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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 29549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________
For Quarter Ended September 30, 1994
Commission File Number 1-3229
NORTHROP GRUMMAN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE No. 95-1055798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1840 Century Park East, Los Angeles, California 90067
(address of principal executive offices)
(310) 553-6262
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes x No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock outstanding as of October 31, 1994 49,186,505 shares
Northrop Grumman Corporation and Subsidiaries
Part I. Financial Information
Item 1. Financial Statements
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three months ended Nine months ended
September 30 September 30
$ in millions, except per share 1994 1993 1994 1993
Net Sales $1,927 $1,220 $4,831 $3,807
Cost of sales
Operating costs 1,555 1,018 3,924 3,194
Administrative and general
expenses 267 119 586 354
Operating margin 105 83 321 259
Interest income 2 5 1
Other, net (10) (4) (6) (3)
Interest expense (35) (10) (73) (30)
Income before income taxes 62 69 247 227
Federal and foreign income taxes 23 43 91 96
Net income $ 39 $ 26 $ 156 $ 131
Weighted average shares
outstanding, in millions 49.2 48.4 49.1 47.8
Earnings per share $ .79 $ .54 $ 3.17 $ 2.74
Dividends per share .40 .40 1.20 1.20
I-1
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF
FINANCIAL POSITION
September 30 December 31
$ in millions 1994 1993
Assets:
Cash and cash equivalents $ 14 $ 100
Marketable securities 11
Accounts receivable, net of
progress payments of $2,253 in
1994 and $2,410 in 1993 1,221 820
Inventoried costs, net of progress
payments of $759 in 1994 and $326 in 1993 1,061 569
Deferred state income taxes 31 46
Prepaid expenses 58 25
Total current assets 2,396 1,560
Property, plant and equipment 3,384 2,789
Accumulated depreciation and
amortization (1,838) (1,773)
1,546 1,016
Goodwill, net of amortization of $16 1,236
Other purchased intangibles, net of
amortization of $10 382
Prepaid pension cost, intangible
pension asset and benefit trust fund 455 278
Deferred income taxes 27 7
Investments in and advances to
affiliates and sundry assets 80 48
Assets held for sale 67 30
2,247 363
$ 6,189 $ 2,939
I-2
September 30 December 31
$ in millions 1994 1993
Liabilities and Shareholders' Equity:
Notes payable to banks $ 23 $
Current portion of long-term debt 202
Trade accounts payable 442 324
Accrued employees' compensation 279 146
Income taxes payable, including deferred
income taxes of $339 in 1994 and
$426 in 1993 350 438
Other current liabilities 540 171
Total current liabilities 1,836 1,079
Long-term debt 1,721 160
Accrued retiree benefits 1,064 308
Other long-term obligations 50
Deferred gain on sale/leaseback 21 23
Deferred income taxes 72 47
Paid-in capital
Preferred stock, 10,000,000 shares
authorized and none issued
Common stock, 200,000,000 shares
authorized; issued and outstanding:
1994 -- 49,175,485; 1993 -- 48,913,403 261 256
Retained earnings 1,167 1,070
Unvested employee restricted award shares (1) (2)
Unfunded pension losses, net of taxes (2) (2)
1,425 1,322
$ 6,189 $ 2,939
I-3
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine months ended September 30,
$ in millions 1994 1993
Operating Activities
Sources of Cash
Cash received from customers
Progress payments $ 2,092 $ 1,488
Other collections 3,433 1,939
Interest received 6 2
Other cash receipts 9 8
Cash provided by operating activities 5,540 3,437
Uses of Cash
Cash paid to suppliers and employees 4,999 3,336
Interest paid 64 21
Income taxes paid 76 36
Other cash payments 8 4
Cash used in operating activities 5,147 3,397
Net cash provided by operating activities 393 40
Investing Activities
Payment for purchase, net of cash acquired, of:
Grumman Corporation (1,841)
Vought Aircraft Company (12)
Additions to property, plant and equipment (99) (104)
Proceeds from sale of property, plant
and equipment 11 1
Funding of retiree benefit trust (31)
Dividends from affiliate 5
Other investing activities 13 3
Net cash used in investing activities (1,954) (100)
Financing Activities
Borrowings under lines of credit 2,223 55
Repayment of borrowings under lines of credit (500) (155)
Principal payments of long-term
debt/capital leases (195) (41)
Proceeds from issuance of stock 6 40
Dividends paid (59) (57)
Net cash provided by (used in)
financing activities 1,475 (158)
Decrease in cash and cash equivalents (86) (218)
Cash and cash equivalents balance
at beginning of period 100 230
Cash and cash equivalents balance
at end of period $ 14 $ 12
I-4
Nine months ended September 30
$ in millions, 1994 1993
Reconciliation of Net Income to
Net Cash Provided by Operating Activities:
Net income $ 156 $ 131
Adjustments to reconcile net income
to net cash provided
Depreciation of property, plant
and equipment 175 149
Amortization of intangible assets 26
Common stock issued to employees 2
Loss on disposals of property,
plant and equipment 14 10
Noncash retiree benefit income (18) (30)
Amortization of deferred gain on
sale/leaseback (2) (2)
Gain on sale of affiliate (2)
Decrease(increase) in
Accounts receivable 445 50
Inventoried costs (471) 91
Prepaid expenses (23) (15)
Increase(decrease) in
Progress payments 276 (412)
Accounts payable and accruals (144) 9
Provisions for contract losses (81) (21)
Income taxes 45 80
Other noncash transactions (5)
Net cash provided by operating activities $ 393 $ 40
Noncash Investing and Financing Activities:
Purchase of Grumman Corporation
Fair value of assets acquired $ 3,508
Cash paid (2,128)
Liabilities assumed $ 1,380
Purchase of Vought Aircraft Company
Fair value of assets acquired
(less $45 invested in VAC in 1992) $ 711
Cash paid (130)
Liabilities assumed $ 581
I-5
Northrop Grumman Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Nine months ended September 30,
$ in millions 1994 1993
Paid-in Capital:
At beginning of year $ 256 $ 207
Employee stock awards and options exercised,
net of forfeitures 5 42
$ 261 $ 249
Retained Earnings:
At beginning of year $1,070 $1,051
Net income 156 131
Cash dividends (59) (57)
$1,167 $1,125
Unvested Employee Restricted Award Shares:
At beginning of year $ (2) $ (2)
Amortization 1
$ (1) $ (2)
Unfunded Pension Losses, Net of Taxes $ (2) $ (2)
I-6
Northrop Grumman Corporation and Subsidiaries
SELECTED INDUSTRY SEGMENT INFORMATION
Three months ended Nine months ended
September 30 September 30
$ in millions 1994 1993 1994 1993
Net Sales:
Military and Commercial
Aircraft $ 1,320 $ 960 $ 3,412 $ 3,033
Electronics and Systems
Integration 484 178 1,047 536
Data Systems and Services 94 19 222 58
Missiles and Unmanned
Vehicle Systems 68 89 264 268
Intersegment sales (39) (26) (114) (88)
$ 1,927 $ 1,220 $ 4,831 $ 3,807
Operating Profit(Loss):
Military and Commercial
Aircraft $ 121 $ 84 $ 317 $ 282
Electronics and Systems
Integration 40 15 87 46
Data Systems and Services 4 2 8 3
Missiles and Unmanned
Vehicle Systems (20) (11) (14) (25)
Total operating profit 145 90 398 306
Adjustments to reconcile
operating profit to operating margin:
Other deductions included above 4 2 4 3
State and local income taxes (14) (1) (29) (15)
General corporate expenses (28) (19) (84) (71)
Corporate retiree
benefit income(cost) (2) 11 32 36
Operating margin $ 105 $ 83 $ 321 $ 259
I-7
Three months ended Nine months ended
September 30 September 30
$ in millions 1994 1993 1994 1993
Contract Acquisitions:
Military and Commercial
Aircraft $ 1,528 $ 1,064 $ 7,277 $ 3,060
Electronics and Systems
Integration 507 146 2,594 429
Data Systems and Services 144 52 403 69
Missiles and Unmanned
Vehicle Systems 7 163 160 310
Intersegment acquisitions (21) (22) (158) (79)
$ 2,165 $ 1,403 $10,276 $ 3,789
Funded Order Backlog:
Military and Commercial Aircraft $ 9,515 $ 6,026
Electronics and Systems Integration 2,308 626
Data Systems and Services 224 58
Missiles and Unmanned Vehicle Systems 423 491
Intersegment backlog (106) (44)
$12,364 $ 7,157
I-8
Northrop Grumman Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared by management in accordance with the instructions to
Form 10-Q of the Securities and Exchange Commission. They do not
include all information and notes necessary for a complete presentation
of financial position, results of operations, changes in shareholders'
equity, and cash flows in conformity with generally accepted accounting
principles. They do, however, in the opinion of management, include
all adjustments (all of which were normal recurring accruals) necessary
for a fair statement of the results for the periods presented. The
financial statements should be read in conjunction with the Notes and
Independent Auditors' Report contained in the company's 1993 Annual
Report.
