SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
NEWPORT NEWS SHIPBUILDING INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials:
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[NEWPORT NEWS SHIPBUILDING LOGO]
ANNUAL MEETING OF STOCKHOLDERS
1997
<PAGE>
[NEWPORT NEWS SHIPBUILDING LOGO]
4101 WASHINGTON AVENUE
NEWPORT NEWS, VIRGINIA 23607-2770
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------------
April 9, 1997
To the Stockholders of
Newport News Shipbuilding Inc.:
We are pleased to invite you to attend the first Annual Meeting of
stockholders of Newport News Shipbuilding. The meeting will be held at the Omni
Newport News Hotel, 1000 Omni Boulevard, Newport News, Virginia, on Friday, May
16, 1997, beginning at 10:00 A.M., for the following purposes:
(1) To elect three Class I directors to serve until the Annual Meeting of
stockholders in the year 2000;
(2) To approve a proposed amendment to the Newport News Shipbuilding
Stock Ownership Plan to increase by 1,250,000 the number of shares
authorized for issuance under the plan;
(3) To approve a proposed amendment to the Newport News Shipbuilding 1997
Employee Stock Purchase Plan to increase by 400,000 the number of
shares authorized for issuance under the plan;
(4) To ratify the appointment by the Board of Directors of Arthur
Andersen LLP as the Company's independent accountants for 1997; and
(5) To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 1, 1997 are
entitled to notice of, to vote at and to participate in the meeting.
Because your vote is important, you are requested to mark, date, sign and
return the enclosed form of proxy in the enclosed envelope, whether or not you
expect to attend the meeting in person. Signing and returning the enclosed form
of proxy will not affect your right to attend, or vote your shares in person at,
the meeting, should you choose to do so.
By order of the Board of Directors:
/s/ STEPHEN B. CLARKSON
-----------------------
STEPHEN B. CLARKSON
SECRETARY
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
[NEWPORT NEWS SHIPBUILDING LOGO]
4101 WASHINGTON AVENUE
NEWPORT NEWS, VIRGINIA 23607-2770
GENERAL INFORMATION
The enclosed proxy is solicited by and on behalf of Newport News
Shipbuilding Inc. (the "Company") for use at the Annual Meeting of stockholders
to be held at the Omni Newport News Hotel, 1000 Omni Boulevard, Newport News,
Virginia, on Friday, May 16, 1997, beginning at 10:00 A.M., and at any
adjournments of such meeting. The Company's Annual Report, including financial
statements for the year ended December 31, 1996, is enclosed with this proxy
statement.
Prior to December 11, 1996, the Company was a wholly-owned subsidiary of
Tenneco Inc. ("Tenneco"). As part of a series of transactions that were closed
on December 11, 1996, Tenneco and its existing subsidiaries, including the
Company, restructured their various businesses and assets so that, among other
things, substantially all of Tenneco's former shipbuilding business is now owned
by the Company and its subsidiaries. After such restructuring, Tenneco fully
divested its ownership interest in the Company by means of a tax-free
distribution to its shareholders of all of the outstanding shares of common
stock of the Company (the "Spin-off"). The Company's principal operating
subsidiary is Newport News Shipbuilding and Dry Dock Company ("Newport News").
The expense of this solicitation will be paid by the Company. Officers,
directors and employees of the Company may solicit proxies by telephone,
telegraph or personal calls. The firm of Georgeson & Company has been retained
to assist in the solicitation of proxies for a fee estimated at $25,000, plus
out-of-pocket expenses. Brokerage houses, nominees and fiduciaries have been
requested to forward proxy soliciting material to the beneficial owners of the
stock held of record by them, and the Company will reimburse them for their
charges and expenses.
Only holders of record of the outstanding common stock, par value $.01 per
share (the "Company Common Stock"), of the Company at the close of business on
April 1, 1997 are entitled to notice of, to vote at and to participate in the
meeting. On the record date, 34,766,584 shares of Company Common Stock were
outstanding. Holders of Company Common Stock will vote as a single class at the
Annual Meeting. Each outstanding share will entitle the holder to one vote. All
shares represented by properly executed and delivered proxies will be voted at
the meeting and any adjournments.
A majority of shares entitled to vote, present in person or by proxy, will
constitute a quorum for the conduct of business at the Annual Meeting.
Abstentions, and shares held of record by a broker or its nominee ("Broker
Shares") that are voted on any matter, are included in the number of shares
considered present or represented at the meeting for purposes of determining
whether a quorum is present. Broker Shares that are not voted on any matter at
the meeting will not be included in determining whether a quorum is present.
Directors are elected by a plurality vote of the shares present in person or
represented by proxy at the meeting and entitled to vote in the election of
directors. Votes that are withheld and Broker Shares that are not voted in the
election of directors will not be included in determining the number of shares
present and entitled to vote in the election of directors. Approval of the
amendments to the Newport News Shipbuilding Stock Ownership Plan (the "Stock
Ownership
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Plan") and the Newport News Shipbuilding 1997 Employee Stock Purchase Plan (the
"Stock Purchase Plan") requires the affirmative vote of the holders of a
majority of the shares of Company Common Stock cast on the proposals, provided
that the total votes cast on the proposals represent over 50% of the shares
entitled to vote on the proposals. Abstentions will have the same effect as a
negative vote for purposes of approving the amendments to the Stock Ownership
Plan and the Stock Purchase Plan. Broker Shares that are not voted with respect
to the approval of the amendments to the plans will not be included in
determining the number of votes cast.
This proxy statement and the enclosed form of proxy were first mailed to
stockholders on April 9, 1997.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Company's Board of Directors is divided into three classes. At the
Annual Meeting, three directors are expected to be elected to Class I to hold
office for a term of three years and until their respective successors are duly
elected and qualified.
INFORMATION CONCERNING NOMINEES
CLASS I (TO SERVE UNTIL THE 2000 ANNUAL MEETING OF STOCKHOLDERS)
WILLIAM P. FRICKS has served as the President of the Company since
September 1994, as its Chief Executive Officer since November 1995 and as its
Chairman of the Board since January 1997. Mr. Fricks first joined Newport News
in 1966. Most recently, he was appointed Senior Vice President in 1988,
Executive Vice President in 1992, and President and Chief Operating Officer in
1994. Mr. Fricks is currently the Chairman of the Board of Directors of the
American Shipbuilding Association and is on the Board of Directors of the
Virginia Manufacturers Association. On July 1, 1996, Mr. Fricks was appointed to
the Board of Visitors of the College of William and Mary. Mr. Fricks is 52 years
old and has been a director of the Company since October 1996.
DR. WILLIAM R. HARVEY has been the President of Hampton University in
Hampton, Virginia, since July 1978. He is also the owner of the Pepsi-Cola
Bottling Company of Houghton, Michigan. Previously, Dr. Harvey served as
Administrative Vice President at Tuskegee University, as Administrative
Assistant to the President of Fisk University, and as Assistant for Governmental
Affairs to the Dean at Harvard University's Graduate School of Education. He is
a director of the Signet Banking Company, Blue Cross Blue Shield of Virginia,
and International Guaranty Insurance Company. Dr. Harvey is 55 years old and has
been a director of the Company since January 1997.
STEPHEN R. WILSON has served as the Executive Vice President and Chief
Financial Officer of Readers' Digest Association, Inc. since April 1995. From
March 1993 to April 1995 he served as the Executive Vice President and Chief
Financial Officer of RJR Nabisco, Inc. From October 1990 until March 1993, Mr.
Wilson served as Senior Vice President, Corporate Development of RJR Nabisco.
Mr. Wilson is 50 years old and has been a director of the Company since January
1997.
Unless authority to do so is withheld, shares represented by properly
executed proxies in the enclosed form will be voted for the election of the
three persons named above. If any nominee should become unable or unavailable to
serve, the Board of Directors may designate a substitute nominee, for whom the
proxies will be voted. Alternatively, the Board may reduce the size of the Class
to the number of remaining nominees, for whom the proxies will be voted.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 1 TO
ELECT MESSRS. FRICKS, HARVEY AND WILSON TO THE BOARD OF DIRECTORS TO SERVE UNTIL
THE ANNUAL MEETING OF STOCKHOLDERS IN THE YEAR 2000.
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DIRECTORS CONTINUING IN OFFICE
There are four directors whose present term of office will continue until
1998 or 1999, as indicated below, and until their respective successors are duly
elected and qualified.
CLASS II (TO SERVE UNTIL THE 1998 ANNUAL MEETING OF STOCKHOLDERS)
LEON A. EDNEY, ADMIRAL (RET.) served in the United States Navy for 39
years, last serving as Supreme Allied Commander Atlantic (NATO) and
Commander-in-Chief, U.S. Atlantic Command, from May 1990 to August 1992. From
August 1988 to May 1990 he served as the Vice Chief of Naval Operations. Admiral
Edney retired from the Navy in August 1992. From September 1992 to April 1994
Admiral Edney served as a defense consultant to the U.S. Navy and from May 1994
to July 1995 he served as Vice President of Loral Company. He currently serves
as a director of Armed Forces Benefit Services Inc. and the Retired Officers
Association, as Vice Chairman of the Board of the Naval Aviation Museum
Foundation, as Senior Fellow at the Center for Naval Analysis and as a trustee
of the Naval Academy Foundation. Admiral Edney is 61 years old and has been a
director of the Company since January 1997.
DR. JOSEPH J. SISCO has been a partner of Sisco Associates, a management
consulting firm, since January 1980. Previously, he served as President and
Chancellor of The American University and was employed by the United States
Department of State for 25 years, last serving as Under Secretary of State for
Political Affairs. He is also a director of The Interpublic Group of Companies,
Inc., Raytheon Company, and Braun AG. Dr. Sisco served as a Director of Tenneco
from 1977 until his retirement from the Tenneco Board in May 1996. Dr. Sisco is
77 years old and has been a director of the Company since October 1996.
CLASS III (TO SERVE UNTIL THE 1999 ANNUAL MEETING OF STOCKHOLDERS)
HON. GERALD L. BALILES has been a partner with the law firm of Hunton &
Williams since February 1990. From January 1986 until January 1990, he served as
Governor of the Commonwealth of Virginia. While Governor, he served as Chairman
of the National Governors' Association from 1988 to 1989. He currently serves as
Chairman of the Board of the Public Broadcasting Service, and as a director of
Norfolk Southern Company, The Atlantic Council of the United States, The United
States Council for International Business, and the Washington Airports Task
Force. Governor Baliles is 56 years old and has been a director of the Company
since January 1997.
DANA G. MEAD has served as an executive officer of Tenneco since March
1992, when he joined Tenneco as Chief Operating Officer and a member of the
Board. He was elected President one month later and was named Chief Executive
Officer in February 1994 and Chairman in May 1994. Prior to joining Tenneco, Mr.
Mead served as an Executive Vice President of International Paper Company, a
manufacturer of paper, pulp and wood products. Mr. Mead is also a director of
Alco Standard Company, Baker Hughes Incorporated, Case Company and Textron Inc.
Mr. Mead is 60 years old and has been a director of the Company since June 1992.
For purposes of this paragraph, "Tenneco" refers: (i) for periods prior to the
Spin-off, to Tenneco Inc., now known as El Paso Tennessee Pipeline Co., and (ii)
for periods after the Spin-off, to Tenneco Inc., formerly known as New Tenneco
Inc.
COMMITTEES OF THE BOARD OF DIRECTORS
In January 1997, the Board of Directors established four standing
committees, which have the following responsibilities and authority:
AUDIT COMMITTEE. The Audit Committee has the responsibility, among other
things, to (i) recommend the selection of the Company's independent public
accountants, (ii) review and approve the scope of the independent public
accountants' audit activity and extent of non-audit services, (iii) review with
management and such independent public accountants the adequacy of the Company's
basic accounting systems and the effectiveness of the
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Company's internal audit plan and activities, (iv) review with management and
the independent public accountants the Company's certified financial statements
and exercise general oversight of the Company's financial reporting process, (v)
review with management litigation and other legal matters that may affect the
Company's financial condition and (vi) monitor compliance with the Company's
business ethics and other policies. The Members of the Audit Committee are
Messrs. Wilson, Edney and Harvey. Mr. Wilson is the Chairman of the Audit
Committee.
COMPENSATION AND BENEFITS COMMITTEE. The Compensation and Benefits
Committee has the responsibility, among other things, to (i) establish the
salary rate of officers and employees of the Company, (ii) examine periodically
the compensation structure of the Company and (iii) supervise the welfare,
pension and compensation plans of the Company. The Members of the Compensation
and Benefits Committee are Messrs. Sisco, Wilson and Mead. Dr. Sisco is the
Chairman of the Compensation and Benefits Committee.
NOMINATING AND MANAGEMENT DEVELOPMENT COMMITTEE. The Nominating and
Management Development Committee has the responsibility, among other things, to
(i) review possible candidates for election to the Board of Directors and
recommend a slate of nominees for election as directors at the Company's annual
stockholders' meetings, (ii) review the function and composition of the other
committees of the Board of Directors and recommend membership on such committees
and (iii) review the qualifications and recommend candidates for election as
officers of the Company. The Members of the Nominating and Management
Development Committee are Messrs. Baliles, Harvey, Edney and Sisco. Governor
Baliles is the Chairman of the Nominating and Management Development Committee.
Stockholders entitled to vote for the election of directors may nominate
candidates for consideration by the Nominating and Management Development
Committee in accordance with the procedures set forth below under the heading
"Shareholder Proposals and Nominations for the 1998 Annual Meeting of
Stockholders."
