Ownership Retention Agreement
The undersigned elected officer (the "Officer") of Northrop
Grumman Corporation (the "Company"), and the Company, by
executing and delivering this instrument, and intending to be
legally bound, agree to the following:
I. Escrow of the Shares and Cash Payment.
1.01. The amount of federal, state and local income and
social security, medicare and any other applicable employment tax
with respect to the vesting of Restricted Performance Stock
Rights that occurred as a result of the stockholder vote on
February 26, 1998 approving the merger of the Company with a
wholly owned subsidiary of Lockheed Xxxxxx Corporation pursuant
to that certain Agreement and Plan of Merger dated as of July 2,
1997, as amended to the date hereof, shall be deemed to equal 50%
of the number of shares that vested on the date of such
stockholder vote multiplied by $138.25 per share. The amount, if
any, of such deemed tax in excess of the amount heretofore
withheld by the Company with respect to such shares shall be paid
as soon as practicable to the Officer in cash in lieu of an
appropriate number of such shares valued at $138.25 per share.
Shares equal in value (at $138.25 per share) to the amount of the
tax withholding and the in-lieu cash payment shall not be issued
and the Officer shall have no rights therein or thereto.
1.02. The shares of Common Stock to which the Officer is
entitled (net of (i) tax withholding and (ii) the in-lieu cash
payment specified in Section 1.01 hereof) are referred to herein
as the "Shares." All of the Shares shall remain the property of
the Officer but shall be subject to the restrictions contained in
this Agreement. Annex A sets forth the number of Shares subject
to this Agreement.
1.03. The Shares shall be issued in the name of the Officer
and delivered to Chase Manhattan Bank and Trust Company, National
Association, as Escrow Agent, pursuant to the terms of that
certain Master Escrow Agreement, of even date herewith, by and
among the Company, the Officer and certain other employees of the
Company, and the Escrow Agent, the form of which is attached
hereto as Annex B (the "Master Escrow Agreement"), and shall be
held by the Escrow Agent in accordance with the terms of the
Master Escrow Agreement. In lieu of delivering all of the Shares
to the Escrow Agent, the Officer may elect to substitute other
owned shares of Common Stock for an equal number (all or part) of
the Shares, and such substituted shares of Common Stock shall
thereupon become "Shares" for purposes of this Agreement in lieu
of the shares for which they were substituted. During the
pendency of this Agreement, the Officer may, in accordance with
the provisions of the Master Escrow Agreement, elect to deliver
other owned shares of Common Stock in exchange for a like number
of Shares previously contributed hereunder, and such shares so
exchanged shall be "Shares" for purposes of this Agreement. The
restrictions imposed by this Agreement shall apply only to the
Shares, and only so long as the Shares are held in escrow.
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1.04. If, prior to March 1, 2000 (the "Payment Date"), the
Officer neither voluntarily terminates nor is terminated for
Cause as an employee of the Company, then on or before the tenth
business day after the Payment Date, the Company shall instruct
the Escrow Agent in writing to release and distribute to the
Officer the certificate representing the Shares. If, prior to
the Payment Date, the Officer dies, Retires, is terminated for a
reason other than Cause as an employee of the Company, or first
becomes Disabled, and has not previously voluntarily terminated
his or her employment with the Company or been terminated for
Cause, then on or before the twentieth business day after the
date of such death, Retirement, termination or Disability, the
Company shall instruct the Escrow Agent in writing to release and
distribute to the Officer (or his guardian or estate, as
appropriate) the certificate representing the Shares. If, prior
to the Payment Date, the Officer voluntarily terminates, other
than by Retirement, or is terminated for Cause, then the Officer
shall forfeit to the Company all of his right, title and interest
in and to the Shares and the Company is hereby empowered, in such
event, to instruct the Escrow Agent in writing to release and
distribute to the Company the certificate representing the
Shares.
1.05. The certificates representing the Shares shall have
the following legend conspicuously imprinted on the face thereof:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO AN AGREEMENT BETWEEN THE OWNER OF SUCH SHARES AND
NORTHROP GRUMMAN CORPORATION AND IN CERTAIN EVENTS SPECIFIED
IN SUCH AGREEMENT MAY BE SUBJECT TO FORFEITURE. A COPY OF
THE AGREEMENT MAY BE INSPECTED AT THE OFFICES OF NORTHROP
GRUMMAN CORPORATION.