Acquisitions
During the second quarter the company purchased the outstanding common
stock of Grumman Corporation at a cost of $2.1 billion and financed the
transaction mainly with new borrowings. In August 1994 the company
purchased The Carlyle Group's 51 percent interest in Vought Aircraft
Company for $130 million cash. The company purchased a 49 percent
interest in Vought for $45 million in September 1992. The purchase
method of accounting was used to record the transactions with estimated
fair values being assigned to assets and liabilities. The excess of
the purchase price over the net assets acquired was assigned to
identifiable intangible assets and the balance to goodwill with
amortization on a straight-line basis over weighted average periods of
23 years and 40 years, respectively. In October 1994, $53 million was
paid to settle a preacquisition lawsuit brought against a Grumman
subsidiary. Provision for this liability was made, along with other
adjustments to the fair values of Grumman's assets and liabilities,
during the third quarter.
Grumman's and Vought's financial data have been consolidated
with Northrop's effective April 1, 1994 and August 1, 1994,
respectively. Northrop Corporation was renamed Northrop Grumman
Corporation effective May 18, 1994. The following unaudited pro forma
financial information combines Northrop's, Grumman's and Vought's
results of operations as if the acquisitions had taken place on January
1, 1993, and is not necessarily indicative of future operating results
for Northrop Grumman.
Three months ended Nine months ended
September 30 September 30
$ in millions,
except per share 1994 1993 1994 1993
Sales $1,953 $2,086 $5,857 $6,167
Net income 39 33 178 145
Earnings per share .79 .68 3.62 3.03
I-9
Inventories
The company's inventories consist primarily of work in process related
to long-term contracts with customers; therefore further breakdown is
considered inapplicable.
Long-Term Debt
During the second quarter, the company's $2.8 billion credit agreement
with a group of domestic and foreign banks was amended to provide for
two credit facilities: $800 million available on a revolving credit
basis through March 1999 and, to finance the acquisition of Grumman, a
floating interest rate $2 billion five-year term loan due in 18
quarterly installments of $100 million and a final installment of $200
million in March 1999. As of September 30, 1994, $1.7 billion was
outstanding under the term loan facility along with $23 million of
money market loans and $223 million of assumed Grumman indebtedness.
The last installment of private placement debt, $160 million due in
November 1995, was prepaid in September 1994 along with a $7 million
prepayment penalty. In May 1994 the company entered into four $50
million interest rate swap agreements with four domestic banks for the
purpose of fixing, at 6.47 percent through May 23, 1997, the interest
cost on $200 million in notional principal of the floating rate term
loan.
The Company will pay, quarterly, a facility fee and, at least
quarterly, interest based on the company's leverage ratio and
outstanding debt. In the event of a "change in control," the banks are
relieved of their commitments. Compensating balances are not required.
The new credit agreement contains restrictions including those
relating to the payment of dividends, acquisition of the company's
stock, aggregate indebtedness for borrowed money, interest coverage,
and the maintenance of shareholders' equity.
Subsequent Event
In October 1994 the company, in a public offering, sold $600 million in
debt comprised of $350 million of noncallable 10-year notes at 8.63
percent interest and $250 million of 30-year debentures, callable after
10, at 9.38 percent interest. Interest will be payable semi-annually.
Proceeds from the sale were used to pay down the term loan facility to
$1.1 billion. As a result, the amount and terms of the $2.8 billion
credit agreement are currently in the process of being amended.
I-10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL
CONDITION AND THE RESULTS OF ITS OPERATIONS
During the third quarter of 1994, Northrop Grumman Corporation completed
its purchase of Vought Aircraft Company. That followed the second
quarter's purchase of Grumman Corporation. Northrop Grumman results for
the third quarter and first nine months of 1994 include Grumman activity
for only the second and third quarters, and Vought for August and
September. Comparative results for 1993 do not include Grumman or Vought
data.
Sales were 58 percent higher in the third quarter of 1994 versus the
third quarter of 1993. Without the Grumman and Vought acquisitions sales
would have declined 6 percent. Sales rose 27 percent in the first nine
months of 1994 versus the first three quarters of last year. Without
Grumman and Vought, sales would have declined 8 percent. Lower volume in
the production and development phases of the B-2 program and fewer 747
shipset deliveries more than offset higher revenue on the F/A-18E/F
development program.
Sales by major program and units delivered were as shown below. The E-2
aircraft and E-8 Joint STARS (Joint Surveillance Target Attack Radar
System) programs were acquired as part of Grumman. These sophisticated,
electronics ladened, airborne surveillance platforms are reported as part
of the Electronics and Systems Integration industry segment. Grumman's and
Vought's revenue from C-17 transport work and Vought's 747 tail section
revenue are recognized as components are delivered, as is the case with 747
fuselage shipsets. The balance of Vought's and Grumman's sales is included
in the "all other" category and thereby caused the increases shown over
those for 1993.
Three months Nine months
$ in millions 1994 1993 1994 1993
B-2 $ 629 $ 680 $1,900 $2,131
F/A-18C/D 84 73 233 279
F/A-18E/F 133 73 370 168
747 96 120 280 409
E-2 170 259
E-8 122 236
C-17 62 67
ECM 71 93 244 272
AGM-137 66 64 220 198
BAT 21 18 63 75
All other 473 99 959 275
$1,927 $1,220 $4,831 $3,807
Three months Nine months
Units 1994 1993 1994 1993
F/A-18C/D 10 10 32 40
747 7 14 25 45
E-2 2 3
I-11
Sales for this year are now projected to approximate $6.6 billion.
The amount of operating margin increased, but the rate earned on sales
during the third quarter and first nine months of 1994 declined as compared
with comparable figures for 1993. While Grumman and Vought contributed to
the increased amounts of margin, the amortization of Grumman goodwill and
other purchased intangibles reduced the company's overall rate of operating
margin. Operating profit earned by the Military and Commercial Aircraft
industry segment improved during the third quarter as the benefit from the
delivery of two B-2 bombers more than offset a small loss on the 747
program where the rate of operating margin was reduced for the increased
costs allocated to its contracts as a result of establishing a separate
commercial aircraft operating element. Last year's third quarter and nine
month periods reflected $14 million and $37 million loss provisions,
respectively, made for the AGM-137 development program to cover the
additional costs estimated for its completion, whereas this year's Missiles
and Unmanned Vehicle Systems segment results reflect a $20 million loss
provision made in the third quarter for this program.
In September the company announced that, over a 15-month period, it will
reduce its workforce from 47,500 to about 38,900 people. As part of that
reduction, approximately 5,000 eligible employees were offered an
enhancement to their retirement benefits in exchange for volunteering to
retire early. The fourth quarter one-time charge for the total cost of
these special termination benefits, estimated at $100,000 per employee,
cannot be determined until after the November 15, 1994 acceptance deadline
expires and the number of acceptors is known. This noncash charge to the
company will be funded from the plans' pension and VEBA trusts.
Other deductions reported in this year's third quarter included a $7
million penalty for prepaying $160 million in notes payable to
institutional investors.
Interest expense in the third quarter of 1994 was $25 million higher than
in the corresponding quarter of 1993, following the $1.7 billion increase
in average debt outstanding between the two years' third quarters.
Interest expense for the first nine months of 1994 was $43 million higher
than in the first nine months of 1993, following the $950 million increase
in average debt outstanding between the two years' first nine month
periods. Interest paid on borrowed funds averaged 400 and 300 basis points
lower in this year's third quarter and first nine months versus last year's
comparable periods, respectively.
Net income in the third quarter and first nine months of 1993 was reduced
by $18 million, 38 cents per share, for the cumulative effect of the
retroactive application of the new federal statutory income tax rate
enacted in August 1993.
I-12
During the first three quarters of 1994, $393 million of cash was
generated from operations versus $40 million in last year's first three
quarters and was more than sufficient to finance capital expenditures and
dividends. The company purchased for $130 million, in cash, the Carlyle
Group's 51 percent interest in Vought Aircraft Company in August.
