EXHIBIT 99.3
EMPLOYEE MATTERS AGREEMENT
This Employee Matters Agreement, (the "Employee Agreement") is entered
into as of this 9th day of June, 2000, by and between Northrop Grumman
Corporation, a Delaware corporation ("Seller") and VAC Acquisition Corp. II, a
Delaware corporation ("Buyer"). Seller and Buyer are sometimes hereinafter
collectively referred to as the "Parties."
W I T N E S S E T H:
WHEREAS, Seller and Buyer have entered into an Asset Purchase Agreement
(the "Purchase Agreement") dated as of the 9th day of June, 2000, relating to
the purchase by Buyer of a portion of the business and assets, and the
assumption of certain related liabilities (collectively, the "Business") of
Seller's Integrated Systems and Aerostructures Sector; and
WHEREAS, the Purchase Agreement contemplates the execution and delivery
of this Employee Agreement; and
NOW, THEREFORE, the Parties, intending to become legally bound, hereby
agree as follows:
SECTION 1
Definitions
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For the purposes of this Employee Agreement, the following capitalized
terms shall have the meanings assigned to them below. Capitalized terms not
defined below shall have the meanings ascribed to them in the Purchase
Agreement.
1.1 "Business Employees" shall mean as of the Closing Date all persons
who are employed on such date by Seller or a Sold Subsidiary and assigned by
Seller or a Sold Subsidiary pursuant to the Seller's or Sold Subsidiary's
ongoing payroll practice to the Business, including each person so employed and
assigned who is on disability (but still on the payroll), and any person so
employed on an approved leave of absence, and any person so employed on layoff
with recall rights and any person listed on Schedule 1(a) as a Shared Service
Employee.
1.2 "Retired Business Employees" shall mean as of the Closing Date all
persons (a) who are not active employees of Seller but who have a defined
benefit pension accrual under either (i) the Northrop Grumman Commercial
Aircraft Division Salaried Retirement Plan portion of the Northrop Grumman
Pension Plan, (ii) the Grumman Pension Plan portion of the Northrop Grumman
Pension Plan, but only if such accrual is attributable solely to service with
the former Grumman Aerostructures business (designated Entity 58 by Seller)
("Entity 58"), (iii) the Northrop Grumman Commercial Aircraft Division Hourly
Retirement Plan, and/or (iv) the Northrop Grumman Commercial Aircraft Division
Protective Services Retirement Plan, but not under any other Seller defined
benefit pension plan; or (b) who are receiving retiree medical benefits pursuant
to either (i) the Northrop Grumman Commercial Aircraft Division Salaried Health
Care Plan (Retiree Health Program only), (ii) the Northrop Grumman Commercial
Aircraft Division Hourly Health Care Plan, or (iii) the Grumman Corporation
Group Health and
Life Plan (Retiree Health Care and Insurance Program only), and, in the case of
this clause (iii), who terminated employment with Seller while assigned to
Entity 58.
SECTION 2
General Employment Terms and Conditions
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2.1 Buyer shall offer employment to each Business Employee actively at
work on the Closing Date and shall honor any obligation to reemploy any Business
Employee who is not actively at work on the Closing Date due to leave of absence
(including without limitation disability leave or military leave) or layoff with
recall rights. Seller agrees to provide to Buyer, in a complete, diligent and
timely manner, all relevant information as Buyer may reasonably request with
respect to compensation, service, and other information relating to the
employment of the Business Employees. Buyer shall also after the Closing Date
offer employment to any Shared Service Employee not listed on Schedule 1(a) but
whom Seller and Buyer mutually agree after the Closing Date shall be treated as
a Business Employee ("Delayed Business Employees") and such person(s) shall,
except as expressly provided herein, be treated as Business Employees for all
purposes hereunder.
2.2 Except as provided herein, as of the Closing Date, Business
Employees and Retired Business Employees and their beneficiaries and dependents
shall cease to participate in all Seller Plans. Except as provided herein, Buyer
shall not assume sponsorship, maintenance or administration of any Seller Plan
or any Employee Benefit Plan or Employee Benefit Arrangement that is not a
Seller Plan or receive or assume any assets or liabilities in connection with
any such plan. Notwithstanding the foregoing, all Delayed Business Employees
shall cease participation in all Seller Plans as of their respective dates of
actual transfer to Buyer (in each case, an "Applicable Transfer Date").
