Attached files
file | filename |
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10-Q - FORM 10-Q - NORTHROP GRUMMAN CORP /DE/ | v55417e10vq.htm |
EX-15 - EX-15 - NORTHROP GRUMMAN CORP /DE/ | v55417exv15.htm |
EX-31.1 - EX-31.1 - NORTHROP GRUMMAN CORP /DE/ | v55417exv31w1.htm |
EX-32.1 - EX-32.1 - NORTHROP GRUMMAN CORP /DE/ | v55417exv32w1.htm |
EX-10.4 - EX-10.4 - NORTHROP GRUMMAN CORP /DE/ | v55417exv10w4.htm |
EX-12.A - EX-12.A - NORTHROP GRUMMAN CORP /DE/ | v55417exv12wa.htm |
EX-31.2 - EX-31.2 - NORTHROP GRUMMAN CORP /DE/ | v55417exv31w2.htm |
EX-10.5 - EX-10.5 - NORTHROP GRUMMAN CORP /DE/ | v55417exv10w5.htm |
EX-32.2 - EX-32.2 - NORTHROP GRUMMAN CORP /DE/ | v55417exv32w2.htm |
EX-10.2 - EX-10.2 - NORTHROP GRUMMAN CORP /DE/ | v55417exv10w2.htm |
EXCEL - IDEA: XBRL DOCUMENT - NORTHROP GRUMMAN CORP /DE/ | Financial_Report.xls |
Exhibit 10.3
NORTHROP GRUMMAN CORPORATION
TERMS AND CONDITIONS APPLICABLE TO 2010 STOCK OPTIONS
GRANTED UNDER THE 2001 LONG-TERM INCENTIVE STOCK PLAN
TERMS AND CONDITIONS APPLICABLE TO 2010 STOCK OPTIONS
GRANTED UNDER THE 2001 LONG-TERM INCENTIVE STOCK PLAN
These Terms and Conditions (Terms) apply to certain stock options granted by Northrop
Grumman Corporation (the Company) in 2010. If you were granted a stock option by the Company in
2010, the date of grant of your stock option (your Option), the total number of shares of common
stock of the Company subject to your Option, and the per share exercise price of your Option are
set forth in the letter from the Company announcing your Option grant (your Grant Letter) and are
reflected in the electronic stock plan award recordkeeping system (Stock Plan System) maintained
by the Company or its designee. These Terms apply to your Option if referenced in your Grant
Letter and/or on the Stock Plan System with respect to your Option. If you were granted an Option,
you are referred to as the Grantee with respect to your Option. Capitalized terms are generally
defined in Section 10 below if not otherwise defined herein.
The Option represents a right to purchase the number of shares of the Companys Common Stock,
for the per share exercise price of the Option, each as stated in your Grant Letter and as
reflected in the Stock Plan System. The number of shares and exercise price of the Option are
subject to adjustment as provided herein. The Option is subject to all of the terms and conditions
set forth in these Terms, and is further subject to all of the terms and conditions of the Plan, as
it may be amended from time to time, and any rules adopted by the Committee, as such rules are in
effect from time to time.
1. | Vesting; Exercise of Option. |
1.1 Vesting. The Option is exercisable only to the extent that it has vested and has not
expired or terminated. Subject to Sections 2 and 5 below, one-third (1/3) of the total number of
shares of Company Common Stock subject to the Option (subject to adjustment as provided in Section
5.1) shall vest and become exercisable upon each of the first, second and third anniversaries of
the Grant Date.
1.2 Method of Exercise. In order to exercise the Option, the Grantee or such other person
as may be entitled to exercise the same shall (a) execute and deliver to the Corporate Secretary of
the Company a written notice indicating the number of shares subject to the Option to be exercised,
and/or (b) complete such other exercise procedure as may be prescribed by the Corporate Secretary
of the Company. The date of exercise of the Option shall be the day such notice is received by the
Corporate Secretary of the Company or the day such exercise procedures are satisfied, as
applicable; provided that in no event shall the Option be considered to have been exercised unless
the per share exercise price of the Option is paid in full (or provided for in accordance with
Section 1.3) for each of the shares to be acquired on such exercise and all required tax
withholding obligations with respect to such exercise have been satisfied or provided for in
accordance with Section 6 hereof. No fractional shares will be issued.
