<PAGE>
                                                                   Exhibit 10.27
                         NEWPORT NEWS SHIPBUILDING INC.
                              ANNUAL INCENTIVE PLAN


Article I. Purpose

        The purpose of the Annual Incentive Plan (the "Plan") is to advance the
        interests of Newport News Shipbuilding Inc. (the "Company")
        shareholders, by tying a significant portion of executive compensation
        to corporate performance measures. Payments made to executives under the
        Plan will satisfy the Company's need to attract, retain and motivate key
        executive talent.


Article II.   Definitions

        When used in this document the following terms shall have the meanings
        set forth below:

     A.   NNS and Company means Newport News Shipbuilding Inc.

     B.   Board means the Board of Directors of Newport News Shipbuilding Inc.

     C.   Cause means the commission of any of the following acts by a
          Participant:

          (1)  an intentional act of fraud embezzlement or theft in connection
               with his/her duties or in the course of his/her employment with
               NNS,

          (2)  intentional, wrongful damage to property of NNS,

          (3)  intentional, wrongful disclosure of secret processes or of
               confidential information of NNS, or

          (4)  intentional violation of NNS code of conduct or ethics.

     D.   Code means the Internal Revenue Code of l986, as amended from time to
          time, and the regulations thereunder

     E.   Committee means the Board's Compensation and Benefits Committee, which
          shall consist solely of at least two outside directors within the
          meaning of Code section 162(m)(3)(C)(i).

     F.   Participant means an employee of NNS who participates in the Plan in
          accordance with Article 4.

     G.   Plan means the Newport News Shipbuilding Inc. Annual Incentive Plan,
          as set forth in this document and as may be amended from time to time.
<PAGE>

     H.   Salary means the salary earned by a Participant during a plan year
          from employment with NNS. For purposes of this Plan, Salary shall
          include salary earned pursuant to any holiday, vacation, or sick leave
          policy of NNS, salary deferred pursuant to any Internal Revenue Code
          section 401(k) plan and nonqualified deferred compensation plan
          maintained by NNS, and salary contributed pursuant to any Internal
          Revenue Code section 125 plan maintained by NNS. Except as otherwise
          provided in the preceding sentence, Salary shall not include any
          amount payable pursuant to an employee benefit or incentive
          compensation plan.


Article III.  Committee Authority

     The Compensation and Benefits Committee of the Board shall have full
     discretion and authority to modify, interpret, and establish
     procedures for Plan administration.


Article IV.  Eligibility and Participation

     A.   The individuals who are eligible to participate in the Plan are those
          key executives who, by the nature and scope of their positions,
          regularly and directly make or influence policy decisions which
          significantly impact the overall results or success of the Company.
          The Company will receive recommendations for participation from
          functional Staff Heads. Each such nominated executive shall become a
          Participant upon being approved by the Company. Non-employee directors
          of NNS will not be eligible to participate in the Plan.

     B.   The Company may withdraw its approval of an existing position at any
          time during the Plan Year Participants whose employment is terminated
          during the Plan Year for reasons other than disability, death, or
          retirement under a Company retirement plan shall forfeit participation
          in the Plan unless otherwise authorized by the Company. At the sole
          discretion of the Company, participation may be prorated for
          participants who become disabled, die, retire or are assigned to a
          non-eligible position.

Article V.  Awards

     A.   Payout Determination - Under the Plan, a Participant may become
          entitled to an award equal to a percentage (or percentages) of his/her
          Salary. The percentage(s) shall be established by the Committee and
          shall depend upon the position held by the Participant and the
          performance of NNS, measured by the relationship of one or more of the
          following measures (i) earnings per share, net profits, total
          shareholder return, cash flow, return on equity, return on assets,
          return on investment, and/or operating income to (ii) the objective(s)
          approved by the Committee for purposes of the Plan. The percentage(s)
          shall be determined in accordance with one or more schedules. NNS
          shall inform each Participant of the schedule of awards applicable to
          him/her.

                                       2
<PAGE>

     B.   Establishment of Performance_Criteria - Annually, the Company, subject
          to the approval of the Committee, shall establish objectives as
          described in subsection (A) above. The Company may adjust the target
          incentive amount during the Plan Year to accommodate the admission or
          elimination of Participants to the Plan or to incorporate adjustments
          to individual incentive targets of Participants whose executive level
          changes during the Plan Year. Company incentive funds will be
          determined based on the budgeted objectives, each weighted to reflect
          appropriate emphasis. Anything herein to the contrary notwithstanding,
          no award shall be paid pursuant to this Plan unless and until the
          Committee has certified that such objective(s) and all other material
          terms of this Plan have been satisfied.

