SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
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/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.142-12
NORTHROP CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
NORTHROP CORPORATION
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
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[LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
NOTICE
Notice is hereby given that the Annual Meeting of Stockholders of Northrop
Corporation (the "Company") will be held on Wednesday, May 18, 1994, at 10:00
A.M. at the Sheraton Los Angeles Airport Hotel, 6101 West Century Boulevard, Los
Angeles, California 90045 for the following purposes:
(1) To elect four Class III directors to hold office for three years and
until their respective successors are elected and qualified.
(2) To consider and act upon a proposal to ratify the appointment of
Deloitte & Touche as the Company's independent auditors.
(3) To consider and act upon a proposal to amend the Northrop Corporation
Certificate of Incorporation to change the corporate name to Northrop
Grumman Corporation.
(4) To consider and act upon such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Stockholders of record at the close of business on March 22, 1994, are
entitled to receive notice of and to vote at the Annual Meeting.
By order of the Board of Directors,
SHEILA M. GIBBONS
CORPORATE VICE PRESIDENT AND SECRETARY
1840 Century Park East
Los Angeles, California 90067
April 18, 1994
IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE SIGN AND
MAIL PROMPTLY THE ENCLOSED PROXY FOR WHICH A RETURN ENVELOPE IS
PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement, which is part of the accompanying Notice of Annual
Meeting of Stockholders, is furnished in connection with the solicitation, by
the Board of Directors of Northrop Corporation (the "Company"), of proxies to be
used at the Company's 1994 Annual Meeting of Stockholders (the "Annual Meeting")
and at any and all adjournments of such Annual Meeting. If a proxy in the
accompanying form is duly executed and returned, the shares represented by such
proxy will be voted as indicated. Any person executing the proxy may revoke it
prior to its exercise. Unless otherwise directed in the accompanying proxy, the
persons named therein (or their substitutes) will vote FOR the election of the
four director nominees listed below under "Election of Directors" and FOR the
proposal to ratify the appointment of Deloitte & Touche as auditors of the
Company for the year ending December 31, 1994 and FOR the proposal to amend the
Northrop Corporation Certificate of Incorporation to change the corporate name
to Northrop Grumman Corporation. As to any other business which may properly
come before the Annual Meeting, the named proxies will vote in accordance with
their best judgment. The Company does not presently know of any other such
business.
At the close of business on February 22, 1994 there were 49,132,906 shares
of Common Stock of the Company, par value $1.00 per share (the "Common Stock"),
outstanding. Only holders of record of Common Stock at the close of business on
March 22, 1994 are entitled to notice of, and to vote at, the Annual Meeting or
any adjournment thereof. Each share of Common Stock is entitled to one vote.
Proxies for shares marked "abstain" on a matter will be considered to be
represented at the meeting, but not voted, for these purposes. Shares registered
in the names of brokers or other "street name" nominees for which proxies are
voted on some but not all matters will be considered to be represented at the
meeting, but will be considered to be voted only as to those matters actually
voted.
The principal office of the Company is located at 1840 Century Park East,
Los Angeles, California 90067. This Proxy Statement and the form of proxy will
be sent to stockholders commencing approximately April 18, 1994.
VOTING SECURITIES
The following table lists the beneficial ownership of each person or group
who, as of December 31, 1993, owned to the Company's knowledge more than five
percent of the Company's Common Stock then outstanding.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ---------------------------------------------------------------- ------------------------ ------------
Bankers Trust Company (a)....................................... 6,149,445 shares(b) 12.6%
300 So. Grand Avenue, Los Angeles, CA 90071
U.S. Trust Company of California, N.A. (c)...................... 7,574,800 shares(d) 15.5%
555 So. Flower St., Los Angeles, CA 90071-2429
Wellington Management Company................................... 3,921,310 shares(e) 8.0%
75 State Street, Boston, MA 02109
- ------------------------
(a) Bankers Trust Company is Trustee (the "Trustee") under the Northrop
Corporation Employee Benefit Plans Master Trust (the "Trust").
(b) These shares are held under the Northrop Savings Plan, the relevant
portion of which is an Employee Stock Ownership Plan, for the account of
(but not beneficially owned by) the Trustee. The Trustee votes these
shares in accordance with instructions received from the
employee-participants in such Plan to whose accounts the shares have been
allocated. Undirected shares are voted in the same proportion as shares
for which instructions are received.
1
(c) U.S. Trust Company is an Investment Manager (the "Investment Manager") for
the Northrop Retirement Plan and the pension plans for certain divisions
of the Company (the "Retirement Plans"); under the Trust, the Investment
Manager has responsibility for the management and control of the Northrop
shares held in the Trust as assets of the Retirement Plans.
(d) These shares are held for the account of (but not beneficially owned by)
the Trustee. The Investment Manager has voting power over these shares,
except in the event of a contested election of directors or in connection
with a tender offer. In such case the shares are voted in accordance with
instructions received from eligible participants in the Retirement Plans.
Undirected shares are voted in the same proportion as shares for which
instructions are received.
(e) This information was provided by Wellington Management Company ("WMC").
According to WMC, as of the date set forth above, WMC had shared
dispositive power over 3,921,310 shares but shared voting power over only
911,160 shares.
STOCK OWNERSHIP OF OFFICERS AND DIRECTORS
The total number of shares of Common Stock beneficially owned by directors,
nominees and Named Executive Officers and all directors and executive officers
as a group at the close of business on February 22, 1994 was as follows:
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS
- ------------------------------------------------------- ------------------------ -----------
Oliver C. Boileau, Jr.................................. 27,390 *
Jack R. Borsting....................................... 1,570 *
John T. Chain, Jr. .................................... 570 *
Jack Edwards........................................... 170 *
Barbara C. Jordan...................................... 570 *
Kent Kresa............................................. 583,416 1.2 %
Richard R. Molleur..................................... 13,666 *
Aulana L. Peters....................................... 370 *
John Robson............................................ 1,070 *
Richard M. Rosenberg................................... 1,070 *
William F. Schmied..................................... 2,070 *
Brent Scowcroft........................................ 670 *
John Slaughter......................................... 70 *
Wallace C. Solberg..................................... 72,250 *
Richard J. Stegemeier.................................. 1,070 *
Richard B. Waugh, Jr................................... 9,459 *
Total.............................................. 715,451 1.5 %
Directors and executive officers as a group............ 774,533 1.6 %
- ------------------------
* Denotes ownership of less than 1% of the outstanding shares
(1) Includes shares which, as of March 15, 1994, may be acquired within sixty
days pursuant to the exercise of options (which shares are treated as
outstanding for the purposes of determining beneficial ownership and
computing the percentage set forth); shares held by trusts of which
directors and their wives are trustees; shares held by a trust in which an
officer and director is trustee; Restricted Award Shares held by the Named
Executive Officers, issued pursuant to the Long-Term Incentive Plans,
which shares carry voting and dividend rights; and shares held as of
December 31, 1993 in the Northrop Savings Plan for the benefit of
officers.
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ELECTION OF DIRECTORS
Under the Company's Certificate of Incorporation, which provides for a
classified Board of Directors, four directors in Class III will be elected at
the 1994 Annual Meeting to hold office for three years until the 1997 Annual
Meeting of Stockholders and until their successors have been duly elected and
qualified. Unless instructed otherwise, the persons named in the accompanying
proxy (or their substitutes) will vote the shares represented by such proxy for
the election of the four Class III Director Nominees listed in the table set
forth below. In case any of such nominees shall become unavailable for election
to the Board of Directors, an event which is not anticipated, the persons named
as proxies (or their substitutes) shall have full discretion and authority to
vote or refrain from voting for any other nominee in accordance with their
judgment.
The following information, furnished with respect to each of the four
nominees for election as a Class III director, and each of the five Class I and
five Class II directors whose terms will continue after the Annual Meeting, is
obtained from the Company's records or from information furnished directly by
the individual to the Company. All the nominees are presently serving on the
Board of Directors. It is the Company's policy that members of the Board of
Directors are ineligible to stand for election to the Board of Directors if they
will have attained age 70 by the date of the Company's Annual Meeting of
Stockholders at which such election is held.
NOMINEES FOR DIRECTOR -- CLASS III
JOHN T. CHAIN, JR., 59. EXECUTIVE VICE PRESIDENT, SAFETY AND CORPORATE
SUPPORT, BURLINGTON NORTHERN RAILROAD COMPANY.
ELECTED 1991
CHAIRMAN OF THE EXECUTIVE COMMITTEE; MEMBER OF THE AUDIT COMMITTEE.
During his military career, John T. Chain, Jr. held a number of Air Force
commands. In 1978, he became military assistant to the Secretary of the Air
Force. In 1984, he became the Director of Politico-Military Affairs, Department
of State. General Chain has been Chief of Staff for Supreme Headquarters Allied
Powers Europe, and Commander in Chief, Strategic Air Command, the position from
which he retired in February 1991. In March 1991, he became Executive Vice
President of Operations for Burlington Northern Railroad, serving in that
capacity until March of 1992. General Chain is a member of the Council on
Foreign Relations and Chairman of the Wellness Council of America. He is a
director of Kemper Corporation.
