exv10w2






EXHIBIT 10.2




 





INSURANCE MATTERS AGREEMENT



among



NORTHROP GRUMMAN CORPORATION,



NEW P, INC.,



and



HUNTINGTON INGALLS INDUSTRIES, INC.



Dated as of [______]



 









 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	Section 1.1 Table of Definitions
	 	 	1	 
	Section 1.2 Certain Defined Terms
	 	 	2	 
	Section 1.3 Other Capitalized Terms
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II SHIPBUILDING INSURANCE POLICIES
	 	 	2	 
	Section 2.1 Assignment of Shipbuilding Insurance Policies
	 	 	2	 
	Section 2.2 Assumption of Risk
	 	 	3	 
	Section 2.3 Assumption of Amounts Payable
	 	 	3	 
	Section 2.4 Further Assurances
	 	 	3	 
	Section 2.5 Pending Claims
	 	 	3	 
	 
	 	 	 	 
	ARTICLE III RETAINED INSURANCE POLICIES
	 	 	3	 
	Section 3.1 Assignment of Retained Insurance Policies
	 	 	3	 
	Section 3.2 Pre-Distribution Occurrences
	 	 	4	 
	Section 3.3 HII’s Financial Obligations for the Retained Insurance Policies
	 	 	4	 
	Section 3.4 Assumption of Risk
	 	 	4	 
	Section 3.5 Directors’ and Officers’ Insurance
	 	 	4	 
	Section 3.6 Northrop Grumman Risk Management Inc. Insurance Policies
	 	 	4	 
	Section 3.7 Replacement Insurance Policies
	 	 	5	 
	Section 3.8 Insurance Company Bankruptcy or Insolvency
	 	 	5	 
	 
	 	 	 	 
	ARTICLE IV COOPERATION
	 	 	5	 
	Section 4.1 Cooperation in Claims Handling
	 	 	5	 
	Section 4.2 Information
	 	 	5	 
	Section 4.3 Retention of Insurance Policies
	 	 	5	 
	Section 4.4 Certain Actions
	 	 	5	 
	Section 4.5 Allocation of Amounts
	 	 	6	 
	Section 4.6 No Agreement to Provide Insurance Management or Risk Management Services
	 	 	6	 
	Section 4.7 Outside-Entity Insurance Policies
	 	 	6	 
	 
	 	 	 	 
	ARTICLE V GENERAL PROVISIONS
	 	 	6	 
	Section 5.1 Effect if Distribution Does Not Occur
	 	 	6	 
	Section 5.2 Incorporation of Separation Agreement Provisions
	 	 	6	 






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     INSURANCE MATTERS AGREEMENT, dated as of [______________] (this “Insurance Matters
Agreement”), among Northrop Grumman Corporation, a Delaware corporation (“NGC”), New P,
Inc., a Delaware corporation (“New NGC”), and Huntington Ingalls Industries, Inc., a
Delaware corporation (“HII”).



RECITALS




     A. The parties to this Insurance Matters Agreement, together with certain Subsidiaries of NGC,
have entered into the Separation and Distribution Agreement (the “Separation Agreement”),
dated as of the date hereof.



     B. Pursuant to the Separation Agreement, the business of NGC will be separated into two
publicly traded companies: (a) HII, which following the Separation will own and conduct, directly
and indirectly, the Shipbuilding Business (as defined in the Separation Agreement), and (b) New
NGC, which following the Separation will own and conduct, directly and indirectly, the Retained
Business (as defined in the Separation Agreement).



     C. NGC, its Subsidiaries, and their respective predecessors have historically maintained
various Insurance Policies providing coverage for the Shipbuilding Business and the Retained
Business.



     D. The parties desire to enter into this Insurance Matters Agreement to allocate, among
themselves, rights in the Insurance Policies and related coverages.



AGREEMENT




     In consideration of the foregoing and the mutual covenants and agreements herein contained,
and intending to become legally bound hereby, the parties agree as follows:



ARTICLE I

DEFINITIONS





	 	 	Section 1.1 Table of Definitions. The following terms have the meanings
set forth on the pages referenced below:





	 	 	 	 	 
	Definition	 	Page	 
	Current Retained Insurance Policies
	 	 	2	 
	HII
	 	 	1	 
	Insurance Matters Agreement
	 	 	1	 
	Insurance Policies
	 	 	2	 
	New NGC
	 	 	1	 
	NGC
	 	 	1	 
	Outside-Entity Insurance Policies
	 	 	2	 
	Retained Insurance Policies
	 	 	2	 
	Separation Agreement
	 	 	1	 
	Shipbuilding Insurance Policies
	 	 	2	 






 









 







     Section 1.2 Certain Defined Terms. For the purposes of this Insurance Matters
Agreement:



          “Current Retained Insurance Policies” means Retained Insurance Policies in effect as
of the Distribution Date.




