EXHIBIT 10.32
RETENTION BONUS AGREEMENT
1. PARTIES: The parties to this Retention Bonus Agreement ("Agreement") are
Xxxxxx X. Xxxxxxxxxxxx ("Executive") and Northrop Grumman Corporation
("Parent").
2. RECITALS: This Agreement is made with reference to the following facts:
2.1 Parent, Purchaser Corp. I, and Newport News Shipbuilding, Inc.
("Newport News") intend to enter into an Agreement and Plan of Merger
(the "Merger Agreement"), pursuant to which Parent shall offer to
acquire shares of Newport News common stock (the "Offer") and, subject
to the terms and conditions of the Merger Agreement, Newport News will
be merged into a subsidiary of Parent (the "Merger"). For purposes of
this Agreement, Parent and its subsidiaries following the Merger shall
be referred to as "Northrop Grumman."
2.2 Executive has an Employment Agreement with Newport News (the
"Employment Agreement") dated June 21, 1998.
2.3 Executive is a participant in the Newport News Shipbuilding, Inc.
Change in Control Severance Benefit Plan for Key Executives (the "CIC
Plan"), which plan will be assumed by Parent effective as of the
purchase of shares of Newport News common stock in the Offer ("Offer
Closing").
2.4 The Offer Closing will constitute a "Change in Control" (as that term
is defined in the CIC Plan) of Newport News. Pursuant to the terms of
the CIC Plan, if Executive's employment is terminated within three
years following the Change in Control either (i) by Northrop Grumman
in a termination that is not a "Discharge for Cause" (as that term is
defined in the CIC Plan) or (ii) by Executive in a termination that is
a "Constructive Termination" (as that term is defined in the CIC
Plan), then Executive is entitled to benefits set forth in the CIC
Plan, including without limitation certain severance benefits under
Section 4 of the CIC Plan.
2.5 Parent has offered to provide certain incentives (as described below)
for Executive to remain employed by Northrop Grumman for two years
following the Offer Closing (the "Employment Period"), in exchange for
Executive's agreement (i) to defer certain of the rights he may have
under the CIC Plan (as set forth below); (ii) to waive the right to
receive benefits under the CIC Plan to the extent similar benefits are
provided to him under this Agreement; and (iii) to terminate the
Employment Agreement without any liability of Northrop Grumman there-
under except as set forth in this Agreement.
2.6 Executive wishes to accept Parent's offer by signing this Agreement.
3. EMPLOYMENT PERIOD: Executive hereby agrees to be employed by Northrop
Grumman, and Northrop Grumman hereby agrees to employ Executive, during the
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Employment Period as a Corporate Vice President and as an elected officer of
Northrop Grumman. Executive acknowledges that his employment shall be as an
at-will employee subject to the terms and conditions of this Agreement.
4. SALARY AND BONUS: During the Employment Period, Executive shall be paid an
annual base salary of not less than $435,000, which shall be subject to
normal merit reviews each March 1 over the two-year Employment Period. In
addition, commencing January 1, 2002 Executive will participate in the
Northrop Grumman Incentive Compensation Plan ("ICP"). Executive's target
bonus under the ICP shall be 50% of his annual base salary, and he shall be
guaranteed a minimum ICP Bonus of $400,000 per year during the Employment
Period (pro-rated for any partial year of service, to include any year in
which Executive's employment is terminated under circumstances which he is
entitled to receive payments under Section 8 of this Agreement).
5. STOCK AND STOCK OPTIONS: Effective as of the Offer Closing, Executive shall
be granted non-qualified stock options to purchase 15,000 shares of the
common stock of Parent, with an exercise price per share equal to the fair
market value of a share of Parent common stock as of the date of the Offer
Closing. These options shall vest in equal increments over a four-year
period. Effective as of the same date, Executive shall be granted 8,000
Northrop Grumman Restricted Performance Stock Rights ("RPSRs"), which shall
have a three-year performance period beginning January 1, 2002. During
calendar years 2002 and 2003, Executive will receive additional grants of
options and RPSRs consistent with grants given to similarly situated elected
officers of Parent. All
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options and RPSRs shall be subject to the terms and conditions of Northrop
Grumman's 2001 Long Term Incentive Stock Plan ("LTISP"), the Guide to
Administration for the LTISP, and the grant certificates provided to
Executive in connection with each grant.