JACK EDWARDS, 65. PARTNER, HAND, ARENDALL, BEDSOLE, GREAVES & JOHNSTON.
ELECTED 1991
MEMBER OF THE EXECUTIVE AND THE AUDIT COMMITTEES.
Jack Edwards was elected in 1964 to the House of Representatives and served in
the Congress for twenty years representing the First District of Alabama. In his
tenure in the House, Mr. Edwards served on the Appropriations Committee for
sixteen years, including ten years as Senior Republican on the Defense
Subcommittee, and sixteen years on the Transportation Subcommittee. He also
served on the Banking, Finance and Urban Affairs Committee. He retired from the
Congress in January 1985 and became a partner in his current law firm. He is a
director of Southern Company, Holnam Inc., and Dravo Corporation. Mr. Edwards is
also a member of the Board of Trustees of the University of Alabama System.
3
KENT KRESA, 55. CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER.
ELECTED 1987
Before joining Northrop Corporation, Kent Kresa was associated with the Lincoln
Laboratories of M.I.T. and the Defense Advanced Research Projects Agency. In
1975, he joined Northrop as Vice President and Manager of the Corporation's
Research and Technology Center. He became General Manager of the Ventura
Division in 1976, Group Vice President of the Aircraft Group in 1982 and Senior
Vice President for Technology and Development in 1986. Mr. Kresa was elected
President and Chief Operating Officer of Northrop in 1987. He was named Chief
Executive Officer in 1989 and Chairman of the Board in 1990. Mr. Kresa is a
member of the Massachusetts Institute of Technology Visiting Committee for the
Department of Aeronautics and Astronautics, a Fellow of the American Institute
of Aeronautics and Astronautics, serves on the Board of Governors of the
Aerospace Industries Association, on the Board of Directors of Chrysler
Corporation, Atlantic Richfield Company, and the Los Angeles World Affairs
Council, and is also a director of the John Tracy Clinic for the hearing
impaired.
BRENT SCOWCROFT, 69. LIEUTENANT GENERAL, USAF (RET.) AND FORMER ASSISTANT TO
THE PRESIDENT FOR NATIONAL SECURITY AFFAIRS.
ELECTED 1993
MEMBER OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT AND THE FINANCE
COMMITTEES.
General Scowcroft served as Assistant to the President for National Security
Affairs for Presidents Bush and Ford. A retired U.S. Air Force Lieutenant
General, General Scowcroft served in numerous national security posts in the
Pentagon and the White House prior to his appointments as Assistant to the
President for National Security Affairs. He also held a number of teaching
positions at West Point and the Air Force Academy, specializing in political
science. He received his B.S. degree from West Point, and M.A. and Ph.D. degrees
from Columbia University. General Scowcroft is also a director of Pennzoil.
CONTINUING DIRECTORS -- CLASS I
JACK R. BORSTING, 65. E. MORGAN STANLEY PROFESSOR OF BUSINESS ADMINISTRATION,
UNIVERSITY OF SOUTHERN CALIFORNIA.
ELECTED 1991
CHAIRMAN OF THE NOMINATING COMMITTEE; MEMBER OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT AND THE FINANCE COMMITTEES.
Dr. Jack Borsting was at the Naval Postgraduate School in Monterey, California
from 1959 to 1980. During his tenure at Monterey, he was professor of Operations
Research, Chairman of the Department of Operations Research and Administration
Science, and Provost and Academic Dean. Dr. Borsting was Assistant Secretary of
Defense (Comptroller) from 1980 to 1983 and Dean of the School of Business at
the University of Miami from 1983 to 1988. From 1988 to 1994, he was the Robert
R. Dockson professor and Dean of the School of Business Administration at the
University of Southern California, Los Angeles. He is past president of both the
Operations Research Society of America and the Military Operations Research
Society. He is currently a trustee of the Orthopaedic Hospital Foundation of Los
Angeles and serves as a director of Delta Research and TROLearning.
4
AULANA L. PETERS, 52. PARTNER, GIBSON, DUNN & CRUTCHER.
ELECTED 1992
MEMBER OF THE EXECUTIVE AND THE AUDIT COMMITTEES.
Aulana L. Peters joined the law firm of Gibson, Dunn & Crutcher in 1973. In
1980, she was named a partner in the firm and continued in the practice of law
until 1984 when she accepted an appointment as Commissioner of the Securities
and Exchange Commission. In 1988, after serving four years as a Commissioner,
she returned to Gibson, Dunn & Crutcher. Ms. Peters is a director of 3M, the New
York Stock Exchange, IDS Mutual Fund Group and Mobil Corporation.
RICHARD M. ROSENBERG, 63. CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER,
BANKAMERICA CORPORATION AND BANK OF AMERICA NT &
SA.
ELECTED 1991
CHAIRMAN OF THE FINANCE COMMITTEE AND MEMBER OF THE NOMINATING COMMITTEE.
Richard M. Rosenberg became Chairman and Chief Executive Officer of BankAmerica
Corporation (BAC) and Bank of America in May 1990 after having served as
President since February 1990 and as Vice Chairman of the Board and a director
of BAC and the Bank since 1987. Before joining BankAmerica Corporation, Mr.
Rosenberg served as President and Chief Operating Officer of Seafirst
Corporation and Seattle-First National Bank which he joined in 1986. Mr.
Rosenberg is a retired Commander in the U.S. Navy Reserve, a director of
Airborne Express and Potlatch Corporation, a trustee of the University of
Southern California and the California Institute of Technology and a member of
the Federal Advisory Council of the Board of Governors of the Federal Reserve
System.
WALLACE C. SOLBERG, 62. CORPORATE VICE PRESIDENT AND GENERAL MANAGER, AIRCRAFT
DIVISION.
ELECTED 1992
MEMBER OF THE EXECUTIVE COMMITTEE.
Before joining Northrop Corporation, Wallace C. Solberg was a research engineer
at the Hotpoint Division of General Electric Company. In 1959 he joined
Hallicrafters Company which was acquired by Northrop in 1966 and renamed the
Defense Systems Division. While at Northrop he has held such positions as
Manager of Engineering, Program Management, Customer Requirements and Finance
before being named Vice President and General Manager of the Division in 1974.
In November 1990, when Northrop integrated its three electronics operations, Mr.
Solberg was named Vice President and General Manager of the new Electronics
Systems Division. In November 1991 he was named Corporate Vice President and
General Manager of the Aircraft Division.
RICHARD J. STEGEMEIER, 65. CHAIRMAN AND CHIEF EXECUTIVE OFFICER, UNOCAL
CORPORATION, AN ENERGY RESOURCES COMPANY.
ELECTED 1990
CHAIRMAN OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE; MEMBER OF THE
FINANCE COMMITTEE.
Richard J. Stegemeier joined Union Oil Company of California, principal
operating subsidiary of Unocal Corporation, in 1951. Mr. Stegemeier has been
Chairman of the Board for Unocal Corporation since April 1989, and Chief
Executive Officer since July 1988. From December 1985 to June 1992 he was
President for Unocal Corporation. Mr. Stegemeier is Chairman of the California
Chamber of Commerce and the
5
Los Angeles World Affairs Council and a member of the National Academy of
Engineering, the Council on Foreign Relations, the Advisory Board of the U.S.
Secretary of Energy, The Conference Board and the California Council on Science
and Technology. He is a director of First Interstate Bancorp, Foundation Health
Corporation and Outboard Marine Corporation.
CONTINUING DIRECTORS -- CLASS II
OLIVER C. BOILEAU, JR., 67. CORPORATE VICE PRESIDENT, PRESIDENT AND GENERAL
MANAGER, B-2 DIVISION.
ELECTED 1992
MEMBER OF THE FINANCE COMMITTEE.
Oliver C. Boileau, Jr. joined The Boeing Company in 1953 as a research engineer.
He progressed through several technical and management positions and was named
Vice President in 1968 and then President of Boeing Aerospace in 1973. In 1980,
he joined General Dynamics as President and a member of the Board of Directors.
In January 1988, Mr. Boileau was promoted to Vice Chairman and then retired in
May 1988. Mr. Boileau joined Northrop Corporation in December 1989 as Vice
President and President and General Manager of the B-2 Division. He is an
Honorary Fellow of the American Institute of Aeronautics and Astronautics, a
member of the National Academy of Engineering, the Board of Trustees of St.
Louis University, and Chairman of the Massachusetts Institute of
Technology-Lincoln Laboratory Advisory Board.
BARBARA C. JORDAN, 58. LYNDON B. JOHNSON SCHOOL OF PUBLIC AFFAIRS, UNIVERSITY
OF TEXAS AT AUSTIN.