          “Insurance Policies” means insurance contracts of any kind, including, without
limitation, first-party property, primary liability, excess liability, self-insurance, captive
insurance company arrangements, reinsurance, surety bonds, and certificates of insurance naming or
benefiting NGC or one of its pre-Distribution Subsidiaries, together with the rights, benefits, and
privileges that arise thereunder or by virtue of law, except that “Insurance Policies” excludes
life and employee benefits insurance. “Insurance Policies” includes insurance contracts issued to
Subsidiaries of NGC before NGC acquired such Subsidiaries.




          “Outside-Entity Insurance Policies” means any Insurance Policies that (a) are acquired
by any entity that is not a member of either Group and (b) name or benefit any New NGC Entity or
any HII Entity.




          “Retained Insurance Policies” means the Insurance Policies identified on the
memorandum exchanged between the parties to this Insurance Matters Agreement entitled “Listing of
Retained Insurance Policies.”




          “Shipbuilding Insurance Policies” means the Insurance Policies identified on the
memorandum exchanged between the parties to this Insurance Matters Agreement entitled “Listing of
Shipbuilding Insurance Policies.”




     Section 1.3 Other Capitalized Terms. Capitalized terms not defined in this Insurance
Matters Agreement shall have the meanings ascribed to them in the Separation Agreement.



ARTICLE II

SHIPBUILDING INSURANCE POLICIES




     Section 2.1 Assignment of Shipbuilding Insurance Policies. Effective as of the date
of the Internal Reorganization, to the extent not already assigned, transferred, conveyed and
delivered prior to such date and subject to Section 2.2 of the Separation Agreement, NGC hereby
assigns, transfers, conveys and delivers to HII and HII hereby accepts and assumes NGC’s rights and
obligations in the Shipbuilding Insurance Policies to the extent that the Shipbuilding Insurance
Policies cover Shipbuilding Liabilities. NGC shall use reasonable best efforts to obtain written
confirmation from its insurance broker that the Shipbuilding Insurance Policies may be assigned to
HII or an HII Entity and shall
use reasonable best efforts to obtain any necessary consents identified by its insurance
broker to assign the Shipbuilding Insurance Policies.



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     Section 2.2 Assumption of Risk. In the event that NGC does not have the right to
completely assign the Shipbuilding Insurance Policies to HII, HII shall bear the risk that such
coverage is not available and will be obligated at its own expense to obtain replacement coverage,
but New NGC shall use reasonable best efforts to assist HII to the extent reasonably necessary to
provide HII access to the benefits of the Shipbuilding Insurance Policies. HII shall nonetheless
be responsible for handling its own claims and coverage disputes. New NGC shall promptly notify
HII if New NGC receives notice from any insurance carrier that NGC does not have the right to
assign the Shipbuilding Insurance Policies to HII.



     Section 2.3 Assumption of Amounts Payable. HII shall pay or cause to be paid any
self-insured retentions, deductibles, premiums, retrospective premium adjustments, or other amounts
payable after the Distribution relating to the Shipbuilding Insurance Policies.



     Section 2.4 Further Assurances. Under the Separation Agreement, HII has assumed or
will assume the Shipbuilding Liabilities and is solely responsible for such. HII nevertheless
agrees to use its reasonable best efforts to provide the New NGC Group the benefit of the
Shipbuilding Insurance Policies to the extent any Person seeks to collect any Shipbuilding
Liability against any New NGC Entity. HII shall not cancel, terminate, or amend the Shipbuilding
Insurance Policies in a manner that adversely affects coverage for the New NGC Group. HII shall
pay all amounts necessary to exhaust or otherwise satisfy all applicable self-insured retentions,
deductibles, and retrospective premium adjustments for the Shipbuilding Insurance Policies and
related to any Shipbuilding Liability, as well as similar amounts not covered by the Shipbuilding
Insurance Policies and related to any of the Shipbuilding Liabilities. New NGC shall not be
responsible for letters of credit or surety bonds required to maintain the Shipbuilding Insurance
Policies.



     Section 2.5 Pending Claims. Unless otherwise provided in the Separation Agreement,
New NGC shall pay to HII all net recoveries received on claims filed by NGC on behalf of the
Shipbuilding Business under the Shipbuilding Insurance Policies when such claims were filed prior
to the Distribution Date. New NGC shall make payments (net of expenses) to HII within 30 days of
receiving the insurance proceeds related to the claims.



ARTICLE III

RETAINED INSURANCE POLICIES




     Section 3.1 Assignment of Retained Insurance Policies. Effective as of the date of
the Internal Reorganization, to the extent not already assigned, transferred, conveyed and
delivered prior to such date and subject to Section 2.2 of the Separation Agreement, NGC hereby
assigns, transfers, conveys and delivers to New NGC and New NGC hereby accepts and assumes NGC’s
rights and obligations in the Retained Insurance
Policies. NGC shall use reasonable best efforts to obtain written confirmation from its
insurance broker that the Retained Insurance Policies may be assigned to New NGC and its
Subsidiaries and Affiliates and shall use reasonable best efforts to obtain any necessary consents
identified by its insurance broker to assign the Retained Insurance Policies.



