanding Securities for Exchange Securities pursuant to the Registered
Exchange Offer, (ii) the holding period of the Exchange Securities will include
the holding period of the Outstanding Securities exchanged therefor; and (iii)
the adjusted tax basis of the Exchange Securities will be the same as the
adjusted tax basis of the Outstanding Securities exchanged therefor immediately
before such exchange.
Sale, Exchange and Redemption of the Securities
Upon the sale, exchange or redemption of a Security, a United States Holder
will recognize gain or loss equal to the difference between (1) the amount
realized upon the sale, exchange or redemption, other than amounts attributable
to accrued but unpaid interest, and (2) such holder's adjusted tax basis in the
Security. Any amount attributable to accrued but unpaid interest on the Note
will be treated in the same manner as
43
payments of interest made to such holder, as described above. A United States
Holder's adjusted tax basis will be, in general, its initial purchase price for
the Security, net of accrued interest. Such gain or loss will be capital gain
or loss and will be long-term capital gain or loss if at the time of sale,
exchange or redemption, the Security has been held for more than one year.
Under current law, the deductibility of capital losses is subject to
limitations. The net capital gains of individuals are taxed at lower rates than
ordinary income.
Non-United States Holders
The following is a general discussion of certain United States federal
income and estate tax consequences of the acquisition, ownership and
disposition of Securities by a Non-United States Holder. This discussion is
based upon the United States federal tax law now in effect, which is subject to
change, possibly retroactively. The tax treatment of the holders of each series
of Securities may vary depending upon their particular situations. Certain
holders (including insurance companies, tax exempt organizations, financial
institutions and broker-dealers) may be subject to special rules not discussed
below. Prospective investors are urged to consult their tax advisors regarding
the United States federal tax consequences of acquiring, holding and disposing
of Securities, as well any tax consequences that may arise under the laws of
any foreign, state, local or other taxing jurisdiction.
Payments of Interest
Subject to the discussion below concerning backup withholding, no
withholding of United States federal income tax will be required with respect
to the payment by Northrop Systems or any paying agent of principal or interest
on a Security held by a Non-United States Holder, provided that the beneficial
owner (1) does not actually or constructively own 10% or more of the total
combined voting power of all classes of Northrop Systems' stock entitled to
vote within the meaning of Section 871(h)(3) of the Code and the regulations
thereunder; (2) is not a controlled foreign corporation related, directly or
indirectly, to Northrop Systems through stock ownership; (3) is not a bank
whose receipt of interest on a Security is described in Section 881(c)(3)(A) of
the Code; and (4) satisfies the statement requirement, described generally
below, set forth in Section 871(h) and Section 881(c) of the Code and the
regulations thereunder.
To satisfy the requirement referred to in clause (4) above, the beneficial
owner of a Security, or a financial institution holding the Security on behalf
of such owner, must provide, in accordance with specified procedures, Northrop
Systems or Northrop Systems' paying agent with a statement to the effect that
the beneficial owner is not a U.S. person. These requirements will be met if
(1) the beneficial owner provides his name and address, and certifies, under
penalties of perjury, that he is not a U.S. person, which certification may be
made on an IRS Form W-8BEN; or (2) a financial institution holding the Security
on behalf of the beneficial owner certifies, under penalties of perjury, that
such statement has been received by it and furnishes a paying agent with a copy
thereof.
In the event that any of the above requirements are not satisfied, Northrop
Systems will nonetheless not withhold federal income tax on interest paid to a
Non-United States Holder if it receives IRS Form W-8ECI from that Non-United
States Holder, establishing that such income is effectively connected with the
conduct of a trade or business in the United States, unless Northrop Systems
has knowledge to the contrary. Interest paid to a Non-United States Holder that
is effectively connected with the conduct by the holder of a trade or business
in the United States is generally taxed at graduated rates that are applicable
to U.S. persons. In the case of a Non-United States Holder that is a
corporation, such effectively connected income may also be subject to the
United States federal branch profits tax, which is generally imposed on a
foreign corporation on the deemed repatriation from the United States of
effectively connected earnings and profits, at a 30% rate, unless the rate is
reduced or eliminated by an applicable income tax treaty and the Non-United
States Holder is a qualified resident of the treaty country.
44
Sale, Exchange and Redemption of the Securities
A Non-United States Holder will generally not be subject to United States
federal income tax with respect to gain recognized on a sale, exchange or
redemption of a Security unless (1) the gain is effectively connected with a
trade or business of the Non-United States Holder in the United States; (2) in
the case of a Non-United States Holder who is an individual and holds the
Security as a capital asset, such holder is present in the United States for
183 or more days in the taxable year of the sale or other disposition and
certain other conditions are met; (3) Northrop Systems is or has been a "United
States real property holding corporation" for United States federal income tax
purposes; or (4) the Non-United States Holder is subject to tax pursuant to
certain provisions of the Code applicable to United States expatriates.
However, any amount attributable to accrued but unpaid interest on the Security
will be treated in the same manner as payments of interest made to such Non-
United States Holder, as described above.
