NORTHROP GRUMMAN CORPORATION
MARCH 2000 SPECIAL AGREEMENT
THIS AGREEMENT is made and entered into by and between
Northrop Grumman Corporation, a Delaware corporation
(hereinafter referred to as the "Company") and
________________________________ (hereinafter referred to as
the "Executive").
RECITALS
The Board of Directors of the Company has approved the
Company entering into a severance agreement with the
Executive.
The Executive is a key executive of the Company.
Should the possibility of a Change in Control of the
Company arise, the Board believes it imperative that the
Company and the Board should be able to rely upon the
Executive to continue in his position, and that the Company
should be able to receive and rely upon the Executive's
advice, if requested, as to the best interests of the
Company and its stockholders without concern that the
Executive might be distracted by the personal uncertainties
and risks created by the possibility of a Change in Control.
Should the possibility of a Change in Control arise, in
addition to his regular duties, the Executive may be called
upon to assist in the assessment of such possible Change in
Control, advise management and the Board as to whether such
Change in Control would be in the best interests of the
Company and its stockholders, and to take such other actions
as the Board might determine to be appropriate.
NOW THEREFORE, to assure the Company that it will have
the continued dedication of the Executive and the
availability of his advice and counsel notwithstanding the
possibility, threat, or occurrence of a Change in Control of
the Company, and to induce the Executive to remain in the
employ of the Company in the face of these circumstances and
for other good and valuable consideration, the Company and
the Executive agree as follows:
Article 1. Certain Definitions
Whenever used in this Agreement, the following terms
shall have the meanings set forth below and, when the
meaning is intended, the initial letter of the word is
capitalized:
(a) "Agreement" means this March 2000 Special Agreement.
(b) "Base Salary" means the salary of record paid to the
Executive by the Company as annual salary (whether or not
deferred), but excludes amounts received under incentive or
other bonus plans.
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(c) "Beneficial Owner" shall have the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations
under the Exchange Act.
(d) "Beneficiary" means the persons or entities designated
or deemed designated by the Executive pursuant to Section
9.2 herein.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" shall mean the occurrence of either or both of
the following:
(i) The Executive's conviction for committing an act of
fraud, embezzlement, theft, or other act constituting a
felony; or
(ii) The willful engaging by the Executive in misconduct
which would have resulted in his termination by the Company
under its policies and practices applicable to the Executive
on September 1, 1999. However, no act or failure to act, on
the Executive's part shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that his action or
omission was in the best interest of the Company.
(g) "Change in Control" of the Company shall be deemed to
have occurred as of the first day that any one or more of
the following conditions shall have been satisfied:
(i) Any Person (other than those Persons in control of the
Company as of the Effective Date, or other than a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company) becomes the Beneficial Owner, directly
or indirectly, of securities of the Company representing
thirty three and one-third percent (33-1/3%) or more of the
combined voting power of the Company's then outstanding
securities, and for purposes of this subsection (i) "Person"
or "group" shall not include underwriters acquiring newly-
issued voting securities (or securities convertible into
voting securities) directly from the Company with a view
towards distribution.
(ii) On any day after the Effective Date (the "Measurement
Date") Continuing Directors cease for any reason to
constitute a majority of the Board. A director is a
"Continuing Director" if he or she either:
(1) was a member of the Board on the
applicable Initial Date (an "Initial
Director"); or
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(2) was elected to the Board, or was
nominated for election by the Company's
stockholders, by a vote of at least two-
thirds (2/3) of the Initial Directors
then in office.
A member of the Board who was not a director
on the applicable Initial Date shall be
deemed to be an Initial Director for purposes
of clause (2) above if his or her election,
or nomination for election by the Company's
stockholders, was approved by a vote of at
least two-thirds (2/3) of the Initial
Directors (including directors elected after
the applicable Initial Date who are deemed to
be Initial Directors by application of this
provision) then in office.
"Initial Date" means the later of (1) the
Effective Date or (2) the date that is two
(2) years before the Measurement Date.
(iii) The Company is liquidated; all or substantially
all of the Company's assets are sold in one or a series of
related transactions; or the Company is merged,
consolidated, or reorganized with or involving any other
corporation, other than a merger, consolidation, or
reorganization that results in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than fifty percent (50%) of the combined voting power
of the voting securities of the Company (or such surviving
entity) outstanding immediately after such merger,
consolidation, or reorganization. Notwithstanding the
foregoing, an event described in this clause (iii) that
occurred prior to the Effective Date shall not constitute a
Change in Control.
(h) "Code" means the United States Internal Revenue Code of
1986, as amended.
(i) "Committee" means the Compensation and Management
Development Committee of the Board, or any other committee
appointed by the Board to perform the functions of the
Compensation and Management Development Committee.