Following the acquisition of Vought, capital expenditures for 1994 are now
expected to approximate $160 million. Also in August, the company filed a
universal shelf registration statement for up to $800 million in
securities, with the intent of publicly issuing longer-term debt so as to
better balance the maturity mix and interest rate exposure of the company's
overall indebtedness. On October 27, 1994 the company sold $350 million of
10-year notes and $250 million of 30-year debentures with interest rates of
8.63 percent and 9.38 percent, respectively. Proceeds were used to reduce
$600 million of outstanding bank term loans with a weighted average
interest rate of 5.46 percent. The company's liquidity and financial
flexibility provided by cash flow generated from operating activities
during the fourth quarter of 1994 will be supplemented by the unused
borrowing capacity available under its $2.8 billion credit agreement and
other short-term credit facilities. The amount and terms of the existing
credit agreement are now in the process of being amended as a result of the
$600 million public debt issuance.
I-13
Part II. Other Information
Item 1. Legal Proceedings
Grumman St. Augustine Corporation
On August 31, 1994, the Grumman St. Augustine Corporation ("GSAC"), a
third-tier subsidiary of the Company, entered into an agreed upon short
form consent order with the Florida Department of Environmental Protection
to resolve alleged violations previously reported. GSAC did not admit and
the Order does not constitute an admission of liability or any wrongdoing.
As part of the settlement, GSAC agreed to pay the agency $9,700 in civil
penalties and costs.
Grumman Systems Support Corporation
As previously disclosed in the Grumman Corporation Form 10-K for the year
ended December 31, 1993, Data General Corporation sued Grumman Systems
Support Corporation ("GSSC") in 1988 claiming that GSSC had infringed
certain copyrights and misappropriated trade secrets. On September 14,
1994 the First Circuit Court of Appeals entered a $52.3 million judgment
against GSSC. On September 27, 1994 the United States District Court for
the District of Massachusetts entered an order finding GSSC's parent,
Grumman Data Systems Corporation, vicariously liable for the copyright
infringement of GSSC. On October 17, 1994, Data General Corporation was
paid $53 million in settlement of this litigation.
II-1
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3(b) Northrop Grumman Corporation Bylaws, as amended.
Exhibit 11. Statement re Computation of Per Share Earnings
Exhibit 27. Financial Data Schedule
(b) There were no reports on Form 8-K filed with the Securities and
Exchange Commission during the quarter ended September 30, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Northrop Grumman Corporation (Registrant)
Date: November 11, 1994 &&PINAZ2928
Nelson F. Gibbs
Vice President and Controller
Date: November 11, 1994 &&PINAD1368
Sheila M. Gibbons
Vice President and Secretary
II-2
Northrop Grumman Corporation and Subsidiaries
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(in thousands, except per share)
Three months ended Nine months ended
September 30 September 30
1994 1993 1994 1993
Primary:
Average shares outstanding 49,157 48,392 49,115 47,816
Common stock equivalents 811 701 732 878
Totals 49,968 49,093 49,847 48,694
Net income $38,719 $26,156 $155,897 $131,241
Earnings per share(1) $ .77 $ .53 $ 3.13 $ 2.70
Fully diluted:
Average shares outstanding 49,157 48,392 49,115 47,816
Common stock equivalents 879 695 879 972
Totals 50,036 49,087 49,994 48,788
Net income $38,719 $26,156 $157,897 $131,241
Earnings per share(1) $ .77 $ .53 $ 3.12 $ 2.69
_____________
(1) This calculation was made in compliance with Item 601 of Regulation
S-K. Earnings per share presented elsewhere in this report exclude
from their calculation shares issuable under employee stock options,
since their dilutive effect is less than 3%.
BYLAWS
OF
NORTHROP GRUMMAN CORPORATION
(A Delaware Corporation)
ARTICLE I
OFFICES
Section 1.01. REGISTERED OFFICE. The registered office of
Northrop Grumman Corporation (the "Corporation") in the State of
Delaware shall be at Corporation Trust Center, 1209 Orange Street,
City of Wilmington, County of New Castle, and the name of the
registered agent at that address shall be The Corporation Trust
Company.
Section 1.02. PRINCIPAL EXECUTIVE OFFICE. The principal
executive office of the Corporation shall be located at 1840
Century Park East, Los Angeles, California 90067. The Board of
Directors of the Corporation (the "Board of Directors") may change
the location of said principal executive office.
Section 1.03. OTHER OFFICES. The Corporation may also have
an office or offices at such other place or places, either within
or without the State of Delaware, as the Board of Directors may
from time to time determine or as the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01. ANNUAL MEETINGS. The annual meeting of
stockholders of the Corporation shall be held between May 1 and
July 1 of each year on such date and at such time as the Board of
Directors shall determine. At each annual meeting of stockholders,
directors shall be elected in accordance with the provisions of
Section 3.04 hereof and any other proper business may be
transacted.
Section 2.02. SPECIAL MEETINGS. Special meetings of
stockholders for any purpose or purposes may be called at any time
by a majority of the Board of Directors, the Chairman of the Board,
or by the President and Chief Executive Officer. Special meetings
may not be called by any other person or persons. Each special
meeting shall be held at such date and time as is requested by the
person or persons calling the meeting, within the limits fixed by
law.
Section 2.03. PLACE OF MEETINGS. Each annual or special
meeting of stockholders shall be held at such location as may be
determined by the Board of Directors or, if no such determination
is made, at such place as may be determined by the Chairman of the
Board. If no location is so determined, any annual or special
meeting shall be held at the principal executive office of the
Corporation.
Section 2.04. NOTICE OF MEETINGS. Written notice of each
annual or special meeting of stockholders stating the date and time
when, and the place where, it is to be held shall be delivered
either personally or by mail to stockholders entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days
before the date of the meeting. The purpose or purposes for which
the meeting is called may, in the case of an annual meeting, and
shall, in the case of a special meeting, also be stated. If
mailed, such notice shall be directed to a stockholder at his
address as it shall appear on the stock books of the Corporation,
unless he shall have filed with the Secretary of the Corporation a
written request that notices intended for him be mailed to some
other address, in which case such notice shall be mailed to the
address designated in such request.
Section 2.05. CONDUCT OF MEETINGS. All annual and special
meetings of stockholders shall be conducted in accordance with such
rules and procedures as the Board of Directors may determine
subject to the requirements of applicable law and, as to matters
not governed by such rules and procedures, as the chairman of such
meeting shall determine. The chairman of any annual or special
meeting of stockholders shall be the Chairman of the Board. The
Secretary, or in the absence of the Secretary, a person designated
by the Chairman of the Board, shall act as secretary of the
meeting.
Section 2.06. NOTICE OF BUSINESS. At any meeting of
stockholders, only such business shall be conducted as shall be a
proper matter for stockholder action under the laws of the State of
Delaware and as shall have been brought before the meeting (a) by
or at the direction of the Board of Directors or (b) by any
stockholder of the Corporation who is a stockholder of record at
the time of giving of the notice provided for in this Section 2.06
who shall be entitled to vote at such meeting and who complies with
the notice procedures set forth in this Section 2.07. For business
to be properly brought before a meeting of stockholders by a
stockholder, the stockholder shall have given timely notice thereof
in writing to the Secretary. To be timely, a stockholder's notice
shall be delivered to or mailed and received at the principal
executive office of the Corporation not less than sixty (60) days
nor more than ninety (90) days prior to the meeting: provided,
however, that in the event that less than seventy (70) days' notice
or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must
be so received not later than the close of business on the 10th day
following the date on which such notice of the date of the meeting
was mailed or such public disclosure was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before the
meeting (a) a brief description of the business desired to be
brought before the meeting, the reasons for conducting such
business at the meeting, and, in the event that such business
includes a proposal to amend either the Certificate of
Incorporation or these Bylaws, the language of the proposed
amendment, (b) the name and address as they appear on the
Corporation's books of the stockholder proposing such business, (c)
the class and number of shares of capital stock of the Corporation
which are beneficially owned by such stockholder and (d) any
material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at a stockholder meeting except in
accordance with the procedures set forth in this Section 2.06. The
chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of these
Bylaws and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing
provisions of this Section 2.06, a stockholder shall also comply
with all applicable requirements of the Securities Exchange Act of
1934 as amended and the rules and regulations thereunder with
respect to the matters set forth in this Section 2.06. Nothing in
this Bylaw shall be deemed to affect any rights of stockholders or
the Corporation under Rule 14a-8 of the Securities Exchange Act of
1934 with respect to proposals which are requested to be included
in the Corporation's proxy statement.