2.3 Buyer shall have established as of the Closing Date compensation
and employee benefit plans or arrangements (or shall have designated existing
plans or arrangements) which, for at least 24 months following the Closing Date,
provide each Business Employee who continues to be employed by Buyer and is not
a member of a collective bargaining unit or is not covered by a collective
bargaining agreement with at least the same salary or hourly wage rate as in
effect immediately prior to the Closing Date, or Applicable Transfer Date, and
with other compensation and employee benefits which are comparable in the
aggregate to those provided under the Seller Plans covering such individual
immediately prior to the Closing Date, or Applicable Transfer Date. Buyer shall
have established or designated as of the Closing Date employee benefit plans or
arrangements which, for at least 24 months following the Closing Date, provide
each Retired Business Employee who is not a member of a collective bargaining
unit or is not covered by a collective bargaining agreement with retiree
benefits (including without limitation retiree health and life insurance
coverage) which are comparable in the aggregate to those provided under the
Seller Plans covering such individual immediately prior to the Closing Date. For
purposes of this Section 2.3, compensation and employee benefits shall not
include compensation and employee benefits pursuant to any stock option, stock
purchase, phantom stock, restricted stock, stock appreciation right, or other
stock-based or equity-based compensation plan, program or arrangement.
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2.4 From and after the Closing Date, or Applicable Transfer Date,
Buyer shall, and shall cause its affiliates and successors to, provide credit
under Buyer's plans to Business Employees and Retired Business Employees for
their service with Seller and its predecessors and affiliates for purposes of
determining eligibility to participate, vesting, and eligibility to retire (but
not for purposes of benefit accrual), to the same extent that such service was
recognized under the Seller Plans that most closely resemble such Buyer plans.
For purposes of such Buyer plans, Buyer shall recognize all amounts applied to
deductibles, co-payments and out-of-pocket maximums with respect to Business
Employees and Retired Business Employees under the Seller Plans during the plan
year in which the Closing Date occurs, and will not impose any limitations on
coverage for pre-existing conditions other than such limitations as were
applicable under the Seller Plans which most closely resemble such Buyer plans.
2.5 Effective as of the Closing Date, Buyer shall assume the
collective bargaining agreements disclosed on Schedule 4.7 to the Purchase
Agreement. Promptly after the date hereof, Seller shall advise each union which
is a party to such collective bargaining agreements of such proposed assumption.
SECTION 3
Qualified Defined Contribution Plans
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3.1 Prior to the Closing Date, Seller shall take all actions as are
necessary to provide that all persons who are neither Business Employees nor
Retired Business Employees shall cease accruing benefits under the Northrop
Grumman Integrated Systems & Aerostructures Represented Employee Savings and
Investment Plan in respect of periods following the Closing Date. Effective as
of the Closing Date, Buyer shall assume the sponsorship of the Northrop Grumman
Integrated Systems & Aerostructures Represented Employee Savings and Investment
Plan and in connection therewith shall assume all responsibility for the
administration of such plan and its assets and liabilities with respect to
Business Employees and Retired Business Employees. Buyer shall arrange effective
as of the Closing Date to enter into appropriate agreements or modify existing
agreements with trustees and other vendors providing services to this plan;
provided, how ever, that Seller shall use its reasonable efforts to cause such
trustees and vendors to continue to provide services to such plan until December
31, 2001 (or such earlier date as Buyer shall determine) on substantially the
same terms and conditions as such services were provided to such plan
immediately prior to the Closing Date. As soon as practicable after the Closing
Date but effective as of the Closing Date, Buyer and Seller shall cause such
plan to transfer to one or more other defined contribution plans maintained by
Seller (the "Seller Defined Contribution Plans"), in a manner consistent with
Code Section 414(l), assets and liabilities attributable to persons who are
neither Business Employees nor Retired Business Employees but who do have
account balances under such plan, and Buyer shall have no obligation or
liability with respect thereto. Such transfer of assets to the Seller Defined
Contribution Plans is subject to the receipt by Buyer of, and no such transfer
shall be made unless Buyer has received: (i) evidence reasonably satisfactory to
it that Seller has timely completed all governmental filings or submissions
needed in order for the Seller Defined Contribution Plans to receive a transfer
of assets from the Northrop Grumman Integrated Systems & Aerostructures
Represented Employee Savings and Investment Plan and (ii)(A) a current and valid
IRS qualification letter with respect to the Seller Defined Contribution Plans,
or
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(B) a representation by Seller that the Seller Defined Contribution Plans are
designed to so qualify and that Seller shall timely make all filings necessary
to obtain such qualification and make any and all necessary amendments on a
retroactive basis to the Seller Defined Contribution Plans as are required by
the Internal Revenue Service to obtain such qualification.