3









 





     Section 3.2 Pre-Distribution Occurrences. New NGC shall use reasonable best efforts
to provide HII the benefit of the Retained Insurance Policies for occurrences, losses,
circumstances and other acts or events occurring prior to the Distribution. HII shall make claims
under the Retained Insurance Policies directly to the insurer and shall provide New NGC
contemporaneous written notice of any such claim. HII may negotiate settlement of such claims
under the Retained Insurance Policies independently of the New NGC Group, but shall keep New NGC
reasonably advised concerning the status of any such negotiation. HII shall obtain the prior
written consent of New NGC, which shall not be unreasonably withheld or delayed, before initiating
coverage litigation against any insurer or initiating any legal action against a broker of the
Retained Insurance Policies. In no event will HII initiate coverage litigation directly against
any New NGC Entity.



     Section 3.3 HII’s Financial Obligations for the Retained Insurance Policies. After
the Distribution Date, HII shall, independently and without the involvement of the New NGC Group,
pay all amounts necessary to exhaust or otherwise satisfy all applicable self-insured retentions,
deductibles, fronted policy program repayments, and any other amounts not covered by the Retained
Insurance Policies and related to any claim made on the Retained Insurance Policies by HII. HII
also shall pay its proportionate share of any retrospective premium adjustments for the Retained
Insurance Policies, according to the protocols which have historically been followed prior to the
Distribution. HII shall not be responsible for letters of credit or surety bonds required to
maintain the Retained Insurance Policies.



     Section 3.4 Assumption of Risk. In the event that New NGC does not have the right
under the Retained Insurance Policies to provide HII the benefit of such Insurance Policies, HII
shall bear the risk that such coverage is not available, but New NGC shall at its own cost and
expense use reasonable best efforts to assist HII to the extent reasonably necessary to provide HII
access to the benefits of the Retained Insurance Policies. HII shall nonetheless be responsible
for its own claims handling. New NGC shall promptly notify HII if New NGC receives notice from any
insurance carrier that NGC does not have the right to provide HII with the benefits of the Retained
Insurance Policies.



     Section 3.5 Directors’ and Officers’ Insurance. For the six-year period commencing
immediately after the Distribution, New NGC shall maintain in effect directors’ and officers’
liability Insurance Policies providing coverage for acts or omissions occurring prior to the
Distribution with respect to those Persons who are currently covered by NGC’s directors’ and
officers’ liability Insurance Policies, including such Persons who become officers, directors or
employees of HII, on terms and at limits no less favorable than New NGC’s directors’ and officers’
liability Insurance Policies in any given policy year.



     Section 3.6 Northrop Grumman Risk Management Inc. Insurance Policies. Notwithstanding
Section 3.2 of this Insurance Matters Agreement, HII shall retain coverage under certain
self-insurance policies issued by Northrop Grumman Risk Management Inc. until March 15, 2011, but
only to the extent that Northrop Grumman Risk Management Inc. has reinsurance contracts covering
losses incurred by HII during



4









 







that period. HII shall, independently and without the involvement of
the New NGC Group, pay all amounts necessary to exhaust or otherwise satisfy all applicable
self-insured retentions, deductibles, fronted policy program repayments, and any other amounts not
covered by reinsurance and related to any claim made on Northrop Grumman Risk Management Inc.
Insurance Policies.



     Section 3.7 Replacement Insurance Policies. Except as expressly set forth above, the
policy period of all Current Retained Insurance Policies shall be deemed to end as to HII as of the
Distribution. HII has arranged and shall be obligated to maintain its own separate replacement
Insurance Policies for the period that commences as of the Distribution, and such insurance
arrangements shall be separate and apart from the insurance programs of New NGC and its
Subsidiaries.



     Section 3.8 Insurance Company Bankruptcy or Insolvency. With regards to the Retained
Insurance Policies only, the parties shall use their best efforts to cooperate with one another to
maximize the total recovery in the event of any future settlement or other disposition of the
liabilities of any insurance company, which shall become insolvent or otherwise seek to avail
itself of any scheme of arrangement or bankruptcy proceeding. In addition, the parties shall use
their best efforts to allocate to HII any portion of any such recovery which pertains to the
Shipbuilding Liabilities.



ARTICLE IV

COOPERATION




     Section 4.1 Cooperation in Claims Handling. Each of New NGC and HII, at the request
of the other and at its own cost and expense, shall cooperate with and use reasonable best efforts
to assist the other in processing or presenting claims made under any Insurance Policy for the
benefit of any insured party.



