Master Escrow Agreement
This MASTER ESCROW AGREEMENT, dated as of March 25, 1998, is
entered into by and among Northrop Grumman Corporation, a
Delaware corporation (the "Company"), the persons named on
Exhibit A hereto (each an "Employee," and collectively, the
"Employees") and Chase Manhattan Bank and Trust Company, National
Association, as escrow agent.
W I T N E S S E T H:
WHEREAS, the Company and each Employee have entered into an
Ownership Retention Agreement dated as of March 25, 1998 (the
"Ownership Retention Agreements") pursuant to which the Company
has agreed to issue in the future certain shares of its common
stock to the Employee if certain conditions are met and the
Employee has agreed to place in escrow, for receipt in the future
if certain other conditions are met (the "Conditions"), certain
shares of the Company's Common Stock that Employee owns (the
"Shares"); and
WHEREAS, each Employee desires to deposit certificates
evidencing the Shares with the Escrow Agent pending the
occurrence of events that will determine whether the Conditions
are met.
NOW THEREFORE, in consideration of the premises and the
mutual agreements hereinafter set forth and for other good and
valuable consideration, receipt of which is hereby acknowledged,
the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent; Acceptance. The Company
and each Employee hereby appoints Chase Manhattan Bank and Trust
Company, National Association (the "Escrow Agent") to act as
escrow agent in accordance with the terms and provisions of this
Master Escrow Agreement, and the Escrow Agent hereby accepts such
appointment on the terms and provisions of this Master Escrow
Agreement.
2. Deposit of Certificates. The Company, on behalf of the
Employees, has deposited with the Escrow Agent certificates
representing the Shares.
3. Receipt by Escrow Agent. Escrow Agent hereby
acknowledges receipt of certificates representing the total
number of Shares specified in Exhibit A hereto.
4. Release of the Shares.
(a) The Escrow Agent will hold the certificates
representing the Shares owned by an Employee in the Escrow
Agent's possession until the first business day following the
date upon which the Escrow Agent receives notice as provided in
Section 4(b) hereof.
(b) The Company shall give notice to the Escrow Agent
as follows:
(i) If, prior to the Payment Date, an Employee
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 to release and distribute to the Employee the certificate
representing the Shares owned by the Employee;
(ii) If, prior to the Payment Date, an Employee
dies, Retires, is terminated for a reason other than Cause, 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 to
release and distribute to the Employee (or his guardian or
estate, as appropriate) the certificate representing the Shares
owned by the Employee;
(iii) If an Employee is employed by the Company
at the time of the occurrence of a Change in Control that occurs
prior to March 1, 2000, then on or before the tenth business day
after such occurrence, the Company shall instruct the Escrow
Agent to release and distribute to the Employee the certificate
representing the Shares owned by the Employee; or
(iv) If, prior to the Payment Date, an Employee
voluntarily terminates, other than by Retirement, or is
terminated for Cause, then the Employee 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 to release and distribute to the Company the
certificate representing the Shares owned by the Employee prior
to such forfeiture.
(c) Forthwith upon the receipt of the notice referred
to in Sections 4(b)(i), (ii) or (iii), the Escrow Agent shall
release and distribute to the Employee designated in such notice
(or his guardian or estate, as appropriate), the certificates
representing the Shares owned by such Employee or Employees;
forthwith upon the receipt of the notice referred to in
Section 4(b)(iv), the Escrow Agent shall release and distribute
to the Company the certificates representing the Shares owned by
the Employee prior to such forfeiture; provided in either case
that such action shall not then be enjoined, either preliminarily
or permanently, by a court of competent jurisdiction; and
provided further, that if so enjoined the Escrow Agent shall take
such action at any time thereafter when such action shall no
longer be enjoined. The Escrow Agent shall take all actions as
are specified in this Section 4(c) as promptly as practicable
following the receipt of any such notice.
(d) An Employee may give notice to the Escrow Agent
that such Employee desires to substitute a number of shares of
the Company's common stock held by the Employee (the "Input
Shares") for an equal number of shares held in escrow pursuant to
this Master Escrow Agreement (the "Output Shares"). Such notice
shall be accompanied by certificates representing the Input
Shares and a declaration of the Employee with guaranteed
signature that the Input Shares are held by the Employee free and
clear of any and all pledges, liens, encumbrances or other rights
whatsoever and are freely transferable by the Employee. Upon
receipt of such notice, such certificates and such declaration,
the Escrow Agent shall promptly give notice of such receipt to
the Company, which notice shall include a copy of each such
document. Thirty days after sending such notice to the Company,
the Escrow Agent shall release and distribute to the Employee the
certificates representing the Output Shares, unless prior to the
thirtieth day the Escrow Agent shall have received from the
Company notice that in the opinion of legal counsel to the
Company the Input Shares are not held by the Employee free and
clear of any and all pledges, liens, encumbrances or other rights
whatsoever or are not freely transferable by the Employee. If
the Escrow Agent timely receives the notice from the Company
described in the preceding sentence, the Escrow Agent shall not
release and distribute to the Employee certificates representing
the Output Shares, and the dispute shall be handled pursuant to
Section 5 hereof.