(j) "Company" means Northrop Grumman Corporation, a
Delaware corporation (including, for purposes of determining
whether the Executive is employed by the Company, any and
all subsidiaries specified by the Committee), or any
successor thereto as provided in Article 8 herein.
(k) "Disability" means permanent and total disability,
within the meaning of Code Section 22(e)(3), as determined
by the Committee in the exercise of good faith and
reasonable judgment, upon receipt of and in reliance on
competent medical advice from one or more individuals
licensed and qualified to give professional medical advice.
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(l) "Effective Date" means March 1, 2000.
(m) "Effective Date of Termination" means the date on which
a Qualifying Termination occurs.
(n) "Exchange Act" means the United States Securities
Exchange Act of 1934, as amended.
(o) "Executive" means the individual identified in the
first sentence and on the signature page of this Agreement.
(p) "Good Reason" means, without the Executive's express
written consent, the occurrence of any one or more of the
following:
(i) A material reduction in the nature or status of the
Executive's authorities, duties, and/or responsibilities,
(when such authorities, duties, and/or responsibilities are
viewed in the aggregate) from their level in effect on the
day immediately prior to the start of the Protected Period,
other than an insubstantial and inadvertent act that is
remedied by the Company promptly after receipt of notice
thereof given by the Executive; provided that if the
Executive is a vice president, for purposes of the preceding
phrase the Executive's loss of vice president status (other
than a promotion to a higher level officer) will constitute
Good Reason. In addition, if the Executive reports directly
to the Company's Chief Executive Officer immediately prior
to the start of the Protected Period, Good Reason will be
deemed to exist if the Executive's reporting relationship is
changed such that the Executive does not report to one of
the following: the Chair of the Board, or the Company's
Chief Executive Officer, President, or Chief Operating
Officer.
(ii) A reduction by the Company of the Executive's Base
Salary as in effect on the Effective Date, or as the same
shall be increased from time to time.
(iii) A significant reduction by the Company of the
Executive's aggregate incentive opportunities under the
Company's short and/or long-term incentive programs, as such
opportunities exist on the Effective Date, or as such
opportunities may be increased after the Effective Date.
For this purpose, a significant reduction in the Executive's
incentive opportunities shall be deemed to have occurred in
the event his targeted annualized award opportunities and/or
the degree of probability of attainment of such annualized
award opportunities are diminished by the Company from the
levels and probability of attainment that existed as of the
Effective Date.
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(iv) The failure of the Company to maintain (x) the
Executive's relative level of coverage and accruals under
the Company's employee benefit and/or retirement plans,
policies, practices, or arrangements in which the Executive
participates as of the Effective Date, both in terms of the
amount of benefits provided, and amounts accrued and (y) the
relative level of the Executive's participation in such
plans, policies, practices, or arrangements on a basis at
least as beneficial as, or substantially equivalent to, that
on which the Executive participated in such plans
immediately prior to the Effective Date. For this purpose,
the Company may eliminate and/or modify existing programs
and coverage levels; provided, however, that the Executive's
level of coverage under all such programs must be at least
as great as is provided to executives who have the same or
lesser levels of reporting responsibilities within the
Company's organization.
(v) The failure of the Company to obtain a satisfactory
agreement from any successor to the Company to assume and
agree to perform the Company's obligations under this
Agreement, as contemplated in Article 8 herein.
(vi) Any purported termination by the Company of the
Executive's employment that is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
2.8 herein and for purposes of this Agreement, no such
purported termination shall be effective.
The Executive's right to terminate employment for
Good Reason shall not be affected by the
Executive's incapacity due to physical or mental
illness. The Executive's continued employment
shall not constitute a consent to, or a waiver of
rights with respect to, any circumstance
constituting Good Reason herein.
(q) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections
13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) thereof.
(r) "Qualifying Termination" means any of the events
described in Section 2.3(a) herein.
(s) "Severance Benefits" means the payments and/or benefits
provided in Section 2.4 herein.
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Article 2. Severance Benefits
.1 Right to Severance Benefits. The Executive shall be
entitled to receive the Severance Benefits described in
Section 2.4 herein if the Executive has incurred a
Qualifying Termination as described in Section 2.3.
The Executive shall not be entitled to receive
Severance Benefits if he is terminated for Cause, or if his
employment with the Company ends due to death or Disability,
or due to a voluntary termination of employment by the
Executive without Good Reason.