1.3 Payment of Exercise Price. The exercise price shall be paid at the time of exercise.
Payment may be made (a) in cash; (b) in the sole discretion of the Committee and on such terms and
conditions as the Corporate Secretary of the Company may prescribe, either in whole or in part (i)
by a reduction in the number of shares of Common Stock otherwise deliverable
pursuant to the Option
(valued at their Fair Market Value on the date of exercise of the Option) or (ii) in Common Stock
of the Company (either actually or by attestation and valued at their Fair Market Value on the date
of exercise of the Option; (c) in a combination of payments under clauses (a) and (b); or (d)
pursuant to a cashless exercise arranged through a broker or other third party. Notwithstanding
the foregoing, the Committee may at any time (a) limit the ability of the Grantee to exercise the
Option through any method other than a cash payment, or (b) require the Grantee to exercise, to the
extent possible, the Option in the manner described in clauses (b)(i) and (b)(ii) of the preceding
sentence.
1.4 Tax Status. The Option is not and shall not be deemed to be an incentive stock option
within the meaning of Section 422 of the Code.
2. | Termination of Option; Termination of Employment. |
2.1 General. The Option, to the extent not previously exercised, and all other rights in
respect thereof, whether vested and exercisable or not, shall terminate and become null and void at
the close of business on the last business day preceding the seventh (7th) anniversary
of the Grant Date (the Expiration Date). The Option, to the extent not previously exercised, and
all other rights in respect thereof, whether vested and exercisable or not, shall terminate and
become null and void prior to the Expiration Date if and when (a) the Option terminates in
connection with a Change in Control pursuant to Section 5 below, or (b) except as provided below in
this Section 2 and in Section 5, the Grantee ceases to be an employee of the Company or one of its
subsidiaries.
2.2 Termination of Employment Due to Retirement. If the Grantee ceases to be employed by
the
Company or one of its subsidiaries due to the Grantees Early Retirement and such Early
Retirement occurs more than six months after the Grant Date, the next succeeding vesting
installment of the Option shall vest, and all installments under the Option which have vested may
be exercised by the Grantee (or, in the event of the Grantees death, by the Grantees Successor)
until the fifth anniversary of the Grantees Early Retirement, but in no event after the Expiration
Date. Any remaining unvested installments, after giving effect to the foregoing sentence, shall
terminate immediately upon the Grantees Early Retirement. If the Grantee ceases to be employed by
the Company or one of its subsidiaries due to the Grantees Normal Retirement and such Normal
Retirement occurs more than six months after the Grant Date, all remaining installments of the
Option shall vest, and all installments under the Option may be exercised by the Grantee (or, in
the event of the Grantees death, by the Grantees Successor) until the fifth anniversary of the
Grantees Normal Retirement, but in no event after the Expiration Date.
In determining the Grantees eligibility for Early or Normal Retirement, service is measured
by dividing (a) the number of days the Grantee was employed by the Company or a subsidiary in the
period commencing with his or her last date of hire by the Company or a subsidiary through and
including the date on which the Grantee is last employed by the Company or a subsidiary, by (b)
365. If the Grantee ceased to be employed by the Company or a subsidiary and was later rehired by
the Company or a subsidiary, the Grantees service prior to the break in service shall be
disregarded in determining service for such purposes; provided that, if the Grantees employment
with the Company or a subsidiary had terminated due to the Grantees Early Retirement, Normal
Retirement, or by the Company as part of a reduction in force (in each case, other than a
termination by the Company or a subsidiary for cause) and, within the two-year period following
such termination of employment (the break in service) the Grantee was subsequently rehired by the
Company or a subsidiary, then the Grantees period of service with the Company or a subsidiary
prior to and ending with the break in service will be included in determining service for such
purposes. In the event the Grantee is employed by a business that is acquired by the Company or a
subsidiary, the Company shall have discretion to determine whether the Grantees service prior to
the acquisition will be included in determining service for such purposes.