ELECTED IN 1993
MEMBER OF THE AUDIT, THE EXECUTIVE AND THE NOMINATING COMMITTEES.
After graduating MAGNA CUM LAUDE from Texas Southern University, Ms. Jordan
received her LLB from Boston University in 1959. She was admitted to the Texas
and Massachusetts bars the same year and began her career as an Administrative
Assistant to a County Judge in Harris County, Texas. In 1966, Ms. Jordan was
elected to the Texas State Senate and in 1972 she became a member of the 93rd
Congress, representing the 18th District of Texas. As a Congressperson, Ms.
Jordan was a member on the Judiciary and Government Operations Committees.
During the 94th Congress, she was a member of the Steering and Policy Committee
of the House Democratic Caucus. After serving three terms in the House, Ms.
Jordan assumed her current association with the University of Texas. She is a
director of The Mead Corporation, Burlington Northern Railroad, Texas Commerce
Bankshares, Inc. and the Federal Home Loan Mortgage Corporation.
JOHN E. ROBSON, 63. SENIOR ADVISOR, ROBERTSON STEVENS & COMPANY, INVESTMENT
BANKERS.
ELECTED 1993
MEMBER OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT AND THE FINANCE
COMMITTEES.
From 1989 to 1993, Mr. Robson served as Deputy Secretary of the United States
Treasury. Prior to that, he was Dean and Professor of Management at the Emory
University School of Business Administration (1986-1989), President and Chief
Executive Officer and Executive Vice President and Chief Operating Officer of
G.D. Searle & Co., a pharmaceutical company (1977-1986). From 1975 to 1977, he
served as Chairman of the U.S. Civil Aeronautics Board, regulator of the airline
industry. Mr. Robson earned his B.A. from Yale University in 1952 and his J.D.,
with honors, from Harvard Law School in 1955. He was in
6
the U.S. Army from 1955 to 1957 and returned to Illinois to become a partner in
a major Chicago law firm. Mr. Robson became General Counsel of the Department of
Transportation in 1967. In 1968, he was appointed Under Secretary of the
Department of Transportation, leaving government service in 1969 to return to
the private practice of law as a partner of Sidley & Austin, into which his old
law firm merged. Mr. Robson is a director of Rand McNally Company and Security
Capital Industrial Trust, a Distinguished Visiting Fellow of the Hoover
Institution and a Visiting Fellow at the Heritage Foundation.
WILLIAM F. SCHMIED, 65. RETIRED CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE, THE
SINGER COMPANY, FORMERLY AN ELECTRONICS AND AEROSPACE
COMPANY.
ELECTED 1990
CHAIRMAN OF THE AUDIT COMMITTEE; MEMBER OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE.
William F. Schmied joined the Autonetics Division of North American Aviation
(Rockwell International) in 1953 as a research electronics engineer. In 1959 he
joined the newly formed Guidance and Control Systems Division of Litton
Industries and progressed through a number of technical and management
positions. He joined the Singer Company Kearfott Division in 1969 as Division
President and advanced through the Aerospace & Marine Systems Group and the
Products & Services for Government Group until he was named President and Chief
Operating Officer of Singer in 1980. In 1987 Mr. Schmied was named Chief
Executive and Chairman of the Board, the position from which he retired in 1988
following the acquisition of The Singer Company by an investment group. He has
been a director of Northeast Bancorp, Inc., Union Trust Company, Tiger
International, Flying Tiger Line, Inc., and trustee of the Link Foundation. Mr.
Schmied is a fellow of the American Institute of Aeronautics and Astronautics.
JOHN BROOKS SLAUGHTER, 59. PRESIDENT, OCCIDENTAL COLLEGE.
ELECTED 1993
MEMBER OF THE AUDIT AND THE NOMINATING COMMITTEES.
Dr. Slaughter earned his B.S.E.E. from Kansas State University in 1956, and was
an electronics engineer with General Dynamics Convair in San Diego from 1956 to
1960. He earned his M.S. in Engineering from the University of California at Los
Angeles in 1961 and was with the Naval Electronics Laboratories in San Diego
from 1960 until 1975. In 1971, Dr. Slaughter was awarded a Ph.D. in Engineering
Sciences from the University of California at San Diego. In 1975, he joined the
University of Washington as a director of the applied physics laboratory and
became academic Vice President and, later, Provost of Washington State
University from 1979 to 1980. During this period, Dr. Slaughter was also
associated with the National Science Foundation, first as Assistant Director
and, later, as Director. From 1982 through 1988, he was Chancellor of the
University of Maryland and in 1988 he became President of Occidental College.
Dr. Slaughter, who is a fellow of the I.E.E.E. and the recipient of numerous
honorary doctoral degrees, serves on the Board of Directors of Monsanto, ARCO,
Avery Dennison, and IBM.
MEETINGS OF THE BOARD OF DIRECTORS, COMMITTEES OF THE BOARD AND DIRECTORS' FEES
The Board of Directors schedules regular meetings throughout the year.
Normally, such meetings convene at the Company's principal office in Los
Angeles. Provision has been made in the Bylaws for special meetings of the
Board, should they be required, and for meetings of the various committees of
the Board at appropriate times. In 1993 nine meetings of the Board of Directors
were held. During 1994 the Board has scheduled eight regular meetings of the
Board.
7
The Company has an Audit Committee, a Compensation and Management
Development Committee and a Nominating Committee, each of which is composed of
at least three members, all of whom must be "Independent Outside Directors" as
defined in the Company's Bylaws. The members of the Audit Committee are William
F. Schmied, John T. Chain, Jr., Jack Edwards, Barbara C. Jordan, Aulana L.
Peters, and John Brooks Slaughter. The members of the Compensation and
Management Development Committee are Richard J. Stegemeier, Jack R. Borsting,
John E. Robson, William F. Schmied and Brent Scowcroft. The members of the
Nominating Committee are Jack R. Borsting, Barbara C. Jordan, Richard M.
Rosenberg and John Brooks Slaughter. During 1993, the Audit Committee met five
times, the Compensation and Management Development Committee met five times and
the Nominating Committee met once.
The Audit Committee meets periodically with both the Company's independent
auditors and the Company's chief internal auditor to review audit results and
the adequacy of the Company's systems of internal controls. In addition, the
Audit Committee recommends to the Board of Directors the appointment or
discharge of the Company's independent auditors, and reviews each professional
service of a non-audit nature to be provided by the independent auditors to
evaluate the impact on the independence of the auditors of undertaking such
added services.
The Compensation and Management Development Committee recommends to the
Board of Directors the base salary and incentive compensation of all elected
officers, takes final action with respect to base salary and incentive
compensation for certain other officers and key employees, and reviews the
Company's compensation policies and management actions to assure the succession
of qualified officers. In addition, this Committee establishes the Company's
annual performance objectives under the Company's incentive compensation plans,
recommends to the Board of Directors the amounts to be appropriated for awards
under such plans, recommends to the Board of Directors awards under the
Company's 1973 Incentive Compensation Plan (the "1973 Plan"), grants awards
under, administers the Company's Long-Term Incentive Plans and recommends to the
Board of Directors all compensation plans in which Company officers are eligible
to participate.
The Nominating Committee reviews candidates to serve as directors and
recommends to the Board of Directors nominees for election as directors. The
activities and associations of each candidate are examined to ensure that there
is no legal impediment, conflict of interest, or other consideration that might
prevent service on the Board of Directors. In making its selection, the Board of
Directors bears in mind that the foremost responsibility of a Northrop director
is to represent the interests of the stockholders as a whole. The Committee will
consider nominees recommended by stockholders if such nominations have been
submitted in writing, accompanied both by a description of the proposed
nominee's qualifications and an indication of the consent of the proposed
nominee and relevant biographical information. The recommendation should be
addressed to the Committee in care of the Secretary of the Company. In addition,
the Nominating Committee makes recommendations to the Board of Directors
concerning the composition and size of the Board of Directors, candidates to
fill vacancies, the performance of incumbent directors, and the remuneration of
Non-Employee Directors.
In addition, the Company has an Executive Committee and a Finance Committee.
During 1993, each of the directors attended at least 75% or more of all
meetings of the Board of Directors and the various committees on which they
serve, with the exception of Barbara C. Jordan and Brent Scowcroft.
8
Directors are compensated for their services according to a standard
arrangement authorized by resolution of the Board of Directors. An annual
retainer fee of $25,000 was paid to each director and an additional fee of
$1,000 was paid to each director for every Board meeting attended during 1993.
Committees of the Board usually meet on the same day as the regular Board
meeting. Members of each committee who attended such meetings were compensated
at the rate of $1,000 for each such committee meeting. Committee chairmen were
compensated an extra $200 for attendance at the committee meetings for which
they were chairmen. If a director performed extraordinary services for the Board
at the request of the Chairman of the Board or the chairman of a committee, such
director was compensated at the rate of $1,000 per day. Directors are reimbursed
for all reasonable expenses incurred by them in attending meetings of the Board
of Directors or committee meetings and in performing compensable extraordinary
services. Board members who are employees of the Company do not receive
compensation under the above provisions.