5. Settlement of Disputes. Any dispute which may arise
under this Master Escrow Agreement with respect to the rights of
any of the parties hereto in respect of the Shares or any part
thereof or the duties of the Escrow Agent hereunder shall be
settled either by mutual agreement of the parties concerned
(evidenced by appropriate instructions in writing to the Escrow
Agent, signed by the Company and each Employee who is a party to
such dispute) or by a final order, decree or judgment of a court
of competent jurisdiction (the time for appeal having expired and
no appeal having been perfected), all costs and expenses of which
shall be borne equally by the Company and such Employee or
Employees. The Escrow Agent shall be under no duty whatsoever to
institute or defend any such proceedings.
6. Concerning the Escrow Agent.
(a) The Escrow Agent shall be entitled to compensation
for its services hereunder at its usual and customary rates,
payable in advance on an annual basis upon the establishment of
the escrow with respect to all of the Shares, and the Escrow
Agent shall be reimbursed for all reasonable expenses,
disbursements and advances incurred or made by the Escrow Agent
in performance of its duties hereunder, including the fees and
disbursements of its counsel. The payment of such fees,
disbursements, expenses and advances to the Escrow Agent shall be
borne by the Company.
(b) The Escrow Agent may resign and be discharged from
its duties hereunder at any time by giving notice of such
resignation to the Company and each Employee specifying a date
not less than ten business days following the date of such notice
when such resignation shall take effect. Upon such notice, a
successor escrow agent shall be selected by the Company, such
successor escrow agent to become the Escrow Agent hereunder upon
the resignation date specified in such notice. The Escrow Agent
shall continue to serve until its successor accepts the escrow
and receives the Shares.
(c) The Escrow Agent undertakes to perform only such
duties as are specifically set forth herein and may conclusively
rely and shall be protected in acting or refraining from acting
on any written notice, instrument or signature believed by it to
be genuine and to have been signed or presented by the proper
party or parties duly authorized to do so. The Escrow Agent
shall have no responsibility for the contents of any writing
contemplated herein and may rely without any liability upon the
contents thereof. Notwithstanding anything to the contrary in
this Master Escrow Agreement, where any action is specified to be
taken by the Escrow Agent upon delivery by the Company or an
Employee (or both the Company and one or more Employees) of a
notice, certificate or instructions to the Escrow Agent, the
Escrow Agent shall not be obligated to take any action until the
appropriate party (or parties) has acted by delivering the
certificate, notice or instructions to the Escrow Agent (none of
which shall be binding upon the Escrow Agent unless in writing)
as to the action to be taken hereunder indicating in writing that
a copy of such certificate, notice or instructions has been
delivered to the other party to this Master Escrow Agreement. It
is acknowledged by the Company and each Employee that the Escrow
Agent is bound only by the terms of this Master Escrow Agreement
and the Escrow Agent may, but shall not be required to, use its
discretion with respect to any matter that is the subject of this
Master Escrow Agreement or with respect to instructions received
under this Master Escrow Agreement.
(d) The Escrow Agent shall not be liable for any
action taken or omitted to be taken by it in good faith and
believed by it to be authorized hereby or within the rights or
powers conferred upon it hereunder, nor for action taken or
omitted to be taken by it in good faith and in accordance with
the advice of counsel (which counsel may be of the Escrow Agent's
own choosing), and shall not be liable for any mistakes of fact
or errors of judgment or for any acts or omissions of any kind
unless caused by its own willful misconduct or gross negligence.
In no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits) even if the Escrow
Agent has been advised of the likelihood of such loss or damage
and regardless of the form of action.
(e) The Company and each Employee hereby severally,
but not jointly, agree to indemnify and hold harmless the Escrow
Agent and its officers, employees and agents from and against any
and all costs, damages, claims, liabilities, judgments and
expenses (including reasonable attorney's fees) incurred by it in
connection with or arising out of the performance of its
obligations pursuant to this Master Escrow Agreement.
(f) Any corporation into which the Escrow Agent in its
individual capacity may be merged or converted or with which it
may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Escrow Agent in
its individual capacity shall be a party, or any corporation to
which substantially all the corporate trust business of the
Escrow Agent in its individual capacity may be transferred, shall
be the Escrow Agent under the Escrow Agent Agreement without
further act.