3.2 All Business Employees as of the Closing Date, or Applicable
Transfer Date, shall be fully vested in their account balances under the
Northrop Grumman Savings and Investment Plan ("SIP") and Business Employees and
Retired Business Employees shall be entitled to either (i) an immediate
distribution of their account balances in accordance with the terms of such plan
and pursuant to Section 401(k)(l0)(A)(ii) or (iii) of the Code, (ii) maintain
such amounts in the SIP in accordance with its terms, or (iii) transfer their
respective account balances (including any unpaid participant loans and Seller
common stock held in such accounts) directly to one or more defined contribution
plans established or designated by Buyer (each, a "Buyer Savings Plan") each of
which is designed and intended to qualify under Code Section 401(a). As soon as
practicable after the Closing Date, Buyer shall seek a favorable Internal
Revenue Service determination letter that each Buyer Savings Plan, as organized,
satisfies all qualification requirements under Section 401(a) of the Code, and
Buyer shall make any and all necessary amendments on a retroactive basis to the
Buyer Savings Plans as are required by the Internal Revenue Service to issue
such determination letter. In the event that, pursuant to clause (iii) above,
any Business Employee or Retired Business Employee elects to transfer his or her
account balance to a Buyer Savings Plan (collectively, the "Transferred Savings
Plan Accounts"), then Seller shall cause the trustees of the SIP to transfer to
the trustees or other funding agent of such Buyer Savings Plan, in the case of
each electing Business Employee and Retired Business Employee, the assets
(including but not limited to Seller securities) allocated to the account of
each such person under SIP, such amount to be established as an account balance
or accrued benefit of such individual under the Buyer Savings Plan. Each such
transfer shall comply with Section 414(1) of the Code and the requirements of
ERISA and the regulations promulgated thereunder and no such transfer shall be
made until Buyer provides to Seller a copy of a favorable IRS determination
letter for each Buyer Savings Plan or a representation by Buyer that it has
commenced its undertaking, described above, to seek a determination letter for
each Buyer Savings Plan. Notwithstanding the foregoing, as of the Closing Date,
Buyer shall, at Seller's direction, administer unpaid participant loans under
SIP outstanding as of the Closing Date and, until such time as all of the
affected participant's SIP account is transferred to the applicable Buyer
Savings Plan, remit to SIP the collected loan repayments. The Transferred
Savings Plan Accounts shall be valued as of the date on which the transfer is
made, which value shall include the earnings, gains and losses, appreciation and
depreciation of the investment funds in which the accounts are invested through
the date on which the transfer is made. Except with respect to the Transferred
Savings Plan Accounts, (a) Buyer shall have no liability or obligation with
respect to benefits accrued under the SIP nor shall Buyer be responsible for any
other obligation or liability under the SIP, and (b) Seller shall retain and
shall be solely responsible for any and all liabilities and obligations
whatsoever under the SIP (including with respect to Business Employees or
Retired Business who do not elect to transfer their account balances to a Buyer
Savings Plan pursuant to clause (iii) above). Treatment of any Business
Employees as terminated in connection with the SIP shall not necessarily be
determinative for purposes of any other Seller Plan.
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3.3 Effective as of the Closing Date, Buyer shall establish or
designate a defined contribution retirement plan comparable to SIP in which
Business Employees who were eligible to participate in SIP immediately prior to
the Closing Date may be eligible to participate.
3.4 Notwithstanding the foregoing, Seller shall be responsible for all
liabilities incurred by Seller or Buyer as a direct result of any failure of the
SIP to be qualified under Section 401(a) of the Code.
SECTION 4
Qualified Defined Benefit Plans
-------------------------------
4.1 Prior to the Effective Time, Seller shall take all actions as are
necessary to provide that all persons who are neither Business Employees nor
Retired Business Employees shall cease accruing benefits under the Northrop
Grumman Commercial Aircraft Division Hourly Retirement Plan and the Northrop
Grumman Commercial Aircraft Division Protective Services Retirement Plan (the
"CAD Pension Plans") as of the Effective Time. Effective as of the Closing Date,
Buyer shall assume the sponsorship of the CAD Pension Plans and in connection
therewith shall assume all responsibility for the administration of such plans
and their assets and liabilities with respect to Business Employees and Retired
Business Employees. Buyer shall be responsible for all contributions to these
plans accrued after the Closing Date. Buyer shall arrange effective as of the
Closing Date to enter into appropriate agreements or modify existing agreements
with trustees and other vendors providing services to those plans; provided,
however, that Seller shall use its reasonable efforts to cause such trustees and
vendors to continue to provide services to such plans until December 31, 2001
(or such earlier date as Buyer shall determine) on substantially the same terms
and conditions as such services were provided to the CAD Pension Plans
immediately prior to the Closing Date. As soon as practicable after the Closing
Date but effective as of the Closing Date, Seller and Buyer shall cause the CAD
Pension Plans to transfer to one or more other defined benefit plans maintained
by Seller (the "Seller Defined Benefit Plans"), in a manner consistent with Code
Section 414(l) and using the assumptions set forth in Schedule 4.1, assets and
liabilities (plus an appropriate share of earnings) attributable to persons who
are neither Business Employees nor Retired Business Employees but who did accrue
benefits under such plans, and Buyer shall have no obligation or liability with
respect thereto; provided that, in the case of each plan, if the liabilities
attributable to such employees account for less than 3 percent of the total
assets of the plan as of the Closing Date, Section 414(l) shall be applied
without an allocation under ERISA Section 4044 and the assumptions used shall be
those set forth in Schedule 4.2. Such transfer of assets to the Seller Defined
Benefit Plans is subject to the receipt by Buyer of, and no such transfer shall
be made unless Buyer has received: (i) evidence reasonably satisfactory to it
that Seller has timely completed all governmental filings or submissions needed
in order for the Seller Defined Benefit Plans to receive a transfer of assets
from the CAD Pension Plans and (ii)(A) a current and valid IRS qualification
letter with respect to the Seller Defined Benefit Plans, or (B) a representation
by Seller that the Seller Defined Benefit Plans are designed to so qualify and
that Seller shall timely make all filings necessary to obtain such qualification
and make any and all necessary amendments on a retroactive basis to the Seller
Defined Benefit Plans as are required by the Internal Revenue Service to obtain
such qualification.