EXECUTIVE COMMITTEE. Other than matters assigned to the Compensation and
Benefits Committee, the Executive Committee has, during the interval between the
meetings of the Board of Directors, the authority to exercise all the powers of
the Board that may be delegated legally to it by the Board in the management and
direction of the business and affairs of the Company. The Members of the
Executive Committee are Messrs. Fricks, Baliles, Mead and Wilson. Mr. Fricks is
the Chairman of the Executive Committee.
During 1996, there were no meetings of the Board of Directors and no
committee meetings. Messrs. Fricks, Sisco and Mead, being the only current
directors in office during 1996, took all Board actions during 1996 by written
consent.
COMPENSATION OF DIRECTORS
All directors who are not also officers of the Company are paid a
director's fee of $25,000 per annum, one-half in cash and one-half in restricted
shares of Company Common Stock, and an attendance fee of $1,000, plus expenses,
for each meeting of the Board of Directors and each committee meeting attended.
Each director who serves as chairman of a committee of the Board is paid an
additional fee of $3,000 per annum per chairmanship.
Directors who are not also officers of the Company each receive an initial
grant of 2,000 stock options and an additional 1,000 stock options annually.
Directors who are not also officers of the Company each receive a one-time grant
of 1,000 shares of restricted stock upon joining the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is the ownership, as of January 20, 1997, of the number of
shares and percentage of Company Common Stock beneficially owned by (i) each
director of the Company, (ii) each of the executive officers of the Company
whose names are set forth on the Summary Compensation Table, (iii) all executive
officers of the
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Company and directors of the Company as a group and (iv) all persons
beneficially owning more than 5% of the outstanding Company Common Stock.
<TABLE>
<CAPTION>
SHARES OF THE AGGREGATE
COMPANY COMMON STOCK PERCENTAGE
OWNED(A) OWNED(B)
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
William P. Fricks............................................................ 88,455(c)(d)
Hon. Gerald L. Baliles....................................................... 1,000
Leon A. Edney, Admiral (Ret.)................................................ 1,000
Dr. William R. Harvey........................................................ 1,000
Dana G. Mead................................................................. 23,204(e)
Dr. Joseph J. Sisco.......................................................... 1,837
Stephen R. Wilson............................................................ 1,000
Thomas C. Schievelbein....................................................... 34,219(c)(d)
Stephen B. Clarkson.......................................................... 22,522(c)(d)
James A. Palmer, Jr.......................................................... 22,075(c)(d)
George A. Wade............................................................... 24,391(c)(d)
All directors and executive officers as a group (22 persons)................. 310,746(c)(d)(e)
FMR Corp., Edward C. Johnson
3d, Abigail P. Johnson
and Fidelity Management
& Research Company
82 Devonshire Street
Boston, Massachusetts 02109................................................ 4,076,160(f) 11.9%
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116................................................ 3,367,730(g) 9.8%
Oppenheimer Group, Inc., Oppenheimer
Financial Corp., Oppenheimer Equities,
Inc., Oppenheimer Holdings, Inc.,
Oppenheimer & Co., Inc., Oppenheimer
Capital and OpCap Advisors
Oppenheimer Tower
World Financial Center
New York, New York 10281................................................... 2,389,132(h) 7.0%
The Capital Group Companies, Inc.
and Capital Research
and Management Company
333 South Hope Street
Los Angeles, California 90071.............................................. 1,751,260(i) 5.1%
</TABLE>
- ---------------
(a)Except as described in the notes below, each director, executive officer
and 5% holder has sole voting and investment power over the shares beneficially
owned, as set forth in this column.
(b)Except as indicated, each person or group beneficially owns less than 1%
of the outstanding Company Common Stock.
(c)Includes options to acquire shares of Company Common Stock in
replacement of options to acquire shares of Tenneco Common Stock, which may be
exercised within sixty days from January 20, 1997. Options held by Company
employees to acquire shares of Tenneco Common Stock were canceled as of December
11, 1996 and were replaced in January 1997 with options to acquire Company
Common Stock under which the excess of the fair market value of the shares
subject to the replacement options immediately after the grant over the
aggregate option price is not more than the excess of the aggregate fair market
value of all Tenneco shares subject to the employee's Tenneco stock options
immediately before such cancellation over the aggregate option price under such
Tenneco options. The replacement options of Messrs. Fricks, Schievelbein,
Clarkson, Palmer and Wade,
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which may be exercised within sixty days from January 20, 1997, are for 82,797,
32,677, 21,307, 19,816, and 22,908 shares of Company Common Stock, respectively.
All directors and executive officers as a group have replacement options, which
may be exercised within 60 days from January 20, 1997, for 262,361 shares of
Company Common Stock.
(d)Includes shares held under the Company's 401(k) plan. Shares in the
Company's 401(k) plan held by Messrs. Fricks, Schievelbein, Clarkson, Palmer and
Wade were 159, 206, 124, 154, and 161, respectively. All directors and executive
officers as a group held 2,723 shares in the 401(k) plan.
(e)Includes 81 shares held under the Tenneco Inc. 401(k) plan and 5,905
stock units in the Tenneco Inc. Deferred Compensation Plan.
(f)The number of shares owned is as of January 31, 1997, as reported in the
Schedule 13G filed by FMR Corp. with the Securities and Exchange Commission on
February 7, 1997. FMR Corp. reported sole voting power for 183,000 of the
4,076,160 shares beneficially owned.
(g)The number of shares owned is as of February 11, 1997, as reported in
the Schedule 13G filed by Massachusetts Financial Services Company with the
Securities and Exchange Commission on February 11, 1997. Massachusetts Financial
Services Company reported sole voting power for 3,289,230 of the 3,367,730
shares beneficially owned.
(h)The number of shares owned is as of January 21, 1997, as reported in the
Schedule 13G filed by Oppenheimer Group, Inc. with the Securities and Exchange
Commission on February 4, 1997. Oppenheimer Group, Inc. reported shared voting
and investment power for all 2,389,132 shares beneficially owned.
(i)The number of shares owned is as of February 12, 1997, as reported in
the Schedule 13G filed by The Capital Group Companies, Inc. with the Securities
and Exchange Commission on February 12, 1997. The Capital Group Companies, Inc.
reported sole investment power for all 1,751,260 shares beneficially owned and
no voting power for such shares.
EXECUTIVE COMPENSATION
COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee (the "Committee") of the Board of
Directors, which consists entirely of non-employee directors, provides the
following report on executive compensation. Under the Committee's supervision,
the Company has developed and implemented the executive compensation philosophy,
policies, plans, and programs described below.
COMPENSATION PHILOSOPHY
The Company is a newly independent, publicly traded company and has
established a basic philosophy for executive compensation to reward executives
primarily based upon their ability to improve the financial performance of the
Company and increase shareholder value. The Committee believes this
pay-for-performance philosophy will appropriately link the interests of
executives with those of stockholders.
Accordingly, the Company's executive compensation program has been
structured to:
-- Align the total compensation paid to the Company's executives with
the Company's business goals, including (but not limited to) operating
income, cash flow, earnings per share, stock price growth, leadership
development, new business development, and process improvement.
-- Reinforce a pay-for-performance culture through significant
short-and long-term incentives. Performance-based pay constitutes the
majority of compensation opportunities available to all of the Company's
senior executives. For performance above target, executives have
significantly higher award opportunities. For performance below target,
award opportunities are significantly reduced and below
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certain levels, no award may be earned. Greater emphasis is placed on
incentives which reward executives for sustained long-term performance.
-- Strengthen the linkage between stockholders' and executives'
interests through stock-based incentives and stock ownership
requirements. A significant portion of each executive's on-going
compensation will be derived from stock-based compensation, including
stock options and performance shares, which require stock price growth
and/or achievement of earnings per share growth before any value is
received by executives. Additionally, each executive is required to
achieve and maintain certain stock ownership levels which vary with
executive level.
-- Attract and retain high quality executive talent by providing
competitive total compensation. The compensation program provides target
compensation levels at market medians (50th percentile) when the Company
achieves targeted performance objectives. However, Company performance
above established performance objectives will result in a total
compensation package that is above market medians.
Under this structure, the Company's on-going executive compensation program
has been designed to provide compensation from three primary sources -- base
salary, annual cash incentive awards, and long-term, stock-based incentive
awards, such as stock options and performance shares. The following is a
description of each of the components of the program.
BASE SALARY
The Committee reviews annually base salaries for executives. The Company's
annual salary plan is based on (i) the executive's performance against
objectives, (ii) judgments as to the executive's past and expected future
contributions to the Company and (iii) market survey data for comparable
positions. Salary recommendations are developed under the direction of the Chief
Executive Officer. However, the base salary of the Chief Executive Officer is
set by the Committee alone.
The information on competitive market salaries is provided to the Committee
with the assistance of an independent executive compensation consultant. Survey
data is derived from a sample of similarly-sized organizations within the same
or highly related industries (the "Comparator Group"). The Comparator Group
consists of organizations within the shipbuilding, defense, and heavy
manufacturing industries. Some of these companies will be included in the peer
group indices contained in the Company's performance graphs which will be
included in the Company's future proxy statements for annual meetings of
stockholders.
ANNUAL INCENTIVES
Annual incentive plan opportunities are also established using market
survey data. The Company's Annual Incentive Plan provides that Company
executives will receive cash payments from the Plan if they meet specified
performance goals. These goals will typically consist of (but not be limited to)
one or more of the following financial measures: operating income, operating
cash flow, earnings per share, return on equity, return on investment, and net
income. For 1997, the principal financial measures will be operating income
(weighted 70%) and operating cash flow (weighted 30%). Larger payouts may be
earned if Plan goals are exceeded. Conversely, smaller payouts (or no payout)
may be earned if Plan goals are not met.
The Committee will be responsible for establishing performance measures and
goals at the beginning of each year and for evaluating performance against these
goals and determining awards earned under the Plan. Individual incentive awards
will be based on Company performance against goals and evaluations of individual
performance.
LONG-TERM INCENTIVES
The Company's long-term, stock-based incentive plan is designed to align a
significant portion of the executives' total compensation with stockholder
interests. The Stock Ownership Plan provides the flexibility to grant
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<PAGE>
long-term incentives in a variety of forms, including stock options, performance
shares, restricted stock, stock appreciation rights, and other stock-based
incentive vehicles. Periodically, the Committee establishes the types and levels
of long-term incentives it believes are most likely to achieve the Company's
performance and total compensation objectives. At increasing levels of executive
responsibility, it is the Committee's intent that executives derive a larger
percentage of total compensation from long-term, stock-based incentive vehicles.
For 1997, long-term incentives will be provided through a combination of
stock options and performance shares, and earnings per share ("EPS") will be the
performance measure for determining performance share awards under the Plan.
Incentive opportunities are graduated by executive level. Payout levels will be
based upon performance against EPS goals over a three year period. Larger
payouts may be earned if EPS goals are exceeded. Conversely, smaller payouts (or
no payout) may be earned if EPS goals are not met.
In consideration of its need to retain and provide incentive to key
executives in the challenging environment surrounding its transition to a
publicly-traded company and to create an immediate link between executive and
stockholder interests, in 1997 the Company will make a one-time grant of
performance shares to key executives. The grant has a minimum vesting period of
three years. Beyond that minimum, vesting is linked to stock price performance,
and no vesting occurs unless stock price targets are achieved.
EXECUTIVE STOCK OWNERSHIP
The Committee believes that stockholder interests are enhanced through
stock ownership of key Company executives. Accordingly, the Committee has
established stock ownership requirements for its executives. The share
requirements are defined as a multiple of each executive's base salary. The
multiple varies with level of executive responsibility from four times base
salary at the highest executive level ("CEO") to one times base salary at the
lowest executive level.
CEO COMPENSATION
In recognition of his performance in 1996 and his responsibilities as CEO
of the Company, a newly independent publicly traded corporation, Mr. Fricks'
base salary was increased from $375,000 to $525,000 effective January 1, 1997.
His base salary was established based upon a market survey of CEO salaries in
the Comparator Group for publicly-traded organizations of comparable size
operating in similar industries. In November 1996, in anticipation of the
Spin-off, Tenneco vested and paid all Tenneco performance shares held by Mr.
Fricks (10,000 for 1996; 9,000 for 1995). Under Tenneco's annual incentive plan,
Mr. Fricks received an incentive award of $230,000 in 1996.
For 1997, Mr. Fricks will be entitled to receive compensation pursuant to
the Annual Incentive Plan and stock-based incentive grants consistent with the
provisions of the Stock Ownership Plan.
$1 MILLION TAX LIMITATION
The Internal Revenue Code of 1986, as amended, provides that a
publicly-owned corporation may not deduct compensation in excess of $1 million
per year paid to a corporation's Chief Executive Officer or other named
executives, subject to certain exceptions. One exception is for
performance-based compensation that satisfies certain conditions of Section
162(m).
The Company desiring, both to compensate its executives competitively and
to protect its tax deduction for compensation, has elected to use certain
stock-based incentives (i.e., stock options and performance shares) that qualify
as "performance-based compensation." These incentives qualify as
"performance-based compensation" because their value to the executive is
determined by either increases in the Company's stock price alone or in
combination with the achievement of objective performance goals. The Company
does not expect any compensation to be non-deductible for Federal income tax
purposes.
8
<PAGE>
The Committee believes the overall design of the compensation program
appropriately links executive and stockholder interests. The Committee will
regularly evaluate the program to ensure future alignment.