2.3 Termination of Employment Due to Death or Disability. If the Grantee dies while
employed by the Company or a subsidiary and such death occurs more than six months after the Grant
Date, or if the Grantees employment by the Company and its subsidiaries terminates due to the
Grantees Disability and such termination occurs more than six months after the Grant
Date, the next succeeding vesting installment of the Option shall vest, and all installments under the Option
which have vested may be exercised by the Grantee (or, in the case of the Grantees death, by the
Grantees Successor) until the fifth anniversary of the Grantees death or Disability, whichever
first occurs, but in no event after the Expiration Date. Any remaining unvested installments,
after giving effect to the foregoing sentence, shall terminate immediately upon the Grantees death
or Disability, as applicable.
2.4 Other Terminations of Employment. Subject to the following sentence, if the employment
of the Grantee with the Company or a subsidiary is terminated for any reason other than the
Grantees Early or Normal Retirement, death, or Disability, or in the event of a termination of the
Grantees employment with the Company or a subsidiary on or before the six-month anniversary of the
Grant Date due to the Grantees Early or Normal Retirement, death, or Disability, the Option may be
exercised (as to not more than the number of shares as to which the Grantee might have exercised
the Option on the date on which his or her employment terminated) only within 90 days from the date
of such termination of employment, but in no event after the Expiration Date; provided, however,
that if the Grantee is dismissed by the Company or a subsidiary for cause, the Option shall expire
forthwith. If the Grantee dies within 90 days after a termination of employment described in the
preceding sentence (other than a termination by the Company or a subsidiary for cause), the Option
may be exercised by the Grantees Successor for one year from the date of the Grantees death, but
in no event after the Expiration Date and as to not more than the number of shares as to which the
Grantee might have exercised the Option on the date on which his or her employment by the Company
or a subsidiary terminated. For purposes of this Section 2 and prior to a Change in Control, the
Company shall be the sole judge of cause unless such term is expressly defined in a written
employment agreement by and between the Grantee and either the Company or one of its subsidiaries,
in which case cause is used as defined in such employment agreement for purposes of this Section
2. Prior to a Change in Control, the definition of Cause in Section 10 does not apply for
purposes of this Section 2. With respect to a termination of employment upon or following a Change
in Control, the definition of Cause in Section 10 shall apply for purposes of this Section 2.
2.5 Leave of Absence. Unless the Committee otherwise provides (at the time of the leave or
otherwise), if the Grantee is granted a leave of absence by the Company, the Grantee (a) shall not
be deemed to have incurred a termination of employment at the time such leave commences for
purposes of the Option, and (b) shall be deemed to be employed by the Company for the duration of
such approved leave of absence for purposes of the Option. A termination of employment
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shall be
deemed to have occurred if the Grantee does not timely return to active employment upon the
expiration of such approved leave or if the Grantee commences a leave that is not approved by the
Company.
2.6 Salary Continuation. Subject to Section 2.5 above, the term employment as
used herein
means active employment by the Company and salary continuation without active employment (other
than a leave of absence approved by the Company and covered by Section 2.5) will not, in and of
itself, constitute employment for purposes hereof (in the case of salary continuation without
active employment, the Grantees cessation of active employee status shall, subject to Section 2.5,
be deemed to be a termination of employment for purposes hereof). Furthermore, salary
continuation will not, in and of itself, constitute a leave of absence approved by the Company for
purposes of the Option.
2.7 Sale or Spinoff of Subsidiary or Business Unit. For purposes of the Option, a
termination of employment of the Grantee shall be deemed to have occurred if the Grantee is
employed by a subsidiary or business unit and that subsidiary or business unit is sold, spun off,
or otherwise divested and the Grantees employment does not terminate due to the Grantees Early or
Normal Retirement upon or immediately before such event and the Grantee does not otherwise continue
to be employed by the Company after such event.
2.8 Continuance of Employment Required. Except as expressly provided in Sections 2.2 and
2.3 above, and Section 5 below, the vesting of the Option requires continued employment through
each vesting date as a condition to the vesting of the corresponding installment of the award.