Section 2.07. QUORUM. At any meeting of stockholders, the
presence, in person or by proxy, of the holders of record of a
majority of shares then issued and outstanding and entitled to vote
at the meeting shall constitute a quorum for the transaction of
business; provided, however, that this Section 2.07 shall not
affect any different requirement which may exist under statute,
pursuant to the rights of any authorized class or series of stock,
or under the Certificate of Incorporation of the Corporation (the
"Certificate") for the vote necessary for the adoption of any
measure governed thereby. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote and
without further notice, may adjourn the meeting from time to time
until a quorum is attained. At any reconvened meeting following
such an adjournment at which a quorum shall be present, any
business may be transacted which might have been transacted at the
meeting as originally notified.
Section 2.08. VOTES REQUIRED. A majority of the votes cast
at a duly called meeting of stockholders, at which a quorum is
present, shall be sufficient to take or authorize action upon any
matter which may properly come before the meeting, unless the vote
of a greater or different number thereof is required by statute, by
the rights of any authorized class of stock or by the Certificate.
Unless the Certificate or a resolution of the Board of Directors
adopted in connection with the issuance of shares of any class or
series of stock provides for a greater or lesser number of votes
per share, or limits or denies voting rights, each outstanding
share of stock, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of stockholders.
Section 2.09. PROXIES. A stockholder may vote the shares
owned of record by him either in person or by proxy executed in
writing (which shall include writings sent by telex, telegraph,
cable or facsimile transmission) by the stockholder himself or by
his duly authorized attorney-in-fact. No proxy shall be valid
after three (3) years from its date, unless the proxy provides for
a longer period. Each proxy shall be in writing, subscribed by the
stockholder or his duly authorized attorney-in-fact, and dated, but
it need not be sealed, witnessed or acknowledged.
Section 2.10. STOCKHOLDER ACTION. Any action required or
permitted to be taken by the stockholders of the Corporation must
be effected at a duly called annual meeting or special meeting of
stockholders of the Corporation, unless such action requiring or
permitting shareholder approval is approved by a majority of the
Continuing Directors (as defined in the Certificate), in which case
such action may be authorized or taken by the written consent of
the holders of outstanding shares of stock having not less than the
minimum voting power that would be necessary to authorize or take
such action at a meeting of stockholders at which all shares
entitled to vote thereon were present and voted, provided all other
requirements of applicable law and the Certificate have been
satisfied.
Section 2.11. LIST OF STOCKHOLDERS. The Secretary of the
Corporation shall prepare and make (or cause to be prepared and
made), at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order and showing the address of,
and the number of shares registered in the name of, each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice
of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the duration thereof, and
may be inspected by any stockholder who is present.
Section 2.12. INSPECTORS OF ELECTION. In advance of any
meeting of stockholders, the Board of Directors may appoint
Inspectors of Election to act at such meeting or at any adjournment
or adjournments thereof. If such Inspectors are not so appointed
or fail or refuse to act, the chairman of any such meeting may
(and, upon the demand of any stockholder or stockholder's proxy,
shall) make such an appointment.
The number of Inspectors of Election shall be one (1) or three
(3). If there are three (3) Inspectors of Election, the decision,
act or certificate of a majority shall be effective and shall
represent the decision, act or certificate of all. No such
Inspector need be a stockholder of the Corporation.
The Inspectors of Election shall determine the number of
shares outstanding, the voting power of each, the shares
represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies; they shall receive
votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote,
count and tabulate all votes or consents, determine when the polls
shall close and determine the result; and finally, they shall do
such acts as may be proper to conduct the election or vote with
fairness to all stockholders. On request, the Inspectors shall
make a report in writing to the secretary of the meeting concerning
any challenge, question or other matter as may have been determined
by them and shall execute and deliver to such secretary a
certificate of any fact found by them.
ARTICLE III
DIRECTORS
Section 3.01. POWERS. The business and affairs of the
Corporation shall be managed by and be under the direction of the
Board of Directors. The Board of Directors shall exercise all the
powers of the Corporation, except those that are conferred upon or
reserved to the stockholders by statute, the Certificate or these
Bylaws.
Section 3.02. NUMBER. Except as otherwise fixed pursuant to
the provisions of Section 2 of Article Fourth of the Certificate in
connection with rights to elect additional directors under
specified circumstances which may be granted to the holders of any
class or series of Preferred Stock, par value One Dollar ($1.00)
per share of the Corporation ("Preferred Stock"), the number of
directors shall be fixed from time to time by resolution of the
Board of Directors but shall not be less than three (3). The Board
of Directors, as of May 17, 1989, and thereafter, shall consist of
fourteen (14) directors until changed as herein provided.
Section 3.03. INDEPENDENT OUTSIDE DIRECTORS. At least sixty
percent (60%) of the members of the Board of Directors of the
Corporation shall at all times be "Independent Outside Directors",
which term is hereby defined to mean any director who:
1. has not in the last five (5) years been an officer or
employee of the Corporation or any of its subsidiaries or
affiliates; and
2. is not related to an officer of the Corporation (or
an officer of any of the Corporation's parents, subsidiaries
or affiliates) by blood, marriage or adoption (except
relationships more remote than first cousin); and
3. is not, and has not within the last two (2) years
been, an officer, director or employee of, and does not own, and
has not within the last two (2) years owned, directly or
indirectly, in excess of one percent (1%) of any firm, corporation
or other business or professional entity which has made or proposes
to make during either the Corporation's or such entity's last or
next fiscal year payments for property or services in excess of one
percent (1%) of the gross revenues either of the Corporation for
its last fiscal year or of such entity for its last fiscal year,
but excluding payments determined by competitive bids, public
utility services at rates set by law or government authority, or
payments arising solely from the ownership of securities, or to
which the Corporation was indebted at any time during the
Corporation's last fiscal year in an aggregate amount in excess of
one percent (1%) of the Corporation's total assets at the end of
such fiscal year or Five Million Dollars ($5,000,000), whichever is
less, but excluding debt securities which have been publicly
offered or which are publicly traded; and
4. is not a director, partner, officer or employee of an
investment banking firm which has performed services for the
Corporation in the last two (2) years or which the Corporation
proposes to have perform services in the next year other than
as a participating underwriter in a syndicate; and
5. is not a control person of the Corporation (other
than as a director of the Corporation) as defined by the
regulations of the Securities and Exchange Commission.
Section 3.04. ELECTION AND TERM OF OFFICE. Except as
provided in Section 3.07 hereof and subject to the right to elect
additional directors under specified circumstances which may be
granted, pursuant to the provisions of Section 2 of Article Fourth
of the Certificate, to the holders of any class or series of
Preferred Stock, directors shall be elected by the stockholders of
the Corporation. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. The number
of directors in each class shall be the whole number contained in
the quotient obtained by dividing the authorized number of
directors (fixed pursuant to Section 3.02 hereof) by three. If a
fraction is also contained in such quotient, then additional
directors shall be apportioned as follows: if such fraction is
one-third, the additional director shall be a member of Class I;
and if such fraction is two-thirds, one of the additional directors
shall be a member of Class I and the other shall be a member of
Class II. Each director shall serve for a term ending on the date
of the third annual meeting of stockholders of the Corporation
following the annual meeting at which such director was elected;
provided, however, that the directors first elected to Class I
shall serve for a term ending on the date of the annual meeting
next following the end of the calendar year 1985, the directors
first elected to Class II shall serve for a term ending on the date
of the second annual meeting next following the end of the calendar
year 1985 and the directors first elected to Class III shall serve
for a term ending on the date of the third annual meeting next
following the end of the calendar year 1985.
Notwithstanding the foregoing provisions of this Section 3.04:
each director shall serve until his successor is elected and
qualified or until his death, resignation or removal; no decrease
in the authorized number of directors shall shorten the term of any
incumbent director; and additional directors, elected pursuant to
Section 2 of Article Fourth of the Certificate in connection with
rights to elect such additional directors under specified
circumstances which may be granted to the holders of any class or
series of Preferred Stock, shall not be included in any class, but
shall serve for such term or terms and pursuant to such other
provisions as are specified in the resolution of the Board of
Directors establishing such class or series.
Nominations for the election of directors may be made by the
Board or a committee thereof or by any stockholder entitled to vote
in the election of directors; provided, however, that a stockholder
may nominate a person for election as a director at a meeting only
if written notice of such stockholder's intent to make such
nomination has been given by such stockholder to, and received by,
the Secretary of the Corporation at the principal executive offices
of the Corporation not less than sixty (60) days nor more than
ninety (90) days prior to the meeting; provided, however, that (a)
in the event that less than seventy (70) days' notice or prior
public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 10th day
following the date on which such notice of the date of the meeting
was mailed or such public disclosure was made, whichever first
occurs; and (b) in the event that less than seventy (70) days shall
remain from the date of public disclosure of the adoption of this
bylaw provision to the date of any meeting, notice by the
stockholder to be timely with respect to such meeting must be so
received not later than the close of business on the 10th day
following the date on which such public disclosure was made. Each
such notice shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) the name and address as they appear on
the Corporation's books of the stockholder intending to make such
nomination; (c) the class and number of shares of capital stock of
the Corporation which are beneficially owned by such stockholder
(d) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (e) the occupations
and business history for the previous five years, other
directorships, names of business entities of which the proposed
nominee owns a 10 percent or more equity interest, a list of any
criminal convictions, including federal and state securities
violations and such other information regarding each proposed
nominee as may be required by the federal proxy rules in effect at
the time the notice is submitted and (f) the consent of each
nominee to serve as a director of the Corporation if so elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set
forth in this Section 3.04. The Chairman of any meeting of
stockholders shall direct that any nomination not made in
accordance with these procedures be disregarded.