COMPENSATION AND BENEFITS COMMITTEE
Joseph J. Sisco -- Chairman
Dana G. Mead
Stephen R. Wilson
SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons owning more than 10% of
the Company Common Stock to file reports of ownership and changes in ownership
of the Company Common Stock and derivative securities of the Company with the
Securities and Exchange Commission and the New York Stock Exchange. All
directors and executive officers filed on a timely basis all reports required to
be filed in 1996.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
Prior to the Spin-off, the business of the Company and its subsidiaries was
owned and operated by Tenneco through its direct and indirect subsidiaries and,
as such, the management of the Company was employed by Tenneco and/or its direct
and indirect subsidiaries. The following table sets forth the remuneration paid
by Tenneco and/or its direct and indirect subsidiaries prior to the Spin-off on
December 11, 1996 and by the Company after that date (i) to the Chairman,
President and Chief Executive Officer of the Company and (ii) to each of the
four most highly compensated executive officers of the Company, other than the
Chief Executive Officer, whose salary and bonus exceeded $100,000, for the years
indicated in connection with his position with the Company.
9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION RESTRICTED
NAME AND PRINCIPAL ------------------------------ STOCK ALL OTHER
POSITION YEAR SALARY(A) BONUS AWARDS(B) OPTIONS COMPENSATION(C)
- ------------------------- ----- -------- -------- -------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
William P. Fricks(d) 1996 $395,500 $230,000 $ -- 30,000 $45,378
Chairman, President and 1995 $323,759 $195,000 -- 12,000 $34,680
Chief Executive Officer 1994 $276,960 $145,000 $161,814 7,000 $35,226
Thomas C. Schievelbein 1996 $238,900 $109,000 $168,875 14,000 $26,513
Executive Vice President 1995 $188,202 $ 90,000 $ 90,038 3,300 $ 9,810
1994 $125,000 $ 75,000 $107,876 3,000 $ 8,288
Stephen B. Clarkson 1996 $206,565 $ 68,000 $ 86,850 4,300 $13,595
Vice President, General 1995 $200,400 $ 75,000 $ 85,750 3,000 $13,287
Counsel and Secretary 1994 $199,920 $ 84,000 $ 80,907 3,000 $11,767
James A. Palmer, Jr. 1996 $211,900 $ 81,000 $110,975 5,000 $33,178
Vice President 1995 $206,760 $ 95,000 $ 98,613 3,500 $31,735
1994 $189,480 $ 95,000 $107,876 3,150 $30,752
George A. Wade 1996 $201,100 $ 68,000 $ 96,500 4,300 $25,225
Vice President 1995 $195,960 $ 90,000 $ 98,613 3,500 $24,299
1994 $139,800 $ 95,000 $107,876 3,150 $22,252
</TABLE>
- ---------------
(a)Includes base salary plus amounts paid in lieu of matching contributions
to the Tenneco Inc. Thrift Plan.
(b)Includes the dollar value of grants of restricted stock made pursuant to
Tenneco restricted stock plans based on the price of the Tenneco Common Stock on
the date of grant. All grants of Tenneco restricted stock vested as of November
1, 1996.
(c)Includes amounts attributable during 1996 to benefit plans of the
Company as follows:
(1) The amounts contributed pursuant to the Tenneco Inc. Thrift Plan for
the accounts of Messrs. Fricks, Schievelbein, Clarkson, Palmer and Wade
were $9,500; $9,500; $7,635; $9,500; and $9,500 respectively.
(2) The amounts accrued under the Tenneco Inc. Deferred Compensation Plan,
together with adjustments based upon changes in the Consumer Price
Index for All Urban Households, as computed by the Bureau of Labor
Statistics, for Messrs. Fricks, Schievelbein, Palmer and Wade were
$28,576; $15,469; $13,987; and $12,059, respectively.
(3) Amounts imputed as income for federal income tax purposes under the
Company's group life insurance plan for Messrs. Fricks, Schievelbein,
Clarkson, Palmer and Wade were $7,302; $1,544; $5,960; $9,691; and
$3,666, respectively.
(d)William P. Fricks has served as Chairman and Chief Executive Officer of
the Company since January 16, 1997, President and Chief Executive Officer of
Newport News since November 1, 1995, prior to which he served as President and
Chief Operating Officer from January 24, 1995. Prior to that time, Mr. Fricks
served as Executive Vice President of Newport News from January 1, 1992, prior
to which he served as a Senior Vice President from September 1, 1988.
10
<PAGE>
The Company has an employment agreement with Mr. Fricks for a term ending
December 12, 1999. Mr. Fricks will receive annual compensation of not less than
$525,000, subject to such adjustments as may, from time to time, be approved by
the Compensation and Benefits Committee of the Board of Directors, and annual
financial planning services and retirement and other benefits. The agreement
provides that, upon Mr. Fricks' separation from the Company, he will receive
career transition assistance of up to $75,000. Upon involuntary termination, or
if the term of the agreement is not extended, the Company will pay Mr. Fricks a
severance benefit in an amount equal to the greater of (i) the total salary for
the remainder of the agreement assuming his base salary then in effect or (ii)
three times his then-current base salary. Subject to approval of the Board of
Directors, Mr. Fricks' outstanding restricted stock, stock option and
performance share awards will vest and/or become exercisable on the date of his
termination. The agreement includes a supplemental executive retirement plan
(SERP) which provides for certain retirement benefits.
OPTION GRANTS IN 1996
The following table sets forth the number of stock options to acquire
Tenneco Common Stock that were granted by Tenneco during 1996 prior to the
Spin-off to the following persons named in the Summary Compensation Table. As
discussed in note (b), these options were replaced in January 1997 by options to
acquire Company Common Stock.
11
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
---------------------------------------------------------------------- AT ASSUMED ANNUAL RATES
% OF TOTAL OF STOCK PRICE
OPTIONS OPTIONS EXERCISE OR APPRECIATION FOR OPTION
GRANTED GRANTED TO BASE PRICE TERM(D)
(NO. OF EMPLOYEES PER -----------------------
NAME SHARES)(A)(B) IN FISCAL YEAR SHARE(C) EXPIRATION DATE 5% 10%
- ----------------------- ------------- -------------- ----------- ----------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William P. Fricks 30,000 1.3% $48.25 January 16, 2006 $910,200 $2,307,000
Thomas C. Schievelbein 14,000 0.6% $48.25 January 16, 2006 $424,760 $1,076,600
Stephen B. Clarkson 4,300 0.2% $48.25 January 16, 2006 $130,462 $ 330,670
James A. Palmer, Jr. 5,000 0.2% $48.25 January 16, 2006 $151,700 $ 384,500
George A. Wade 4,300 0.2% $48.25 January 16, 2006 $130,462 $ 330,670
</TABLE>
- ---------------
(a)These options provided that a grantee who delivered shares of Tenneco
Common Stock to pay the option exercise price would be granted, upon such
delivery and without further action by Tenneco, an additional option to purchase
the number of shares so delivered. These "reload" options were granted at 100%
of the fair market value (as defined in the plan) on the date they were granted,
become exercisable six months from that date and expired coincident with the
options they replaced. Grantees were limited to 10 reload options and the
automatic grant of such reload options was limited to twice during any one
calendar year.
(b)All Tenneco stock options held by employees of the Company were canceled
as of December 11, 1996 and were replaced in January 1997 with options to
acquire Company Common Stock under the Stock Ownership Plan, which is
substantially similar to the 1994 Tenneco Stock Ownership Plan. Tenneco approved
the Stock Ownership Plan as the sole stockholder of the Company. All employees
of the Company who formerly held Tenneco options have replacement options under
the Stock Ownership Plan. Each such employee has replacement options of the
Company under which the excess of the fair market value of the shares subject to
the options immediately after the grant over the aggregate option price is not
more than the excess of the aggregate fair market value of all Tenneco shares
subject to his or her Tenneco stock options immediately before such cancellation
over the aggregate option price under such Tenneco options. The terms of the
Company options are the same as if the Tenneco options had remained outstanding,
except to the extent that the Stock Ownership Plan reflects legal changes
adopted after the Tenneco options were granted. These options provide that a
grantee who delivers shares of Tenneco Common Stock to pay the option exercise
price will be granted, upon such delivery and without further action by the
Company, an additional option to purchase the number of shares so delivered.
These "reload" options are granted at 100% of the fair market value (as defined
in the Stock Ownership Plan) on the date they are granted, become exercisable
six months from that date and expire at the same time as the options they
replace. Grantees are limited to 10 reload options and automatic grant of such
reload options is limited to twice during any one calendar year. The replacement
options for the Tenneco stock options granted in 1996 of Messrs. Fricks,
Schievelbein, Clarkson, Palmer and Wade are for 99,359, 46,368, 14,242, 16,560,
and 14,242, shares of Company Common Stock, respectively, and are exercisable at
the rate of one-third per year on January 16, 1997, 1998 and 1999. The aggregate
replacement options for Tenneco stock options granted in 1996 and in prior years
to Messrs. Fricks, Schievelbein, Clarkson, Palmer and Wade are for 162,287,
67,234, 34,114, 34,720, and 36,267 shares of Company Common Stock, respectively.
The replacement options are exercisable at a rate of one-third per year
beginning on the first anniversary of the date of grant of the Tenneco stock
options replaced.
(c)All options were granted by Tenneco at 100% of the fair market value on
the date of the grant.
(d)The dollar amounts under these columns are the result of calculations
for the period from the date of grant to the expiration of the option at the 5%
and 10% annual appreciation rates set by the Securities and Exchange Commission
and, therefore, are not intended to forecast possible future appreciation, if
any, in the price of Tenneco Common Stock. No gain to the optionee is possible
without an increase in price of the underlying stock. In order to realize the
potential values set forth in the 5% and 10% columns of this table, the per
share price of Tenneco Common Stock would be $78.59 and $125.15, respectively,
or 63% and 160%, respectively, above the exercise or base price. As described in
footnote (b) above, however, options to acquire Tenneco Common Stock held by
Company employees have been replaced by options to acquire Company Common Stock.
12
<PAGE>
OPTION/SAR EXERCISES IN 1996 AND 1996 YEAR-END VALUES
The following table sets forth the number of Tenneco options and SARs
exercised by the following persons named in the Summary Compensation Table. No
options were outstanding as of December 31, 1996.
<TABLE>
<CAPTION>
TOTAL NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS/SARS HELD AT DECEMBER MONEY OPTIONS/SARS HELD AT
31, 1996(A) DECEMBER 31, 1996(A)(B)
SHARES ACQUIRED VALUE ------------------------------ -----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- --------------- ------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William P. Fricks 213 $ 1,824 -- -- $34,500 $ 166,500
Thomas C. Schievelbein -- -- -- -- $ 9,488 $ 64,475
Stephen B. Clarkson -- -- -- -- $ 8,625 $ 31,225
James A. Palmer, Jr. 1,167 $13,858 -- -- -- $ 36,372
George A. Wade 100 $ 919 -- -- $10,065 $ 34,098
</TABLE>
- ---------------
(a)No options were outstanding as of December 31, 1996. As described in
footnote (b) to the Option Grant Table, options to acquire shares of Tenneco
Common Stock held by Company employees were canceled as of December 11, 1996.
Options to acquire shares of Tenneco Common Stock were replaced in January 1997
by options to acquire shares of Company Common Stock.
(b)The value of replacement options to acquire Company Common Stock
approximates the value of options previously held to acquire Tenneco Common
Stock.
LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE EQUIVALENT UNIT AWARDS IN LAST FISCAL YEAR
Mr. Fricks is the sole person named in the Summary Compensation Table who
received a performance-based award under Tenneco's long-term incentive plan
during 1996 prior to the Spin-off. Mr. Fricks received an aggregate award of
10,000 performance share equivalent units. Each performance share equivalent
unit represented one share of Tenneco Common Stock that could be earned under
this award and the 10,000 performance share equivalent units represented the
maximum number of such units that could be earned under this award. All shares
credited for payout under Tenneco's long-term incentive plan vested as of
November 1, 1996 and the number of shares of Tenneco Company Common Stock
subject thereto were issued. Consequently, there are no estimated future
payouts.
13
<PAGE>
PENSION PLAN TABLE
The following table sets forth the aggregate estimated annual benefits
payable upon normal retirement pursuant to the Company's Retirement Plan (the
"Retirement Plan"), the Tenneco Retirement Plan (the "TRP") and certain
non-qualified structures. The Company has adopted a Retirement Plan that is
similar to the TRP and will count service with Tenneco for benefit accrual
purposes but with an offset for benefits accrued under the TRP. It is
anticipated that the Company will adopt one or more non-qualified structures to
provide employees with the benefits that would be provided under the Retirement
Plan but for applicable legal limits. The numbers set forth in the following
table assume that plans are adopted accordingly.
<TABLE>
<CAPTION>
YEARS OF CREDITED PARTICIPATION
------------------------------------------------------------
REMUNERATION 15 20 25 30 35
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
$ 200,000 $ 47,100 $ 62,900 $ 78,600 $ 94,300 $110,000
250,000 58,900 78,600 98,200 117,900 137,500
300,000 70,700 94,300 117,900 141,400 165,000
350,000 82,500 110,000 137,500 165,000 192,500
400,000 94,300 125,700 157,100 188,600 220,000
450,000 106,100 141,400 176,800 212,100 247,500
500,000 117,900 157,100 196,400 235,700 275,000
550,000 129,600 172,900 216,100 259,300 302,500
600,000 141,400 188,600 235,700 282,900 330,000
650,000 153,200 204,300 255,400 306,400 357,000
700,000 165,000 220,000 275,000 330,000 365,000
750,000 176,800 235,700 294,600 353,600 412,500
800,000 188,600 251,400 314,300 377,100 440,000
850,000 200,400 267,100 333,900 400,700 467,500
900,000 212,100 282,900 353,600 424,300 495,000
950,000 223,900 298,600 373,200 447,900 522,500
1,000,000 235,700 314,300 392,900 471,400 550,000
</TABLE>
The benefits set forth above are computed as a straight life annuity and
are based on years of credited participation in the Retirement Plan and the
employee's average base salary during the final five years of credited
participation in the Plan; such benefits are not subject to any deduction for
Social Security or other offset amounts. The estimated credited years of service
for Messrs. Fricks, Schievelbein, Clarkson, Palmer and Wade are 34, 8, 5, 11 and
27, respectively. Pursuant to the employment agreement with Mr. Fricks, benefits
for Mr. Fricks are based on his average base salary and bonus during the term of
the agreement. See " -- Executive Compensation."