.2 Services During Certain Events. In the event a Person
begins a tender or exchange offer, circulates a proxy to
stockholders of the Company, or takes other steps seeking to
effect a Change in Control, the Executive agrees that he
will not voluntarily leave the employ of the Company and
will render services until such Person has abandoned or
terminated his or its efforts to effect a Change in Control,
or until six (6) months after a Change in Control has
occurred; provided, however, that the Company may terminate
the Executive's employment for Cause at any time, and the
Executive may terminate his employment at any time after the
Change in Control for Good Reason.
.3 Qualifying Termination.
(a) The occurrence of any one or more of the following
events within the Protected Period (as such term
is defined in Section 2.3(b)) corresponding to a
Change in Control of the Company, or within twenty-
four (24) calendar months following the date of a
Change in Control of the Company shall constitute
a Qualifying Termination and trigger the payment
of Severance Benefits to the Executive under this
Agreement:
(i) An involuntary termination of the Executive's
employment by the Company for reasons other
than Cause;
(ii) A voluntary termination of employment by the
Executive for Good Reason;
(iii)A successor company fails or refuses to
assume by written instrument the Company's
obligations under this Agreement, as required
by Article 8 herein; or
(iv) The Company or any successor company
repudiates or breaches any of the provisions
of this Agreement.
If more than one of the events set forth in this
subsection occurs, such events shall constitute
but a single Qualifying Termination and the
Executive shall be entitled to but a single
payment of the Severance Benefits.
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(b) The "Protected Period" corresponding to a Change
in Control of the Company shall be a period of
time determined in accordance with the following:
(i) If the Change in Control is triggered by a
tender offer for shares of the Company's
stock or by the offeror's acquisition of
shares pursuant to such a tender offer, the
Protected Period shall commence on the date
of the initial tender offer and shall
continue through and including the date of
the Change in Control; provided that in no
case will the Protected Period commence
earlier than the date that is six (6) months
prior to the Change in Control.
(ii) If the Change in Control is triggered by a
merger, consolidation, or reorganization of
the Company with or involving any other
corporation, the Protected Period shall
commence on the date that serious and
substantial discussions first take place to
effect the merger, consolidation, or
reorganization and shall continue through and
including the date of the Change in Control;
provided that in no case will the Protected
Period commence earlier than the date that is
six (6) months prior to the Change in
Control.
(iii) In the case of any Change in Control not
described in clause (i) or (ii) above, the
Protected Period shall commence on the date
that is six (6) months prior to the Change in
Control and shall continue through and
including the date of the Change in Control.
(c) Notwithstanding anything else contained herein to
the contrary, the Executive's termination of
employment on account of reaching mandatory
retirement age, as such age may be defined from
time to time in policies adopted by the Company
prior to the commencement of the Protected Period,
and consistent with applicable law, shall not be a
Qualifying Termination.
(d) Notwithstanding anything else contained herein to
the contrary, the termination of the Executive's
employment shall not constitute a Qualifying
Termination if the termination (or events giving
rise to Good Reason) would have otherwise occurred
as part of the predictable consequences of a
corporate restructuring or downsizing program that
commenced prior to the Protected Period.
(e) Notwithstanding anything else contained herein to
the contrary, the Executive shall not be entitled
to Severance Benefits under this Agreement if he
receives or is entitled to receive severance
benefits under a prior Northrop Grumman
Corporation Special Agreement or under the
Northrop Grumman Corporation Change-In-Control
Severance Plan. If the Executive is otherwise
entitled to receive Severance Benefits under this
Agreement and severance benefits under the
Northrop Grumman Corporation March 2000 Change-In-
Control Severance Plan, benefits shall be paid
under this Agreement rather than under such plan.
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.4 Description of Severance Benefits. In the event that
the Executive becomes entitled to receive Severance
Benefits, as provided in Sections 2.1 and 2.3 herein, the
Company shall pay to the Executive and provide him with the
following:
(a) An amount equal to three (3) times the highest
rate of the Executive's annualized Base Salary in effect at
any time up to and including the Effective Date of
Termination.
(b) An amount equal to three (3) times the greater of:
(i) the average of the Executive's bonus earned with respect
to the three (3) full fiscal years prior to the Effective
Date of Termination; or (ii) the Executive's target annual
bonus established for the bonus plan year in which the
Executive's Effective Date of Termination occurs.
(c) An amount equal to the Executive's unpaid Base
Salary and accrued vacation pay through the Effective Date
of Termination, together with a portion of the Executive's
target bonus under the bonus plan in which he participates
for that year, calculated by multiplying the target bonus by
a fraction the numerator of which is the number of days from
January 1 through the Effective Date of Termination and the
denominator of which is three hundred sixty-five (365).