In 1993, the stockholders approved the 1993 Stock Plan For Non-Employee
Directors which provides that 20% of the retainer fee earned by each director
will be paid in Northrop stock, which will be issued as soon as practicable
following the close of the fiscal year, on December 31. In addition, directors
may defer payment of all or a portion of their remaining retainer fees and/or
their Board and Committee meeting fees. Deferred compensation may either be
distributed in Northrop stock, issued as soon as practicable after the close of
the fiscal year, or such compensation may be placed in a Stock Unit Account
until the conclusion of a director-specified deferral period, a minimum of two
years from the time the compensation is earned. All deferral instructions must
be received prior to the performance of the services for which the director is
compensated. Directors are credited with dividend equivalents in connection with
the Northrop stock which is distributed early in the year following the year
earned or deferred into the Stock Unit Account for longer periods, pending
distribution.
The Northrop Corporation Board of Directors Retirement Plan (the "Directors
Plan") provides that outside directors, as defined in the Bylaws of the Company,
are eligible to receive a retirement benefit pursuant to the Directors Plan if
they retire from the Board following completion of at least five or more
consecutive years of service as an outside Board member. Outside directors are
also eligible for benefits if they are ineligible to stand for election to the
Board of Directors by virtue of the fact that they will have attained age 70
prior to the Annual Meeting of Stockholders and have not completed at least five
consecutive years of service as an outside director. The annual benefit payable
pursuant to the Directors Plan is equal to the annual retainer fee then being
paid to active directors or such lesser amount as is provided for under the
Directors Plan. Benefits are payable for ten years or less (as set forth in the
Directors Plan), from the retirement date of the director. In the case of the
death of a director while receiving benefits, the benefits are payable to the
director's surviving spouse, as defined in the Directors Plan.
9
COMPENSATION COMMITTEE
REPORT OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
The Compensation and Management Development Committee of the Board of
Directors (the "Committee") has furnished the following report on executive
compensation applicable to employees elected as officers of the Company. The
Committee is comprised exclusively of outside directors, all of whom are free of
interlocking relationships with the Company.
COMPENSATION PHILOSOPHY
Under the direction of the Committee, the Corporation has developed and
implemented compensation policies and programs that promote the attainment of
the strategic business goals of the Company. As a vital element of the Company's
overall plan to accomplish its mission, its compensation philosophy is designed
to enable acquisition and retention of executives of exceptional ability, and to
concentrate their attention, energy and skill on achieving high current
performance on commitments to customers, financial results exceeding specific
acceptable thresholds, and long-term prosperous growth.
Northrop executive compensation programs comprise a set of linked incentives
and rewards that impel management to achieve the strategic business plan
established by the Chief Executive Officer and approved by the Board of
Directors. They include base salary, annually determined variable compensation
referred to as incentive pay or bonus, and a long-term incentive plan based on
stock ownership, appreciation and total return to shareholders. Successful
accomplishment of goals tied to the business plan can produce significant
individual reward. Most components of this reward are at risk and vary directly
in their amount with each executive's impact on desired business results. While,
in combination, these reward opportunities raise motivation, they also foster
behaviors and attitudes common to owners and entrepreneurs -- creating equity
partners with Company shareholders.
The Company's administration of executive total compensation is based on
both performance and competitive market considerations. Base salaries of
executives are targeted at a competitive market median on a job-by-job basis
with individual variations explained by training, experience, skills of special
value to the Company and sustained performance. Incentive compensation varies
directly with Company and business element performance, and also with individual
job level, scope and performance. Normalized for aforementioned individual
variations, annual total cash compensation -- base salary plus incentive pay --
will be lower than competitive market median in years of below target
performance, and above competitive market median in years performance exceeds
target. At the time of their initial grant, the size of individual long-term
incentive awards is targeted at competitive market median.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code (the "Code"), enacted in 1993,
generally disallows a deduction to public companies for compensation over $1
million paid to the corporation's chief executive officer and four other most
highly compensated executive officers. Qualifying performance-based compensation
will not be subject to the deduction limit.
Prior to the enactment of Section 162(m), the Company's stockholders
approved the 1993 Long Term Incentive Stock Plan ("Stock Plan"). Initial grants
of certain awards under that plan while perfomance-based, do not satisfy the
definition of performance-based compensation under Section 162(m) and,
therefore, deductions with respect to compensation related to those initial
grants may
10
be lost. The 1973 Incentive Compensation Plan ("1973 Plan") is also subject to
Section 162(m) of the Code. With respect to the 1973 Plan, the impact of Section
162(m) for the tax year 1994 is not expected to be material.
After the proposed Internal Revenue Service regulations for this section of
the code are finalized, the Committee will determine if changes to any plans
will be recommended to retain tax deductibility of compensation.
MEASUREMENT OF COMPANY PERFORMANCE
Consistent with the business plan, management in each organizational element
prepares an Annual Operating Plan containing strategic, financial and
supplemental business goals together with defined measures and weights for their
assessment. Strategic goals focus on such factors as new product development and
new business initiatives; while financial goals focus on operating earnings,
cash flow and shareholder value metrics. Supplemental business goals include
contract acquisition, productivity and quality improvement, work place
diversity, management development, and environmental management. These goals
cascade within each organizational element culminating in formation of
individual performance goals specific to each salaried employee. Documented and
approved in accordance with the Company's Performance Management Process,
accomplishments against individual goals are evaluated on an interim basis at
mid-year and, on a final basis, at year-end.
For the Named Executive Officers, three measurement factors weighted 1/3
each are used to determine annual incentive awards: pre-tax return on 3-year
average shareholder equity; profitability as measured by return on assets and
return on equity -- weighted equally; and supplemental business goals such as
are delineated above. Associated with each financial measure is a specific
numerical threshold approved by the Committee below which no value is earned.
Supplemental business goals have stated milestones, objectives and numerical
targets also approved by the Committee. In 1993, the category of supplemental
business goals included seven corporate goals and 15 divisional goals.
Annually, the Committee reviews, approves and -- at its discretion --
modifies the Chief Executive Officer's written proposal of goals and their
numerical values within each of the three measurement factors stated above. Goal
performance highlights for 1993 can be found below in ANNUAL INCENTIVE
COMPENSATION and in CHIEF EXECUTIVE OFFICER COMPENSATION.
COMPANY PERFORMANCE AND THE ELEMENTS OF COMPENSATION
COMPETITIVE COMPENSATION INFORMATION
In determining base salaries and incentive compensation for the Named
Executive Officers, primary sources of competitive compensation information are
independent surveys of industry peer companies, specifically including those in
the Standard & Poors Aerospace and Defense Index cited in the SHAREOWNER RETURN
PERFORMANCE PRESENTATION following this Report. These primary sources include
the Hewitt Associates MCS Project 777 Survey (Aerospace Segment) and the
Towers-Perrin Summit Survey of Aerospace Companies. Secondary sources of
competitive compensation information are the Consolidated Industries Segment of
Project 777, the Towers-Perrin Compensation Data Bank and the Hewitt Associates
Total Compensation DataBase-TM-.
Competitive award guidelines contained in the Company's Long-Term Incentive
Plan Guide to Administration have been determined by a reputable independent
consulting firm and adopted by the Committee.
11
BASE SALARY
At the beginning of each year, the Committee reviews, and accepts or
modifies as it deems appropriate, an annual salary plan submitted by the Chief
Executive Officer for the Company's senior executives (other than the Chief
Executive Officer). This salary plan is developed by the Corporation's human
resources staff under the ultimate direction of the Chief Executive Officer,
based on independent market surveys of compensation as well as judgments of
performance as to past and expected future contributions of the individual
executives.
Separately, the Committee reviews the base salary of the Chief Executive
Officer considering competitive compensation data and the Committee's assessment
of his past performance and its expectation of his future contributions in
leading the Corporation and its businesses. The Committee then presents to the
Board (absent all employee-directors) its recommendations concerning both the
annual salary plan for senior executives, and the salary of the Chief Executive
Officer. The Board approves this submission, modified as it deems appropriate.
Measured by reputable third-party published compensation surveys of the
aerospace and defense industry, the Chief Executive Officer is paid a base
salary at the competitive market median. From the Hewitt/MCS '777' Ten-Hi
Report, a common standard for comparing a company's compensation practices for
top executives below the Chief Executive Officer, it can be concluded that the
average base salary paid by the Corporation to this executive group is below the
competitive market median.
ANNUAL INCENTIVE COMPENSATION
Executives, including the Named Executive Officers, are eligible for
incentive pay annually under the Corporation's shareholder-approved Incentive
Compensation Plan. However, no awards may be earned or paid for years in which
the pre-tax return on 3-year average shareholder equity is not at least 10%, or
in which no dividend is declared on common and preferred stock. When awards are
payable, their total amount may not exceed 3% of the pre-tax adjusted gross
margin for that year.