Employment before or between the specified vesting dates, even if substantial, will not entitle the
Grantee to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon
or following a termination of employment. Nothing contained in these Terms, the Grant Letter, the
Stock Plan System, or the Plan constitutes an employment commitment by the Company or any
subsidiary, affects the Grantees status (if the Grantee is otherwise an at-will employee) as an
employee at will who is subject to termination without cause, confers upon the Grantee any right to
continue in the employ of the Company or any subsidiary, or interferes in any way with the right of
the Company or of any subsidiary to terminate such employment at any time.
3. | Non-Transferability and Other Restrictions. |
3.1 Non-Transferability. The Option is non-transferable and shall not be subject in any
manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge. The
foregoing transfer restrictions shall not apply to: (a) transfers to the
Company; (b) transfers by
will or the laws of descent and distribution; or (c) if the Grantee has suffered a disability,
permitted transfers to or exercises on behalf of the holder by his or her legal representative.
Notwithstanding the foregoing, the Company may honor any transfer required pursuant to the terms of
a court order in a divorce or similar domestic relations matter to the extent that such transfer
does not adversely affect the Companys ability to register the offer and sale of the underlying
shares on a Form S-8 Registration Statement and such transfer is otherwise in compliance with all
applicable legal, regulatory and listing requirements.
3.2 Recoupment of Awards. Any payments or issuances of shares with respect to the Option
are subject to recoupment pursuant to the Companys Policy Regarding the Recoupment of Certain
Performance-Based Compensation Payments as in effect from time to time, and the Grantee shall
promptly make any reimbursement requested by the Board or Committee pursuant to such policy with
respect to the Option. Further, the Grantee agrees, by accepting the Option, that the Company and
its affiliates may deduct from any amounts it may owe the Grantee from time to time (such as wages
or other compensation) to the extent of any amounts the Grantee is required to reimburse the
Company pursuant to such policy with respect to the Option.
4. | Compliance with Laws; No Stockholder Rights Prior to Issuance. |
The Companys obligation to issue any shares with respect to the Option is subject to full
compliance with all then applicable requirements of law, the Securities and Exchange Commission,
the Commissioner of Corporations of the State of California, or other regulatory agencies having
jurisdiction over the Company and its shares, and of any exchanges upon which stock of the Company
may be listed. The Grantee shall not have the rights and privileges of a stockholder with respect
to shares subject to or purchased under the Option until the date appearing on the certificate(s)
for such shares (or, in the case of shares entered in book entry form, the date that the shares are
actually recorded in such form for the benefit of the Grantee) issued upon the exercise of the
Option.
5. | Adjustments; Change in Control. |
5.1 Adjustments. The number, type and price of shares subject to the Option, as well as the
per share exercise price of the Option, are subject to adjustment upon the occurrence of events
such as stock splits, stock dividends and other changes in capitalization in accordance with
Section 6(a) of the Plan. In the event of any adjustment, the Company will give the Grantee
written notice thereof which will set forth the nature of the adjustment.
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5.2 Possible Acceleration on Change in Control. Notwithstanding the acceleration provisions
of Section 2 hereof but subject to the limited exercise periods set forth therein, and further
subject to the Companys ability to terminate the Option as provided in Section 5.3 below, the
outstanding and previously unvested portion of the Option shall become fully exercisable as of the
date of the Grantees termination of employment as follows:
(a) | if the Grantee is covered by a Change in Control Severance Arrangement at the time of the termination, if the termination of employment constitutes a Qualifying Termination (as such term, or any similar successor term, is defined in such Change in Control Severance Arrangement) that triggers the Grantees right to severance benefits under such Change in Control Severance Arrangement. |
(b) | if the Grantee is not covered by a Change in Control Severance Arrangement at the time of the termination and if the termination occurs either within the Protected Period 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, the Grantees employment by the Company and its subsidiaries is involuntarily terminated by the Company and its subsidiaries for reasons other than Cause or by the Grantee for Good Reason. |
Notwithstanding anything else contained herein to the contrary, the termination of the
Grantees employment (or other events giving rise to Good Reason) shall not entitle the Grantee to
any accelerated vesting pursuant to clause (b) above if there is objective evidence that, as of the
commencement of the Protected Period, the Grantee had specifically been identified by the Company
as an employee whose employment would be terminated as part of a corporate restructuring or
downsizing program that commenced prior to the Protected Period and such termination of employment
was expected at that time to occur within six (6) months. The applicable Change in Control
Severance Arrangement shall govern the matters addressed in this paragraph as to clause (a) above.