Section 3.05. ELECTION OF CHAIRMAN OF THE BOARD. At the
organizational meeting immediately following the annual meeting of
stockholders, the directors shall elect a Chairman of the Board
from among the directors who shall hold office until the
corresponding meeting of the Board of Directors in the next year
and until his successor shall have been elected or until his
earlier resignation or removal. Any vacancy in such office may be
filled for the unexpired portion of the term in the same manner by
the Board of Directors at any regular or special meeting.
Section 3.06. REMOVAL. Subject to the right to elect
directors under specified circumstances which may be granted
pursuant to Section 2 of Article Fourth of the Certificate to the
holders of any class or series of Preferred Stock, any director may
be removed from office only as provided in Article Tenth of the
Certificate.
Section 3.07. VACANCIES AND ADDITIONAL DIRECTORSHIPS. Except
as otherwise provided pursuant to Section 2 of Article Fourth of
the Certificate in connection with rights to elect additional
directors under specified circumstances which may be granted to the
holders of any class or series of Preferred Stock, newly created
directorships resulting from any increase in the number of
directors and any vacancies on the Board of Directors resulting
from death, resignation, disqualification, removal or other cause
shall be filled solely by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum
of the Board of Directors. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the
full term of the class of directors in which the new directorship
was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in
the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 3.08. REGULAR AND SPECIAL MEETINGS. Regular meetings
of the Board of Directors shall be held immediately following the
annual meeting of stockholders, and at 9:00 o'clock a.m. on the
third Wednesday of each succeeding month (or, should such day fall
upon a legal holiday, then on the first day thereafter which is not
a legal holiday), unless a regular meeting is otherwise called by
the Chairman of the Board in accordance with applicable law.
Special meetings of the Board of Directors shall be held upon
call by or at the direction of the Chairman of the Board, the
President either of whom may be the, Chief Executive Officer, or
any two directors, except that when the Board of Directors consists
of one director, then the one director may call a special meeting.
Except as otherwise required by law, notice of each special meeting
shall be mailed to each director, addressed to him at his residence
or usual place of business, at least two days before the day on
which the meeting is to be held, or shall be sent to him at such
place by telex, telegram, cable, facsimile transmission or
telephoned or delivered to him personally, not later than the day
before the day on which the meeting is to be held. Such notice
shall state the time and place of such meeting, but need not state
the purpose or purposes thereof unless otherwise required by law,
the Certificate or these Bylaws.
Notice of any meeting need not be given to any director who
shall attend such meeting in person or who shall waive notice
thereof, before or after such meeting, in a signed writing.
Section 3.09. QUORUM. At all meetings of the Board of
Directors, a majority of the fixed number of directors shall
constitute a quorum for the transaction of business, except that
when the Board of Directors consists of one director, then the one
director shall constitute a quorum. In the absence of a quorum,
the directors present, by majority vote and without notice other
than by announcement, may adjourn the meeting from time to time
until a quorum shall be present. At any reconvened meeting
following such an adjournment at which a quorum shall be present,
any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 3.10. VOTES REQUIRED. Except as otherwise provided
by applicable law or by the Certificate, the vote of a majority of
the directors present at a meeting duly held at which a quorum is
present shall be sufficient to pass any measure.
Section 3.11. PLACE AND CONDUCT OF MEETINGS. Each regular
meeting and special meeting of the Board of Directors shall be held
at a location determined as follows: The Board of Directors may
designate any place, within or without the State of Delaware, for
the holding of any meeting. If no such designation is made: (i)
any meeting called by a majority of the directors shall be held at
such location, within the county of the Corporation's principal
executive office, as the directors calling the meeting shall
designate; and (ii) any other meeting shall be held at such
location, within the county of the Corporation's principal
executive office, as the Chairman of the Board may designate or, in
the absence of such designation, at the Corporation's principal
executive office. Subject to the requirements of applicable law,
all regular and special meetings of the Board of Directors shall be
conducted in accordance with such rules and procedures as the Board
of Directors may approve and, as to matters not governed by such
rules and procedures, as the chairman of such meeting shall
determine. The chairman of any regular or special meeting shall be
the Chairman of the Board, or in his absence a person designated by
the Board of Directors. The Secretary, or in the absence of the
Secretary a person designated by the chairman of the meeting, shall
act as secretary of the meeting.
Section 3.12. FEES AND COMPENSATION. Directors shall be paid
such compensation as may be fixed from time to time by resolutions
of the Board of Directors (a) for their usual and contemplated
services as directors, (b) for their services as members of
committees appointed by the Board of Directors, including
attendance at committee meetings as well as services which may be
required when committee members must consult with management staff,
and (c) for extraordinary services as directors or as members of
committees appointed by the Board of Directors, over and above
those services for which compensation is fixed pursuant to items
(a) and (b) in this Section 3.12. Compensation may be in the form
of an annual retainer fee or a fee for attendance at meetings, or
both, or in such other form or on such basis as the resolutions of
the Board of Directors shall fix. Directors shall be reimbursed
for all reasonable expenses incurred by them in attending meetings
of the Board of Directors and committees appointed by the Board of
Directors and in performing compensable extraordinary services.
Nothing contained herein shall be construed to preclude any
director from serving the Corporation in any other capacity, such
as an officer, agent, employee, consultant or otherwise, and
receiving compensation therefor.
Section 3.13. COMMITTEES OF THE BOARD OF DIRECTORS. Subject
to the requirements of applicable law, the Board of Directors may
from time to time establish committees, including standing or
special committees, which shall have such duties and powers as are
authorized by these Bylaws or by the Board of Directors. Committee
members, and the chairman of each committee, shall be appointed by
the Board of Directors. The Chairman of the Board, in conjunction
with the several committee chairmen, shall make recommendations to
the Board of Directors for its final action concerning members to
be appointed to the several committees of the Board of Directors.
Any member of any committee may be removed at any time with or
without cause by the Board of Directors. Vacancies which occur in
any committee shall be filled by a resolution of the Board of
Directors. If any vacancy shall occur in any committee by reason
of death, resignation, disqualification, removal or otherwise, the
remaining members of such committee, so long as a quorum is
present, may continue to act until such vacancy is filled by the
Board of Directors. The Board of Directors may, by resolution, at
any time deemed desirable, discontinue any standing or special
committee. Members of standing committees, and their chairmen,
shall be elected yearly at the organizational meeting of the Board
of Directors which is held immediately following the annual meeting
of stockholders.
Section 3.14. AUDIT COMMITTEE. There shall be an Audit
Committee of the Board of Directors which shall serve at the
pleasure of the Board of Directors and be subject to its control.
The Committee shall have the following membership and powers:
1. The Committee shall have at least three (3) members.
All members of the Committee shall be Independent Outside
Directors.
2. The Committee shall recommend to the Board of
Directors for its action the appointment or discharge of the
Corporation's independent auditors, based upon the Committee's
judgment of the independence of the auditors (taking into
account the fees charged both for audit and non-audit
services) and the quality of its audit work. Ratification by
the stockholders of the Board of Directors' appointment of the
Corporation's independent auditors may be sought in
conjunction with management's solicitation of proxies for the
annual meeting of stockholders, if so determined by the Board
of Directors. If the auditors must be replaced, the Committee
shall recommend to the Board of Directors for its action the
appointment of new auditors until the next annual meeting of
stockholders.
3. The Committee shall review and approve the scope and
plan of the audit.
4. The Committee shall meet with the independent
auditors at appropriate times to review, among other things,
the results of the audit and any certification, report or
opinion which the auditors propose to render in connection
with the Corporation's financial statements.
5. The Committee shall review and approve each
professional service of a non-audit nature to be provided by
the auditors.
6. The Committee shall meet with the Corporation's chief
internal auditor at least once a year to review his comments
concerning the adequacy of the Corporation's system of
internal accounting controls and such other matters as the
Committee may deem appropriate.