CHANGE-IN-CONTROL ARRANGEMENTS
The Company has established a severance plan for the benefit of certain
employees and officers whose position is terminated under certain circumstances
following a change in control of the Company. Under the severance plan, key
executives of the rank of Senior Vice President and above, as well as certain
designated Vice Presidents, would receive three times their annual compensation
and the average of their targeted or actual bonus awards, whichever average is
higher, together with any special awards, over the last three years if they are
terminated within two years of a change in control. Certain other key employees
would receive two times their annual salaries and the average of their targeted
or actual bonus awards, whichever average is higher, together with any special
awards, over the last three years if they are terminated within two years of a
change in control. The Spin-off was not deemed to constitute a "change in
control" for purposes of the plan.
14
<PAGE>
CERTAIN TRANSACTIONS
Governor Baliles, a director of the Company, is a partner in the law firm
of Hunton & Williams. Hunton & Williams has provided legal services to the
Company during the last two years.
PERFORMANCE GRAPH
A graph comparing the cumulative total return for the Company Common Stock
to the cumulative total returns for the S&P 500 Composite Index and a peer index
is not included herein because the Company Common Stock was first traded on the
New York Stock Exchange on December 12, 1996.
PROPOSAL TO APPROVE AN AMENDMENT TO THE STOCK OWNERSHIP PLAN
TO INCREASE SHARE AUTHORIZATION BY 1,250,000 SHARES
(PROPOSAL 2)
The Company proposes that the stockholders approve an amendment to the
Stock Ownership Plan. On March 25, 1997, subject to stockholder approval, the
Board of Directors approved a proposed amendment to the Stock Ownership Plan
that would increase the aggregate number of shares available for awards under
the Stock Ownership Plan by an additional 1,250,000 shares of Company Common
Stock. The Board believes this amendment is necessary in order to make shares
available for future awards under the Stock Ownership Plan. It is anticipated
that, at the current rate of useage, all of the shares presently available for
awards under the Stock Ownership Plan will be exhausted prior to the 1998 Annual
Meeting of stockholders.
SUMMARY OF THE STOCK OWNERSHIP PLAN
The following paragraphs summarize the principal features of the Stock
Ownership Plan. This summary is subject to the terms of the Stock Ownership
Plan. The Company will provide, upon request and without charge, a copy of the
full text of the Stock Ownership Plan to each person to whom a copy of this
proxy statement is delivered. Requests should be directed to: Stephen B.
Clarkson, Secretary, Newport News Shipbuilding Inc., 4101 Washington Avenue,
Newport News, Virginia 23607.
PURPOSE. The purpose of the Stock Ownership Plan is to promote the
long-term success of the Company and its subsidiaries for the benefit of the
Company's stockholders by encouraging its officers and key employees to have
meaningful investments in the Company so that, as stockholders themselves, those
individuals will be more likely to represent the views and interests of other
stockholders and by providing incentives to such officers and key employees for
continued services. The Company believes that the possibility of participation
under the Stock Ownership Plan will provide this group of officers and employees
an incentive to perform more effectively and will assist the Company and its
subsidiaries in attracting and retaining people of outstanding training,
experience and ability.
TERM. The Stock Ownership Plan was adopted effective as of October 8, 1996
for a term to expire on December 31, 2001.
ADMINISTRATION. The Stock Ownership Plan is administered by the
Compensation and Benefits Committee of the Board of Directors (the "Committee"),
which has exclusive authority to make awards under the Stock Ownership Plan and
all interpretations and determinations affecting the Stock Ownership Plan. No
member of the Committee is eligible to participate in the Stock Ownership Plan.
PARTICIPATION. Participation in the Stock Ownership Plan is limited to
officers and key employees of the Company and its subsidiaries who are selected
from time to time by the Committee. Participants in the Stock Ownership Plan are
also eligible to participate in other incentive plans of the Company. The
Company estimates that approximately 50 employees are eligible to participate in
the plan.
15
<PAGE>
SHARES AVAILABLE FOR AWARDS. The proposed amendment would increase the
aggregate number of shares of Company Common Stock authorized for issuance under
the Stock Ownership Plan by 1,250,000, to 5,250,000 shares. Such shares will
consist of authorized and unissued shares of Company Common Stock. As of January
23, 1997, the Company has made awards covering 2,100,000 shares of Company
Common Stock under the plan and only 1,900,000 shares were available for future
awards under the Stock Ownership Plan. With respect to the unexercised portion
of any lapsed, forfeited or canceled Awards (as defined by the plan), such
shares may again be available for future Awards. On April 1, 1997, the closing
price of the Company Common Stock on the New York Stock Exchange was $14 5/8.
CASH AWARDS. The Stock Ownership Plan allows the Committee to award Stock
Equivalent Units, Dividend Equivalent Units, Stock Appreciation Rights and
Performance Units to be exercisable for, or settled in, cash. Such Awards, which
may be redeemed or exercised only on a fixed date or dates not less than six
months after the date of such Award or incident to retirement, death, or total
disability, coincident with termination of employment, are not included in the
limitation on shares available for issuance.
AWARDS. The Stock Ownership Plan permits grants of any or all of the
following types of Awards: (i) Options, including Incentive Stock Options
("ISOs"), Non-Qualified Stock Options, and Reload Stock Options; (ii) Stock
Appreciation Rights ("SARs"); (iii) Restricted Stock; (iv) Stock Equivalent
Units; (v) Dividend Equivalents; and (vi) Performance Units. All Awards will be
evidenced by an Award Agreement (as defined by the plan), which sets out the
details, terms, conditions and limitations applicable to such Award. Under the
terms of the Stock Ownership Plan, no Award may vest in less than six months
from the award date, except in the event of retirement, death or total
disability.
STOCK OPTIONS. The Stock Ownership Plan provides that the option price
pursuant to which Company Common Stock may be purchased will be not less than
100% of the fair market value of the Company Common Stock on the date the Stock
Option is awarded. The term of each Stock Option will be fixed by the Committee
and evidenced in an Award Agreement. Payment of the option price may be made in
(i) cash, (ii) check, (iii) through the delivery of shares of Company Common
Stock having a fair market value on the exercise date equal to the option price,
and (iv) through simultaneously exercising Stock Options and selling the shares
of Company Common Stock acquired thereby and applying the proceeds to the option
price, or (v) such other method as may be permitted by the Committee.
The Committee may award Reload Stock Options in conjunction with any Stock
Option awarded under the Stock Ownership Plan or otherwise. A Reload Stock
Option is an option to purchase shares equal to the number of shares of Company
Common Stock delivered in payment of the option price for a Stock Option and is
deemed to be granted upon such delivery without further action by the Committee.
Reload Stock Options are subject to all of the terms and conditions of Stock
Options generally, except that their term ends upon termination of the Stock
Options with respect to which they are granted.
STOCK APPRECIATION RIGHTS. The Committee may award SARs either free
standing as an additional right (the "Additional Right SAR") or in conjunction
with any other Award as an alternative right (the "Alternative Right SAR"). The
exercise of an Award granted in conjunction with an Alternative Right SAR
terminates the Alternative Right SAR to the extent of the shares or share
equivalents acquired upon exercise of the Award. Conversely, the exercise of an
Alternative Right SAR terminates the associated Award to the extent of the
shares or share equivalents with respect to which such rights are exercised. The
exercise of an Additional Right SAR has no effect on the exercisability of any
other Award and the exercise of any other Award has no effect on the
exercisability of an Additional Right SAR.
Upon the exercise of an SAR, the participant will receive the excess of the
Fair Market Value (as defined by the plan) of a share of Company Common Stock on
the Settlement Date (as defined by the plan) over the Award Price (as defined by
the plan). The Award Price for: (i) Additional Right SARs is 100% of the Fair
Market Value of a share of Company Common Stock on the date the SAR was awarded;
and (ii) Alternative Right SARs is 100% of the Fair Market Value of a share of
Company Common Stock on the date such other Award was made.
16
<PAGE>
For purposes of the limitation on the aggregate number of shares of Company
Common Stock which may be issued under the Stock Ownership Plan, only the number
of shares actually issued in connection with the exercise of an SAR will be
considered.
RESTRICTED STOCK. The Committee may make Awards of Restricted Stock on such
terms, conditions and restrictions (which may include, but are not limited to,
continuous service with the Company, achievement of specific business
objectives, and other measurements of individual, business unit, or Company
performance) as it determines. Such terms and conditions may include the manner
in which such Restricted Stock is held, the extent to which the holder of such
shares has rights of a stockholder and the circumstances under which such shares
will be forfeited. None of the shares subject to a Restricted Stock Award may be
assigned, transferred, pledged, or sold by the participant until the termination
or earlier lapse of restrictions relating thereto.
The Company's ability to take a federal income tax deduction with respect
to Restricted Stock Awards made to "Covered Employees," as defined in Section
162 of the Internal Revenue Code of 1986, as amended (the "Tax Code"), will be
subject to limitation, as discussed below under the heading "Tax Aspects of the
Stock Ownership Plan."
STOCK EQUIVALENT UNITS. The Committee may make Awards of Stock Equivalent
Units on such terms and conditions and with such restrictions (which may
include, but are not limited to, continuous service with the Company,
achievement of specific business objectives, and other measurements of
individual, business unit, or Company performance that may include earnings per
share, net profits, total stockholder return, cash flow, return on stockholders'
equity, economic valued added, and cumulative return on net assets employed) as
it determines. Such terms and conditions may include the manner in which such
Stock Equivalent Units are held and the circumstances under which such units
will be forfeited. A Stock Equivalent Unit is an Award unit having a value
equivalent to the Fair Market Value of one share of Company Common Stock, the
value of which fluctuates with that of the Company Common Stock from which such
unit derives its value.
The Committee intends, during each year of the plan, to establish
performance criteria associated with grants of Stock Equivalent Units to
participants who may be "Covered Employees," as defined in Section 162 of the
Tax Code, which are intended to qualify under such section with regard to
preserving the Company's tax deduction for certain compensation paid in excess
of $1 million, as discussed below under the heading "Tax Aspects of the Stock
Ownership Plan."
DIVIDEND EQUIVALENTS. The Committee may provide in the Award Agreement that
Awards accrue Dividend Equivalents that shall accrue and be payable, subject to
any additional conditions or limitations imposed by the Committee, in the amount
of, and at such times as, dividends are paid by the Company on shares of Company
Common Stock.
PERFORMANCE UNITS. The Committee may make Awards of Performance Units,
which are based on the attainment over a specified period of individual
performance targets or on parameters (which may include, but are not limited to,
earnings per share, net profits, total stockholder return, cash flow, return on
stockholders' equity, economic value added, and cumulative return on net assets
employed).
The Committee intends, during each year of the plan, to establish
performance criteria associated with grants of Performance Units to participants
who may be "Covered Employees," as such term is defined in Section 162 of the
Tax Code, which are intended to qualify under such section with regard to
preserving the Company's tax deduction for certain compensation paid in excess
of $1 million, as discussed below under the heading "Tax Aspects of the Stock
Ownership Plan."
SETTLEMENT OF AWARDS. At the Committee's discretion, Awards may be settled
in cash, shares of Company Common Stock, other Awards, or in combinations
thereof. The Committee may also require or permit participants to defer the
issuance of shares or the settlement of awards in cash under such rules and
procedures as it may establish. The Committee may also provide that deferred
settlements include the payment or crediting of interest
17
<PAGE>
on the deferral amounts or the payment or crediting of Dividend Equivalents on
deferred settlements denominated in shares of Company Common Stock. The
Committee may determine the manner in which federal, state or local tax
withholding obligations of the Company will be satisfied including, but not
limited to, the reduction in the amount of stock or cash to be delivered or paid
to the participant or reimbursement by the participant in cash or with shares of
Company Common Stock (rounded up to the next full share), at the Fair Market
Value on the Settlement Date.
TAX ASPECTS OF THE STOCK OWNERSHIP PLAN
$1 MILLION LIMITATION ON DEDUCTIBILITY. The performance goals established
for awards of Performance Units and Stock Equivalent Units are intended to
qualify such Awards as "performance-based compensation" as defined in Section
162 of the Tax Code in order to preserve tax deductions by the Company with
respect to any such compensation in excess of $1 million paid to "Covered
Employees," i.e., the Company's Chief Executive Officer and the four highest
compensated executive officers of the Company or those individuals deemed to be
executive officers of the Company (other than the Chief Executive Officer) and
who are officers on the last day of the year in question.
The Committee will establish specific performance goals discussed above
applicable to Stock Equivalent Unit and Performance Unit awards made to
individuals who the Committee has determined are or are likely to become persons
whose compensation might be subject to the rules of Tax Code Section 162(m). In
addition, the maximum amount of compensation that may be paid under Performance
Units to any one individual with respect to any one year will be $2,000,000 and
the maximum amount of compensation that may be paid under Stock Equivalent Units
to any one individual with respect to any one year may not exceed 100,000 units.
To qualify stock options and SARs as "performance-based compensation" for
federal income tax purposes, the Stock Ownership Plan limits the total number of
shares of Company Common Stock subject to stock options and underlying SARs
awarded to any one participant during the period from October 8, 1996, through
December 31, 2001, to 10% of the number of shares authorized under the Stock
Ownership Plan.