5.3 Automatic Acceleration; Early Termination. If the Company undergoes a Change in Control
triggered by clause (iii) or (iv) of the definition thereof and the Company is not the surviving
entity and the successor to the Company (if any) (or a Parent thereof) does not agree in writing
prior to the occurrence of the Change in Control to continue and assume the Option following the
Change in Control, or if for any other reason the Option would not continue after the Change in
Control, then upon the Change in Control the outstanding and previously unvested portion of the
Option shall vest fully
and completely, any and all restrictions on exercisability or otherwise
shall lapse, and it shall be fully exercisable. Unless the Committee expressly provides otherwise
in the circumstances, no acceleration of vesting or exercisability of the Option shall occur
pursuant to this Section 5.3 in connection with a Change in Control if either (a) the Company is
the surviving entity, or (b) the successor to the Company (if any) (or a Parent thereof) agrees in
writing prior to the Change in Control to assume the Option. If the Option is fully vested or
becomes fully vested as provided in this Section 5.3 but is not exercised prior to a Change in
Control triggered by clause (iii) or (iv) of the definition thereof and the Company is not the
surviving entity and the successor to the Company (if any) (or a Parent thereof) does not agree in
writing prior to the occurrence of the Change in Control to continue and assume the Option
following the Change in Control, or if for any other reason the Option would not continue after the
Change in Control, then the Committee may provide for the settlement in cash of the award (such
settlement to be calculated as though the Option was exercised simultaneously with the Change in
Control and based upon the then Fair Market Value of a share of Common Stock). The Option, if so
settled by the Committee, shall automatically terminate. If, in such circumstances, the Committee
does not provide for the cash settlement of the Option, then upon the Change in Control the Option
shall terminate, subject to any provision that has been made by the Committee through a plan of
reorganization or otherwise for the survival, substitution or exchange of the Option; provided that
the Grantee shall be given reasonable notice of such intended termination and an opportunity to
exercise the Option prior to or upon the Change in Control. The Committee may make adjustments
pursuant to Section 6(a) of the Plan and/or deem an acceleration of vesting of the Option pursuant
to this Section 5.3 to occur sufficiently prior to an event if necessary or deemed appropriate to
permit the Grantee to realize the benefits intended to be conveyed with respect to the shares
underlying the Option; provided, however, that, the Committee may reinstate the original terms of
the Option if the related event does not actually occur. The provisions in this Section 5.3 for
the early termination of the Option in connection with a Change in Control of the Company supercede
any other provision hereof that would otherwise allow for a longer Option term.
6. | Tax Matters. |
6.1 Tax Withholding. The Company or the subsidiary which employs the Grantee shall be
entitled to require, as a condition of issuing shares upon exercise of the Option, that the Grantee
or other person exercising the Option pay any sums required to be withheld by federal, state or
local tax law with respect to such vesting or payment. Alternatively, the Company or such
subsidiary, in its discretion, may make such provisions for the withholding of taxes as it deems
appropriate
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(including, without limitation, withholding the taxes due from compensation otherwise
payable to the Grantee or reducing the number of shares otherwise deliverable with respect to the
Option (valued at their then Fair Market Value) by the amount necessary to satisfy such withholding
obligations at the flat percentage rates applicable to supplemental wages).
6.2 Transfer Taxes. The Company will pay all federal and state transfer taxes, if any, and
other fees and expenses in connection with the issuance of shares in connection with the vesting of
the Option.
7. | Committee Authority. |
The Committee has the discretionary authority to determine any questions as to the date when
the Grantees employment terminated and the cause of such termination and to interpret any
provision of these Terms, the Grant Letter, the Stock Plan System, the Plan, and any other
applicable rules. Any action taken by, or inaction of, the Committee relating to or pursuant to
these Terms, the Grant Letter, the Stock Plan System, the Plan, or any other applicable rules shall
be within the absolute discretion of the Committee and shall be conclusive and binding on all
persons.