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4.2 (a) Establishment of Buyer Pension Plan. Buyer shall, effective
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as of the Closing Date, establish a defined benefit plan (or designate an
existing defined benefit plan of Buyer), intended to qualify under Section
401(a) of the Code (such new or existing defined benefit plan of Buyer being
referred to herein as "Buyer Pension Plan") to provide benefits to Business
Employees and Retired Business Employees who immediately prior to the Closing
Date had accrued any benefit under the Northrop Grumman Pension Plan (the
"Seller Pension Plan"). Each Business Employee or Retired Business Employee so
participating in the Seller Pension Plan prior to the Closing Date shall
thereupon become a participant in the Buyer Pension Plan; except that Delayed
Business Employees shall cease participation in the Seller Pension Plan and
commence participation in the Buyer Pension Plan on an Applicable Transfer Date.
(b) Initial Transfer of Assets. Not later than 120 days after the
--------------------------
Closing Date and subject to the requirements of Section 4.2(d) being satisfied,
Seller shall cause an initial transfer of assets and liabilities from the Seller
Pension Plan to the Buyer Pension Plan. The value of the assets of the Seller
Pension Plan to be so transferred shall be at least 90 percent of an estimate of
the "CAS Amount." The "CAS Amount" is defined as the assets allocated with
respect to the Business Employees and Retired Business Employees under Seller's
accounting procedures to implement the segment accounting requirements of Cost
Accounting Standard CAS 413-50(c), and specifically CAS 413-50(c)(7). The CAS
Amount so defined shall equal the sum of amounts attributable to each of the
following five portions of the Seller Pension Plan (each, a "Heritage Plan"), as
indicated in clauses (i), (ii), (iii), (iv) and (v) below:
(i) An amount equal to the market value of assets of the
Northrop Grumman Retirement Plan portion of the Seller Pension Plan, multiplied
by a fraction the numerator of which is the actuarial accrued liability
attributable to Business Employees under the Northrop Grumman Retirement Plan
portion of the Seller Pension Plan and the denominator of which is the actuarial
accrued liability of all participants in the Northrop Grumman Retirement Plan
portion of the Seller Pension Plan.
(ii) An amount equal to the market value of assets of the Grumman
Pension Plan portion of the Seller Pension Plan, multiplied by a fraction the
numerator of which is the actuarial accrued liability attributable to Business
Employees and Retired Business Employees under the Grumman Pension Plan portion
of the Seller Pension Plan and the denominator of which is the actuarial accrued
liability of all participants in the Grumman Pension Plan portion of the Seller
Pension Plan.
(iii) An amount equal to the market value of assets of the
Northrop Grumman Commercial Aircraft Division Salaried Retirement Plan portion
of the Seller Pension Plan, multiplied by a fraction the numerator of which is
the actuarial accrued liability attributable to Business Employees and Retired
Business Employees under the Northrop Grumman Commercial Aircraft Division
Salaried Retirement Plan portion of the Seller Pension Plan and the denominator
of which is the actuarial accrued liability of all participants in the Northrop
Grumman Commercial Aircraft Division Salaried Retirement Plan portion of the
Seller Pension Plan.
(iv) An amount equal to the market value of assets of the Northrop
Grumman Retirement Plan--Rolling Xxxxxxx Site portion of the Seller Pension
Plan,
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multiplied by a fraction the numerator of which is the actuarial accrued
liability attributable to Business Employees and Retired Business Employees
under the Northrop Grumman Retirement Plan--Rolling Xxxxxxx Site portion of the
Seller Pension Plan and the denominator of which is the actuarial accrued
liability of all participants in the Northrop Grumman Retirement Plan--Rolling
Xxxxxxx Site portion of the Seller Pension Plan.
(v) An amount equal to the market value of the assets of the
Northrop Grumman Electronic Sensors & Systems Sector Nonrepresented Employees
Pension Plan portion of the Seller Pension Plan, multiplied by a fraction the
numerator of which is the actuarial accrued liability attributable to Business
Employees and Retired Business Employees under the Northrop Grumman Electronic
Sensors & Systems Sector Nonrepresented Employees Pension Plan portion of the
Seller Pension Plan and the denominator of which is the actuarial accrued
liability of all participants in the Northrop Grumman Electronic Sensors &
Systems Sector Nonrepresented Employees Pension Plan portion of the Seller
Pension Plan.