     Section 4.2 Information. Each of New NGC and HII and their respective Groups shall
share such information as is reasonably necessary in order to permit the other to manage and
conduct its insurance matters in an orderly fashion. On or before the Distribution, New NGC will
provide to HII the best available listing of historic Insurance Policies that provide coverage to
HII for occurrences, claims, losses, circumstances and other acts or events on or after April 3,
2001 and electronic copies of all such Insurance Policies in its possession. HII shall be solely
responsible for maintaining this information and New NGC shall not be obligated to provide
duplicative or additional information following the Distribution.



     Section 4.3 Retention of Insurance Policies. Each of New NGC Entities and HII
Entities will use reasonable best efforts to prevent the destruction of any Insurance
Policy, to notify the other Group of the proposed destruction of any Insurance Policy, and to
give such other Group reasonable opportunity to take possession of such Insurance Policy prior to
such destruction.



     Section 4.4 Certain Actions. Except to the extent provided in this Insurance Matters
Agreement, no New NGC Entity or HII Entity shall take any action that would



5









 







compromise, jeopardize,
or otherwise interfere with either Group’s rights under any Insurance Policy. Except as otherwise
contemplated by the Separation Agreement, this Insurance Matters Agreement, or any other Ancillary
Agreement, after the Distribution, no New NGC Entity or HII Entity shall, without the prior written
consent of the other Group, which such consent shall not be unreasonably withheld or delayed,
provide any insurance carrier with a release, or amend, modify, settle, compromise, or waive any
rights under any Insurance Policy, if such release, amendment, modification or waiver would
adversely affect any rights or potential rights of any member of the other Group thereunder.
However, nothing in this Section 4.4 shall (a) preclude any member of any Group from presenting any
claim or from exhausting any policy limit, (b) require any member of any Group to pay any premium
or other amount or to incur any Liability or (c) require any member of any Group to renew, extend
or continue any Insurance Policy.



     Section 4.5 Allocation of Amounts. For purposes of the exhaustion of any limits that
apply to coverage available under the Insurance Policies, amounts shall be allocated to the
Insurance Policies on a first come/first served basis. That means that amounts covered by such
Insurance Policies shall be allocated to such Insurance Policies in the order in which such amounts
were paid by the insurance companies.



     Section 4.6 No Agreement to Provide Insurance Management or Risk Management Services.
Nothing in this Insurance Matters Agreement shall be construed as providing for or creating an
obligation to provide insurance management or risk management services.



     Section 4.7 Outside-Entity Insurance Policies. Outside-Entity Insurance Policies are
unaffected by this transaction. It will be the responsibility of each Group to monitor and renew
any Outside-Entity Insurance Policies benefiting that Group without the involvement of the other
Group. However, the parties shall, each at its own cost and expense, use their reasonable best
efforts to cooperate and assist one another to assure that appropriate name change amendments are
made to any Outside-Entity Insurance Policies necessary to assure that said Outside-Entity
Insurance Policies insure the entity that has the Liabilities to which the insurance relates.



ARTICLE V

GENERAL PROVISIONS




     Section 5.1 Effect if Distribution Does Not Occur. If the Distribution does not
occur, then all actions and events that are, under this Insurance Matters Agreement, to be taken or
occur effective as of the Distribution, or otherwise in connection with the
Distribution shall not be taken or occur, except to the extent specifically agreed by the
parties.



     Section 5.2 Incorporation of Separation Agreement Provisions. The following
provisions of the Separation Agreement are hereby incorporated herein by reference, and unless
otherwise expressly specified herein, such provisions shall apply as if fully set forth herein
(references in this Section 5.2 to an “Article” or “Section” shall mean Articles or Sections of the
Separation Agreement, and references in the material incorporated herein



6









 







by reference shall be
references to the Separation Agreement): Article V (relating to Mutual Releases; Indemnification);
Article VI (relating to Shared Gains and Shared Liabilities); Article VII (relating to Exchange of
Information; Confidentiality); Article VIII (relating to Further Assurances and Additional
Covenants); Article IX (relating to Termination); Article X (relating to Dispute Resolution); and
Article XI (relating to Miscellaneous). In the event of any conflict or inconsistency between any
of the foregoing provisions of the Separation Agreement and any provision of this Insurance Matters
Agreement, this Insurance Matters Agreement shall prevail with respect to matters governed by this
Insurance Matters Agreement.



[The remainder of this page is intentionally left blank.]




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     IN WITNESS WHEREOF, the parties have caused this Insurance Matters Agreement to be executed as
of the date first written above by their respective officers thereunto duly authorized.



	 	 	 	 	 
	 	NORTHROP GRUMMAN CORPORATION

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	NEW P, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	HUNTINGTON INGALLS INDUSTRIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



[Signature Page to Insurance Matters Agreement]