(d) A continuation of all benefits pursuant to any and
all welfare benefit plans under which the Executive and/or
the Executive's family is eligible to receive benefits
and/or coverage as of the effective date of the Change in
Control, including, but not limited to, group life
insurance, hospitalization, disability, medical, and dental
plans. Except as provided in the next sentence, such
benefits shall be provided to the Executive at the same
premium cost, and at the same coverage level, as in effect
as of the Executive's Effective Date of Termination. If the
Executive is entitled to benefits under the Company's
Special Officer Retiree Medical Plan as of or immediately
following the Effective Date of Termination, the medical
benefits referred to in the first sentence of this paragraph
shall be provided under and in accordance with the terms of
such plan and the Executive and/or the Executive's family
shall not be eligible for continued medical coverage under
any other Company plan or arrangement.
The welfare benefits described in this Subsection
2.4(d) shall continue for three years following
the Effective Date of Termination for the
Executive and his spouse; provided, however, that:
(i) such welfare benefits that are medical
benefits provided under the Company's Special
Officer Retiree Medical Plan shall continue and be
coordinated with other medical coverage in
accordance with the terms of such plan; (ii) if
the Executive is not entitled to benefits under
the Company's Special Officer Retiree Medical Plan
as of or immediately following the Effective Date
of Termination, the medical benefits referred to
in the first sentence of the preceding paragraph
shall continue for the life of the Executive and
the life of his spouse; and (iii) such welfare
benefits that are medical benefits provided under
any plan or arrangement other than the Special
Officer Retiree Medical Plan may be coordinated
with and paid secondary to any benefits that the
Executive or his family member receives from
another employer or from Medicare (following the
Executive and/or his family member's entitlement
to Medicare benefits).
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(e) Except as provided in Section 2.9, a lump-sum cash
payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the
Effective Date of Termination under the qualified defined
benefit pension plan or plans in which the Executive
participates (the "qualified plan"), and under any and all
supplemental retirement plans in which the Executive
participates. For this purpose, such benefits shall be
calculated as if the Executive's employment continued for
three full years following the Effective Date of Termination
(i.e., the Executive receives three additional years of
vesting and benefit accruals, and his age is also increased
three years from his age as of the Effective Date of
Termination for all purposes under such plans, including any
and all early retirement subsidies); provided, however, that
for purposes of determining "Final Average Pay" under such
plans, the Executive's actual pay history as of the
Effective Date of Termination shall be used, except that
there shall be substituted for each of the actual annual
incentive plan bonuses otherwise included in such pay the
higher of (x) the average of the last three annual incentive
plan bonuses received by the Executive, or (y) the
Executive's target annual incentive plan bonus for the year
in which the Effective Date of Termination occurs. In
addition, for this purpose there shall be offset from the
lump sum payment the actuarial present value equivalent of
benefits payable (calculated assuming that the Executive
retired and went into pay status under the terms of the
qualified plan in which he participates on or as soon as
possible after his Effective Date of Termination) to the
Executive from the qualified plan as actually accrued by the
Executive through the Effective Date of Termination under
the qualified plan (or such other date as determined under
the terms of the qualified plan); the intent of this
provision being that the qualified plan benefits will be
paid in the normal course under the terms of the qualified
plan, with additional benefits payable as a result of the
imputation of age and service under this provision being
paid under this Agreement.
(f) A lump-sum cash payment of the entire balance of
the Executive's compensation which has been deferred under
the Company's nonqualified deferred compensation plan(s)
together with all interest that has been credited with
respect to such deferred compensation balance.
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(g) For purposes of this Agreement, any acceleration
of vesting, lapse of restrictions and/or payout occasioned
by the Change in Control pursuant to the provisions of long-
term incentive plans and/or individual award agreements
under such long-term incentive plans shall be deemed a
benefit within the meaning of this Section 2.4. Any amounts
paid either directly to, or for the benefit of the Executive
pursuant to Article 7 of this Agreement shall also be deemed
a benefit within the meaning of this Section 2.4.
.5 Termination for Total and Permanent Disability.
Following a Change in Control of the Company, if the
Executive's employment is terminated due to Disability, the
Company shall pay the Executive his full Base Salary and
accrued vacation through the effective date of the
Executive's termination, at the rate then in effect, plus
all other amounts to which the Executive is entitled under
any compensation plans of the Company, at the time such
payments are due, and, following the effective date of the
Executive's termination, the Executive's benefits shall be
determined in accordance with the Company's disability,
retirement, insurance, and other applicable plans and
programs then in effect and the Company shall have no
further obligations to the Executive under this Agreement;
provided, however, that if immediately prior to the
condition or event leading to, or the commencement of, the
Disability of the Executive, the Executive would have been
entitled to invoke any of the clauses of Section 2.3(a) of
this Agreement if he had terminated at that time, then upon
termination of his employment for Disability he shall be
entitled to collect immediately his full Severance Benefits
hereunder.