For the above purposes, the assets are measured as of the last day of the month
preceding the Closing Date. The market value of assets for each of the above
Heritage Plans takes into account the result of employing an asset allocation
convention for those Heritage Plans. The funding convention requires that assets
of the Seller Pension Plan be used to fund any underfunded Heritage Plan pension
liabilities. This convention will be used to allocate pension assets for
unfunded liabilities that are determined for the period from January 1, 2000
through the Closing Date (the "Period"). The assets allocated to an underfunded
Heritage Plan are equal to the pension costs measured in accordance with CAS
412, Cost Accounting Standard for Composition and Measurement of Pension Cost,
for the Period. The funding convention is carried out by allocating a pro rata
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share of the actuarial surplus (defined as the excess of the market value of
assets over the actuarial accrued liability) from each overfunded Heritage Plan
to provide assets to underfunded Heritage Plans. The Heritage Plan pension costs
measured in accordance with CAS 412 include: (1) the normal cost of the Period;
(2) an amortized part of any unfunded actuarial liability; (3) an adjustment for
actuarial gains and loss; and (4) appropriate interest adjustments for the
Period.
The actuarial accrued liability shall be determined utilizing the entry
age normal cost method and assumptions set forth in Schedule 4.2 and, for both
the numerators and denominators in (i) through (v), above, based on the January
1, 2000 valuation completed by Seller's actuary in accordance with the
requirements of CAS, including the expected change in the actuarial accrued
liability projected due to additional service, benefits paid and interest for
the Period. The actuarial liability so calculated shall cover all benefits
(including ancillary benefits) accrued under the Seller Pension Plan by the
Business employees and Retired Business Employees. For purposes of this initial
transfer the CAS Amount shall be computed without regard to Delayed Business
Employees. The assets of the Seller Pension Plan to be transferred to the Buyer
Pension Plan both under the initial transfer and under any adjustment pursuant
to Section 4.2(c) hereof, shall be in the form of cash and other assets
(excluding Seller securities) reasonably representative of the Seller Pension
Plan investment portfolio as a whole but without regard to Seller securities,
and Buyer shall cause the Buyer Pension Plan to accept such transfer and, to the
extent of the assets so transferred, to assume all obligations for benefits
(including ancillary benefits) accrued under the Seller Pension Plan by the
Business Employees and Retired Business Employees.
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(c) Subsequent Adjustments
----------------------
(i) Seller shall cause its enrolled actuary to determine
reasonably and in good faith as soon as practicable but in any case within
twelve (12) months following the Closing Date, the actual CAS Amount (taking
into account Delayed Business Employees) and an amount equal to 130 percent of
the present value of accrued benefits attributable to Business Employees and
Retired Business Employees calculated as current liability pursuant to the
principles of Code Section 412(c)(7)(B) as of the last day of the month
preceding the Closing Date using an interest rate (the "Rate") as defined in the
next sentence and the other assumptions set forth in Schedule 4.2 (the
"Guaranteed Amount"). The Rate shall be 105 percent of the weighted average of
the rates of interest on 30-year Treasury securities during the 4-year period
ending on the last day of the month preceding the Closing Date as permitted by
Code Section 412(b)(5)(B)(ii).
(ii) If the actual CAS Amount exceeds the Guaranteed Amount, then
not later than 45 days following the determination of the actual CAS Amount and
Guaranteed Amount, either Seller shall cause a transfer of assets from the
Seller Pension Plan to the Buyer Pension Plan equal to the amount, if any, by
which the actual CAS Amount exceeds the initial transfer, or Buyer shall cause a
transfer of assets from the Buyer Pension Plan to the Seller Pension Plan equal
to the amount by which the initial transfer exceeds the CAS Amount, if any. If
the Guaranteed Amount exceeds the actual CAS Amount then not later than 45 days
following the determination of the actual CAS Amount and Guaranteed Amount, then
either Seller shall cause a transfer of assets from the Seller Pension Plan to
the Buyer Pension Plan equal to the amount, if any, by which the Guaranteed
Amount exceeds the initial transfer, or Buyer shall cause a transfer of assets
from the Buyer Pension Plan to the Seller Pension Plan equal to the amount, if
any, by which the initial transfer exceeds the Guaranteed Amount.
(iii) Any amounts to be transferred between the plans more than
one day following the Closing Date in satisfaction of the of this Section 4.2
shall include investment gains or losses from the day preceding the Closing
Date, as follows:
(A) With respect to the period from the day preceding the
Closing Date to and including the date of the initial transfer of
assets hereunder ("Initial Transfer Date"), investment gains and losses
shall mean the aggregate net investment experience of the transferor
plan during such period; and
(B) With respect to the period from the Initial Transfer Date to
and including the day preceding the date of payment of any adjustment
under clause (ii), investment gains and losses shall mean interest
credited during such period at the interest rate assumption specified
in Schedule 4.2 regardless of the actual investment experience of the
assets of the transferor plan.