Awards of Restricted Stock to Covered Employees will not qualify as
"performance-based compensation" and will be subject to the limitation on
deductibility under Section 162 of the Tax Code.
FEDERAL INCOME TAX CONSEQUENCES. The rules governing the tax treatment of
Stock Options, Stock Appreciation Rights, Restricted Stock, Stock Equivalent
Units, Dividend Equivalents, and Performance Units are quite technical.
Therefore, the description of the federal income tax consequences set forth
below is necessarily general in nature and does not purport to be complete. The
discussion is based on the Tax Code provisions in effect on the date of this
proxy statement, current regulations thereunder and existing administrative
rulings of the Internal Revenue Service. The discussion is limited to the United
States tax consequences and the tax consequences may vary depending on the
personal circumstances of individual participants.
INCENTIVE STOCK OPTIONS. With respect to ISOs, generally, the participant
will recognize no taxable gain or loss when the ISO is granted or exercised, and
upon exercise, the spread between the fair market value and the exercise price
will be an item of tax preference for purposes of the participant's alternative
minimum tax.
If the shares acquired upon the exercise of an ISO are held for at least
one year after exercise and two years after grant (the "Holding Periods"), the
participant will recognize any gain or loss realized upon such sale as long-term
capital gain or loss. The Company will not be entitled to a deduction. If the
shares are not held for the Holding Periods, the participant will recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of Company Common Stock on the date the option is
exercised. The Company will be entitled to a deduction equal to the amount of
any ordinary income so recognized. If the shares are not held for the Holding
Period and the amount realized upon sale is less than the grant price, such
difference will be a capital loss to the participant.
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NON-QUALIFIED STOCK OPTIONS. With respect to Non-Qualified Stock Options,
generally, the participant will recognize no taxable income at the time of
grant. Upon exercise of a Non-Qualified Stock Option, the participant will
recognize ordinary income equal to the difference between the exercise price and
the fair market value of the shares on the date of exercise. The participant
will recognize as a capital gain or loss any profit or loss realized on the sale
or exchange of any shares disposed of or sold. The Company will be entitled to
deduct an amount equal to the difference between the exercise price and the fair
market value of the shares on the date of exercise.
RELOAD STOCK OPTIONS. The participant recognizes no income on the grant of
a Reload Stock Option. The tax consequences to the participant and the Company
are the same as that for a Non-Qualified Stock Option.
STOCK APPRECIATION RIGHTS. Upon the grant of an SAR, the participant
recognizes no taxable income and the Company receives no deduction. The
participant recognizes income at the time of exercise, if the award becomes
vested and is no longer subject to forfeiture and the participant is entitled to
receive the value of the award. The Company receives a deduction of the same
amount in the same year the participant recognizes income.
RESTRICTED STOCK. A participant granted shares of Restricted Stock is not
required to include the value of such shares in income until the first time such
participant's rights in the shares are transferable or are not subject to a
substantial risk of forfeiture, whichever occurs earlier, unless such
participant timely files an election under Tax Code Section 83(b) to be taxed on
the receipt of the shares. In either case, the amount of such income will be
equal to the excess of the fair market value of the stock at the time the income
is recognized over the amount (if any) paid for the stock. The Company will
generally be entitled to a deduction, in the amount of the ordinary income
recognized by the participant, for the Company's taxable year in which the
participant recognizes such income. However, the deduction with respect to
Awards of Restricted Stock to Covered Employees will be subject to the $1
million limitation under Tax Code Section 162.
STOCK EQUIVALENT UNITS, DIVIDEND EQUIVALENTS AND PERFORMANCE UNITS. A
participant granted Stock Equivalent Units, Dividend Equivalents or Performance
Units recognizes income in the amount of the award of those units when they vest
and are no longer subject to forfeiture and he is entitled to receive the value
of the award. The Company receives a deduction for the same amount in the year
that income is recognized by the participant.
INFORMATION ABOUT OUTSTANDING AWARDS
In December 1996, all Tenneco stock options held by employees of the
Company were canceled and in January 1997 were replaced with options to acquire
Company Common Stock under the Stock Ownership Plan. As a result, as of January
23, 1997, only 1,900,000 shares were available for future awards under the Stock
Ownership Plan. Neither the numbers of individuals who will be selected to
participate in the Stock Ownership Plan nor the type or size of awards that will
be approved can be presently determined. The Company is also unable to determine
the number of individuals who would have participated in the Stock Ownership
Plan or the type or size of awards that would have been made under the Stock
Ownership Plan had it been in effect throughout 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 2 TO
APPROVE AN AMENDMENT TO THE STOCK OWNERSHIP PLAN TO INCREASE THE NUMBER OF
SHARES AVAILABLE FOR AWARDS UNDER THE PLAN BY 1,250,000 SHARES.
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PROPOSAL TO APPROVE AN AMENDMENT TO THE STOCK PURCHASE PLAN
TO INCREASE SHARE AUTHORIZATION BY 400,000 SHARES
(PROPOSAL 3)
The Company proposes that the stockholders approve an amendment to the
Stock Purchase Plan. On March 25, 1997, subject to stockholder approval, the
Board of Directors approved a proposed amendment to the Stock Purchase Plan that
would increase the number of shares available for issuance under the Stock
Purchase Plan by an additional 400,000 shares of Company Common Stock, subject
to future adjustment as provided in the Stock Purchase Plan. The Board believes
this amendment is necessary in order to make shares available for future
purchases by the Company's employees under the Stock Purchase Plan. It is
anticipated that, at the current rate of useage, all of the shares presently
available for issuance under the Stock Purchase Plan will be exhausted prior to
the 1998 Annual Meeting of stockholders.
The Stock Purchase Plan is being presented to the stockholders of the
Company for approval to enable such plan to qualify under Section 423 of the Tax
Code. A discussion of the tax consequences under the Stock Purchase Plan is set
forth below.
SUMMARY OF THE STOCK PURCHASE PLAN
The following paragraphs summarize the principal features of the Stock
Purchase Plan. This summary is subject to the terms of the Stock Purchase Plan.
The Company will provide, upon request and without charge, a copy of the full
text of the Stock Purchase Plan to each person to whom a copy of this proxy
statement is delivered. Requests should be directed to: Stephen B. Clarkson,
Secretary, Newport News Shipbuilding Inc., 4101 Washington Avenue, Newport News,
Virginia 23607.
PURPOSE. The purpose of the Stock Purchase Plan is to permit employees of
the Company to purchase stock in the Company over a period of time at a discount
in order to continue to attract and retain for the long term a group of
dedicated and reliable employees. In the opinion of the Board of Directors, the
Stock Purchase Plan will provide an attractive incentive to employees and
promote a greater interest of such employees in the future growth and success of
the Company.
TERM. The Stock Purchase Plan provides for an Initial Offering Period
commencing on April 1, 1997 and ending December 31, 1997. Thereafter, the plan
provides for four consecutive, one-year Offering Periods, commencing on January
1 of the calendar year and ending on December 31 of the same calendar year.
ADMINISTRATION. The Stock Purchase Plan is administered by the Committee.
The Committee has authority to establish rules and regulations for the
administration of the Stock Purchase Plan and its interpretations and decisions
with regard to the plan will be final.
PARTICIPATION. Participation in the Stock Purchase Plan is open to all
active employees of the Company and of its Subsidiaries (as defined by the
plan). At March 1, 1997, approximately 17,500 persons were eligible to
participate in the Stock Purchase Plan; however, no employee is eligible who
would own, after purchasing Company Common Stock under the plan, shares of
capital stock equalling 5% or more of the total combined voting stock of the
Company.
SHARES AVAILABLE FOR ISSUANCE. The proposed amendment would increase the
number of shares of Company Common Stock available for issuance under the Stock
Purchase Plan by 400,000, to 1,100,000 shares. Such shares will consist of
treasury shares or authorized and unissued shares of Company Common Stock.
Currently, 700,000 shares of Company Common Stock are available for issuance
under the Stock Purchase Plan.
PURCHASE OF COMPANY COMMON STOCK. As of each Grant Date (as defined by the
plan), eligible employees are entitled to allocate payroll deductions ranging
from a minimum of $10 per month up to an overall annual maximum amount of
$21,250. Participants' payroll deductions are invested in shares of the Company
Common Stock on the last business day of each calendar quarter (the "Exercise
Date"). Shares are purchased from the
20
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Company at 85% of the lower of the Fair Market Value (as defined by the plan) of
the Company Common Stock on (i) the Grant Date for the calendar year in which
the Exercise Date falls or (ii) the Exercise Date for the particular quarter.
TERMINATION OF PARTICIPATION. Participation in the Stock Purchase Plan is
canceled (i) at any time upon the election of the employee, or (ii) on the date
that such person ceases to be an employee of the Company or its Subsidiaries.
Any funds deposited by the employee prior to such cancellation are used to
purchase stock on the next Exercise Date. An employee who elects to cancel
participation may not rejoin the Stock Purchase Plan until the next Offering
Period.
TRANSFERABILITY. The rights of employees participating in the Stock
Purchase Plan are not transferable other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee or by the employee's guardian or legal representative. No rights or
payroll deductions of a participating employee are subject to execution,
attachment, levy, garnishment, or similar process.
AMENDMENT. The Board of Directors of the Company may amend, suspend or
terminate the Stock Purchase Plan at any time; provide, however, that no
amendment may increase or decrease the number of shares authorized for the plan,
except as provided by its terms. In addition, except to conform the plan to the
requirements of the Tax Code, no amendment may (i) change the formula for
determining the Exercise Price per share, (ii) withdraw the administration of
the plan from the Committee, (iii) affect the rights of participating employees
to purchase stock on an Exercise Date with funds previously credited to Plan
Accounts (as defined by the plan), or (iv) cause the Stock Purchase Plan not to
meet the requirements of Section 423(b) of the Tax Code.
TAX ASPECTS OF THE STOCK PURCHASE PLAN
The following discussion of certain federal income tax consequences of the
Stock Purchase Plan is based on the Tax Code provisions in effect on the date of
this proxy statement, current regulations thereunder and existing administrative
rulings of the Internal Revenue Service. The discussion is limited to the United
States tax consequences and the tax consequences may vary depending on the
personal circumstances of individual employees.
If the amendment to the Stock Purchase Plan is approved by the stockholders
of the Company at the annual meeting, the additional shares available under the
Stock Purchase Plan will qualify under Section 423 of the Tax Code. As such, the
amount of the discount will not be taxed until the employee disposes of the
stock, and the determination of the ordinary and capital portion of the
resulting gain or loss will depend on the length of time the employee has held
the stock. The Company will be entitled to a deduction equal to the amount of
the employee's ordinary income if the disposition occurs within two years of the
applicable Grant Date; otherwise the Company will have no tax consequences.
CURRENT PARTICIPATION
The enrollment period for the Stock Purchase Plan ended on March 14, 1997,
and 3,696 employees elected to participate in the plan. The Company is unable to
determine the number of individuals who would have participated in the Stock
Purchase Plan or the level of participation had the Stock Purchase Plan been in
effect in 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 3 TO
APPROVE AN AMENDMENT TO THE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES
AVAILABLE FOR ISSUANCE UNDER THE PLAN BY 400,000 SHARES.
21
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SELECTION OF AUDITORS
(PROPOSAL 4)
The Board of Directors has appointed Arthur Andersen LLP to serve as
independent certified public accountants of the Company and its subsidiaries for
1997. Although the appointment of Arthur Andersen LLP is not required to be
submitted to the stockholders for approval, the Board of Directors has elected
to solicit the stockholders' views on the matter. Stockholders are requested to
ratify this appointment. In the event of a negative vote by the stockholders,
the Board of Directors intends to reconsider its decision. Representatives of
Arthur Andersen LLP are expected to be present at the meeting and will be given
an opportunity to make a statement and to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL 4 TO
RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS FOR 1997.
SHAREHOLDER PROPOSALS AND NOMINATIONS FOR THE
1998 ANNUAL MEETING OF STOCKHOLDERS
Any proposal submitted by a stockholder for inclusion in the proxy
materials for the Annual Meeting of stockholders in 1998 must be delivered to
the Secretary of the Company at its principal office in Newport News, Virginia
not later than December 9, 1997.
The Company's bylaws establish advance notice procedures for stockholders
to make nominations for candidates for election as directors or to bring other
business before an annual meeting of stockholders (the "Advance Notice
Procedure"). The Advance Notice Procedure provides that only persons who are
nominated by, or at the direction of, the Board of Directors or by a person who
has given timely written notice to the Secretary of the Company prior to the
meeting at which directors are to be elected will be eligible for election as
directors of the Company. The Advance Notice Procedure also provides that at an
annual meeting only such business may be conducted as has been brought before
the meeting by, or at the direction of, the Board of Directors or by a
stockholder who has given timely written notice to the Secretary of the Company
of such stockholder's intention to bring such business before such meeting. For
a stockholder notice to be timely it must be received by the Secretary of the
Company at the Company's principal executive offices not less than 50 days nor
more than 75 days prior to the meeting; provided, however, that in the event
that less than 65 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made, whichever first occurs.
A stockholder's notice proposing to nominate a person for election as a
director must set forth as to each nominee (i) name, age, business address and
residence, (ii) principal occupation or employment, (iii) class and number of
shares of capital stock of the Company which are beneficially owned by the
nominee and (iv) any other information relating to each nominee that would be
required to be disclosed in a proxy statement prepared in accordance with the
rules and regulations of the Securities and Exchange Commission then in effect.