8. | Plan; Amendment. |
The Option is governed by, and the Grantees rights are subject to, all of the terms and
conditions of the Plan and any other rules adopted by the Committee, as the foregoing may be
amended from time to time. The Grantee shall have no rights with respect to any amendment of these
Terms or the Plan unless such amendment is in writing and signed by a duly authorized officer of
the Company. In the event of a conflict between the provisions of the Grant Letter and/or the
Stock Plan System and the provisions of these Terms and/or the Plan, the provisions of these Terms
and/or the Plan, as applicable, shall control.
9. | Required Holding Period. |
The holding requirements of this Section 9 shall apply to any Grantee who is an elected or
appointed officer of the Company on any date the Option is exercised (or, if earlier, on the date
the Grantees employment by the Company and its subsidiaries terminates for any reason). Any
Grantee subject to this Section 9 shall not be permitted to sell, transfer, anticipate, alienate,
assign, pledge, encumber or charge 50% of the total number of shares of Common Stock the Grantee
receives upon any exercise of the Option until the earlier of (A) the third anniversary of the date
of exercise, or (B) the date of the Grantees death or Disability. Should the Grantees employment
by the Company and its subsidiaries terminate (regardless of the reason for such termination, but
other than due to the
Grantees death or Disability), such holding period requirement shall not
apply as to any shares acquired upon exercise of the Option to the extent the Option remains
exercisable for more than one year after such termination of employment and such exercise actually
occurs more than one year after such termination of employment. (For purposes of clarity, in such
circumstances the holding period requirement will apply as to any shares acquired upon exercise of
the Option within one year after such a termination of employment.) For purposes of this Section
9, the total number of shares of Common Stock the Grantee receives upon exercise shall be
determined on a net basis after taking into account any shares otherwise deliverable with respect
to the Option that the Company withholds to satisfy tax obligations pursuant to Section 6.1. Any
shares of Common Stock received in respect of shares that are covered by the holding period
requirements of this Section 9 (such as shares received in respect of a stock split or stock
dividend) shall be subject to the same holding period requirements as the shares to which they
relate.
10. | Definitions. |
Whenever used in these Terms, the following terms shall have the meanings set forth below and,
when the meaning is intended, the initial letter of the word is capitalized:
Board means the Board of Directors of the Company.
Cause means the occurrence of either or both of the following:
(i) | The Grantees conviction for committing an act of fraud, embezzlement, theft, or other act constituting a felony (other than traffic related offenses or as a result of vicarious liability); or |
(ii) | The willful engaging by the Grantee in misconduct that is significantly injurious to the Company. However, no act, or failure to act, on the Grantees part shall be considered willful unless done, or omitted to be done, by the Grantee not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. |
Change in Control is used as defined in the Plan.
Change in Control Severance Arrangement means a Special Agreement entered into by and
between the Grantee and the Company that provides severance protections in the event of certain
changes in control of the Company or the Companys Change-in-Control Severance Plan, as each may be
in effect from
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time to time, or any similar successor agreement or plan that provides severance
protections in the event of a change in control of the Company.
Code means the United States Internal Revenue Code of 1986, as amended.
Committee means the Companys Compensation Committee or any successor committee appointed by
the Board to administer the Plan.
Disability means disabled pursuant to the provisions of the Companys (or one of its
subsidiarys) Long Term Disability Plan applicable to the Grantee; or, if the Grantee is not
covered by such a Long Term Disability Plan, the incapacity of the Grantee, due to injury, illness,
disease, or bodily or mental infirmity, to engage in the performance of substantially all of the
usual duties of employment with the Company or the subsidiary which employs the Grantee, such
disability to be determined by the Committee upon receipt and in reliance on competent medical
advice from one or more individuals, selected by the Committee, who are qualified to give such
professional medical advice.
Early Retirement means that the Grantee terminates employment after attaining age 55 with at
least 10 years of service (other than in connection with a termination by the Company or a
subsidiary for cause) and other than a Normal Retirement. However, in the case of a Grantee who
is an officer of the Company subject to the Companys mandatory retirement at age 65 policy and
who, at the applicable time, is not otherwise eligible for Early Retirement as defined in the
preceding sentence or for Normal Retirement, Early Retirement as to that Grantee means that the
Grantees employment is terminated pursuant to such mandatory retirement policy (regardless of the
Grantees years of service and other than in connection with a termination by the Company or a
subsidiary for cause).