(d) Requirements of Transfer. The total amount transferred from the
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Seller Pension Plan to the Buyer Pension Plan under this Section 4.2 shall in no
event be less than that required under Code Section 414(l) using the assumptions
set forth in Schedule 4.2. Further, notwithstanding any provision in the
Purchase Agreement or this Employee Agreement to the contrary, each transfer of
assets from the Seller Pension Plan is subject to the receipt by Seller of,
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and no such transfer shall be made unless Seller has received: (i) evidence
reasonably satisfactory to it that Buyer has timely completed all governmental
filings or submissions needed in order for the Buyer Pension Plan to receive a
transfer of assets from the Seller Pension Plan and (ii)(A) a current and valid
IRS qualification letter with respect to the Buyer Pension Plan, or (B) a
representation by Buyer that the Buyer Pension Plan is designed to qualify and
that Buyer shall timely make all filings necessary to obtain such qualification
and make any and all necessary amendments on a retroactive basis to the Buyer
Pension Plan as are required by the Internal Revenue Service to obtain such
qualification. In no event shall any transfer from the Seller Pension Plan be
made prior to the lapse of thirty (30) days after Seller files a complete Form
5310A; provided that Seller shall cause such filing to be made within 90 days of
the Closing Date.
(e) Notwithstanding the foregoing, Seller shall be responsible for
all liabilities incurred by Seller or Buyer as a result of any failure of the
Seller Pension Plan to be qualified under Section 401(a) of the Code.
(f) Seller hereby represents and warrants to Buyer that the
assumptions set forth in Schedule 4.2 are the same assumptions that are utilized
for the preparation and presentation of Seller's public financial statements;
except that (i) the assumptions for current liability do not apply to the
preparation of public financial statements, and (ii) there is no assumption in
Schedule 4.2 for the annual rate of increase in the indexed limits on plan
compensation and maximum benefits inasmuch as such rate is irrelevant to CAS and
ERISA calculations, but the rate used for such purposes in Seller's public
financial reporting is 3.5 percent.
SECTION 5
Welfare Benefit Plans other than Severance
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5.1 Seller shall be responsible in accordance with its applicable welfare
plans in effect prior to the Closing Date for all medical and similar claims for
expenses incurred prior to the Closing Date, or Applicable Transfer Date, by
Business Employees and Retired Business Employees and their dependents.
Reimbursement of said employees and their dependents for medical and similar
expenses associated with such claims (including claims submitted on behalf of
disabled employees and their dependents) shall be determined in accordance with
the terms of Seller's medical and similar programs as in effect immediately
prior to the Closing Date. Seller shall terminate coverage of Business Employees
and Retired Business Employees and their dependents effective for claims for
expenses incurred on and after the Closing Date, or Applicable Transfer Date.
Effective as of the Closing Date, Buyer shall be responsible in accordance with
its applicable welfare plans in effect on and after the Closing Date for all
medical and similar claims for expenses incurred on and after the Closing Date,
or Applicable Transfer Date (including, but not limited to, responsibility for
post-retirement medical and dental claims), by Business Employees and Retired
Business Employees and their dependents; provided, that Buyer's medical and
similar programs shall provide sufficient medical and dental coverage so that
Seller and its affiliates shall have no obligation to provide "COBRA"
continuation coverage to Business Employees or Retired Business Employees under
Section 4980B(f) of the Code.
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5.2 Effective as of the Closing Date, Buyer shall be responsible for all
long-term and short term disability income benefits payable in respect of claims
asserted on or after the Closing Date, or Applicable Transfer Date, for Business
Employees or Retired Business Employees who become disabled on or after the
Closing Date, or Applicable Transfer Date, as the case may be. Seller shall be
responsible for all long-term and short-term disability income benefits payable
in respect of claims asserted by Business Employees or Retired Business
Employees who become disabled before the Closing Date.
5.3 Effective as of the Closing Date, Buyer shall be responsible for all
life insurance claims (including post-retirement life insurance claims) of
Business Employees and Retired Business Employees and their dependents for
losses incurred by such employees or dependents on and after the Closing Date,
or Applicable Transfer Date, under group life, travel and accident, and
accidental death and dismemberment insurance policies. Seller shall be
responsible solely for claims for such losses incurred prior to the Closing
Date, or Applicable Transfer Date.
5.4 Effective as of the Closing Date, Buyer shall establish a cafeteria
plan (or designate an existing plan) subject to Code Section 125 with features
which are comparable to those contained in Seller's cafeteria plan applicable to
Business Employees immediately prior to the Closing Date. Effective as of the
Closing Date, Buyer shall, pursuant to such Buyer cafeteria plan, assume
responsibility for administering all benefit or reimbursement claims of Business
Employees and Retired Business Employees, in respect to calendar year 2000,
whether arising before, on or after the Closing Date, or Applicable Transfer
Date, under the cafeteria plan applicable to such individuals at such time.