The notice of nomination must also set forth the name and record address of the
stockholder proposing the nominee and the class and number of shares of capital
stock of the Company which are beneficially owned by the stockholder. A
stockholder's notice relating to the conduct of business other than the
nomination of directors must contain certain information about such business and
about the proposing stockholder, including, without limitation, a brief
description of the business the stockholder proposes to bring before the
meeting, the reasons for conducting such business at such meeting, the name and
address of such stockholder, the class and number of shares of stock of the
Company beneficially owned by such stockholder, and any material interest of
such stockholder in the business so proposed. If the chairman of the meeting
determines that a person was not nominated, or other business was not brought
before the meeting, in accordance with the Advance Notice Procedure, such
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<PAGE>
person will not be eligible for election as a director, or such business will
not be conducted at any such meeting, as the case may be.
OTHER MATTERS
As of the date of this proxy statement, management knows of no business
that will be presented for consideration at the Annual Meeting of stockholders
other than that stated herein. As to other business, if any, and matters
incident to the conduct of the meeting that may properly come before the
meeting, it is intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the best judgment of the person or persons
voting the proxies.
STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL MEETING IN
PERSON, ARE REQUESTED TO MARK, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT TO
THE COMPANY. PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THE ACCOMPANYING PROXY.
STOCKHOLDERS MAY REVOKE THEIR PROXY BY DELIVERING A WRITTEN NOTICE OF REVOCATION
OR A LATER DATED PROXY TO THE COMPANY AT ITS PRINCIPAL OFFICE TO THE ATTENTION
OF STEPHEN B. CLARKSON, SECRETARY, AT ANY TIME BEFORE THE PROXY IS EXERCISED, OR
BY ATTENDING THE ANNUAL MEETING AND VOTING IN PERSON.
/s/ STEPHEN B. CLARKSON
-----------------------
Stephen B. Clarkson
SECRETARY
April 9, 1997
23
<PAGE>
[NEWPORT NEWS SHIPBUILDING LOGO]
<PAGE>
NEWPORT NEWS SHIPBUILDING INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING MAY 16, 1997
PROXY
The undersigned hereby appoints William P. Fricks, David J. Anderson,
Stephen B. Clarkson and Peter A.V. Huegel, severally and not jointly, proxies,
with full power of substitution in each, to vote all shares of Common Stock of
NEWPORT NEWS SHIPBUILDING INC. owned of record by the undersigned, and which the
undersigned is entitled to vote, on all matters which may come before the 1997
Annual Meeting of Shareholders (including items 1, 2, 3 and 4 on the reverse of
this card) to be held at the Omni Newport News Hotel, 1000 Omni Blvd., Newport
News VA, on Friday, May 16, 1997 at 10:00 a.m., local time, and any adjournments
thereof, unless otherwise specified herein.
Change of Address:
__________________________
__________________________
__________________________
__________________________
(If you have written in
the above space, please
mark the corresponding
box on the reverse side of
this card.)
YOUR VOTE IS VERY IMPORTANT. YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY
MARKING THE APPROPRIATE BOX, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOX,
IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION.
THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
[SEE REVERSE SIDE]
<<FOLD AND DETACH HERE>>
<PAGE>
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER YOU HAVE
DIRECTED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR ITEMS 2, 3 AND 4 SET FORTH BELOW.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH ITEM LISTED
BELOW.
1. Election of Directors [ ] FOR [ ] WITHHELD Nominees for Class I:
William P. Fricks
William R. Harvey
Stephen R. Wilson
For, except vote withheld from the following nominee(s):
- --------------------------------------------------------------------
2. Amendment of Stock Ownership Plan to increase [ ] FOR [ ] AGAINST [ ] ABSTAIN
shares available under the Plan by 1,250,000.
3. Amendment of Employee Stock Purchase Plan to [ ] FOR [ ] AGAINST [ ] ABSTAIN
increase shares available under the Plan by
400,000.
4. Ratification of selection of Arthur Andersen [ ] FOR [ ] AGAINST [ ] ABSTAIN
LLP as independent accountants for 1997.
5. In their discretion the proxies are authorized to vote upon such other
matters that may properly come before the meeting or any adjournment(s)
thereof.
I plan to attend the Annual Meeting [ ]
Change of Address on Reverse Side [ ]
SIGNATURE(S)_________________________________________DATE_______________________
NOTE: Please sign exactly as name appears hereon. If more than one owner, each
must sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
<<FOLD AND DETACH HERE>>
<PAGE>
[LOGO]
NEWPORT NEWS
SHIPBUILDING
ADMISSION TICKET
ANNUAL MEETING OF SHAREHOLDERS
If you plan to attend the 1997 Annual Meeting of Shareholders, please mark the
appropriate box on the reverse of the attached Proxy Card. The meeting will be
held on Friday, May 16, 1997, at the Omni Newport News Hotel, 1000 Omni Blvd.,
Newport News, VA. The meeting will begin promptly at 10:00 a.m. local time.
TO AVOID DELAY AT THE ENTRANCE, PLEASE PRESENT THIS TICKET
AGENDA
1. Elect three Class I directors
2. Amend Stock Ownership Plan to increase shares available by 1,250,000
3. Amend Employee Stock Purchase Plan to increase shares available by 400,000
4. Ratify Arthur Andersen LLP as Independent Accountants for 1997
TRANSACTION OF OTHER BUSINESS PROPERLY BROUGHT BEFORE THE MEETING
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU INTEND TO ATTEND THE MEETING IN PERSON, TO MAKE SURE YOUR SHARES ARE
REPRESENTED, WE URGE YOU TO COMPLETE, SIGN AND MAIL THE PROXY CARD BELOW.
<PAGE>
NEWPORT NEWS SHIPBUILDING INC. STOCK OWNERSHIP PLAN
(AS AMENDED AND RESTATED)
1. Purpose
The purpose of the Plan is to promote the long-term success of the
Company for the benefit of shareholders by encouraging its officers and key
employees to have meaningful investments in the Company so that, as stockholders
themselves, those individuals will be more likely to represent the views and
interest of other stockholders and by providing incentives to such officers and
key employees for continued service. The Company believes that the possibility
of participation under the Plan will provide this group of officers and
employees an incentive to perform more effectively and will assist the Company
in attracting and retaining people of outstanding training, experience and
ability.
2. Definitions
"Authorized Plan Shares" has the meaning set forth in Section 6(a).
"Award" means an award or grant made to a Participant under Section 8.
"Award Agreement" means the agreement provided in connection with an
Award under Section 12.
"Award Date" means the date that an Award is made, as specified in an
Award Agreement.
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor legislation.
"Company" means Newport News Shipbuilding Inc.
"Committee" means the Compensation and Benefits Committee of the Board
of Directors, or any successor committee thereto.
"Common Stock" means the Company's common stock, $.01 par value per
share.
"Covered Employees" shall have the meaning specified in Section
162(m)(3) of the Code.
"Dividend Equivalent" means an amount equal to the amount of the cash
dividends that are declared and become payable after the Award Date for the
Award to which it relates and on or before the Settlement Date for such Award.
<PAGE>
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" on any date means the average of the highest and
the lowest sales prices of a share of Common Stock on the Composite Tape for
such date, as reported by the National Quotation Bureau Incorporated, provided
that if (i) no sales of Common Stock are included on the Composite Tape for such
date, or (ii) in the opinion of the Committee, the sales of Common Stock on such
date are insufficient to constitute a representative market, then the Fair
Market Value of a share of Common Stock on such date shall be deemed to be the
average of the highest and lowest prices of a share of Common Stock as reported
on said Composite Tape for the next preceding day on which (x) sales of Common
Stock are included and (y) the circumstances described in this clause (ii) do
not exist.
"ISO" means any Stock Option designated in an Award Agreement as an
"Incentive Stock Option" within the meaning of Section 422 of the Code.
"Non-Qualified Stock Option" means any Stock Option that is not an ISO.
"Option Price" means the purchase price of one share of Common Stock
under a Stock Option.
"Participant" means an employee or officer of Newport News who has been
selected by the Committee to receive an Award under the Plan.
"Performance Unit" means an Award denominated in cash, the amount of
which may be based on performance of the Participant or of Newport News or of
any subsidiary or division thereof.
"Plan" means this Newport News Shipbuilding Inc. Stock Ownership Plan,
as amended from time to time.
"Reload Stock Option" means a Stock Option (i) that is awarded, either
automatically in accordance with the terms of an Award Agreement in which one or
more other Awards are made or by separate Award, upon the exercise of a stock
option granted under this Plan or otherwise where the option price is paid by
the option holder by delivery of shares of Common Stock on the Settlement Date
for such exercise and (ii) that entitles such holder to purchase the number of
shares so delivered for an Option Price equal to the Fair Market Value of a
share of Common Stock on such Settlement Date.
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<PAGE>
"Restricted Stock" means shares of Common Stock subject to restrictions
and conditions pursuant to Section 8(c).
"Rule 16b-3" means Regulation ' 240.16b-3 of the rules and regulations
of the Securities and Exchange Commission promulgated under the Exchange Act.
"Settlement Date" means, (i) with respect to any Stock Option that has
been exercised in whole or in part, the date or dates upon which shares of
Common Stock are to be delivered to the Participant and the Option Price
therefor paid, (ii) with respect to any SARs that have been exercised, the date
or dates upon which a cash payment is to be made to the Participant, or in the
case of SARs that are to be settled in shares of Common Stock, the date or dates
upon which such shares are to be delivered to the Participant, (iii) with
respect to Performance Units, the date or dates upon which cash or shares of
Common Stock are to be delivered to the Participant, (iv) with respect to
Dividend Equivalents, the date upon which payment thereof is to be made, and (v)
with respect to Stock Equivalent Units, the date upon which payment thereof is
to be made, in each case, determined in accordance with the terms of the Award
Agreement under which any such Award was made.
"Stock Appreciation Right" or "SAR" means an Award that entitles the
Participant to receive on the Settlement Date an amount equal to the excess of
(i) the Fair Market Value of a share of Common Stock
on the date of exercise of the SAR over
(ii) the Fair Market Value of one share of Common Stock on the
Award Date or any other higher amount specified in the Award Agreement.
"Stock Equivalent Unit" means an Award that entitles the Participant to
receive on the Settlement Date an amount equal to the Fair Market Value of one
share of Common Stock on such date.
"Stock Option" or "Option" means any right to purchase shares of Common
Stock (including a Reload Stock Option) awarded pursuant to Section 8(a).
"Newport News" means the Company, any stock corporation of which a
majority of the capital stock generally entitled to vote for directors is owned
directly or indirectly by the Company, and any other company designated as such
by the Committee, but only during the period of such ownership or designation.
-3-
<PAGE>
3. Term
The Plan shall be effective as of October 8, 1996, and shall remain in
effect though December 31, 2001. After termination of the Plan, no further
Awards may be granted other than Reload Stock Options granted in accordance with
Award Agreement existing as of December 31, 2001, but outstanding Awards shall
remain effective in accordance with their terms and the terms of the Plan.
4. Plan Administration
(a) The Committee shall be responsible for administering
the Plan.
(i) Composition of the Committee. The Committee
shall be comprised of two or more members of the Board of Directors, all of whom
shall be "non-employee directors" as defined in Rule 16b-3 and "outside
directors" as that term is used in Section 162 of the Code and the regulations
promulgated thereunder.
(ii) Powers. The Committee shall have full and
exclusive discretionary power to interpret the Plan and to determine
eligibility for benefits and to adopt such rules, regulations and guidelines for
administering the Plan as the Committee may deem necessary or proper. Such power
shall include, but not be limited to, selecting Award recipients, establishing
all Award terms and conditions and, subject to Section 13, adopting
modifications and amendments to the Plan or any Award Agreement, including
without limitation, any that are necessary to comply with the laws of the
countries in which the Company or its affiliates operate.
(iii) Delegation. The Committee may delegate
to one or more of its members or to one or more agents or advisors such
non-discretionary administrative duties as it may deem advisable, and the
Committee or any person to whom it has delegated duties as aforesaid may employ
or more persons to render advice with respect to any responsibility the
Committee or such person may have under the Plan.
(b) The Committee may employ attorneys, consultants,
accountants and other persons, and the Committee, the Company and its officers
and directors shall be entitled to rely upon the advice, opinions, or valuations
of any such persons. All actions take and all interpretations and determinations
made by the Committee in good faith shall be final and binding upon the
Participants, the Company and all other interested persons. No member of the
Committee shall be personally liable for any action, determination, or
interpretation made in good faith with respect to the Plan or Awards,
-4-
<PAGE>
and all members of the Committee shall be fully protected by the Company, to the
fullest extent permitted by applicable law, in respect of any such action,
determination or interpretation.
5. Eligibility
Awards will be limited to persons who are officers or key employees of
Newport News. In determining the persons to whom Awards shall be made, the
Committee shall, in its discretion, take into account the nature of the person's
duties, past and potential contributions to the success of Newport News and such
other factors as the Committee shall deem relevant in connection with
accomplishing the purposes of the Plan. A person who has received an Award or
Awards may receive an additional Award or Awards. For purposes of this Section
5, the terms "employee" and "officer" shall also include any former employee or
former officer of Newport News eligible to receive a replacement award as
contemplated in the third sentence of Section 8.
6. Authorized Awards; Limitations
(a) Except for adjustments pursuant to Section 7, the maximum
number of shares of Common Stock that shall be available for issuance under the
Plan (the "Authorized Plan Shares") shall be 5,250,000 (approximately 15% of the
issued and outstanding shares of Common Stock on the effective date of the
amended and restated Plan).