7. Miscellaneous.
(a) This Master Escrow Agreement shall be construed
and the rights and duties of the parties determined in accordance
with the laws of the State of California, without giving effect
to the principles of conflict of laws thereof.
(b) This Master Escrow Agreement shall inure to the
benefit of and shall be binding upon the parties hereto and their
respective successors.
(c) This Master Escrow Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute but one and
the same instrument.
(d) Section headings contained in this Master Escrow
Agreement have been inserted for reference purposes only, and
shall not be construed as part of this Master Escrow Agreement.
Capitalized terms not otherwise defined herein shall have the
meaning assigned such terms in the Ownership Retention
Agreements. The term "employee of the Company" and its
correlatives mean employee of the Company or any of its
subsidiaries.
(e) Any notice required or permitted to be given
hereunder shall be in writing and shall be sufficient in all
respects if delivered in person or mailed by registered,
certified or express mail, postage prepaid, as follows:
If to Company: Northrop Grumman Corporation
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Attention: Corporate Vice
President, Human Resources
If to Employees: As stated in Exhibit A hereto
If to Escrow Agent: Chase Manhattan Bank and Trust
Company, National Association
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Attention: Corporate Trust Department
or at such other address as any party hereto shall have
designated by notice in writing to the other parties hereto.
IN WITNESS WHEREOF, the undersigned duly authorized
representatives of the Company and the Escrow Agent have hereunto
set their hands as of the date first above written.
NORTHROP GRUMMAN CORPORATION CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By: __________________________ By: _________________________
Name:_________________________ Name:________________________
Its: _________________________ Its:__________________________
EMPLOYEES
All employees of the Company who execute and deliver the
Ownership Retention Agreements automatically become parties to
this Master Escrow Agreement as of the date first above written,
by the express terms of the Ownership Retention Agreements.
April 8, 1998
To: Recipients of the Ownership Retention Plan
Subject: Master Escrow Agreement Clarification
In order to help make your decision with respect to the
Ownership Retention Agreement easier, Northrop Grumman agrees
to the following undertakings with respect to the Master Escrow
Agreement between it and Chase Manhattan Bank and Trust
Company, N.A. (the "Escrow Agent").
First, Northrop Grumman agrees to bear the full costs of any
indemnification of the Escrow Agent under Section 6(e) of the
Master Escrow Agreement and will indemnify and hold you
harmless from and against any such costs, damages, claims,
liabilities, judgments and expenses (including reasonable
attorney's fees) incurred by the Escrow Agent in connection
with or arising out of the performance of its obligations
pursuant to the Master Escrow Agreement.
Second, if there is a dispute between you and Northrop Grumman
over whether your Shares of Northrop Grumman Common Stock held
by the Escrow Agent are to be released to you or are to be
forfeited, and such dispute is not settled by mutual agreement
within ten (10) business days after it arises, then Northrop
Grumman agrees that you may demand that such dispute be
promptly submitted to arbitration in accordance with the then-
current Model Employment Arbitration Procedures of the American
Arbitration Association ("AAA") before a panel of three (3)
arbitrators each of whom is then currently licensed to practice
law in the state in which the arbitration is convened. The
arbitration shall be held in the city in which you are or were
last employed by Northrop Grumman in the nearest office of the
AAA. You and Northrop Grumman shall each designate one
arbitrator, and the two so selected shall select the third
arbitrator, in accordance with AAA practice. The decision of
two of the three arbitrators shall be the decision of the panel
and shall be communicated to the Escrow Agent, which shall
immediately release the Shares to the party designated by the
arbitration panel.
Northrop Grumman agrees that if you elect arbitration in the
preceding paragraph to settle a dispute under the Master Escrow
Agreement, all expenses of such arbitration, including the fees
and expenses of your legal counsel, shall be advanced and borne
by Northrop Grumman; provided, however, that if the arbitration
panel determines that you did not commence the arbitration in
good faith and had no reasonable basis therefor, you shall
repay all such advanced fees and expenses to Northrop Grumman
and shall reimburse Northrop Grumman for its reasonable fees
and expenses in connection therewith, all notwithstanding
anything to the contrary stated in Sections 5 and 6(e) of the
Master Escrow Agreement. If you elect arbitration as provided
herein, Northrop Grumman agrees that the provisions stated in
this letter are in lieu of and shall supersede anything to the
contrary in Section 5 of the Master Escrow Agreement.
I hope that these agreements and undertakings by Northrop
Grumman will make your decision easier with respect to the
Ownership Retention Agreement or, if you have already signed
and returned it, will provide you with a bit more comfort that
Northrop Grumman will act fairly and in your interests.
Sincerely,
/s/
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