.6 Termination for Retirement or Death. Following a
Change in Control of the Company, if the Executive's
employment is terminated by reason of his retirement or
death, the Company shall pay the Executive his full Base
Salary and accrued vacation through the date of the
Executive's death or retirement, as applicable, at the rate
then in effect, plus all other amounts to which the
Executive is entitled under any compensation plans of the
Company, at the time such payments are due, and, following
the date of the Executive's death or retirement, as
applicable, the Executive's benefits shall be determined in
accordance with the Company's retirement, survivor's
benefits, insurance, and other applicable plans and programs
then in effect and the Company shall have no further
obligations to the Executive under this Agreement; provided,
however, that if immediately prior to the Executive's
retirement (but not death), the Executive would have been
entitled to invoke any of the clauses of Section 2.3(a) of
this Agreement if he had terminated at that time, then upon
his retirement he shall (subject to Section 2.3(c)) be
entitled to collect immediately his full Severance Benefits
hereunder.
.7 Termination for Cause or by the Executive Other Than
for Good Reason or Retirement. Following a Change in
Control of the Company, if the Executive's employment is
terminated either: (i) by the Company for Cause; or (ii) by
the Executive other than for retirement and other than for
Good Reason, the Company shall pay the Executive his full
Base Salary and accrued vacation through the effective date
of the Executive's termination, at the rate then in effect,
plus all other amounts to which the Executive is entitled
under any compensation plans of the Company, at the time
such payments are due, and the Company shall have no further
obligations to the Executive under this Agreement.
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.8 Notice of Termination. Any termination by the Company
for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party.
For purposes of this Agreement, a "Notice of Termination"
shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied
upon, and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated.
If the Executive is terminating for Good Reason hereunder,
the Notice of Termination shall be effective on the date
specified in Section 9.7 of this Agreement.
.9 Alternative Form of Payment Election.
(a) Section 2.4(e) contains a provision for a lump sum
cash payout of the actuarial present value
equivalent of the aggregate benefits accrued by
the Executive under supplemental nonqualified
plans. If the Executive timely elects an
alternative form of payment in accordance with
Section 2.9(d), that lump sum override of the form
of payment provisions of other plans is rescinded.
Accordingly, the form of payment of benefits under
those plans will be determined in accordance with
the provisions of those plans.
(b) The rescission of the lump sum override in
accordance with Section 2.9(a) is not meant to
have any effect on the lump sum payout provision
in Section 2.4(e) with respect to the 3+3 benefits
(i.e., the imputed three additional years of
vesting and benefit accruals and three years of
age). Accordingly, the Executive's 3+3 benefits
shall be paid in a lump sum in accordance with
Section 2.4(e) notwithstanding the Executive's
alternative form of payment election (if any).
(c) If the payout provisions in other supplemental
nonqualified retirement plans made operative by
the rescission of the lump sum override in
accordance with Section 2.9 (a) contain reduction
in benefit provisions (such as forfeitures or
penalties attached to a lump sum election), the
reduced amounts will not be restored by this
Agreement.
(d) The Executive may elect the alternative form of
payment described in Section 2.9(a) on a form and
in the manner prescribed by the Committee;
provided that (i) in order to be effective, such
election must be received by the Committee before
the close of business on March 1, 2000, and (ii)
such election will not apply to any Severance
Benefits that relate to a Change in Control that
occurs on or before June 1, 2000.
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Article 3. Form and Timing of Severance Benefits
.1 Form and Timing of Severance Benefits. The Severance
Benefits described in Sections 2.4(a), 2.4(b), 2.4(c),
2.4(e) (except as provided in Section 2.9), and 2.4(f)
herein shall be paid in cash to the Executive in a single
lump sum as soon as practicable following the Effective Date
of Termination, but in no event beyond thirty (30) days from
such date.
.2 Withholding of Taxes. The Company shall be entitled to
withhold from any amounts payable under or pursuant to this
Agreement all taxes as legally shall be required (including,
without limitation, any United States Federal taxes, and any
other state, city, or local taxes).