7. The Committee shall have the power to direct the
auditors and the internal audit staff to inquire into and
report to it with respect to any of the Corporation's
contracts, transactions or procedures, or the conduct of the
Corporate Office, or any division, profit center, subsidiary
or other unit, or any other matter having to do with the
Corporation's business and affairs. If authorized by the
Board of Directors, the Committee may initiate special
investigations in these regards.
8. The Committee shall have such other duties as may be
lawfully delegated to it from time to time by the Board of
Directors.
Section 3.15. COMPENSATION AND MANAGEMENT DEVELOPMENT
COMMITTEE. There shall be a Compensation and Management
Development Committee of the Board of Directors which shall serve
at the pleasure of the Board of Directors and be subject to its
control. The Committee shall have the following membership and
powers:
1. The Committee shall be composed of at least three (3)
members. All members of the Committee shall be Independent
Outside Directors. The principal Human Resources officer of
the Corporation shall be a non-voting member of the Committee.
2. The Committee shall recommend to the Board of
Directors for its action the amount to be appropriated for
awards to be made each year to elected officers under the
Corporation's incentive compensation plan.
3. The Committee shall establish the Corporation's
annual performance objectives under the Corporation's
incentive compensation plans.
4. The Committee shall make recommendations to the Board
of Directors with respect to the base salary and incentive
compensation of the elected officers. The Committee shall
take final action with respect to the base salary and
incentive compensation of all other officers and employees
receiving a base salary over an amount as shall be determined
from time to time either by the Committee or the Board of
Directors.
5. The Committee shall review management's
recommendations and take final action with respect to all
awards to be made under the Corporation's long-term incentive
plans or other similar benefit plans which may be adopted by
the Board of Directors or the stockholders and in which
corporate officers or directors are eligible to participate,
provided however that all such awards relative to the five (5)
most highly compensated officers must be reported to the Board
of Directors.
6. The Committee shall review on a continuing basis the
Corporation's general compensation policies and practices,
fringe benefits and the Corporation's compliance with its
various affirmative action plans and programs. The committee
shall also review and recommend to the Board of Directors for
its final action all compensation plans in which elected
officers or directors are eligible to participate.
7. The Committee shall review from time to time and
report to the Board of Directors actions taken by management
concerning the Corporation's overall executive structure and
the steps being taken to assure the succession of qualified
management.
8. The Committee shall have such other duties as may be
lawfully delegated to it from time to time by the Board of
Directors.
Section 3.16. EXECUTIVE AND PUBLIC POLICY COMMITTEE. There
shall be an Executive and Public Policy Committee of the Board of
Directors which shall serve at the pleasure of the Board of
Directors and be subject to its control. The Committee shall have
the following membership and powers:
1. The Committee shall have at least five (5) members.
At least sixty percent (60%) of the members shall be
Independent Outside Directors.
2. The Committee shall review, approve and monitor the
policy, organization, charter and implementation of the
Northrop Grumman Employees Political Action Committee.
3. The Committee shall review and approve all agreements
with consultants or commission agents under procedures it may
adopt from time to time where the total compensation reaches
a level which shall be determined from time to time by the
Committee or where the relationship is expected to be a
sensitive one.
4. The Committee shall review and report to the Board of
Directors from time to time concerning the Corporation's
compliance with the Corporation's policies, practices and
procedures with respect to consultants and commission agents.
5. The Committee shall review and make policy and budget
recommendations to the Board of Directors for its actions
concerning proposed charitable contributions and aid to higher
education to be given by the Corporation each year.
6. The Committee shall have such other duties as
lawfully may be delegated to it from time to time by the Board
of Directors.
Section 3.17. FINANCE COMMITTEE. There shall be a Finance
Committee of the Board of Directors which shall serve at the
pleasure of the Board of Directors and be subject to its control.
The Committee shall have the following membership and powers:
1. The Committee shall have at least five (5) members.
At least fifty percent (50%) of the members of the Committee
shall be Independent Outside Directors. The chief financial
officer of the Corporation shall be a non-voting member of the
Committee.
2. The Committee shall review and give consideration to
management requests for required specific new financing of a
long-term nature, whether debt or equity, and make recommenda-
tions to the Board of Directors for its final action.
3. The Committee shall review the current financial
condition of the Company and planned financial requirements.
4. The Committee shall review periodically the Corpora-
tion's dividend policy in connection with dividend
declarations and make recommendations to the Board of
Directors for its final action.
5. The Committee shall consider management's recommenda-
tions concerning acquisitions, mergers or divestments which
management has determined to be of an unusual or material
nature and shall make recommendations to the Board of
Directors for its final action.
6. The Committee shall consider management's recom-
mendations concerning contracts or programs which management
has determined to be of an unusual or material nature and
shall make recommendations to the Board of Directors for its
final action.
7. The Committee shall periodically review the
investment performance of the employee benefit plans, capital
asset requirements and short-term investment policy when
appropriate.
8. The Committee shall have such other duties as
lawfully may be delegated to it from time to time by the Board
of Directors.
Section 3.18. NOMINATING COMMITTEE. There shall be a
Nominating Committee of the Board of Directors which shall serve at
the pleasure of the Board of Directors and be subject to its
control. The Committee shall have the following membership and
powers:
1. The Committee shall have at least three (3) members.
All members of the Committee shall be Independent Outside
Directors.
2. The Committee shall review candidates to serve as
directors and shall recommend nominees to the Board of
Directors for election at each annual meeting of stockholders
or other special meetings where directors are to be elected
and shall recommend persons to serve as proxies to vote
proxies solicited by management in connection with such
meetings.
3. The Committee shall cause the names of all director
candidates that are approved by the Board of Directors to be
listed in the Corporation's proxy materials and shall support
the election of all candidates so nominated by the Board of
Directors to the extent permitted by law.
4. The Committee shall review and make recommendations
to the Board of Directors for its final action concerning the
composition and size of the Board of Directors, its evaluation
of the performance of incumbent directors, its recommendations
concerning the compensation of the Directors, its
recommendations concerning directors to fill vacancies and its
evaluation and recommendations concerning potential candidates
to serve in the future on the Board of Directors to assure the
Board's continuity and succession.
5. The Committee shall have such other duties as
lawfully may be delegated to it from time to time by the Board
of Directors.
Section 3.19. MEETINGS OF COMMITTEES. Each committee of the
Board of Directors shall fix its own rules of procedure consistent
with the provisions of applicable law and of any resolutions of the
Board of Directors governing such committee. Each committee shall
meet as provided by such rules or such resolution of the Board of
Directors, and shall also meet at the call of its chairman or any
two (2) members of such committee. Unless otherwise provided by
such rules or by such resolution, the provisions of these Bylaws
under Article III entitled "Directors" relating to the place of
holding meetings and the notice required for meetings of the Board
of Directors shall govern the place of meetings and notice of
meetings for committees of the Board of Directors. A majority of
the members of each committee shall constitute a quorum thereof,
except that when a committee consists of one (1) member, then the
one (1) member shall constitute a quorum. In the absence of a
quorum, a majority of the members present at the time and place of
any meeting may adjourn the meeting from time to time until a
quorum shall be present and the meeting may be held as adjourned
without further notice or waiver. Except in cases where it is
otherwise provided by the rules of such committee or by a
resolution of the Board of Directors, the vote of a majority of the
members present at a duly constituted meeting at which a quorum is
present shall be sufficient to pass any measure by the committee.
ARTICLE IV
OFFICERS
Section 4.01. DESIGNATION, ELECTION AND TERM OF OFFICE. The
Corporation shall have a Chairman of the Board and/or a President
either of whom may be designated Chief Executive Officer by the
Board of Directors, such Vice Presidents (each of whom may be
assigned by the Board of Directors or the Chief Executive Officer
an additional title descriptive of the functions assigned to him
and one or more of whom may be designated Executive, Group or
Senior Vice President) as the Board of Directors deems appropriate,
a Secretary and a Treasurer. These officers shall be elected
annually by the Board of Directors at the organizational meeting
immediately following the annual meeting of stockholders, and each
such officer shall hold office until the corresponding meeting of
the Board of Directors in the next year or until his earlier
resignation, death or removal. Any vacancy in any of the above
offices may be filled for an unexpired portion of the term by the
Board of Directors at any regular special meeting. The Chief
Executive Officer may, by a writing filed with the Secretary,
designate titles for employees and agents, as, from time to time,
may appear necessary or advisable in the conduct of the affairs of
the Corporation and, in the same manner, terminate or change such
titles.
Section 4.02. CHAIRMAN OF THE BOARD. The Board of Directors
shall designate the Chairman of the Board from among its members.