In years in which incentive compensation awards are payable, the Committee
decides individual awards for the Named Executive Officers following its
consideration of the Chief Executive Officer's report of overall corporate
performance against the business measures delineated above in MEASUREMENT OF
COMPANY PERFORMANCE, i.e., 1) pre-tax return on 3-year average shareholder
equity, 2) profitability as measured by return on assets and return on equity --
weighted equally, and 3) supplemental business goals. The Committee determines
the size of the annual incentive awards for executive officers generally by
calculating the product of individual base salary, target bonus percent based on
salary grade, Unit Performance Factor and an individual performance score termed
Individual Performance Factor. The Unit Performance Factor, which represents the
Chief Executive Officer's assessment of overall Company performance, is a single
numeric value for each business unit and the Corporate Office which the
Committee accepts or revises as it deems appropriate.
For 1993, performance thresholds were met with respect to dividends and
exceeded with respect to pre-tax return on 3-year average shareholder equity.
However, the Company's higher target for pre-tax return on 3-year average
shareholder equity and its target for profitability were not met. Below target
performance in these two areas was attributable primarily to a charge to
earnings on the TSSAM fixed price development program. With respect to the third
performance measure, the Company significantly exceeded target performance
against its written plan of supplemental goals.
12
Accompanying this performance report, the Chief Executive Officer submits
recommendations to the Committee for individual incentive awards for the Named
Executive Officers, except the Chief Executive Officer, which reflect their
contributions to the accomplishment of annual goals and the Company's business
plan.
Separately, the Committee considers an incentive compensation award for the
Chief Executive Officer based on the Committee's assessment of his recent-year
performance. The Committee then presents to the Board, absent all
employee-directors, its recommendations concerning the incentive compensation
for the Named Executive Officers, including the Chief Executive Officer. The
Board considers the Committee's recommendations and approves this submission,
modified as it deems appropriate.
In evaluating overall performance and formulating recommendations for annual
incentive compensation for 1993 for the Named Executive Officers, including the
Chief Executive Officer, the Committee considered the Chief Executive Officer's
report on overall corporate performance as well as the Company's improved
financial condition evidenced by improved margin rates on all major aircraft
programs, an increase in shareholder's equity, reduced working capital and
interest expense, and the reduction in the Company's net debt position to $60
million, the lowest level in 10 years. These factors were listed in the Chief
Executive Officer's report as "Additional Considerations" and are additional
factors that were considered in determining annual incentive compensation for
the named executive officers. The Committee considered all factors as a whole
and took into account subjective evaluations of each Named Executive Officer's
performance to arrive at a determination of appropriate annual incentive
compensation.
LONG-TERM INCENTIVE COMPENSATION
During each fiscal year, the Committee considers the desirability of
granting senior executives, including the Named Executive Officers, awards under
the current shareholder-approved Long-Term Incentive Stock Plan. The Committee
believes that its past grants of long-term incentives have successfully focused
the Corporation's senior management on building profitability and shareowner
value.
The Long-Term Incentive Stock Plan provides the flexibility to grant
incentives spanning a number of years in a variety of forms, including stock
options, stock appreciation rights and restricted performance stock rights. The
purpose of this form of compensation is to expand the performance horizon of
Plan participants from several months to several years. By promoting ownership
of Northrop stock, the Plan creates shareholder-managers interested in the
long-term growth and prosperity of the Company. To promote retention of stock
ownership, the Chief Executive Officer has given to executives strong written
encouragement to acquire and hold significant amounts of Company stock.
In the Company's fiscal year ended December 31, 1993, the Committee
determined to grant stock options and restricted performance stock rights to
selected key managers. Making awards in the form of these two vehicles is
consistent with the Committee's intention stated in Northrop's 1993 Proxy
Statement to Shareholders. Since, by the Black-Scholes method, the value of a
Northrop stock option at grant is approximately 1/3 the value of a restricted
stock right, and since stock options are granted on an annual basis while
restricted performance stock rights are granted at three-year intervals, an
equal number of stock options and restricted performance stock rights were
granted in 1993. In fixing grants for individuals, including the Named Executive
Officers other than the Chief Executive Officer, the Committee reviewed the
Chief Executive Officer's recommendations for individual awards. The Committee
approved awards taking into account the scope of accountability, record of
13
achievement and contribution and anticipated future influence on company
performance of each recipient. Award recipients whose planned retirements are
near may receive awards in stock options only, because restricted performance
stock rights are valued at the end of a five year measurement period.
Awards under the Long-Term Incentive Stock Plan in 1993 were granted on
November 17, 1993, and consisted of non-statutory stock options at fair market
value and restricted performance stock rights. The performance variable
governing the value of restricted performance stock rights is linked to Company
total shareholder return compared to that of companies in the Standard & Poors
Aerospace and Defense Index cited in the SHAREOWNER RETURN PERFORMANCE
PRESENTATION that follows this Report. Applying competitive guidelines for the
size of annual long-term incentive awards for executive officers, actual grants
of such awards in 1993 were made-overall-at the established competitive market
median. In granting long-term incentive awards in 1993, the Committee considered
the incentive stock holdings of the Chief Executive Officer and other executive
officers. Satisfied that holdings from prior long-term incentive grants were
appropriate, the Committee chose to adhere to competitive guidelines in its 1993
incentive stock awards to the Chief Executive Officer and other executive
officers.
DETERMINING CHIEF EXECUTIVE OFFICER COMPENSATION
In evaluating 1993 performance of the Chief Executive Officer and setting
his annual incentive compensation, the Committee noted a number of important
Company achievements. In making its final determination as to the Chief
Executive Officer's 1993 annual incentive compensation, these important business
results were considered by the Committee both separately and in the aggregate
without assigned specific relative values.
Following successful completion of all critical milestones in the design,
development and flight test of the B-2 Bomber, the first operational aircraft
was delivered in a flawless flight to the Air Combat Command at Whiteman AFB.
Following this accomplishment and continued high performance to quality
standards and schedule requirements, the Company secured remaining funding to
complete the 20 aircraft program. The Company also won the GPS Aided Targeting
System development contract to implement precision conventional weapons
capability of the B-2.
Financial performance highlights in 1993 have strengthened the outlook for
the Company. Increased margin rates were achieved on B-2, F/A-18 C/D, F/A-18 E/F
and 747 programs. Continuing to reduce debt, Mr. Kresa announced that the
Company's plan to be debt-free -- should it choose to be -- will be achieved by
the end of 1994, ahead of schedule. Under Mr. Kresa's leadership total
shareholder value metrics were developed and introduced into measures of future
business performance and long-term compensation for the senior management team.
Responding to rising health care costs, Mr. Kresa directed major changes to
group insurance programs that join the Company and employees in a partnership to
more effectively manage costs.
Notwithstanding these positive developments, the Committee noted Mr. Kresa's
recent announcement of a loss in 1993 on the fixed price development Tri-Service
Standoff Attack Missile contract. This program performance was the primary
factor reducing the Company's return to shareholders and overall profitability
during 1993.
In the context of overall decline in the availability of defense contracts,
Mr. Kresa directed actions to address the organizational challenges the Company
faces. An exhaustive Aircraft Segment Study was completed charting the Company's
strategy in aircraft design, development and manufacturing, and defining
critical organizational and resource requirements for the future. Teams
conducting proprietary
14
studies have narrowed the field of new business opportunities to those that
leverage the unique strengths of the Company. Competencies that will be
essential for future Company leaders have been defined and are being imbedded in
training curricula. Finally, Mr. Kresa has intelligently and humanely guided the
difficult, but necessary, task of reducing expenses and manpower while, at the
same time, maintaining productivity and preserving the Company's reputation as a
caring employer.
Based on its evaluation of these factors, the Committee believes that Mr.
Kresa and Northrop senior management are strengthening the Company's outlook for
long-term profitable growth. The Committee further believes that the
compensation policies, plans and programs it has implemented are motivating
achievement of objectives which are crucial to the welfare of the Company and
its shareholders.
Based upon the median range of competitive market bonus practice, derived
from sources cited in the Competitive Compensation Information section of this
report and Mr. Kresa's performance, as outlined in this section, and taking into
consideration Mr. Kresa's base salary, the Committee granted Mr. Kresa an
incentive compensation award to recognize his 1993 performance. Following its
review of the total value of his incentive stock holdings (i.e., grants of stock
and stock options under present and previous Long-Term Incentive Plans) and
considering competitive market long-term incentive practices, as discussed in
the Long-Term Incentive Compensation section of this report, the Committee also
granted Mr. Kresa a long-term incentive award to both reward and motivate his
continuing contributions to the future prosperity of the Company. Considering
Mr. Kresa's performance and also that his base salary was not adjusted in 1992,
the Committee adjusted his base salary effective March 1, 1993. The Summary
Compensation Table on page 17 contains information detailing these actions.
THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE:
RICHARD J. STEGEMEIER, CHAIRMAN
JACK R. BORSTING
JOHN E. ROBSON
WILLIAM F. SCHMIED
BRENT SCOWCROFT
15
SHAREOWNER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareowner return on the Corporation's Common Stock against
the cumulative total return of the S&P Composite-500 Stock Index and the S&P
Aerospace and Defense Composite Index for the period of five fiscal years
commencing January 1, 1989 and ended December 31, 1993.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
NORTHROP CORPORATION, S&P 500 INDEX & S&P AEROSPACE/DEFENSE INDEX
[GRAPHIC]
NORTHROP CORP. S&P 500 S&P AEROSPACE/DEFENSE
-------------- ------- ---------------------
1988.......................... 100 100 100
1989.......................... 66 132 118
1990.......................... 71 128 123
1991.......................... 112 166 147
1992.......................... 153 179 155
1993.......................... 175 197 202
Assumes $100 invested on December 31, 1988 in Northrop
Common Stock, S&P 500 Index, and S&P Aerospace/Defense Index.
* Total return assumes reinvestment of dividends.
16
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Corporation for the years
ended December 31, 1993, 1992 and 1991 of those persons who were at December 31,
1993 the chief executive officer and the other four most highly compensated
officers of the Corporation (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
------------------------
AWARDS
------------------------
SECURITIES
ANNUAL COMPENSATION RESTRICTED UNDERLYING
- ------------------------------------------------------------- STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) AWARD(S) ($)(1) SARS (#) COMPENSATION ($)(2)
- -------------------------------- ---- ---------- --------- ------------ ---------- -------------------
KENT KRESA ..................... 1993 675,000 450,000 0 34,400 9,434
Chairman of the Board, 1992 650,000 500,000 0 0 9,154
President and Chief 1991 656,250 600,000 0 0 --
Executive Officer
OLIVER C. BOILEAU, JR. ......... 1993 408,333 270,000 0 7,000 9,434
Corporate Vice President, 1992 395,833 300,000 0 28,000 9,154
President and General 1991 377,083 300,000 0 0 --
Manager--B-2 Division
WALLACE C. SOLBERG ............. 1993 266,667 115,000 128,700 12,000 8,686
Corporate Vice President 1992 250,000 195,000 0 28,000 8,407
and General Manager, 1991 215,583 180,000 165,937 0 --
Aircraft Division
RICHARD R. MOLLEUR ............. 1993 248,000 150,000 107,250 10,000 6,999
Corporate Vice President 1992 235,833 160,000 0 15,000 6,365
and General Counsel 1991 205,385 140,000 125,000 20,000 --
RICHARD B. WAUGH, JR. .......... 1993 225,000 136,000 128,700 12,000 9,434
Corporate Vice President 1992 160,542 90,000 104,500 8,000 9,154
and Chief 1991 151,400 115,000 0 0 --
Financial Officer
- ------------------------
(1) Aggregated restricted shares or rights held by Named Executive Officers,
valued at 12/31/93, were: K. Kresa 62,500 shares @ $2,336,250, W.C.
Solberg 14,225 shares @ $531,731, R.R. Molleur 6,000 shares @ $224,280,
R.B. Waugh, Jr. 7,880 shares @ $294,554.
Restricted Stock Rights ("RSRs") granted under the 1987 Long-Term
Incentive Plan (the "Plan") provide for the issuance of unrestricted
Common Stock in yearly increments equal to 20% of the total grant,
commencing within one year of the grant date. The entire RSR grant is
therefore issued within five (5) years from the date of grant. RSRs with
vesting dates in less than three (3) years were granted to K. Kresa on
1/02/90 for 50,000 shares, W.C. Solberg on 11/20/91 for 7,500 shares, R.R.
Molleur on 2/20/91 for 5,000 shares and Richard B. Waugh, Jr. on 7/18/90
for 2,700 shares and on 11/17/92 for 4,000 shares. No dividends have been
or will be paid on awards in 1991 reported in this column. Dividend
equivalents will be paid on awards in 1993.
(2) Company contributions to Savings Plan for the Named Executive Officers.
Where dashes are indicated, there is no requirement to report.
17
OPTION GRANTS IN LAST FISCAL YEAR
There is shown below information concerning individual grants of stock
options made during the last completed fiscal year to each of the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ---------------------------------------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES % OF TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS EMPLOYEES IN FISCAL BASE EXPIRATION --------------------
NAME GRANTED(#) (2) YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- -------------------------------- --------------- ------------------- --------------- ----------- --------- ---------
KENT KRESA...................... 34,400 6.7 $ 35.75 11/17/03 774,774 1,955,382
OLIVER C. BOILEAU, JR........... 7,000 1.4 35.75 11/17/03 157,657 397,897
WALLACE C. SOLBERG.............. 12,000 2.3 35.75 11/17/03 270,270 682,110
RICHARD R. MOLLEUR.............. 10,000 1.9 35.75 11/17/03 225,225 568,425
RICHARD B. WAUGH, JR............ 12,000 2.3 35.75 11/17/03 270,270 682,110
- ------------------------------
(1) The potential realizable value of each grant of options assuming that the
market price of Northrop Common Stock from the date of the grant to the
end of the option term (10 years), appreciates in value at an annualized
rate of 5% and 10%.
(2) Commencing with the second anniversary of the grant, options become
exercisable in annual installments of 25% of the total grant, with the
exception of Mr. Boileau's grant which becomes exercisable on 12/21/94 as
to 100% of the total grant. There are no tandem SARs associated with these
options.
18
OPTION EXERCISES AND VALUES
Shown below is aggregated information with respect to the exercise of stock
options during the year ending December 31, 1993 of the Chief Executive Officer
and the Named Executive Officers, and the value at December 31, 1993 of
unexercised options, without stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
AGGREGATED OPTIONS EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUE
- -------------------------------------------------------------------------------------------------------------------
SECURITIES
UNDERLYING
UNEXERCISED OPTIONS
AT VALUE OF UNEXERCISED
FY-END(#) IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED ON VALUE EXERCISABLE/ FY-END($) EXERCISABLE/
NAME EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- -------------------------------- ------------------- ------------ ------------------- -------------------------
KENT KRESA...................... 0 N/A 300,000/234,400 5,814,000/3,932,072
OLIVER C. BOILEAU, JR........... 0 N/A 25,600/49,400 460,628/661,122
WALLACE C. SOLBERG.............. 0 N/A 16,600/34,400 287,208/271,672
RICHARD R. MOLLEUR.............. 0 N/A 7,000/34,000 83,285/299,920
RICHARD B. WAUGH, JR............ 0 N/A 4,840/20,560 78,774/132,103
- ------------------------
(1) Valued at 12/31/93 -- $37.38
RESTRICTED PERFORMANCE STOCK RIGHTS GRANTS IN LAST FISCAL YEAR
There is shown below information concerning grants of Restricted Performance
Stock Rights made to named officers during the last completed fiscal year.
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
PERFORMANCE ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF OR OTHER NON-STOCK
SHARES, UNITS PERIOD UNTIL PRICE-BASED PLANS
OR OTHER MATURATION OR ------------------------------
NAME RIGHTS (#)(1) PAYOUT THRESHOLD (#) MAXIMUM (#)
- ----------------------------------------------------- ------------- ------------- --------------- -------------
KENT KRESA........................................... 34,400 5 yrs. 0 51,600
WALLACE C. SOLBERG................................... 12,000 5 yrs. 3,600 18,000
RICHARD R. MOLLEUR................................... 10,000 5 yrs. 3,000 15,000
RICHARD B. WAUGH, JR................................. 12,000 5 yrs. 3,600 18,000
- ------------------------
(1) The number of Restricted Performance Stock Rights which may be earned
under the 1993 Long-Term Incentive Stock Plan is based on Company total
shareholder return compared to that of companies in the S & P
Aerospace/Defense Index. Earnouts range over a five year performance
period from 0% to 150% of the rights awarded to Mr. Kresa and from a
guaranteed minimum of 30% (conditioned upon the executive's retention in
active employment for the full five year performance measurement period)
to 150% of the rights awarded to all other Named Executive Officers. Mr.
Kresa has waived the 30% guaranteed minimum. Dividend equivalents will be
distributed on those shares earned over the five year period. Interim
payments may be made if earned by prorata performance at the end of years
3 and 4. Interim payments are reconciled with and offset by any final
payment due at the end of year 5 based on performance. In the unlikely
event that the sum of interim payments made at the end of years 3 and 4
exceed the final payment due, no restoration of shares received will be
required.
19
RETIREMENT PLANS
For purposes of illustration, the following table shows the amount of annual
retirement benefits that would be accrued at age 65 under the Northrop
Retirement Plan (the "Retirement Plan"), calculated on a straight life annuity
basis, at selected compensation levels and years of service. The listed benefit
amounts are not subject to any reduction for Social Security benefits or other
offset amounts.