Article 4. Excise Tax Gross-Up
.1 Equalization Payment. If upon or following a Change in
Control, the tax imposed by Section 4999 of the Code or any
similar or successor tax (the "Excise Tax") applies, solely
because of the Change in Control, to any payments, benefits
and/or amounts received by the Executive as Severance
Benefits or otherwise, including, without limitation, any
fees, costs and expenses paid under Article 7 of this
Agreement and/or any amounts received or deemed received,
within the meaning of any provision of the Code, by the
Executive as a result of (and not by way of limitation) any
automatic vesting, lapse of restrictions and/or accelerated
target or performance achievement provisions, or otherwise,
applicable to outstanding grants or awards to the Executive
under any of the Company's incentive plans, including
without limitation, the 1993 Long Term Incentive Stock Plan,
the 1987 Long Term Incentive Plan and the 1981 Long-Term
Incentive Plan, the Company shall pay to the Executive in
cash an additional amount or amounts (the "Gross-Up
Payment(s)") such that the net amount retained by the
Executive after the deduction of any Excise Tax on such
payments, benefits and/or amounts so received and any
Federal, state and local income tax and Excise Tax upon the
Gross-Up Payment(s) provided for by this Section 4.1 shall
be equal to such payments, benefits and/or amounts so
received had they not been subject to the Excise Tax. Such
payment(s) shall be made by the Company to the Executive as
soon as practicable following the receipt or deemed receipt
of any such payments, benefits and/or amounts so received,
and may be satisfied by the Company making a payment or
payments on Executive's account in lieu of withholding for
tax purposes but in all events shall be made within thirty
(30) days of the receipt or deemed receipt by the Executive
of any such payment, benefit and/or amount.
.2 Tax Computation. For purposes of determining whether
any payments, benefits and/or amounts, including amounts
paid as Severance Benefits, will be subject to Excise Tax,
and the amount of any such Excise Tax:
(a) Any other payments, benefits and/or amounts
received or to be received by the Executive in connection
with or contingent upon a Change in Control of the Company
or the Executive's termination of employment (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, or with any
Person whose actions result in a Change in Control of the
Company or any Person affiliated with the Company or such
Persons) shall be combined to determine whether the
Executive has received any "parachute payment" within the
meaning of Section 280G(b)(2) of the Code, and if so, the
amount of any "excess parachute payments" within the meaning
of Section 280G(b)(1) that shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel
selected by the Company's independent auditors and
acceptable to the Executive, such other payments, benefits
and/or amounts (in whole or in part) do not constitute
parachute payments, or such excess parachute payments
represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the
Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject
to the Excise Tax;
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(b) The value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up
Payment, the Executive shall be deemed to pay Federal income
taxes at the highest marginal rate of Federal income
taxation in the calendar year in which the Gross-Up Payment
is to be made. Such highest marginal rate shall take into
account the loss of itemized deductions by the Executive and
shall also include the Executive's share of the hospital
insurance portion of FICA and state and local income taxes
at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the Effective Date
of Termination, net of the maximum reduction in Federal
income taxes that could be obtained from the deduction of
such state and local taxes.
.3 Subsequent Recalculation. In the event the Internal
Revenue Service adjusts the computation of the Company under
Section 4.2 herein, so that the Executive did not receive
the greatest net benefit, the Company shall reimburse the
Executive as provided herein for the full amount necessary
to place the Executive in the same after-tax position as he
would have been in had no Excise Tax applied.
Article 5. The Company's Payment Obligation
.1 Payment Obligations Absolute. The Company's obligation
to make the payments and the arrangements provided for
herein shall be absolute and unconditional, and shall not be
affected by any circumstances, including, without
limitation, any offset, counterclaim, recoupment, defense,
or other right which the Company may have against the
Executive or anyone else. All amounts payable by the
Company hereunder shall be paid without notice or demand.
Each and every payment made hereunder by the Company shall
be final, and the Company shall not seek to recover all or
any part of such payment from the Executive or from
whomsoever may be entitled thereto, for any reasons
whatsoever, except as otherwise provided in Article 7
hereof.
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The Executive shall not be obligated to seek other
employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and
the obtaining of any such other employment shall in no event
effect any reduction of the Company's obligations to make
the payments and arrangements required to be made under this
Agreement, except to the extent provided in Section 2.4(d)
herein.
.2 Contractual Rights to Benefits. This Agreement
establishes and vests in the Executive a contractual right
to the benefits to which he is entitled hereunder and the
Company expressly waives any ability, if possible, to deny
liability for any breach of its contractual commitment
hereunder upon the grounds of lack of consideration, accord
and satisfaction or any other defense. In any dispute
arising after a Change in Control as to whether the
Executive is entitled to benefits under this Agreement,
there shall be a presumption that the Executive is entitled
to such benefits and the burden of proving otherwise shall
be on the Company. However, nothing herein contained shall
require or be deemed to require, or prohibit or be deemed to
prohibit, the Company to segregate, earmark, or otherwise
set aside any funds or other assets, in trust or otherwise,
to provide for any payments to be made or required
hereunder.
.3 Pension Plans. All payments, benefits and amounts
provided under this Agreement shall be in addition to and
not in substitution for any pension rights under the
Company's tax-qualified pension plan, and any disability,
workers' compensation or other Company benefit plan
distribution that the Executive is entitled to at his
Effective Date of Termination. Notwithstanding the
foregoing, this Agreement shall not create an inference that
any duplicate payments shall be required.