The Chairman of the Board of Directors shall preside at all
meetings of the Board and the Shareholders, and shall perform such
other duties as shall be delegated to him by the Board or the
officer designated as chief executive.
Section 4.03. PRESIDENT. The President shall perform such
duties and have such responsibilities as may from time to time be
delegated or assigned to him by the Board of Directors or the
officer designated as chief executive.
Section 4.04. CHIEF EXECUTIVE. The Board of Directors shall
designate either the Chairman of the Board or the President to be
the chief executive of the Corporation. The officer so designated
shall be responsible for the general supervision, direction and
control of the business and affairs of the Corporation.
Section 4.05. CHIEF FINANCIAL OFFICER. The Chief Financial
Officer of the Corporation shall be responsible to the Chief
Executive Officer for the management and supervision of all
financial matters and to provide for the financial growth and
stability of the Corporation. He shall attend all regular meetings
of the Board of Directors and keep the Directors currently informed
concerning all significant financial matters that could impact upon
the business or affairs of the Corporation. He shall also perform
such additional duties as may be assigned to him from time to time
by the Board of Directors or the Chief Executive Officer.
Section 4.06. EXECUTIVE VICE PRESIDENTS, SENIOR VICE
PRESIDENTS AND VICE PRESIDENTS. Executive vice presidents, senior
vice presidents and vice presidents of the Corporation that are
elected by the Board of Directors shall perform such duties as may
be assigned to them from time to time by the Chief Executive
Officer.
Section 4.07. CHIEF LEGAL OFFICER. The chief legal officer
of the Corporation shall be the General Counsel who shall be
responsible to the Chief Executive Officer for the management and
supervision of all legal matters. The General Counsel shall attend
all regular meetings of the Board of Directors and shall keep the
Directors currently informed concerning all significant legal
matters, particularly those involving important business, legal,
moral or ethical issues that could impact upon the business or
affairs of the Corporation.
Section 4.08. SECRETARY. The Secretary shall keep the
minutes of the meetings of the stockholders, the Board of Directors
and all committee meetings. The Secretary shall be the custodian
of the corporate seal and shall affix it to all documents which he
is authorized by law or the Board of Directors to sign and seal.
The Secretary also shall perform such other duties as may be
assigned from time to time by the Chief Executive Officer.
Section 4.09. TREASURER. The Treasurer shall be accountable
to the Senior Vice President, Finance, and shall perform such
duties as may be assigned to the Treasurer from time to time by the
Senior Vice President, Finance.
Section 4.10. APPOINTED OFFICERS. The Chief Executive
Officer may appoint one or more Corporate Staff Vice Presidents,
officers of groups or divisions or assistant secretaries, assistant
treasurers and such other assistant officers as the business of the
Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as may be
specified from time to time by the Chief Executive Officer.
Section 4.11. ABSENCE OR DISABILITY OF AN OFFICER. In the
case of the absence or disability of an officer of the Corporation
the Board of Directors, or any officer designated by it, or the
Chief Executive Officer may, for the time of the absence or
disability, delegate such officer's duties and powers to any other
officer of the Corporation.
Section 4.12. OFFICERS HOLDING TWO OR MORE OFFICES. The same
person may hold any two or more of the above-mentioned offices.
However, no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is
required by law, by the Certificate or by these Bylaws, to be
executed, acknowledged or verified by any two or more officers.
Section 4.13. COMPENSATION. The Board of Directors shall
have the power to fix the compensation of all officers and
employees of the Corporation.
Section 4.14. RESIGNATIONS. Any officer may resign at any
time by giving written notice to the Board of Directors, to the
Chief Executive Officer, or to the Secretary of the Corporation.
Any such resignation shall take effect at the time specified
therein unless otherwise determined by the Board of Directors. The
acceptance of a resignation by the Corporation shall not be
necessary to make it effective.
Section 4.15. REMOVAL. Any officer of the Corporation may be
removed, with or without cause, by the affirmative vote of a
majority of the entire Board of Directors. Any assistant officer
of the Corporation may be removed, with or without cause, by the
Chief Executive Officer, or by the Board of Directors.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 5.01. RIGHT TO INDEMNIFICATION. Each person who was
or is made a party, or is threatened to be made a party, to any
actual or threatened action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she is or was a
director, officer, employee, or agent of the Corporation
(hereinafter an "indemnitee") shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may
hereafter be amended, or by other applicable law as then in effect,
against all expense, liability, and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties, and
amounts paid in settlement) actually and reasonably incurred or
suffered by such indemnitee in connection therewith. Any person
who was or is made a party, or is threatened to be made a party, to
any proceeding by reason of the fact that he or she is or was
serving at the request of an executive officer of the Corporation
as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan, shall
also be considered an indemnitee for the purposes of this Article.
The right to indemnification provided by this Article shall apply
whether or not the basis of such proceeding is alleged action in an
official capacity as such director, officer, employee or agent or
in any other capacity while serving as such director, officer,
employee or agent. Notwithstanding anything in this Section 5.01
to the contrary, except as provided in Section 5.03 of this Article
with respect to proceedings to enforce rights to indemnification,
the Corporation shall indemnify any such indemnitee in connection
with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the
Corporation.
Section 5.02. ADVANCEMENT OF EXPENSES. (a) The right to
indemnification conferred in Section 5.01 shall include the right
to have the expenses incurred in defending or preparing for any
such proceeding in advance of its final disposition (hereinafter an
"advancement of expenses") paid by the Corporation; provided,
however, that an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any
other capacity in which service was or is to be rendered by such
indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation
of an undertaking containing such terms and conditions, including
the requirement of security, as the Board of Directors deems
appropriate (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately
be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be
indemnified for such expenses under this Article or otherwise; and
provided, further, that an advancement of expenses shall not be
made if the Corporation's Board of Directors makes a good faith
determination that such payment would violate any applicable law.
The Corporation shall not be obligated to advance fees and expenses
to a director, officer, employee or agent in connection with a
proceeding instituted by the Corporation against such person. (b)
Notwithstanding anything in Section 5.02(a) to the contrary, the
right of employees or agents to advancement of expenses shall be at
the discretion of the Board of Directors and on such terms and
conditions, including the requirement of security, as the Board of
Directors deems appropriate. The Corporation may, by action of its
Board of Directors, authorize one or more executive officers to
grant rights for the advancement of expenses to employees and
agents of the Corporation on such terms and conditions as such
officers deem appropriate.
Section 5.03. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim
under Section 5.01 is not paid in full by the Corporation within
sixty (60) calendar days after a written claim has been received by
the Corporation, except in the case of a claim for an advancement
of expenses under Section 5.02 in which case the applicable period
shall be thirty (30) calendar days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If the indemnitee is successful in whole or
in part in any such suit, the indemnitee shall also be entitled to
be paid the expense of prosecuting or defending such suit.
Section 5.04. NONEXCLUSIVITY OF RIGHTS. (a) The rights to
indemnification and to the advancement of expenses conferred in
this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provisions
of the Certificate of Incorporation, Bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
Notwithstanding any amendment to or repeal of this Article, any
indemnitee shall be entitled to indemnification in accordance with
the provisions hereof with respect to any acts or omissions of such
indemnitee occurring prior to such amendment or repeal. (b) The
Corporation may maintain insurance, at its expense, to protect
itself and any past or present director, officer, employee, or
agent of the Corporation or another corporation, partnership, joint
venture, trust, or other enterprise against any expense, liability,
or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability, or loss
under the Delaware General Corporation Law. The Corporation may
enter into contracts with any indemnitee in furtherance of the
provisions of this Article and may create a trust fund, grant a
security interest or use other means (including, without
limitation, a letter of credit) to ensure the payment of such
amounts as may be necessary to effect indemnification as provided
in this Article. (c) The Corporation may without reference to
Sections 5.01 through 5.04 (a) and (b) hereof, pay the expenses,
including attorneys fees, incurred by any director, officer,
employee or agent of the Corporation who is subpoenaed, interviewed
or deposed as a witness or otherwise incurs expenses in connection
with any civil, arbitration, criminal, or administrative proceeding
or governmental or internal investigation to which the Corporation
is a party, target, or potentially a party or target, or of any
such individual who appears as a witness at any trial, proceeding
or hearing to which the Corporation is a party, if the Corporation
determines that such payments will benefit the Corporation and if,
at the time such expenses are incurred by such individual and paid
by the Corporation, such individual is not a party, and is not
threatened to be made a party, to such proceeding or investigation.