Seller shall cause to be transferred to Buyer an amount in cash equal to the sum
of all contributions to the various reimbursement accounts under Seller's
cafeteria plan prior to the Closing Date, or Applicable Transfer Date, reduced
by the sum of all claims paid with respect to such accounts prior to the Closing
Date, or Applicable Transfer Date (regardless of whether the amount paid to any
participant exceeded such participant's reimbursement account balance), and by
any amount accrued as a liability in respect of such plan on the Closing
Statement of Assets and Liabilities.
SECTION 6
Supplemental Plans
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6.1 Effective as of the Closing Date, Buyer shall establish or otherwise
make available as soon as practicable thereafter one or more nonqualified plans
(the "Buyer Supplemental Plans") in which Business Employees and Retired
Business Employees shall be eligible to participate on terms which are
comparable to those applicable to Business Employees and Retired Business
Employees immediately prior to the Closing Date under the Seller Plans set forth
on Schedule 6 attached hereto (the "Seller Supplemental Plans"). Effective as of
the Closing Date, Buyer shall assume, under the Buyer Supplemental Plans, all
liabilities and obligations with respect to Business Employees and Retired
Business Employees under the Seller Supplemental Plans incurred prior to the
Effective Time. Subject to Section 2.3 hereof, Buyer may, in its discretion,
modify or terminate the Buyer Supplemental Plans at any time following the
Closing Date.
10
6.2 No termination of a Business Employee's employment shall be deemed to
occur for purposes of the Buyer Supplemental Plans as a result of any actions
taken pursuant to this Employee Agreement or otherwise as a result of the
consummation of the transactions contemplated by the Purchase Agreement,
provided that the Business Employee remains continuously employed by Buyer or an
affiliate of Buyer immediately after the Effective Time.
SECTION 7
Severance, Retention and Similar Agreements
-------------------------------------------
Effective as of the Closing Date, Buyer shall assume and be responsible for
the Relocation Agreement between Xxxx Xxxx (assuming Mr. Coco accepts employment
with Buyer in connection with the closing of the transaction contemplated by the
Purchase Agreement) and Northrop Grumman Corporation dated April 28, 2000, and
the Special Severance Agreements and the Retention Incentive Bonus Agreements
for the following Business Employees (assuming the employee accepts employment
with Buyer in connection with the closing of the transaction contemplated by the
Purchase Agreement):
Xxxxxx Xxxxxxxx
Xxxxxxx X. Xxxxx
Xxxxxxx X. XxXxxxx
Xxxxxxx X. XxXxxxx
Xxxxxx X. Xxxxxxx
Xxxxx X. Xxxxxx
Xxxxx X. Xxxxx
Xxxx X. Xxxxxx
X. X. Xxxxx, Xx.
SECTION 8
Workers' Compensation
---------------------
Seller currently sponsors a program that provides workers compensation
benefits for eligible Business Employees and Retired Business Employees
("Seller's Workers Compensation Program"). Seller shall be responsible for all
claims for workers compensation benefits which are incurred prior to the Closing
Date, or Applicable Transfer Date, by such Business Employees or Retired
Business Employees that are payable under the terms and conditions of Seller's
Workers Compensation Program, and Buyer shall have no obligation or liability
with respect thereto. Effective as of the Closing Date, Buyer shall take all
necessary and appropriate action to adopt or designate a workers compensation
program which shall cover the Business Employees or Retired Business Employees
covered by such Seller program ("Buyer's Workers Compensation Program"). Buyer's
Workers Compensation Program shall be responsible for all claims for benefits
which are incurred from and after the Closing Date, or Applicable Transfer Date,
by Business Employees or Retired Business Employees that are payable under the
terms and conditions of Buyer's Workers Compensation Program. For purposes of
this Section 8, a claim for workers compensation benefits shall be deemed to be
incurred when the first event giving rise to the claim occurs.
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SECTION 9
WARN Act
--------
Seller agrees to provide any required notice under the Worker Adjustment
and Retraining Notification Act, as amended (the "WARN Act"), and any similar
statute, and otherwise to comply with any such statute with respect to any
"plant closing" or "mass layoff" (as defined in the WARN Act) or similar event
affecting Business Employees or Retired Business Employees and occurring prior
to the Closing Date. Seller shall indemnify and hold harmless Buyer with respect
to any liability under the WARN Act or similar statute arising from the actions
or inactions of Seller prior to the Closing Date. Buyer agrees to provide any
required notice under the WARN Act, and any similar statute, and otherwise to
comply with any such statute with respect to any plant closing or mass layoff or
similar event affecting Business Employees or Retired Business Employees and
occurring on or after the Closing Date. Buyer shall indemnify and hold harmless
Seller with respect to any liability under the WARN Act or similar statute
arising from the actions or inactions of Buyer on or after the Closing Date.