6. BENEFITS AND PERQUISITES: Immediately following the Offer Closing,
Executive shall continue to participate in the same employee benefit and
executive perquisite programs in which he participates immediately prior to
the Offer Closing (excluding stock or equity based benefit programs). During
the Employment Period, at times selected by Northrop Grumman, Executive will
be transferred from his current benefits and perquisites to the benefit
plans and executive perquisites applicable to similarly situated elected
officers of Northrop Grumman, provided, however, that Executive will receive
a minimum of four weeks vacation per calendar year.
7. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN:
A. Effective as of the Offer Closing, Executive shall have his Accrued
Benefit under the Newport News Supplemental Executive Retirement Plan
("SERP") calculated by adding three years to both his Years of Service
and Years of Participation, and five years to his Age at End of Year, as
defined under the SERP. Further, all SERP payments pursuant to Section
7.A to Executive may, at his election, be paid in a lump sum within 30
days (or as soon as administratively practicable if later) following his
termination from employment with Northrop Grumman for any reason.
Executive acknowledges and agrees that performance by Northrop
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Grumman of this Section 7.A fully satisfies any and all benefits to
which he might otherwise be entitled under any and all change of control
provisions under the SERP or related agreements, including but not
limited to Section 4.(I)D. of the CIC Plan.
B. During the Employment Period, Executive shall continue to participate in
the SERP unless and until Northrop Grumman determines to transfer
Executive to the benefit plans applicable to Northrop Grumman elected
officers. In that event, Executive's SERP Accrued Benefit (as defined in
the SERP) shall be frozen as of the date he transfers into the Northrop
Grumman benefit plans, except only that Executive will continue to
receive age based credits, and his final SERP benefit at the time of
termination of employment from Northrop Grumman will be calculated using
his Final Average Compensation (as defined in the SERP) at the time of
such termination. In no event shall Executive's SERP benefit at the time
of his termination from employment with Northrop Grumman be less than
his SERP benefit as calculated under Section 7.A. as of the Offer
Closing.
8. RETENTION INCENTIVES:
A. Thirteen months following the Offer Closing, or January 31, 2003,
whichever occurs earlier, Executive shall receive in cash a retention
incentive payment of $2,787,500 provided he has remained continuously
employed by Northrop Grumman through this date. This retention incentive
payment shall also be paid
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within 30 days following Executive's separation from employment with
Northrop Grumman due to any of the following reasons: (i) Executive's
death; (ii) Executive's Disability (as defined below); (iii) a
termination of employment by Northrop Grumman which is not a "Discharge
for Cause" (as that term is defined in the CIC Plan); or (iv) a
termination of employment by Executive due to a "Modified Constructive
Termination" (as defined below). Executive acknowledges and agrees that
payment of this retention incentive fully satisfies any and all claims
he may have for a benefit under Section 4.(I).A. of the CIC Plan.
B. A second retention incentive payment in the amount of $1,087,500 will be
paid in cash to Executive 30 days following the two-year anniversary of
the Offer Closing, provided Executive has remained continuously employed
by Northrop Grumman through this date. This second retention incentive
payment shall also be paid to Executive within 30 days following his
separation from employment with Northrop Grumman due to any of the
following reasons: (i) Executive's death; (ii) Executive's Disability
(as defined below); (iii) a termination of employment by Northrop
Grumman which is not a "Discharge for Cause" (as that term is defined in
the CIC Plan); or (iv) a termination from employment by Executive due to
a "Modified Constructive Termination" (as defined below).
9. MODIFIED CONSTRUCTIVE TERMINATION: For purposes of this Agreement, a
"Modified Constructive Termination" shall mean a termination of employment
by
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Executive during the Employment Period following the occurrence of any of
the following, without the Executive's consent.
X. Xxxxxxxx Grumman reduces Executive's salary or bonus below the amounts
set forth in Section 4 of this Agreement.
X. Xxxxxxxx Grumman otherwise fails to comply with a provision of this
Agreement, after being given notice by Executive of the specific non-
compliance and a 30-day opportunity to cure.