Gain derived by a Non-United States Holder from the sale or other
disposition of a Security that is effectively connected with the conduct by the
holder of a trade or business in the United States is generally taxed at the
graduated rates that are applicable to United States persons. In the case of a
Non-United States Holder that is a corporation, such effectively connected
income may also be subject to the United States branch profits tax. If any
individual Non-United States Holder falls under clause (2) of the preceding
paragraph, such holder will be subject to a flat 30% tax on the gain derived
from the sale or other disposition, which may be offset by certain United
States source capital losses recognized within the same taxable year as such
sale or other disposition.
United States Federal Estate Tax Consequences
Securities held by an individual Non-Unites States Holder at the time of
death will be included in the holder's gross estate for United States federal
estate tax purposes, and may be subject to United States federal estate tax,
unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
Payments of interest on, or the proceeds from the sale, retirement or other
disposition of Securities are subject to information reporting unless the
United States Holder establishes an exemption.
Payments of the interest on, or the proceeds from the sale, retirement, or
other disposition of the Securities may be subject to "backup withholding" tax
of 31% if the United States Holder, among other things, (1) fails to furnish
his or her social security number or other taxpayer identification number, or
TIN, to the payor responsible for backup withholding (for example, the United
States Holder's securities broker) on Form W-9 or a substantially similar form
signed under penalty of perjury, (2) furnishes such payor an incorrect TIN, (3)
fails to provide such payor with a certified statement, signed under penalties
of perjury, that the TIN provided to the payor is correct and that the United
States Holder is not subject to backup withholding, or (4) fails to properly
report interest and dividends on his tax return. Backup withholding does not
apply to certain payments made to exempt recipients, such as corporations.
Non-United States Holders will not be subject to information reporting or
backup withholding on payments made by Northrop Systems or its paying agent if
a statement described in clause (4) under "--Non-United States Holders--Payment
of Interest" has been received and the payor has no actual knowledge that the
beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply to
payments or principal, premium, if any, or interest on the Securities paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of a Non-United States Holder, or if a foreign office of a broker pays
the proceeds of the sale of Securities to a Non-United States Holder. If,
however, such nominee, custodian, agent or broker is, for United States federal
income tax purposes, a United States person, a controlled foreign corporation
or a
45
foreign person that derives 50% or more of its gross income for certain periods
from the conduct of a U.S. trade or business, or a foreign partnership with
certain connections to the United States, such payments will be subject to
information reporting unless (i) such custodian, nominee, agent or broker has
documentary evidence that the beneficial owner is not a United States person
and certain other conditions are met, or (ii) the beneficial owner otherwise
establishes an exemption.
Payments of principal, premium, if any, or interest on the Securities paid
to a Non-United States Holder by a United States office of a custodian, nominee
or agent, or payment of the proceeds of a sale of Securities by the United
States office of a broker will be subject to backup withholding and information
reporting unless (i) the Non-United States Holder provides the statement
described above that the holder is not a United States person and the payor
does not have actual knowledge to the contrary, or (ii) the beneficial owner
otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
credit or a refund against such holder's United States federal income tax
liability, if certain required information is provided to the Internal Revenue
Service.
46
PLAN OF DISTRIBUTION
This Exchange Offer is made to existing holders of the Outstanding
Securities. Each broker-dealer that receives Exchange Securities for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of those Exchange Securities. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Securities received
in exchange for Outstanding Securities where such Outstanding Securities were
acquired as a result of market-making activities or other trading activities.
We have agreed that, for a period of 180 days after the expiration date, we
will make this prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale. In addition, until September
2, 2001, all dealers effecting transactions in Exchange Securities may be
required to deliver a prospectus.
We will not receive any proceeds from any sale of Exchange Securities by
broker-dealers. Exchange Securities received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Securities or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such Exchange Securities may be deemed to be
an "underwriter" within the meaning of the Securities Act, and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning the Securities Act.
For a period of 180 days after the expiration date we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the letter of
transmittal. We have agreed to pay all expenses incident to the exchange offer
(including the expenses of one counsel for the holders of the Outstanding
Securities and Exchange Securities) other than commissions or concessions of
any brokers or dealers and will indemnify the holders of Outstanding Securities
and Exchange Securities (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
47
LEGAL MATTERS
The validity of the Exchange Securities will be passed upon for Northrop
Systems by Sheppard, Mullin, Richter & Hampton LLP, Los Angeles, California.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated in this prospectus 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 for the period ended March 31, 2001 and Northrop Systems for the period
ended March 31, 2000 which is incorporated herein 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 Report on Form 10-Q for the quarter
ended March 31, 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 of 1933 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 prospectus 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.
EXCHANGE AGENT
The exchange agent for the exchange offer is:
THE CHASE MANHATTAN BANK
By Mail:
P.O. Box 2320
Dallas, TX 75221-2320
Attn: Events
By Hand Delivery or Overnight Courier:
2001 Bryan Street, 9th Floor
Dallas, TX 75201
Attn: Events
By Facsimile Transmission:
(214) 468-6494
For Information or Confirmation by Telephone:
(800) 275-2048
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[LOGO OF NORTHROP GRUMMAN]