(b) Except for adjustments pursuant to Section 7, in no event
(i) shall more than 1 million of the Authorized Plan Shares be available for
issuance pursuant to the exercise of ISOs awarded under the Plan; and (ii) shall
more than 800,000 of the Authorized Plan Shares be available for issuance
pursuant to Restricted Stock Awards.
(c) If an Award expires unexercised or is forfeited,
surrendered, canceled, terminated or settled in cash in lieu of Common Stock,
the shares of Common Stock that were theretofore subject (or potentially
subject) to such Award may again be made subject to an Award Agreement.
(d) Common Stock that may be issued under the Plan may be
either authorized and unissued shares, or issued shares that have been
reacquired by the Company and that are being held as treasury shares. No
fractional shares of Common Stock shall be issued under the Plan; provided,
however, that cash, in an amount equal to the Fair Market Value of a fractional
share of Common Stock as of the Settlement Date of the Award, shall be paid in
lieu of any fractional shares in the settlement of Awards payable in shares of
Common stock.
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(e) In no event shall the number of shares of Common Stock
subject to Stock Options plus the number of shares underlying SARs awarded to
any one Participant during the period from October 8, 1996, through December 31,
2001, exceed 10% of the Authorized Plan Shares. In all events, determinations
under the preceding sentence shall be made in a manner that is consistent with
Code Section 162 and the regulations promulgated thereunder.
7. Adjustments and Reorganizations
The Committee may make such adjustments to Awards granted under the
Plan (including the terms, exercise price and otherwise) as it deems appropriate
in the event of changes that impact the Company, the Company's share price, or
share status, provided that any such actions are consistently and equitably
applied to all affected Participants; provided, that, notwithstanding any other
provision hereof, insofar as any Award is subject to performance goals
established to qualify payments thereunder as "performance-based compensation"
as described in Section 162(m) of the Code, the Committee shall have no power to
adjust such Awards other than (i) negative discretion and (ii) the power to
adjust Awards for corporate transactions, in either case to the extent
permissible under regulations interpreting Code Section 162(m).
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, extraordinary
dividend, spin-off, split-up, rights offering, share combination, or other
change in the corporate structure of the Company affecting the Common Stock, the
number and kind of shares that may be delivered under the Plan shall be subject
to such equitable adjustment as the Committee, in its sole discretion, may deem
appropriate in order to preserve the benefits or potential benefits to be made
available under the Plan, and the number and kind and price of shares subject to
outstanding Awards and any other terms of outstanding Awards shall be subject to
such equitable adjustment as the Committee, in its sole discretion, may deem
appropriate in order to prevent dilution or enlargement of outstanding Awards.
8. Awards
The Committee shall determine the type and amount of any Award
to be made to any Participant; provided, however, that, except as provided in
paragraph (g), no Award granted pursuant to this Plan shall vest in less than
six months after the date the Award is granted. Awards may be granted singly, in
combination, or in tandem. Awards may also be made in combination or in tandem
with, in replacement of, as alternatives to, or as the payment form for, grants
or rights under any other employee benefit or compensation plan of Newport News,
including any such employee benefit or compensation plan of any acquired entity.
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<PAGE>
(a) Stock Options.
(i) Grants. Stock Options (including Reload
Stock Options) granted under this Plan may be either of the following:
(1) an ISO or
(2) a Non-Qualified Stock Option
The Committee may grant any Participant one or more ISOs,
Non-Qualified Stock Options, or both types of Stock Options, in each case with
or without SARs or Reload Stock Options or any other form of Award. Stock
Options granted pursuant to this Plan shall be subject to such additional terms,
conditions, or restrictions as may be provided in the Award Agreement relating
to such Stock Option.
(ii) Option Price. The Option Price of a Stock
Option shall be not less than 100% of the Fair Market Value of a share of Common
Stock on the Award Date; provided, however, that in the case of a Stock Option
granted retroactively in tandem with or as a substitution for another Award, the
Option Price shall be not less than 100% of the Fair Market Value of a share of
Common Stock on the date of such other Award; and provided further that in any
case ISOs shall have a price equal to 100% of the Fair Market Value of a share
of Common Stock on the Award Date.
(iii) ISOs. Anything in this Plan to the contrary
notwithstanding, no term of this Plan relating to ISOs shall be interpreted,
amended or altered, nor shall any discretion or authority awarded under the Plan
be exercised, so as to disqualify this Plan under Section 422 of the Code, or,
without the consent of the Participants affected, to disqualify any ISO under
Section 422 of the Code.
An ISO shall not be granted to an individual who, on the date of grant,
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the employing Company or of its parent or any subsidiary
corporation.
The aggregate Fair Market Value, determined on the Award Date, of the
shares of Common Stock or other stock with respect to which one or more ISOs (or
other "incentive stock options," within the meaning of Subsection (b) of Section
422 of the Code, under all other stock option plans of the Participant's
employing Company and its parent and subsidiary corporation) that are
exercisable for the first time by the Participant during any particular calendar
year shall not exceed the $100,000 limitation imposed by Section 422(d) of the
Code.
(iv) Manner of Payment of Option Price. The
Option Price shall be paid in full at the time of the exercise of the Stock
Option and may be paid in any of the following methods or combinations
thereof:
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<PAGE>
(A) In United States dollars in cash, check, bank
draft or money order payable to the order of the Company;
(B) By the delivery of shares of Common Stock having an
aggregate Fair Market Value on the date of such exercise equal to the Option
Price;
(C) Participants may simultaneously exercise Stock Options and
sell their shares of Common Stock acquired thereby and apply the proceeds to the
payment of the Option Price pursuant to the procedures established by the
Committee; and
(D) In any other manner that the committee shall approve.
(E) Any shares of Common Stock required or permitted to be
sold by an executive officers of the Company in connection with the payment of
the Option Price shall be transferred to the Company.
(v) Reload Stock Options. The Committee may award Reload Stock
Options to any Participant either in combination with other Awards or in
separate Award Agreements that grant Reload Stock Options upon exercise of
outstanding stock options granted under this Plan or otherwise.
(b) Stock Appreciation Rights.
(i) Grants. The Committee may award any Participant SARs,
which shall be subject to such additional terms, conditions, or restrictions as
may be provided in the Award Agreement relating to such SAR Award, including any
limits on aggregate appreciation. SARs may be settled in Common Stock or cash or
both.
(ii) Award Price. The Award Price per share of Common Stock of
a SAR shall be fixed in the Award Agreement and shall be not less than 100% of
the Fair Market Value of a share of Common Stock on the date of the award;
provided, however, that in the case of a SAR awarded retroactively in tandem
with or as a substitution for another Award, the Award Price per share of a SAR
shall be not less than 100% of the Fair Market Value of a share of Common Stock
on the date of such other Award.
(iii) Distribution of SARs. SARs shall be exercisable in
accordance with the conditions and procedures set out in the Award Agreement
relating to such SAR Award.
(c) Restricted Stock. The Committee may award Restricted Stock to any
Participant. Awards of Restricted Stock shall be subject to such conditions and
restrictions as are established by the Committee and set forth in the Award
Agreement, which may include, but are not limited to, continued service with the
Company, achievement of specific business objectives, and other measurements of
individual or business unit or Company performance.
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<PAGE>
(d) Stock Equivalent Units. The Committee may award Stock Equivalent
Units to any Participant. All or part of any Stock Equivalent Units Award may be
subject to conditions and restrictions established by the Committee, and set
forth in the Award Agreement, which may include some or all of the following;
continued service with the Company, achievement of specific business objects,
and other measurements of individual or business unit or Company performance
that may include but shall not be limited to, earnings per share, net profits,
total shareholder return, cash flow, return on shareholders' equity, EVA, and
cumulative return on net assets employed. Without limiting the generality of the
foregoing, it is intended that the Committee shall establish performance goals
applicable to Stock Equivalent Units granted to Participants who, in the
judgment of the Committee, may be Covered Employees in such manner as shall
permit it to qualify as "performance-based compensation" as described in Section
162(m)(4)(C) of the Code. The maximum number of Stock Equivalent Units that may
be granted to any Participant in any one calendar year shall not exceed 100,000.
(e) Dividend Equivalents. The Committee may provide in any Award
Agreement in which Stock Equivalent Units are awarded that such Stock Equivalent
Units may accrue Dividend Equivalents. In lieu of awarding Dividend Equivalents,
the Committee may provide for automatic awards of additional Stock Equivalent
Units on each date that cash dividends are paid on the Common Stock in an amount
equal to (i) the product of the dividend per share on the Common Stock times the
total number of Stock Equivalent Units then held by the Participant, divided by
(ii) the Fair Market Value of the Common Stock on the dividend payment date.
(f) Performance Units. Performance Units shall be based on attainment
over a specified period of individual performance targets or on other parameters
that may include but shall not be limited to, earnings per share, net profits,
total shareholder return, cash flow, return on shareholders' equity, EVA, and
cumulative return on net assets employed. Performance Units may be settled in
Common Stock or cash or both. Without limiting the generality of the foregoing,
it is intended that the Committee shall establish performance goals applicable
to Performance Units granted to Participants who, in the judgment of the
Committee, may be Covered Employees in such a manner as shall permit payments
with respect thereto to qualify as "performance-based compensation" as described
in Section 162(m)(4)(C) of the Code. The maximum amount of compensation that may
be paid to any one Participant with respect to any one year shall be $2,000,000.
(g) The Committee may also, in its sole discretion, shorten or
terminate the restricted period or waive any other conditions for the lapse of
restrictions with respect to all or any portion of any Award. Notwithstanding
the foregoing, all restricted periods shall terminate and the Awards shall be
fully vested with respect to any Participant upon the Participant's Retirement,
death, or Total Disability, coincident with termination of employment with
Newport News. For purposes of this Section 8:
"Retirement" means the Participant's termination of employment with
Newport News at a time when, under the Newport News Retirement Plan or under any
other retirement plan that is maintained by Newport News and that is determined
by the Committee to be the functional equivalent of the Newport News Retirement
Plan, the Participant is eligible to receive an immediately payable normal
retirement benefit, or, if approved by the Committee, the Participant is
eligible to receive an immediately payable early retirement benefit under such
plan; and
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<PAGE>
"Total Disability" means the permanent inability of the Participant,
which is a result of accident or sickness, to perform such Participant's
occupation or employment for which the Participant is suited by reason of the
Participant's previous training, education and experience and which results in
the termination of the Participant's employment with Newport News.
9. Dividends
The Committee may provide in the appropriate Award Agreement that
dividends on Restricted Stock may be paid currently in cash or credited to a
Participant's account for subsequent distribution as determined by the
Committee. The Award Agreement may provide for the reinvestment of dividends
paid on Restricted Stock in shares of Common Stock.
10. Deferrals and Settlements
Settlement of Awards may be in the form of cash, Common Stock, other
Awards, or in combinations therof as the Committee shall determine, and with
such other restrictions as it may impose. The Committee may also require or
permit Participants to defer the issuance or vesting of shares or the settlement
of Awards under such rules and procedures as it may establish under the Plan.
The Committee may also provide that deferred settlements include the payment of,
or crediting of interest on, the deferral amounts or the payment or crediting of
Dividend Equivalents on deferred settlements denominated in shares.
11. Transferability and Beneficiaries
No Awards under the Plan shall be assignable, alienable,
saleable or otherwise transferable other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order (as defined by
the Code) or Title I of the Employee Retirement Income Security Act, or the
rules thereunder unless otherwise determined by the Committee.
12. Award Agreements
Awards under the Plan shall be evidenced by Award Agreements
that set forth the details, conditions and limitations for each Award, which may
include the term of an Award (except that (i) except as provided in Section
8(g), no Award shall vest in less than six months after the date the Award is
granted and (ii) in no event shall the term of any ISO exceed a period of ten
years from the date of its grant), the provisions applicable in the event the
Participant's employment terminates, and the Company's authority to unilaterally
or bilaterally amend, modify, suspend, cancel or rescind any Award.
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<PAGE>
13. Amendments; Compliance with Rule 16b-3
The Committee may suspend, terminate, or amend the Plan as it
deems necessary or appropriate to better achieve the purposes of the Plan,
except that, without the approval of the Company's shareholders, no such
amendment shall be made for which shareholder approval is necessary to comply
with any applicable tax or regulatory requirement, including for these purposes
any approval requirement which is a prerequisite for exemptive relief under
Section 16b of the Exchange Act.
14. Tax Withholding
The Company shall have the right to (i) make deductions from
any settlement of an Award made under the Plan, including the delivery or
vesting of shares, or require shares or cash or both be withheld from any Award,
in each case in an amount sufficient to satisfy withholding of any federal,
state or local taxes required by law, or (ii) take such other action as may be
necessary or appropriate to satisfy any such withholding obligations. The
Committee may determine the manner in which such tax withholding may be
satisfied, and may permit shares of Common Stock (rounded up to the next whole
number) to be used to satisfy required tax withholding based on the Fair Market
Value of any such shares of Common Stock, as of the Settlement Date of the
applicable Award.
15. Other Company Benefit and Compensation Programs
Unless otherwise specifically determined by the Committee,
settlements of Awards received by a Participant under the Plan shall not be
deemed a part of the Participant's regular, recurring compensation for purposes
of calculating payments or benefits from any Company benefit plan, severance
program or severance pay law of any country. Further, the Company may adopt
other compensation programs, plans or arrangements as it deems appropriate or
necessary.
16. Unfunded Plan
Unless otherwise determined by the Committee, the Plan shall
be unfunded and shall not create (or be construed to create) a trust or a
separate fund or funds. The Plan shall not establish any fiduciary relationship
between the Company and any Participant or other person. To the extent any
person holds any rights by virtue of a grant awarded under the Plan, such right
(unless otherwise determined by the Committee) shall be no greater than the
right of an unsecured general creditor of the Company.