Article 6. Term of Agreement
This Agreement will commence on the Effective Date and
shall continue in effect through February 28, 2003.
However, at the end of such three (3) year period and, if
extended, at the end of each additional year thereafter, the
term of this Agreement shall be extended automatically for
one (1) additional year, unless the Committee delivers
written notice at least six (6) months prior to the end of
such term, or extended term, to the Executive, that this
Agreement will not be extended. In such case, this
Agreement will terminate at the end of the term, or extended
term, then in progress.
However, in the event a Change in Control occurs during
the original or any extended term, this Agreement will
remain in effect for the longer of: (i) twenty-four (24)
months beyond the month in which such Change in Control
occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits
required hereunder have been paid to the Executive. Any
subsequent Change in Control ("Subsequent Change in
Control") that occurs during the original or any extended
term shall also continue the term of this Agreement until
the later of: (i) twenty-four (24) months beyond the month
in which such Subsequent Change in Control occurred; or (ii)
until all obligations of the Company hereunder have been
fulfilled, and until all benefits required hereunder have
been paid to the Executive; provided, however, that if a
Subsequent Change in Control occurs, it shall only be
considered a Change in Control under this Agreement if it
occurs no later than twenty-four (24) months after the
immediately preceding Change in Control or Subsequent Change
in Control.
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Article 7. Resolution of Disputes
.1 Arbitration of Claims. The Company and the Executive
hereby consent to the resolution by arbitration of all
claims or controversies arising out of or in connection with
this Agreement that the Company may have against the
Executive, or that the Executive may have against the
Company or against its officers, directors, employees or
agents acting in their capacity as such. Each party's
promise to resolve all such claims or controversies by
arbitration in accordance with this Agreement, rather than
through the courts, is consideration for the other party's
like promise. It is further agreed that the decision of an
arbitrator on any issue, dispute, claim or controversy
submitted for arbitration shall be final and binding upon
the Company and the Executive and that judgment may be
entered on the award of the arbitrator in any court having
proper jurisdiction.
All expenses of such arbitration, including the fees
and expenses of the counsel for the Executive, shall be
advanced and borne by the Company; provided, however, that
if it is finally determined that the Executive did not
commence the arbitration in good faith and had no reasonable
basis therefore, the Executive shall repay all advanced fees
and expenses and shall reimburse the Company for its
reasonable legal fees and expenses in connection therewith.
Except as otherwise provided in this procedure or by
mutual agreement of the parties, any arbitration shall be
administered: (1) in accordance with the then-current Model
Employment Arbitration Procedures of the American
Arbitration Association ("AAA") before an arbitrator who is
licensed to practice law in the state in which the
arbitration is convened; or (2) if locally available, the
Judicial Arbitration & Mediation Services, Inc. ("JAMS"), in
accordance with the JAMS procedures then in effect. The
party who did not initiate the claim can designate between
JAMS or AAA (the "Tribunal"). The arbitration shall be held
in the city in which the Executive is or was last employed
by the Company in the nearest Tribunal office or at a
mutually agreeable location. Pre-hearing and post-hearing
procedures may be held by telephone or in person as the
arbitrator deems necessary.
The arbitrator shall be selected as follows: if the
parties cannot agree on an arbitrator, the Tribunal (JAMS or
AAA) shall then provide the names of nine (9) available
arbitrators experienced in business employment matters along
with their resumes and fee schedules.
Each party may strike all names on the list it deems
unacceptable. If more than one common name remains on the
list of all parties, the parties shall strike names
alternately until only one remains. The party who did not
initiate the claim shall strike first. If no common name
remains on the lists of the parties, the Tribunal shall
furnish an additional list or lists until an arbitrator is
selected.
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The arbitrator shall interpret this Agreement, any
applicable Company policy or rules and regulations, any
applicable substantive law (and the law of remedies, if
applicable) of the state in which the claim arose, or
applicable federal law. In reaching his or her decision,
the arbitrator shall have no authority to change or modify
any lawful Company policy, rule or regulation, or this
Agreement. The arbitrator, and not any federal, state or
local court or agency, shall have exclusive and broad
authority to resolve any dispute relating to the
interpretation, applicability, enforceability or formation
of this Agreement, including but not limited to, any claim
that all or any part of this Agreement is voidable.
The arbitrator shall have authority to entertain a
motion to dismiss and/or motion for summary judgment by any
party and shall apply the standards governing such motions
under the Federal Rules of Civil Procedure.