Exchange Act means the United States Securities Exchange Act of 1934, as amended.
Fair Market Value is used as defined in the Plan; provided, however, the Committee in
determining such Fair Market Value for purposes of the Option may utilize such other exchange,
market, or listing as it deems appropriate. For purposes of a cashless exercise, the Fair Market
Value of the shares shall be the price at which the shares in payment of the exercise price are
sold.
Good Reason means, without the Grantees express written consent, the occurrence of any one
or more of the following:
(i) | A material and substantial reduction in the nature or status of the Grantees authorities or responsibilities (when such authorities 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 (A) an inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Grantee, and/or (B) changes in the nature or status of the Grantees authorities or responsibilities that, in the aggregate, would generally be viewed by a nationally-recognized executive placement firm as resulting in the Grantee having not materially and substantially fewer authorities and responsibilities (taking into consideration the Companys industry) when compared to the authorities and responsibilities applicable to the position held by the Grantee immediately prior to the start of the Protected Period. The Company may retain a nationally-recognized executive placement firm for purposes of making the determination required by the preceding sentence and the written opinion of the firm thus selected shall be conclusive as to this issue. |
In addition, if the Grantee is a vice president, the Grantees loss of vice-president status will constitute Good Reason; provided that the loss of the title of vice president will not, in and of itself, constitute Good Reason if the Grantees lack of a vice president title is generally consistent with the manner in which the title of vice president is used within the Grantees business unit or if the loss of the title is the result of a promotion to a higher level office. For the purposes of the preceding sentence, the Grantees lack of a vice-president title will only be considered generally consistent with the manner in which such title is used if most persons in the business unit with authorities, duties, and responsibilities comparable to those of the Grantee immediately prior to the commencement of the Protected Period do not have the title of vice-president. |
(ii) | A reduction by the Company in the Grantees annualized rate of base salary as in effect on the Grant Date or as the same shall be increased from time to time. |
(iii) | A material reduction in the aggregate value of the Grantees level of participation in any of the Companys short and/or long-term incentive compensation plans (excluding stock-based incentive compensation plans), employee benefit or retirement plans, or policies, practices, or arrangements in which the Grantee participates immediately prior to the start of the Protected Period provided; however, that a reduction in the aggregate value shall not be deemed to be Good Reason if the reduced value remains |
6
substantially consistent with the average level of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. |
(iv) | A material reduction in the Grantees aggregate level of participation in the Companys stock-based incentive compensation plans from the level in effect immediately prior to the start of the Protected Period; provided, however, that a reduction in the aggregate level of participation shall not be deemed to be Good Reason if the reduced level of participation remains substantially consistent with the average level of participation of other employees who have positions commensurate with the position held by the Grantee immediately prior to the start of the Protected Period. |
(v) | The Grantee is informed by the Company that his or her principal place of employment for the Company will be relocated to a location that is greater than fifty (50) miles away from the Grantees principal place of employment for the Company at the start of the corresponding Protected Period; provided that, if the Company communicates an intended effective date for such relocation, in no event shall Good Reason exist pursuant to this clause (v) more than ninety (90) days before such intended effective date. |
The Grantees right to terminate employment for Good Reason shall not be affected by the
Grantees incapacity due to physical or mental illness. The Grantees continued employment shall
not constitute a consent to, or a waiver of rights with respect to, any circumstances constituting
Good Reason herein.
Grant Date means the date that the Committee approved the grant of the Option.
Normal Retirement means that the Grantee terminates employment after attaining age 65 with
at least 10 years of service (other than in connection with a termination by the Company or a
subsidiary for cause).
Parent is used as defined in the Plan.
Plan means the Northrop Grumman 2001 Long-Term Incentive Stock Plan, as it may be amended
from time to time.
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 Companys stock or by the offerors 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. |
Successor means the person acquiring a Grantees rights to a grant under the Plan by will or by
the laws of descent or distribution.
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