SECTION 10
Payroll
-------
Seller and Buyer agree that, with respect to Business Employees who accept
employment with Buyer upon the Closing Date, or Applicable Transfer Date, they
will take the position that they respectively meet the definitions of
"predecessor" and "successor," each as defined in Revenue Procedure 96-60 and
IRS Regulation Section 31.3121(a)(1)-1(b). Absent a mutual agreement with
respect to Procedure 96-60, Seller shall supply to Buyer, with respect to all
Business Employees who accept employment with Buyer upon the Closing Date, or an
Applicable Transfer Date, all cumulative payroll information as of the Closing
Date, or Applicable Transfer Date, that Buyer shall reasonably request in order
to employ IRS Regulation Section 31.3121(a)(1)-1(b).
SECTION 11
Vacation and Sick Pay
---------------------
Buyer shall assume responsibility for accrued vacation and sick pay
attributable to Business Employees as of the Closing Date, or Applicable
Transfer Date, to the extent such amounts are accrued as a liability on the
Closing Statement of Assets and Liabilities.
SECTION 12
Miscellaneous
-------------
12.1 (a) Further Agreements. Each Party shall be responsible for its own
------------------
expenses incurred before, on or after the Closing Date that are attributable to
the costs of disposing of the Seller Plans and establishing of plans by Buyer
pursuant to this Employee Agreement.
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(b) The Parties agree to reasonably cooperate and to respond to
reasonable requests for information to implement the terms of this Employee
Agreement
12.2 No Third Party Beneficiaries. This Employee Agreement and any
-----------------------------
Schedule attached hereto are for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any person or entity, other than the parties hereto and
such assigns, any legal or equitable rights hereunder
12.3 No Right to Continued Employment. Nothing contained in this Employee
--------------------------------
Agreement shall confer upon any Business Employee any right with respect to
continuance of employment by Buyer, nor shall anything herein interfere with the
right of Buyer to terminate the employment of any Business Employee at any time,
with or without cause, or, except as expressly provided herein, restrict Buyer
in the exercise of its independent business judgment in modifying any of the
terms and conditions of the employment of the Business Employees..
12.4 Severability. If any provision of this Employee Agreement or
------------
Schedules hereto, or the application of any such provision to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof.
12.5 Governing Law. To the extent not governed by federal law, this
-------------
Employee Agreement shall be governed by and construed in accordance with the
internal laws of the State of California applicable to agreements made and to be
performed entirely within such State, without regard to the conflicts of law
principles of such State.
12.6 Schedules Attached To Employee Agreement. The Schedules attached to
----------------------------------------
this Employee Agreement are incorporated herein by reference as though fully
set forth herein.
12.7 Entire Agreement. This Employee Agreement and the Schedules attached
----------------
hereto contain the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersede all prior oral and
written agreements and understandings relating to such subject matter.
12.8 Order of Precedence. The parties agree that if any terms of this
-------------------
Employee Agreement conflict with terms in the Purchase Agreement, the terms of
this Employee Agreement shall govern with respect to the resolution of such
conflict.
12.9 Counterparts. This Employee Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
12.10 Notices. All notices or other communications required or permitted
-------
to be given hereunder shall be in writing and shall be delivered by hand or sent
prepaid telex, cable or telecopy, or sent, postage prepaid, by registered,
certified or express mail, or reputable overnight courier service and shall be
deemed given when so delivered by hand, telexed, cabled or telecopied, or if
mailed, three days after mailing (one business day in the case of express mail
or overnight courier service), as follows:
13
(i) if to Buyer, to:
VAC Acquisition Corp. II
c/o The Carlyle Group
0000 Xxxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxx Xxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Attention: R. Xxxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(ii) if to Seller, to:
Office of General Counsel
Northrop Grumman Corporation
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
12.11 Descriptive Headings. The Section and clause headings of this
--------------------
Employee Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Employee Agreement.
12.12 Expenses. Except as otherwise provided elsewhere in this Employee
--------
Agreement, all fees, costs and expenses incurred in connection with this
Employee Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fees, costs or expenses.
12.13 Amendments. No amendment to this Employee Agreement shall be
----------
effective unless it shall be in writing and signed by the parties hereto.
14
12.14 Assignment. This Employee Agreement and the rights and obligations
----------
hereunder shall not be assignable or transferable by either party other than by
operation of law or in connection with a merger or sale of substantially all the
assets of such party without the prior written consent of the other, which
consent will not be unreasonably withheld; provided, however, that no assignment
shall limit or affect assigning party's obligations hereunder.
12.15 Termination. This Employee Agreement shall terminate and be of no
-----------
force or effect in the event the Purchase Agreement is terminated prior to the
Closing.
IN WITNESS WHEREOF, Seller and Buyer have each caused this Employee
Agreement to be duly signed and delivered to the other parties.
SELLER
By: /s/
-------------------------------------
Title: Corporate Vice President & Treasurer
-------------------------------------
BUYER
By: /s/
Title: Managing Director
15