Actual benefits payable under the Retirement Plan are limited to the
compensation limitation of Section 401(a)(17) of the Internal Revenue Code of
1986, as amended, (the "Code") and the limitations under Section 415 of the
Code. The benefits which exceed these limits are payable from any one or a
combination of the Company's Supplemental Retirement Income Program for Senior
Executives (discussed below) or the Northrop Corporation ERISA Supplemental Plan
I ("ERISA 1") and the ERISA Supplemental Program 2 ("ERISA 2") (collectively,
the "Supplemental Retirement Plans").
YEARS OF BENEFIT SERVICE
ANNUAL
AVERAGE
COMPENSATION
(HIGHEST 5 10 15 20 25 30 35
3 YEARS OUT -------- -------- -------- -------- -------- -------- ----------
OF LAST 5) ANNUAL BENEFITS FROM RETIREMENT PLAN AND ERISA 1 AND 2
- ------------ ----------------------------------------------------------------------------------
$ 100,000 $ 7,500 $ 15,000 $ 22,500 $ 30,000 $ 40,000 $ 50,000 $ 60,000
150,000 11,250 22,500 33,750 45,000 60,000 75,000 90,000
200,000 15,000 30,000 45,000 60,000 80,000 100,000 120,000
250,000 18,750 37,500 56,250 75,000 100,000 125,000 150,000
300,000 22,500 45,000 67,500 90,000 120,000 150,000 180,000
400,000 30,000 60,000 90,000 120,000 160,000 200,000 240,000
500,000 37,500 75,000 112,500 150,000 200,000 250,000 300,000
600,000 45,000 90,000 135,000 180,000 240,000 300,000 360,000
1,000,000 75,000 150,000 225,000 300,000 400,000 500,000 600,000
1,400,000 105,000 210,000 315,000 420,000 560,000 700,000 840,000
1,800,000 135,000 270,000 405,000 540,000 720,000 900,000 1,080,000
Compensation covered by the plans is defined by Income Tax Regulation Section 1.415-2(d)(10) and
generally includes, but is not limited to, salary and bonuses as set forth in this Summary
Compensation Table. The credited years of service under the Retirement Plan and Supplemental
Retirement Plans of the five individuals named in the Summary Compensation Table are as follows:
Mr. Kresa, 19 years; Mr. Boileau, 4 years; Mr. Solberg, 10 years; Mr. Molleur, 3 years; and Mr.
Waugh, 15 years. In addition, Mr. Solberg will receive an annual retirement benefit of $32,059
under a separate retirement plan of a Company division.
- ------------------------
(1) The Supplemental Retirement Income Program for Senior Executives ("SRI"),
under which certain employees are designated by the Board of Directors,
provides a benefit in lieu of that otherwise payable under ERISA 1 and 2.
The amount of the supplemental benefit under the SRI is equal to the
greater of 1) the participant's benefit under the Retirement Plan
calculated without regard to the limits imposed under Section 415 and
401(a)(17) of the Internal Revenue Code, as amended, or 2) a fixed
percentage of the participant's final average salary (highest 3 years out
of last 5) equal to 30% at age 55, increasing 4% for each year up to and
including age 60, and increasing 2% for each year beyond age 60 to 65;
less the benefit allowable under the Retirement Plan.
Mr. Kresa, who is eligible to receive an annual benefit (estimated to be
$710,940 payable at age 65, assuming continued employment and based upon
current final average salary) under the SRI, is the only Named Executive
Officer currently participating in that plan.
SRI eligibility, in addition to designation by the Board of Directors,
requires the attainment of age 55 and 10 years of vesting service. The
vesting service requirement may be waived by the Chief Executive Officer.
20
CHANGE OF CONTROL AGREEMENT
The Corporation recently adopted a plan which permits it to enter into
special severance agreements ("Agreements") with key employees, such employees
being designated from time to time by the Compensation and Management
Development Committee (the "Committee") of the Board of Directors. The Committee
has designated eight key employees, including Messrs., Kresa, Solberg, Molleur,
and Waugh. The purpose of the Agreements is to encourage the key employees to
continue to carry out their duties in the event of the possibility of a change
in control of the Corporation. Payments under the special severance agreements
would be made only if there is (i) a Change in Control of the Corporation; (ii)
if the key employee is then in the employ of the Corporation; and (iii) the key
employee's employment is terminated other than for narrowly defined causes.
Generally, a "Change in Control" shall be deemed to have occurred if there
is a consolidation or merger of the Company and the Company is not the surviving
corporation. A Change in Control shall also be deemed to have occurred (i) in
connection with the sale, lease or transfer of substantially all of the assets
of the Company, (ii) if the shareholders approve a plan or proposal for the
liquidation or dissolution of the Company, (iii) if any person (other than a
trust established pursuant to an employee benefit plan of the Company) becomes
the beneficial owner of 15% or more of the Company's outstanding stock, or (iv)
if during any two-year period the majority of the Company's directors shall
cease to be "continuing Directors." "Continuing Director" shall mean a director
who was a director of the Company at the beginning of any two year period, as
well as any person whose election or nomination as a director was approved by
two-thirds of the then Continuing Directors.
The Executive shall be entitled to certain benefits upon a termination of
employment within the thirty-month period following a Change in Control except a
termination of employment resulting from the Executive's death, a termination by
the company for "cause" or "disability", or a termination by the Executive for
"good cause."
In the event of a termination which required the Company to make payments
under this Agreement, the Executive shall be entitled to: (i) full base salary
through the date of termination, (ii) severance pay equal to 2.99 X the
Executive's Full Base Amount (as defined under the Internal Revenue Code of 1986
as amended), (iii) medical, dental and life insurance benefits substantially
similar to those to which Executive was receiving immediately prior to the
Change in Control, and (iv) all deferred accrued and bonus vacation pay pursuant
to policies in effect immediately prior to the Change in Control.
If any portion of the key employee's severance compensation under the
Agreement (i) exceeds the total amount of payments or benefits which could be
received by the key employee from the Corporation without any portion thereof
constituting a nondeductible "excess parachute payment" pursuant to Section 280G
of the Code; or (ii) is subject to the excise tax imposed by Section 4999 of the
Code, such payments or benefits shall be reduced to the extent necessary to
comply with the limitation. Such reduction shall be made in the order and manner
determined by the key employee as soon as administratively practicable following
the change in control.
MANAGEMENT CONTRACTS
Coincident with the election of Mr. Oliver C. Boileau, Jr. as Vice
President, President and General Manager, B-2 Division in December, 1989,
Northrop entered into a five-year employment agreement with him. Under the
agreement, Mr. Boileau is entitled to an annual base salary of not less than
$350,000 with participation in the Company's bonus and other plans. If Mr.
Boileau's employment is terminated without cause, he will be entitled to a final
pro-rata payment not greater than three times his then current salary.
21
The agreement also provides for the grant of 100,000 Stock Options for Northrop
Common Stock with companion Stock Appreciation Rights with a five-year vesting
schedule. On December 21, 1992, Mr. Boileau, voluntarily and without
consideration, surrendered 60,000 unvested tandem stock appreciation rights.
Under the terms of his employment agreement, in the event Mr. Boileau is
terminated prior to December 10, 1994 the Company will provide a straight life
retirement benefit of $60,000 per year for life plus a pro-rata portion of
$40,000, determined by dividing $40,000 by 24 and multiplying the quotient by
the number of months employed since the third anniversary of his agreement. The
retirement benefit will be payable at the time of termination either through the
Northrop Retirement Plan and the Supplemental Retirement Income Plan for Senior
Executives or through a Deferred Annuity. If Mr. Boileau continues employment
for a full five years (until December 10, 1994), the Company will provide a
straight life retirement benefit of $100,000 per year for life. The $100,000
straight life annuity benefit provided for under the employment contract will be
reduced by the accrued benefit payable under the Northrop Retirement Plan. The
balance of this benefit will be paid from the Supplemental Retirement Income
Plan for Senior Executives or through a deferred annuity.
CERTAIN TRANSACTIONS
Mr. Rosenberg is the Chairman of the Board and Chief Executive Officer of
BankAmerica Corporation. Bank of America is participating as Co-Agent in the
Company's 1994 Credit Agreement among the Company, Bank of America and certain
other banks. During 1993, Bank of America was one of a group of banks
participating in the Company's credit facilities including the 1987 Credit
Agreement and the 1990 Credit Agreement (the "Credit Agreements") among the
Company, Bank of America and certain other banks. During 1993, Bank of America
was prepared to extend up to $56 Million on a committed basis to the Company
under the Credit Agreements. During 1993, $227,098 in fees and interest were
paid to Bank of America under the terms of the Credit Agreements. In 1993, the
Company also paid fees in the approximate aggregate of $48,855 to Bank of
America in compensation for various ancillary services such as cash management
and letters of credit.
Management believes the terms of the foregoing transactions were competitive
or were as favorable to the Company as could have been obtained from other
entities having no affiliation with the Company.