C. A successor to Northrop Grumman fails to assume, in writing, all of
Northrop Grumman's obligations under the CIC Plan and under this
Agreement.
X. Xxxxxxxx Grumman requires Executive to relocate by more than 50 miles
because of a transfer of his place of employment.
10. DISABILITY: For purposes of this Agreement, "Disability" shall be defined
as the inability of the Executive to perform his material duties hereunder
due to the same or related physical or mental injury, infirmity or
incapacity for 180 days in any 365 day period.
11. WAIVER OF RIGHTS UNDER THE CIC PLAN: Executive hereby waives all rights to
severance benefits under the CIC Plan to the extent (but only to the
extent) of any cash
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payments and benefit credits provided to him pursuant to this Agreement.
Executive acknowledges and agrees that, to such extent, he shall have no
right to receive, and will not receive, severance benefits under the CIC.
In addition, Executive hereby waives any right to terminate his employment
during the Employment Period in a "Constructive Termination" (as that term
is defined in the CIC Plan) or pursuant to Section 4(II) of the CIC Plan.
Executive therefore acknowledges and agrees that no termination of
employment by him during the Employment Period will
constitute a "Constructive Termination" (as that term is defined in the CIC
Plan) or a termination pursuant to Section 4 (II) of the CIC Plan.
Notwithstanding the foregoing, Northrop Grumman acknowledges and agrees
that a termination of employment by Executive during the Employment Period
which is a Modified Constructive Termination shall be deemed for purposes
of the CIC Plan to be a termination of employment by Executive due to a
Constructive Termination, except that the severance benefits which
Executive would otherwise be entitled to receive under Section 4 of the CIC
Plan shall be offset by any cash payments or benefit credits provided to
Executive pursuant to this Agreement, except that there shall be no offset
as to the benefits set forth in Section 4.(I).C.
12. TERMINATION AFTER THE EMPLOYMENT PERIOD: Nothing in this
Agreement shall affect Executive's right to terminate from employment after
the Employment Period and claim a "Constructive Termination" (as that term
is defined in the CIC Plan) based on events that occur while this Agreement
is effective. However,
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Executive acknowledges and agrees that in the event of such termination
following the Employment Period, the only benefits to which he shall be
entitled under Section 4 of the CIC Plan are (i) the continuation of certain
benefit plans referred to in Section 4.(I).C. and (ii) the Deferred
Compensation Plan benefit set forth in Section 4.(I).E to the extent that
benefit has not previously been paid.
13. TERMINATION OF EMPLOYMENT AGREEMENT: Executive hereby agrees to terminate
his Employment Agreement in its entirety effective as of the Offer Closing
without any liability of Northrop Grumman under the Employment Agreement
other than accrued but unpaid base salary and incurred but unreimbursed
business expenses.
14. OTHER RIGHTS UNDER CIC PLAN NOT AFFECTED: Except as modified by this
Agreement, Executive shall continue to retain all of his rights under the
CIC Plan (including, without limitation, the rights set forth in Section 6
of the CIC Plan relating to the gross-up payment for any "golden parachute"
excise taxes and related taxes).
15. TAX WITHHOLDING: Northrop Grumman shall be entitled to withhold from any
amounts payable pursuant to this Agreement all taxes as shall legally be
required to be withheld (including without limitation United States federal
taxes, and any other state, city or local taxes).
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16. ENTIRE AGREEMENT: This Agreement represents the complete Agreement and
understanding between Executive and Parent pertaining to the subject
matters contained herein, and supersedes any prior agreements or
understanding, written or oral, between the parties with respect to such
subject matters; provided, however, that Executive shall continue to have
rights under the CIC Plan as set forth in this Agreement.
17. GOVERNING LAW: This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Virginia without regard to
principles of conflict of law.
18. EFFECTIVE DATE: This Agreement shall become effective as of the Offer
Closing and shall be of no effect if the Offer does not close.
XXXXXX X. XXXXXXXXXXXX
Dated: November 7, 2001 By: /s/ Xxxxxx X. Xxxxxxxxxxxx
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Dated: November 7, 2001 NORTHROP GRUMMAN CORPORATION
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By: /s/ J. Xxxxxxx Xxxxxxx
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