1.06. The Shares held in escrow pursuant hereto and
pursuant to the Master Escrow Agreement may not be assigned,
alienated, sold, pledged, hypothecated, or otherwise transferred,
disposed of or encumbered, other than by will or the laws of
descent and distribution or pursuant to a qualified domestic
relations order (as defined by the Internal Revenue Code).
1.07. The Company shall promptly pay to the Officer as
owner of the Shares all dividends and distributions with respect
to the Shares as the same shall have been declared and paid by
the Company with respect to the Common Stock, provided that the
Officer shall have no right to receive any such payment if, on or
prior to the date of such payment, the Officer shall have
forfeited all his right, title and interest in and to the Shares
pursuant to the terms of this Agreement.
1.8. As owner of the Shares, the Officer shall retain all
voting rights with respect to the Shares provided to holders of
shares of Common Stock under the charter or bylaws of the Company
or the laws of the State of Delaware, provided that the Officer
shall have no such voting rights from and after the time, if any,
at which he forfeits all his right, title and interest in and to
the Shares pursuant to the terms of this Agreement.
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1.09. The Compensation and Management Development Committee
of the Board of Directors of the Company may make such waivers
hereunder as such Committee in its sole and absolute discretion
deems appropriate.
II. Lapse of Restrictions.
2.01. All restrictions on the Shares created pursuant to
this Agreement shall lapse and the Company shall deliver written
notice to the Escrow Agent directing that the Shares be
distributed to the Officer, if the Officer is employed by the
Company at the time of the occurrence of a Change in Control that
occurs prior to March 1, 2000.
III. Payment for Taxes.
3.01. If, after a final determination for federal, state or
local tax purposes, the deposit of the Shares into the escrow
created under the Master Escrow Agreement or the subjection of
the Shares to the restrictions contained in this Agreement
results in a tax liability to the Officer in excess of what the
Officer's tax liability would have been had the Shares not been
deposited into the escrow or been made subject to the
restrictions contained in this Agreement, then the Company shall
make a payment in cash to the Officer in an amount equal to any
such excess tax liability grossed up to compensate the Officer
for any tax liability incurred with respect to any payment made
under this Section 3.01.
IV. California Law.
4.01. This Agreement shall be construed in accordance with
and governed by the laws of the State of California, without
giving effect to its conflicts of laws or choice of laws rules.
V. Definitions.
5.1. For all purposes of this Agreement, the following terms
shall have the meanings assigned thereto in this Section 5.01:
"Cause" means the occurrence of either or both of the
following: (i) the Officer's conviction for committing an act of
fraud, embezzlement, theft, or other act constituting a felony;
or (ii) the willful engaging by the Officer in gross misconduct
materially and demonstrably injurious to the Company. However,
no act, or failure to act, on the Officer's part shall be
considered "willful" unless done, or omitted to be done, by the
Officer not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
A "Change in Control" of the Company shall be deemed to
occur if and as of the first day that any one or more of the
following conditions are satisfied:
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(i) Any Person (other than those Persons in control of the
Company as of November 15, 1995, or other than a trustee or
fiduciary holding securities under an employee benefit plan of
the Company) becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing fifteen
percent (15%) or more of the combined voting power of the
Company's then outstanding securities and for purposes of this
section, "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934, as
amended, and as used in Section 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) and for purposes
of this subsection (i) "person or "group" shall not include
underwriters acquiring newly-issued voting shares (or securities
convertible into voting shares) directly from the Company with a
view to distribution; or
(ii) during any period of two (2) consecutive years (not
including any period prior to November 15, 1995), individuals who
at the beginning of such period constitute the Board (and any new
Director, whose election by the Company's stockholders was
approved by a vote of a least two-thirds (2/3) of the Directors
then still in office who either were Directors at the beginning
of the period or whose election or nomination for election was so
approved), cease for any reason to constitute a majority thereof;
or
(iii) a merger, consolidation, or reorganization of
the Company with or involving any other entity ("Merger")
becomes effective upon the filing of all applicable legal
documents with the appropriate governmental authorities, or
an agreement for the sale or disposition of all or
substantially all of the Company's assets in one or a series
of related transactions or a plan of complete liquidation of
the Company ("Asset Sale") is consummated; provided that the
effectiveness of a Merger shall be deemed not to constitute
a Change in Control if it 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 seventy-five percent (75%) of the combined
voting power of the voting securities of the Company (or
such surviving entity) outstanding immediately after such
Merger; and provided, further, that if (A) a Merger becomes
effective that constitutes a Change in Control, or (B) an
Asset Sale is consummated, then the Officer (unless the
Officer has forfeited all his right, title and interest in
and to the Shares pursuant to the last sentence of Section
1.04 prior to the Change in Control) shall be deemed for all
purposes of this Agreement to be employed by the Company at
the time of the occurrence of such Change in Control if the
Officer was employed by the Company on the date of the
shareholder vote approving such Merger or Asset Sale.
