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NAME: W. Burks Terry TITLE: Corporate vice president and general counsel, Northrop Grumman Corp. AGE: 51 COMPANY: Having recently acquired two other large defense contractors — Litton Industries in April 2001 and Newport News Shipbuilding in November — Northrop Grumman Corp., itself the product of a 1994 merger between Northrop Corp. and Grumman Corp., is now the third-largest defense contractor in the United States. The Los Angeles-based company has approximately 100,000 employees, and its 2002 revenue is expected to be about $18 billion, up from approximately $13 billion in 2001. GROWING: At 44 attorneys only a year ago, Northrop’s in-house legal department grew to 70 lawyers after the acquisition of Litton. Five more attorneys came aboard with the acquisition of Newport News, although the shipbuilder’s incumbent general counsel, Steven Clarkson, retired in conjunction with the merger. On Dec. 17, 2001, Northrop elevated one of its associate sector counsel, William Mitchell, to vice president and sector counsel for Newport News. With 12 other mergers and acquisitions since 1994, Terry said that if every acquired attorney had been retained, he would have 129 lawyers on staff. He attributed the reduction in force to “aggressive management of staffing,” paring off the excess attorneys, usually starting with the acquired company’s incumbent general counsel. AT WORK: Terry called himself “the last of the general practitioners,” explaining that his job calls for experience with lots of issues, ranging from real estate to human resources to government contracting to mergers and acquisitions to intellectual property. He is quick to add, “It’s never boring, but you don’t get to set your own schedule. Your schedule is set by your company and by your subordinates.” Unlike most private-sector attorneys, however, Terry and most of his staff are required to obtain government security clearance before they can work on Department of Defense contracts. Terry himself has “secret,” but not “top secret” U.S. government clearance. A background check for top secret clearance is pending, Terry said, adding, “it takes a long time to get those processed.” He professed not to know what the clearance procedure entails or whom the government is talking to in the course of its evaluation. Describing his management style, Terry said, “I believe in delegation.” Because of mergers and reductions in defense spending, the defense industry has been contracting in recent years, meaning that Northrop has not needed to do much hiring of late. Nonetheless, Terry said he believes in “hiring very capable attorneys and giving them enough discretion to exercise their initiatives.” He added that he relies upon his staff to “make sure I know what I need to know before I need to know it.” Associates must bring matters to his attention in time for him to have what he called “appropriate involvement.” His department mirrors the corporate structure. Northrop Grumman is divided into six sectors, each headed by a sector counsel. Terry said that he receives bimonthly reports from each of the sector counsel detailing the “hot issues” and, on the off weeks, he holds telephone conferences with them. Terry himself tends not to become directly involved with the handling of a matter until it involves more than one sector or “where an issue is perceived as having come to the corporate office, out of the sector.” His department farms out all of its litigation and some of the filing and regulatory work associated with environmental activity, he said. It also outsources the drafting and submission of SEC documents contained in tender offers and merger and acquisition agreements, and real estate and leasing agreements. “Other than that, we use outside counsel to supplement our in-house staff,” Terry said. OUTSIDE COUNSEL: Northrop’s roster of outside counsel includes Gibson, Dunn & Crutcher of Los Angeles, used for mergers and acquisitions and for environmental law; Philadelphia-based Morgan, Lewis & Bockius for employment law; Seattle’s Perkins Coie for government contracts; and Chicago’s Wildman, Harrold, Allen & Dixon for litigation. NEWPORT NEWS: When working on the acquisition of Newport News Shipbuilding, however, Terry retained Steven Fraiden and Charles F. “Rick” Rule of New York-based Fried, Frank, Harris, Shriver & Jacobson’s Washington, D.C., office. At the time, Northrop was the shipbuilder’s second suitor, moving to acquire the company after General Dynamics Corp. had already made a tender offer. But, Terry explained, because General Dynamics and Newport News are the nation’s only nuclear submarine builders, General Dynamic’s offer was hobbled by government antitrust concerns. Matching its competitor, Northrop Grumman made an unsolicited tender offer for Newport News for $2.6 billion and ultimately prevailed. Terry said his responsibility was to “deliver the Justice Department.” While other Northrop agents lobbied the federal government on the company’s behalf, Terry, working with the Fried Frank lawyers and with deputy general counsel Steven Yslas, crafted a “white paper” report explaining why a Newport News-General Dynamics merger would violate antitrust laws, and arguing why a Newport News-Northrop merger was the way to go. Under Terry’s direction, the group also prepared the company’s Hart-Scott-Rodino filing and met with the Department of Justice. The white paper prepared by Terry’s team was submitted to the DOJ as well as to the Department of Defense, and was included with the tender offer. “Our position was not about price, but about what was legal and what was in the best interests of the country,” Terry said. WHISTLEBLOWER SUIT: One pending controversy pits Northrop against the U.S. government in U.S. ex rel. Jordan, a 1995 federal whistleblower suit in Los Angeles by a now-former employee accusing the company of knowingly making Navy aerial targeting drones with defective parts. The government intervened in 1997. According to Northrop’s 2000 annual report, alleged damages were pegged at $185 million, and could approach $600 million. On Dec. 21, a federal magistrate granted in part a government motion seeking sanctions against Northrop for being slow to respond to discovery demands, stating that the company’s conduct lacked substantial justification. It was the fourth time the company has faced a motion for such relief. “It’s part of the litigation process,” Terry said of the sanctions. “There’s been no philosophical decision to play hardball. The government needs to get a better understanding of the facts of the case.” He said the DOJ’s claim of damages is inflated. Discovery continues. ROUTE TO THE TOP: A 1973 graduate of the University of California, Berkeley, and a 1976 graduate of Notre Dame Law School, Terry immediately joined a Northrop subsidiary called the George A. Fuller Co., which employed attorneys as contract managers. His first assignment was in Saudi Arabia, working on the “Peace Hawk” program, which called for maintenance of Saudi Arabia’s Northrop-made F-5 fighter jets, as well as the construction of three air bases there. In 25 years at Northrop, Terry said, he’s been counsel to every element on the aircraft and electronics sides of the corporation, giving him what he called “a thorough knowledge of the corporation and its controversies.” One skirmish where Terry said he earned his stripes was a 1999 dogfight with the Air Force over its Joint Surveillance Target Attack Radar System program when the company’s cost of refurbishing Boeing 707-300 jets used by the military exceeded the contract value. That matter was ultimately settled in 1999 through alternative dispute resolution, with Northrop receiving about $80 million from the government, he said. He was promoted to general counsel in July 2000. FAMILY: Married to Debra. The couple has three children: Elizabeth, 24, Steven, 22, and Susan, 20. LAST BOOK READ:“Barbarians at the Gate: The Fall of RJR Nabisco,” by Bryan Burrough.

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