.2 Discovery. Each party shall have the right to take the
deposition of one individual and any expert witness(es)
designated by another party. Each party shall also have the
opportunity to obtain documents from another party through
one request for production of documents. Additional
discovery may be had only when the arbitrator so orders upon
a showing of substantial need. Any disputes regarding
depositions, requests for production of documents or other
discovery shall be submitted to the arbitrator for
determination.
.3 Subpoenas. Each party shall have the right to subpoena
witnesses and documents for the arbitration hearing by
requesting a subpoena from the arbitrator. Any such request
shall be served on all other parties, who shall advise the
arbitrator in writing of any objections that the party may
have to issuance of the subpoena within ten (10) calendar
days of receipt of the request.
.4 Designation of Witnesses. At least thirty (30)
calendar days before the arbitration, the parties must
exchange lists of witnesses, including any expert(s), and
copies of all exhibits intended to be used at the
arbitration.
Article 8. Successors.
The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation, or
otherwise) of all or substantially all of the business
and/or assets of the Company or of any division or
subsidiary thereof (the business and/or assets of which
constitute at least fifty percent (50%) of the total
business and/or assets of the Company) to expressly assume
and agree to perform the Company's obligations under this
Agreement in the same manner and to the same extent that the
Company would be required to perform them if no such
succession had taken place. Failure of the Company to
obtain such assumption and agreement in a written instrument
prior to the effective date of any such succession shall be
a breach of this Agreement and shall entitle the Executive
to compensation from the Company in the same amount and on
the same terms as he would be entitled to hereunder if he
had terminated his employment with the Company voluntarily
for Good Reason. Except for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Effective Date of Termination
if the Executive so elects, but any delay or failure by the
Executive to so elect shall not be a waiver or release of
any rights hereunder which may be asserted at any time.
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This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If the
Executive should die while any amount would still be payable
to him hereunder had he continued to live, all such amounts,
unless otherwise provided herein, shall be paid to the
Executive's Beneficiary in accordance with the terms of this
Agreement. If the Executive has not named a Beneficiary,
then such amounts shall be paid to the Executive's devisee,
legatee, or other designee, or if there is no such designee,
to the Executive's estate.
Article 9. Miscellaneous
.1 Employment Status. The Executive and the Company
acknowledge that, except as may be provided under any other
written agreement between the Executive and the Company, the
employment of the Executive by the Company is "at will,"
and, prior to the effective date of a Change in Control, may
be terminated by either the Executive or the Company at any
time, subject to applicable law.
.2 Beneficiaries. The Executive may designate one or more
persons or entities as the primary and/or contingent
Beneficiaries of any Severance Benefits owing to the
Executive under this Agreement. The Executive may make or
change such designation at any time, provided that any
designation or change thereto must be in the form of a
signed writing acceptable to and received by the Committee.
.3 Entire Agreement. This Agreement contains the entire
understanding of the Company and the Executive with respect
to the subject matter hereof.
.4 Gender and Number. Except where otherwise indicated by
the context any masculine term used herein also shall
include the feminine, the plural shall include the singular,
and the singular shall include the plural.
.5 Severability. In the event any provision of this
Agreement shall be held illegal or invalid for any reason,
the illegality or invalidity shall not affect the remaining
parts of this Agreement, and this Agreement shall be
construed and enforced as if the illegal or invalid
provision had not been included. Further, the captions of
this Agreement are not part of the provisions hereof and
shall have no force and effect.
.6 Modification. No provision of this Agreement may be
modified, waived, or discharged unless such modification,
waiver, or discharge is agreed to in writing and signed by
the Executive and by an authorized member of the Committee,
or by the respective parties' legal representatives and
successors.
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.7 Notice. For purposes of this Agreement, notices,
including Notice of Termination for Good Reason, and all
other communications provided for in this Agreement shall be
in writing and shall be deemed to have been duly given when
delivered or on the date stamped as received by the U.S.
Postal Service for delivery by certified or registered mail,
postage prepaid and addressed: (i) if to the Executive, to
his latest address as reflected on the records of the
Company, and (ii) if to the Company: Northrop Grumman
Corporation, 0000 Xxxxxxx Xxxx Xxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000, Attn: President, or to such other address as the
Company may furnish to the Executive in writing with
specific reference to this Agreement and the importance of
the notice, except that notice of change of address shall be
effective only upon receipt.
.8 Applicable Law. To the extent not preempted by the
laws of the United States, the laws of the State of
California shall be the controlling law in all matters
relating to this Agreement. Any statutory reference in this
Agreement shall also be deemed to refer to all final rules
and final regulations promulgated under or with respect to
the referenced statutory provision.
IN WITNESS WHEREOF, the parties have executed this
Agreement on this ___________ day of ____________________,
_______.
Northrop Grumman Corporation Executive
By:
Attest: Print Name:
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