     C.   Pro-rated Award - At the discretion of the Company, a Participant's
          annual award may be prorated in the event he/she participates in the
          Plan for less than an entire year and/or moves into a position covered
          under a different schedule of awards. In the event an award is
          prorated, the said award for which the Participant qualifies wil1 be
          determined by one of the following schedules:

               (1) Entry into Program - First quarter, 100% participation;
             second quarter, 75% participation; third quarter, 25%
             participation; fourth quarter, 0% participation.

               (2) Exit from Program - First quarter, 0% participation; second
             quarter, 25% participation; third quarter, 75% participation;
             fourth quarter, 100% participation.

          The Participant's award shall equal the sum of the partial awards
          computed by multiplying (i) the Salary earned by the Participant while
          covered under a schedule of awards by (ii) the percentage of Salary
          determined in accordance with such schedule.

     D.   Payment of Award - A Participant's award shall be paid to him/her (or
          in the event of the Participant's death, to his/her estate or
          beneficiary as described below) in cash in a single lump sum during
          either the month of December of the Plan Year or the first quarter of
          the year following the end of each Plan year.

     E.   Award Reductions - The Committee may determine to reduce any award
          determined under the Plan (including no award) but the Committee shall
          be precluded from increasing such award.


Article VI.  Forfeiture of Awards

        Notwithstanding comments in Article V to the contrary, a Participant who
        resigns from NNS or is dismissed for Cause prior to receipt of his/her
        award shall forfeit such award, unless otherwise authorized by the
        Company.



                                        3
<PAGE>

Article VII.  Designation of Beneficiary

          In the event of the Participant's death during the Plan Year, the
          beneficiary(ies) to receive any payment under the Plan that was not
          made prior to the Participant's death, shall be the same
          beneficiary(ies) designated by the Participant to receive proceeds
          from the company-provided life insurance policy held by the
          Participant under the Company's benefits program. Participants
          desiring to designate a different beneficiary under the Plan must
          notify the Company in writing at the following address:

                                            Human Resources Department
                                            Newport News Shipbuilding
                                            4101 Washington Avenue
                                            Newport News, Virginia 23607


Article VIII.  Administration

          This plan shall be administered by the Company in accordance with
          rules that may be established from time to time by the Committee. The
          determination of the Company as to any disputed question arising under
          this Plan, including the question of construction and interpretation,
          shall be final, binding, and conclusive for all persons.



Article IX.   Miscellaneous Provisions

          A.   Tax Withholding - Payments pursuant to the Plan shall be reduced
               by amounts sufficient to satisfy any Federal, State, and/or local
               tax withholding requirements.

          B.   Continuance of Employment - The Plan does not confer on any
               Participant any right to continue in the employ of the company on
               any basis.

          C.   Assignment of Award - A Participant may not assign, sell,
               transfer, alienate or encumber any part of the award payment
               without the Committee's prior written consent.


Article X.   Duration, Amendment and Termination of Plan

        The Plan shall take effect on January 1, 1997 The Committee may amend,
        suspend or terminate the Plan at any time. In no event, however, may any
        such amendment or modification result in an increase in the amount of
        compensation payable pursuant to the award.


                                        4
<PAGE>

Article XI.   Conflicts and Inconsistencies

        In the event of conflict or inconsistency between the provisions of this
        Plan and any provision or provisions of the Newport News Shipbuilding
        Inc. Change-in-Control Severance Benefit Plan for Key Executives (the
        "Benefit Plan"), the applicable provision or provisions of the Benefit
        Plan will control.


Article XII.  Governing Law

        This Plan shall be governed by and construed in accordance with the laws
        of the Commonwealth of Virginia applicable to agreements made and
        entirely to be performed within such jurisdiction except to the extent
        federal law may be applicable.


IN WITNESS WHEREOF, Newport News Shipbuilding Inc. has adopted the foregoing
instrument effective as of January l, 1997


                                        NEWPORT NEWS SHIPBUILDING INC.


                                        BY: _______________________________





ATTEST:


--------------------------------













                                        5