17. Future Rights
No person shall have any claim or right to be granted an award
under the Plan, and no Participant shall have any right under the Plan to be
retained in the employment of the Company or its affiliates.
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<PAGE>
18. Governing Law
The validity, construction and effect of the Plan, and any
actions taken or relating to the Plan, shall be determined in accordance with
the laws of the State of Delaware and applicable federal law.
19. Successors and Assigns
The Plan shall be binding on all successors and assigns of a
Participant, including, without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.
20. Rights as a Shareholder
Except as otherwise provided in any Award Agreement, a
Participant shall have no rights as a shareholder of the Company until he or she
becomes the holder of record of Common Stock.
21. Securities Provisions
No Award or other transaction shall be permitted under this
Plan which would have the effect of imposing liability for a participant under
Section 16 of the Exchange Act. Irrespective of any other provision of this Plan
or Award Agreement, any such Award or other transaction purportedly made under
or pursuant to this Plan shall be void, ab initio.
IN WITNESS WHEREOF, this amended and restated Plan is hereby
adopted, with an effective date of May 16, 1997.
NEWPORT NEWS SHIPBUILDING INC.
By:____________________________
ATTEST: ____________________________
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NEWPORT NEWS SHIPBUILDING INC. 1997 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED AND RESTATED)
This Employee Stock Purchase Plan (the "Plan"), adopted as of April 1,
1997, provides Eligible Employees of Newport News Shipbuilding Inc., a Delaware
Corporation (the "Company"), and its Subsidiaries an opportunity to purchase
shares of Common Stock of the Company on the terms and conditions set forth
below.
1. Definitions.
(a) Base Pay -- for each participating employee, the regular
compensation and commissions earned during each payroll period, before any
deductions or withholding, but excluding overtime pay, bonuses, amounts paid as
reimbursements of expenses and other additional compensation, under rules
uniformly applied by each employer to all employees similarly situated.
(b) Business Day -- any day on which the New York Stock Exchange
is open for business.
(c) Code -- the Internal Revenue Code of 1986, as amended.
(d) Committee -- the Compensation and Benefits Committee of the
Board of Directors of the Company.
(e) Eligible Employees -- those employees of the Company and its
Subsidiaries who are eligible to participate in the Plan pursuant to Section 3.
(f) Exercise Date -- the last Business Day of each calendar
quarter.
(g) Exercise Price -- the lesser of (I) 85% of the Fair Market
Value of a share of the Company's Common Stock, $.01 par value (the "Common
Stock"), on the Grant Date for the calendar year in which the Exercise Date
falls, or (ii) 85% of the Fair Market Value of such share on the Exercise Date.
(h) Fair Market Value -- the average of the high and low sales
price per share of the Company's Common Stock as quoted on the New York Stock
Exchange.
(i) Grant Date -- with respect to the calendar year ending
December 31,1997, the first business day of April, 1997 and with respect to each
calendar year thereafter during which the plan is in effect, the first Business
Day of the calendar year.
(j) Offering Period -- except for the initial offering period,
which will be from April 1, 1997, through December 31,1997, any twelve-month
period beginning on January 1 of a particular calendar year and ending on
December 31 of such calendar year.
<PAGE>
(k) Plan Account -- an account maintained by the Company or its
designated recordkeeper for each employee participating in the Plan to which
payroll and deductions are credited, against which funds used to purchase shares
of Common Stock are charged and to which shares of Common Stock purchased are
credited. .
(l) Subsidiaries -- all United States Corporations (other than the
Company) in one or more unbroken chains of corporations beginning with the
Company if, on the Grant Date, the corporations in the chain other than the last
corporation in the unbroken chain owns stock possessing, directly or indirectly,
more than 50% of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
(m) United States Corporation -- a corporation which incorporated
under the laws of any state in the United States which conducts its business
operations primarily within the United States.
2. Stock Subject to the Plan. The Company shall make available
1,100,000 shares of its Common Stock for purchase under the Plan from either the
shares held by the Company in its treasury account or from the Company's
authorized but unissued shares.
3. Eligible Employees. All active employees of the Company or
any of its subsidiaries, as determined under policies uniformly applied by each
employer, shall be eligible to participate in the Plan.
4. Participation in the Plan (a) An Eligible Employee may
participate in the Plan by completing and filing with the Company, or its
designated recordkeeper, an Election Form or responding to enrollment procedures
as set forth in a voice response system which authorizes payroll deductions from
the employee's pay. Such deductions shall commence with the first pay period in
the Offering Period beginning after such form is filed and recorded with the
Company or its designated recordkeeper and shall continue until the employee
terminates participation in the Plan or the Plan is terminated. An Eligible
Employee may participate in the Plan only through payroll deductions. Other
contributions will not be accepted.
(b) No employee shall be granted an option to purchase
shares of Common Stock on any Grant Date if such employee, immediately after the
option is granted, owns stock possessing 5% or more of the Company's outstanding
Common Stock or 5% or more of the total combined voting power or value of all
classes of stock of the Company or any Subsidiary. For purposes of this
paragraph, the rules of Codes Section 424(d) shall apply in determining the
stock ownership of an individual, and stock which the employee may purchase
under outstanding options shall be treated as stock owned by the employee.
(c) No employee may purchase under the Plan more than
$25,000 U.S. (or the equivalent thereof in other currencies) of the Fair Market
Value of shares of Common Stock (determined at the Grant Date) for each calendar
year. This paragraph shall be interpreted in accordance with Code Section
423(b)(8).
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<PAGE>
5. Payroll Deductions. Payroll deductions shall be made from the
amounts paid to each participating employee for each payroll period in such
amounts as the participating employee shall authorize in his or her Election
Form. The minimum payroll deduction shall be $10 U.S. (or the equivalent thereof
in other currencies) per month up to $21,250 U.S. (or the equivalent thereof in
other currencies) per calendar year. Should a participating employee's pay be
insufficient in any pay period to allow the entire payroll deduction
contemplated under the Plan, no deduction shall be made for such pay period.
Payroll deductions will resume with the next pay period in which the
participating employee has pay sufficient to allow for the deduction. Payroll
deductions under the Plan shall be made in any pay period only after all other
withholdings, deductions, garnishments and the like have been made, and only if
the remaining pay is sufficient to allow the entire payroll deduction
contemplated.
6. Changes in the Payroll Deductions. Subject to the minimum and
maximum deductions set forth above, a participating employee may change the
amount of his or her payroll deduction by filing a new Election Form with the
Company or its designated recordkeeper or responding to a voice response
enrollment system during an annual offering period as specified by the Company.
The change shall become effective for the next Offering Period. Except as set
forth in Section 7, other changes shall not be allowed during an Offering
Period.
7. Termination of Participation in the Plan. A participating
employee, at any time and for any reason, may voluntarily terminate
participation in the Plan by written notification of withdrawal delivered to the
appropriate payroll office at least 10 Business Days before the next pay period.
An employee's participation in the Plan shall be terminated upon termination of
his or her employment with the Company or its Subsidiaries for any reason. In
the event a participating employee's participation in the Plan is voluntarily or
involuntarily terminate, payroll deductions shall cease; provided, however, that
any payroll deductions credited to such employee's Plan Account shall be used to
purchase shares of Common Stock on the next Exercise Date. An employee whose
participation in the Plan has terminated may not rejoin the Plan until the next
Offering Period following the date of such termination. Interruption in
employment as a result of a layoff or the Family Leave Act are considered a
temporary interruption in participation in the Plan and deductions are to resume
when the employee returns to work.
8. Purchase of Shares. (a) On each Grant Date, each
participating employee shall be deemed to have been granted an option to
purchase shares of Common Stock as provided in this Section 8.
(b) On each Exercise Date, each participating employee shall
be deemed to have exercises his or her option granted pursuant to Section 8(a).
On each Exercise Date, the Company shall apply the funds credited to each
participating employee's Plan Account to the purchase (without commissions or
fees) of that number of shares of Common Stock determined by dividing the
Exercise Price into the balance in the employee's Plan Account on the Exercise
Date.
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<PAGE>
(c) As soon as practicable after each Exercise Date, a
statement shall be delivered to each participating employee which shall include
the number of shares of Common Stock purchased on the Exercise Date on behalf of
such employee under the Plan.
(d) When requested, a stock certificate for whole shares of
Common Stock in a participating employee's Plan Account purchased pursuant to
the Plan shall be issued in the name of the participating employee, or if so
requested issued jointly with another person or persons. A cash payment shall be
made for any fraction of a share in such account, if necessary to close the
account.
9. Rights as a Stockholder. As of the Exercise Date, a
participating employee shall be treated as record owner of his or her shares
purchased pursuant to the Plan.
10. Rights Not Transferable. Rights under the Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during the employee's lifetime
only by the employee or by the employee's guardian or legal representative. No
rights or payroll deductions of a participating employee under the Plan shall be
subject to execution, attachment, levy, garnishment or similar process.
11. Sale of Shares. The Company shall pay the brokerage costs
incurred in one sale each calendar year of shares of Common Stock for any Plan
participant purchased under the Plan, provided that such shares are held for at
least two years from the Grant Date for such shares, and such shares of Common
Stock are sold by Smith Barney Inc. Should a participating employee chose to
sell such shares purchased under the Plan within two years from the Grant Date,
such employee shall be responsible for any brokerage costs incurred in such
sale. Sales requested by a participating employee shall occur as soon as
administratively feasible after the receipt of such request, but neither the
Committee nor the Company nor any Subsidiary shall be liable for any delay in
the execution of such a request.
12. Application of Funds. All funds of participating employees
received or held by the Company under the Plan before the purchase of the shares
of Common Stock may be held in bank accounts of the Company.
13. Adjustment in Case of Changes Affecting Shares. In the event of
a subdivision or consolidation of outstanding shares of Common Stock of the
Company, or the payment of a stock dividend, the number of shares approved for
the Plan shall be increased or decreased proportionately, and such other
adjustment shall be made as may be deemed equitable by the Board of Directors of
the Company. In the event of any other change affecting the Common Stock, such
adjustment shall be made as shall be deemed equitable by the Board of Directors
of the Company to give proper effect to such event.
14. Administration of Plan. The Plan shall be administered by the
Committee. The Committee shall have authority to make rules and regulations for
the administration of the Plan, and its interpretations and decisions with
regard to the Plan and such rules and regulations shall be final and conclusive.
It is intended that the Plan shall at all times meet the requirements of Code
Section 423(b), and the Committee shall, to the extent possible, interpret the
provisions of the Pan so as to carry out such intent.
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<PAGE>
15. Amendments to Plan. The Board of Directors of the Company, at
any time, or from time to time, may amend, suspend, or terminate the Plan,
provided, however, that no amendment shall be made increasing or decreasing the
number of shares authorized by the Plan (other than as provided in Section 13 or
Section 16(b), and that, except to conform the Plan to the requirements of the
Code, no amendment shall be made (i) changing the formula for determining the
Exercise Price per share, (ii) withdrawing the administration of the Plan from
the Committee, (iii) affecting the rights of participating employees to purchase
stock on an Exercise Date with funds already credited to Plan Accounts or (iv)
which would cause the Plan not to meet the requirements of Code Section 423(b).
16. Effective Date, Suspension and Termination of Plan. (a) The
Plan shall become effective when adopted by the Board of Directors of the
Company and approved within twelve months of adoption by the stockholders of the
Company by a majority vote of those present and entitled to vote at any annual
or special meeting at which a quorum is present. Shall the Plan fail to become
effective because of lack of approval by the stockholders of the Company, then
any credit balances in the respective employees' Plan Accounts shall be returned
to the employees for whom such Plan Accounts were established.
(b) The Plan shall terminate upon the earliest of (i) the
termination of the Plan by the Board of Directors of the Company as specified
below, (ii) December 31,2001, or (iii) when no more shares remain to be
purchased under the Plan. The Board of Directors of the Company may terminate
the Plan only as of the Business Day immediately following the Exercise Date. If
on an Exercise Date, participating employees in the aggregate have the options
to purchase more shares of Common Stock than are available for purchase under
the Plan, each participating employee shall be eligible to purchase a reduced
number of shares of Common Stock on a pro rata basis and any excess payroll
deductions shall be returned to such employees, all as provided by rules and
regulations adapted by the Committee.
17. Costs. All costs and expenses incurred in administering the
Plan shall be paid by the Company, except that any brokerage fees or certificate
costs incurred in the sale of the shares of Common Stock by any participating
employee shall be handled in accordance with Section 8 and Section 11 of the
Plan.
18. Governmental Regulation. The Company's obligation to sell
and deliver its Common Stock pursuant to the Plan is subject to the approval of
any governmental or regulatory authority required in connection with
authorization, issuance or sale of such stock.
19. Applicable Law. This Plan shall be interpreted under the laws
of the State of Delaware, unless preempted by federal law. This Plan is not be
subject to the Employee Retirement Income Security Act of 1974, as amended, but
is intended to comply with Section 423 of the Code. Any provisions required to
be set forth in this Plan by such Code section are hereby included as fully as
if set forth in the Plan in full.
5
<PAGE>
20. Effect on Employment. The provisions of this Plan shall not
affect the right of the Company or any participating employee to terminate his
or her employment with the Company or Subsidiary.
21. Withholding. The Company reserves the right to withhold
from stock or cash distributed to a participating employee any amounts which it
is required by law to withhold.
IN WITNESS WHEREOF, this amended and restated Plan is hereby
adopted, with an effective date of May 16, 1997.
NEWPORT NEWS SHIPBUILDING INC.
BY:___________________________
ATTEST:_________________________
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