ARTICLE VI
STOCK
Section 6.01. CERTIFICATES. Except as otherwise provided by
law, each stockholder shall be entitled to a certificate or
certificates which shall represent and certify the number and class
(and series, if appropriate) of shares of stock owned by him in the
Corporation. Each certificate shall be signed in the name of the
Corporation by the Chairman of the Board, or the President, or a
Vice President, together with the Secretary, or an Assistant
Secretary, or the Treasurer or Assistant Treasurer. Any or all of
the signatures on any certificate may be facsimile. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the
same effect as if such person were an officer, transfer agent or
registrar at the date of issue.
Section 6.02. TRANSFER OF SHARES. Shares of stock shall be
transferable on the books of the Corporation only by the holder
thereof, in person or by his duly authorized attorney, upon the
surrender of the certificate representing the shares to be
transferred, properly endorsed, to the Corporation's registrar if
the Corporation has a registrar. The Board of Directors shall have
power and authority to make such other rules and regulations
concerning the issue, transfer and registration of certificates of
the Corporation's stock as it may deem expedient.
Section 6.03. TRANSFER AGENTS AND REGISTRARS. The
Corporation may have one or more transfer agents and one or more
registrars of its stock whose respective duties the Board of
Directors or the Secretary may, from time to time, define. No
certificate of stock shall be valid until countersigned by a
transfer agent, if the Corporation has a transfer agent, or until
registered by a registrar, if the Corporation has a registrar. The
duties of transfer agent and registrar may be combined.
Section 6.04. STOCK LEDGERS. Original or duplicate stock
ledgers, containing the names and addresses of the stockholders of
the Corporation and the number of shares of each class of stock
held by them, shall be kept at the principal executive office of
the Corporation or at the office of its transfer agent or
registrar.
Section 6.05. RECORD DATES. The Board of Directors shall
fix, in advance, a date as the record date for the purpose of
determining stockholders entitled to notice of, or to vote at, any
meeting of stockholders or any adjournment thereof, or stockholders
entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or in order
to make a determination of stockholders for any other proper
purpose. Such date in any case shall be not more than sixty (60)
days, and in case of a meeting of stockholders, not less than ten
(10) days, prior to the date on which the particular action,
requiring such determination of stockholders is to be taken. Only
those stockholders of record on the date so fixed shall be entitled
to any of the foregoing rights, notwithstanding the transfer of any
such stock on the books of the Corporation after any such record
date fixed by the Board of Directors.
Section 6.06. NEW CERTIFICATES. In case any certificate of
stock is lost, stolen, mutilated or destroyed, the Board of
Directors may authorize the issuance of a new certificate in place
thereof upon such terms and conditions as it may deem advisable; or
the Board of Directors may delegate such power to any officer or
officers or agents of the Corporation; but the Board of Directors
or such officer or officers or agents, in their discretion, may
refuse to issue such a new certificate unless the Corporation is
ordered to do so by a court of competent jurisdiction.
ARTICLE VII
RESTRICTIONS ON SECURITIES REPURCHASES
Section 7.01. RESTRICTIONS ON SECURITIES REPURCHASES.
1. Vote required for certain acquisition of securities.
Except as set forth in Subsection 2 of this Section 7.01, in
addition to any affirmative vote of stockholders required by any
provision of law, the Certificate of Incorporation or Bylaws of
this Corporation, or any policy adopted by the Board of Directors,
neither the Corporation nor any Subsidiary shall knowingly effect
any direct or indirect purchase or other acquisition of any equity
security of a class of securities which is registered pursuant to
Section 12 of the /Securities Exchange Act of 1934, as amended (the
"Exchange Act"), issued by the Corporation at a price which is in
excess of the highest Market Price of such equity security on the
largest principal national securities exchange in the United States
on which such security is listed for trading on the date that the
understanding to effect such transaction is entered into by the
Corporation (whether or not such transaction is concluded or a
written agreement relating to such transaction is executed on such
date, and such date to be conclusively established by determination
of the Board of Directors), from any Interested Person, without the
affirmative vote of the holders of the Voting Shares representing
at least a majority of the aggregate voting power of all
outstanding voting shares, excluding Voting Shares beneficially
owned by such Interested Person, voting together as a single class.
Such affirmative vote shall be required notwithstanding the fact
that no vote may be required, or that a lesser percentage may be
specified, by law or any agreement with any national securities
exchange, or otherwise.
2. When A Vote Is Not Required. The provisions of
Subsection 1 of this Section 7.01 shall not be applicable with
respect to:
a. any purchase, acquisition, redemption or exchange of
such equity securities, the purchase, acquisition, redemption
or exchange of which is provided for in the Corporation's
Certificate of Incorporation;
b. any purchase or other acquisition of equity
securities made as part of a tender or exchange offer by the
Corporation to purchase securities of the same class made on
the same terms to all holders of such securities and complying
with the applicable requirements of the Exchange Act of 1934,
as amended and the rules and regulations thereunder (or any
successor provisions to such Act, rules or regulations);
c. any purchase or acquisition of equity securities made
pursuant to an open market purchase program which has been
approved by the Board of Directors.
3. Certain definitions. For the purpose of this Section:
a. "Affiliate" and "Associate" shall have their
respective meanings ascribed to such terms in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act, as in effect
on January 1, 1991.
b. "Beneficial Owner" and "Beneficial Ownership" shall
have the meanings ascribed to such terms in Rule 13d-3 and Rule
13d-5 of the General Rules and Regulations under the Exchange Act,
as in effect on January 1, 1991.
c. "Interested person" shall mean any person (other
than the Corporation or any subsidiary) that is the direct or
indirect Beneficial Owner of five percent (5%) or more of the
aggregate voting power of the Voting Shares, and any Affiliate
or Associate of any such person. For the purpose of
determining whether a person is an Interested Person, the
outstanding Voting Shares include unissued shares of voting
stock of the Corporation of which the Interested Person is the
Beneficial Owner, but shall not include any other shares of
voting stock of the Corporation which may be issuable pursuant
to any agreement, arrangement or understanding, or upon
exercise or conversion of rights, warrants or options, or
otherwise to any person who is not the Interested Person.
d. "Market Price" of shares of the class of equity
security of the Corporation on any day shall mean the highest
sale price (regular way) of shares of such class of such
equity security on such day, or, if that day is not a trading
day, on the trading day immediately preceding such day, on the
largest principal national securities exchange on which such
class of stock is then listed or admitted to trading, or if
not listed or admitted to trading on any national securities
exchange, then the highest reported sale price for such shares
in the over-the-counter market as reported on the NASDAQ
National Market System, or if such sale price shall not be
reported thereon, the highest bid price so reported, or, of
such price shall not be reported thereon, as the same shall be
reported by the National Quotation Bureau, Incorporated, or if
the price is not determinable as set forth above, as
determined in good faith by the Board of Directors.
e. "Person" shall mean any individual, partnership,
firm, corporation, association, trust, unincorporated
organization or other entity, as well as any syndicate or
group deemed to be a person pursuant to Section 13(d)(3) of
the Exchange Act, as in effect on January 1, 1991.
f. "Subsidiary" shall mean any company or entity of
which the Corporation owns, directly or indirectly, (i) a
majority of the outstanding shares of equity securities, or
(ii) shares having a majority of the voting power represented
by all of the outstanding Voting Stock of such company
entitled to vote generally in the election of directors. For
the purpose of determining whether a company is a Subsidiary,
the outstanding voting stock and shares of equity securities
thereof shall include unissued shares of which The Corporation
is the beneficial owner but, except for the purpose of
determining whether a company is a Subsidiary for the purpose
of Subsection 3(c) hereof shall not include any shares which
may be issuable pursuant to any agreement, arrangement,or
understanding, or upon the exercise of conversion rights,
warrants or options, or otherwise to any Person who is not the
Corporation.
g. "Voting shares" shall mean the outstanding shares of
capital stock of the Corporation entitled to vote generally in
the election of directors.
ARTICLE VIII
SUNDRY PROVISIONS
Section 8.01. FISCAL YEAR. The fiscal year of the
Corporation shall end on the 31st day of December of each year.
Section 8.02. SEAL. The seal of the Corporation shall bear
the name of the Corporation and the words "Delaware" and
"Incorporated March 12, 1985."
Section 8.03. VOTING OF STOCK IN OTHER CORPORATIONS. Any
shares of stock in other corporations or associations, which may
from time to time be held by the Corporation, may be represented
and voted at any of the stockholders' meetings thereof by the Chief
Executive Officer or his designee. The Board of Directors,
however, may by resolution appoint some other person or persons to
vote such shares, in which case such person or persons shall be
entitled to vote such shares upon the production of a certified
copy of such resolution.
Section 8.04. AMENDMENTS. These Bylaws may be adopted,
repealed, rescinded, altered or amended only as provided in
Articles Fifth and Sixth of the Certificate.
August 17, 1994