"Disabled" and its correlatives mean total and permanent
disability as defined in the rules of the Social Security
Administration of the United States.
"employee of the Company" and its correlatives means
employment by the Company or any of its subsidiaries.
"Retire," "Retirement" and their correlatives mean any
retirement on or after March 1, 1999 from active service with the
Company with immediate receipt of a pension benefit under a
Company retirement or pension plan or, for Company elements not
covered by such plans, termination by the Officer at or after age
55 following 10 or more consecutive years of Company service. If
the Officer retires before March 1, 1999, such retirement shall
be treated as a voluntary termination, and not as a Retirement,
for all purposes of this Agreement.
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VI. Amendments.
No amendment or modification to this Agreement may be made
except in writing signed by the Company and the Officer.
BY SIGNING AND DELIVERING THIS AGREEMENT, THE OFFICER
EXPRESSLY AGREES THAT THE OFFICER IS A PARTY TO AND IS BOUND BY
THIS AGREEMENT AND THE MASTER ESCROW AGREEMENT.
IN WITNESS WHEREOF, the Company and the Officer have
executed this Agreement as of the ____th day of March, 1998.
NORTHROP GRUMMAN CORPORATION
BY:---------------------------
ITS:--------------------------
OFFICER
SIGNATURE:---------------------
PRINTED NAME:------------------
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April 8, 1998
To: Elected Officers
Subject: Ownership Retention Agreement
We want to clarify one point concerning the Ownership Retention
Agreement we sent you on April 2, 1998. Some Northrop Grumman
personnel who want to elect to be covered by the Ownership
Retention Agreement have asked what happens to their escrowed
shares if they terminate their employment under the Good Reason
provision of the Special Agreements to which they are parties.
The answer is that you will get all your escrowed shares if you
terminate your employment for "Good Reason." In other words,
it will be treated just as if you had been laid off or
otherwise terminated for reasons other than Cause, and it will
not be treated as a voluntary termination by you. The
definition of "Good Reason" will be the same as set forth in
the Special Agreement to which you are a party.
To cement this understanding of your benefits into the legal
documents, this letter will serve to modify, as Amendment No.
1, the Ownership Retention Agreement we sent you. If you sign
and return the Ownership Retention Agreement and this Amendment
No. 1, your Ownership Retention Agreement will be conclusively
deemed to include a new Article VII stating that:
"Termination for Good Reason (as defined in the Company's
Special Agreement to which the Company and the Officer are
parties) by the Officer as an employee of the Company
shall be treated identically to a termination of the
Officer by the Company for reasons other than Cause, for
all purposes of this Agreement, the Master Escrow
Agreement."
We trust that this Amendment No. 1 clarifies and confirms the
extensive protections of your interests that we built into the
Ownership Retention Agreement. The undersigned, on behalf of
Northrop Grumman Corporation, has executed this Amendment No.
1, intending to be legally bound thereby.
Northrop Grumman Corporation
Xxxx Xxxxx
___________________________
Officer Name (print)
___________________________
Officer Signature