Mr. Edwards is a senior partner at the law firm of Hand, Arendall, Bedsole,
Greaves & Johnston. Hand Arendall has been a consultant for Northrop Corporation
during the past year and continues this status. Pursuant to this Consulting
Agreement, Hand Arendall provides analyses and advice with respect to pending
and proposed legislation. During 1993 the Company paid Hand Arendall consulting
fees of $92,072 under this Agreement.
Ms. Peters is a senior partner at the law firm of Gibson, Dunn & Crutcher. A
partner of Gibson, Dunn & Crutcher has been a consultant for Northrop
Corporation providing analysis and advice with respect to pending and proposed
legislation. No fees were paid under this Agreement in 1993. Gibson Dunn has
represented Northrop in various legal matters and continues to do so.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock voting at
the Annual Meeting (with each share entitled to one vote), provided a quorum is
present, is required for the election of directors. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE FOUR NOMINEES FOR DIRECTOR LISTED ABOVE.
22
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends that the stockholders ratify the Board's
appointment of Deloitte & Touche as the independent auditors of the Company for
1994. Deloitte & Touche served the Company as its independent auditors for 1993.
Should the stockholders fail to ratify the appointment of Deloitte & Touche, the
Board of Directors will consider this an indication to select other auditors for
the following year.
A representative of Deloitte & Touche will be present at the Annual Meeting
of Stockholders and will be offered an opportunity to make a statement if he so
desires. He will also be available to answer appropriate questions from
stockholders.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock voting at
the Annual Meeting (with each share entitled to one vote), provided a quorum is
present, is required for approval of this proposal. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THIS PROPOSAL.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires the Corporation's
officers and directors, and persons who own more than ten percent of a
registered class of the Corporation's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (SEC) and the New York Stock Exchange. Officers, directors
and greater than ten percent shareowners are required by SEC regulation to
furnish the Corporation with copies of all Forms 3, 4 and 5 they file.
Based solely on the Corporation's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Corporation
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them with
respect to transactions during fiscal 1993, except Charles L. Jones, Jr., who
reported on December 31, 1993 the sale of 860 shares on October 26, 1993 and the
sale of 860 shares on December 15, 1992.
APPROVAL OF AMENDMENT TO CERTIFICATE OF INCORPORATION
The Board of Directors has approved, and recommends to the stockholders of
the Company, the adoption of an amendment to the Company's Certificate of
Incorporation to change the corporate name from "Northrop Corporation" to
"Northrop Grumman Corporation." In connection with the Company's acquisition of
93.4% of the outstanding shares of Common Stock of Grumman Corporation, the
Board of Directors has approved the proposed change in the name of the Company
in order to preserve the proud heritage of the Grumman name in U.S. military
aviation. The Company believes that the name change is an appropriate reflection
of its commitment to the combined Northrop/Grumman entity.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the issued and
outstanding shares of Common Stock entitled to vote at the Annual Meeting (with
each share entitled to one vote), provided a quorum is present, is required for
approval of this proposal. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS
PROPOSAL.
23
MISCELLANEOUS
VOTING ON OTHER MATTERS
At the time of filing this Proxy Statement with the Securities and Exchange
Commission, management was not aware of any matters not referred to herein that
will be presented for action at the Annual Meeting. If any other matters
properly come before the Annual Meeting, it is intended that the shares
represented by proxies will be voted with respect thereto in accordance with the
judgment of the persons authorized to vote them.
PROPOSAL OF SECURITY HOLDERS
Copies of proposals which security holders of the Company wish to be
included in the Company's proxy statement relating to its Annual Meeting to be
held in 1995 must be received by the Company no later than December 1, 1994.
Copies of such proposals of security holders should be sent to the Corporate
Secretary, Northrop Corporation, 1840 Century Park East, Los Angeles, California
90067.
COST OF SOLICITING PROXIES
The cost of soliciting proxies in the accompanying form has been or will be
paid by the Company. In addition to solicitation by mail, arrangements will,
where appropriate, be made with brokerage houses and other custodians, nominees
and fiduciaries to send proxy materials to beneficial owners, and the Company
will, upon request, reimburse them for their reasonable expenses in so doing.
The Company has retained Georgeson & Company Inc. of New York to aid in the
solicitation of proxies at an estimated fee of $10,000 plus reasonable
disbursements. Officers, directors and regular employees of the Company may
request the return of proxies personally, by means of materials prepared for
stockholders and employee-stockholders or by telephone or telegram to the extent
deemed appropriate by the Board of Directors. No additional compensation will be
paid to such individuals for this activity. The extent to which this
solicitation will be necessary will depend upon how promptly proxies are
received; therefore, stockholders are urged to return their proxies without
delay.
Sheila M. Gibbons
CORPORATE VICE PRESIDENT AND SECRETARY
April 18, 1994
NOTICE: THE COMPANY FILED AN ANNUAL REPORT ON FORM 10-K ON FEBRUARY 28,
1994. SHAREHOLDERS OF RECORD ON MARCH 22, 1994, MAY OBTAIN A COPY OF THIS REPORT
WITHOUT CHARGE BY DIRECTING A REQUEST TO THE CORPORATE SECRETARY, NORTHROP
CORPORATION, 1840 CENTURY PARK EAST, LOS ANGELES, CALIFORNIA 90067.
24
[LOGO]
ANNUAL MEETING OF STOCKHOLDERS MAY 18, 1994
PROXY SOLICITED BY THE BOARD OF DIRECTORS
P
R
O
X
Y
The undersigned hereby appoints R. R. MOLLEUR and S.M. GIBBONS, and each of
them, proxies of the undersigned, with full power of substitution in each of
them, to vote all shares of Common Stock of Northrop Corporation which the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
the Company to be held at the Sheraton Los Angeles Airport Hotel, 6101 West
Century Boulevard, Los Angeles, California, on May 18, 1994 at 10:00 A.M., and
at any adjournments thereof, with all powers the undersigned would possess if
personally present and voting, as specified below, and in their discretion on
any other matters that may properly come before the Meeting.
Election of Directors: Nominees--J. Chain, J. Edwards, K. Kresa and B. Scowcroft
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY, EVEN IF YOU PLAN
TO ATTEND THE MEETING.
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
X
PLEASE MARK YOUR CHOICES LIKE THIS
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED, WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
FOR ALL
Item 1--Election of four Class III directors FOR WITHHELD
to hold office for three years and FOR ALL
until their respective successors are / / / /
elected and qualified.
WITHHELD FOR :(Write that nominee's
name in the space provided below)
_______________________________________________
Item 2--The ratification of the appointment of FOR AGAINST ABSTAIN
Deloitte & Touche as the Company's
independent auditors. / / / / / /
Item 3--Amend the Certificate of Incorporation FOR AGAINST ABSTAIN
to change the Corporate name.
/ / / / / /
COMMENTS/ADDRESS CHANGE
Please mark this box if you have comments/address change on reverse side. / /
Signature(s)_____________________________Date_____________________
Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
[LOGO]
ANNUAL MEETING OF STOCKHOLDERS MAY 18, 1994
CONFIDENTIAL INSTRUCTIONS TO BANKERS TRUST COMPANY.
TRUSTEE FOR THE NORTHROP SAVINGS PLAN
Receipt of proxy material for the above Meeting is acknowledged. I instruct
you to vote (in person or by proxy) all shares of Common Stock of Northrop
Corporation held by you for my account under the Plan at the Annual Meeting of
Stockholders of Northrop Corporation to be held May 18, 1994 at 10:00 A.M., and
at all adjournments thereof, on the following matters as indicated on the
reverse side and in your discretion on any other matters that may come before
the Meeting. If this card is signed and returned, but no choice is specified, I
instruct you to vote this proxy in accordance with the Board of Directors'
recommendations, "FOR all Nominees" in Proposal 1 and "FOR" Proposals 2 and 3.
Election of Directors: Nominees--J. Chain, J. Edwards, K. Kresa and B. Scowcroft
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENTS/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on other side)
THIS INSTRUCTION CARD WILL BE VOTED AS DIRECTED, BUT IF NOT OTHERWISE DIRECTED,
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
/X/ PLEASE MARK YOUR CHOICES LIKE THIS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
Item 1--Election of four Class III directors to FOR WITHHELD
hold office for three years and until their FOR ALL
respective successors are elected and qualified. / / / /
WITHHELD FOR: (Write that nominee's
name in the space provided below)
_____________________________________________________
Item 2--The ratification of the appointment of FOR AGAINST ABSTAIN
Deloitte & Touche as the Company's
independent auditors. / / / / / /
Item 3--Amend the Certificate of Incorporation FOR AGAINST ABSTAIN
to change the Corporate name.
/ / / / / /
COMMENTS/ADDRESS CHANGE Please mark this box if you have comments/address
change on reverse side. / /
Signature(s)_________________________________________Date ____________________
Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
